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Commodities Briefing 15.Oct 2012

Posted on 15 October 2012 by VRS |  Email |Print

Global commodity prices surged as much as 10 per cent in the three months ended September 2012, as food and energy costs went up amid widespread supply constraints, according to the IMF. “Commodity prices, led by food and energy, leapt 10 per cent in the third quarter due to supply constraints,” the International Monetary Fund said in a report.
The figure is based on IMF’s Primary Commodities Price Index (PCPI) that reflects weighted average of prices for 51 primary commodities. They are grouped into three main clusters — energy, industrial inputs (mainly base metals) and edibles (of which food is the main component)………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Hedge funds cut bullish commodity wagers to the lowest since the middle of August before signs the U.S. economy is improving and declining grain stockpiles drove prices to a three-week high.
Speculators reduced net-long positions across 18 U.S. futures and options by 0.4 percent to 1.24 million contracts in the week ended Oct. 9, the lowest since Aug. 14, U.S. Commodity Futures Trading Commission data show. Corn bets dropped to the lowest since July before the U.S. government cut its stockpile forecast on Oct. 11. Soybean-oil wagers tumbled 64 percent, and those on crude oil contracted for a third week………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Canada’s biggest companies may join their Wall Street peers in posting poor financial results for the latest quarter as miners and energy producers struggle with soft global demand and volatile commodity prices.
Energy and materials shares make up about half of the value of the Toronto Stock Exchange’s benchmark S&P/TSX composite index and include such blue chips as Cenovus Energy, Teck Resources Ltd and Goldcorp Inc. All three are expected to report a year-on-year drop in third-quarter earnings per share in the coming weeks………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

China’s imports of iron ore reached their highest level in 20 months in September as buyers took advantage of falling prices to replenish stocks, and copper and crude oil imports also rose, but the data did little to raise hopes that demand in the world’s second biggest economy was on track for a full recovery.
Figures from China’s General Administration of Customs on Saturday gave indications of renewed vigour in the world’s second largest economy, with total exports in September rising by a much faster than expected rate of 9.9 percent year on year, but the signals from a raft of commodities data were mixed………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

As the turmoil in South Africa’s mining sector continues, the economic toll is becoming clearer. With the strikes spreading beyond the natural resources companies, worries over economic paralysis have brought the South African rand to a more than three-year low against the dollar.
Then on Friday, rating agency Standard & Poor’s cut the country’s credit rating by once notch, following rival Moody’s downgrade of the country last month which had marked its first since the end of apartheid………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries assured world financial leaders Saturday that the oil market will remain amply supplied next year and that the cartel is committed to a stable market and prices that are healthy for an increasingly fragile global economy.
Oil price strength, stemming partly from fears over an escalating conflict with major oil producer and OPEC member Iran, has weighed on the global economy, adding to factors threatening to push advanced economies into another recession………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Oil supply growth in the United States is expected to be the highest for non-OPEC countries this year, the Vienna-based cartel said. With less than a month before U.S. voters head to the polls in what’s expected to be a close race, both sides of the political debate are making aggressive claims on energy, a contributing factor to the national economy.
OPEC said it anticipated “robust” growth in the U.S. economy when compared to other developed countries, though “U.S. expansion remains below potential.” The economic climate in the United States, OPEC said, could have regional implications, suggesting the U.S. election could have broad-based effects………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

The IEA’s latest Oil Market Report, released 12 October, maintains the IEA storyline of global oil shortage and extreme high prices being almost certain - by about 2017 - unless and until the 28 OECD member countries of the IEA enact and pay for a whole range of new energy policies and programs.
For a flavor of these heavily promoted big-spending policies and programs from the IEA, high level conferences like its ‘Clean Energy Future’ ministerial meeting held in London, 25 April (for which the IEA Web page no longer exists) provide all that is needed………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

The International Energy Agency (IEA) has predicted that oil prices could fall over the next five years as a result of the slow global economy and low demand in comparison to the rising world production of oil following increased output from North America and Iraq.
The IEA has stated that the average price of oil per barrel should drop from $107 this year, to around $89 in 2017. They noted that “even China, the main engine of demand growth in the last decade, is showing signs of slowing down.” This poor economic growth, mixed with improvements to efficiency and a general theme to move away from fossil fuels, will mean that demand will be much lower than initially predicted………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Oil fell after the International Energy Agency reduced its forecast for global demand, saying slower economic growth may limit fuel consumption.
Prices declined 21 cents after the IEA cut the outlooks for 2012 and 2013 by 100,000 barrels a day each from a month earlier. Economic expansion isn’t happening fast enough to curb unemployment, International Monetary Fund Managing Director Christine Lagarde said today. U.S. oil production advanced to a 17-year high last week………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Forget the Farmer’s Almanac. As we move into the winter season, two things are becoming clear. First, this one will be colder than last year, nationwide. Second, the price of natural gas is moving up. A colder season ahead is an almost statistical certainty. The likelihood of having a repeat of last year’s mild winter is quite low. And my second assertion is now supported by several factors.
Until very recently, the changing of seasons was a determining factor in gas prices. The warm winter throughout much of the U.S. last year certainly contributed to the dive that saw gas prices plummet to near $2 per 1,000 cubic feet (or million BTUs), the NYMEX futures contract unit………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Buying Gold is clearly sensible, given how it is moving up on concern about inflation and a weakening Dollar amid easy-money central bank policies. But don’t get carried away by the bullish dreams of gold bugs, said macro trader Dennis Gartman at IndexUniverse’s Inside Commodities conference.
Taking issue with prevalent views that the Federal Reserve is dangerously expanding its monetary base with its quantitative easing (QE) programs, the editor of The Gartman Letter told attendees that the Fed’s monetary base is coming down………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

The historical average for the gold coverage ratio is roughly 40%, meaning that the current price of gold would have to more than double to reach the average.
It gets better: “The gold coverage ratio has risen above 100% twice during 20th century,” most recently at gold’s 1980 peak. “Were this to happen today, the value of an ounce of gold would exceed $12,000.”……………………………………….Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Gold prices to average $1,860 an ounce in 2013 and silver at $32.50 per ounce, said Barclays Capital in a commodity research note. According to Barclays, the platinum price to average $1,760 an ounce next year and palladium at $775 per ounce. The precious metals are seeing fundamentals diverge.
“The macro environment has evolved more favorably for gold after the announcement of QE3 (third quantitative easing) removed one of the hurdles over which gold has stumbled in the form of dollar strength,” the British bank added………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Gold remains robust in euro terms at €1,364.50/oz. and remains less than only 1% away from new record highs in the single currency. India and China are embarking on their peak consumption season which may create a boost to the physical market.
US election years tend to see gold underperform vis-à-vis other years and this was seen in 2004 (+4.7%) and 2008 (+5%) when gold saw only marginal gains compared to the 17% annualized dollar returns seen in that decade………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

South Africa’s labor issues have affected the country severely, with over 90,000 of South Africa’s miners or 30% of the workforce in the mining sector are now on strike,, said Deutsche Bank in a commodity research note.
Of all the resources, platinum has been hit the hardest. “We estimate that 28% of South African platinum production or 17% of global production has been affected,” they say. It’s possible the output losses could push platinum prices to trade at a premium to gold, the the largest German bank added………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Zinc mines tend to be smaller than gold and copper mines with fewer very large producers. But early next year, the first of several large mines will close with production of about 275,000 tons (275 Kt) a year.
Later in the year, another large mine is scheduled to shut down. Along with a few smaller operations, the market will lose more than 0.5 Mt next year alone, which is a big chunk of production. That will start the trend of depleting zinc inventories. In 2014, more large mines will close. These are structural changes in the industry because there are no large operations to replace them. The global decline in inventory should perk-up the price of zinc………………………………………..Full Article: Source

Posted on 15 October 2012 by VRS |  Email |Print

Federal Reserve Chairman Ben Bernanke encouraged policy makers in developing economies to let their currencies appreciate, delivering a strongly worded counterargument to their own critiques of the Fed.
Many central bankers in developing economies have complained that the Fed’s easy money policies are hurting U.S. trading partners around the world. One common refrain is that when the Fed prints money, it causes investors to search for other places to put their money, causing a potentially destabilizing rush of funds into less developed economies……………………………………….Full Article: Source

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