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Commodities Briefing 18.Oct 2012

Posted on 18 October 2012 by VRS |  Email |Print

Risk assets were expected to benefit from the liquidity unleashed first by the European Central Bank (ECB), which promised to buy distressed sovereign debt without any limits, and soon after by the US Federal Reserve, which said it will buy $40 billion in bonds without setting a date for this programme to end. Indeed, asset prices did move up as expected, but one asset class has stumbled.
Commodities have shed their initial gains seen since the first week of September, when ECB first announced its bond-buying plan. The Thomson Reuters/Jefferies CRB Index, a broad indicator of commodity prices, has fallen by 0.7% since then. That is in contrast to what’s visible in the equities space, where the MSCI Index for Asia ex-Japan is up by 7.7%, while the MSCI World Index is up by 4.4% since the first week of September. Gold prices have risen by 3.2% over the period………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Australia’s economy has been hit by weaker commodity prices this year, but recent interest rate cuts should soften the blow. David Gruen, the Treasury’s head of economic forecasting, said Australia’s central bank has scope to cut interest rates further “if it sees fit” as inflation is low.
Slowing growth in China, the country’s biggest trading partner, has led to sharp falls in key industrial commodity prices in recent times, buffeting Australian exports. Mr. Gruen said there is “no question” that those falling prices will impact growth and budget revenues………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

While August was weak for crude oil imports, will iron ore imports show a different story? Although iron ore imports surged to 65.01 million tons in September, the highest since January 2011, this could be due to spot iron ore prices falling from $137 per ton in late June to $86.70 per ton in early September, prompting mills to stock up on cheap iron ore ahead of the Golden Week holiday in October.
Coincidentally, Australia’s Port Headland is reported as seeing a 9.5 percent decline in new shipments in September, suggesting October’s imports into China may be significantly lower………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

The grain market has settled down the last 4-5 weeks due to a combination of weak exports for corn and soybeans, too many speculators long the market and ideas that South American crops will be huge this winter (Brazil/Argentina summer). In addition, we began forecasting in late August, the drought to begin to slowly ease in the Midwest, in which crop conditions stabilized for soybeans.
These rains went a long ways towards the USDA increasing their U.S. soybean crop estimate to 2.86 billion bushels in October, up from 2.63 billion bushels a month earlier; something that we sort of got wind about, during September………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

A sprinkle of optimism coming from Europe coupled with some early corporate earnings reports that came in better than expected was enough to send the equity markets into a decent one day rally that spread to the oil sector and other key commodity sectors.
Comments out of Germany suggesting that they may ease their objection or resistance to a Spanish bailout sent a message to the market that the EU Ministers meeting on Thursday and Friday could now make progress in taking another step in solving the EU sovereign debt issues………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

The price of oil has experienced high volatility in the past couple of weeks. But despite this high volatility the price of oil remained close to its starting point from the beginning of month. Will this high volatility in the oil market continue? Further, will oil prices resume their downward trend?
During October, the price of oil fell by 0.4%; United States Oil mirrored this decline with a 0.4% drop of its own. The tensions in the Middle East may have contributed to the high volatility in the oil market, but the stable OPEC oil production, the decline in the IEA projection for global demand in 2012, and the rise in U.S oil production and refineries input curbed the rally of the price of oil………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Changing partners in Russia can be a fraught affair, to which the tribulations of Anna Karenina are as good a guide as any. But sometimes there is no choice. BP’s relationship with a group of oligarchs who owned half of TNK-BP, the company’s Russian joint venture, had broken down so completely that it was only a matter of time before one side or the other was forced to quit.
In the event both are likely to get out, to be replaced by the firm at the root of the trouble between them, Rosneft, Russia’s state-controlled oil giant………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

It could be argued that the Organization of the Petroleum Exporting Countries is becoming more interesting as a political forum than a major decider of global oil prices since years of overproduction has rendered the cartel’s production ceiling largely redundant.
And politics is at the fore as OPEC members meet in Vienna next week to discuss who will replace the current secretary-general, Libyan national Abdalla Salem El-Badri, when he retires this year. Ecuador, Iraq and Saudi Arabia have put forward candidates, but the pick looks likely to become a battleground for dominance of the group between rival factions led by Saudi Arabia and Iran………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Major bullion bank HSBC cut its 2012 average gold price outlook for 2012, but raised its 2013 and 2014 forecasts on solid investor demand and high commodity prices. The bank cut its 2012 price outlook to $1,700 per ounce from $1,760 in light of price weakness earlier this year and raised its 2013 forecast to $1,850 from $1,775. It also raised its 2014 price forecast to $1,775 from $1,750.
“We remain bullish on gold, and we expect prices to reach $1,900 an ounce by year-end,” HSBC chief commodity analyst James Steel said in a note to clients………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Goldcore’s Head of Research, Mark O’Byrne was interviewed on Bloomberg Television’s “The Pulse” with Guy Johnson about his outlook for gold. Gold looks like it may rise in November after the October correction and could rise above $2,500/oz. by March 2013 or by September of 2013 due to fiat currency debasement and concerns about all fiat currencies.
Longer term, respected analysts are calling for gold prices above $5,000/oz, and much higher forecasted prices such as between $5,000 and $10,000 per ounce are not raising eyebrows as much as they have in the past………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

A correction in global gold prices accompanied by a strong rupee has pushed down gold prices in India, which has prompted a wave of buying in the country from the beginning of this week which marked the end of the inauspicious shradh paksh.
Bullion dealers and jewellers are stocking gold at this price for the upcoming festival season. Gold traders say there has been an increase in demand by 10% in October compared to the previous month which may go up further if there is a further correction in prices………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

The mining sector had enjoyed ten glorious years of soaring commodity prices and even higher demand. Yet, this was never guaranteed to last forever, as the sector would inevitably succumb to the ups and downs of the global economy.
As miners experience a sudden downturn, they should adapt to a new era of cutting costs, take less risks and debts, while mergers and acquisitions, or M&As, would become more of a necessity for some companies………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Although the concept of “hedging” has been stretched, abused, and otherwise manipulated over the years, it is nevertheless a very important process for many companies. Commodity producers use forwards and futures contracts to help ensure a certain level of cash flow, and corporate commodity consumers use hedging to help control costs.
So here’s a thought – can regular people use commodity investment products like ETFs to hedge some of their everyday costs of living?……………………………………….Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

U.S. market operator Nasdaq OMX and Chinese firm Dalian Commodity Exchange unveiled a partnership Monday to seek new business opportunities in China and globally. The two companies pledged in a memorandum of understanding to “carry out extensive and in-depth cooperation in terms of visits, information sharing, trading technology and consulting services,” they said in a statement.
Liu Xingqiang, president and chief executive of Dalian Commodity Exchange, and Sandy Frucher, vice chairman of Nasdaq OMX, attended the signing ceremony in Taipei………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Active investment fund managers have been arguing that indexing is causing securities to move in tandem. We’ve seen that the story isn’t true for small-cap stocks, and today we turn our spotlight on the commodities markets. By examining the year-to-date returns of individual commodities, we’ll demonstrate that the same findings we saw in the stock market hold true across markets and asset classes.
To test whether indexing has affected commodities, we’ll look at the changes in prices for some of the commodities within the S&P GSCI Index………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

DBS’ commodities financing is its fastest growing business, said Piyush Gupta, the bank’s chief executive on Wednesday. The bank’s commodity financing book is now close to S$25 billion, making it the “fastest growing portfolio in our book right now”, Mr Gupta said.
“It was about S$1 (billion) to S$2 billion two years ago,” he said. DBS has been able to gain rapid market share in the commodities financing business as the traditional providers like Rabobank and some French banks are good in the financing part but not in risk management, he said………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Imagine it’s Jan. 21, 2013, the day after Mitt Romney’s inauguration. He arrives at the Oval Office for his first full day as president, and makes good on a major campaign promise: He signs an executive order declaring China a currency manipulator.
What happens next? Not a whole lot. In fact, Romney’s act of bravado, should he win the election, could wind up disappointing supporters who voted for him because they expected him to come down hard on China………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Doubling down on QE3, the Federal Reserve (Fed) Chairman Bernanke tells China and Brazil: allow your currencies to appreciate. One does not need to be a rocket scientist to conclude that Bernanke wants the U.S. dollar to fall. Is it merely a war of words, or an actual war? Who is winning the war?
The cheapest Fed policy is one where a Fed official utters a few words and the markets move. Rate cuts are more expensive; even more so are emergency rate cuts and the printing of billions, then trillions of dollars. As such, the Fed’s communication strategy may be considered part of a war of words……………………………………….Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

Time is fast running out on the euro. With record high unemployment in the euro zone, failing austerity measures, and restive populations in southern Europe, the E.U. may soon have to consider a far more radical long-term solution to the crisis: the introduction of dual currencies.
This solution of last resort would allow member countries such as Greece or Spain to introduce a new local currency—the new drachma or the new peseta, for instance. This national currency would be used for domestic transactions, pension benefits, and the salaries of public sector employees………………………………………..Full Article: Source

Posted on 18 October 2012 by VRS |  Email |Print

New Zealand looks unlikely follow Australia and join the world’s biggest Emissions Trading Scheme. In August, Australia announced it would link its carbon trading scheme to Europe’s in 2015, allowing Australian credits to be sold into the $100 billion market from 2018.
An advisor on carbon markets at the European Commission in Brussels, Damien Meadows, says New Zealand’s policy of allowing unlimited imports of credits from overseas, including developing countries, is a barrier to linking with Europe’s scheme………………………………………..Full Article: Source

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