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Commodities Briefing 19.Nov 2012

Posted on 19 November 2012 by VRS |  Email |Print

When forecasters struggle to know if we’re heading for a triple dip of recession, and the risk of falling off a fiscal cliff next month, a much more distant horizon has been scanned this week.
This one gets less reliably predictable the further out you go, but allowing for that, the view is both fascinating and alarming. The International Energy Agency (IEA) has published its annual World Energy Outlook, and it’s hard to think of any time when there’s been more change under way……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

The IEA’s 2012 World Energy Outlook has spurned many a headline since its release on Monday, which should be none too surprising given it is 688 pages long. The executive summary of the report can be viewed here (which is 676 pages less than the full version), while through even more distillation here are ten points I have gleaned from it in the past few days:
1) The number of vehicles on the road is set to double to 1.7 billion by 2035. Increasing demand for road freight is responsible for almost 40% of the increase in global oil demand. 2) US oil production is set to surpass that of Saudi Arabia by 2020 to become the largest global oil producer (caveat: this will only likely be until the mid-2020s, when Saudi takes back this accolade)………………………………………Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

America’s newfound natural-gas bounty has already sparked arguments over whether or not to export it. Soon, it will be oil’s turn. The International Energy Agency reckons the U.S. could become a net oil exporter around 2030. It is a tantalizing prospect. But crude-oil exports will make headlines well before 2030. Try next year.
U.S. crude-oil exports are heavily restricted. Refined products such as gasoline can be shipped abroad more easily—indeed, the U.S. became a net exporter of these last year for the first time since 1949. Refiners have been selling increasing amounts in foreign markets as domestic demand has sagged amid economic sluggishness and renewed energy-conservation efforts……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

The Organisation of Petroleum Exporting Countries (Opec) recently issued its annual World Oil Outlook and while the report may not please Opec producers, it might not overly displease them either.
Right at the beginning, Opec says “Ongoing geopolitical tensions, continuing excessive speculation in oil markets, a fragile financial and banking system, an anaemic economic recovery despite the extraordinary fiscal and monetary support, persistent high unemployment and social unrest in a number of countries have all made 2012 a challenging year for oil producers and consumers everywhere.” As most of these problems won’t go away easily or soon, they are, therefore, the background setting for the outlook Opec makes in the long term to 2035……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

OPEC member Kuwait is headed for its 14th consecutive year of budget surplus thanks to strong oil prices and high production, an economic report said on Sunday.
The oil-rich Gulf state is expected to post a surplus of between 9.8 billion dinars ($34.8 billion) and 12.8 billion dinars ($45.4 billion) in the current 2012/2013 fiscal year, the National Bank of Kuwait said. The projections were based on an average oil price of between $104 and $107 a barrel for Kuwaiti crude, the NBK report said……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Whilst some, most notably the IEA, claim that shale oil will help the US become the largest oil producer in the world, OPEC has never really acknowledged the significance of tight oil in the US until now.
In its recently released World Oil Outlook 2012, it wrote that, “given recent significant increases in North American shale oil and shale gas production, it is now clear that these resources might play an increasingly important role in non-OPEC medium- and long-term supply prospects.” This is a huge admission by OPEC, and one that could influence global oil markets, as previously OPEC has never been keen on new technologies such as fracking……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Strong evidence that the price of gold tends to follow the price of oil was given in the Seeking Alpha article titled, “Oil Will Drive Gold Prices Even Higher”. The relationship between oil and gold prices is primarily caused by two factors: higher oil prices cause increased inflation and also leads to expansion of the trade and fiscal deficits in the United States, the world’s largest oil importer.
The International Energy Agency (IEA) has recently issued a report predicting the U.S. will become the world’s largest oil producer, and may even begin exporting by the year 2030. The obvious question then becomes: will increased U.S. oil production kill the bull market in gold prices?………………………………………Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Comex gold futures ended lower on Friday as uncertainty on the outlook for the global economy dragged on prices. The euro zone debt crisis dragged the block into its second recession since 2009 in the third quarter despite modest growth in Germany and France, data showed on Thursday.
The markets are on their toes due to the looming “fiscal cliff” phenomenon, as it could push the US economy back into recession. Prices gained slightly on Friday as markets rose amid on-going missile strikes between Israel and Gaza………………………………………Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Gold gained for the first time in three days, climbing alongside other commodities as the dollar weakened and investors boosted holdings in exchange-traded products to a record.
Spot gold advanced as much as 0.4 percent to $1,721.30 an ounce and traded at $1,720.70 at 9:10 a.m. in Singapore. The metal slumped 1 percent last week as the dollar strengthened for a fourth week against a six-currency basket in the best run since June. Holdings in ETPs backed by bullion rose to 2,603.692 metric tons on Nov. 16, data compiled by Bloomberg show……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

The final trading session of the week opened with losses across the board in precious metals values. Gold market players continued to show concern about the latest reported dip in global demand for the yellow metal. While last Friday surveyed traders were almost unanimous in their forecast for higher gold prices this week, gold is now showing that it could finish the week with a net loss instead.
Spot quotes showed gold falling by $5 to 1,711 and silver by 25 cents to $32.35 the ounce. Reuters News relays that “technical analysis suggests that spot gold could test support at $1,701 an ounce, a break below which will open the way towards $1,672.24,” according to its market analyst ,Wang Tao……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

As history has shown again and again, hard currencies like gold and silver are perhapsthe only truly safe long term investments. Part of the safety of these assets arises from the fact that they are traditionally accumulated and hoarded by individuals, especially in financially challenging times and periods of high inflation. Even more importantly, precious metals like gold and silver are liquid assets that can be readily sold for currency or exchanged in a barter situation.
Those two qualities alone make the precious metals very unique investment assets. This is something that the anti-gold antagonists seemingly fail to understand. Alternatively, perhaps they understand it so well that they are actually scared of gold……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

There is a reason why it has not been easy to trade gold or silver, of late. One area where information is least reliable is in the middle of a trading range. That is precisely where the price of gold is currently, on the larger monthly time frame.
However, while waiting idly until clarity re-enters the picture, we can do some stage-setting in preparation for what is to come, in either direction……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Rising investment demand may raise silver prices 12 per cent to $36 an ounce (oz) by the year-end and $50 an oz by the end of 2013, according to ‘Silver Market Review’, an interim report by Thomson Reuters GFMS, a London-based global precious metals consultancy.
In India, silver prices would stand at Rs 70,000 a kg by the year-end and about Rs 90,000 a kg by the end of next year. Yesterday, the metal closed at $32.22 an oz. In Mumbai, silver is trading at about Rs 61,000 a kg……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Gold and silver have traded a bit lower on Friday and are both heading for a loss of 1% on the week in dollar terms. This is to be expected after the 3% and 5% returns of last week and the trading action this week has all the hallmarks of consolidation.
Interestingly, the sharp falls seen in the Japanese yen this week have created the unusual situation of gold and silver prices being nearly 1% higher in yen terms while lower in most fiat currencies……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

The world’s most abundant metal aluminium, has been an under performer in the base metals complex owing to weak demand and rising inventories at LME.
The metal that has wide usage in packaging, aerospace, automobiles, construction and power, amongst other sectors, has been witnessing slackening demand due to slowdown in global economy, especially China, said Bitupan Majumdar, lead analyst for commodity and currency derivatives at JRG Wealth Management. For 12 months in a row, Chinese manufacturing continued to contract during October, as per data from HSBC……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

In “Platinum 2012 Interim Review” Johnson Matthey, a world leader in platinum distribution had projected a shortfall of 915,000 ounces in palladium for 2012, a substitute for platinum, due to lower mine supply, reduced Russian stock sales (down to 250koz from 755koz in 2011) and record demand from auto catalytic manufacturers.
The report triggered a 7 percent jump for palladium and only a 2 percent on platinum; Saxo Bank said in a report……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Despite their longer-term concerns with respect to the nickel market, Deutsche Bank expects that an improvement in overall physical conditions over the next couple of months, in addition to favourable seasonality trends could see the nickel price move off its recent lows around $16,000/t towards the $17,500/t level.
Nickel price performance has been reasonably strong from the end of February to mid January. This pricing trend seems to correspond to a regular tightening in stainless markets in Europe……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

What are the benefits of using a CTA (managed futures) fund in a portfolio? What is a reasonable allocation, and where should that allocation come from? Commodity trading advisors (CTAs) are an important strategy that should be considered as part of a diversified portfolio.
CTAs can be characterised into three groups based on the length of trends and holding times. Trends and holding times of less than eight to nine days are considered short term, three months to six months as medium term and beyond six months as long-term. Each group has a different response to market volatility, and sometimes market volatility will not work for CTAs – in particular, when market volatility is high but a trend is not identifiable. ………………………………………Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

With equity markets sputtering thanks to the fiscal cliff, investors are once again looking to commodities for exposure. Luckily there is no shortage of ways to play this market in exchange-traded form, as literally dozens of ETFs and ETNs occupy the segment.
However, many investors are probably not getting the returns they want in many of these products, as most focus in on front-month futures and continually roll from one front month contract to the next. This process usually results in a great deal of contango, a factor that can destroy returns when compared to spot price performance………………………………………Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

There was a time when commodities trading was only for the most sophisticated of investors. Whether it’s gold, oil, agricultural products or just a commodity index-based ETF, the world of raw materials trading has expanded tremendously in the past 10 years and is now accessible to the everyday trader.
In fact, in September 2012, The Financial Times wrote about the popularity of commodities investing in pension funds of schools and municipal retirement associations………………………………………Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

The Ugandan and Tanzanian shillings are expected to come under pressure next week because of a surge in dollar demand from domestic importers, while the Ghanaian cedi is expected to benefit from a $650 million syndicated loan. Uganda’s shilling is forecast to struggle against the dollar in the coming week as a spike in demand from fuel firms and other importers adds further pressure on already tight dollar supplies.
On Thursday, commercial banks quoted the shilling at 2,605/2,615, weaker than last Thursday’s close of 2,587/2,597. Pressure has been mounting on Uganda’s currency this week, mainly driven by importers looking to stock goods for Christmas holiday shoppers. The shilling has shed nearly 5 percent of its value in the year to date……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

Amid re-ignited concerns over the macro-economic scenario in India and abroad, the rupee has again slipped below the 55-level against dollar, the largest fall among its major peers globally in the past 30 days.
As against the US dollar, the rupee has sharply fallen from 52.88 levels one month ago to 55.16 on Friday, marking a drop of over 4.2 per cent. This is the largest fall vis-a-vis the US dollar in the past one month among 25 major currencies across Asia, Americas, Europe, the West Asia and Africa……………………………………….Full Article: Source

Posted on 19 November 2012 by VRS |  Email |Print

The European Union said it will “stop the clock” for aviation in the E.U.-wide carbon trading scheme for one year to give way to the United Nations international aviation body to deliver on a global market-based approach to greenhouse gas regulation in the sector.
European Climate Commissioner Connie Hedegaard said the move results from encouraging signs from the International Civil Aviation Organization during a council meeting last week……………………………………….Full Article: Source

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