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Commodities Briefing 18.Jan 2013

Posted on 18 January 2013 by VRS |  Email |Print

Commodities may never have comprised a large chunk of a pension fund’s portfolio but the asset class did generate quite a buzz over the past few years on the back of China’s seemingly unstoppable economic engine.
The excitement has since died down as the country’s growth slowed and the eurozone crisis exploded. Institutions remain wary although fund managers believe there are benefits to be reaped if markets are navigated carefully………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Commodities have a close relationship with the dollar; most commodities tend to be priced in dollars so they are sensitive to changes in the value of the greenback. Commodities also tend to be correlated with risky assets; however, they haven’t followed equities higher since the start of the year.
As a firm believer that you can’t look at one market (say FX) in isolation, I will try to explain in as simple terms as possible what commodity prices may be telling us and the impact this could have on the broader market………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Grains represent agriculture investors’ better bet for most of 2013, but it is soft commodities, in particular cotton and sugar, which will end the year on the up, Macquarie said.
The bank, in a major crop report, rated corn as its “favourite in the short-term” in agricultural commodities, forecasting a return in prices to an average of $8.50 a bushel in the April-to-June quarter, well above the level that futures are pricing in………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

US oil production should increase by 490,000 barrels of oil per day this year, according to the Organization of Petroleum Exporting Countries, to reach an average of 10.4 million bpd, Graeber writes.
The Organization of Petroleum Exporting Countries in its report for January said the United States in 2013 may post the highest oil supply increase among non-member states. U.S. oil production should increase by 490,000 barrels of oil per day this year to reach an average of 10.4 million bpd. OPEC said much of the production increase should come from more drilling in the Gulf of Mexico and the oil boom under way in North Dakota………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will curb its increase in shipments this month as Saudi Arabia reduced production and mild temperatures check demand, according to tanker tracker Oil Movements.
The group that supplies about 40 percent of the world’s oil will export 23.64 million barrels a day in the four weeks to Feb. 2, up 70,000 barrels, or 0.3 percent, from the previous period, the researcher said today in an e-mailed report. The figures exclude Angola and Ecuador. Shipments were to gain 210,000 barrels a day in the four weeks to Jan. 26………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Some numbers in the global oil supply/demand balance have shifted fairly dramatically in just one month’s time, possibly putting an end to the big world inventory build. You can look at numbers until you are cross-eyed. But if you’ve only got a minute to analyze, you look at what the International Energy Agency says is the call on OPEC crude, and you compare that to what OPEC actually is producing.
The call is calculated by taking IEA’s estimate of global demand, subtracting its estimate of non-OPEC supply, subtracting its estimate of OPEC NGL production, and you have the call………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Crude Oil is expected to be the slowest growing of the major fuels to 2030, with demand growing at an average of just 0.8% a year, according to BP Energy Outlook 2030. Nonetheless, this will still result in demand for oil and other liquid fuels being 16 million barrels a day higher in 2030 than 2011, the report added.
All the net demand growth will come from outside the OECD – demand growth from China, India and the Middle East will together account for almost all of net demand growth………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

In December, Goldman Sachs commodity analysts caused quite a bit of chatter when they called the end of the bull market in gold. The bank’s central thesis is that the U.S. economic recovery finally takes off in 2013, and Goldman expects that to drive a selloff in the gold market as investors rotate away from traditional “safe-haven” investments.
At the time, the analysts wrote, “We lower our 3-, 6- and 12-mo gold price forecasts to $1,825/toz, $1,805/toz and $1,800/toz and introduce a $1,750/toz 2014 forecast. While we see potential for higher gold prices in early 2013, we see growing downside risks.”……………………………………….Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Iamgold Corp. (IMG), the gold producer with mines in Canada and Mali, says the metal will rise to a record $2,500 an ounce as global output peaks and ore grades decline. The industry has exploited its best-quality gold reserves and is being forced to tap lower-grade and higher-cost deposits, Iamgold Chief Executive Officer Steve Letwin said.
“I really think now we are at Peak Gold,” Letwin, 57, said in a Jan. 10 interview at his company’s Toronto headquarters. “Nobody has seen the kind of production profiles they thought they were going to see.”……………………………………….Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Gold is expected by many to continue to sparkle as an investment opportunity over the next two years despite a 12-year bull run that briefly took the precious metal as high as US$1,900 an ounce before pulling back.
Investment strategist Gavin Graham says gold should rise from its current price of US$1,689 an ounce to approach the 2011 high price later this year before perhaps hitting US$2,000 in 2014. “I know a number of people have got US$2,000 an ounce pencilled in at some stage over the next 18 months to two years and that’s not an unreasonable forecast,” the president of Graham Investment Strategy Ltd. said………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

“Amazingly,” says Thursday’s note from the commodity team at Commerzbank in Frankfurt, “the German Bundesbank’s [statement on] the future storage of its gold reserves attracted more attention yesterday than the latest data from Thomson Reuters GFMS – the research institute, which specializes in analysing precious metals.”
“Criminal masterminds and Hollywood scriptwriters have been put on notice,” says the Financial Times today, calling Germany’s seven-year plan to move 674 tonnes of gold from New York and Paris to Frankfurt “one of the biggest publicly announced shipments of the precious metal on record.”……………………………………….Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

The Base III norms may not have any impact on the ongoing bull market as Gold was considered ‚riskless asset, according to Przemyslaw Radomski, CFA Founder, Editor-in-chiefl of Sunshine Profits.
The Basel III recomendations have categorised assets in to Tier 1 and Tier 2 abolishing the tier 3 introduced in Base II recomendations. Under these recommendations gold remained eligible collateral with a haircut of 15% just as it was under Basel II………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

We have had a great pull-back presenting precious metal investors with opportunity buys for the long term. My primary thesis, much of which is laid out here, is that the endless easy money policies from central banks around the globe have created a long-term tailwind for the various precious metals.
In recent articles, I have suggested that gold prices have long-term tailwinds in the form of extensive inflationary pressures and have recommended considering several gold plays, most notably the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU)………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Palladium prices rose to the highest in 16 months while platinum touched $1,700 a troy ounce for the first time in three months as supply-side problems buoyed the white precious metals.
The announcement on Tuesday that Anglo American would shut down platinum mines with total capacity of 400,000 ounces a year – or 7 per cent of global capacity – has reinvigorated investor interest in the markets for the so-called “platinum group metals”………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Whilst the outlook for the Chinese economy and domestic metals demand have dominated recent attention on the base metals complex, stronger supply expectations for 2013 are a critical component of projected softer metals market balances according to the latest Barclays Metals Magnifier.
Barclays forecasts point to an average 4.3% supply growth level in 2013, versus just 1.2% in 2012, supported by a combination of new projects, expansions and recoveries from disruption last year………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

History shows commodity prices tend to trend sideways for 10–20 years, and then jump upwards in response to structural changes in the global economy, before resuming their sideways trajectory. That makes clear economic sense.
An event like China’s rapid industrialization and urbanization inevitably causes a sudden price leap, as suppliers scramble to meet the upsurge in demand. Eventually, producers bring new (and sometimes more marginal) resources on line and supply begins to catch up, at which point the dramatic price increases stop………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

The agricultural commodity market experienced quite the volatile 2012, thanks to the massive drought in the Midwest growing region last summer that resulted in lower yield and steeper price increases for grains like corn and soybean. With a majority of agricultural land affected by drought, total crop production was the least in several years, hampering not only crops, but livestock as well.
In short, the highly volatile agricultural commodity market is largely a function of weather and thus subject to extreme volatility. Below is what we see in store for corn, wheat, and soybean in 2013:……………………………………….Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

Goldman Sachs has reduced its risk taking in commodities to the lowest in eight years, the clearest sign of how Wall Street is facing up to tighter regulation. Goldman is the largest bank in commodities by revenues.
At its latest results presentation, the bank said on Wednesday it could have lost a daily $22m last year on average when measured by the so-called “value-at-risk” ratio, the lowest since 2004, when it was at $20m, and half the $44m of 2008, at the peak of the commodities boom………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

JPMorgan Chase & Co. (JPM) led lending to commodities companies for a third consecutive year even as global financing to the industry fell to the lowest since 2010.
The biggest U.S. bank by assets arranged $44.1 billion of loans, giving the New York-based company a 7.8 percent market share, according to data compiled by Bloomberg. Bank of America Corp. and Citigroup Inc. (C) came next. Three Canadian banks were in the top 10, from one a year ago, as European lenders retreated………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

As nations see Japan’s success in weakening the yen, some begin to take notice. Emerging markets nations often attempted to devalue their currencies in the past in order to improve competitiveness.
But these days developed economies are doing it as well. This morning the Russians called these policies “currency wars”, which is a good way to describe the latest developments. And such policies are not limited to Japan………………………………………..Full Article: Source

Posted on 18 January 2013 by VRS |  Email |Print

A new bill to end U.S. green energy tax credits doesn’t go far enough. Washington is struggling with too many expenses and not enough revenue. Replacing preferential treatment for Uncle Sam’s renewable energy darlings with a tax on emissions that need discouraging could help fix that – while also reducing market distortions.
Republican Congressman Mike Pompeo on Tuesday reintroduced a measure that would eliminate all tax credits for energy, including the $18 billion (U.S.) worth over a decade renewed in the recent tax deal………………………………………..Full Article: Source

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