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Commodities Briefing 06.Mar 2013

Posted on 06 March 2013 by VRS |  Email |Print

Observing Brent in the first two months of 2013 has been a bit like watching a broken barometer. It is not clear what the market has been reacting to, as prices swing to and fro, but it certainly hasn’t been fundamentals. Volatility has fallen to its lowest level for almost two decades. But what remains seems to have been induced by hedge funds rather than changes in physical supply and demand.
The now customary rally at the beginning of 2013 started a little later than last year. But between Jan 17 and Feb 8, front-month futures climbed steadily from $110 to more than $119 per barrel, before subsiding with the same steady consistency and ending up back where they started by the start of March……………………………………….Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

An excellent observation from John Kemp over at Reuters on Tuesday regarding the spot/forward disconnect we’ve been talking about: The increasingly close linkage between hedge funds and spot prices since 2010 has also coincided with a sharp reduction in the correlation between front-month and far-forward prices. Correlation between spot month and forward prices, generally above 90 percent until 2010, is now often less than 50 percent.
Now the spot and forward markets have become almost entirely separated. Something has clearly changed in the way the futures market works. Hedge funds and other money managers are the prime candidates………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

So Hugo Chávez is dead. Now what? It’s still early days. But one thing to keep an eye on is what Big Oil’s reactions could be.
Remember, Venezuela has the world’s largest oil reserves in the world. The country has proven oil reserves of 297.6bn barrels at the end of 2011, compared to Saudi Arabia’s 265.4bn barrels, according to data from Opec………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Few pieces of data are as important for the oil market as the monthly estimate of China’s oil imports released by Beijing’s General Administration of Customs.
China’s rapidly growing economy accounted for a third of global oil demand growth in 2012, and with efficiency measures and slow economic growth expected to weigh further on demand in the industrialised world, that is unlikely to be a one-off………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Normally, you can’t expect interest or dividends from investing in gold. But this has changed, thanks to a convoluted new vehicle launched by Credit Suisse: an ETN (Exchange-Traded Note) called Gold Shares Covered Call ETN.
As we’ve said before in this space, ETNs are IOUs issued by investment banks based on the returns of particular indexes. In this case, the IOU is issued on the quirky “Credit Suisse NASDAQ Gold FLOWS 103 Index.”……………………………………….Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

South Korea’s central bank said Wednesday it increased its holding of gold in three months in February in a bid to diversify the portfolio of its foreign exchange reserves worth more than US$320 billion.
The Bank of Korea (BOK) said it bought 20 tons of gold, raising the central bank’s gold holdings to 104.4 tons valued at US$4.79 billion as of end-February. The move marked the BOK’s fifth purchase of the yellow metal since July 2011 when the bank bought gold for the first time in 13 years. It also bought gold in November 2011, July and November 2012………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

The gold price is set to flatten in 2013, says new analysis from Bank of America Merrill Lynch, before rising in 2014 on renewed currency weakening by central banks. The giant US bank’s chief gold analyst has cut next year’s price target, however – down by 10% from $2000 per ounce – and cut the 2013 forecast by 7% to an average gold price of $1680.
The gold price averaged $1669 in 2012 according to trade body the London Bullion Market Association………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

There are a lot of words in the dictionary to describe what you need these days to be a gold investor: Patience, endurance and fortitude are some of them. Recently investors were beginning to lose their staying power. But, in the past, it has often worked out that just as investors’ patience runs out, gold comes charging in.
Sentiment towards gold is so low that you can scrape the floor with it. Two weeks ago gold exchange-traded funds suffered their largest outflow since January 2011 with gold falling on Friday as low as $1,572.80………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

The copper market is bracing for a wave of new mine openings this year. Copper prices recently fell to three-month lows as investors and traders anticipate an onslaught of supplies, estimated to be the biggest increase in global copper mine output in 13 years.
At the same time, the outlook for growth in copper demand remains dim: The No. 2 and No. 3 users of the industrial metal, Europe and the U.S., continue to face economic headwinds. Copper demand is highly correlated with manufacturing activity because it is used in many goods, from electronics to automobiles to home appliances………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Investors in the global mining industry are calling on mining companies to “get smarter” and refrain from making investments that contribute to depressed commodity prices, said the chief executive of commodities titan Glencore International PLC.
“Pension companies have a hole in their pockets because the mining companies have not performed,” Ivan Glasenberg told journalists on a call. Mining companies are “not kicking out sufficient dividends, we’re not getting growth in value,” he added………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Price wars have been escalating across the investment world and that means consumers benefit from these competitive dynamics as prices decline. In the ETF marketplace, BlackRock recently slashed fees on many of its funds in response to market share losses to Vanguard, the traditional low cost provider.
Charles Schwab, a relative upstart in the ETF business, has undercut Vanguard’s prices in an effort to take market share. Since ETFs are hot commodities with few supply limitations, a competitive marketplace naturally drives down costs to the benefit of consumers. ETF investors reap the benefits without much effort………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

I’ve been saying for a while that investors should have more exposure to commodities. But resources like industrial metals, gas and oil aren’t that easy to tuck away in your investment portfolio. So, how do you get exposure?
Probably the most common approach is to buy exchange-traded funds (ETFs). You can buy them through your regular stockbroker, and they’re designed to move with various commodity indices – anything from aluminium, through to hogs, soybeans and zinc………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Leveraged exchange-traded funds (ETFs), which provide magnified exposure to different market indices, have provided everyday investors with powerful hedging and speculative trading instruments that were once the reserve of institutional investors.
These instruments typically provide two (2x) or three-times (3x) exposure – long or short – to a specific financial market index covering equities, bonds, commodities or currencies………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

The value effect has been a very potent source of alpha in the past. I advocate investing in stocks based on value over trying to divine the price movements of commodities. Investors seeking alpha in the agricultural sector are better served by trying to find cheap stocks to buy instead of trying to guess the price movements in futures markets.
This perspective is also based on the observation that commodity markets are tough to predict. A price performance comparison between popular funds, such as the iPath Pure Beta Agriculture ETN (DIRT) and the iPath DJ-UBS Agriculture TR Sub-Idx ETN (JJA), versus corn futures has shown that a long corn position outperformed almost all commodity and commodity-related investment products in 2012………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

India’s sixth nationwide commodity futures trading platform, Universal Comm-odity Exchange (UCX), is set to go live in April this year with at least 10 agri and non-agri commodities in its kitty. The exchange has enrolled a little 200 members for trading on its platform, which is awaiting the issuance of a unique trading code by the regulator, Forward Markets Comm-ission (FMC).
“We are in the process of getting a unique trading code for each of our registered members. Once that process gets completed, we would be ready for launch,” said Ketan Sheth, managing director of Commex Technologies, the promoter of UCX………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

The Shanghai Futures Exchange, the country’s leading commodities market, is expected to launch after-hours trading before the end of the year, in a critical step to gain a foothold in global futures trading. The exchange will further boost its international ambitions by expanding the list of futures contracts in the coming years, including crude oil - one of the world’s most important commodities - said Yang Maijun, general manager of the exchange.
“We are actively making preparations and hope to roll out night trading this year,” Yang, a national legislator from Shanghai, said on the sidelines of the first session of the 12th National People’s Congress………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Glencore’s net income fell by a quarter last year due to lower prices for commodities, but it made more money from trading so did not suffer as much as some rivals. That modest drop was important as Glencore is just a month away from its takeover of miner Xstrata – which will make it the world’s fourth-largest diversified mining company.
The company said nothing about what assets it might dispose of after the merger. The market has been keenly awaiting a roadmap for the combined Glencore-Xstrata and had hoped that Glencore would expand on its post-takeover strategy as it announced the latest results………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

The euro struggled to gain ground on Wednesday with investors sidelined ahead of the European Central Bank policy meeting, but commodity currencies made the most of improved risk appetite that saw the Dow Jones hit a record-closing high.
The better mood was fuelled by the growing prospect of further easing by the ECB, Bank of England and Bank of Japan, along with the Federal Reserve’s commitment to bond buying………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

Although US soybean farmers have grown in the past five years, the industry will continue to face revenue and profit pressures from international operators, with Brazil expected to overtake the United States as the top provider of soybeans in the next five years.
For these reasons, industry research firm IBISWorld has added a report on the soybean farming industry. “A surge in South American inventory is responsible for the United States experiencing a steadily declining share of global exports. The 2012 drought has also reduced the supply of soybeans, with US exports falling 7.1% for the year………………………………………..Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

China will introduce a new environmental protection tax that will include a levy on carbon dioxide emissions, according to a report from Xinhua News Agency, China’s official press agency.
The Xinhua report is based on an article published on the website of the Chinese Ministry of Finance. The article quotes the head of the ministry’s tax division policy, Jia Chen, as saying, “the government will collect the environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon dioxide emissions.”……………………………………….Full Article: Source

Posted on 06 March 2013 by VRS |  Email |Print

RWE AG (RWE), Germany’s second-biggest utility, boosted carbon trading by 65 percent in 2012 before the European Union halted free allocations of emission allowances this year.
RWE traded 1.06 billion metric tons of carbon permits in 2012, compared with 644 million tons the previous year, company spokesman Michael Murphy on Essen said in an e-mail today. Starting this year, west European power generators must buy all of their emission permits until at least 2020, after getting most of their allowances for free over the past five years………………………………………..Full Article: Source

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