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Commodities Briefing 03.Apr 2013

Posted on 03 April 2013 by VRS |  Email |Print

It would be logical to assume that the rise in China’s official Purchasing Managers’ Index to an 11-month high would signal stronger commodity demand, but this isn’t guaranteed.
What the increase in the PMI to 50.9 in March from February’s 50.1 does show is that the modest expansion in China’s economy remains on track. At these levels gross domestic product growth should easily achieve the government’s 7.5 percent target for 2013, and is more likely to be closer to 8 percent………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Believe it or not, the price of corn really does matter to the average investor. Commodities from industrial metals, silver and copper are also getting hit. Copper has been coined as having its PhD in economics. If copper goes up, the economy does well. Now, clearly something is amiss there.
Then, silver is the benchmark for liquidity. Typically, silver goes up and makes new highs, versus what it’s doing right now, which is making new lows. That’s because of all of the liquidity in the system………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

After poor performance in the last few months, some investors have cut back their exposure to commodities and boosted positions in equities. While there are cyclical reasons to support this asset allocation decision, BofAML’s most recent work suggests commodity and equity returns are comparable in the very long run.
The S&P GSCI TR index only has history going back to 1970, while DJ UBS and MLCX TR indices merely date back to 1990. The Bank built a commodity index going back to 1930 and calculated average returns of 8% with a standard deviation of 11% in the 1930-2013 period, compared to 11% returns and 16% deviation for equities (S&P 500 TR)………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

The International Monetary Fund (IMF) has called for an end to the US$1.9 trillion in fossil fuel subsidies handed out worldwide each year.
A study commissioned by the organisation reveals that 8% of all government revenue globally is spent subsidising unsustainable energy with 40% of the $1.9 trillion total from advanced economies. The group’s Energy Subsidy Reform study found that an overhaul could have beneficial results for a nation’s economy………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

China is on course to overtake the U.S. as the world’s top crude importer by 2014, as the Asian country’s growing refining capacity boosts demand and America’s fracking boom cuts the need for foreign oil, OPEC said.
Imports to China may surpass 6 million barrels a day by the end of this year, according to an e-mailed report from the Organization of Petroleum Exporting Countries. U.S. oil imports declined 21 percent last year, according to the U.S. Energy Information Administration. Shipments may drop below 6 million a day in 2014, according to OPEC………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

For the oil market specifically, two massive structural changes have occurred since 2008. First, U.S. oil supply from horizontal drilling in tight shale formations has created a reversal of the four decade-long decline we’ve seen in U.S. oil production. When I say reversal, I’m not just talking a minor blip; I’m talking about erasing a 40-year decline within five years. This truly is a massive structural change to U.S. oil markets.
On top of that, in conjunction with the Great Recession, the world has figured out that there’s too much debt, and most of the developed world is going through a deleveraging period. Historically, whenever you deleverage, you get subpar economic growth, and subpar oil demand growth………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

The price of gold has reached bubble territory and stands to fall 15 percent by year’s end, Societe Generale Head of Commodities Research Michael Haigh said Tuesday on CNBC.
“We’ve been bearish gold for a couple of months now,” he added. “Coincidentally, we put out our longer report today looking at the end of the gold era right before we saw a 1.5 percent selloff.” On “Fast Money,” Haigh expanded on his SocGen note, titled, “The End of the Gold Era,” and making the case that a perfect storm is brewing for gold………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Gold futures are trading slightly higher in the early part of Wednesday’s Asian despite French bank Societe Generale offering up a dismal outlook for the yellow metal on Tuesday.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery are up 0.03% at USD1,577.05 per troy ounce in Asian trading Wednesday. Bullion settled down 1.51% at USD1,576.65 a troy ounce in U.S. trading on Tuesday………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Gold swung between gains and losses in New York as investors weighed slowing physical demand against concern that Europe’s debt crisis may worsen. Silver was little changed after falling into a bear market.
Cypriot government officials meet with the European Union and the International Monetary Fund today to seek seek easier bailout terms, before a meeting of euro-area finance officials later this week………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

When did you last find the gold market in the grip of bears? While since 2001, the gold market has been moving only one-way, which is up, only with some consolidation and correction in the last two years. But history also suggests that gold prices can fall, and they can fall sharply.
If you think that bear runs, if any, in gold may not last long and prices will always rebound sooner, then let me remind you that gold prices were in a bear grip for 12 years prior to the current bull run………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

The recent price action of gold has been frustrating for some people. The precious metal logged its second consecutive quarterly loss and remains in consolidation mode amid the greatest financial crisis since the Great Depression. However, there are still plenty of buyers around the world that are interested in gold.
Gold finished 2012 with a solid 7 percent gain, capping its longest steak of annual gains since at least 1920. Despite the performance, gold entered the new year on weakness. The fourth quarter was gold’s weakest quarter in four years and the decline has yet to stop………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Silver futures are down -2.3 percent today, and look poised to settle at 9 month lows of around $27 an ounce. Just two years ago, prices were trading in the high $40s. What happened?
StockTwit’s Peter Brandt recently posted a note from research outfit Factor that offers a good explanation. Factor highlights four myths Silver bulls keep telling themselves: 1. Silver is just like gold in its inherent, store value. 2.There is an exact relationship between the price of gold and the price of silver. 3. Paper silver contracts don’t represent the REAL silver.4.There is an imminent silver shortage………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

It’s one of the biggest mysteries in finance right now. I mean, it’s a real head-scratcher .. On one hand, demand for silver coins has been off the charts. With so many investors wanting to swap currency for silver, neither the U.S. Mint nor the Royal Canadian Mint has been able to keep up with purchase requests.
In fact, the U.S. Mint actually had to suspend sales of the “Silver Eagles” just a couple of weeks into the New Year - and it still smashed the all-time monthly sales record in January by selling 7.5 million of the hugely popular coins………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Of my recent contrarian picks, it is worth noting that the only companies that lost substantial money were a couple of commodities companies: Kazakhmys and Vedanta. I have worked out that mining companies are different from other companies.
Because of the highly cyclical, supply and demand led nature of commodity markets, share prices can be extremely volatile. Kazakhmys’ price is a quarter of what it was in 2011. Rio Tinto’s share price is half of what it was a few years ago………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Gold prices finished Tuesday lower once again, as futures for June delivery dropped more than 1.5% on the session. This pushed the precious metal below the $1,600/oz. mark once more , and led to renewed worries over a further slump in the commodity’s price going forward.
This is especially true given the robust level of dollar strength in the market, and the continued bullishness in the equity world, factors that are dulling safe haven appeal across the board. In fact, this somewhat unusual combination has devastated gold prices so far in 2013, pushing the commodity down by nearly $100/oz since the start of the year………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Silver ETFs have fallen to their lowest levels in over seven months as a recent smackdown in commodities suggests natural resource investors are concerned about global growth despite the S&P 500 rising to new all-time highs.
The $9.9 billion iShares Silver Trust (SLV) was off 1.7% in early trading Tuesday after falling the previous four sessions. The silver ETF was down about 8% year to date heading into Tuesday’s sell-off………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

It has been a rather forgetful year for the British pound so far as the currency lost close to 6.5% versus the U.S dollar since the start of January. This makes it one of the worst performing currencies on a year to date basis after the Japanese yen (read DXJ–Best ETF to Play the Japan Rally).
The economy suffered a credit rating downgrade of one notch by rating agency Moody’s in mid February this year. Also, recessionary concerns have been plaguing the economy for a long time………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

CF Partners, active in the commodities market since 2006, has launched a long/short equity hedge fund after hiring Alvaro Ventosa from Spanish fund manager Cygnus Asset Management. Commodity trader CF Partners has launched a long/short equity fund that will trade the utilities, oil and infrastructure sectors.
CFP Equity Fund is CF Partners’ first hedge fund. It started trading in December 2012 with $29 million of internal money and it is now open to external investors………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

If you’ve ever been into horses, you know that you can spend as much money as you’ve got—and plenty more—on their care. Personally, I like draft horses; Clydesdales, in particular. But the thing about a draft horse is that it can eat a lot of food. And during the drought last year, hay costs soared.
Agriculture, as an investment theme, is consistently on my mind, but it is a stock market sector that is limited. The marketplace is dominated by only a handful of companies. There aren’t a lot of publicly traded agriculture stocks that would be considered mid-cap; the same goes for small-cap companies………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

India’s above average economic growth has attracted not only domestic, but also overseas investors. If you are a non-resident Indian (NRI) who remits money onshore, you are in a unique place given the long-term investment opportunity in the Indian equity market. An aspect of investing that you should consider is currency risk, which you face when converting funds from another currency to invest in Indian rupees.
A part of the return gets hit by the change in the value of the rupee. Typically, this is the rupee value against the US dollar………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

European Union carbon permits for December rose for the fourth time in five days as traders focused on lawmakers’ proposals to boost prices after data showed emissions declined 1.4 percent in 2012. The benchmark future closed 2.7 percent higher at 4.94 euros ($6.34) a metric ton on London’s ICE Futures Europe exchange, after having fallen as much as 6 percent in earlier trading.
Carbon emissions fell to 1.787 billion tons last year from 2011, according to incomplete European Commission data from 89 percent of factories and power stations. Discharges from the 68 percent of airlines that submitted reports by the April 30 deadline totaled 55 million tons, the data showed………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

A senior Chinese official has told a conference on climate change that his nation faces a “horrific” future with unimaginable environmental consequences if China does not act now to establish a carbon trading scheme and install more renewable energy. Dr Jiang Zhaoli made the comments at the Australia-China Climate Change Forum, held last week at the University of NSW (UNSW).
Federal Minister for Climate Change, Industry and Innovation, Greg Combet co-hosted the bi-lateral conference, alongside his Chinese counterpart, Vice-Chairman Xie Zhenhua, China’s most senior minister responsible for climate change. Mr. Zenhua said China planned to reduce carbon emissions by 40-45 percent by 2020………………………………………..Full Article: Source

Posted on 03 April 2013 by VRS |  Email |Print

Until 2012, Europe was central to the global carbon market; heck, it was the only “real” market. Carbon offset project developers invested billions to earn Certified Emission Reductions (CERs) under the Clean Development Mechanism (CDM) and sold them to European companies and traders participating in the European Union Emissions Trading Scheme (EU ETS).
Projects had sprung up in almost all parts of the developing world. Countries otherwise isolated in the weird geopolitical arena, like North Korea and Iran, were also hosting CDM projects. With too much supply, the quality had to be affected………………………………………..Full Article: Source

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