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Commodities Briefing 17.Apr 2013

Posted on 17 April 2013 by VRS |  Email |Print

Investors are reassessing commodities after sharp price falls and years of poor returns, but traders say the long-term outlook is still promising for those with specialized expertise. Global demand for raw materials will continue to increase as the populations of China and other emerging economies consume more, offering support for prices and creating local shortages and price imbalances that can provide attractive margins.
But those margins will be best captured by professionals in the big trading houses and specialists in investment banks or funds, rather than through passive investment funds that just track indexes…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The S&P 500 hit a record high in April, but that hasn’t driven professional money managers to new optimism on equity markets overall. According to the latest fund manager survey from Bank of America, they are tempering their enthusiasm for stocks – and have given up on commodities.
“Global investors are moderating their earlier exuberance in the face of somewhat lower conviction over global growth, though they remain positive towards equity markets overall,” Bank of America said in a release…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Global investors were less optimistic about the global economy in April as the growth outlook for China deteriorated, weighing on commodity and equity allocations, a closely-watched survey of fund managers showed.
The monthly survey from Bank of America Merrill Lynch, published on Tuesday, showed a net 18 percent of investors underweight commodities, the worst level since January 2009. Fund managers were surveyed before a sharp sell-off in gold and the release of weak Chinese data this week. The index reading shows the difference between overweight and underweight positions…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Commodity supercycle still has about a decade left, while the “mid-cycle pause” may last for 12 more months, according to JPMorgan Chase & Co.
“My view is that commodity supercycle has a decade left in it,” Michael Camacho, chief executive officer of commodities for Europe, Middle East and North Africa, told the FT Global Commodities Summit in Lausanne today. Marginal costs will increase for every commodity in the next 10 years, he said…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The status of commodities as a distinct asset class is under threat following another lousy start to the year for investors. Total returns on the two major commodity indices, the Standard and Poor’s Goldman Sachs Commodity Index and the Dow Jones-UBS Commodity Index, show losses of 4.4% and 3.7% respectively so far this year, while an investment in the S&P 500 equity index is up 12%, including dividends.
Both major commodity indices were flat in 2012, with investors missing out on a 16% return on equities. With the exception of the bull market in 2007-2008, commodities have generally underperformed equities since 1989…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Commodity prices are set to fall 2 percent this year from 2012 amid increased supplies of raw materials from crude oil to grains, the International Monetary Fund said.
Energy prices probably will decline almost 3 percent as supply rebounds from outages last year, the Washington-based IMF said today in an online report. Food prices will drop more than 2 percent on increasing world harvests, while metals may climb more than 3 percent on recovering world economies and increasing demand in China, the report showed…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

China’s economy will stay commodity-oriented even amid slower growth, according to JPMorgan Chase & Co.
Raw-material markets in the medium term will still be driven by China,Michael Camacho, chief executive officer of commodities for Europe, Middle East and North Africa, told the FT Global Commodities Summit in Lausanne today. The nation will still buy more raw materials, whether its economy grows at 6 percent or 8 percent a year, he said…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The “barbarous relic” is how Keynes referred to gold, and recent buyers of the stuff might not be too well disposed to it either. Over Friday and Monday, gold suffered its biggest plunge in value in 30 years. At one point on Monday, the market price of a troy ounce dropped by over $30 in just a few minutes. Even after a mild recovery yesterday, at $1,363 an ounce, the not so precious metal remains more than $200 below where it began on Friday.
Why the plunge? Very few of the explanations are especially persuasive. A slowdown in China (which is a major buyer of commodities)? Hardly news. Ditto the signs of a (very) mild pickup in the US…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Speculation on the cause is rife but one thing is certain – gold’s special place in finance means there will be repercussions. After years of attracting strong demand from fearful investors, a crash in gold prices on Monday caught the financial world on the hop.
In London the price was officially “fixed” at $1,395 per troy ounce, down 9.2% from Friday. Eight hours later on the New York market, the price for immediate delivery was down 9.1% from Friday at $1,365 an ounce. Most other commodity prices fell in gold’s wake. By Monday evening Brent oil fell below $100 a barrel for the first time since July 2012…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The facts in the public domain do not justify the sharp fall in the gold price over the past two trading days. At the time of writing, the price per 100oz is $1363, down over $200 since Friday’s open. The scale of the sell-off was the worst in 30 years, with the volatility index standing at the highest level in its history.
John Kemp at Reuters has calculated that based on a normal distribution, you would expect to see movements like Monday’s only once in every 500 million trading days, or two million years. The news which would justify such a price swing is curiously absent – in fact, my view is that the market ought to be bullish for gold. Something doesn’t add up…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Gold is where money runs when it’s scared. That’s what we found in the autumn of 2008, when the banking crisis unfolded. Gold has such strong cultural resonance – from Midas to Goldfinger – that it is hard to regard it rationally. And so when the price soars, or plunges, there is a temptation to try to extract some grand message for humankind: what is the plunge saying about the state of the world economy?
Well, maybe nothing. Gold is a market just like any other, in the sense that it is driven by supply and demand…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Although the U.S. stock market has generated a healthy glow this year, the commodity complex appears to be entering into a growling bear market. Just consider these stats: After a sharp drop on April 15, gold has plunged nearly 20% since the year began and nearly 30% since hitting an all-time high of around $1,900 per ounce in the autumn of 2011.
West Texas crude oil has slipped from $97 per barrel to $87 in just the past two weeks. Copper has slid roughly 12% this year and is off roughly 27% since the summer of 2011 peak. If aluminum breaches the 80 cents per pound mark (it’s currently at 82 cents), it will see its lowest levels since the summer of 2009…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The average price of benchmark OPEC crudes ended its longest run above $100 a barrel after dropping below that level for the first time since July amid signs the global economic recovery is faltering.
The so-called OPEC basket, a weighted average of the main grades produced by the Organization of Petroleum Exporting Countries, slipped to $98.56 a barrel yesterday, according to an e-mail today from the group’s Vienna-based secretariat. It’s the first time OPEC’s reference price slipped below $100 since July 16 and ends an unprecedented 191-day spell above that threshold…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Iran will call on the members of the Organization of Petroleum Exporting Countries (OPEC) to convene in an emergency meeting to discuss oil prices if they slump below $100 per barrel, an oil ministry official said.
On Friday, crude prices dropped to near $101 ahead of the next OPEC meeting on May 31. “Iranian Oil Minister Rostam Qassemi will have telephone conservation with OPEC president about an extraordinary meeting if prices fall below $100,” the official, speaking on condition of anonymity, said on Monday…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Brent crude sank below $100 a barrel for the first time in nine months on Tuesday, extending a recent rout triggered by data from China and the US that weakened the outlook for demand.
Earlier in the session, the dismal outlook pushed gold to a more than two-year low and shaved more than $2 off oil prices. As the day progressed, gold and precious metals bounced back but oil was unable to move into positive territory…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Hedge funds are betting on cheaper silver for the first time since at least 2006, splitting from investors accumulating close to the biggest hoard ever and the analyst consensus for prices to rebound from a bear market.
Speculators were the most bullish in two years as recently as October and now have a net-short position of 560 futures and options, U.S. Commodity Futures Trading Commission data show. Holdings in exchange-traded products, valued at $14.5 billion, are within 1.3 percent of the all-time high reached mid-March, according to data compiled by Bloomberg…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Commodities trading risk at Goldman Sachs Group Inc was steady in the first quarter from the previous three months, but fell from a year ago as prices of raw materials seesawed.
Wall Street’s leading investment bank said its value-at-risk (VaR) in commodities stood at $21 million in the three months to March 31, versus $20 million in the fourth quarter of 2012 and $26 million in the year-ago first quarter…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The yen rose from recent multiyear lows against the dollar and euro on Monday as renewed worries about the global economy spurred traders to sell riskier investments funded by the relatively cheap Japanese currency.
Commodity-linked currencies, such as the Australian and New Zealand dollars, fell sharply against the U.S. currency, as gold prices plunged below $1,400 an ounce to a more than two-year low. Prices for other precious metal were dragged lower as a result of gold’s slide…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

The European Parliament has rejected a plan to rescue the EU’s ailing carbon trading scheme. Members narrowly voted against a so-called “backloading” proposal that would have cut the huge surplus of allowances currently being traded.
Because of this excess, the price of carbon on the EU Emissions Trading Scheme (ETS) has plunged to less than 5 euros a tonne.But opponents won the day by arguing the plan would push up energy costs…………………………………….Full Article: Source

Posted on 17 April 2013 by VRS |  Email |Print

Europe, which led the world in creating a system of emission permits to combat greenhouse-gas emissions, dealt a potential death blow to that system on Tuesday.
Focusing on immediate economic concerns over future environmental ones, the European Parliament narrowly rejected a proposal to cut the number of pollution permits. Fewer permits would have raised companies’ costs to emit greenhouse gases, which scientists have linked to global warming…………………………………….Full Article: Source

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