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Commodities Briefing 02.May 2013

Posted on 02 May 2013 by VRS |  Email |Print

Fresh evidence of slowing global growth prompted further falls for industrial commodities, US stocks and the dollar, and gains for Treasury bonds, even as the Federal Reserve backed away from previous hints that the pace of its asset purchase programme might be curbed.
The central bank said it was prepared to raise or lower the level of its purchases as economic conditions evolved. It described the economy as expanding moderately but said fiscal policy was “restraining” growth………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The world’s little-regulated and often secretive commodity trading houses could face new disclosure rules, and even capital requirements, because of their money lending activities, after a global regulatory watchdog’s review of “shadow banking”.
The Financial Stability Board (FSB) - a task force set up by the G20 group of major economies to improve global financial regulation in the wake of the 2008 crisis - has asked national and regional regulators to determine whether commodity traders should come under the scope of new rules………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

In China the investment share of GDP stands at 48%, 12% higher than any other industrializing country in the past. While many point to such high numbers as proof that the commodity boom will last forever, the truth of the matter is that such growth is unsustainable.
Below is a chart from Credit Suisse that shows us Japan and Korea when they went through a similar investment expansion boom………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Sometimes following where money is being invested is a solid course of action to gain alpha; other times, a better opportunity lies in going the opposite direction, i.e., thinking contrarian.
Take commodities, energy and materials, which may be the most unappreciated areas of the market these days. According to Bank of America Merrill Lynch’s Global Fund Manager Survey of 250 participants who collectively manage $725 billion, energy, materials and commodities are extremely underowned………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Oil prices have lost the key $100 a barrel level for the second time in a month as poor economic data from China and the US added to jitters about demand.
ICE June Brent crude oil fell as much as 3.4 per cent to a session low of $98.87, highlighting lingering nerves in a market that fell 7 per cent last month. The sell-off in oil also bled into other commodity markets, with sharp drops seen in copper and gold too………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Oil prices are headed down, and I mean down at least $20 a barrel. The key reason is that prices have been high. It’s not a paradox, but a result of the long time lags in oil production.
Oil prices were fairly stable from 1986 through 2001, averaging just $20 per barrel. Then prices started rising, spiking to $134 just as the recession began. The price of oil has been above $80 for the past two and a half years. With rising prices has come a dramatic increase in exploration activity………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The latest assessment of the estimated oil reserves in the Bakken and Three Forks formation in the northern U.S. plains states was about twice as much as previously thought. Those plays, spread out over North Dakota, South Dakota and Montana, could bring the United States one step closer to energy independence, the U.S. interior secretary said.
New technologies used to get at the oil locked in those shale formations has redefined the geopolitics associated with the global energy sector. The latest government figures suggest the United States is relying less on OPEC for its oil, yet Saudi Oil Minister Ali al-Naimi said talk of energy independence is, in his words, “naive.”……………………………………….Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

OPEC is again attempting to break the deadlock over selecting its next secretary general, after rivalry between Saudi Arabia and Iran last year prevented a new candidate being named to its top administrative post.
A panel of officials is meeting this weekend at the Vienna headquarters of the Organization of the Petroleum Exporting Countries to discuss criteria for the secretary general post, OPEC delegates said. Abdullah al-Badri’s one-year term in the job ends in December………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Investment totalling a trillion Euros is required before the end of this decade if the European Union is to stave off an energy crisis. That is the conclusion of an eight-month inquiry by the House of Lords into the EU power sector.
The Lords report says that a muddled Brussels energy policy is putting off big investors. In addition, it says there needs to be greater support for Europe’s emissions trading system (ETS)………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Gold’s sharp decline, which saw the metal fall to $1,321 on April 16, led to a global surge in physical demand. But some market participants question whether this appetite and the upward price moves are sustainable.
Surging demand drove the US Mint to suspend sales of 1/10-ounce gold coins, Reuters reported. By April 30, the Mint had reported sales of 312,500 gold coins. Equaling 209,500 ounces, April’s gold coins sales are more than a quarter of the 753,000 ounces sold in 2012, according to Bloomberg………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

For those of you who have been following the precious metals sector you know that things aren’t going too well currently. Silver prices have fallen ~25% year to date, gold has fallen ~16% year to date, and platinum has fallen ~8% year to date.
The general trend of the precious metals sector, one of downward momentum and negative investor sentiment, looks to continue, with no telling when the rebound will occur. Last week was especially dismal for investors when gold and silver prices tumbled 10 and 12 percent respectively. The only difference: gold rebounded a little whereas silver continued to fall………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

For the past five years or so, gold company costs have been rising at around 17% per year. And, while they have moderated somewhat of late and could go lower in the short term, the long term trend is definitely up.
This is according to Earth Resource Group, investment advisor, Georges Lequime, who told Mineweb’s Gold Weekly podcast that much of this increase has been driven by falling grades, with the average across the industry now below 1 gram per tonne………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The flow of investments out of commodities slowed down sharply in March to a net $2.6bn from $4bn in February. The main reason for this slowdown was a halving in the value of funds withdrawn from precious metals ETPs to $2.6bn.
Inflows to commodity indices stayed positive but at just $200m, were a long way below the February total of $1.4bn, while there was a small pickup in commodity structured products, which saw $320m of new issuance………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Gold’s longest winning streak in at least nine decades is poised to end as diminishing trust in the metal’s ability to preserve value spurred a majority of analysts to predict the first annual retreat since 2000.
Prices will close the year at $1,550 an ounce, 7.5 percent less than at the end of 2012 and the biggest drop since 1997, according to the median of 38 estimates compiled by Bloomberg. Investors are selling bullion held through exchange-traded products at the fastest pace on record, hedge funds accumulated their second-biggest bearish bet ever and futures had their biggest two-day drop in 33 years last month………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Only a short time ago it seems (five or six years actually) the uranium price was riding high, uranium explorers were springing up everywhere and uranium producer and explorer shares were among the strongest in the mining sector.
The spot price soared to close on $140/lb in 2007, but then collapsed to the $40 or so level by early 2009 before making something of a recovery up to around $70/lb by early 2011, and seemed to be progressing upwards again with all kinds of predictions of huge growth in nuclear power leading to shortages ahead. Investors were beginning to climb in again – and then came Fukushima!……………………………………….Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

In the wake of the recent collapse of several commodity markets, Dennis Gartman of The Gartman Letter has some surprising things to say about where to look for shortages that could drive prices back up.
In the wake of the recent collapse of several commodity markets, Dennis Gartman of The Gartman Letter has some surprising things to say about where to look for shortages that could drive prices back up………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The move lower is base metals portends poorly for the U.S. and global economies, commodities trader Dennis Gartman said Wednesday on CNBC. “Dr. Copper Is Sick,” he said, adding that prices for aluminum and zinc were also heading lower. “And they don’t argue for good economic growth.”
On “Fast Money,” Gartman said that while the growing copper inventories in Shanghai, London and the Comex were nothing new, the move in other commodities were cause for concern………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Gold holdings in exchange-traded products plunged 174 metric tons last month, the biggest drop ever, as prices entered a bear market and wiped $17.9 billion from the value of the funds.
Holdings in the ETPs slumped 7.1 percent in April to 2,275.84 tons, the lowest since October 2011, data compiled by Bloomberg show. The value of the assets dropped to $108.1 billion. Investors pulled $10.23 billion from gold funds in the first quarter, the most since at least 2000, when the data begins according to Cambridge, Massachusetts-based EPFR Global………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The commodity ETF space has seen only a few winners so far this year, thanks to a strong dollar and weak demand (read: 3 Commodity ETFs Still Going Higher). Some products in the energy or soft commodities space (like natural gas, cotton or cocoa) have added double digits but others have seen significant weakness in the year-to-date period.
ETF investors have especially seen weakness in the industrial metals segment of the industry. These products have been crushed by sluggish conditions in some key emerging markets like China, recent fears of a deepening euro zone crisis as well as worries over continued dollar strength………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Active ETFs are still a relatively recent innovation despite that the first index exchange-traded fund was launched in 1990 in Canada and the first index ETF was launched in the U.S. in 1993. For investors, it’s important to separate the excitement about active ETFs as a new investment product class from the reality.
The first active ETF products launched in 2008, and at the end of the first quarter of 2013, there were 108 active ETFs and exchange-traded products listed globally with $17.8 billion in assets from 18 providers, listed on nine exchanges………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

High-speed traders are using a hidden facet of the Chicago Mercantile Exchange’s CME -1.20% computer system to trade on the direction of the futures market before other investors get the same information.
Using powerful computers, high-speed traders are trying to profit from their ability to detect when their own orders for certain commodities are executed a fraction of a second before the rest of the market sees that data, traders say………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The ‘people’s currency’ of China is redefining the global economic monetary system. The closed-capital pariah is blossoming into a reserve standard and is hedging appeal against the indebted dollar and the untested euro, piquing foreign interest.
Degenerating credit quality across the board has prompted asset managers to shy away from the dollar, euro, Japanese yen, British pound, and Swiss franc. And some are turning to the yuan, a currency that 10 years ago was completely off limits to foreign investors………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

The federal government is scrambling to find more than $3 billion of additional savings in the two weeks before the budget after Treasury halved the projected price of carbon when Australia links to the European scheme.
The government plans revise down the projected price of carbon in 2015-16 from $29 a tonne to around $15………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Europe’s reputation as a leader in climate change policy took another beating this month when the European Parliament rejected, by 334 votes to 315, a proposal to reform the EU Emissions Trading System (EU ETS). The vote leaves Europe’s carbon-trading market — the world’s largest — at risk of collapse and threatens to fragment and complicate efforts to tackle climate change on both sides of the Atlantic.
The EU ETS was set up in 2005 as a market-based alternative to reduce greenhouse gas emissions. It gave companies the choice of reducing their emissions or buying emission allowances from other companies………………………………………..Full Article: Source

Posted on 02 May 2013 by VRS |  Email |Print

Cotton inventories at the end of July 2014 will be 11 percent higher than estimated last month as production gains outpace improved demand, according to an industry group.
Stockpiles will climb to 18.25 million metric tons, the equivalent of about nine months of global mill use, and up from 16.44 million forecast a month earlier, the International Cotton Advisory Committee said today in an e-mailed statement. In the 12 months that start Aug. 1, production will be 24.61 million, up 4.9 percent from April’s projection, the Washington-based group said. The consumption estimate was increased 2.3 percent to 24.25 million tons………………………………………..Full Article: Source

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