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Commodities Briefing 03.Jun 2013

Posted on 03 June 2013 by VRS |  Email |Print

Hedge funds raised bets on a gold rally by the most in two months as the U.S. economy expanded less than previously estimated, boosting speculation the Federal Reserve will maintain the pace of stimulus.
Speculators raised their net-long position by 35 percent to 48,096 futures and options by May 28, the biggest gain since March 19, U.S. Commodity Futures Trading Commission data show. Most of the gain came from a drop in short bets, which reached a record a week earlier. Net-bullish wagers across 18 U.S.-traded commodities climbed 13 percent to a nine-week high of 652,708 contracts, led by gains in corn and natural gas………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

The headlines did not quite reflect the wider drama as the Organisation of the Petroleum Exporting Countries (Opec), the cartel of 12 oil-producing nations, met behind closed doors on Friday.
Gathering for their biannual meeting to set their production target, they left it, as expected, at 30m barrels per day (bpd), their third rollover in a row. As ever, Opec has to consider the benefit its members could reap from reduced supply, which would push up prices, to the damage higher prices could inflict on the global economy – potentially risking a hit to demand. For now, it has stuck with the status quo………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Organisation of Petroleum Exporting Countries (OPEC) has attributed the current global crude oil price volatility to continued uncertainty, stemming from the slow pace of global economic growth, continued Euro-zone debt crises, high unemployment in advanced economies and the risk of inflation in developing countries.
Already, there have been fluctuations in crude oil prices going below $98 per barrel and this is setting off warnings about the ability of Nigeria to fund its yearly budget. The National Assembly passed a N4.987 trillion budget for 2013 last December, based on oil production of 2.562 million barrel per day; however the crude oil production assumption contained in the 2013 budget was never achieved in 2012………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

There is often quite a debate in the Peak Oil community over the difference between a reserve and a resource. Simplistically a resource is the amount of, for the sake of discussion, oil that is in the ground in a certain country, while the reserve is the amount of oil that can be both technically and economically recovered from that resource.
The numbers can differ quite markedly, and the judgment as to whether a certain body is a reserve is finally made when a well is drilled down, and production (or not) begins………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Kicking an economy when it’s down! The European Union may be asking when it will all end? Having not yet fully recovered from the banking crisis the EU is likely to now suffer at the hands of high oil prices.
Analysts are divided as to how long, and how big, the US shale oil boom will last for. PricewaterhouseCoopers believes that shale oil production will continue to grow, flooding the market with oil and sending prices 40% lower than current levels by 2035………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Brent crude dropped below $100 a barrel for the first time in a month and WTI declined amid speculation that stockpiles will climb after OPEC kept its production target unchanged.
Brent, used to price more than half the world’s oil, fell as much as 0.6 percent while West Texas Intermediate slid 0.8 percent. The Organization of Petroleum Exporting Countries maintained its output ceiling of 30 million barrels a day at a meeting in Vienna on May 31. Crude inventories in the U.S., the world’s biggest consumer of the commodity, increased to 398 million barrels in the week ended May 24, the most since at least 1931, a government report showed May 30………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Economist Nouriel Roubini, in a fearless forecast on Project Syndicate, projected that the price of gold would likely plummet to about $1,000 before the end of 2015. He attributed the likely further plunge of gold prices to:
1. Gold spiking during extreme crises, but the crises days are now over. 2. A risk of high inflation is the period that gold does well. 3.Because of the recovering economy, investors are not interested in holdings that pay no dividends………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

The veteran Sydney yellow metal analyst, now sailing under his own flag at Eagle Research, finds some inexplicable contradictions to the events of April. While many investors will be throwing up their hands with gold plunging $US24 an ounce on Friday to close at $US1388/oz, they should take heed of Goode’s analysis showing how recent weakness tends to be more about hedge funds than physical demand.
Goode is especially interested in the role of Goldman Sachs over two weeks in April. He points out that the advice went from “buy gold” at $US1570/oz to “short gold” on April 10, sending the metal down $US140/oz in one session. Then on April 23 Goldman advised investors to close their gold short positions as the metal’s price could rise………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Global commodity markets seem to be going through a churn currently for a variety of reasons including waning investor interest (more pronounced in gold and silver) as evidenced by a considerable reduction in the speculative froth; relative underperformance of commodities as equities rebound; a firmer dollar weighing on prices; and supply side looking comfortable even as the demand growth looks lacklustre.
An important reason may be that markets have already begun to factor-in a gradual scale back of the US Fed quantitative easing………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

The gap between fundamentals and pricing continues to widen as value investors awaken to the speculative potential of silver. Instead of irrational euphoria and widespread participation, there was irrational despair in the form of generally poor sentiment from the outside looking in.
Recent trading in silver and gold has shown the inverse of patterns consistent with a speculative frenzy. Instead of retail investors buying into a rising market, steady and massive accumulation has been noted on dips………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Physical gold demand is expected to slow before outflows from Exchange Traded Products (ETP) ease, stated London based Barclays in a report. For the time being, the yellow metal is witnessing ETP outflows and higher physical demand.
Last week, poor quarterly GDP data from the United States and a rise in US initial jobless claims supported safe heaven appeal of the precious metal to some extent………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

A new report indicates that the Chinese State Reserves Bureau has bought about 30,000 tonnes of nickel and may be considering adding to the country’s copper stockpiles as well. The nickel bought by the government’s powerful stockpiling agency represents more than 15% of the inventories held in London Metal Exchange warehouses worldwide and is likely to move markets.
The last time the SRB intervened in base metals markets was during the 2008 financial crisis when it made the most of lower prices picking up vast stocks of import commodities and effectively setting a floor for metal prices………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

China’s powerful stockpiling agency has purchased base metals on the international market for the first time since prices crashed during the global financial crisis, as Beijing takes advantage of the recent price slide.
The Chinese State Reserves Bureau has bought about 30,000 tonnes of nickel, equivalent to one-sixth of the stocks in London Metal Exchange warehouses, according to two people familiar with the deal. In recent weeks it has also been making enquiries about copper, several other people with knowledge of the matter said………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Various academic studies have indicated that asset allocation is more important than security selection, especially in times of greater volatility in the markets.
However, according to Roger Ibbotson, writing about the importance of asset allocation in the March/April 2010 publication of the Financial Analyst Journal, about three-quarters of market gains or losses come from general (broad) market moves, rather than asset allocation or security selection. As a consequence, individual investors are turning more and more to index-based and/or sector-specific exchange traded funds (ETFs), rather than managed mutual funds or individual securities………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

The classification of income as speculative or non-speculative is vital, as speculative losses can be carried forward only for four years and set off only against speculative incomes. Finance Act 2013 states that commodity derivatives would not be treated as ‘speculative transaction’ from April 1, 2013, provided.
it is executed on an electronic screen-based system through an intermediary of a recognised association (such as MCX or NCDEX); and it is supported by a contract note containing prescribed particulars………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

The securities regulator of Bangladesh is planning to formulate norms in introducing commodities exchange as part of its efforts to provide a platform for producers to discover fair prices and hedge risks of their products. The platform would be mainly for agriculture produces as well as manufacturing products to be initiated with Jute, sugar and gold. Futures contracts among the traders would be set up on the platform.
Bangladesh Securities and Exchange Commission (BSEC) initiated the move following an amendment to the Securities and Exchange Ordinance 1969 in November last year, allowing establishment of a ‘commodity exchange’ in the country………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

Australian bonds have been a darling of the strategic bond sector for some time but as the Australian dollar (AUD) – the world’s most overpriced currency on a trade weighted basis – breaks down, is the Oz trade over?
Some of the sector’s biggest names, such as the Citywire-A rated Fidelity Strategic Bond manager Ian Spreadbury, Jupiter Strategic Bond manager Ariel Bezalel and Pimco have all held significant positions in the country’s debt in the last 12 months. While some of those have already been unwound, as much as 70% of Australian debt remains in foreign hands, which, in itself, is one of the structural weaknesses now creating headwinds………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

When he clinched the Democratic Party’s presidential nomination in 2008, Barack Obama claimed that “generations from now, we will be able to look back and tell our children that this was the moment . . . when the rise of the oceans began to slow and our planet began to heal”.
Right now, however, honest environmentalists are telling their children that Obama stood aside while the House of Representatives’ legislation on climate mitigation died in the Senate, despite impassioned pleas for him to make an effort to push the bill across the finish line. And despite Obama’s 11th-hour intervention in Copenhagen in 2009, the UN Kyoto process hit the wall………………………………………..Full Article: Source

Posted on 03 June 2013 by VRS |  Email |Print

The Bank also expects USD rally in the second half of 2013 with its economists providing for a EUR/USD forecast of 1.23 for one year. The bank states that in the context of this happening, a broad based rally in commodities would be few and far between.
The year so far has seen commodities under-performing equities. Dollar strength is enduring and investors in general are disenchanted with commodities. Now, will these underlying structural trends continue to take commodities down? Barclays seem to have an answer………………………………………..Full Article: Source

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