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Commodities Briefing 04.Jun 2013

Posted on 04 June 2013 by VRS |  Email |Print

Global equity markets have been rattled by the comments of the US Federal Reserve that it might wind down the $85-billion-a-month bond-buying programme. On the other hand, investors in the commodity space, especially in gold and crude oil, have seen the value erode with the prices of these two commodities on a downward spiral.
I think the bull-run in commodities will continue and what we are seeing now is a long overdue correction. In all bull markets, there are corrections and it does not mean that it has come to an end. We have seen that in the equity bull markets………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

With multiple investment banks signposting the end of the commodity supercycle, a World Bank director has warned developing countries that have benefited from the surge to protect themselves against a price crash.
Marcelo Giugale, the World Bank’s director of economic policy and poverty reduction programs for Africa, told CNBC that states which have gained from the commodity boom should prepare for a slump. “We don’t want another wasted opportunity,” he said. “This time around, things should be done differently. The material bonanza has the potential to become a human bonanza – whereby the standard of living for many people across these developing countries can be raised.”……………………………………….Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

It’s been a good year so far for most investments, except commodities. The Standard & Poor’s 500 index, which many consider the best measure of stock-market value, is up around 17 percent as are real estate investment trusts. International stocks are up around 10 percent. Commodities, meanwhile, are down more than 5 percent.
But when you look for a logical explanation of why commodities are in the doldrums, it gets downright confusing. Gold is down 17 percent despite the fact that central banks around the world keep printing money — something you would expect to boost the value of the precious metal………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

City Asset Management has removed commodity exposure from its model portfolios in favour of international equities and alternative strategies. The group said it had removed its 4 per cent commodity exposure in its unitised model portfolios in April and put the proceeds towards increasing international equities from 12 per cent to 14 per cent, and alternative strategies from 15.5 per cent to 17 per cent.
James Calder, research director at City Asset Management, said he had decided to increase merger arbitrage strategies because they appeared “particularly attractive given the prospect of increased corporate deal activity resulting from the cash-rich nature of many businesses”………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Australia’s export commodity prices fell in May, the second monthly fall, following a run of three increases. The Reserve Bank of Australia’s index of commodity prices fell by 2.6 per cent in the month in foreign currency terms.
Commodity prices peaked in July 2011 and are now down by 20.1 per cent from that high, but still more than 200 per cent higher than 10 years ago before the commodities boom started to lift prices. The RBA said the main contributors to the fall in May were iron ore, gold and coal………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

The US shale gas revolution “virtually guarantees” the end of oil’s monopoly as a transport fuel paving the way for lower crude prices, according to Ed Morse, the commodities guru at Citi famed for calling the peak of the oil market in 2008.
While coal, natural gas and renewable fuels regularly substitute for each other in power generation, oil has traditionally been immune from price competition because of the lack of widely adopted alternatives to kerosene, diesel and petrol in plane, train and car engines………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Sanford C. Bernstein, the Wall Street research company, estimates that non-OPEC marginal cost of production rose last year to $104.5 a barrel, up more than 13% from $92.3 a barrel in 2011, according to the Financial Times.
New production is capping price rises, but the average cost of production is rising rapidly, impacting some producers and regions more than others. In the long run, this is not sustainable and nor is the shale oil industry itself, some believe, if prices fall much lower………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Brent crude rose, returning prices to the level prior to OPEC’s May 31 meeting. Hedge funds and other money managers increased bullish bets on Brent last week to the most in more than three months, a report showed.
Brent advanced as much as 1.9 percent to $102.30 a barrel. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 161,550 lots in the week ended May 28, according to data from ICE Futures Europe………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Something very interesting just happened at the 2013 MoneyShow in Las Vegas. The purveyors of doom and gloom were all still hawking their services there. But the primary solution they offer – a cure-all elixir for everything that ails markets – was beginning to wear thin.
The usual conviction that this one asset is the remedy was gone. And the seats at these sessions were only half-filled………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

There are many reasons why the gold bubble is deflating, and why gold prices are likely to move much lower by 2015. The runup in gold prices in recent years – from $800 per ounce in early 2009 to above $1,900 in the autumn of 2011 – had all the features of a bubble. Now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.
At the peak, gold bugs – a combination of paranoid investors and others with a fear-based political agenda – were happily predicting gold prices going to $2,000, $3,000 and even to $5,000 in a matter of years. But prices have moved mostly downward since then………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Although Asian physical demand for gold has underpinned the market since the mid-April selloff, it could have less of an impact on the yellow metal’s price in the second half of the year.
Zhang Bingnan, secretary-general of the China Gold Association said in a media interview on Saturday that gold demand in China may slow in the second half of the year. “The kind of frenzied buying in late April and early May won’t be repeated,” he said………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

As a Devil’s Advocate writing a contrary opinion to those who are convinced that the gold price will soon resume its upwards trajectory, Economist Nouriel Roubini has few equals. Indeed to the ardent gold believer Roubini may well be considered the Devil himself, rather than just an Advocate for the Satanic master.
In his latest opinion on gold, Roubini pulls few punches, although he does condescend at the end that the gold price will be volatile and could still temporarily move higher in the next few years. But he qualifies this in saying that the overall trend will be lower over time as the global economy mends itself. “The gold rush is over”, he says and predicts gold falling towards $1,000 by 2015………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Global exchange giant NYSE Euronext is considering a fresh bid to sell its nearly 5 per cent stake in India’s premier commodity bourse MCX, after an earlier attempt failed in March this year. NYSE Euronext, which runs leading bourses in the US and Europe, holds 4.79 per cent stake in Multi Commodity Exchange (MCX) and its stake is currently valued at over Rs. 200 crore.
According to the investment banking sources, NYSE Euronext will soon make a fresh attempt to sell its MCX stake, either in part or full, depending on the market conditions. The sale would most probably be carried out through an open market transaction and would be part of NYSE Euronext’s stated objective to monetise non-strategic assets across the world………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Even 10 years after futures trading was reintroduced in agri commodities, hedging activities are yet to attract momentum. After 40-odd years of suspension, the ministry of consumer affairs reintroduced futures trading in agri commodities in November 2002, which saw the emergence of three national level derivatives exchanges — Multi Commodity Exchange, National Commodity and Derivatives Exchange and National Multi Commodity Exchange.
In addition to that, 21 regional commodity exchanges also offered futures trading in agri commodities, albeit meagrely………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Australian stocks finished lower as investors sold off mining stocks due to weaker commodity prices. The benchmark S&P/ASX200 index was 38.3 points, or 0.78 per cent, lower at 4888.3 points, while the broader All Ordinaries index was 40.3 points, or 0.82 per cent, weaker at 4873.7.
IG markets analyst Evan Lucas said the major miners suffered as the price of iron ore continued to fall. “The falls at Rio and BHP have got faster as iron ore continues to slide and there’s a bit of a rotation out,” Mr Lucas said………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

When the Brazilian real was strengthening like gangbusters against the dollar, all the way to R$1.55 back in July of 2008, the government both loved it and hated it. They loved it because it meant the world loved Brazil and Brazil, with its nagging (and misplaced) inferiority complex, was mighty proud of its strong currency.
Fast forward to the Lehman Brothers and pending fall out in late 2008-09 and the strong currency became a curse. It became part of the “currency war”, a term made quite popular over the last two years by Brazilian Finance Minister Guido Mantega………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Users in the mushrooming world of digital currencies were in for a shock, when Liberty Reserve was accused of money-laundering operations amounting to $6 billion. “If Al Capone were alive today, this is how he would be hiding his money,” said U.S. prosecutors about Liberty Reserve, the popular digital currency site.
Liberty Reserve described itself as the “oldest, safest and most popular payment processor… serving millions all around a world.” However, the users in the mushrooming world of digital currencies were shocked on Friday, when Liberty was indicted by U.S. regulators on charges of money-laundering operations amounting to $6 billion………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

Today, the International Emissions Trading Association (IETA) and Environmental Defense Fund (EDF) released The World’s Carbon Markets: A case study guide to Emissions Trading, a collaborative series of case studies examining carbon market development around the globe.
The report compares key features of current and prospective policies in 18 jurisdictions around the world. It is a resource for policy makers, analysts, and anyone interested in learning more about emissions trading………………………………………..Full Article: Source

Posted on 04 June 2013 by VRS |  Email |Print

I last raised the issue of a carbon price in “What Unconventional Fuels Tell Us About the Global Energy System”, which added several data points to Charles C. Mann’s already thorough discussion of fossil fuels for The Atlantic.
My conclusion is: a carbon price is needed to induce large-scale changes of how we produce and consume energy. It’s only part of the solution, but one that many experts say is needed to reduce carbon emissions………………………………………..Full Article: Source

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