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Commodities Briefing 24.Jun 2013

Posted on 24 June 2013 by VRS |  Email |Print

After enjoying a historical bull run, commodity prices have cooled down in the past year and are likely to be in a subdued territory for some years, according to a Deutsche Bank report. What drove the cycle? Strong demand from emerging markets, especially China and India. Liquidity fuelled by policy response to mitigate the global financial crisis. Rush towards gold as inflation hedge and a safe haven. Geopolitical concerns about stability of oil supply.
What’s driving the correction? Slowing down of the Chinese economy. Using commodities as an inflation hedge has lost its attractiveness as a strategy. Global policy risks have abated. Commodity demand projections are muted………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

With the S&P 500 SPX 0.27% down 2.4% after the Fed laid it on the line, it shouldn’t come as too much of a surprise to see the bears out there growling away. Noted contrarian Marc Faber told CNBC on Thursday that he sees further downside for the S&P.
“…not because of Fed’s statements because, like always, they hedged their bets in the sense that this tapering off would not neccesarily stop. Mr Bernanke said if the economy does not improve along the lines that we expect we will provide additional support. I think the markets are worried about something else,” says the publisher of the GloomBoomDoom report………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Two weeks ago Julian Jessop, head of commodity research at Capital Economics, sent out a client noted headed: “How vulnerable are commodities to the tapering of QE3?” He and we sure got the message after Ben Bernanke did his tapering unveiling last week. Copper fell to $US6739 a tonne, nickel plunged 3.5 per cent to $US13,628/tonne and tin was off 3 per cent to $US19,439/tonne.
They, like the Dow, rebounded anemically on Friday. On top of tapering of money-printing by the Federal Reserve, we now have China seemingly in the throes of a credit squeeze. Jessop two weeks ago did not foresee Fed tapering as having too great an impact on commodities, mainly because a good deal of damage had already been done………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

In addition to a strengthening US dollar, weakness was seen across most asset classes last week as the recent selling in emerging market bonds, stocks and currencies moved on to developed markets. Commodities got caught up in this weakness with the major indices showing negative returns, especially because of renewed weakness in metals — precious as well as industrial.
The double dose of weaker than expected manufacturing activity and rising short-term interest rates in China, together with the US Federal Reserve talking — for the first time — about an early end to quantitative easing, triggered these major corrections………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Morgan Stanley this week joined a growing list of big investment banks beating a partial retreat from commodities trading. Like Barclays, UBS and Deutsche Bank, it is struggling to make sense of a business where revenues have tumbled since the heyday of the natural resources boom immediately prior to the financial crisis. So is the commodities super-cycle over?
For three reasons, I think the remarkable rally in the prices of energy and metals (although maybe not food which marches to a different beat) may have ground to a halt. If so, this might have big implications for investors………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

The leadership changes in Louis Dreyfus Commodities and Bunge are a good reminder that chief executives do not stay forever – and a wake-up call for some big trading houses facing a “key-man risk”.
The names of the chief executives of trading titans Glencore, Wilmar, Trafigura and Vitol are so closely associated with their firms that they are almost inseparable. But at some point Ivan Glasenberg, Kuok Khoon Hong, Claude Dauphin and Ian Taylor will retire………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Brent crude futures traded below $101 a barrel on Monday, hurt by a stronger dollar and concerns over slower growth in demand for oil in the United States and China. The European benchmark dropped nearly 5 percent last week in its biggest weekly drop since early April, after Federal Reserve Chairman Ben Bernanke laid out a strategy for paring back monetary stimulus, broadly sapping demand for commodities.
The step by the U.S. central bank also lifted the dollar, making it more expensive for holders of other currencies to buy greenback-denominated oil………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Hedge funds cut bets on a gold rally by the most since February after the Federal Reserve laid out plans for reducing stimulus and this year’s drop in the value of exchange-traded products extended to $54 billion.
Speculators reduced their net-long position by 29 percent to 38,951 futures and options by June 18, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts jumped 14 percent, the most in eight weeks. Net-bullish wagers across 18 commodities slid 2.2 percent as investors became more bearish on copper and wheat………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Global stocks plunged Thursday in the biggest one-day sell-off so far this year, after Federal Reserve Chairman Ben Bernanke said the US central bank might consider paring back its cash infusions into the financial markets within the next six months.
The panic in stock and bond markets sparked by the remarks of Bernanke, who on Wednesday suggested the Fed might start winding down its $85 billion per month in asset purchases, was compounded by the release of data on Thursday showing that Chinese manufacturing activity hit its lowest level in nine months………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

We have often said that fundamentals are not necessarily the key influence in the path of the gold price – sentiment and fear are perhaps the main influences on the yellow metal’s price movements. And at the moment neither seem to be playing a significant role in where gold’s path is trending.
Indeed some technical analysts, who make their predictions based virtually solely on chart performance, see gold falling yet further with possible significant support levels at $1,200 – and then, if that is breached, as low as $1,000………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Our recent calls for a bottom have been proven wrong as precious metals plunged to another new low. Two trading rules we have is to always use a 20 percent stop and never add to a losing position. Note our previous article in which we said use the late May low for a stop.
This helps minimize risk and potential losses, though we have a handful of small losses trying to anticipate the coming rebound. We always admit mistakes to subscribers and we never blame manipulation. That is just unprofessional. All being said, a close examination of history tells us that this could be the final capitulation that would lead directly to a huge rebound in the ensuing months………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

A surge in exchange traded fund trading this week signals that investors should buckle up for a volatile summer. ETF trading as a percentage of overall stock-trading volume tends to skyrocket in headline-driven markets, and particularly when fear trumps greed.
ETF trading soared to about 40% of overall volume on Thursday, one day after Federal Reserve Chairman Ben Bernanke said the Fed may soon begin tapering its purchases of $85 billion a month of Treasury bonds and mortgages. The Dow Jones industrial average plunged 354 points………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

The Bank of England and its Chinese counterpart have signed a deal likely to boost trade between the UK and China in the yuan. The Bank and the People’s Bank of China have signed a three-year currency swap arrangement worth 200bn yuan (£21bn, $33bn), the UK central bank confirmed.
The UK is looking to become a centre for the Chinese currency, also known as the renminbi. British banks hold 35bn yuan worth of deposits in the Chinese currency………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

The Iranian rial has strengthened by more than 15 percent against the dollar since the victory of moderate Hassan Rowhani who was elected president more than a week ago, reports said on Sunday.
The Iranian currency was trading at under 30,000 to the dollar on Sunday morning compared to 35,000 a week ago, media and dealers said………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

US carbon dioxide emissions have been falling only because of the cheap price of natural gas and could easily pick up again if the price of gas rises, the International Energy Agency has warned.
The threat of a rise in US emissions comes as President Barack Obama plans on Tuesday to set out plans for regulation to reduce the output of greenhouse gases………………………………………..Full Article: Source

Posted on 24 June 2013 by VRS |  Email |Print

Will he, won’t he? Will she, won’t she? Maybe only her hairdresser knows for sure. But regardless of whether Labor’s soap opera ends with a bang or a whimper, one thing seems a sure bet - the carbon tax, a year old next week, won’t survive to a second birthday.
Nor should any tears be shed at its demise. The tax’s premise was that the world was moving to binding agreement on emissions reduction, with Treasury assuming a “co-ordinated international regime” would ensure “a harmonised world carbon price” by 2016. Scarcely believable when it was made, that assumption is now plainly delusional………………………………………..Full Article: Source

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