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Commodities Briefing 25.Jun 2013

Posted on 25 June 2013 by VRS |  Email |Print

In addition to a strengthening US dollar, weakness was seen across most asset classes this week as the recent selling in emerging market bonds, stocks and currencies moved on to developed markets, according to Saxo Bank.
“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,” said Saxo Bank in a media release. “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 25 June 2013 by VRS |  Email |Print

Proponents of commodity investing typically point to the overall low correlation between commodities and other asset classes as one of the three main benefits of commodity investing (the other two being equitylike returns and a positive correlation with inflation).
Over the last 50 years, the stock-commodity and stock-bond correlations have been close to zero. However, these point estimates conceal wide degrees of variation. For instance, the annual correlation between stocks and commodities has ranged from -0.39 to 0.76.2……………………………………….Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Global commodity prices have fallen more than 30% over the past year. The extent of the decline has taken most producers, governments and investors by surprise. Profits have fallen sharply. In South Africa, many gold and platinum producers are now operating at a loss.
Across the globe, miners have scaled back planned expansions dramatically. The Financial Times reports that the last time investors were as negative about mining shares as they are now was in December 2008, at the start of the global financial crisis………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Market manipulation, especially in the commodity space, is nothing new. Hard assets like gold and silver are almost always under scrutiny for fear that large institutions are getting away with fixing the market; JPMorgan Chase & Co. just recently escaped such charges concerning silver markets.
The latest scandal has hit the European Union, as one trader has stepped forward, detailing how he (and many others) have been able to successfully manipulate Platts oil prices over the years………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Uganda has announced that it could start producing commercial oil by 2016, great news for the East African nation who is looking to reduce its energy bill, and gain more independence and security. Currently Uganda, a landlocked country, must import all of its fuel, with the majority arriving via truck from the Mombassa seaport in Kenya, several hundred miles away. This method of transportation is unreliable and costly, and Uganda is hoping that by building its own refinery it will be able to dramatically reduce the imports needed.
Oil was originally discovered in Uganda back in 2006 by Hardman Resources of Australia, and reserves have been estimated in the region of 3.5 billion barrels. Production has been delayed due to a debate over the viability of building a local refinery………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

More stable economic situation and higher real interest rates will encourage investors to seek returns elsewhere, say analysts. The price of gold fell some $20 to $1277 an ounce on Monday and Goldman Sachs predicted further falls over the next couple of years as the more stable economic situation and higher real interest rates encouraged investors to seek returns elsewhere.
Even the growing popularity of gold as a wedding present in India, the biggest retail market for the precious metal, cannot stop the price tumbling further according to the investment bank………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Gold declined toward a 2 1/2-year low in New York as prospects that the US Federal Reserve will reduce monetary stimulus curbed demand for a protection of wealth. Silver also declined.
Gold for August delivery fell 0.7% to $1,283.40 an ounce by 7:57 am on the Comex in New York on Monday. Prices slipped 6.9% last week. Futures trading volume was 5% above the average in the past 100 days for this time of day, according to data compiled by Bloomberg. Gold for immediate delivery in London dropped 1% to $1,283.91………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

As the sell-off in gold continued into Monday morning, analysts told CNBC that investors need to re-examine their expectations of the gold market and that prices are likely to fall to levels before the Federal Reserve opted for unlimited bond-buying.
“You need to re-examine your expectations for the gold market if you’re long - you need to stop thinking in terms of crisis and start thinking about where gold was pre-crisis,” Tom Kendall, director and head of precious metals research at Credit Suisse, told CNBC on Monday………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Among other asset classes that got slammed in recent weeks, gold totally got torpedoed falling below $1,300 for the first time since 2010. And with inflation falling and the dollar stronger, analysts across Wall Street are convinced the yellow metal will continue to lose its luster.
Unfortunately, this has been devastating for the gold bulls, especially those who expected easy monetary policy to send prices into the stratosphere………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

That’s the question that Gold traders and investors are asking themselves. Gold has now reached a climax point that long term traders get to really find out if Gold is still in a bull market or finally in a long term bear market.
No matter how you look at it, Gold has been in a bear market for the past few years, whilst long term you could argue its still in an up trend, I think the decision about the direction of Gold being in a long term bull trend is about to be decided shortly………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

HSBC on Monday lowered its gold and silver forecasts for 2013 and 2014, mainly on the US Federal Reserve’s plans to reduce economic stimulus and weak Chinese growth prospects. The bank also said that its positive outlook for U.S. dollar implied more weakness for gold.
“Although we expect a positive physical demand response to eventually cushion gold’s drop, we do not believe it will be of the scale or magnitude of the reaction in April,” HSBC analyst James Steel said in a note to clients………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

UBS lowered its forecasts for silver on Monday, saying prices would come under pressure as sentiment towards gold sours and that silver has no drivers of its own. The investment bank cut its 2013 silver price outlook to $24 an ounce from $29 per ounce. It also reduced its 2014 forecast to $25 an ounce from $30 earlier.
“The elements of silver, which offer investors exposure to the gold price and effectively an insurance against macroeconomic uncertainties, currency debasement and the implications of such on inflation, will work to its detriment based on the current macro outlook,” UBS strategist Edel Tully said in a note………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Gold, silver and platinum slumped to multiyear lows as investors dumped the precious metals on the belief that rising U.S. interest rates and a cash crunch in China would limit demand.
The most actively traded gold contract, for August delivery, fell $14.90, or 1.2%, to settle at $1,277.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Silver for July delivery fell 2.3% to settle at $19.493. Both settlements were the lowest since September 2010………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Morgan Stanley reduced its forecasts for industrial metals on concerns slowing growth in China, the world’s biggest consumer, and the nation’s worst cash squeeze in at least a decade will curb demand.
The bank cut its 2013 copper estimate by 3 percent to $3.42 a pound and lowered its nickel prediction by 7 percent to $7.23 a pound, according to analysts Peter Richardson and Joel Crane in a report. Copper for September delivery traded at $3.0285 on the Comex in New York………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Investors may have long forgotten the rebound in commodities last month as metals get pressured lower in June. Bull investors face an uphill battle. Gold, silver and copper are all trading at multi-year lows.
And it could get worse. Goldman Sachs cut its outlook nearly 10 per cent for gold prices in 2013 to $1,300 per ounce and about 17 per cent in 2014 to $1,050 per ounce due to a brigher economic scenario in the U.S………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

With the LME Week taking place this week, it is time to look at why Hong Kong has failed in its many attempts to introduce commodities trading. Without Hong Kong Exchanges and Clearing’s £1.39 billion (HK$16.6 billion) purchase of the London Metal Exchange last year, it is hard to imagine 1,000 commodities traders, producers and end users flying to Hong Kong to attend a three-day seminar.
The LME deal was yet another effort by Hong Kong to achieve the city’s dream of turning itself into a commodities trading centre. Back in the 1980s, the former Hong Kong Futures Exchange, which later combined with the stock exchange to form the HKEx, introduced cotton, sugar, soyabean and gold trading. However, turnover was so thin that it was abolished in the 1990s………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Merger talks have surfaced in the decade-old commodity futures market. Universal Commodity Exchange, promoted by Commex Technology, owned by IT entrepreneur Ketan Sheth, is learnt to have called on R-ADA, anchor investor through Reliance Exchange Next, in loss-making Indian Commodity Exchange (ICEX), for a possible merger, sources said.
However, the talks did not progress to a conclusive state, according to a person aware of the discussions. Ketan Sheth’s phone was switched off while Sanjay Saksena, ICEX CEO, could not be contacted immediately……………………………………….Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Recent volatility in global commodity prices may help lift the trading volume on the London Metal Exchange as demand for hedging services increases. Chow Chung-kong, chairman of Hong Kong Exchanges and Clearing (0388), which owns the LME, said trading volume on the British-based platform reached record highs in April and May, thanks to fluctuating commodity prices.
Chow’s comments came after the LME signed a memorandum of understanding with the Bank of China to examine the feasibility of exchange contracts being cleared in yuan………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Traders using super high-speed computers executed as many as 500 trades per second at the daily openings and closings of commodity markets during the past year, a federal regulator said Monday in a call for expanded examination of the trading tactic.
Speaking at an electronic-trading conference in Chicago, Bart Chilton, a commissioner on the Commodity Futures Trading Commission, said the high-frequency traders may be conducting so-called “wash” trades. Traders buy and sell securities almost simultaneously in a no-risk transaction that makes it appears as though there’s more market action than there really is………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

European Union negotiators gathered on Monday for talks to finalise reforms of the bloc’s 50 billion euro-a-year farm policy that could remove almost half of the subsidies now given to some of its largest grain and livestock producers.
Many of the proposals are meant to make the 50-year-old common agricultural policy (CAP) more fair and environmentally friendly, to justify the huge sums paid to farmers each year………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

The Indian currency derivatives, which include futures and options, have registered a 50% jump in average daily turnover to over 60,000 crore in June against 41,000 crore in May due to increased volatility in the rupee against the US dollar, the combined data of National Stock Exchange (NSE) and Multi Commodity Exchange’s (MCX-SX) shows.
The rupee has hit a record low of 59.98 against the dollar earlier this month, and has depreciated nearly 10% against it since April this year, and experts reckon the trajectory of the rupee is downwards………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Japan and South Korea agreed to end part of their currency swap contract next month as scheduled, reducing its overall size to $10 billion from $13 billion, the Finance Ministry said Monday.
The two countries “have reached the conclusion that they will not extend the term of yen-won swaps between their central banks worth $3 billion, which will expire July 3,” the ministry said………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

Carbon trade will give local governments an alternative source of revenue. China launched its first pilot carbon emissions exchange on Tuesday, though plans for a nationwide rollout and efforts to apply the scheme to some polluting heavy industries could be undermined by a slowdown in the world’s No.2 economy.
High-emission industries such as aluminum and steel are likely to resist higher costs as they are already battling weak prices due to tepid demand and a persistent supply gut………………………………………..Full Article: Source

Posted on 25 June 2013 by VRS |  Email |Print

The market craziness continues, with stocks down, commodities crashing, and bond yields rising. As usual during such periods, wild theories about what’s happening abound: The U.S. recovery is a mirage; China is having a Lehman Brothers-style meltdown; etc.
Here are four things you need to know about what’s really going on. The next few days and weeks will be a mad market scramble that doesn’t reflect what’s happening in the underlying economy. The Fed’s recent announcement that it will start scaling back asset purchases has sent everyone scurrying to get rid of riskier assets or assets that are perceived to be dependent on quantitative easing (emerging market stocks, hot-money commodity plays, any companies that are particularly sensitive to interest rates). Hold tight – we’re in for a summer of volatility but the underlying global growth story hasn’t changed that much………………………………………..Full Article: Source

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