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Commodities Briefing 03.Jul 2013

Posted on 03 July 2013 by VRS |  Email |Print

Like Graham Greene’s The End of the Affair, it is hard to believe it is over and let go. But, it has been an extraordinary run, a decade of what has been called the commodity super-cycle. It started, and perhaps will end, with China. The global integration of an economy that has grown at double digits since China joined the World Trade Organization (WTO) in December 2001 perhaps marked the start. Will China also now mark the end?
Until the last decade, the real price - so, taking off inflation - of commodities had fallen for 150 years. It was the reason why developing countries wished to diversify out of natural resources and into manufacturing……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

The commodity supercycle has ended and investors should reduce their holdings in raw materials, especially gold, and buy equities, UBS AG said.
Slow economic growth in the U.S. will boost equities more than commodities and reduced quantitative easing by the U.S. Federal Reserve will be negative for gold, Stephane Deo, a strategist at UBS in London, said in a report dated today. Industrial metals are rated “underweight” on increased supply and slower growth in top consumer China……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

After the plunge in the gold price and rout in coal, JPMorgan has made a bold choice it has made its first overweight call on commodities since September 2010. “Though we may be a little early, we do not think we are very early. We would rather be premature in our pretend portfolio than you be late in your real portfolio,” the investment bank’s strategist Colin Fenton said.
Commodities have been under increasing pressure as evidence mounts that China’s growth is slowing and the US Federal Reserve may soon taper the $US85 billion of liquidity it is pumping into markets every month……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

For the first time in almost two years commodity analysts at JPMorgan have turned bullish on commodities and are now overweight the entire complex. “In a number of commodities, prices have fallen far enough for long enough to force involuntary cuts in production and to spur fresh demand,” the bank said in the report released Sunday. “Risk is now skewed toward demand growth surprise and production disappointment.”
Although the firm’s analysts do admit that downside risks remain high, their recommendation in the report has been very clear……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Australia has proved resilient during the global economic downturn, with the commodities boom a key factor driving its economy in the right direction. But there are fears that a slowdown in Chinese manufacturing could depress demand for iron ore and other Australian raw materials.
The BBC’s Linda Yueh reports from Port Hedland, an Australian town shaped by the commodities boom……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Flamboyant Brazilian commodities billionaire Eike Batista’s (pawall) empire is under assault. The latest blow was Monday’s announcement that his oil company would probably close its only productive wells next year (paywall).
OGX is one of the six publicly-listed corporations he runs through his holding company EBX. OGX shares have lost nearly all of their value over the last year……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

On the face of it, oil has defied gravity. Amid a deepening sell-off in commodities that has sent gold and industrial metals tumbling, crude has been impassive.
As a transport fuel, oil is closely linked to the ups-and-downs of the world economy. Yet, benchmark Brent has held steady above the $100 a barrel level even as metals have floundered amid concern at slowing Chinese growth and the prospect of reduced emergency support from the US Federal Reserve……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Oil prices neared $100 a barrel Tuesday, as traders feared tensions in Egypt could spread to the broader Middle East. U.S. oil prices hovered around $99.50 a barrel Tuesday afternoon, the highest they’ve been in over a year.
While oil production from Egypt is negligible, the country controls the Suez Canal and pipeline, which move about 4 million barrels of oil per day. Plus, the country is one of the largest and most powerful in the Middle East and North Africa — home to about a third of the world’s oil production……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Russia’s President Vladimir Putin has called for a single-pricing model for gas production. Speaking at the Gas Exporting Countries Forum (GECF), whose members represent 60% of the world’s gas reserves, he called for a commonly agreed price formation for gas, similar to the OPEC agreements on oil pricing.
Speaking at the GECG, which continues on Tuesday and which was also attended by Venezuelan President Nicolas Maduro and Iran’s leader Mahmoud Ahmadinejad, he said: “I believe that we need to go even further, cooperate even more closely and consolidate our efforts to effectively protect gas exporting countries’’ interests in order to strengthen the competitiveness of gas as a promising and clean fuel.”………………………………Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

The price of gold rose in Asia and jumped at the start of London trade Tuesday, hitting $1,267 per ounce to recover 40% of last month’s crash before easing back. Prices for silver bullion also rose, but lagged gold’s rate of gain, before slipping back below last week’s finish at $19.69 per ounce.
European stock markets meantime fell, as did the Euro – down 0.5¢ against the Dollar – after Eurozone and IMF officials said Greece has just three days to prove its commitment to fresh budget cuts……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Barclays has lowered its gold price forecast for 2013 citing a weak second quarter, a recent sell-off and lack of investment buying. The bank expects an average gold price at $1,393 per ounce in 2013 with a predominantly weak third quarter. The bank earlier held a forecast of $1,483.
“Gold has been exposed to further downside following firmer equity markets, a firmer dollar and firmer-than-expected U.S. housing data, which has compounded the weakness after the hawkish Fed press conference,” Barclays analysts said in a note……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

The matter goes out of control when the person who has leased out the gold turns out to be a Central Bank. The Central Banks which have gargantuan reserves in gold have not parked it idle locked away in bullion vaults.
They lease gold and the kind of amount they lease is almost a state-secret! What would they do when they find it out that gold has sky-rocketed to insane levels and they could not get that gold back?………………………………Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

As I write this, gold is trading at $1,238 an ounce. Compare that to the price of $1,790 back in October last year, and over $1,900 in 2011. Morgan Stanley has put a $1,313 price on gold for the end of 2014, which is 16 percent less than its previous forecast. Goldman Sachs is even more gloomy, suggesting it will dive to $1,050.
Things look even worse for silver, now trading at $18.55, with Morgan Stanley forecasting just $21.01 for end of 2014……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

UBS AG (UBSN), Switzerland’s biggest bank, started storing gold for wealth-management clients at a facility in Singapore, citing interest from investors in the region even after the metal slumped into a bear market.
The leased vault in the Singapore FreePort is available for clients in the city-state and Hong Kong, according to Peter Kok, regional market manager for wealth management in Singapore and Malaysia. While bullion is heading for the first annual drop in 13 years, client interest persists, Kok said……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

After the recent notable decline in gold and silver prices, many precious metals investors are questioning whether or not to continue to hold their long positions. At this point, it may make sense to take a step back to gain some perspective on the matter by looking at the past, present and likely projected future for the prices of silver and gold.
Macro sentiment still seems to be living in fantasy land. It tends to assumes that stock market corrections are cyclical and not secular in nature. There also seems to be an assumption being made that the Federal Reserve will step in to support a falling bond market……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

China’s Ministry of Commerce announced its second rare earth export quota of 15,550 tonnes for this year. The quota includes 13,821 tonnes for light rare earth metals and 1,670 tonnes for heavy rare earth metals.
Monday’s announcement brings this year’s full year REE quota to 31,001 tonnes. The REE quota for the first half of this year was set at 15,501 tonnes. China, which produces 95% of global rare earths, exported 16,265 tonnes of rare earths in 2012 although the allocated quota for last year was 30,966 tonnes……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

The recent weakness in base metals presents “attractive buying opportunities,” Commerzbank said Tuesday, when it released its outlook for the complex. The bank looks for copper to average $7,100 a metric ton in the third quarter and $7,500 for the fourth, with aluminum expected to be $1,850 in the third quarter and $1,950 for the final three months of the year.
Other forecasts for the final two quarters of 2013 include nickel, $14,250 and $15,500; lead, $2,100 and $2,200; zinc, $1,900 and $1,950; and tin, $20,500 and $22,400……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Industrial metals declined as concerns remained that economic growth in China, the biggest user, is slowing. Copper for delivery in three months on the London Metal Exchange declined as much as 0.9 percent to $6,919 a metric ton and was at $6,937.75 by 10:28 a.m. in Shanghai. Metal for delivery in September on the Comex fell 0.4 percent to $3.146 a pound.
China’s economic expansion in the second quarter may slow to about 7.5 percent, the China Securities Journal reported, after two gauges of manufacturing released yesterday showed growth slowing……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

In the near term, further declines in gold prices can’t be ruled out but the fact that gold is trading 20% below its average marginal cost of production, silver 10%, and platinum 25% below marginal production costs, prices will have to move above these levels to support long term supply growth, according to ETF Securities Ltd.
Recent fall in gold and silver prices were the result of an over-reaction from bond markets to Fed comments and ultimately real interst rates will fall back from current levels, making the situation positive for precious metals in general, according to ETF Securities Ltd……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

The period of seasonal strength for gold bullion is approaching. Thackray’s 2013 Investor’s Guide notes that the optimal time to invest in gold bullion for a seasonal trade is from July 12 to October 9. The trade has been profitable during 12 of the past 15 periods.
Traditionally, advances in gold during its period of seasonal strength is attributed to precious metal fabricators in India who purchase bullion to make into jewellery for the Indian wedding season that starts this year in the first week in November. India is the second biggest consumer of gold jewellery in the world behind China……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

As a group, commodities performed miserably in the second quarter. The 8% decline for the PowerShares DB Commodity Index Tracking ETF tells the story, but it was gold and silver that garnered the bulk of the press.
Investors should not forget that natural gas futures also suffered through a dismal second quarter. The U.S. Natural Gas Fund, which tracks natural gas futures, plunged almost 14% last quarter due to soaring inventories and mild weather after getting a lift in the first quarter due to low temperatures in some parts of the U.S. On June 27, UNG tumbled to its lowest levels since February due to rising inventories and mild weather forecasts……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

New Zealand commodity prices fell for a second month in June, led by dairy products and beef, though the slide in the kiwi meant prices actually rose in the local currency. The ANZ Commodity Price Index fell 3.7% last month, following a 1.6% decline in May. Whole milk powder declined 9% and skim milk powder fell 8%.
The Thomson Reuters/Jefferies CRB Commodity Index, the world’s leading benchmark of commodity prices, fell 1.5% last month and is now sitting near its lowest levels since June last year. Weaker manufacturing activity in China has weighed on prices of raw materials and prices of dairy products have fallen in three of the past four GlobalDairyTrade auctions……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Asian currencies have seen a lot of volatility in recent weeks, with some of the region’s leading economies seeing their currencies fall against the US dollar. The depreciation is impacting countries in different ways.
Japan - which relies heavily on exports for growth - is benefiting, but some other countries have warned that they are being hurt by the fall in the value of the Japanese yen. While depreciation for export-led economies might be good, for countries that rely heavily on imports, such as India, it is not……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

Financial globalisation means that all markets have an impact on each other - quities, currencies bonds or commodities. Hence, currency movement not only depends on the economic scenario of a country, but also on the overall macro-economic environment.
Rupee’s recent depreciation is an example as its movement is largely driven by global factors, which may not be under the control of the Indian central banker……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

A vote on salvaging the European Union’s faltering carbon-trading program is expected to be close, although some officials believe the proposals will narrowly pass. On Wednesday, the European Parliament will vote on whether to delay the auction of emissions permits in order to raise the price of producing carbon dioxide. The measures are intended to reinvigorate financial incentives for shifting away from fossil fuels and toward renewable energy.
The parliament shot down a similar plan in April. Another vote against the measures would severely undercut the credibility of Europe’s carbon market, adding to a string of recent setbacks for the region’s energy policies……………………………….Full Article: Source

Posted on 03 July 2013 by VRS |  Email |Print

The city of Shenzhen, in south China’s Guangdong Province, has launched a carbon trading scheme, to become China’s first market for compulsory carbon trading. Energy consumption and environmental experts are praising the move as a positive sign that the government is changing its ways and reducing carbon dioxide emissions.
However, they also point out that the government still has a lot to do to realize carbon trading nationwide. The Shenzhen pilot scheme involves 635 local companies which account for 26 percent of the city’s gross domestic product and 38 percent of its CO2 emissions, or about 30 million tonnes — a tiny amount compared to the 8 billion tonnes China emitted in 2012……………………………….Full Article: Source

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