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Commodities Briefing 10.Jul 2013

Reports of commodities bull market demise may be greatly exaggerated
Commodity super cycle not over, support should last another 15-20 years: SocGen
Commodity traders’ expansion on easy money seen as a risk
Fears of Chinese hard landing cast a shadow over commodities complex
Not everyone is complaining about the bearish commodities market
Commodity warehouse ownership rules need rethink
IMF shaves oil price forecasts to $100.09/b in 2013, $95.36 in 2014
Oil price agency fires back at EU benchmark reform plan
EIA: OPEC June oil output falls to 30.24 mln barrels a day
Is Vladimir Putin building a new OPEC?
IEA expects gas price hike to give investment a lift
Can Germany afford its 'energy bender' shift to green power?
Does gold price collapse signal a vote in economic confidence?
Does gold price collapse really represent confidence in the global economy?
Scotia Capital lowers 2013 gold price estimate to $1,400/oz
Gold bulls defy price slump as Paulson loss widens: Commodities
Gold borrowing cost hits post-Lehman high
Will gold prices rise in 2013?
What the fundamentals say about gold prices!
Jim Rogers fears Indian politicians triggered history's worst gold crash
Chile cuts copper production forecast for 2013 as global slowdowns impact demand
No tax guarantee from commodity trading hub Geneva
Commodity ETF flows: Energy funds fuel inflows, GLD slips below $40 bln in AUM
Gold in Japan ETF expands 10pct as price drop entices buyers
A hidden danger in ETFs
Hedge funds face big losses if weather fears hold
Tax hurts India's commodity derivatives trading
African countries come up short on investment in agriculture
Who is affected by big currency movements?
RBI, Sebi go tough on currency speculators
Top forecaster Barclays sees risk to lira outlook
Kazakhstan: Carbon trade scheme fuels divisions in Kazakhstan
China's carbon emissions traders await offset demand

Posted on 10 July 2013 by VRS |  Email |Print

It has been a powerful bull market in commodities. So impressive, many refer to it as “the super-cycle.” Driven by insatiable demand from China and other developing nations, cheap money courtesy of the Fed and lack of investment in the previous cycle, commodities have been the place to be for over a decade.
Oil prices are up five-fold since the late 1990s, iron ore is up seven times and most agricultural commodities have more than doubled. Gold, as attested to on AM radio and in late night TV commercials, also enjoyed a bullish ride and is up over five times its price in 2001………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The current and history’s third commodities super cycle, which began in 2000, is far from over, and the major factors supporting it — population growth and rapid urbanization — would easily stay with us for another 15-20 years, according to a senior analyst at Societe Generale.
While acknowledging that “nobody really defines what a commodity super cycle is,” and the current period might not be “as super,” it is “not uncommon to have cycles within super cycles,” Michael Haigh, SocGen’s New York-based Global Head of Commodity Research, told a media round table in Singapore Monday………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Commodity trading companies active in multiple markets have used easy access to finance to expand their physical holdings, creating a potential “systemic” risk, according to two research groups in Brussels.
The merger of Glencore and Xstrata Plc signals commodity trading has reached “a tipping point,” where more investments in physical holdings rather than futures or services may lift profitability, according to a report by the Centre for European Policy Studies with the European Capital Markets Institute………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Renewed jitters about China’s decelerating economy have raised questions about what happens to prices of metals and energy if the world’s most voracious consumer of commodities suddenly goes on a barebones diet.
Some economists are warning the recent liquidity squeeze that gripped Chinese lenders coupled with the new leadership’s aversion to stimulus raise the risk of a so-called “hard landing” that could briefly send the country’s gross domestic product growth tumbling to as low as 3%………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

For the past several months, financial news outlets have been awash with bearish write ups on the commodities market. Gold and silver in particular have been the worst hit, with the latter making headlines last month for dipping to the lowest level in over two years.
Toward the end of May, silver prices dipped to lows not seen since September 2010. This was as a result of the underlying slow industrial growth. With similar headlines in the gold sector, analysts have gone on to point fingers, with some of them even blaming the Fed. Amid the ruckus, little attention has been given to a small group of hedge funds, which are raking in incredible profits from the declining precious metal prices………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Conflicts of interest over ownership of commodity warehouses can inflate prices of raw materials such as aluminium, a report by two Brussels think-tanks said on Tuesday. It is likely to add to market pressure to reform the London Metal Exchange’s (LME) storage system, in which companies such as Glencore and Goldman Sachs have been able to make profits from holding big inventories.
The report published on Tuesday follows more than a year of data-gathering to assess the relationship between physical raw materials and derivatives markets………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The International Monetary Fund has lowered its oil price forecasts to $100.09/barrel in 2013 and $95.36/b in 2014. In April, the IMF forecast that oil prices would average $102.60/b this year and fall back to $97.58/b in 2014.
However, in an update to its World Economic Outlook, the IMF said on Tuesday that global growth was set to remain subdued at slightly above 3%, the same as in 2012. “This is less than forecast in the April 2013 World Economic Outlook (WEO), driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area,” the IMF said………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Rigorous legislation proposed by the European Commission on financial benchmarks could destroy transparency in the oil market and force up energy costs for consumers and industry, oil price publisher Argus Media said on Tuesday.
The new rules aim to regulate oil price reporting agencies (PRAs), whose daily assessments are used as benchmarks to settle physical and derivative deals worth billions, as well as the market sources who submit data to them………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The Organization of the Petroleum Exporting Countries cut its oil output in June to the lowest level since March, according to U.S. government data released Tuesday. The Energy Information Administration said in its monthly Short-Term Energy Outlook that the group lowered production to 30.24 million barrels a day from a revised 30.58 million barrels a day in May.
OPEC spare capacity stood at 2.2 million barrels, steady compared to the revised May figure, as production in Angola, Libya and Nigeria fell in June………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

For years, natural gas has been a relatively regional product, and producers that had access to major markets via pipelines were the only game in town. The prospect of liquefied natural gas, or LNG, exports from new places all over the world is turning that logic on its head, and so the former big bosses of natural gas are looking to maintain their prominence through an OPEC-style cartel.
Let’s find out why these natural gas giants are nervous and discover what an organization like OPEC could mean for the natural gas industry………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The International Energy Agency (IEA) expects India’s new gas pricing regime to boost investment in exploration and production, which will enhance energy security and help consumers, including gas-starved power plants.
IEA, the energy watchdog for the developed world, along with western experts and trade bodies such as the Confederation of Indian Industry, is unanimous in supporting market-linked prices, in sharp contrast to consumers of natural gas as well as opposition parties, particularly the Left parties, who have criticised the move to adopt the new pricing formula, which will double the price to $8.4 per unit, going by current trends………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Germany’s rapid transition to renewable energy is said to be the country’s biggest and most expensive project since the fall of the Berlin wall - but with rising costs for consumers and industry, will this great energy experiment succeed?
The powerful whiff of farmyard manure can’t dim the smiles on people’s faces in the German village of Juehnde. Located in the heart of the country, this rural community is home to Germany’s first energy co-operative that started in 2005. The co-op generates electricity from solar panels and from a biogas plant that mixes locally grown grain and locally sourced farm waste………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The commodity’s past highs and lows means policymakers should be cautious in interpreting its latest plunge in value. In principle, holding gold is a form of insurance against war, financial Armageddon and wholesale currency debasement.
And from the onset of the global financial crisis, the price of gold has often been portrayed as a barometer of global economic insecurity. So, does the collapse in gold prices, from a peak of $1,900 per ounce in August 2011 to less than $1,250 (£841) at the beginning of this month, represent a vote of confidence in the global economy?……………………………………….Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Government policymakers should not allow gold’s collapse to provide a false sense of accomplishment, argues Harvard economist Kenneth Rogoff in a recent article for Project Syndicate.
Rogoff – influential yet much criticized because of his work with Carmen Reinhart on the relationship between public debt and GDP growth – suggests that a surge of “naïve investors” and weakening gold market fundamentals go a long way to explain bullion’s recent decline………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Reflecting the year-to-date average, and assuming a relatively flat second half of this year, Scotiabank analysts Monday revised short-term precious metals prices. Despite the revisions, Scotia Capital analysts Tanya Jakusconek, Joanne van Ballegooie, and James Bender initiated only one rating change as Agnico-Eagle Mines was lowered from Sector Outperform to Sector Perform.
“We are adjusting our gold price background for 2013 given year-to-date actual pricing ($1,515/oz). Short term, the gold price faces headwinds with the strengthening of the U.S. dollar…and more positive sentiment toward the global economic outlook,” said the analysts………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Hedge funds lifted their bets on a gold rally as signs of an improving U.S. economy drove prices lower in the longest slump since April, while this year’s bullion declines spurred losses for billionaire John Paulson.
Money managers increased their net-long positions in gold by 9.9 percent to 34,301 futures and options as of July 2, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts climbed 1.4 percent to 78,148, the second-highest on record. Net-bullish bets across 18 U.S.-traded commodities dropped 17 percent as investors grew more bearish on wheat and soybean oil………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The cost of borrowing gold has risen to the highest since the post-Lehman Brothers scramble for supplies, as the bullion market adjusts to a new era in which western investor demand is less dominant.
The niche gold lending market, largely the preserve of a few big banks and central banks, has been uneventful in recent years as investors have built up large holdings and lent them out on the market, keeping rates depressed………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Will gold prices rise in 2013, or will the bear market continue in the second half of the year. The bears have certainly been loud this year, as short-term bets against gold paid off in the first half of 2013. Gold lost 27% in Q1, the worst first-half performance since 1981.
Gold futures shed 23% in Q1, the most since Bloomberg data began in 1975. On June 28, gold futures hit $1,179.40, the lowest level since August 2010. The continued gold prices rout is “shattering” investors’ confidence, Ric Deverell, head of commodity research at Credit Suisse Group said in a recent report………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

After all the fall in the gold price was hard and fast due entirely to the bear raid in the U.S. This started in mid-April after the sales from the SPDR gold ETF had begun more than a month ahead of that. The signal for the bear raid was given when Goldman Sachs issued a recommendation to their clients to go ‘short’ of gold.
The fall was very dramatic and shook the gold world to its roots. The volumes of physical gold that were sold were enormous. Even the Central Bank Gold Agreement limitations on gold sales (when they occurred, pre-2009) were held at 4 – 500 tonnes a year. These sales took place over three months, with the 500 tonne bear raid happening in one week………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Jim Rogers loves India and Indians! And I am pretty much sure that he has got nothing in the world against Palaniappan Chidambaram, India’s Finance Minister. But when it comes to the iconoclastic gold rout; the downfall in gold from 2011 highs of $1900 to the recent $1200, India’s import curbs has got a direct role to play, said Jim Rogers, the living legendary investor.
“…India has a huge balance of trade deficit. The largest drivers are oil and gold. You can’t do anything about oil so the Indian politicians are blaming their problems on gold. And they’ve taken many measures, and more measures are coming to diminish or even eliminate the import of gold,” said Jim Rogers………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Chile, the world’s top copper producer, said Tuesday it expects to produce 5.53 million metric tons of the red metal in 2013, down from its previous forecast of 5.58 million tons, which was announced in April.
Chilean authorities attributed the lower estimate to two factors, delays at the Caserones mine managed by Japan’s JX Holdings and lower forecasts for output from the Spence and Esperanza deposits. These factors combine with Chile’s aging mines and labor unrest to curb output………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The Swiss canton of Geneva, pressured by EU demands to end tax breaks, cannot guarantee its proposal for a tax compromise will get through, its finance minister said, even though trading houses said less attractive conditions could drive them away.
In April the co-owner of Gunvor, Gennady Timchenko, said it could move to Singapore, a rival commodity trading hub, if Switzerland became less attractive. Geneva is the hub for a third of the world’s physical oil traded volumes, according to the Geneva Trading and Shipping Association. For Switzerland as a whole, the commodity sector accounts for around 3.5 per cent of gross domestic product and employs around 10,000 people………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Commodity exchange-traded products added nearly $800 million in the shortened week ending Wednesday, July 3, with the majority of inflows attributable to the energy sector. The SPDR Gold ETF (GLD) suffered outflows, however, dropping below $40 billion in total assets. Energy funds piled on $733 million, and precious metals snagged $193 million despite GLD’s losses.
Broad market (multicommodity) funds shed $78 million overall, agriculture lost $27 million, and industrial metal funds saw outflows of $25 million. Exchange-traded products (ETPs) include exchange-traded funds (ETFs), exchange-traded vehicles (ETVs), and exchange-traded notes (ETNs)………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Japan’s biggest bullion-backed exchange-traded fund expanded 10 percent this year by volume, bucking a global trend as lower prices and the yen’s weakness spurred buying as a hedge against inflation.
Bullion held by the ETF exceeded 6 metric tons on July 5, nearing a record reached in October, said Osamu Hoshi, general manager at Mitsubishi UFJ Trust and Banking Corp., which introduced the nation’s first gold-backed ETF three years ago. The value of assets held by the fund declined 5 percent this year to July 5 as gold futures in yen slid 13 percent, he said………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Investors who buy and sell exchange-traded funds are learning that they don’t always get what they pay for. Sharp price swings and heavy selling can cause the prices of ETFs to vary from the value of the assets they own. That’s been especially clear of late in bond ETFs, as Bloomberg’s Lisa Abramowicz and Mary Childs explain.
ETFs, you’ll recall, hold baskets of underlying securities and trade throughout the day like a stock. Most track an index and stray little from their net-asset value, or NAV. But heavy trading and market volatility can compromise that consistency………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Hedge funds, having avoided a second drubbing at the hands of US grain stocks numbers, face heavy losses if forecasts hold of worrying heat for Midwest crops, having extended short positions on corn to a record high.
Managed money, a proxy for speculators, slashed its net long position in futures and options in the major US-traded agricultural commodities by 134,000 contracts in the week to July 2, according to analysis of data from the Commodities Futures Trading Commission, the regulatory authority………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

India’s trading volumes of gold, silver and metal derivatives have fallen by more than a third since the imposition of a commodity transaction tax a week back, exchange data showed on Tuesday.
The finance ministry imposed a 0.01% tax on the trading of all non-agriculture and some agriculture commodity derivatives on July 1 to boost revenues, government officials have said. Stock investors are already paying a similar tax, they said. Commodity exchange officials say the tax has added costs and reduced the incentive for participants to hedge their price risks through trading in derivatives………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Only seven of the 53 African Union countries who pledged to commit at least 10 percent of their national budgets to investment in agriculture in 2003 have reached that goal. Aid organizations say that investment in agriculture is key to breaking the cycle of food insecurity and crisis in West Africa. As the declaration approaches its 10th anniversary on Wednesday, the aid groups are calling on AU countries to renew their commitment to the Maputo Declaration.
In 2003, 53 African heads of state agreed to allocate at least 10 percent of their national budgets to investment in agriculture and livestock by July 2008. Ten years later, only seven countries - Burkina Faso, Niger, Guinea, Senegal, Mali, Malawi and Ethiopia - have reached that target………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Some of the largest economies in Asia have seen big movements in the value of their currencies in recent months. Other than domestic factors, the potential tapering off of the US Federal Reserve’s cheap cash injections is partly responsible for the volatility.
The US central bank’s moves had allowed billions of dollars of inflows into emerging economies, and now that money is leaving and it is having an impact on their economies………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The going will get tough for domestic bourses in the currency segment. In a coordinated clamp down on currency trading, the Reserve Bank of India on Monday barred banks from doing propriety account trades in exchange-traded currency segment, while the Securities and Exchange Board of India imposed stringent restrictions on trading positions and doubled margin requirement for traders.
Sebi has said that gross open position of clients cannot exceed 6% of the total open interest (OI), or $10 million, whichever was lower. For non-bank trading members, the limit has been fixed at 15%, or $50 million, whichever is lower. The margin requirement was raised to 8% from 4%………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

The top forecaster for the Turkish lira says his prediction for the currency to strengthen by year-end risks being undermined by the country’s external funding needs even as the central bank provides support.
The lira will rise 3 percent to 1.89 per dollar by the end of the third quarter, with the currency at 1.90 by Dec. 31, Koon Chow, an emerging-market strategist in London at Barclays Plc, the most accurate forecaster for the past two quarters, said yesterday in an interview by phone. Should the exchange rate stabilize, bond yields, among the highest in developing nations, may fall, he said………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Authorities in Kazakhstan are at loggerheads with business executives over a plan to introduce a carbon dioxide trading scheme for companies generating greenhouse gas emissions.
The government sees two benefits to the scheme — a healthier environment and more revenue for state coffers. But leaders of the country’s business community, including KazEnergy, a powerful alliance of energy producers, is opposing the plan, arguing that it would stifle economic growth and decrease Kazakh global competitiveness………………………………………..Full Article: Source

Posted on 10 July 2013 by VRS |  Email |Print

Designated as China’s first special economic zone back in 1980, the fast-growing city of Shenzhen has come to epitomize the country’s move toward market-oriented economic policies. On June 18, Shenzhen set yet another precedent when it launched the first of seven pilot programs to help pave the way for a national cap-and-trade program.
Under the pilot program, 635 companies in Shenzhen, responsible for about 38% of the city’s emissions, face obligations to reduce their carbon intensity by 6.68% on average per year by 2015. ……………………………………….Full Article: Source

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