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Commodities Briefing 24.Jul 2013

Posted on 24 July 2013 by VRS |  Email |Print

Time is the most important variable in commodity markets but also the most frequently overlooked. Too often observers become trapped in an endless short term and fail to notice that the world is gradually changing around them.
As is well known, in the short term both supply and demand for most commodities are fixed and show little response to small price changes. Lack of responsiveness in the short term is why very large price adjustments are required to force markets back into balance and why commodities exhibit more volatility than the prices of other goods and services………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Goldman Sachs has maintained a “neutral” recommendation for commodities both a near-term and a 12-month horizon on expectations of flat returns. The bank lowered its 12-month S&P GSCI Enhanced Commodity Index return forecast to 0.1 per cent from 2.3 per cent.
“Our current outlook is extremely benign, with returns expected to be mostly flat over the next 12 months,” analyst Jeffrey Currie said in a note. The 12-month return forecast will include a 1.5 per cent gain in energy and 6 per cent gain in industrial metals, the bank said in a note dated Monday………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Wall Street’s lucrative commodities businesses came to the fore here Tuesday as a Senate panel questioned whether banks should be allowed to control warehouses, pipelines and other infrastructure used to store and transport essential goods.
The hearing, convened by the Senate Financial Institutions and Consumer Protection subcommittee, came as Goldman Sachs, JPMorgan Chase and others face growing scrutiny over their role in the commodities markets and the extent to which their activities can inflate prices paid by manufacturers and consumers. The Federal Reserve is reviewing the potential risks posed by the operations, which have generated many billions of dollars in profits for the banks………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

The Federal Reserve’s review of its decision to let banks store, transport and trade raw materials signals a potential rebuilding of the wall between banking and commerce that legislation and rulemaking have eroded.
The central bank said July 19 that it’s reviewing a decade-old decision that physical commodities are “complementary” to banking, allowing lenders such as Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) to operate in both industries. Goldman Sachs Group Inc. (GS) and Morgan Stanley may be less at risk from the review as some businesses owned before the firms became bank holding companies in 2008 are grandfathered………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Wall Street’s multibillion-dollar commodity trading operations came under the political spotlight on Tuesday as a powerful Senate committee questioned whether commercial banks should control oil pipelines, power plants and metals warehouses.
The Senate Banking Committee hearing comes as Goldman Sachs, Morgan Stanley and JPMorgan Chase - which generated an estimated $4 billion in commodity revenues last year - face growing pressure from a number of investigations into their operations, and as the Federal Reserve reviews Wall Street’s right to operate in raw material markets………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Saudi Arabia remains OPEC’s top oil producer in terms of net export revenues for 2012, the U.S. Energy Department said. The Energy Information Administration, the department’s analytic arm, said the Organization of the Petroleum Exporting Countries for all members except Iran earned nearly $982 billion in net oil export revenues last year. That’s a 5 percent increase from 2011.
Saudi Arabia accounted for 32 percent of the total OPEC revenues in 2012 with $311 billion, the EIA said. OPEC said in its July market report that Saudi Arabia produced 9.7 million barrels of oil per day last year, a 4.3 percent increase from 2011………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

OPEC, excluding Iran, made $982 billion from exporting oil in 2012, the most in 38 years of data, the US Energy Information Administration (EIA) reported Monday. It forecast that sales will drop in 2013 and 2014.
Net oil export revenue by the 12-member organization climbed 5.4 percent last year from 2011, according to the EIA, the Energy Department’s statistical arm. Sales will tumble by 4.3 percent to $940 billion this year and by 3.9 percent to $903 billion next year, the agency said………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Signs of an improving US economy have been positive for share markets around the world, but they have also helped spur on the price of oil. Falling crude oil stockpiles in the US and fears that Egypt’s oil production may be impeded by ongoing political turmoil have also aided the cause with oil sitting just off its 16-month high of US$109 per barrel.
This is bad news for consumers, compounded by recent falls in the Aussie dollar, but it makes for prime conditions for oil and gas producers earning US dollars………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Though the long-term trajectory will be defined by how the US Federal Reserve’s stimulus withdrawal plays out, analysts rule out a sharp movement on either side in the near-term. The Indian consumer’s insatiable appetite for gold and the country’s burgeoning current account deficit (CAD) prompted the Reserve Bank of India (RBI) to further tighten gold import norms late Monday evening.
According to the latest norms, an entity importing 100 kg of gold to be kept in a bonded warehouse, for example, would have to release 20 kg to exporters (gold/gold jewellery), against an undertaking to Customs authorities. The new policy would be applicable to gold imports in any form/purity, including gold coins, reports suggest………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Since gold touched its recent lows of $1,200/ounce at the end of June, the gold price has rallied over 10% to nearly $1,340/ounce. While the gold price is still a far cry from the levels seen in late 2012, it looks like some share market participants see value at current levels.
Given the inherent leverage most gold miners have to a higher gold price, and considering the significant declines this calendar year in share prices (many over 40%), it is perhaps not surprising that gold miners are starting to see some support………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Gold prices may have made a sturdy recovery in recent weeks, but one analyst from Roubini Global Economics is warning that an “endgame” is coming for bullion, with the winding down of the Federal Reserve’s massive monetary stimulus still very much in play.
“Weak U.S. data and falling inflation could all serve to prolong QE, providing a boost to the gold price. But the U.S. economy is improving and QE will gradually come to an end-this endgame is the scenario that gold investors need to be positioned for,” Gary Clark, commodities analyst at Roubini Global Economics, wrote in a note published late Monday………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Gold surged over 3% due to what appears to be have been significant short covering due to concerns about gold backwardation and the continual haemorrhaging of gold inventories from the COMEX. Concerns about a default on the COMEX, once the preserve of a few observant market watchers, are becoming more widespread as we appear to be witnessing a run on the highly leveraged bullion banking system.
Very robust physical demand from the Middle East, Asia and particularly China and a decline in the dollar also helped prices log their biggest one-day gain in over a year and their first close above $1,300 an ounce in nearly five weeks………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Unlike other precious metals, palladium has been on the receiving end of raft of positive attention over the last few months: in May, Thomson Reuters GFMS said in its Platinum & Palladium Survey 2013 that it expects palladium to remain in deficit next year, and in June, news surfaced that the metal was beating analysts’ expectations. Since then, an RBC Capital Markets report and a Reuters survey have expressed similarly rosy outlooks for the metal.
As June drew to a close, RBC Capital Markets echoed GFMS’ prediction that palladium will spend 2014 in deficit, citing continued increases in autocatalyst demand and declining Russian stockpiles………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

The bullish case for silver is easy enough to make. It also makes sense that if the price per ounce eventually takes off, then the miners would do well. Nevertheless, the problems that silver miners face are multifaceted and will be discussed further in the following sections.
Inflation: The next trigger that catapults silver prices higher will likely be associated with a notable rise in inflation that may already be in process. The Producer Price Index (PPI) was up last month significantly for the first time in a while and crude oil is again testing the psychological $100 level………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Copper hit a one-month high on hopes for higher demand from top consumer China after a report that its premier said growth must remain above 7%. The most actively traded copper contract, for September delivery, rose 1.3 cents, or 0.4%, to settle at $3.198 a pound on the Comex division of the New York Mercantile Exchange, the highest since June 14.
Chinese Premier Li Keqiang said that economic growth can’t be allowed to slip below the 7% level, a state newspaper reported on Tuesday. Worries about a slowdown in Chinese growth have weighed on copper prices this year………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Hong Kong became the go-to listing destination for resources companies in recent years, but a slide in commodity prices and China’s economic slowdown mean the city faces challenges in attracting further listings by foreign companies.
Commodity prices started rising more than a decade ago, and the sector became the darling of investors. In a bid to attract non-Chinese miners, which have typically listed in London or Toronto, the Hong Kong stock exchange eased its listing requirements for the sector three years ago………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

In gold ETFs, bullion-backed funds receive most of the attention and assets. However, an ETF that uses futures contracts for exposure to the precious metal is getting a second look as gold goes into backwardation.
Backwardation occurs when the spot price is higher than the near future contract, and is a rare situation in gold. This market condition puts the focus on PowerShares DB Gold Fund, which stands to benefit from backwardation. Gold’s biggest backwardation since 1999 prompted a “corrective rally,” Bloomberg reports, citing Societe Generale analysts………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

In the first half of 2013, just one new ETF/ETP launched in the US joined the exclusive blockbuster or Billion Dollar Club. Many ETF/ETP managers adjust their product offerings hoping to create and develop best-selling products that will enter the exclusive blockbuster or Billion Dollar Club, a milestone that indicates $1 billion in assets under management.
Popular with investors, these are profitable and blockbuster products for firms. At the end of H1 2013, there were 1,478 ETFs/ETPs with assets of $1.44 trillion from 54 providers listed on three exchanges in the United States………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

The National Spot Exchange Ltd (NSEL) said it will not offer contracts where settlement and delivery of commodities is done beyond 11 days, a move that comes after the Centre ordered the bourse not to launch new contracts following violation of certain rules.
Last week, the Consumer Affairs Ministry had asked the exchange not to launch any new contracts till further instructions and also sought undertaking from the NSEL in this regard………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

There’s no denying China’s massive economic growth over the past decade, as the country recorded an average GDP of more than 10 percent per year. In only seven years, China’s economy doubled; in 13 years, it tripled.
With this incredible expansion, China began to import commodities at an incredible pace. In 2000, the country imported only 70 million tons of iron ore; today, it’s more than 10 times that amount, at 763 million tons. Copper imports increased dramatically too, growing from 1.6 million tons in 2000 to more than 4 million tons per year today, according to BCA Research data………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

The dollar fell against the majority of its 16 most-traded peers after an unexpected slump in a regional manufacturing index bolstered the argument for the Federal Reserve to delay winding down its bond-buying program.
The yen reversed losses versus the dollar after U.S. housing-price gains trailed forecasts. Data since a July 5 report said U.S. payrolls rose more than forecast have shown housing starts and existing-home sales unexpectedly fell………………………………………..Full Article: Source

Posted on 24 July 2013 by VRS |  Email |Print

Diplomatic talks on a deal to curb greenhouse gas emissions from the global aviation industry have intensified recently as EU and US officials try to stave off the threat of a trade war, lawmakers and observers said.
Peter Liese, a member of the European Parliament from the conservative German Christian-Democratic Union, led a delegation to meet with Obama administration officials in Washington last week to discuss the issue. The International Civil Aviation Organization (ICAO), the United Nations’ civil aviation body, has until September to complete a resolution on a market-based plan that would curb rising greenhouse gas emissions from global airlines………………………………………..Full Article: Source

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