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Commodities Briefing 25.Jul 2013

Posted on 25 July 2013 by VRS |  Email |Print

Buying commodities in order to diversify your portfolio might not be that bright an idea after all. A new study from the Bank for International Settlements disputes the idea that adding commodities to a portfolio can lower the volatility of returns. Considering that this has been the bedrock idea underlying the buying and selling of commodities as an asset class over the past 15 years or so, this is big news.
Taken in combination with trends negative for commodities markets like the migration of manufacturing back to developed markets and 3-D printing, there may be fewer reasons for investors to consider the asset class………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Americans have learned a lot in recent years about how our largest financial institutions make their money. But few would have imagined that a million and a half tons of aluminum – a quarter of the national supply at any given moment – typically sits in a network of 27 Detroit warehouses owned by Goldman Sachs.
And hardly anyone would have thought that manufacturers seeking to purchase that aluminum might wait 18 months or more for delivery, while warehouse owners like Goldman Sachs collect additional rent, paid for by consumers of aluminum products ranging from beer cans to home siding………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Just as Wall Street’s commodity titans face intensifying pressure over their trading operations, nimble rivals are stepping up efforts to chip away at their bedrock business of financing the world’s raw materials industry.
Minutes before senators in Washington began questioning why the biggest U.S. banks were straying so deeply into the murky world of commodities, privately owned merchant trading group Freepoint Commodities announced on Tuesday it had completed its first deal to finance oil and gas output………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Commodities do not diversify an investment portfolio, according to new research by the Bank for International Settlements (BIS), overturning conventional wisdom that including commodity futures can reduce the volatility of returns.
Beginning in September 2008 and continuing through 2012, commodity and equity prices have shown heightened correlation, Marco Lombardi and Francesco Ravazzolo argue in a paper “On the correlation between commodity and equity returns” published on July 11……………………………………….Full Article: Source

Posted on 25 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% 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 25 July 2013 by VRS |  Email |Print

The negative impact of shale gas on the GCC won’t be significant for at least another 20 years, citing the high cost of shale gas and projected growth in Asia’s oil consumption, Kuwait-based Asiya Investments said in its new report titled “Shale gas impact on the GCC” released Wednesday.
In fact, the report noted that Asia’s oil consumption growth will outpace natural gas consumption during the same period. Commenting on the report, Asiya Investments’ economist Dana Al Fakir said: “There is much hype about shale oil and gas these days, and much of it is true, especially in the US. But on the global scene we see no major changes in the dynamics of Gulf oil in the next two decades………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Iraq is the bad boy of the global oil scene, callously pursuing its interests despite its impacts on others. Investors who want to understand how the global oil picture develops over the next few years need to be aware of Iraq’s ambitions. The country risks incurring OPEC’s ire as it seeks to grow production significantly over the next few years.
At the same time, the country has inflamed tensions with the autonomous region within its borders, the Kurdistan Regional Government, or KRG, over oil sovereignty. Initially, oil and gas companies, lured by Iraq’s enormous reserves, were willing to go on a first date, but the KRG’s also-lucrative reserves and more attractive legal and operating environment have stolen many of Iraq’s original suitors………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

The price of gold has surged 13 percent - its biggest gain in more than a year- from a late-June low of $1,211.60 as recent signals from the U.S. central bank of continued money-printing hold down the value of the dollar and the recently depressed price sparks Asian bargain-hunting.
The yellow metal’s July bounce may continue, vindicating the small number of bullish forecasters still keeping faith with the precious metal, or the slide that began in late October could resume, vindicating the many sell-side analysts working for giant investment banks who are happy to see gold get what they see as well-deserved comeuppance………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

After watching some drastic one-day plunges this year for the yellow metal, investors are wondering why gold prices are rising now– could this be the start of a healthy, prolonged rebound? On Monday, gold enjoyed its biggest one-day jump in more than a year. It hit a four-week high as gold finally broke through the $1,300 an ounce technical resistance level and finished above $1,335 an ounce.
Short-covering by technically-oriented traders and the perception that the Fed will continue QE for the foreseeable future are the short-term answers as to why gold had such a strong day, and why prices are rising now………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Goldman Sachs(GS.N) is sticking to its average forecast of $1,413 for an ounce of gold this year as it does not see sharp reductions in U.S. Federal Reserve stimulus, after fears of such cuts drove bullion prices to near three-year lows recently.
In a note issued on Wednesday, Goldman said it also expected gold to average $1,165 an ounce in 2014 as previously forecast, although the price could reach $1,050 by the year-end………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

The recent rebound in gold prices has injected bullishness back in the market, as gold bugs call for further gains in the months ahead, with one analyst expecting bullion to hit $1,600 per ounce by year end.
David Lennox, resources analyst at equity research firm Fat Prophets, told CNBC he’s not ruling out another 20 percent upside for gold by December, as the expected robust recovery in the U.S. economy remains elusive………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

A US dollar rally seems likely in the short term, and this will probably have a very negative impact on the precious metals. Gold climbed up to over $1,347 per ounce after the US dollar slipped against other currencies. The American currency dropped to a one-month low slightly below 82 after extending a broad decline for a third session. Investors are probably wondering if it will drop any further.
The recent price action suggests that market players are still long the dollar, which could weigh on the greenback, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Base metals prices strengthened in official trading on the London Metal Exchange on Wednesday July 24, on a weaker dollar and bullish manufacturing indicators in Europe.
The dollar was trading at about 1.325 to the euro in early trading, from about 1.318 on Tuesday, while European purchasing managers’ indexes (PMIs) saw unexpected growth. “Euro-area PMIs have improved modestly over the past couple of months and the ‘flash’ readings for July showed improvement again today,” a broker said in a note………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Copper futures fell, snapping the longest rally in nine months, after Goldman Sachs Group Inc. said surpluses will weigh on mined commodities and Caterpillar Inc. reported disappointing earnings.
Goldman Sachs pared estimates on prices of industrial metals including nickel, lead and zinc, and said copper’s surplus may almost double in two years. Caterpillar, the world’s largest manufacturer of mining and construction equipment, cut its earnings forecast and posted profit that trailed analysts’ estimates for a third straight quarter. The Standard & Poor’s 500 Index dropped as much as 0.6 percent………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Over the last three years, Wall Street has witnessed a tremendous shift in the investment environment. Investors are slowly adopting riskier appetites as they continue to recover from the 2008 financial crisis, allowing bullish momentum to become a more dominant force in the markets. But while most asset classes have fared relatively well over the years, some have posted both hits and misses.
Below, we highlight a handful of ETFs across each asset class that have surged over the past three years, as well as those that have struggled to keep up with Wall Street’s quick pace……………………………………….Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

One of the amendments carried out by the 2013 budget was the introduction of commodities turnover tax (CTT), effective 1 July 2013. Simultaneously, the budget amended the definition of speculative transaction under income tax laws to exclude commodity derivative transactions carried out in a recognized commodity association (recognized commodity exchange).
The exclusion would apply to all commodity derivatives transactions in agricultural as well as non-agricultural commodities and not just non-agricultural commodity derivatives, which are subject to CTT………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Investors may recall that the commodities-driven Toronto Stock Exchange was a star performer for an extended period in the mid-2000s. Since then, this asset class, which had benefited from strong global growth during the early years of this century, has languished.
In particular, gold stocks have been unloved and unwanted, though they should benefit from widespread and aggressive printing of money by the world’s central banks………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

The global economy needs exchange rate coordination now. Absent that, the world is likely to be increasingly afflicted by exchange rate fluctuations and policy acrimony. These are bound to undermine the economic recovery and increase the likelihood of stagnation.
In 2010, Brazilian Finance Minister Guido Mantega warned of the possibility of “currency wars” as countries sought to devalue their exchange rates to gain competitive advantage………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Manufacturers in the UK and Europe put their Chinese rivals in the shade for once today amid more recovery signs for the economy. The CBI’s latest snapshot of the industry’s fortunes showed UK firms growing orders at the quickest pace since April last year in the quarter to July.
The cheer comes ahead of official estimates tomorrow set to show the wider economy picking up the pace of growth to 0.6 per cent between April and June, the best since last summer’s Olympics………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

Be careful of the summer lull in the currency markets. That’s the message from Valentin Marinov, chief G10 FX strategist at Citi. Trading Post noted this week how even the implied volatility of the Hungarian forint had fallen sharply of late.
Its move is replicated across top pairings. The JPMorgan G7 index of leading currency volatility is flirting with six-month lows. “Forex volatility has been hammered lower ahead of the traditionally quiet month of August,” Mr Marinov said in a note to clients………………………………………..Full Article: Source

Posted on 25 July 2013 by VRS |  Email |Print

The headlines last week were dramatic: Australia abandons its carbon tax. The move seemed to confirm suspicions that putting a price on carbon dioxide emissions is politically toxic.
The reality, experts say, is more nuanced. Australia has not abandoned its commitment to reducing climate-warming emissions. And carbon tax systems, while rare and rife with controversy, retain a firm foothold in a number of advanced economies………………………………………..Full Article: Source

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