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Commodities Briefing 06.Aug 2013

Posted on 06 August 2013 by VRS |  Email |Print

Commodities revenue at the 10 largest investment banks fell 25 percent in the first half, putting those units on pace for the worst annual performance in more than five years, according to analytics company Coalition Ltd.
Revenue fell to about $2.7 billion in the first six months from $3.6 billion in the same period of 2012, Coalition said today in an e-mail. Last year’s total of $6 billion was down 24 percent from 2011 and was less than half that of 2008, when oil prices climbed to a record………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

The end of the commodities super-cycle of rising prices is being accompanied by a series of humiliating reverses for some of the biggest bank traders in the energy and metals markets. These banks might struggle to retreat to a sustainable, client-based commodities business model, given over-ambitious former revenue targets, the over-sized egos of some of the main players involved, and the extent to which they have alienated customers and regulators.
JPMorgan has become a symbol of this hubris, with the tribulations of its commodities head, Blythe Masters, drawing some attention away from the many problems faced by the traditional big-two bank traders of commodities, Goldman Sachs and Morgan Stanley………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Commodities are usually advertised as having the same returns and less volatility than equities. This column presents the results of a recent CEPR working paper showing that previous studies based on rather restrictive assumptions produced biased results that favoured commodities over equities.
Using an alternative methodology, co-movement between traditional asset and commodity markets seems to be symmetric and occurs most of the time. What changes is the strength of the relationship. The returns of equities and commodities have become more integrated in the aftermath of the subprime crisis, a result that questions the diversification benefits of commodities………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

The world’s three biggest natural-gas producers—Iran, Qatar and Russia—have agreed to work on stabilizing the price of the resource, according to a report from Central Asian news agency Trend. The three, who have arranged a de facto OPEC-style grouping that controls around 60% of the world’s natural gas reserves, are fearful of falling prices if and when the U.S. gas production begins to move out into the wider world.
The ground work for this is taking place now. Some of the world’s largest energy companies are proposing half a trillion dollars in projects to export North American natural gas, The Wall Street Journal’s Chester Dawson and Ben Lefebvre report………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

A study conducted by Baker Institute estimates that Russian’s share in European oil market will decline from 27% in 2009 to less than 13% in 2040 due to the rising shale oil production in the U.S.
The extraordinary shale oil boom might have given a sigh of relief to the United States, which is one of the world’s largest oil importers. But it’s a big cause of worry for other countries like Russia, Saudi Arabia, Iran, Qatar and other major oil producers. They fear that the increase in U.S. shale oil production will bring down prices………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

In 1956, Marion King Hubbert laid out in a paper the idea of “peak oil“—that at some point in the future, the production of non-renewable resources like oil and coal would hit its highest point and then decline. Well, according to an editorial in the Economist, that time may be now.
But, the Economist says, oil’s peak may have come about in a different way than Hubbert thought it would: it’s not the production of oil that’s dropping off, it’s the demand………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

A pipeline designed to carry up to 125,000 barrels of oil per day was attacked in Yemen, halting the flow of crude oil to Yemeni ports. Yemen relies on oil exports for more than half of its government spending and the country’s president said last week his economy would grind to a halt if oil companies flee the national security situation there.
The attack comes amid growing concerns about the possibility of al-Qaida plots in Yemen and elsewhere in the region. It also follows an emerging trend in the region’s energy sector………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

The U.S. oil market is well supplied, with U.S. commercial crude oil inventories near all time highs, with production of U.S. oil increasing by some million barrels/day from a year ago, with weekly inventory of gasoline jumping by 800,00bbls equivalent last week alone, while Chinese demand is flat to down and the risks to Suez canal transit have abated.
Yet the price of oil has jumped by some 9.5 percent over the last thirty days. This while virtually all basic commodities have gone down in price significantly………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

This has not been an easy year to be a gold investor. For two years there has been a general slump in global commodity prices, particularly raw materials. Precious metals prices held up about six months longer than most raw materials, then joined the march lower.
The strengthening dollar, which bottomed about two years ago, is partially responsible, since it makes internationally traded goods cheaper. But many domestically traded commodities, like steel, are suffering as well. That can’t be chalked up to currency exchange rates. It has to be laid to economic weakness………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

The vast majority of investors either retained or added to their holdings of silver and gold after prices fell sharply in the spring, a survey suggests. When asked whether they had made any changes to their precious metal investments over the past year, 37pc of investors said they hadn’t changed their allocations to silver and gold, while 43pc had increased their holdings.
Just 14pc of investors said they had reduced their holdings, while 4pc had switched from gold to silver. Only one in 100 said they had sold all of their holdings of the precious metals while 0.7pc had moved from silver to gold………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Currency wars, equities and geo political issues have been the three key drivers which influenced the value of gold. Bernanke, Draghi and China were only the supporting characters of the story. But technically, the story was different…
For last month, Gold prices was trading at bullish territory, the commodity rallied from 25,755 to 28,676 levels in a short span of time. Even though it failed to breach 29000 levels, futures are looking good for gold futures………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Despite some positive data, the global economy is showing signs of slowing, a remarkable development in itself when you consider all the money printing and deficit spending that’s transpired over the past few years. According to the IMF’s overview, global growth was less than expected in the first quarter of 2013, at just over 3%, which is roughly the same as 2012.
The lower-than-expected figures were driven by significantly weaker domestic demand and slower growth in emerging-market economies, a deeper recession in the euro area, and a slower US expansion than anticipated. The report concludes that the prospects for the world economy remain subdued………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

When we take into account last week’s events, it seems that the yellow metal is more sensitive to signs of tapering than any other asset. According to Reuters, gold slipped to a two-week low on Friday after falling through a key technical level near $1,300 as strong U.S. economic data raised fears that the Federal Reserve may start to taper its commodities-supportive stimulus measures.
Losses pushed gold toward its worst weekly performance in a month. However, the shiny metal rebounded sharply from a low at $1,285 to $1,317 after weaker than expected U.S. non-farm payrolls………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Silver and gold have both been held down by resistance and have been held up by support. In other words, they are now in no-man’s-land.
According to Elliott Wave theory, if we are to view that the top of a smaller degree fourth wave has been struck, then no new highs should be seen in either of the metals and new lows should be right around the corner………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

In a tough year for precious-metals investors, a pair of specialists at HSBC don’t see much changing for the rest of 2013, at least when it comes to the price of silver. HSBC’s James Steel and Howard Wen predict in an Aug. 5 note that the metal’s price — down about 35% this year — is likely to hover between $17 to $23 per ounce for the remainder of 2013.
Sandwiching the recent price of $19.70 is the duo’s way of accounting for rising supply of the metal alongside the dampening effect of Federal Reserve policy shifts and weaker demand from exchange-traded funds………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

While markets have been oscillating lately as traders worry about catalysts such as the Chinese interbank lending market and the prospect of a tapering of bond-buying stimulus by the Federal Reserve, insiders have been reacting to every wiggle in the U.S. dollar.
From emerging-market stocks to commodities, all are rising and falling based on how the greenback is trading relative to the euro and the yen………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

At a time when gold and silver are tumbling the most in three decades, hedge funds are holding a near-record bullish bet on palladium as forecasters from Morgan Stanley to Credit Suisse Group AG predict years of shortages.
Demand will exceed output by 1.33 million ounces in 2013, more than North America produces in a year, Morgan Stanley says. Credit Suisse anticipates deficits through at least 2016, and researcher CPM Group says mines won’t catch up for a decade. Prices will average $800 an ounce in the first quarter, 9.2 percent more than now, and $850 in 2015, the median of as many as 12 analyst estimates compiled by Bloomberg show………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

The rates to obtain aluminum tumbled the most in 20 months in Europe last month and retreated from a record in the U.S. as lawmakers and regulators scrutinize long lines for metal that buyers say raised their overheads.
The surcharge added to the price of aluminum for immediate delivery on the London Metal Exchange slid 7 percent in Europe, the most since November 2011, according to Metal Bulletin data………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Gloom over weaker economic growth in China has led some investors to miss signs of robust underlying copper demand, which may wrong-foot those betting on a further slide in prices.
Benchmark prices in copper, viewed by many investors as a proxy for global economic health, hit the lowest levels in nearly three years at $6,602 a tonne in late June………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Inflows for global exchange traded products soared to $44.1 billion last month, the best month since September 2012, when inflows reached $45.1 billion. Year-to-date inflows of $143.3 billion are now ahead of last year’s record of $128.3 billion, according to data from BlackRock, parent company of iShares, the world’s largest ETF issuer.
Helped by a rebound in U.S. stocks, U.S. equity ETFs attracted $31.6 billion in cash in July, more than triple the amount that went into equity mutual funds………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

There are lots of numbers showing investors’ sour attitude on gold this year. The most interesting one is $30.9 billion. That’s the figure for net asset outflows around the world from gold exchange-traded funds and related investments. BlackRock sent it out this morning documenting the state of the ETF market as of July 31st.
Commodity ETFs have bled money this year, but the story is almost entirely about gold. Here’s a chart of how the $30.9 billion in gold outflows compares to other commodity funds………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

In my experience, diversified stock and bond fund investors generally get the doughnut while currency investors tend to get the hole. But, while I will spend some time below on a currency hole I would avoid, I’ll also provide a recipe for a currency donut that could make for a sweet trade this month.
Long the pride and prize of institutional trading, ETFs broke the currency bank wide open for anyone who wanted to try their hand at becoming the next George Soros………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

There has been some rough trading in the commodity producer world so far in 2013, as a number of issues have kept these companies as underperformers. In particular, sluggish global demand, a low level of interest in commodities, and oversupplied conditions have been impacting a number of products this year.
These trends have definitely taken place in the agribusiness market and especially in the fertilizer segment. This corner of the market has been doing quite poorly and earnings estimates have been falling across the board for the space, pushing the industry down to dead last in terms of the Zacks Industry Rank at time of writing………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Hedge funds have turned their least optimistic ever on prospects for agricultural commodity prices, slashing exposure to rising soybean futures, and hiking their net short position in 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 nearly 48,000 contracts to 58,489 lots, Agrimoney.com analysis of regulatory data shows………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Indian brokers said that a lack of oversight allowed the nation’s biggest spot commodity exchange to stretch settlement dates, prompting a government clampdown that sparked a two-day, 73 per cent crash in its parent’s shares.
The National Spot Exchange Ltd (NSEL) suspended some contracts after the government on July 14 asked the bourse not to start new obligations until further notice. The NSEL broke rules by allowing settlement longer than 11 days and permitting sale of goods traders didn’t keep in its warehouses, according to the Forward Markets Commission (FMC), which regulates futures trading………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

The Federal Reserve should reverse a decade-old ruling that lets banks trade physical commodities, Commodity Futures Trading Commission member Bart Chilton said.
“I don’t want a bank owning an electric service, or cotton, corn or feedlots,” Chilton, a Democrat, said in remarks prepared for delivery today at a conference of U.S. cotton growers in Lake Tahoe, California. “I don’t want banks owning warehouses, whether they have aluminum, gold, silver or anything else in them.” The Fed “can and should reverse” the policy, he said………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

One of China’s top securities brokers has bought parts of the commodities trading unit of French bank Natixis in the latest move by Chinese institutions to expand into natural resources markets.
Western banks that trade raw materials face increased regulatory and political pressure, with some market leaders such as JPMorgan considering selling, spinning off or clinching strategic partnerships for their commodities desks………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

JPMorgan Chase & Co. (JPM), which said last month it plans to get out of the business of owning and trading physical commodities from metals to oil, bought the over-the-counter commodity derivatives portfolio of UBS AG (UBSN), which is exiting most of its raw-materials trading.
The transaction includes on-exchange hedge positions and excludes precious metals and index-based products, UBS said in an e-mailed statement today. JPMorgan assumed market risk on the portfolio and the two banks “will work together in the coming months with their clients to fully assign contracts for individual trades to JPMorgan,” according to the statement. JPMorgan spokesman Patrick Burton declined to comment………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Australia’s industry minister Monday said the nation’s currency needs to weaken sharply if the manufacturing sector, especially car makers, is to regain competitiveness against rival trading partners.
The comments came as the Australian dollar fell to fresh three-year lows against the greenback on Monday, having fallen by around 16.5% since April after trading much of the previous two years above parity………………………………………..Full Article: Source

Posted on 06 August 2013 by VRS |  Email |Print

Carbon markets are particularly vulnerable to criminal activity because the “commodity” being traded has no physical presence and is difficult to measure, INTERPOL has said. Criminals can target the fast-growing market through securities fraud, insider trading, embezzlement, money laundering and cybercrime, the world’s biggest international police organisation shows in a new guide to carbon trading crime.
“The noteworthy potential for the carbon market to be exploited rests on a single significant vulnerability that distinguishes it from other markets – the intangible nature of carbon itself,” says the guide………………………………………..Full Article: Source

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