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Commodities Briefing 07.Aug 2013

Posted on 07 August 2013 by VRS |  Email |Print

An ex-Glencore oil trader and a veteran grains merchant are among those behind the largest number of commodity fund launches in 3 years despite investor worries the multi-year rally in those markets is over.
A dozen hedge funds trading raw materials derivatives on discretion were launched in the first six months of this year, the same as in the whole of 2012, data from London-based research house Preqin showed. In 2011, only seven of such funds took off, the smallest number in 5 years………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

The average Joe on the street would be forgiven for thinking that banks are supposed to move money, not metal. But events in recent weeks have put paid to that misconception.
Last week in a lawsuit filed in a Detroit court, aluminium product manufacturer Superior Extrusion sued Goldman Sachs, along with the London Metal Exchange, for alleged “anti-competitive and monopolistic behaviour in the warehousing market in connection with aluminium prices”, according to Hong Kong Exchanges and Clearing, the parent company of the LME………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

“Just being able to trade financial commodities is a serious limitation because financial commodities represent only a tiny fraction of the reality of the real commodity exposure picture…. We need to be active in the underlying physical commodity markets in order to understand and make prices.”
So said Blythe Masters about 3 years ago, as noted by the Financial Times. The occasion was a then-groundbreaking deal to buy RBS Sempra Commodities, which owned a lot of physical storage space. This was a groundbreaking move by Wall Street to move much deeper in the commodities machinery, right down to the housing of physical goods. For years, the conventional wisdom held that investment banks ought to jump in………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

The U.S. Energy Information Administration expects the price of U.S. benchmark crude oil to fall through the remainder of 2013 after rising to a 28-month high of more than $108 a barrel last month.
In its monthly short-term energy outlook report, the agency said the price of West Texas Intermediate, or WTI, crude–the main U.S. oil benchmark–would fall to as low as $96.50 a barrel in December, after hitting a high of $108.05 a barrel in July………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

“The price of oil is rigged,” alleges author and former trader Raymond Learsy. Prices for most other commodities have dropped and there’s a bountiful supply, Learsy writes in an article for The Huffington Post. U.S. commercial crude inventories are near all-time highs, domestic oil production is about a million barrels a day higher than it was last year, weekly gasoline inventory is up substantially and Chinese demand is flat or down.
So why has the price of oil increased 9.5 percent in the last month? Because of manipulation by speculative traders, Learsy argues………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

A few years after the global economy emerged from the economic crisis of 2008, commodity prices began to surge, thanks to ongoing robust demand from China. Chief financial officers at mining firms quickly realized that firm commodity prices implied robust future profit streams, and a broad range of new mining projects were put into motion.
To pay for those projects, billions of dollars were borrowed, and investors began to anticipate impressive cash flow returns from all of that borrowing. Just a few years later, that optimism has evaporated………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

For one thing, there is India, the world’s biggest consumer of gold for jewelry, with an astonishing 25% share. (China bought more gold last year, but was not tops for jewelry use.) The current Indian government continues to try to improve its balance of trade by raising taxes on the metal and restricting gold imports in various ways.
Not only does this add costs that impinge on demand, but the regulations change month to month and are so confusing and byzantine that the red tape alone curtails trade. The regulations also have gotten even more burdensome recently………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

To predict future prices of any good or service, Economics 101 dictates that we must measure the demand and supply of the good or service in question. Today, I’m applying those time-proven measures to the state of gold bullion.
On the demand side, we continue to hear about the increased demand for gold bullion from China. The managing director of investment for the World Gold Council (WGC), Marcus Grubb, said late last week, “China will probably be the world’s biggest gold consumer this year for the first time on an annual basis… That will be driven by both jewellery and investment demand. Jewellery will be the biggest overall demand segment, but investment will grow fastest.”……………………………………….Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

Gold price is likely to hit US$1,400 an ounce by year-end, with stable demand amid better economic expectations, says Malaysia’s largest gold jeweller. Gold price currently hovers between US$1,200 and US$1,300 an ounce.
Poh Kong Holdings Bhd executive director Ermin D.M. Siow said the price would not slide back to this year’s mid-April to mid-May level. He said one of the reasons why the sudden plunge between April and May was due to market speculation of the US Federal Reserve quantitative easing (QE) measures. ……………………………………….Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

You might see seven, but in gold-mining circles “hedging” is a four-letter word. On Newmont Mining’s recent earnings call, one analyst even owned up to having published a report on hedging and felt the need to add that he had “not heard a death threat yet.” Hedging gets a bad rap for two reasons.
First, locking in a price for gold limits potential profit gains. Second, the sector’s history with hedging hasn’t been happy. Once the bull market in gold got going in 1999, many hedge books became a drag on profits. Investors cheered in 2009 when Barrick Gold, the world’s largest gold miner by output and one of the last hedging holdouts, said it would unwind its remaining positions………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

The exodus out of gold this year, triggered by heavy exchange traded fund (ETF) selling, may nearing its end, according to an executive at the World Gold Council (WGC), who expects prices to pick up towards the end of 2013.
“We feel that speculative money has largely come out of the gold market. We feel that gold is nearer the bottom than the top right now. You’ll see a stronger market towards the end of the year, and into next year,” Marcus Grubb, managing director of investment at the WGC told CNBC on Tuesday………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

A dramatic drop in the recycling of gold jewellery was helping to rebalance the global bullion market, now in surplus, and could set the stage for a price recovery, the industry-funded World Gold Council said on Tuesday.
The council’s managing director of investment, Marcus Grubb, said supplies of gold from recycling would fall by 300 tonnes in 2013, almost a fifth of last year’s 1,600 tonnes, as low bullion prices discourage people from cashing in their jewellery………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

In the U.S. institutional investors, in 2013, have sold off over 1,000 tonnes of gold holdings from the SPDR gold ETF, the investment banks, from the Gold Trust and from COMEX because they have switched from gold to equities in the U.S.
Nowhere in the world have gold investors followed U.S. investors, but have either held onto their gold or rushed in to buy up the physical gold made available to them. And this was done when prices were falling………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

Near-record net inflows of $44.08 billion and strong market performance helped to push global exchange-traded fund (ETF) and exchange-traded product (ETP) assets to $2.16 trillion at the end of July 2013, according to preliminary data from ETFGI, a London-based ETF consultancy.
These assets are spread across some 4,883 ETFs/ETPs, with 9,925 listings, from 209 providers listed on 57 exchanges. Deborah Fuhr, Managing Partner at ETFGI, said: “Dovish comments from the Fed and positive market performance encouraged investors to put net inflows of $44.08 billion back into the market through ETFs/ETPs.”……………………………………….Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

The envisaged Commodity Exchange might not operate smoothly due to excessive market monopoly in the marketing of agricultural produce in some parts of the country, Tanzania Exporter Association (TANEXA) has warned.
Four cash crops–cashew nuts, coffee, cotton and rice are lined up as the first products to trade on the exchange that is expected to boost the country’s exports and contribute to the national economic growth. TANEXA Executive Director Mtemi Laurence said in an interview with the ‘Daily News’ in Dar es Salaam that there were unsettled problems with regards to marketing of traditional cash crops like cashew nuts and cotton………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

The top executive of IntercontinentalExchange Inc. (ICE) said Tuesday that commodity futures trading activity would remain strong despite some Wall Street banks’ planned exit from commodities businesses.
“These physical commodities infrastructure resources are valuable businesses that will continue to require risk management regardless of who owns them,” Jeffrey Sprecher, chief executive of ICE, said Tuesday on a conference call with analysts to discuss second-quarter earnings………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

Morgan Stanley is exploring various options for its multibillion dollar commodities business, with the sale of a minority stake being one possibility, three sources familiar with the situation said on Monday.
The business, which includes three U.S. power plants, a 49 percent stake in a tanker fleet and a pipeline and logistics firm, has been shopped for more than a year. But the bank is not in any hurry to sell a stake at any price and is not close to a deal, the sources said………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

U.S. bank JP Morgan Chase & Co , which plans to stop trading in physical commodities, has bought the over-the-counter business in commodity derivatives of Switzerland’s UBS AG, the banks said on Tuesday.
The deal excluded precious metals and index-based trades, but included hedge positions on financial exchanges, UBS said in a statement. No financial details were released………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

Loyal readers of this column, if there are any, will know that a few weeks ago I was in the Galápagos Islands, part of Ecuador. As is inevitable, I came back with a handful of small change. There is a US dollar coin, and another coin that simply states on its face “fifty cents”.
The 50 cent coin is minted for the government of Ecuador, but there is no Ecuadorean currency, and the cents referred to are therefore not Ecuadorean cents. Ecuador is the largest country in the world to have chosen the route commonly known as “dollarisation”………………………………………..Full Article: Source

Posted on 07 August 2013 by VRS |  Email |Print

Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm for most major economies. The exchange rate of one currency versus the other is influenced by numerous fundamental and technical factors. These include relative supply and demand of the two currencies, economic performance, outlook for inflation, interest rate differentials, capital flows, technical support and resistance levels, and so on.
As these factors are generally in a state of perpetual flux, currency values fluctuate from one moment to the next. But although a currency’s level is largely supposed to be determined by the underlying economy, the tables are often turned, as huge movements in a currency can dictate the economy’s fortunes. In this situation, a currency becomes the tail that wags the dog, in a manner of speaking………………………………………..Full Article: Source

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