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Commodities Briefing 08.Aug 2013

Posted on 08 August 2013 by VRS |  Email |Print

An ex-Glencore oil trader and a veteran grains merchant with futures broker R.J. O’Brien 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 08 August 2013 by VRS |  Email |Print

BHP Billiton Ltd chief executive officer Andrew Mackenzie is calling for a rethink of industrial relations policy and greater consultation on productivity to shore up the miner’s operations against growing competition from emerging suppliers.
Mackenzie also predicted global demand for resources would rise by up to 75 per cent over the next 15 years. However, Australia was facing fiercer competition from rival nations, he said………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

A strengthening US dollar will cause commodities and emerging markets to continue to underperform, according to Andy Merricks, who says he is avoiding both areas of the market entirely.
Both sectors have struggled of late. According to FE Analytics, the MSCI Emerging Markets index has returned 6.24 per cent over three years while the FTSE All Share Mining index has lost 21.34 per cent. This compares with gains of 40.99 per cent from the MSCI AC World index………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Some market pros think stocks have become overvalued and may be ripe for a correction, but other asset classes might have gotten ahead of themselves too.
Abah Ofon, Director of Agricultural Commodities Research at Standard Chartered Bank, thinks some of the so-called soft commodities have entered a bear market as well………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

On the coast of Colombia there is a port that goes by the name of Sociedad Portuaria de Río Córdoba; a privately operated facility for loading coal onto vessels for export. It is also owned by global investment bank Goldman Sachs.
As discussions heat up among regulators on banks owning commodity assets it is worth asking who exactly owns what?……………………………………….Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Grupo BTG Pactual, the Brazilian investment bank led by billionaire Andre Esteves, said its new commodities business will start adding to revenue as some of the world’s biggest lenders retreat.
“We expect to have some revenue from the area in coming quarters,” Marcelo Kalim, chief financial officer for the Sao Paulo-based company, told analysts on a conference call today. “This is the appropriate moment to start this business.”……………………………………….Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Regulators have had the financial industry under a microscope since the late-2000s crisis, and every time they turn over a stone they seem to find something to litigate or regulate. Most recently, mega-banks like Goldman Sachs and JP Morgan have come under fire for allegedly shady business practices regarding their ownership of commodities storage facilities.
The New York Times called attention to some suspicious behavior from Goldman Sachs in July. The bank was accused of using a fleet of trucks to move 1,500-pound bars of aluminum between warehouses, thereby lengthening the storage time of the commodity and increasing the prices paid by manufacturers and consumers across the country, thus adding millions of dollars per year to the company’s coffers………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

A flurry of new energy price forecasts released this week predicts the price of U.S. crude oil will retreat below $100 for the second half of the year.
This, after the price of benchmark West Texas Intermediate (WTI) surged 16% to $108 between mid-June and mid-July. The August futures contract now stands at about $105………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Many readers will know about the claim that a frog plopped into boiling water will hop right back out if it can, while one put into cold water which is then slowly heated will remain until it is cooked. The claim is wrong, but the story is quite useful in understanding some human behavior. Gradually changing circumstances are typically more difficult for humans to detect and react to than circumstances that are changing rapidly.
Such is the case with oil prices. The velocity with which oil prices rose in 2007 and 2008 transfixed the public and policymakers. The price vaulted from $60 a barrel on the first trading day of 2007 to above $147 on July 11, 2008, the (so far) all-time high………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

We know the world economic pattern we have been used to in years past–world population grows, resource usage grows (including energy resources), and debt increases. The economy grows fast enough that paying an interest rate a little higher than the inflation rate “works” for both lenders and borrowers. Borrowers are able to handle the required interest rate, because their wages are rising fast enough to buy homes and cars at prevailing interest rates.
Unemployment is not too much of a problem because jobs grow with population and resource usage. Governments do fairly well, too, because they can tax the growing wages of the population sufficiently to get enough taxes to pay the benefits they have promised to constituents………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

It happened to potash. It can happen to oil. Last week marked the collapse of one of the last remaining cartels in the world economy—the potash cartel. Potash is a critical ingredient in the production of the fertilizers that help grow our food.
For decades, the global potash industry has been dominated by Belarusian Potash Company (BPC), a joint venture between the Belarusian Belaruskali and the Russian Uralkali, together producing about a third of the world’s potash supply. On July 30th Uralkali broke away from BPC and directed its exports to China, consumer of one fifth of the world’s supply, via its own distribution channels………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Gold may again be sending a warning to markets. Its price is again on a losing run, the most sustained since its spring cataclysm. The likely reason is that fears of a September tightening in U.S. monetary policy are reviving.
In April, a gold price decline of more than 10 percent signalled an approaching seismic shift – the end of the expectation of endless quantitative easing from the U.S. Federal Reserve. Since then, the yield on 10-year U.S Treasuries has jumped from 1.6 to 2.6 percent. Emerging markets have slipped and commodities have stagnated. The only clear winner is developed country equities; the U.S. S&P 500 index is up by about 10 percent………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

A lot of smart people have widely divergent views on where gold is headed. To a large extent, the differences in opinion stem from their different view of the function of gold. Some see gold primarily as a hedge against political chaos, a breakdown of the financial system or war. Some see it as a universal, incorruptible currency. Many talk about its function as an inflation hedge.
Others take a strictly market-oriented approach and ignore function, focusing solely on supply, demand and production costs. Each of these factions make good points in support of its views………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

A common question that I receive from readers is in regard to gold bullion. Many people over the past few years have begun allocating a portion of their investment strategy into the yellow precious metal and are curious about what’s possible in the near future.
Naturally, with gold prices down over 20% this year, this has certainly hurt investors. The questions many are asking are: what will be the catalyst for a boost in gold prices and when will they rebound?……………………………………….Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Silver has been resilient, though the price of the metal has not. What do I mean by that? Since the collapse of precious metals prices started in May of this year we’ve seen valuations fall tremendously. Even greater has been the drop of demand for certain metals. Probably the most brutal attack on a metal that we can visualize is that of the gold ETF known as GLD.
The GLD has lost a staggering 31% of its holdings since the peak seen back in December 2012. By July, 29 2013 it had lost 13,638,000 of its 43,453,000 ounces, leaving 29,815,000 ounces of gold held in trust………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

HSBC Precious Metals Analysts James Steel and Howard Wen Monday predicted Monday that the global silver surplus will likely widen to 177 million ounces this year, up from 108 million ounces in 2012.
In their analysis, Steel and Wen forecast that silver mine supply will post a further gain in output this year, topping 800 million ounces. “Even with the recent price plunge silver prices remain above the costs of production for virtually all of the world’s notable silver mines,” they observed. “Producers therefore still have considerable financial incentive to maximize output, wherever possible.”……………………………………….Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Precious metals had a strong month in July. But while gold was up 5%, silver advanced only 1%. A more recent reading of the past 30 days through August 6th, shows gold up 4.9%, while silver is up only 3.3%. This is an atypical relationship between the two metals, as silver usually leads gold higher (or lower). As the more volatile metal, silver is often up at twice the pace of gold during any given move.
I called this out in the latest edition of the Gold Stock Bull newsletter (Road Less Traveled Contrarian Report) and suggested this anomaly may be a warning sign that July’s strong performance in precious metals was a head fake or false breakout. The first few days of this week seem to be confirming this hypothesis………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

With the price of gold falling like the weighty metal that it is, even some hardcore gold bugs are now advising near-term caution, so maybe it is time to look at some alternative commodities exposure.
While the case for and against gold has always been multidimensional, from a fundamental perspective at least, investors might find a viable alternative to the commodity in palladium. “Right now, the case for palladium is fundamental and we’re looking at it as an alternative commodity play at a time when the price of gold is moving for non-fundamental reasons,” said Todd Rosenbluth, a fund analyst at S&P Capital IQ………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Still just a small slice of the $2.16 trillion in assets under management across global exchange traded products, global inverse and leveraged ETFs saw their AUM total rise $1.7 billion, or 3.5%, to $50.9 billion at the end of June, according to Boost ETP. Boost is a boutique firm specializing in trading triple-leveraged ETFs listed in Europe.
Year-to-date, “global S&L ETF/ETP AUM is up $6.8 billion or 15%” and “57% of AUM is held in short products with leverage factors ranging between -1x to -3x. However the leverage factor with the most assets is +2x, with 33% of AUM. 43% of AUM is held in long products with leverage factors ranging between +1.5x to +3x,” according to Boost………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Although commodity investing has remained popular despite sluggish prices, many focus on only a handful of products like gold, silver, or oil. However, there is definitely an overlooked but indispensable resource, fresh water, which can be an interesting commodity play.
This is especially true given that water is the most important commodity of all, and that fresh water supplies are actually quite scarce. In fact, fresh water accounts for only 3% of all the water on earth while surface water makes up just 0.3% of that figure……………………………………….Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

U.S. farmers are poised to reap their biggest-ever corn crop, expanding global stockpiles to the most in 13 years and spurring hedge funds and other speculators to make record bets that prices will keep slumping.
The harvest in the largest grower will jump 30 percent to 14.036 billion bushels (356.5 million metric tons), the average of 27 analyst estimates compiled by Bloomberg shows. That’s 53 million bushels more than they expected a month ago and 86 million above the government’s July forecast………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

Chile’s peso declined to a 14-month low amid speculation that the U.S. Federal Reserve will slow stimulus this year.
The currency depreciated 0.1 percent to 515.46 per U.S. dollar at the close in Santiago, the weakest level since June 2012. The peso touched a level weaker than 800 per pound for the first time since June 2012………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

The digital currency Bitcoin gained a measure of legitimacy this week when a federal judge ruled in a fraud case that Bitcoins are “a currency or form of money” and are therefore subject to U.S. laws.
The virtual currency has gained traction with investors during recent economic uncertainty in Europe. But frequent outages of Bitcoin exchanges — blamed on hackers — and volatile market trading have lead some to declare the currency unstable………………………………………..Full Article: Source

Posted on 08 August 2013 by VRS |  Email |Print

As Tony Abbott made clear yesterday in a letter to the secretary to the Department of Prime Minister and Cabinet, the top priority of an incoming Coalition government would be to repeal the carbon tax and associated measures that have dramatically increased the cost of power.
The carbon tax-emissions trading scheme is only one of four broad measures employed to abate greenhouse gas emissions. The others are the renewables program, direct government budgetary assistance, and regulations. The costs of all these measures change year by year. The best way to compare them is to take their measure at 2019-20, when most transitory arrangements are in place………………………………………..Full Article: Source

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