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Commodities Briefing 12.Aug 2013

Posted on 12 August 2013 by VRS |  Email |Print

Commodity prices have increased sharply over the past ten years. Large populous emerging economies, first and foremost China, have become major consumers of commodities as they build out their infrastructure, their per capita income and nutrition patterns change and their populations become more mobile and thus consume more energy.
Time will tell whether we currently find ourselves in the midst of a commodity super-cycle, or not. Either way, it is worth and prudent to ask which emerging markets would be the most sensitive to a sustained drop in commodity prices. As far as the balance of payments is concerned, it is evident that Russia (negatively) and Korea (positively) are the two EM that would be most affected by a decline in commodity prices………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

In the last 10 years, commodities have been one of the best performing assets, giving high double-digit returns to investors. This is best exemplified by gold, that has nearly quadrupled in value (in dollar terms) since 2003 and was up five times in rupee terms in the last decade. In comparison, the benchmark S&P BSE Sensex is up around 4.7 times since the middle of 2003.
Gold’s performance in the last five years has been even more spectacular. In the domestic bullion market, gold prices have appreciated at a compounded annual growth rate (CAGR) of 18.6 per cent since 2008, much higher than the 4.2 per cent CAGR return delivered by the National Stock Exchange’s 50-stock Nifty index during the period………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

The growing involvement of banks in commodities markets is finally being placed under the microscope. Next month the US Federal Reserve is expected to report on whether it will allow US banks to continue with their current involvement in the commodity markets. Its action could well prompt governments around the world to follow the lead.
Metals, energy and soft commodities are all now heavily influenced by the activities of banks: whether it is financing, physical trading, warehousing or derivatives. Most of these areas are unregulated and opaque and thus render the banks open to allegations of conflicts of interest and abuse………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Leading Chinese banks, brokerages and securities firms are getting ready to snap up commodities trading assets from their foreign counterparts which are facing tougher regulatory and political pressure in trading physical raw materials.
However, sweeping changes to warehousing regulations could bring a decade-long commodity rally to an end, industry participants and analysts said………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

This year was meant to mark a turning point for the oil market. An energy revolution that has been gathering pace in North America was expected to reduce the world’s dependence on crude oil from the Opec cartel of producers.
As technological advances unlocked ever more oil from Canada’s oil sands and shale rock formations in the US, demand for oil from Saudi Arabia in particular was expected to fall, paving the way for lower prices and muted volatility………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

America’s shale oil boom is protecting the world from steep oil price spikes as several OPEC members struggle to maintain production due to unrest and infrastructure problems, the International Energy Agency (IEA) said on Friday.
The agency, adviser to developed economies on energy policy, said violence and maintenance was limiting oil production and exports from Iraq and Libya, and supplies to Europe, Asia and the United States faced further disruption………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

If you hold any bets on crude oil rising, we encourage you to dump them. A correction is headed our way. A simple boating concept explains why… Picture a boat… the kind you’d take on the ocean for a fishing trip. Now picture the Dallas Cowboys football team on the boat. If all 53 players are evenly spaced, things are fine.
But if all 53 players move to one side of the boat, bad things happen. The boat tips over until lots of Cowboys are shark food………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Export earnings among OPEC members rose to $1.26 trillion last year. That’s up from the $1.15 trillion it earned in 2011. That’s an incredibly large number. The entire U.S. economy is estimated to be $16.62 trillion, meaning OPEC’s earnings are about 7.5% of the size of the entire American economy.
While the U.S. isn’t solely responsible for pouring a trillion dollars into OPEC’s coffers, it is on track to send another $400 billion to foreign nations again this year. About 39% of that will end up padding OPEC’s bottom line this year………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries (OPEC) announced that its production of oil during July has decreased due to disturbances in Iraq and Libya.
OPEC mentioned on its monthly report that ”The oil production has declined by (1000) Oil barrels and the countries that are not associated with OPEC are promoting the oil production by (170,000) oil barrels daily.”……………………………………….Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Political unrest and infrastructure problems in the Middle East and Africa could constrain exports “indefinitely” in some parts of the region, the International Energy Agency (IEA) has warned.
The IEA, which consults developed nations on energy policies, said North America’s shale boom was insulating the world from steep oil price spikes as several OPEC members struggle to maintain production due to unrest and infrastructure problems………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Comex gold futures ended higher on Friday as a softer dollar offset fears of a tapering in stimulus measures next month. The US Federal Reserve has hinted that it will likely begin cutting back on its massive bond-buying program next month, as long as economic data continues to improve.
Gold prices have benefited from the stimulus measures, which have kept interest rates down and fanned worries about higher inflation. Market participants worry that gold prices will decline as the accommodative policies are reined in. The dollar held near a seven-week low against a basket of currencies as risk sentiment picked up as investors abandoned the greenback after surprisingly strong trade figures from China………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Hedge funds cut bullish gold bets by the most since June amid speculation about whether the Federal Reserve will begin trimming its monthly bond purchases. Money managers cut their net-long position by 27 percent to 48,103 futures and options by Aug. 6, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts rose 26 percent.
Net-bullish bets across 18 U.S.-traded raw materials dropped 19 percent to the lowest since March and a measure of wagers across agricultural commodities turned negative for the first time on record………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Amid gloomy sentiment across various markets, gold is turning out to be a worse investment avenue than stocks so far this year, yielding double the losses compared to equities.
The gold prices have fallen by nearly 8.5 per cent since the beginning of 2013, while the stock market benchmark Sensex has dipped by about 4 per cent………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Gold premiums in India, the world’s largest consumer last year, may extend their advance to a record as central bank restrictions halt imports. The fees paid by jewelers to banks and other suppliers have jumped to about $40 an ounce over the London cash price from $30 in the week ended Aug. 2, said Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation.
Premiums may surge to $100 if the government doesn’t ease the rules, said Bachhraj Bamalwa, a director at the federation, which represents about 300,000 jewelers and bullion dealers………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Perhaps it is not terribly surprising to learn that recent silver demand numbers from India have set records. While gold still seems to be the typical precious metal of choice in the United States, silver is clearly making waves abroad.
Indian silver imports are up a staggering 259% at 857 tons in the April-July time period. That amount is approximately one third of the global monthly production of silver. Furthermore, July’s Indian silver import amount of 275 tons is the second highest import figure of any month in the last 5 years………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Spring may mean flowers to most people, but for iron ore investors it is the time to assume the brace position. This time last year, the iron ore price had already begun its terrifying descent towards a September low of $US86.70 ($94.10) per tonne, a price that prompted more than a few Australian miners to contemplate their existence.
Similar turbulence was expected in the third quarter of this year, but so far there’s been no sign of weakness. The iron ore price has been creeping higher since late June, and spent most of last week in a positive trajectory towards $US133.10 ($144.45) per tonne; a very comfortable price for most Australian miners, made even better by the local currency trading well below parity………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

How do you know a commodities story has permeated the public consciousness? When it hits America’s prime-time satirical news show, perhaps. Late last month, The Daily Show with Jon Stewart offered viewers a sketch called “arcane details of boron-group metals pricing update”. More succinctly, the show dubbed the issue “aluminium hoarding” – the metal belongs to the boron group of the periodic table.
“The new version of Monopoly,” summarised the reporter. “You just move pieces of metal around and around in a circle, collecting money whenever you want.”……………………………………….Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Exchange traded funds (ETFs) have been in vogue in recent years, with major firms such as BlackRock’s iShares and Deutsche Bank’s DBX Trackers launching round after round of the passive products. ETFs act very much like tracker funds, replicating an index, commodity or basket of assets. However, rather than operating as open-ended vehicles, they are traded like a company on a stock exchange; in this way they are similar to investment trusts.
Trading on a stock exchange means the price depends on supply and demand for the shares; this in turn means that the price can vary from that of the underlying index or commodity………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Eight new names joined the list while thirteen came off. The count for August stands at 326, consisting of 218 ETFs and 108 ETNs. The average product on the list is 37 months old and has $6.2 million in assets. However, 73 have surpassed five years of age and an incredible 57 (not including those less than six months of age) continue to struggle along with less than $2 million in assets.
Some of the products joining the list this month showed great potential when they were launched, such as ETRACS Oil Futures Contango ETN (OILZ) that debuted in June of 2011………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Unlisted index funds are likely to lose flows to the exchange-traded fund (ETF) market, according to ETF issuer Market Vectors. , Market Vectors Australia managing director Arian Neiron said listed versions of indexes are preferable to their listed alternatives.
Index funds tend to be less transparent than ETFs because the investor cannot always see the value of the holdings on a daily basis, said Mr Neiron. In addition, index funds tend to be set up more like a mutual fund, in contrast to an ETF which is traded like any security on an exchange, he said………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Commodity prices have most often been impacted by the value of the dollar. The greenback’s strength over the last two years has surely placed a lid on upward price movement in most commodities, although admittedly the firming of the dollar has stalled against some currencies in recent months. No wonder, commodities continue to face headwinds in the global marketplace.
Forex experts foresee a broad resurgence in the dollar, gathering pace towards the last quarter of the year. In the event, commodity markets could come under further pressure from currency markets………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

Trading the Swiss franc in recent months has been like hitting the snooze button over and over again. The franc has been one of the world’s most boring currencies ever since the Swiss National Bank took steps to anchor its appreciation versus the euro back in August 2011.
That move had a spillover effect of keeping the currency weak against other major currencies, including the U.S. dollar. But a look at the fundamentals and the technicals shows the dollar-franc trade is finally about to wake up, and when it does, the franc will tumble………………………………………..Full Article: Source

Posted on 12 August 2013 by VRS |  Email |Print

A Coalition government could be forced to buy international permits if its Direct Action scheme fails to deliver the cuts in emissions needed to meet its commitment to reduce greenhouse gases by at least 5 per cent by 2020.
Opposition Leader Tony Abbott has claimed the government’s emissions scheme relies on “dodgy” overseas carbon credits and attacked Labor for using the international permits to count towards domestic targets………………………………………..Full Article: Source

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