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Commodities Briefing 21.Aug 2013

Posted on 21 August 2013 by VRS |  Email |Print

The machinations in the equity markets this summer have confounded both casual and professional investors. The equity markets continue to resist the sirens’ call of a reversal, the bond market has been brought to its knees, and the commodity complex has seemingly regained its footing.
Last week it was reported via 13F filings that hedge fund titans John Paulson and George Soros reduced their holdings in gold-related investments near the lows. Even the most well-known money managers are not immune from the effects of capitulation that can oftentimes signal an inflection point in the markets………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Wood Mackenzie, the energy consultant, has said China is on track to spend $500bn a year on crude oil imports by 2020, in one of the most bullish forecasts yet of oil demand growth in the world’s second-largest economy.
Analysts at the Edinburgh-based group, one of the most respected analysts of the oil market, said Chinese net oil imports would rise to 9.2m barrels a day by 2020. The figure includes refined products such as diesel and gas as well as crude oil………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

OPEC should start to shift its supply focus to the Chinese market as the United States starts using more of its own oil, Wood Mackenzie said. The energy analysis company said Chinese demand for crude oil should grow substantially. Beijing should spend about $500 billion on crude oil by 2020, it said.
The Organization of Petroleum Exporting Countries said it expected Chinese oil demand to increase because of steady economic growth. Wood Mackenzie said much of the growth is attributed to “the near-exponential” increase in personal and commercial vehicle use………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

According to Wood Mackenzie, China’s demand for crude oil imports will grow significantly, requiring spending of US$ 500 billion by 2020. The price China pays will overtake the peak cost ever incurred by the US of US$ 335 billion, with US import spending to only be US$ 160 billion by 2020.
This spending clearly demonstrates the growth of the Chinese market and reliance on oil imports in relation to the US, whose import requirements have already and will continue to decrease due to a previous weakening in oil demand and growing domestic supply. The opposing trends in crude oil imports will affect the cost to both countries and inter regional trade flows………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

The fascinating aspect of the energy industry is how what may seem like a small event can have such a large impact on companies. Today, there’s one small trend that resulted in Exxonmobilhaving a tragic quarter, while others like Devon Energy crushed earnings estimates: the Brent-WTI spread. Let’s take a look at what the spread means, and who wins and loses as the spread narrows, as it has done in recent months.
Contrary to what many may think, oil is not a universal product. Granted, the price for oil is much more global than its hydrocarbon counterpart natural gas, but there are some regional discrepancies in the price of oil. In the U.S., the two most important oil price benchmarks are the foreign Brent, and the domestic West Texas Intermediate — also known as WTI………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Very interesting comments this month from one of the gold industry’s biggest players. Gold Fields CEO Nick Holland was quoted in South African newspapers talking about problems faced by the precious metals sector. Primarily costs.
It’s always interesting hearing from professionals on the “front line” of the business. And Holland’s comments were particularly surprising and revealing. He went on record saying that both the South African gold and platinum sectors are “under water” at current prices. Not making profits. Forcing the shut-down of mines. The really interesting part was the pace of cost inflation seen by the CEO. Holland said that costs for the South African precious metals sector are doubling every four years………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Acquisitions by China’s gold mining companies reached a record this year as the metal’s steepest quarterly drop in more than nine decades slashes mine values and sidelines Western rivals laden with debt.
Takeovers and asset purchases by producers based in China and Hong Kong rose to record $2.24 billion this year, beating last year’s record $1.96 billion, according to data compiled by Bloomberg. Zijin Mining Group Co., the world’s seventh-largest gold company by market value, and Zhaojin Mining Industry Co. are among companies looking to strike after the share prices of targets fell an average 53 percent since bullion peaked in 2011………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Comex gold futures prices are trading near unchanged and hovering near a two-month high in early U.S. dealings Tuesday. The bulls have established a price uptrend on the daily bar chart to suggest prices can continue to trade sideways to higher in the near term.
December gold was last down $0.40 at $1,365.40 an ounce. Spot gold was last quoted up $0.10 at $1,366.40. September Comex silver last traded down $0.201 at $22.96 an ounce………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

India’s demand for gold during the second quarter of 2013 topped all other countries, according to the latest World Gold Council data. As noted by GoldCore, the demand for gold in India rose to its “highest in the last 10 years,” with jewelry, bars and coins demand, capping 310 tons during the period.
You can see India isn’t the only country in the East enamored with gold. I’ve discussed many times how China’s love for physical gold has endured, as gold deliveries on the Shanghai Gold Exchange climbed to record levels and jewelry stores were flooded with buyers in Beijing, Shanghai and Guangzhou………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

The silver price today plunged nearly four percent in early European trading due to concerns over US Fed’s plans to scale back its quantitative easing programme and technical selling. Gold also fell, retreating to as low as $1,352.2 an ounce but recovered later in the day as a weaker dollar boosted demand for gold as an alternative investment.
“The dollar is supporting the gold market,” said Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, as quoted by Bloomberg. “People will be looking for a clear indication from the Fed tomorrow.”……………………………………….Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Silver still looks golden. A late July recommendation to sell puts and buy calls on the iShares Silver Trust when the fund was trading just under $20 profitably expired Friday.
The trade continues to look like a winner, so investors should re-establish a position, using a similar options strategy. The expired trade was to buy the iShares Silver Trust August $20 call for 22 cents when the fund was below $20. When the calls expired Friday they were worth about $2.37. ……………………………………….Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Bullion was mauled in the overnight session, when thin volume facilitates cartel price management. As can be seen with the overnight session’s sharp decline, this was not the typical stair-step downward move that would be considered normal profit taking following last week’s big gains.
In fact, the regular session on Monday saw normal profit taking during London and New York trading sessions. Who in their right mind would try to exit large positions for profit taking during the most illiquid period during Tuesday’s overnight session?……………………………………….Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Mining giants Glencore Xstrata and BHP Billiton reported poor results for the first half, underscoring the bleak outlook for the commodities market amid slowing global growth. BHP said net profit dropped 29.5 per cent to US$10.88 billion in the year to June, citing slowing global growth and commodity price volatility.
The world’s biggest miner said lower prices for its key resources, including a 17 per cent dive in iron ore, wiped US$8.9 billion from underlying earnings of US$28.4 billion………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

From the plumbing in our homes to the studs in our jeans - metals are an essential part of everyday life. For much of the year the price of copper, steel and aluminium has been falling. However, with the slow recovery of large economies, prices have begun to rise.
Mining analyst, Chris Welch says metal prices will remain constant for the next 18 months and businesses will see “less downside risks”………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

The crisis at the National Spot Exchange have brought things to a head, and the Forward Market Commission, which regulates commodity exchanges, is taking a hard line when it comes to compliance with its directives.
The commodities exchange regulator has been working on plugging regulatory gaps in these exchanges for a few months now. The hue-and-cry created by the NSEL crisis has only strengthened the FMC’s resolve to crack the whip to ensure that all 6 commodity exchanges in the country conform to its ‘fit & proper’ management guidelines………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Amid a review of a 2003 determination by the Federal Reserve, the involvement of US banks in physical commodities has come under fire from regulators, politicians and the media. Could they really be forced to exit physical trading?
During the last two weeks of July, many Wall Street executives were undoubtedly looking forward to a much-needed summer break. But instead, bank commodity chiefs found themselves engulfed in a maelstrom of criticism about their firms’ involvement in physical commodities………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Eurex will enter the foreign-exchange market for the first time as Europe’s largest derivatives exchange seeks to expand into an asset class dominated by its American rival CME Group Inc.
From Oct. 7, Eurex will offer exchange-listed derivatives on the six currency pairs where the bulk of over-the-counter trading takes place. The futures and options will include contracts based on euro-dollar, euro-pound, euro-Swiss franc and pound-dollar, according to a notice sent to members today. The exchange will also make available contracts based on the pound-Swiss franc and dollar-Swiss franc pairs………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

What happens when billions of dollars worth of stimulus in the financial system is about to be unwound and historically low interest rates eventually have to be lifted?
Nobody knows, and the uncertainty this seemingly unanswerable question has created in recent weeks is having a damaging effect on many emerging markets as investors cut their exposure to risk………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

The Reserve Bank of India appears to be preparing for a long winter as far as the domestic currency is concerned as it let the rupee slip past 64 level to touch an intra-day low of 64.13. The central bank also said that banks can avoid making provisions for fall in the value of government bonds that was triggered by its measure to support the rupee.
Bankers said relief on provisioning norms will insulate bank balance sheet from losses arising out of measures to protect rupee. The buyback of long-term bonds through open market operation will bring down long-term yields to avoid stunting growth even as sale of cash management bills keep shortener liquidity right………………………………………..Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Large global accounting firm, Ernst & Young or EY, has released a report arguing that the political uncertainty surrounding carbon policy is undermining investment in Australia.
EY Climate Change and Sustainability Leader Mathew Nelson said, “The incoming Government must provide longer-term regulatory certainty in the pricing of carbon. This will incentivise business to reduce carbon emissions in the most efficient way and support the transition to a low carbon economy.”……………………………………….Full Article: Source

Posted on 21 August 2013 by VRS |  Email |Print

Since the 1997 Kyoto agreement, world CO² emissions have risen by 40% and are now over 400 parts per million. In Europe, windfarms, carbon taxes and carbon trading systems have all been ineffective at best and counter-productive at worst.
The cost of subsidising these initiatives has boosted energy prices to a level where many companies have relocated manufacturing to other parts of the world where factories are far more carbon-intensive………………………………………..Full Article: Source

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