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Commodities Briefing 23.Aug 2013

Posted on 23 August 2013 by VRS |  Email |Print

Commodities may fall 11 percent by the second quarter next year as the biggest rally in 11 months runs “out of steam,” according to technical analysis by Commerzbank AG.
The Standard & Poor’s GSCI Total Return Index of 24 raw materials will first slide toward its 200-week moving average at 4,781.68 before testing 4,442.35, the 50 percent Fibonacci retracement of its advance between 2009 and 2011, Axel Rudolph, a London-based technical analyst at Commerzbank, said in an Aug. 20 report. The decline is forecast by the second quarter next year, he said………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

For much of this year, investors have seen the commodities sector as a straightforward story. Chinese growth and industrialisation, the great driver of the decade-long commodity boom, was slowing, according to ever-widening consensus.
The effect on industrial commodities like iron ore, copper or nickel would surely be bleak. Investors headed for the exits, pulling money from industrial commodities and contributing to a 15 per cent slide in metals prices in the first half of the year………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

BNP Paribas is taking part of its commodity trade book off balance sheet, in a new deal called Lighthouse Trade Finance 1, reviving the “originate to distribute” business model.
It has sold a securitisation of USD131.6m of commodity transport receivables, the first in a planned series of deals from the bank’s Energy and Commodities group. The deal removes the receivables from the French bank’s accounting and regulatory balance sheet, which should allow it to originate more commodity trade finance than its increasingly constrained balance sheet allows………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Two major traders on Thursday welcomed Sberbank as a new player in financing commodity supplies after the lender announced its plans to get on the list of Europe’s largest banks funding Russian exports. The state-controlled lender said it would provide the new service through its Swiss-based subsidiary, with talks being already underway with a number of potential clients.
“These are primarily traders affiliated with Russian exporters or working with commodity suppliers from Russia and [other former Soviet countries],” Sberbank said in e-mailed comments without providing the names………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Scotiabank’s Commodity Price Index jumped by 4.1% month-over-month (m/m) in July. Despite considerable month-to-month volatility, the All Items Index has edged up by 1.2% year-to-date (YTD) over the previous seven months and is currently 6.3% above a year earlier.
“While it is too early to say that commodity prices have bottomed, the correction since April 2011 could be largely over later this year,” said Patricia Mohr, Scotiabank’s Vice President of Economics and Commodity Market Specialist. “The downturn since the Spring of 2011 has been linked to an austerity-led recession in the southern euro zone, a sub-par U.S. economic recovery and new mine supply coming on stream in a lacklustre global economy. The euro zone’s real GDP rose by 1.1% annualized in 2013:Q2, ending six consecutive quarters of contraction, and signs point to a moderate pick-up in the United States.” (Press Release)

Posted on 23 August 2013 by VRS |  Email |Print

Bijan Namdar-Zanganeh is on a mission to make up for the last eight years. In his first few days as oil minister in President Hassan Rohani’s new government in Tehran, the 61-year-old initiated plans to revive oil production to pre-2005 levels, hinted at a price war to win old customers and brought back managers sidelined by the previous administration.
“Revival of Iran’s lost oil markets is among my top priorities,” Zanganeh told the Fars News agency this week. “We only ask those who have replaced us in the world’s oil markets to know that when we are reentering these markets they will have to accept that oil prices decline or they should reduce their production to create enough space for Iran’s oil.”……………………………………….Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Growing civil unrest across the Middle East could inflate petrol prices by as much as 5p a litre. The Petrol Retailers Association (PRA) warn that conflict in Syria and Egypt, oil port blockades, the reduction of Libya’s oil exports by a third and a growing demand for oil from Asian markets have all impacted prices.
The cost of Brent pushed through the critical $110/barrel level last week which equates to a 10% increase since the end of June………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Gold traders are the most bearish in nine weeks after Federal Reserve policy makers backed plans to taper stimulus if the economy strengthens, eclipsing a surge in demand for physical metal that drove prices to a two-month high.
Twelve analysts surveyed by Bloomberg expect prices to fall next week, eight were bullish and two neutral. That’s the highest proportion of bears since June 21, a week before prices reached a 34-month low. Gold is heading for back-to-back monthly gains for the first time since September after speculators cut bearish bets by 27 percent from a record in July………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will reduce shipments through to early September as summer demand for driving fuels ebbs, tanker-tracker Oil Movements said.
The group, which supplies about 40 percent of the world’s oil, will cut exports by 320,000 barrels a day, or 1.3 percent, to about 23.6 million barrels a day in the four weeks to Sept. 7 from the period to Aug. 10, the researcher said today in an e-mailed report. The figures exclude two of OPEC’s 12 members, Angola and Ecuador………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

The all-in cost of gold production under the World Gold Council’s new all-in cost metric is some $1 500/oz at a time of the gold price being a good $130/oz below that at the time of going to press.
Return on equity and return on capital employed of gold mining companies have been in decline for the last three years in a row to 2012 and gearing ratios have rocketed upwards as a result of troubled companies borrowing more money to keep existing operations afloat………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

South African miner Gold Fields on Thursday announced a major restructuring to restore profits, hollowed out by the plunging price of gold. It said it was not afraid of closing mines to make money, including its Damang operation in Ghana, and would revamp its business to generate profit at a spot gold price of $1,300 an ounce.
Gold Fields has already spun off the bulk of its assets in South Africa where labour, power and other costs are escalating in the world’s deepest shafts………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Sales of U.S. Mint American Eagle silver coins have maintained the scorching pace while sales of gold coins so far in August are down sharply as compared to earlier months this year and also on a year-on-year basis.
The record demand for gold coins seen in April after the price collapse has consistently fallen, month on month, while that for silver coins has seen a steady and a massive demand. The U.S. mint sold 5,000 ounces of gold American Eagles so far this month, but has sold 2,446,000 ounces of silver American Eagles till now. The U.S. Mint was cleared out of its gold coin inventory in April after the astonishing 15% two day price plunge………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Silver’s fortunes may be picking up. After months of heavy selling, the price of silver is finding its feet, a reflection of improving demand for the metal from both the industrial and investment sectors, say market watchers.
Silver prices settled at $23.03 a troy ounce on the spot market Thursday, up 26% from the nearly three-year low silver hit during a broad rout in commodities markets in late June. Gold, by comparison, has recouped 16.5% of its June slide………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Metal stocks have been the top sectoral outperformers even as the benchmarks crumbled on rupee and CAD concerns. A couple of brokerages has turned bullish on the sector following pick-up in prices on hopes of stimulus in China and rupee weakness.
Nomura and JP Morgan expect the metal stocks to give sharp returns over the long term on the back of pick-up in demand and currency fluctuation………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

The 2013 LME price trend story of non-ferrous metals seems to be in a downward-dog pose – that will be my only yoga-related cliche of the day. (Ok, probably for the month. Besides, that photo is neither downward dog nor yoga, as my yogically inclined colleagues inform me.)
Based on this chart from our friend Bob Garino at Export Tax Advisors, nearly all LME base metal average prices are down for the first half of this year so far compared to 2012 averages, save for tin and lead:……………………………………….Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

For the first time private investors can convert the value of their gold ETF shares into real gold coins. Index fund provider ETF Securities has teamed up with Government-owned coin maker Royal Mint to offer investors with shares in its leading exchange traded fund ETFS Physical Gold the option of cashing in shares for physical bullion coins.
Exchange traded funds have mushroomed in recent years as a highly popular way for private investors to own gold. Real holdings of gold, stored in bank vaults, are represented by shares which trade daily on the London Stock Exchange. This makes it possible for investors to buy and sell cheaply and in relatively small quantities………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Exchange-traded funds may not want gold, but Asian buyers certainly do. As the West shed gold holdings, emerging markets, particularly India and China, bought it up. As we wrote recently, China and India have been importing record amounts of physical gold, stimulated in large part it seems by the dramatic fall in price this year.
In the same piece, we advised the fall in gold price was matched by an unprecedented outflow of metal from the gold ETFs, over 176 tons in the first quarter followed by over 402 tons in the second quarter. Outflows have slowed in July, but still posted a negative number………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Broad commodity exchange traded funds have rebounded the past couple of months, but the asset class is still the biggest outflow loser in ETFs this year, reflecting investors’ diminished inflation expectations.
The iPath S&P GSCI Total Return Index ETN has gained 3.9% over the past three months while the iShares S&P GSCI Commodity-Indexed Trust rose 3.2%………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Exchange traded funds are one of the most cost efficient investment tools available on the market. This factor alone is contributing to the overall growth and popularity of this segment of the market, with total assets at $1.53 trillion as of July 31, 2013.
“Like mutual funds, ETFs charge a total expense ratio or annual charges that come directly out of the funds’ returns. ETFs’ expense ratios are generally lower than those of comparable mutual funds,” Deborah Fuhr wrote for ETFGI………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

Jodie M. Gunzberg, vice president at S&P Dow Jones Indices, wrote an interesting piece in the S&P Dow Jones Indices blog, Indexology. The blog is titled “Fear Gauge Spikes: Let’s Play Hot Potato” and in it Gunzberg tries to answer a number of questions, but the basic question is: why have commodities reacted differently to spikes in the Chicago Board Options Volatility Index (VIX), or fear gauge, as Gunzberg refers to it, since the credit crisis of 2008 than they did to spikes in the VIX pre-2008.
The reference to the VIX itself is a bit of subterfuge in my opinion because basically what she is describing though avoiding saying explicitly is that commodities markets in general and the S&P GSCI in particular has become increasingly correlated to the S&P 500 since 2008……………………………………….Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

How far the emerging market currency sell-off has to go is the million dollar question that few - at the minute - would dare to answer. Since the first week of August, when the turmoil began, the Brazilian real, Indonesian rupiah and Mexican peso have all fared particularly badly, and of the top 10 fallers, eight also capitulated to the slide back in May.
While the main catalyst for each of these bouts of unrest has remained unchanged - investor’s fear of the Federal Reserve’s tapering plan - this time additional stresses and strains are also at play, and all of them have thrust a spotlight on to emerging markets’ weaknesses………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

The fall in the value of Brazil’s currency against the dollar amid recent emerging market turmoil is having a positive effect on exports, according to early indications from trade data compiled by the Maersk Line shipping group.
Brazil’s container trade with the rest of the world accelerated in the three months to June – rising 3.8 per cent, compared with a 1.6 per cent rise the previous quarter – helped by the US economic recovery………………………………………..Full Article: Source

Posted on 23 August 2013 by VRS |  Email |Print

The Reserve Bank said it has adequate foreign exchange reserves to deal with the declining value of rupee and the widening current account deficit (CAD). “I believe our forex reserves are adequate to manage current situation,” RBI Governor D Subbarao said in a response to whether RBI has enough firepower to defend the rupee, which plunged to an all-time low of 65.56.
The country’s foreign exchange reserves were up at USD 278.602 billion as of August 9 compared with USD 277.17 billion a week earlier………………………………………..Full Article: Source

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