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Commodities Briefing 11.Sep 2013

Posted on 11 September 2013 by VRS |  Email |Print

“Bad news is good news” is a meme of this quantitatively eased era. But it was ever thus in commodities markets. Prices for things like fuel and gold have often jumped at the prospect of mayhem descending. So, this week, as it looks like U.S. military strikes in Syria might not happen, commodities have sold off sharply. For investors, this serves as a timely reminder of what has been supporting prices this summer—and what hasn’t.
The biggest beneficiary of fears about yet another conflict in the Middle East has been, unsurprisingly, oil. Brent crude jumped to $116 a barrel last Friday from about $108 in early August. Gold, a refuge for many investors when the world looks unstable, added roughly $100 an ounce in August. Less intuitively, prices of copper, aluminum and other industrial metals either stabilized or rallied in August………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Commodities fell the most since June on mounting prospects for a diplomatic solution to Syria’s chemical attacks, avoiding military action and easing concern that oil shipments from the Middle East will be disrupted.
The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 1.7 percent to 646.24 at 11:37 a.m. in New York, heading for the biggest slide since June 20. Earlier, the index touched 644.41, the lowest since Aug. 23. Silver led the decline, falling as much as 3.7 percent, gold headed for the biggest drop in two months, and crude oil slid the most since June………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Commodity prices soared during the first decade of this century. But now the party’s over: new sources of supply are coming on line just as demand from China is slowing, leading to expectations of price declines. So should investors shun commodity-related investments?
We don’t think so. But it will take a more focused approach to extract commodity returns in the new environment. From 2001 through 2010, commodities posted double-digit price increases, year after year, with only a brief pause during the global financial crisis………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

According to the USDA, population growth and rising incomes will likely result in an increase in world food demand during the next decade, particularly in developing economies. For many of these countries, increases in demand will outpace domestic production and will require an increase in imports.
Specifically, larger populations, rising incomes, and an expanding middle class in developing countries will result in added consumption of protein-rich foods as consumers substitute higher quality foods for staples. Increased consumption of livestock products in developing countries will result in increased demand, not only of livestock and livestock products, but in the commodities used as feed………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Wall Street is bracing for a ruling that may hasten the exit of J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley from businesses such as metals warehousing, oil shipping and power generation. Financial-industry executives expect the Federal Reserve to issue guidelines as soon as this month limiting bank participation in so-called physical-commodities businesses.
The decision would mark a significant step in the government’s effort to curtail risky activities on Wall Street, forcing large financial companies to dismantle franchises a decade or more in the making. The rules would apply to all U.S. banking companies………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

The International Energy Agency is concerned about current high oil prices, but does not see the need for any release of strategic stockpiles, as the market is well supplied despite supply outages in Libya, the group’s head said on Tuesday.
Supply outages from Libya and concerns the escalating situation in Syria could spill into other Middle East countries pushed up prices for international benchmark Brent to a six-month peak above $117 per barrel late last month. But Brent dropped to a one-week low below $113 on Tuesday………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Opec, the oil producers’ cartel, has said the market is “well supplied”, in its first public pronouncement since oil prices surged at the end of August. Brent crude hit a six-month high two weeks ago as Libyan exports slowed to a trickle and western powers appeared ready to intervene in Syria.
That had prompted speculation the US might tap its strategic reserves of crude. But in its monthly report on the market, Vienna-based Opec said demand was likely to fall as refineries headed into the maintenance season. It highlighted substantial crude stocks in industrialised countries………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

The energy world is fixated on the price of oil, but not all upstream firms benefit from price increases. Between futures, options, swaps and other techniques, there are many ways that a firm can remove pricing volatility from its bottom line.
In the long run higher oil prices help the industry by making more expensive fields worth developing, but in the short run there are only a limited number of firms that benefit from volatile prices………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Supply shortages and intensifying turmoil in Syria have helped push crude oil prices to 6-month highs, reaching USD 107 per barrel last August, said a National Bank of Kuwait (NBK) report.
The report went on saying that much of the rise in prices appears to be linked to supply issues. Output in OPEC members Iraq, Libya and Nigeria has dropped considerably in recent months owing to a mixture of strikes, sabotage and maintenance issues………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

OPEC has maintained its forecast for 1.04 million-barrel daily demand growth next year, but further cut its expectations for its own oil amid expanding non-OPEC supplies. The organisation said it expected demand for its crude to fall by 320,000 barrels per day in 2014 at 29.61 million barrels, having last month predicted a drop of 260,000 barrels.
OPEC’s predicted demand for its crude this year is unchanged at 29.9 million barrels, a fall of half a million on 2012. Overall demand is expected to rise by around 820,000 barrels this year, with OPEC adding 25,000 barrels to its prediction based on actual first-half demand………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Gold and silver fell as Syria’s support for a Russian proposal to hand over its chemical-weapons stockpiles to international control soothed fears of a potential military conflict. Gold for December delivery, the most actively traded contract, fell $22.70, or 1.6%, to settle at $1,364 a troy ounce on the Comex division of the New York Mercantile Exchange. This was gold’s lowest settlement since Aug. 15.
Silver fell 3% to $23.016 an ounce, its lowest settlement price in nearly three weeks. Syria accepted a Russian proposal to turn over its chemical weapons to international control, paving the way for avoiding a military confrontation between the Middle East nation and the U.S………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Spot gold prices trade in sideways fashion around the $1,380 level as there were little fresh news but found some support from a weaker dollar. It was a quiet session, a sea of calm compared to the previous week’s volatility when tensions on the Syrian conflict drove gold and oil to trade in large swings.
Other than the ongoing US debate about whether they should intervene in Syria, gold seems relatively unaffected by the slew of supportive economic data out of China earlier this week. Exports rose 7.2 percent compared to a year ago and the consumer price index came out showing inflation was contained, a 0.1 percentage point lower at 2.6 compared to July………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

The gold price fell more than $20 to a near one-month low of $1,362 on Tuesday after a possible deal averting US airstrikes on Syria emerged and news that Indian gold imports fell by 70% in August hurt sentiment.
The gold price seemed to have turned a corner in August fighting back from near 3-year lows of $1,200 hit at the end of June, but it failed to decisively clear the $1,400 level and the rally has been steadily losing steam this month………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

India’s imports of gold in August fell to less than a 10th of what it bought a year earlier, as higher import tax and a weaker rupee currency drove up local prices to a near record and tighter rules made imports tougher. But demand is expected to pick up over the next two months because of the festival season, industry executives said.
India imported three metric tons of gold in the past month, compared with 35 tons a year earlier. The drop was even more dramatic compared with April, when imports totaled 142 tons as buyers rushed to take advantage of a fall in gold prices to a two-year low………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

In dollar terms, PGMs are the smallest of the precious metal markets, and these metals are used differently than gold. For example, gold is a monetary metal and very little of it is used by industry. Most platinum and palladium is consumed by industrial processes, but it is still considered a precious metal.
Both platinum and palladium are used in catalytic converters, which remove carbon dioxide and some of the smog producing gases from internal combustion engines. However, platinum has a higher melting point and can be used in hotter burning engines, like diesel cars. Engines with lower operating temperatures, such as gasoline cars, can use palladium in their converters. Right now, palladium is about half the price of platinum………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Precious metals came under pressure last week as the Syria premium receded and stock markets recovered on the back of generally better than expected economic data. However, following weaker than expected US unemployment data on Friday precious metals prices rebounded.
August US unemployment was consistent with the July figure, indicating stagnating employment growth. Despite a decline in the unemployment rate to 7.3%, the labor participation rate declined to 63.2%, the lowest since 1978 and non-farm payrolls remain disappointing. In addition, with the US expected to hit its budget ceiling by mid-October, concern surrounding policy relating to US debt may also help support the gold price………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

ETFs tracking gold and oil were among Tuesday’s biggest percentage decliners amid reports that Syria has accepted a Russian proposal to hand over its chemical weapons, a move that could avert a U.S. military strike.
U.S. Oil Fund (NYSEArca: USO) slipped 2% while SPDR Gold Shares (NYSEArca: GLD) fell 1.8%. The iShares Silver Trust (NYSEArca: SLV) was off more than 3%. President Barack Obama will address the nation on Syria on Tuesday evening………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Commodities specialist Simon Wainwright has stepped back from active management and handed over responsibility for the Globersel – Pactum Natural Resources fund. The London-based manager, who has co-run the $24 million fund since launch, will hand full control of the fund over to Tim Callaghan.
Pactum Asset Management said Wainwright will remain an advisor on the fund but is moving to Texas to assume a role within the oil and gas services industry………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

The decade-old commodity futures market might witness consolidation for the first time with Indian Commodity Exchange (ICEX), owned jointly by Reliance Capital, MMTC and Indiabulls, mulling over a proposal to be acquired by rival bourse Universal Commodity Exchange (UCX).
UCX has been promoted by Ketan Sheth-owned listed exchange solutions provider Commex Technology. “The proposal was discussed and minuted at an ICEX board meeting held a month ago…..A decision can be taken once the valuation and due diligence is completed,” said two people aware of the development………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

The U.S. and European Union are selling wheat at the fastest pace in at least six years, diminishing stockpiles even as farmers reap a record crop. Sales from the U.S. in the past three months surged 38 percent from last year and export licenses issued by the 28-nation EU more than doubled, government data show.
World inventories will drop to a five-year low by June 30 as farmers harvest 705.4 million metric tons, the U.S. Department of Agriculture estimates. Futures will rise 15 percent to $7.40 a bushel by the start of the next season on July 1, according to the median of 10 analyst estimates compiled by Bloomberg………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Singapore, a hot spot for tourism in Southeast Asia, may begin to feel the heat of the currency turmoil afflicting neighboring economies as the cost for regional visitors to vacation in the island nation skyrockets.
The Indonesian rupiah, Malaysian ringgit and Indian rupee have tumbled between 4 and 14 percent against the Singapore dollar over the past two months, translating into higher holiday costs – from accommodation to food and entertainment – for inbound tourists………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

As a plunging currency and a slowdown in consumption hamper India’s once vibrant economy, many industries are facing the prospect of plummeting profits.
Usually at this time of the year, consumer companies look ahead to windfall profits. Starting in September, consumption increases because it is considered auspicious to buy new products such as cars and televisions for the main Hindu festival, Diwali, to be celebrated in November………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Australia’s landslide election result seems to be bad news for the climate. Following the election of a new government, Australia is to abolish its emissions trading scheme, disband a climate advisory body and institute a carbon reduction policy that experts say will fail to meet its meagre target.
It will also scale back the country’s embryonic National Broadband Network and direct funding away from research projects it deems “ridiculous”. The conservative Liberal-National coalition, headed by incoming prime minister Tony Abbott, triumphed at the polls this weekend. It ran for election with a core idea of “scrapping the carbon tax”………………………………………..Full Article: Source

Posted on 11 September 2013 by VRS |  Email |Print

Financial markets are signaling that several major emerging economies may be approaching crisis. Morgan Stanley has named Brazil, India, Indonesia, Turkey and South Africa the “fragile five.” They share some common characteristics: All took in excessive short-term international financial inflows, which enticed them into accepting excessive current-account deficits for too long.
High economic growth has made their governments complacent, even as rising exchange rates undermined their competitiveness. Now their growth rates and exchange rates are falling………………………………………..Full Article: Source

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