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Commodities Briefing 19.Sep 2013

Posted on 19 September 2013 by VRS |  Email |Print

As the Federal Reserve meeting approaches this Wednesday, low volumes and declining interest rates are leading to surprising correlations among financial markets. For investors looking to see the negative effects in assets tied to tighter monetary policy, they can continue looking.
Equities are at record highs and investors continue to buy treasuries and sell U.S. dollars. Although it can be said that much of the cut for future bond purchases is already priced in, only commodities look to be acting as if the future holds higher rate………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Mexico has hedged its oil production for the coming year at the highest price on record, in a striking indication of how stubbornly high oil prices continue to allow producing governments to finance growing budgets.
Surging output from US shale oilfields and slowing consumption in mature economies are expected to weigh on the price of crude eventually, eating into the revenue available to the world’s largest exporters. But concerns about rising production costs mean that long-term prices have remained high………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

US manufacturer’s sounded alarm bells last week with the approval of a fourth liquefied natural gas (LNG) export facility, this time on the East coast at Cove Point Maryland. At issue is whether LNG exports would “harm” the US economy by raising energy costs.
But opponents of US energy exports are missing the point: US exports of LNG, refined products, condensate (and some day even oil) strengthen the United States’ ability to promote open trade in energy and capital investment in oil and gas resources around the world and to depoliticize the market once and for all………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

A report by information company IHS reported that a shale awakening could be on the horizon in the next decade, as more countries will have the technological means to develop tight oil from shale formations.
The study identifies shale hotspots such as the Vaca Muerta of Argentina, the Silurian Shale fields of North Africa, and the Bazhenov Shale of Siberia as ones that could surpass oil production from the Bakken of North Dakota and the Eagle Ford of Texas. Together, these areas hold 175 billion barrels of recoverable oil versus the 43 billion barrels in North America………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

The International Energy Agency (IEA) announced Wednesday to activate a comprehensive overhaul of the statistics pages of its website, in the meanwhile, to release more than 20 years of global energy data it has collected.
To “boost transparency and user-friendliness,” it is the first time for IEA to release “more than 20 years” of energy data online “for more than 140 countries and regions worldwide,” said IEA in a statement. The enhancements will give users easy access to the IEA’s wealth of information on fuels, emissions, taxes, prices and more going back to 1990………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

The International Energy Agency unveiled Wednesday a new look for the statistics pages on its website, and Sankey diagrams of energy production and use are one of the cooler aspects.
(Sankey diagrams are directional flow charts where the width of arrows is proportional to the flow quantity. Its namesake first used one to describe the energy efficiency of a steam engine.) Some of the Sankeys had been available for a while but one can now search for dozens of countries, click on each flow and graph it over time………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Gold jumped 4 per cent on the US Federal Reserve’s decision to maintain its easy monetary policy, recovering the $1,300 level it had breached during earlier trading. The yellow metal, which fell as much as 1.4 per cent to $1,291.34 a troy ounce before the Fed statement, rose to $1,364.25.
Analysts said traders and investors were expected to keep a close eye on the currency markets in the aftermath of the Fed’s decision………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Gold mining companies should lock in 2013 prices by hedging their production as all signs point to further declines in the yellow metal in coming months, Goldman Sachs Group analysts said recently.
In a research note, the analysts reiterated their forecast for gold to fall below $1,050/oz in coming months, well below its Wednesday opening price of $1,309/oz. Meanwhile, Goldman’s 2014 year-end price forecast represents a 20 percent decline from current prices………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

It has been very well documented in these pages how the demand from India and China for gold bullion is increasing. We have also seen central banks buying the precious metal to protect their reserves. But when I look at other side of the equation, the supply side, the case for higher gold bullion prices becomes even stronger.
The biggest sources of gold bullion are obviously the gold producers—the companies that actually do the “dirty work,” digging the ground and extracting gold bullion. When the price of gold bullion declines, it gives them less incentive to produce at higher-cost mines as profitability is at stake………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Gold and silver have always been and will always be many investors’ favorite precious metals. The summer sell-off and subsequent bounce in gold and silver has reignited investment fever in the commodities.
Traders often substitute silver for gold because the two have a strong correlation with each other. However, the commodities are very different and should not be used interchangeably despite the seeming correlation………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Next week the FOMC will meet for one their eight scheduled meetings. It is this particular meeting that has had traders, market commentators and investors almost in frenzy as they try to predict the outcome. It seems everyone is convinced that tapering will go ahead, as of next week, and the gold bears believe that this will signal gold’s demise.
Given the drop in the gold price each time tapering is merely hinted at, one might not be surprised at this prediction. However, as we have learnt since April’s gold price drop, gold investors continue to stock up on gold regardless of what they pay for it. We believe the same will be the case if and when tapering begins………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Mining industry is going through tough times on fall in commodity prices which has put pressure on their margins but iron ore and zinc miners will perform best on average while copper, metallurgical coal and gold will be most challenged, according to a new report by Wood Mackenzie.
Iron ore continues to have a very strong average industry margin of US $49/ton (52% of average price0in 2014, enabling continued large cash generation in this high volume business. This enables iron ore majors Rio Tinto, BHP Billiton and Vale to push ahead with their expansion on low cost of operations………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Market fundamentals are sufficient to support rhodium prices near the current $1,000/oz level, despite reduced usage in automobile catalytic converters, according to analysts with A-1 Specialized, one of the largest recyclers of platinum-group metals in the US.
“Underlying fundamentals for rhodium appear sufficient to justify a longer-term floor in the price of the metal near current levels, values also reached at the trough of this cycle in late-2008,” A-1 analysts said in a report………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

After speculation that the US Federal Reserve would rein in its asset-purchasing program earlier than anticipated, Western investors began exiting gold-back exchanged-traded funds (ETFs) in record numbers, highlighted by $8.7 billion in net outflows during April.
While the languishing paper-gold market has many declaring the gold trade dead, demand for bullion has never been greater, as buyers have focused on the big picture that includes endemic debt levels and unsustainable money-printing schemes………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

In strength training and investing, your core is everything. It’s the foundation or base from which you build upon to reach new levels of success. Without a solid core, you are doomed to underachieve because you don’t have the right balance needed to attain your goals.
By starting from the ground up using concrete core holdings, you can add additional tactical positions from which to enhance your returns. That way you will have a well-rounded portfolio strategy that is easy to understand………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

It has been a rough year for commodities ETFs and ETNs and not is just gold and silver plays that have suffered. Exchange traded products offering exposure to soft commodities have been repudiated as well. For example, the Teucrium Corn Fund is down 22.2% this year while the iPath DJ-UBS Coffee TR Sub-Index ETN has plunged nearly 28%.
Cocoa is one soft commodity that has shined amid a tumultuous year for commodities. The iPath DJ-UBS Cocoa TR Sub-Index ETN is up 15.3% year-to-date and 5.2% in just the past week. More gains could be on the way for the oft-overlooked ETN………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

It has been a rough year for commodities ETFs and ETNs and not is just gold and silver plays that have suffered. Exchange traded products offering exposure to soft commodities have been repudiated as well. For example, the Teucrium Corn Fund is down 22.2% this year while the iPath DJ-UBS Coffee TR Sub-Index ETN has plunged nearly 28%.
Cocoa is one soft commodity that has shined amid a tumultuous year for commodities. The iPath DJ-UBS Cocoa TR Sub-Index ETN is up 15.3% year-to-date and 5.2% in just the past week. More gains could be on the way for the oft-overlooked ETN………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Commodities hedge fund Arbalet Capital is set to close over the next month or two, just a year and a half since its launch, after sluggish returns sparked an investor exodus at the firm, people familiar with the matter said.
Run by 30-year-old Jennifer Fan, one of the youngest hedge fund managers and among the few women in the business, Arbalet had nearly $700 million of capital at the peak of its fund raising last year, and its launch in April was one of the biggest of 2012………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Goldman Sachs Group Inc Chief Executive Lloyd Blankfein made his most public commitment to the bank’s commodity trading business on Wednesday, even as regulators consider measures that may push Wall Street out of physical markets.
While rival JPMorgan Chase & Co decided in July to quit trading in the physical raw material markets and Morgan Stanley has publicly weighed spinning off all or part of its vast franchise, Goldman has remained steadfast………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

Power market veteran Paul Posoli has returned to JPMorgan Chase & Co. after a year-long sabbatical to help advise on the bank’s sale of its physical commodities business, according to an internal bank memo.
Posoli, a senior trading executives who rose through Enron and utility giant Calpine before building a formidable gas and power trading division at Bear Stearns, will serve on the commodity unit’s management team in an advisory capacity, according to the memo from commodities chief Blythe Masters, a copy of which was seen by Reuters………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

CME Group Inc., the owner of the world’s largest futures market, applied to create a new kind of venue known as a swap execution facility that will initially focus on trading commodities derivatives.
The Chicago-based exchange operator said today that it’s seeking U.S. Commodity Futures Trading Commission permission to form the market. Other companies that have asked for or received approval to create one include IntercontinentalExchange Inc., ICAP Plc (IAP), Tradeweb Markets LLC, GFI Group Inc. and Bloomberg News parent Bloomberg LP, according to the CFTC website………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

India’s commodity market regulator Wednesday asked the country’s six national-level commodity exchanges to stop futures trading in non-agriculture commodities on Saturdays, as it is the global practice.
Commodity exchanges in India currently allow trading on Saturdays for four hours, compared with seven hours for agriculture commodities and 14 hours for non-agriculture commodities during week days………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

India’s commodity market regulator Wednesday asked the country’s six national-level commodity exchanges to stop futures trading in non-agriculture commodities on Saturdays, as it is the global practice.
Commodity exchanges in India currently allow trading on Saturdays for four hours, compared with seven hours for agriculture commodities and 14 hours for non-agriculture commodities during week days………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

In volatile times, such as in the last one year or more, currency risk looms large in all foreign exchange transactions. One way to minimise exposure to exchange rate fluctuations and its potential impact on cash flow and balance-sheets is through hedging. When exposures are large and short-term — as they were for East Asian firms during the 1997 currency crisis — illiquidity in terms of cash flows turns into insolvency.
In India too, currency volatility has led to adverse impacts on firms and banks that have lent to them. But short-term foreign currency debts have generally been smaller, since external commercial borrowings were permitted only for long-term debt………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

An independent Scotland could face a decade of fiscal tightening through tax rises and spending cuts in order to meet European debt-to-GDP rules and maintain sustainable borrowing costs, depending on how much public debt it inherits from the UK’s vast pile of over £1tn.
The National Institute of Economic and Social Research (NIESR) estimates that Scotland may need fiscal tightening of 5.4% in the ten years from independence to achieve the Maastricht Treaty agreed debt-to-GDP ratio of 60% under borrowing costs likely to be as much as 1.65% above current interest rates on 10-year UK gilts………………………………………..Full Article: Source

Posted on 19 September 2013 by VRS |  Email |Print

The European Parliament’s environment committee rejected a resolution to improve Europe’s carbon market and swiftly adopt a climate and energy policy package for 2030.
The panel, which leads parliamentary work on legislation linked to the European Union’s 53 billion-euro ($70.8 billion) emissions trading system, voted 32 to 27 against the non-binding opinion in Brussels today. EU emission permits for December pared gains after the rejection, dropping to 5.64 euros a metric ton from an intraday high of 5.92 euros………………………………………..Full Article: Source

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