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Commodities Briefing 25.Sep 2013

Posted on 25 September 2013 by VRS |  Email |Print

Investment flows into commodities are improving, but broad sector indexes are unlikely to consistently outperform equities for at least another year, until global growth gathers more momentum, analysts and fund managers say.
Strong commodity gains in August together with a breakdown in correlations between commodities and other asset classes like equities is helping to spark interest from investors. “The view on commodities was pessimistic at best a few months ago. That seems to have changed, especially after August,” David Hemming, portfolio manager in commodities at Hermes, told a recent conference………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Wall Street, with all its so-called genius and ingenuity, now has the ability to screw around with the price of your gasoline. That’s not all. Loosely regulated commodities markets appear to be more and more the apple of Wall Street’s eye, even as the major stock market indices on Wednesday hit all time highs.
Banks’ focus on commodities is particularly worrisome, as commodities are extremely volatile and can whipsaw and wipe out investors on the wrong side of a trade in the blink of an eye. But with the stock market roaring, why are Wall Street banks more keenly focused than ever on commodities trades?……………………………………….Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

BHP Billiton Ltd has warned of short-term downward pressure on commodity prices, but expects more balanced global growth over the longer term. In the group’s annual review, BHP chairman Jac Nasser noted increased supply has exerted downward pressure on many commodity markets and said the miner expects that trend to continue over the short term.
“While lower rates of investment across the industry will ultimately lead to more balanced markets, all resources companies will need to improve productivity and be flexible enough to adapt to change in this more challenging environment.”……………………………………….Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

The Fed’s decision last week not to begin the tapering off of its Quantitative Easing saw oil prices shoot up about $2 a barrel. If the minds of commodity traders were linear (insert your comment here), then that would imply that about $15 of the current oil price of $105 a barrel was due to the pump priming (financial, not physical) of the Fed.
This would conform to the current futures strip, which puts the mid-2015 price at about $90………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

West Texas Intermediate crude oil prices held to less than $104 per barrel in New York Tuesday as price pressures have shifted in the past week.
Crude oil prices dropped for a fifth consecutive trading sessions as worries over a potentially supply disrupting military intervention in Syria have abated. Increased oil flow from Libya has also taken pressure off of the market, analysts say………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

The UAE’s oil output rose by 1.8 per cent to 2.72mn bpd in Q2 2013, compared with 2.67mn bpd during Q1 2013, according to data from the International Energy Agency (IEA). The IEA report showed that the country’s oil output in August, however, fell marginally to 2.72mn bpd compared to its average output of 2.75mn bpd in July.
The agency also noted that the UAE has a sustainable oil production capacity of 2.9mn bpd and its crude supply averaged 2.69mn bpd in the first half of 2013………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

From a look at the commodities’ charts, it’s clear that the connection between light crude and gold has changed in recent days. Last week, after the Fed said that it would stick to its stimulus plan for now, the yellow metal gained more than 4%, leading the rally in commodities, and it rose to a new one-week high. At the same time, crude oil extended earlier increases and finally gained over 2% on Wednesday.
However, during this euphoric rally, investors overlooked the fact that it was fueled by a weaker economic outlook from the Fed. Therefore, the improvement didn’t last long, and we saw a quick profit-taking during the last two sessions of the week. Gold then gave back almost 60% of the previous sessions’ gains and dropped to $1,325 per ounce on Friday………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Gold Bullion prices retreated to low at $1315 per ounce in London trade Tuesday morning, drifting down as world stock markets and commodity prices also slipped. The US Dollar extended its rally on the FX market, nudging the Euro back towards 1-week lows beneath $1.3450.
That move held gold bullion prices for Eurozone investors around €975 per ounce, some 4% below last Thursday’s 1-week highs. Major government bonds ticked higher, meantime, nudging the yield on 10-year US Treasury debt down to a 6-week low of 2.68%………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

During the recent downturn in the gold price, there was significant buying from places like Asia. The Chinese and its counterparts continue to buy gold and silver when the price comes off, as we saw this past spring, and also as stocks rise.
Fundamentally, everything looks very good for gold. The pullback in the gold price, from the high of $1921 per ounce to $1180, is reminiscent of 1974 to 1976. During that time, there was a big pullback of almost 50% in the gold market followed by a rise from $100 per ounce in 1976 to $850 in 1980………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Platinum and palladium are two metals that could prosper as other commodities falter amid economic uncertainty, says Carlos Sanchez, director of commodities at New York’s CPM Group. “I think you’re going to have a resurgence of investor interest in these two metals,” Sanchez predicted.
He cited a recovery in the automobile sector, which uses the two metals to reduce toxic emissions, alongside strong demand from electronics manufacturers, who also use the two industrial metals………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

With the recent shock of the latest Federal Reserve meeting now beginning to subside, the implications can now be extrapolated. By holding its foot on the accelerator, the Federal Reserve is opening the door to further price appreciation in many asset classes, including precious metals.
One of the precious metals I like is the little-mentioned palladium. While many of the precious metals covered by the mainstream (i.e. gold and silver) have been under pressure all year, palladium is actually positive for the year. Because so much of palladium is used for industrial purposes, the negative investor sentiment seen with other precious metals did not have as much of an impact on palladium………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

The uranium spot price has not moved as quickly as we were forecasting. However, uranium equities have shown some strength over the past year or so, as investors started buying ahead of the uranium spot price moving. Spot prices depend more on utilities and their short-term requirements, which translates into their activity in the spot market.
However the spot market accounts for a small portion of the total market. Most transactions occur in the long-term prices, and the long-term contract price is at a healthier level in the $50/lb range. We believe the uranium spot price is currently below the marginal cost of production and therefore unsustainable, as half the producers around the world are losing money………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Exchange-traded fund companies are coming to market with a rash of new products and strategies designed to protect income investors from the dangers of rising interest rates.
Even though the Federal Reserve deferred the start of a rising rate era when it held policy steady last week, “the narrative still holds,” said Matt Tucker, head of fixed income strategy at BlackRock’s iShares. Investors still expect interest rates to rise when the central bank starts to reduce its bond-buying in the months to come, Tucker said………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Every day, people around the world trade $5 trillion worth of currency. That’s an astonishingly large number; it’s equivalent to about four months of economic output for the entire U.S. A new report shows how that $5 trillion is spread among the world’s currencies — and how the breakdown has changed over the past few years.
The U.S. dollar is still the currency of choice for most international transactions, accounting for 44 percent of the global currency trade. In fact, its share of all transactions has actually increased over the past few years………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Whether we pull out paper bills or swipe a credit card, most of the transactions we engage in daily use currency. Indeed, money is the lifeblood of economies around the world.
To understand why civilized societies have used currency throughout history, it’s useful to compare it to the alternative. Imagine you make shoes for a living and need to buy bread to feed your family. You approach the baker and offer a pair of shoes for a specific number of loaves. But as it turns out, he doesn’t need shoes at the moment………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

The essential first step is to put in place a functioning carbon price. Europe has had this since 2005 in the form of the European Union Emissions Trading Scheme (EU ETS). California, Québec, British Columbia, Australia and New Zealand have all recently established carbon pricing of one sort or another.
South Korea, Japan, and Switzerland appear to be moving toward carbon markets. Even China has started pilot carbon trading in Shenzhen, and it plans to add programs in Beijing, Tianjin, Shanghai, Chongqing, Guangdong and Hubei………………………………………..Full Article: Source

Posted on 25 September 2013 by VRS |  Email |Print

Australia’s new prime minister can’t count on big polluters to support his plan to stop charging them for greenhouse-gas emissions, according to the Carbon Market Institute.
While business groups such as the Minerals Council of Australia have criticized the carbon price as a “dead weight on the economy,” few individual companies have spoken up to endorse Tony Abbott’s plan to scrap what he calls a carbon tax, said Peter Castellas, chief executive officer for the Melbourne-based institute, which surveyed about 200 of the country’s largest emitters before the Sept. 7 election………………………………………..Full Article: Source

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