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Commodities Briefing 30.Sep 2013

Posted on 30 September 2013 by VRS |  Email |Print

Commodities may no longer be the asset class of choice for investors, but the idea that the resources “super-cycle” has run its course is simply wrong, argues global advisory heavyweight McKinsey & Company in its latest survey on the sector.
Equally misguided, according to the consultancy firm’s research arm, is the argument that recent declines in prices for a range of commodities – from copper to iron ore and oil – mark the beginning of a downward trend………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Global commodity markets are at a crossroads. On the one side is a high road to expanded demand and improved price performance, while on the other is a low-road to tepid demand conditions and range-bound or falling prices.
It is as yet uncertain which direction the market will take. Monetary policy of major economies and global growth prospects will continue to impact commodity markets. Continued sluggishness in global economic growth despite some pick-up signals suggests that the recent jump in prices of oil and some base metals such as copper may not sustain unless the growth momentum gathers pace decisively………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Commodity benchmarks are on course in Q3, 2013 to the biggest quarterly gains in a year however, Barclays cautions that it is not due to any real recovery in the global economy. Commodity returns were boosted with the easing of a number of potentially negative factors and the emergence of the some idiosyncratic risks in specific markets such as oil, rather than any convincing evidence of a sustained improvement in the demand environment.
“With the list of issues and events that could potentially wrong-foot investors now a little shorter and positioning much cleaner, we see outcomes for commodity markets in Q4 tied to three key themes,” Barclays said:……………………………………….Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

What does China’s factory sector growing at its strongest pace in six months have in common with the US Federal Reserve’s decision to keep buying bonds? Both failed to boost commodity prices much.
The flash HSBC Purchasing Managers’ Index (PMI) rose to 51.2 in September from August’s 50.1, the highest level since March and strengthening the view that economic growth in the world’s largest commodity consumer is regaining momentum. The improvement came days after the Fed surprised market watchers by keeping its bond purchases at $85 billion (Dh312 billion) a month, judging that it is still too early to taper monetary stimulus, given the nascent economic recovery in the US………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Are commodities over-valued? There are two schools of thought on the subject, one that says constrained supply and surging demand from emerging markets is the key driver of price, and the other that suggests high prices are a consequence of market speculation (boosted by cheap money).
McKinsey’s annual commodity report, released on Thursday, gives succour to the latter group. The chart below shows average commodity prices since 1980, combining metal, food, energy and raw material prices. Average prices are about 12 per cent down on their 2008 peak – but they are still more than double what they were in 1980. The commodity super-cycle “isn’t dead”, it suggests………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Should Goldman Sachs stay in physical commodities? Once the controversy really got hot, JPMorgan wasted no time in announcing that it would exit the business of physically storing metals commodities. The issue is alive for other banks, notably Goldman Sachs, which has taken its lumps over its controversial Metro warehousing facility in Detroit.
Reuters notes that regulators have some big decisions to make. First, the Federal Reserve must decide whether former investment banks Goldman Sachs and Morgan Stanley will “be allowed to continue owning and operating physical assets like oil pipelines and metal warehouses.” ……………………………………….Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Global oil prices sank last week on receding tensions over Iran and Syria, while coffee struck another three-year low on the back of plentiful supplies, dealers said.
Sentiment was also hit by the US budget impasse, with lawmakers unable to reach agreement over a budget just days before a deadline kicks in that could see parts of the federal government shut down………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

U.S. President Barack Obama and Iran’s Hassan Rouhani must build on their weekend phone call to convince crude traders that a thaw in relations will open the way to increased oil exports. While the historic conversation Sept. 27 will probably limit gains in prices, any “long-term” declines for crude will depend on the success of negotiations aimed at curbing the Persian Gulf nation’s ability to enrich uranium, according to Nomura Holdings Inc.
For Citigroup Inc., the differences between the two nations are likely to weigh on talks even as some countries, such as India, seek to boost imports from Iran………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Petroleum products such as gasoline and heating oil are produced by refining crude oil. Many oil market analysts believe that the prices for these petroleum products contain useful information about the future evolution of the price of crude oil.
In particular, changes in the product price spread – defined as the extent to which today’s price of gasoline or heating oil deviates from today’s price of crude oil – is widely viewed as a predictor of changes in the price of crude oil………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Hedge funds’ combined holdings in gold futures rose the most this month as continued U.S. monetary stimulus spurred investors to sell short contracts and sent prices toward the first quarterly advance in a year.
The net-long position in bullion jumped 12 percent to 78,654 futures and options in the week ended Sept. 24, the most since Aug. 27, U.S. Commodity Futures Trading Commission data show. Long wagers gained 1.8 percent and short bets fell 17 percent, the biggest drop in four weeks. Combined net-long holdings across 18 U.S.-traded commodities climbed 1.7 percent, the first gain in September………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Hindu temples are resisting divulging their gold holdings - perhaps nearly half the amount held in Fort Knox - amid mistrust of the motives of authorities who are trying to cut a hefty import bill that is hurting the economy.
The central bank, which has already taken steps that have slowed to a trickle the incoming supplies that have exacerbated India’s current account deficit, has sent letters to some of the country’s richest temples asking for details of their gold. It says the inquiries are simply data collection, but Hindu groups are up in arms………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Falling gold prices in recent months have encouraged bargain hunters across Asia to buy more of the precious metal. Gold has traditionally been bought in India and China as insurance against currency fluctuations and inflation.
Perth Mint, which produces 10 per cent of the world’s gold bullion, has been keeping a close watch on gold price movements. The miner’s analysis and strategy manager Bron Suchecki told Radio Australia that it was overwhelmed with interest from Asian buyers when gold had a massive correction early this year………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Bank of America Merrill Lynch has cut its average gold and silver price forecasts for next year as United States monetary policy starts to normalize. The bank expected silver to outperform gold next year.
Gold Price Forecast: The American bank has trimmed its average gold price forecast by 17% and is expecting to see an average price of $1,294 an ounce in next year. According to the bank, a gradual increase of U.S. real interest rates should be accompanied by lower gold prices in 2014, a key reason behind the reduction of price forecasts………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Little in the way of news has transpired in the past week that could have an impact on the silver market. The main stage has been set for some time, regarding all the known factors affecting silver, to date. There is no need to review any of them, at this point.
What can be noted is that the CFTC has reached the conclusion that the “alleged” manipulation by JPMorgan in the silver market, well documented and presented to the CFTC by Andrew Macguire, was much ado about nothing.. Just like lackey Eric Holder, chief law [un]enforcement official a the Dept of [no]Justice, has not been able to uncover any wrongdoing by Wall Street over the past 5 years, the CFTC ran into the same “bad luck” during its two-year investigation………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

The Fed seems to be stuck because of housing market weakness and its associated mortgage backed securities. The repo market appears to be where the stress is most threatening, though hidden from view. These trillion dollar daily transactions are the lifeblood of world financial markets.
Furthermore, the size of global financial markets has become so large that their downfall would severely threaten the underlying economy………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Over the past year, gold has lost a quarter of its value, and though it’s bounced off its most recent lows, it remains depressed. A big price surge last month had investors hoping a new bull rally was upon us, and then again a few weeks ago after Federal Reserve Chairman Bernanke’s “no taper” speech, it was off to the races.
But the rallies were short-lived, and gold is down again around the $1,330-per-ounce level again………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

iShares has announced the closure of 15 equity and commodity exchange traded funds (ETFs) due to low investor demand for the funds. The group acquired Credit Suisse’s ETF business in July this year and has begun integrating its funds.
The funds include eight iShares funds and seven legacy Credit Suisse ETFs. The group said the combination of the two fund lines resulted in 10 identical exposures. iShares has harmonised the pricing for these to ensure holders in each range are treated equally………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

If the Federal Reserve’s unprecedented quantitative easing program started a currency war, the euro may offer the next battleground. The euro zone’s policy makers are set to launch the next salvo in a move to push down euro’s value, said Jens Nordvig, global head of foreign-exchange strategy at Nomura and the author of “The Fall of the Euro.”
In 2010, Brazil’s Finance Minister Guido Mantega popularized the phrase “currency wars” after developed nations, such as the U.S. and the euro zone, rolled out a series of easing measures to bolster their exports by weakening their currencies, which pushed up emerging market currencies………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

But whether the Chinese RMB will become a reserve currency is an entirely different question. Of course it will, over time, but the question has always been when. There are some preconditions required for reserve currency status.
Quietly, apart from anything that might happen to the US dollar, China is working to meet those conditions. Rather than wallowing in concerns about China’s actions, we might opt for a more thoughtful and constructive response: to welcome the RMB to the reserve currency club and hope that it gets here soon………………………………………..Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Headlines such as “The rupee has appreciated or depreciated 30 paise against the dollar…” appear on a daily basis. Such reports on currency invariably attribute the reasons for currency movement to a government decision, uncertainty in markets, or perhaps even a controversy.
This piece is about knowing the actual value of the rupee. In India, the de facto way to measure the rupee’s value is to compare it to the US dollar. When was the last time you heard of the rupee being valued against the Japanese Yen, despite the fact that Japan has the 3rd largest economy in the world?……………………………………….Full Article: Source

Posted on 30 September 2013 by VRS |  Email |Print

Last week I tried to grab some time with my family during the school holidays and sneak out to the golf course to get away from the rollercoaster that is this country’s carbon politics and robust climate debate. Whether it was the best week to pick is debatable.
In Europe, hundreds of the world’s top scientists and government officials worked on the latest report by the Intergovernmental Panel on Climate Change. On Friday evening they strengthened their warning the world is warming and that activities like the burning of coal, oil and gas are causing it………………………………………..Full Article: Source

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