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Commodities Briefing 17.Oct 2013

Posted on 17 October 2013 by VRS |  Email |Print

If you’re a long-term commodity bull — like me — you’ve spent much of the last year licking your wounds. That’s because firms that produce the building blocks of modern society have been on a straight shot downward since the beginning of the year.
In fact, commodity stocks were the worst-performing S&P 500 group during the first six months of the year and have lagged behind the equity benchmark by the biggest gap in 15 years. Much of the underperformance can be attributed to the slowing economic growth concerns from key demand drivers like China and India. As these two nations have stalled, the prices of everything from copper to corn have taken a downward turn………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Strong gains in commodity prices since the early 2000s created a growing interest in the asset class. The financial industry responded with many products, including new hedge funds, index funds, commodity-linked fixed income products and exchange-traded funds.
With oil and natural gas making a prominent peak in 2008 and gold hitting a peak in 2011, many took this as a sign that the commodity bull had run its course and expected that we would return to the normal, long-standing trend of commodity price deflation………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical-commodities assets, according to people familiar with the matter.
Such an approach could encourage banks to pare back their involvement in physical commodities, which has increasingly raised concerns among regulators and lawmakers………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Markets will be dominated by news from the US in the coming weeks as the political showdown over the funding of the US government continues. So far, the government shutdown has not created high levels of anxiety in markets. This is because the shutdown itself is not the big problem for investors or US politicians, but failure to reach an agreement on the debt ceiling might be.
If the US did default on Treasury debt, the damage to the economy would be huge. The US is expected to reach its borrowing limit around the middle of October, but there is potentially enough cash down the back of the sofa for the US government to continue to meet obligations for another couple of weeks after this without additional borrowing………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Asset bubbles make theorists crazy, because they seem to be obvious, at least in hindsight, and yet constantly recur. Some academic economists argue that price and value are identical, so that by definition, nothing is ever overpriced.
Others now undertake neurological studies of trading to show that people seem to pay attention to what others are doing, in part, confirming the idea that many in the market plan to make money, not by spotting better values in assets, but by making it off the so-called “greater-fool”. That is, recognizing a bubble, but riding it up and getting out when it bursts, leaving the “greater fool” to take the losses………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

As global equity markets continue a strong move higher into Options Expiration week, something seems to be missing. Yup, Crude Oil prices aren’t playing along. In fact, Crude Oil has been mired in a steady grind lower, unaffected by the wild swing in equities. So, what’s up with the black gold?
Well, relative weakness in Crude Oil prices seem to be telling investors a couple things: The short-term rush higher in equity prices may be fleeting. Crude Oil isn’t quite ready for prime time… yet………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Forty years after the start of the OPEC oil embargo left the U.S. with iconic images of gas lines, America is still susceptible to price shocks stemming from decisions made on the other side of the world, according to a report issued Tuesday.
In the 52-page policy paper, former high-ranking military officers, cabinet secretaries and business leaders recommended ways the United States can pare America’s vulnerability to oil price hikes, by giving alternatives a chance to compete with gasoline and ending “oil’s virtual monopoly as a transportation fuel.”……………………………………….Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Last month Greenpeace protestors attempted to board the Prirazlomnove oil platform to hang a protest banner against Arctic Sea oil drilling. In a report from February this year, titled “Point of No Return”, Greenpeace identified new oil drilling in the Arctic seas as one of the biggest threats to the environment that is currently ignored by world governments.
“Oil companies plan to take advantage of melting sea ice … to produce up to 8 million barrels a day of oil and gas. The drilling would add 520 million tons of CO2 a year to global emissions by 2020.”……………………………………….Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Rising oil and gas production and improving energy efficiency in the United States could slash its oil imports in half by the end of 2020 from levels seen two years ago, the West’s energy watchdog said on Wednesday.
The Paris-based International Energy Agency (IEA) earlier this month said the United States would overtake Russia next year to become the world’s largest oil producer thanks to its shale oil boom………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Gold will drop in each of the next four quarters and reach a four-year low as reduced U.S. stimulus in response to faster economic growth curbs demand for bullion as a haven, the most accurate forecasters said.
The metal will decline to an average of $1,175 an ounce in the third quarter next year, or 8.3 percent less than now, according to the median of estimates from the 10 most-accurate precious metals analysts tracked by Bloomberg over the past two years. Prices were last at that level in 2010………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

If you are a gold bug, you probably won’t like what I have to say in this column, but just give me a chance to explain why I simply feel the time for the shiny yellow metal has come and gone for now.
Yes, the yellow precious metal could inevitably head back to the $1,800-an-ounce level, but I doubt that. Maybe $1,400, but it won’t reach much higher in the short term, of course, unless the country defaults on its debt, a war in the Middle East escalates and brings in more countries, or inflation suddenly jumps much higher………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

While I avidly follow the actions of central banks to see where the gold bullion prices may be headed next, when I look at them today, their actions are speaking louder than words.
Central banks have pretty much stopped selling gold bullion, which is very important. In 1999, a number of central banks in Europe formed an alliance and agreed that they would not sell more than 400 tonnes of gold bullion per year. The agreement was called the Central Bank Gold Agreement (CBGA). In 2004, the CBGA was renewed again; this time the limit was 500 tonnes. Once again, it was renewed for another five years in 2009, and the limit is back to the sale of no more than 400 tonnes of gold bullion per year………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

After being revived for a while thanks to some dollar weakness, natural resources again slipped into trouble. This is especially true for soft commodities which couldn’t even stay afloat when other products from metal and mining sectors were surging on the latest round of concerns.
A demand-supply imbalance was mainly held responsible for such a downturn in agricultural commodities. Among various others, coffee has been massively beaten down over the last two years and no hope is seen for a return to strength anytime soon………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

JPMorgan Chase & Co agreed to pay $100-million and admit its traders acted recklessly to settle one more set of U.S. charges over its disastrous “London Whale” trade, the Commodity Futures Trading Commission announced on Wednesday.
Last month the bank paid $920-million to four other U.S. and British regulators to resolve civil probes of the bank’s $6.2-billion in derivative losses involving its chief investment office………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

The global grain and oilseed trade represents up to ~20% of total dry bulk shipments. These shipments primarily use Panamax vessels. When shipments rise, the shipments of global grain or oilseed rise, which increases demand for Panamax ships and has a positive impact on shipping rates.
Long-term shipping rates movements in turn have a significant impact on the performance of dry bulk shippers………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

The British market regulator has begun an investigation into allegations staff at major banks have attempted to manipulate foreign exchange markets. The Financial Conduct Authority (FCA) confirmed it was at the “early stage” of an inquiry into potential rigging of the $5.3 trillion (£3.3 trillion) daily global trade in currencies as part of an international probe into what could be the next scandal to hit the banking industry.
In a statement the FCA responded to mounting speculation that it had launched a probe, admitting it had started “gathering information from a wide variety of sources including market participants”………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

Remember the last time the country came to the brink of default? It was August 2011. For the first time in history, Standard & Poor’s, the ratings agency, downgraded US government debt.
“The effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges,” it said. Investors around the world rushed to find a safe place to put their money………………………………………..Full Article: Source

Posted on 17 October 2013 by VRS |  Email |Print

The European Commission wants to impose carbon emission charges for all flights using Europe’s airspace. Wednesday’s proposal by the 28-nation bloc’s executive arm would force airlines to buy carbon emission permits for all flights within Europe but also for the parts of intercontinental flights that use the bloc’s airspace.
That means, for example, that a U.S. airline flying from New York to Frankfurt would have to buy pollution rights under the EU emission trading system for the part of the route within Europe’s airspace………………………………………..Full Article: Source

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