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Commodities Briefing 21.Oct 2013

Posted on 21 October 2013 by VRS |  Email |Print

Weaker economic growth in emerging countries, hit by a squeeze in liquidity and weaker currencies, is due to curb raw material demand and weigh on commodity markets.
This month, the International Monetary Fund cut its forecasts for economic growth in emerging markets for this year and next. China, India and other emerging economies have been the main drivers of demand growth in commodities ranging from copper to oil to soybeans………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

There has been plenty of downside pressure on commodities throughout 2013. But while the worst may be over, BMO commodity strategist Jessica Fung does not expect any miraculous recovery to finish the year.
In a lengthy research note, she predicted that prices will be “relatively range-bound” through the rest of 2013. That said, she does see the chance for upside surprises in a few commodities: iron ore, palladium and metallurgical (coking) coal………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

In October 1973, the Organization of Petroleum-Exporting Countries (OPEC) instituted an oil embargo against the nations, including the United States, that supported Israel in the 1973 Arab-Israeli War. The embargo was lifted six months later, but not before it changed the way we drive.
Could oil shocks, such as those in 1973, happen again? How resilient is the U.S. now? While its energy picture has changed dramatically, it still imports 35% of the petroleum it consumes………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

U.S. energy policy has been shaped by one critical event that happened 40 years ago this week: the OPEC oil embargo of 1973. Since then, the United States has embarked on an ambitious goal of drilling for our own oil and gas, as well as diversifying our energy portfolio.
In this segment, Joel discusses why the shift away from OPEC domination could be a major opportunity for companies like Schlumberger and Kinder Morgan as well as whether OPEC is still the force it once was………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

October 17 was the fortieth anniversary of the oil embargo slapped on America by the Organization of Petroleum Exporting Countries (OPEC). That action changed the entire geopolitical map—taking the power from the United States and giving it to the Middle East.
As a result of the embargo, the price of gasoline quadrupled, gas stations had multi-hour long lines, and the stock market plummeted—kicking off a serious recession. My entire driving life has been impacted by OPEC’s actions. On October 17, 1973, I was 15—days away from turning 16. I got my driver’s license on my sixteenth birthday………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

This summer, disgruntled Saudis took their grievances online in droves, complaining of ever-growing inequality, rising poverty, corruption and unemployment. Their Twitter campaign became one of the world’s highest trending topics. It caused great alarm within elite circles in Saudi Arabia and sent ripples throughout the region. The rallying cry that “salaries are not enough” helped to prove that the monarchy’s social contract with its people is now publicly coming unstuck, and on a significant scale.
Many experts believe that the Gulf states have survived the Arab Spring because they are different. After all, they’ve weathered numerous past storms - from the Arab nationalist revolutions of the 1950s and ’60s to Saddam Hussein’s 1990 invasion of Kuwait to an al-Qaida terror campaign in 2003………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

“Developing a comprehensive plan to achieve U.S. energy independence is the “single biggest” way to boost the economy. Oil is at the center of everything we do. If we produce more in the U.S. and use less and develop alternatives … you allow the United States within our economy a half a trillion dollars more in GDP,” FedEx (FDX) Chairman and CEO Fred Smith said.
The previous peaks were followed by a near $40 drop in 2011 and a $20 fall in 2012. For those readers technically inclined, this meant oil popped to the upper Bollinger Band and then plunged to the lower………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Global commodity markets, so far this year, have gone through wide swings given the diversity of driving forces including economic growth, monetary policy, geopolitical instabilities and currency gyrations.
Central banks of different countries have often followed monetary policies that are seemingly divergent. The economic growth trajectories of different countries have also diverged. The risk-on/risk-off environment too has undergone subtle but unmistakable changes. No wonder that the risk-reward profile of commodities has not been the same this year………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Goldman Sachs sees downside potential for copper, gold and soybeans but upside potential for zinc and lead. According to Goldman Sachs, it would wait for clarity on tapering of U.S. quantitative easing before shorting certain commodities. The debt-ceiling limit was only extended by a few months this week, prompting ideas that the lack of a lasting resolution means that QE will be extended.
“Although we maintain our neutral recommendation for commodities and our expectations for (a) mostly flat S&P GSCI returns over the next 12 months, we see significant downside opportunities in copper, gold and soybeans,” Goldman added………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Remember, several months ago when US Fed Chair Ben Bernanke made headiness saying, “Nobody really understands gold prices and I don’t either.” That was a Quaint remark, and brings up the Big Q, how does the world’s biggest holder of Gold not know anything about Gold or where it may go?
The US Fed just holds 75% of the its reserves in Gold, over 8,000 tonnes, and its Chairman says publicly that he does not understand what, why or how come. Not true…the Fed and Mr. Bernanke know all about it……………………………………….Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

In the early hours of the New York morning on Thursday, when scarcely a few hundred lots of gold futures are usually traded, a wave of buy orders worth over $2.3 billion surged into the market.
Prices soared 3 percent in just 10 minutes, setting the tone for the next 12 hours of trade - and puzzling many traders and investors who have been rattled by a series of similarly abrupt, and largely unexplained, trade surges over the past two weeks………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Gold held near one-and-a-half-week highs above $1,300 an ounce on Monday, supported by expectations the Federal Reserve would hold off curbing its economic stimulus while the United States eyes a more lasting fix to its budget problems.
Gold posted its best weekly gain in two months last week after U.S. lawmakers reached a last-minute deal that averted a debt default and reopened government agencies that were shut for 16 days………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Silver’s rally may be far from over: Commodities research firm CPM Group says silver prices could reach record highs over the next decade. According to CPM’s Silver Long-Term Outlook, published this week, a medium-term decline could lead to long-term rise, MarketWatch reports.
In an interview with Kitco News, commodities analyst with CPM Group Erica Rannestad said that “after a couple of years of price consolidation, we do expect investors to come back into the market with renewed interest.”……………………………………….Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Goldman Sachs cut its price targets for aluminum to $1,800, $1,750 and $1,750 per metric ton on a three-, six- and 12-month horizon. The bank previously looked for $1,850, $1,900 and $2,000, respectively.
“Driving these aluminum forecast revisions is the lack of a sufficient supply response to low and declining prices, which we believe is the result of a sharply declining cost structure driven by weaker coal and power prices,” Goldman added………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Strategies that eschew traditional market-cap weighting are the current trend in exchange-traded funds. Funds that use fundamental indexing or other rules-based weighting methodologies are popping up in almost every sector. In the commodities space, there’s United States Commodity Index (USCI), which launched in 2010 and uses market-price signals to construct its index.
Most commodity indexes weight by consumption or production, but USCI’s strategy is based on research by academics Geert Rouwenhorst and Gary Gorton. In a 2007 paper, Rouwenhorst and Gorton found that the futures contracts of commodities with low inventory consistently outperformed those of commodities with high inventory………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Money has been flowing in and out of financial markets more rapidly than ever before this year, a bullish signal as the threat of a U.S. government default fades. About $47 billion has gone to exchange-traded funds that track everything from stocks to bonds to commodities since Sept. 1, according to data compiled by Bloomberg.
That followed about $18 billion pulled in August, $40 billion added in July and $11 billion pulled in June, making it the most volatile period on record for flows. Almost $7 billion went to ETFs on Oct. 17 alone, as Congress passed legislation to avoid a default………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Garry Jones, the new chief executive of the world’s largest bourse for industrial metals, has plans to grow business out of Asia, open a clearing house and develop more options trading.
Change is coming at the London Metal Exchange (LME) says Garry Jones, the new chief executive of the world’s largest bourse for industrial metals who plans to grow business out of Asia, open a clearing house and develop more options trading to modernise the 136-year-old exchange………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Goldman Sachs Group cut its price forecasts for Arabica coffee traded in New York by 7.7%, citing favourable weather and the biggest stockpiles of the variety favoured by Starbucks in five years.
The beans traded on the ICE Futures US exchange will be at $1.20 a pound in three, six and 12 months, the bank said in a report e-mailed on Friday. That’s down from last month’s forecast for $1.30 a pound. Arabica coffee futures fell 20% this year on signs of bigger harvests in leading producer Brazil and Colombia, the second-biggest grower of the variety………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

China’s government on Friday reported an increase of 7.8% in the country’s GDP in the third quarter, the latest in a world-beating expansion after three decades of economic reform. Yet export gains – once the country’s main growth engine – have turned modest; they actually declined by 0.3% in September from a year earlier.
Increasingly, there are worries here about the country’s ability to maintain its export competitiveness in the face of rising costs and an appreciating currency………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Given the scale of China’s consumption of fossil fuels and raw materials, it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources.
China has overtaken the US as the world’s largest oil importer and goods trading nation. Over the next five years, it will surpass the rest of the world combined in its consumption of base metals………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

Playing a game of brinkmanship, the United States government may just end up hurting itself as other countries start to plot out long-term strategies to find replacements to the greenback as the world’s de facto currency.
A senior official of the Philippines’ central bank said that the US government risks losing its “exorbitant privilege”—being the issuer of the world’s most used currency—if its polarized Congress were to continue flirting with disaster by waiting to resolve a potential crisis at the eleventh hour………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

South Korea and Malaysia on Sunday signed a currency swap agreement worth $4.7 billion, Seoul’s central bank said, in a move to encourage bilateral trade and help curb currency swings.
The latest agreement allows the two Asian nations to purchase and repurchase each other’s currency of up to 5 trillion won ($4.7 billion), or 15 billion ringgit, the central Bank of Korea said in a statement. The deal—valid for three years and renewable upon agreement—will allow greater flexibility for businesses to use local currencies for trades that have been commonly settled in US dollars, the two countries’ central banks said in a joint statement………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

You may never have heard of it, but a European scheme, designed to achieve carbon emissions targets that have already been met, is adding billions to consumer energy bills. This year and every year until 2020, the UK government will auction hundreds of millions of carbon credits – called European Union Allowances (EUAs) – into the market for use by power companies. At current prices of around €5 per credit, this should net the Treasury about €1bn (£845m) a year.
The EUAs are the main “currency” of the European Union Emissions Trading System (EU ETS), borne out of the 1997 Kyoto Protocol, and designed to help us monitor and reduce our carbon emissions to hit various targets………………………………………..Full Article: Source

Posted on 21 October 2013 by VRS |  Email |Print

When Parliament resumes, the first item of business will be abolishing the carbon tax. The Greens have flatly rejected supporting the repeal. This provides a golden opportunity for the newly minted Opposition Leader Bill Shorten to abandon one of the former Labor Government’s greatest liabilities and simultaneously to defend its achievements.
In short, the ALP should support repeal of the carbon tax in return for retaining a cap on carbon emissions. Opinion polling has consistently shown that Australians want effective action on climate change, but dislike the carbon tax. The ALP should belatedly follow the community’s lead and acknowledge that instead of being an instrument of effective climate action, the carbon tax has now become an impediment to progress………………………………………..Full Article: Source

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