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Commodities Briefing 23.Oct 2013

Posted on 23 October 2013 by VRS |  Email |Print

The bust of agricultural commodities over the past couple of years has brought down the cost of betting on the world’s growing need for food and clothing. Since the recession, the so-called soft commodities have been influenced by much more than supply and demand. Fuelled by speculative trading, prices of food and cotton hit extremes, peaking in 2011 before dropping off almost across the board.
But fundamentally, not all that much has changed the outlook for commodities like coffee, cocoa, sugar and cotton. “We’re looking at a pretty interesting environment for making initial long-term bets on soft commodities,” said Shawn Hackett, president of Hackett Financial Advisors in Boynton Beach, Fla………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

“Bank holding companies ought to confine their activities to the management and control of banks,” the Senate Banking Committee wrote in 1955, reporting favourably on legislation that eventually became the 1956 Bank Holding Company Act.
“Bank holding companies ought not to manage or control nonbanking assets having no close relationship to banking,” the committee went on. Bank holding companies were required to divest shares in nonbanking enterprises and forbidden to acquire new ones, with a few carefully limited exceptions………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Commodities markets are a lot like the Wild West: they’re either unregulated or have poorly defined regulations, offer enormous possibilities for investors and are prone to boom and bust cycles.
One of the top criticisms investors (as well as consumers and politicians) often make with these markets is “price volatility,” and now the governing body of these markets, the Commodity Futures Trading Commission (CFTC), is weighing in with a new rule designed to prevent commodity price swings caused by rampant speculation………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Commodities have been the strength behind the Australian economy for the past decade with the resources super cycle providing the wherewithal for the Rudd government to throw money at the country during the darkest days of the global financial crisis.
When resource prices did weaken some time into the crisis, the Chinese government’s massive stimulus program kicked in, pushing up demand for iron ore and coal and saving Australia’s economic bacon in the process………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Saudi Arabia and Iran, two titans of the oil industry, are heading for a headlong confrontation in what could result in a destructive and devastating new episode of conflict in the Middle East.
The potential for destructive power in the event of Tehran and Riyadh opting for a military confrontation is huge and goes well beyond anything we have seen in the region. To get an apercu of what such a conflict would entail, have a look at the civil war currently raging in Syria and multiply it tenfold………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

West Texas Intermediate (or WTI) crude (priced at Cushing, Oklahoma) is the benchmark crude for US oil. So movements in WTI oil prices are a major driver in the valuation of domestic oil producers.
Higher oil prices also incentivize producers to spend more money on drilling, which results in increased revenues for oilfield service companies (companies that provide services such as drilling, fracking, and well servicing). Consequently, WTI prices are an important indicator to watch for investors who own domestic energy stocks………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Iran is reaching out to its old oil buyers and is ready to cut prices if Western sanctions against it are eased, promising a battle for market share in a world less hungry for oil than when sanctions were imposed.
New Iranian President Hassam Rouhani’s “charm offensive” at the United Nations last month, coupled with a historic phone call with U.S. President Barak Obama, revived market hopes that Iranian barrels could return with a vengeance if the diplomatic mood music translates into a breakthrough in the stand-off over Tehran’s disputed nuclear programme………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

The Organisation of Petroleum Exporting Countries (Opec), which supplies about 40 per cent of crude across the world, sees a possible drop in demand for crude oil in the coming months, caused by a slowdown in economic growth in several regions.
“As we approach the end of 2013 and head into the next year, we need to remain vigilant. There remain many concerns for the market to digest, and act upon,” said Abdullah Salem El Badri, Secretary General of Opec………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Wind power could account for almost a fifth of global electricity production by 2050, if the trend for cheaper and more effective turbine technologies continues and economies of scale are fully realised.
That is conclusion of a major new report from the International Energy Agency, which predicts a healthy future for the global wind industry, but warns barriers to deployment such as access to finance, grid connections, and public acceptance still need to be overcome if the technology is to realise its full potential………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Going short gold was the top commodity investment pick for the next 12 months by two top-ranked analysts at the recent World Commodities Week conference in London. There is nothing wrong with this view as there are solid reasons to believe the precious metal may decline further, such as the likely scaling back of quantitative easing in the United States and a generally more positive global economic outlook.
But it struck me that if the best investment in the near term is to be short something that has already shed 21 percent of its value so far this year, this is a sad reflection of the overall state of the market for commodities………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Global economic conditions continue to point to increasing gold prices in the coming years, according to Angelos Damaskos, manager of the MFM Junior Gold fund. Damaskos contended that the continued uncertainty regarding the level of borrowing by the US government in 2014 will weaken the purchasing power of the US dollar.
Gold, in its traditional role as a hedge against inflation, would benefit from such a scenario. There was much surprise among market observers that, during the recent US debt ceiling crisis, the price of gold actually fell to below $1,300 an ounce………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Analysts at BofA Merrill Lynch and Morgan Stanley are telling clients that gold is set to rally as Indian festival season gets underway. In a note to clients today, BAML analysts led by Michael Jalonen write:
Gold markets – Poised for a November rally? Last week, the gold price rose 3.5% ending Friday at $1,316/oz. This belied considerable intra-week volatility as bullion fell to an intra week low of $1,255/oz before rallying sharply (some $60/oz) due to the end of US Government shutdown and an expansion of the debt ceiling………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Toronto based BMO Research upwardly revised its gold and silver forecasts for 2014, although the bank listed expected averages that are down modestly from current prices.
The 2014 gold outlook was revised up to $1,275 an ounce from $1,181 previously, while the silver forecast was revised up to $21 from $18, said the Canadian bank in a quarterly report………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

This silver price is a market of extremes. Since the last Silver Summit, the price has fallen by nearly 50%, to the lowest levels since 2010. But take a longer-term view and we find from its 2008 lows, the silver price is still higher by 250%.
As the price of silver did to the upside in 2009-2011, the downside since has been equally extreme in emotions, now a fear-dominated sentiment. The price reflecting this negative state with a sell-off low during the Summer, trading below $20/ounce………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

BMO Research said that it looks for silver to underperform gold due to an uncertain industrial demand outlook in the United States in the near term, as well as expectations for significant supply growth in 2014 and 2016.
According to BMO, gold and silver prices to decline through 2014, assuming the US recovery is well under way. Gold could potentially be supported over the longer term by unknown fallout from years of easy money. The last four years of money printing and increasing debt levels are unprecedented, and the medium- to long-term repercussion of these actions can only be speculated………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Diamonds will need to continue to sit on the sidelines, waiting to be called off the bench to perform as a physically-backed investment vehicle.
The irony of what’s keeping diamonds from becoming a physically-backed commodity is that the uniqueness in each diamond is one driving factor that propels the price upwards, and is also what’s holding it back………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

World crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 133 million tonnes (Mt) in September 2013, an increase of 6.1% compared to September 2012.
World crude steel production for the 65 reporting countries was 1,186 Mt in the first nine months of 2013, an increase of 2.7% compared to the same months of 2012. Asia produced 795.1 Mt of crude steel in the first three quarters of 2013, an increase of 5.9% compared to the same period of 2012………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

So you think the commodities supercycle is over? For zinc bulls, it may be just beginning. The price of zinc has remained subdued since the financial crisis even as copper, gold and tin rose to record highs.
But the metal, used to rustproof steel in everything from cars to building materials, has an increasingly vocal following among analysts and investors who believe that it could witness a sharp rally in the coming years………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

The Gold futures for December delivery closed at what was nearly a 5-week high today, with the precious metal climbing 2% during the session settling at $1,342.60.
This move came on the heels of what has been a considerable move higher since the temporary resolution that was signed by the President during the early morning hours of October 17th, at which time December Gold was trading just shy of $1,250. It is our belief that there are a number of factors at work here………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Ondo State Government has decided to establish a commodities exchange which will help in strengthening the production, marketing and processing of the value chain of cocoa in the state.
Briefing journalists at Cocoa Conference Hall of the Governor’s Office on the decisions taken at the last Executive Council meeting, the State Commissioner for Information, Mr Kayode Akinmade revealed that the commodities exchange will further help in transforming cocoa marketing in the State by ensuring that farmers get adequate rewards on the produce of their farms………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Grupo BTG Pactual SA is considering a bid for JPMorgan Chase & Co’s physical commodities unit, a source familiar with the matter said, a move which would dovetail with the Brazilian bank’s plans to expand heavily into commodities sales and trading.
The bank, controlled by billionaire financier Andre Esteves, is currently analyzing the asset and reviewing its finances, said the source, who declined to be identified by name because the process is private. A deal is, at this point, “far away from being something concrete,” the person said, adding that no amount or terms have been discussed………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Canadian wheat and canola grower Mike Bast spent five years building silos to store 100,000 bushels on his 2,000-acre farm in La Salle, Manitoba. It wasn’t enough. He’s already dumping grain into his neighbor’s bins.
Harvests this year across the Prairie provinces of Canada, the world’s top canola producer and the second-largest exporter of wheat, will jump 14 percent to a record 80.8 million metric tons, the government said Oct. 16. ……………………………………….Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Cuba has approved a plan to gradually eliminate its dual monetary system as part of reforms aimed at improving the country’s economic performance, a communique carried by official media on Tuesday said.
“The Council of Ministers has adopted a chronogram of measures that will lead to monetary and exchange unification,” the government statement said, giving few details………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

Cuba is to scrap its two-currency system in the latest financial reform rolled out by President Raul Castro, official media report. Since 1994 Cuba has had two currencies, one pegged to the US dollar and the other worth only a fraction of that.
The more valuable convertible peso (CUC) was reserved for use in the tourism sector and foreign trade. Now its value will be gradually unified with the lower-value CUP, ending a system resented by ordinary Cubans………………………………………..Full Article: Source

Posted on 23 October 2013 by VRS |  Email |Print

The decision by the Bill Shorten-led Labor Party on carbon pricing repeal will be decisive for Shorten’s prospects as leader and is pivotal for Labor’s long-run future.
This is a risky test for Shorten, devoid of any easy solution. The danger is that Tony Abbott will exploit Labor’s expected opposition towards repeal to discredit Shorten from the start, depicting him as a factional dogmatist who refuses to change or heed the election message………………………………………..Full Article: Source

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