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Commodities Briefing 04.Nov 2013

Posted on 04 November 2013 by VRS |  Email |Print

Ongoing uncertainties over economic growth, monetary policy, geopolitics and currency gyrations continue to buffet the global commodity markets even as commodities respond to these in several ways. The last quarter witnessed a broad-based recovery in spot prices of commodities such as crude because of supply disruption and in gold and copper because of short-covering.
Will the price rally sustain over Q4? It looks most unlikely on current reckoning given the still muted global growth environment and strong possibility of the beginning of a progressive end to the US easy money policy in the months ahead………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

The possibility that the Federal Reserve will slap a surcharge on physical commodity trading by banks highlights some tricky new challenges for the US central bank as it tries to rein in Wall Street’s involvement in the raw materials supply chain.
Banking lawyers and finance experts say that implementing a proposal to require additional capital from banks, a possibility first raised by the Wall Street Journal in October, would put the Fed on uncertain ground in formulating a new policy for banks owning physical commodities………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Facing lingering questions about the oversight and profitability of their businesses, Morgan Stanley and JPMorgan Chase have taken steps to sell their commodity divisions, say people familiar with the matter. The firms are holding discussions with a range of offshore buyers who wouldn’t be subject to relatively stringent US banking rules.
Morgan Stanley held detailed discussions with China International United Petroleum & Chemicals—otherwise known as Unipec—as recently as September about a possible purchase of its commodities-trading division, according to people with knowledge of the talks………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Diary of a Private Investor: James Bartholomew bought commodity shares early in the expectation of a strong recovery. It is possible that this idea is a bit too early. To be honest, I have already been “too early” with it for some time. The idea is commodity shares. I think their time will come again and perhaps soon.
The FTSE index of mining companies has been falling for almost four years. It has declined by more than 40pc while the FTSE 100 index has risen by 10pc. The miners continued to do worse than other shares right up until the beginning of July. And then? They stopped………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Commodities dropped to a four-month low, paced by declines in crude oil and gold, on signs of climbing supplies of raw materials at a time when the prospect of reduced Federal Reserve stimulus may cut demand. The Standard & Poor’s GSCI Spot Index of 24 raw materials lost 1.7% to settle at 612.24 at 4 p.m. in New York, after touching 611.58, the lowest since July 1.
West Texas Intermediate fell below $95 a barrel for the first time since June. Gold reached a twoweek low. Hog futures capped the longest slump in three months, and cotton slumped to the lowest since January. Production is poised to top demand for everything from coffee to zinc as ample rains this year boosted global crops and demand waned for metals, grains and energy………………………………………..Full Article: Source

Posted on 04 November 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 US 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 per cent 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 04 November 2013 by VRS |  Email |Print

Crude-oil stockpiles in the U.S. are heading toward a record, pushing off a return to $100-a-barrel oil, and giving drivers a shot at $3-a-gallon gasoline. “With the overhang of crude supplies building over six weeks, we are unlikely to see $100 oil again very soon,” said Kevin Kerr, president of Kerr Trading International.
“This is good news for refiners and ultimately consumers” as it should depress gasoline prices at the pump. U.S. weekly crude supplies have jumped nearly 8% since mid-September, according to figures from the Energy Information Administration………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

The average price of crude oil is forecast at $105 per barrel in 2013, $101 per barrel in 2014 and $100 per barrel in 2015, according to Giyas Gokkent, chief economist at the National Bank of Abu Dhabi (NBAD).
“Average oil price was $112 per barrel in 2012. The base case is for oil prices to soften mildly, but remain close to $100 per barrel through 2018. Thereafter, prices rise by a few dollars each year in this scenario,” Gokkent told Gulf News in reply to e-mailed questions………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Bryan Sheffield, a third-generation oil wildcatter in Texas’ Permian Basin, knows what he’ll do if crude drops to $80 a barrel: shut down half his drilling rigs and go on a takeover hunt for weaker rivals.
He’s among producers who have invested $150 billion in the Permian since 2010, seeking a piece of a shale-oil trove estimated to be valued at as much as $5 trillion. As the money pours in, risks of a bust are mounting; some analysts forecast that crude is heading down to $70 a barrel next year………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

OPEC’s oil output has fallen below 30 million barrels per day (bpd) for the first time in two years in October, a Reuters survey found, as near-record Saudi Arabian output failed to offset disruption in Libya and lower supply from Iran and Nigeria.
Supply from the Organization of the Petroleum Exporting Countries has averaged 29.90 million bpd, down from a revised 30.01 million in September, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

For decades, the Organization of the Petroleum Exporting Countries, better known as OPEC, has wielded extraordinary power over the global oil market. The organization, which consists of 12 member countries, accounts for roughly 40% of total global oil production and controls a little over 80% of the world’s oil reserves.
But the recent surge in non-OPEC oil supplies, led by the North American shale oil boom, and the risk of a downturn in the global economy pose significant threats to the cartel’s continued prosperity. Let’s take a closer look………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

The news that a Chinese company is to buy the largest commercial gold vault in the world (inthe Chase Manhattan Plaza in New York) is yet another reflection of China’s enthusiasm for stockpiling gold. Although China only infrequently releases official figures on this matter,the World Gold Council estimates China will import over 1000 tonnes of gold this year, overtaking India as the biggest buyer in the world.
But whereas India is trying to reduce its gold imports through the imposition of taxes and import restrictions, China takes the opposite view and is encouraging the acquisition of gold by all sectors………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

While gold traders have squared their books for month-end and added to price volatility, a latest report from the World Gold Council (WGC) ‘Why Invest in Gold?’ urged investors not to overly focus on the daily swings of gold prices.
The WGC said that gold should be viewed as a strategic asset, which can bring downside protection and portfolio diversification without sacrificing long-term returns. In a traditional portfolio of 60% equities and 40% fixed income, an optimal gold allocation would be five to six percent………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

A recent visit to the gold market at Al-Batha souk in downtown old Riyadh convinced me that the female appetite for the ultimate yellow metal remains extraordinarily high.
Shops were packed with lustrous gold Bedouin jewelry, necklaces, sparkling rings, and bracelets in different designs, offering an impossible choice between the 22K and 21K jewelry and the 24K (99.99 percent purest gold) ingots………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Peter Schiff lays an iPod-sized bar valued at about $40,000 on the sun room floor of his Connecticut mansion, and calculates it would cost about $250,000 for each floor tile to pave the room with gold.
He shows off $50 gold chips, to be used when paper money becomes worthless, a prediction repeated on his daily two-hour radio show broadcast from his basement studio to 68 stations in 30 states and 50,000 listeners online. The unabashed gold bug’s Euro Pacific Capital Inc. manages a $20 million mutual fund that invests in stocks related to the metal and lost 4.5 percent since it began in July. The Philadelphia Stock Exchange Gold and Silver Index slid 2.9 percent in the same period………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Over the next decade, we expect uranium demand to grow at about 3% per year (3%/year) with about two-thirds of that incremental buying coming from China, Russia and India. China is building reactors like they’re going out of style—30 units are currently under construction domestically, with 59 in the planning stage — and we’ve just seen China grow its presence internationally with an equity stake in the Hinkley Point power station in the U.K.
Russia is building 10 reactors at the moment. It’s got 28 on the drawing board, according to the World Nuclear Association, and that’s going to more than offset the retirement of some of its aging reactors. Russia is heavily involved in vending reactors globally as well, with projects around the world………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

A seemingly “unbridgeable valuation gap” between buyers and sellers continues to stymie big merger activity in the mining sector while private capital has emerged as a growing force in dealmaking.
A total of 165 deals worth only $8bn were completed in the three months to September, down from 236 deals worth $20bn in the same period a year ago, according to figures from consultants E&Y. “Sellers do not need to sell urgently and buyers remain cautious, creating significant deal inertia,” said Lee Downham of E&Y………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

It’s no secret that mergers and acquisitions (M&A) activity in the mining sector is in the dumps. According to PWC, deal volume in the first half of 2013 declined 31% as compared to the same period last year. Deal value declined 74%. Excluding Glencore’s $54 billion acquisition of Xstrata in 2012, deal value is still down 21%.
A recent Bloomberg article noted that the volume of acquisitions valued at less than $1 billion is at an eight-year low while the volume of deals in Q3 was the lowest since Q4 of 2004. However, some deals are taking place and in order for speculators and investors to capitalize, they will need to keep a discerning eye, just like potential suitors………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

An already rocky year for commodities exchange traded funds could get even more tumultuous as the charts for some commodities are weakening. The $6.1 billion PowerShares DB Commodity Index Tracking Fund is down 7.3% this year, which does not sound compared to the bear market losses for gold, silver and several soft commodities. However, DBC is facing a potentially ominous technical situation of its own.
“Many key commodities are breaking support, ranging from the CRB Index, Crude Oil, Commodities ETF (DBC) and Gasoline futures. This has my attention, due to this…the majority of the time Crude Oil & Gasoline have been soft, it may have been good for prices at the pump, yet it wasn’t good for stock prices,” said Chris Kimble of Kimble Charting Solutions………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

UK bank Barclays has suspended six traders as part of a probe into suggestions that currency markets could have been rigged, the BBC has learnt. On Thursday, Royal Bank of Scotland suspended two traders in connection with the investigation.
The Financial Conduct Authority (FCA) probe is said to be at an early stage. Of the six, some work in London and some in other parts of Barclays’ global business, the BBC’s chief economics correspondent Hugh Pym said………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

This year’s burst of euro strength has brought crisis closer and baked a lot of future damage into the 17-nation bloc. Be careful what you wish for. The euro’s founding fathers dreamed of a superpower currency that could stand toe-to-toe with the dollar, freeing Europe from US monetary hegemony.
France’s Charles de Gaulle liked to grumble that America enjoyed an “exorbitant privilege” as holder of the world’s reserve currency, able to get away with economic murder. Now they have such a trophy themselves, only to discover what Washington learned the hard way: it is an exorbitant burden, and at times a curse………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

The carbon bubble idea is an interesting hypothesis, Styles writes, but there are some flaws in the arguments Al Gore makes in its support. Carbon bubble or no, there’s nothing wrong with investors wanting to track their carbon exposure, consider shadow carbon prices, or ensure they are properly diversified.
In their Wall St. Journal op-ed last week, Al Gore and one of his business partners characterize the current market for investments in oil, gas and coal as an asset bubble. They also offer investors some advice for quantifying and managing the risks associated with such a bubble………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

Costa Rica expects to sell 16 million tonnes of carbon credits over eight years on its new carbon exchange, Latin America’s first, a venue that allows polluters to offset their emissions with permits they can buy.
Launched last month, the exchange provides a forum for tradable certificates that confer the right to emit one tonne of carbon dioxide. The approach attaches a cost to pollutants and seeks to reduce greenhouse gases in the atmosphere………………………………………..Full Article: Source

Posted on 04 November 2013 by VRS |  Email |Print

According to the Climate Policy Initiative, we’re on pace to spend about $359 billion this year to fight global warming. That’s roughly a billion dollars a day. Depending on which side of the debate one stands, that’s either not enough or way too much.
This year’s projection is actually a few billion dollars lower than last year suggesting that funding to combat global warming has plateaued. One reason for this is pretty simply, private investors won’t fund clean energy projects unless the returns are there………………………………………..Full Article: Source

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