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Commodities Briefing 20.Dec 2013

Posted on 20 December 2013 by VRS |  Email |Print

A key rule in financial markets is that rational investors should not take unnecessary risks. It is strange, then, that some savvy investors still allocate to commodities over a long-term, five-year-plus horizon. The assumption is that commodities diversify portfolios, hedge against inflation, and, in the case of gold, offer a safe store of value. But our research suggests these justifications for long-term bets on commodities are illusory.
First, the correlation between commodity and other asset price changes was near 20 per cent in the 1980s and 1990s. Commodities were better placed to diversify investment portfolios and hedge against risk………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

Scotiabank’s Commodity Price Index declined by a sharp -5.8 per cent month-over-month in November and is currently -10.4 per cent below a year earlier. While commodity prices lost ground in 2013 — partly due to disappointingly slow global growth (2.9 per cent in 2013, down from 3.2 per cent in 2012) — signs point to a bottoming in 2014 and a return of the ‘Bull-Run’ in the second half of the decade.
Zinc is a Top ‘Pick’ for early investors. Lumber should post another solid advance in 2014, with a 19 per cent year-over-year gain expected in Western Spruce-Pine-Fir 2×4 prices………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

At a staff meeting in Budapest this fall, Morgan Stanley Chief Executive James Gorman told employees that a hypothetical oil spill by a tanker under the company’s control is “a risk we just can’t take,” according to people familiar with the remark.
The comment underscored the degree to which a once-lucrative business has fallen out of favor within the bank. Morgan Stanley helped pioneer trading of raw materials on Wall Street, buying and selling physical supplies of everything from copper to crude oil and taking stakes in companies that move commodities around the world………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will keep crude shipments stable through to early January as the first of two surges in winter fuel demand passes, according to tanker tracker Oil Movements.
OPEC, supplier of about 40 percent of the world’s oil, will boost sailings by 50,000 barrels a day, or 0.2 percent, to 23.98 million barrels in the four weeks to Jan. 4, the researcher said today in a report. That compares with 23.93 million in the period to Dec. 7. The figures exclude two of OPEC’s 12 members, Angola and Ecuador………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

OPEC’s crude-oil output is up by 100,000 barrels a day in December from November, despite a 200,000 barrel-a-day drop in flow from Saudi Arabia, U.S. government estimates published Thursday show.
Crude output from the Organization of the Petroleum Exporting Countries is averaging 29.4 million barrels a day, slightly more than the month-earlier level that was the lowest since May 2011, the Energy Information Administration said………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

There is a lot of confusion about which limit we are reaching with respect to oil supply. There seems to be a huge amount of “reserves,” and oil production seems to be increasing right now, so people can’t imagine that there might be a near term problem. There are at least three different views regarding the nature of the limit:
Climate Change. There is no limit on oil production within the foreseeable future. Oil prices can be expected to keep rising. With higher prices, alternative fuels and higher cost extraction techniques will become available………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

October 2013 marked the 40th anniversary of the oil embargo launched by the Organisation of the Petroleum Exporting Countries (OPEC) after the Yom kippur War.
Just as the event sent shockwaves through the world economy in 1973, the rise of shale gas and tight oil in the US and elsewhere is now creating an impact of similar magnitude in the oil world. ……………………………………….Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

Growth in global coal demand will slow over the next five years as consumption in China, the US and Europe are expected to ease, according to the International Energy Agency (IEA). In its Medium-Term Coal Market Report, the IEA said that in the period to 2018, global coal demand will grow by 2.3% per year, reaching almost 9 billion tonnes. This is down from its previous forecast annual growth rate of 2.6% over the same period.
Between 2007 and 2012, global coal demand grew by an average of 3.4% per year, the IEA said. However in 2012 the growth in global coal consumption dropped to 2.3% year-on-year, reaching 7.7 billion tonnes………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

Authorities around the world are gradually piecing together a shocking picture of how banks have manipulated benchmarks that influence the price of everything from mortgage loans to foreign currencies.
Another area deserves their scrutiny: gold and silver. In recent weeks, Bloomberg News and others have reported on concerns, among market participants and regulators, that the process for establishing the price of gold may lend itself to insider trading and other forms of unfair dealing………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

As 2013 looks set to close on a sour note for gold, analysts are forecasting another lackluster year of performance for the yellow metal in 2014, with Federal Reserve tapering action looming early in the New Year.
With its safe-haven appeal weakening, the gold price is on track to record its first annual decline in 13 years. Gold is down more than 25% so far this year, while the SPDR Gold Trust ETF has tumbled more than 27% year-to-date. Gold stocks have fared worse, with the Market Vectors Gold Miners ETF falling more than 55% in the last year………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

Gold slid to the lowest price in three years after the Federal Reserve said it would cut back on the easy-money policies deployed to steady the U.S. economy. Gold for February delivery, the most actively traded contract, fell $41.40, or 3.4%, to settle at $1,193.60 a troy ounce, the lowest price since August 2010, on the Comex division of the New York Mercantile Exchange.
Front-month gold for December delivery fell $41.10 to $1,195.00, also a three-year low. Gold’s declines—prices are down nearly 29% in 2013—erased much of the gains made in the wake of the financial crisis and have gold on track to end a 12-year bull run. On an annual basis, gold hasn’t lost ground since 2000………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

2014 is likely to be another difficult year for Commodities, writes Barclays, in a note out earlier this week. But, it expects base metals to out perform both oil and precious metals in the early parts of the year.
The main reasons for this are twofold. Firstly, on the base metals side, Barclays expects 2014 to mark the end of a period of structural surplus that has afflicted base metal markets to a greater or lesser degree since 2007/2008………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

U.S. gold bullion exports hit a new record during the first nine months of the year. Not only have exports recorded significant growth year-on-year, but also surpassed the total exports for the entire year 2012.
According to data provided by the U.S. Geological Survey (USGS), U.S. gold bullion exports during 2013 through September totaled 416 mt. This is 47% higher when compared with the exports during the corresponding nine-month period in 2012. In the first nine months of 2012, the United States had exported only 283 mt of gold bullions……………………………………….Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

Deutsche Bank AG is holding preliminary talks with potential buyers of its uranium trading business - the first sign since announcing it was largely exiting commodities trading that parts of the operation are now on the block.
The bank’s uranium desk is one of the biggest third-party traders in the market, and holds substantial stockpiles of low-grade uranium, known as yellowcake, and numerous long-term deals with nuclear power plants………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

Consumer staples stocks are notoriously slow-moving, but the sector’s reputation for dependable dividend growth and decent yields has made it a favored destination for scores of income investors.
Those attributes have also compelled investors to pour billions of dollars into exchange traded funds tracking the consumer staples sector. But in a strong bull market, such as the one investors have been treated to in 2013, lower beta sectors, including staples, have a propensity to lag the broader market………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

What are the best exchange-traded funds to buy in 2014? Most Wall Street strategists expect moderate returns for the S&P 500 in 2014, especially compared to what we’ve seen in 2013.
It’s unlikely investors will see a second consecutive year of 20% returns, although double-digit returns are entirely plausible. ETF selection in the coming year is even more important as performance becomes harder to obtain………………………………………..Full Article:

Posted on 20 December 2013 by VRS |  Email |Print

Exchange owner Financial Technologies (India) Ltd was deemed not fit by regulators on Wednesday to run India’s biggest commodities bourse and ordered to sell most of its holding.
Forward Markets Commissions (FMC), which oversees commodities markets, removed its “fit and proper” designation for both Financial Technologies and its chief executive, Jignesh Shah - a status needed to operate an exchange in India………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

European insurers are investing in commodity trade finance (CTF) as they look for new ways to increase yield and diversify their short-dated investment portfolios.
CTF is an umbrella term for a wide range of assets used to finance the production and transportation of physical materials around the world, secured by the underlying commodities themselves. The current size of the market is $18 trillion………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

While Britain and the US kickstart their economic recovery, Europe clings to its sinking ship. Rarely has the economic gulf that separates the English-speaking world and continental Europe looked quite as wide as it does today. While much of the eurozone remains mired in an economic funk, Britain and America are recovering fast, with rising demand and near record levels of private-sector job creation.
As if the last, crisis-ridden three years haven’t already given Europe’s policy elite enough to think about, this juxtaposition in fortunes must surely have awoken them to the truth: monetary union isn’t working………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

It took only 900 years, but paper money is fading away. As a new technology, plastic bank notes, becomes more popular around the world, people will have to get used to money that is slipperier but less grimy and harder to fold into origami cranes but more likely to survive washing machines.
The decline of one of the world’s greatest inventions gained momentum on Wednesday when Britain announced that the British pound, a reserve currency that has been printed on cotton-based paper for 300 years, will be made from plastic………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

The first day’s trading in what will be by far the largest carbon market in China kicked off briskly on Thursday with pricing in line with expectations, as Beijing continues its drive to slow its rapid growth of heat-trapping emissions.
Volumes in Guangdong’s carbon permit market, expected to be the world’s second largest in terms of carbon dioxide covered, in early trade surpassed full-day totals during the launches of the country’s three other carbon exchanges………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

It is not well known that Kazakhstan, a nation whose landmass exceeds that of Western Europe and boasts the largest economy in Central Asia, introduced a carbon trading scheme earlier this year. It is the first Asian nation to take on an economy-wide cap, and the trading system has been designed to help it achieve its goal of reducing greenhouse gas emissions to 7 percent below 1990 levels by 2020.
Indonesia is also considering carbon trading, and in 2014 Thailand will introduce a voluntary emissions trading system, likely to be a precursor to a mandatory scheme. These developments follow hot on the heels of the landmark passage in May 2012 of a South Korean law that introduces a carbon trading scheme in 2015………………………………………..Full Article: Source

Posted on 20 December 2013 by VRS |  Email |Print

As Europe’s recession recedes, trading via brokers in the $74 billion carbon emissions market is plunging amid a record glut in the commodity Richard Sandor once predicted to reach the highest volume in the world.
Brokers’ share of the market slumped to an all-time low of 10 percent this year, from 30 percent in 2012, according to CME Group Inc. As middlemen from ICAP Plc (IAP) to GFI Group Inc. (GFIG) lost ground to regulated bourses, fees dropped to as low as 0.5 euro-cent (0.69 U.S. cent) a metric ton from 20 cents a decade ago, said Andy Ager, the head of carbon at Vertis Environmental Finance Plc in Budapest………………………………………..Full Article: Source

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