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Commodities Briefing 07.Jan 2014

Posted on 07 January 2014 by VRS |  Email |Print

In the current scenario, the growing economic uncertainty and developments call for a tool or mechanism that can be used by investors to reduce and minimise the risk exposure. Hedging is one such financial instrument that can help you do this. By taking a position in the futures market, which is equal and opposite to the one in the physical market, an investor can trade with the objective of reducing risks associated with changes in price levels.
If an investor has physical material or stock of a particular commodity, he can hedge his exposure to the physical market by taking a reverse and opposite position in the futures market. If a jeweller has an underlying stock, he can sell gold on the exchange platform to safeguard his position against a fall in prices. Hence, hedging can help protect businesses from the adverse effects of temporary price volatility in the commodity markets………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

2013 proved to be a revealing lesson in risk and reward, where high rates of return were not always necessarily accompanied by proportionately high levels of risk, and negative or low returns were not necessarily volatile.
The risk-return chart of 21 securities (15 equity indices, 2 bond indices and 4 commodities) shows the percentage price change over the 12-month period ending on January 3rd (proxy for 2013 performance) on the x-axis, and the 90-day volatility, ending on the same day on the y-axis. Here are the findings:……………………………………….Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

OPEC’s oil output fell in December to the lowest since May 2011, a Reuters survey found, due to strikes and protests in Libya, stagnation in Iraqi exports and a further reduction in Saudi Arabian supply.
Output from the Organization of the Petroleum Exporting Countries averaged 29.53 million barrels per day (bpd), down from 29.64 million bpd in November, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

The New Year has started with some decidedly bearish action in the oil market. The price of Brent crude oil, the benchmark for much of the world’s non-U.S. oil trade, has fallen by $5 since the Saudi oil minister, Ali al-Naimi, made his final pronouncement of 2013. “Please don’t talk about cuts,” Mr. Naimi said when asked if OPEC may consider a cut next year. “There are no cuts.”
“People are expecting a shortage in supply, not oversupply,” he said. The new year’s first price movements suggest otherwise, at least in the near term. The daily drip of news from Libya, where oil fields are starting, stopping and starting again like a 30-year-old car, is like catnip to futures investors………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Russia remained the largest global oil producer in 2013, increasing production 1.4% from 2012 to reach a post-Soviet Union high of 10.51 million barrels per day, Reuters reported. December oil production in Russia also hit a post-Soviet high with an average of 10.63 million bpd. Russia continues to prioritize oil output and it shows in its budget revenues with oil and gas representing more than half under President Vladimir Putin.
“Enough investment is being made to slow declines in West Siberia and increase production in East Siberia in order to make for small net production increases,” analysts from the International Energy Agency (IEA) told Reuters………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Bank of America Merrill Lynch says its preliminary spending projections for 2014 place Saudi Arabia’s fiscal breakeven oil price at $85 a barrel. “This is $5 higher than the floor we had previously anticipated policy-makers would be looking to defend,” the bank said in a report.
“We see two main takeaways from Saudi Arabia’s 2014 budget. Firstly, the fiscal breakeven oil price has crawled higher and remains sticky at $85 per barrel due to Arab Spring spending. Secondly, a shift to more realistic budgeting practices suggests awareness of the need to manage expenditures carefully. We accordingly maintain our 2014 GDP growth projection at 3.6 percent,” said the bank………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

A wave of violence has swept parts of Iraq at the start of 2014 as the central government fights back against Al-Qaeda aligned militants in Anbar Province. The Islamic State of Iraq and the Levant (ISIL) reportedly took control of Ramadi and Fallujah, bombing police headquarters and killing dozens.
On New Year’s Day Prime Minister Nouri al-Maliki sent in reinforcements to take back control of Anbar Province’s two largest cities. The clashes kick off 2014 in much the same way as 2013 ended – a return to violence in a country that had seen important security gains in recent years………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Prices of energy commodities decreased only modestly or increased last year, while prices of non-energy commodities like wheat and copper generally fell significantly, according to the U.S. Energy Information Administration (EIA).
Natural gas, western coal, electricity and West Texas Intermediate (WTI) crude prices increased, while North Sea Brent crude oil, petroleum products and eastern coal prices decreased slightly………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Gold is a nearly perfect form of money. It is one of the few things on planet earth that contains all of the following attributes; beauty, scarcity, virtual indestructability, and is also transferable and divisible. However, even after five thousand years of utility as a store of wealth, gold is still completely misunderstood by most on Wall Street.
This is why most money managers wrongfully predict another disastrous year for the yellow metal. These advisors have never realized the simple truth that the value of gold never changes; only its expression in dilutable currencies changes………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Predictions for the gold price in 2014 by investment and bullion banks don’t vary much in that the majority predict a decline this year. There are bulls – none of them anywhere near raging – like Germany’s Commerzbank and Scotia Mocatta which predict a return to $1,400 an ounce.
Barclays is somewhere in the middle with a move to $1,350 in the first half but for gold to be back to around $1,270 by end-2014. Merrill Lynch sees the opposite price movement with $1,350 hit at the end of the year………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Last week gold had its biggest weekly gain in over 10 weeks, a great start to 2014. Gold was lifted by strong Chinese buying, coin demand and record low speculative positions.
It looks as though the gold market may almost be resetting itself as significant fundamentals are returning to levels seen pre-crisis, suggesting major speculators are moving out of the paper gold market. If this is the case, then physical gold may begin to impact its own price, rather than the paper gold market dominating………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

If you were dealing in several stocks until now and want to bring some diversity in your investment, gold investment might be a good option for you. Investing in varied fields has various benefits one of which is staying safe at time of market fall or imbalance.
Gold market is always considered as a better option when the rest of the stocks are not doing well. The reason for this is that gold has an inverse relation from all other stocks. There are various ways how you can make an investment in gold. Here are some ways how you can make an investment in gold………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

As we kick off the New Year, commodity investors are hoping that 2014 brings more favorable returns than its predecessor. Last year was largely marked by dwindling commodity returns with a number of hard assets wreaking havoc on investors and traders across the board. Gearing up for 2014, let’s take a look at some of the biggest commodities currently contangoed to help you get prepared for the new year.
Contango is the process whereby near-month futures are cheaper than those expiring further into the future, creating an upward sloping curve for future prices over time. This is often caused by storage costs associated with each individual commodity, but it can also be partly attributed to market expectations of which way that particular asset will move in the future………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Copper is one of the world’s staple industrial metals. While scared investors sent gold into a free fall in 2013, copper performed better thanks to stable consumption. 2014 is shaping up to be a different story.
The International Copper Study Group expects that refined copper production will exceed refined usage by 632,000 tonnes in 2014, an increase from 387,000 tonnes in 2013………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Prevailing sentiment throughout the stainless steel supply chain is one of “cautious optimism” that 2014 will be a little better than 2013, in terms of both business volumes and profitability. Market participants have been, for some time, expressing the view that activity and prices have been bumping along a prolonged bottom in the business cycle and that that situation is close to its end.
A number of major western industrial nations have begun to record encouraging economic indicators, such as positive GDP growth, increasing manufacturing output and falling unemployment. The Japanese government’s economic stimulus measures, or “Abenomics”, have, at least in the short term, boosted industrial activity in a market that has been in the doldrums for two decades………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

The sweet spot for seasonal strength in silver has just started. How does the seasonal trade line up this year? Equityclock.com notes that the strongest time of year for the price of silver has been from Dec. 23 to Feb. 28. Over the past 20 years, the metal has gained an average of 9.05 per cent with positive results recorded in 14 of the past 20 periods.
Gains are prominent during the first two months of the year when equity market volatility is heightened, resulting in outperformance versus the S&P 500 averaging 8.65 per cent. The metal posted gains stronger than equity market returns in 16 of the past 20 periods………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Gold, silver, oil and natural gas are some of the most heavily traded commodity ETFs. Three of these commodities are at major inflection points which could determine if the downtrend continues, or the ETF forms a base strong enough to push the commodity higher.
Another ETF has already reversed course, and likely has further to rally, but major resistance isn’t far off. Certain price levels and overall price action provide early indicators as to where these ETFs are likely to go next………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

In the first two articles of this three-part series on 2014 ETF income investing, I touched on my thoughts for fixed-income and dividend-paying equities in the New Year. I generally divide my strategic income portfolio into three sleeves that include bonds, dividend-paying equities and alternative investments.
This piece will focus on how to incorporate alternative strategies such as preferred stocks, master limited partnerships and REITs into your income game plan………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

We promised at the end of our previous post that we would qualify the economic case for the introduction of “free money” with some direct references to Willem Buiter, Citi chief economist and former BoE MPC member.
So here follow some of his observations on all things “money” during a liquidity trap, as plucked from his papers on seigniorage, the nature of irredeemable fiat money, numerairology and the use of virtual currencies to break through the ZLB from the last decade or so………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

IntercontinentalExchange is looking to sell at least a quarter of Euronext, the European stock exchange group, ahead of an initial public offering that is expected this year, according to people familiar with the situation.
A sale would allow the US derivatives exchange group a way to circumvent regulatory requirements that it hold a long-term stake in Euronext, which operates the main stock exchanges in Paris, Amsterdam, Lisbon and Madrid………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

China has so far launched a total of five pilot carbon emission trading markets in major Chinese cities as part of an intensifying effort to rein in the impact of its fast economic growth on the environment.
The latest, or the fifth emissions trading market was established in the northern Chinese city of Tianjin on Dec. 26. Five trade deals for a total of 45,000 tons of carbon emissions worth 1.25 million yuan were announced at the market’s launch ceremony………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

As the European Commission is working to revive the EU’s ailing Emissions Trading System (ETS), big energy companies say that making the system more flexible should be the first priority. EurActiv Czech Republic reports.
An initiative of twelve European utility companies calls for a resuscitation of the emission trading system. The EU ETS does deliver on its goal to reduce CO2 emissions. However, reductions are mainly due to the economic crisis and not because of a structural shift towards low carbon technologies, the companies say………………………………………..Full Article: Source

Posted on 07 January 2014 by VRS |  Email |Print

Worried the carbon price is hurting industry and costing jobs? There’s a neat solution no one’s talking about – and it doesn’t involve axing the tax. Australia could levy a carbon tariff so domestic goods don’t suffer for being produced under a carbon price. The tariff could be levied on imports at the border, or rebated on exported goods.
That would mean if you paid for the pollution generated by a tonne of Australian steel, the same tax would be levied on a tonne of Chinese steel as it entered the country. It’s a level playing field and an incentive to others to price pollution………………………………………..Full Article: Source

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