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Commodities Briefing 17.Jan 2014

Posted on 17 January 2014 by VRS |  Email |Print

With the growing number of calls for a significant stock market pullback ahead, one area likely to start seeing investor inflows is commodities. The space has suffered a rough couple of years as the so-called Commodity Supercycle broke down.
Strong supplies of various crops, wobbly global economic growth and a meltdown in gold and other metals caused prices to sag and money to flow to equities. But the damage may have been done, setting the stage for a rebound. Experts see opportunities in metals outside gold as well as selected agricultural commodities………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Commodity prices have been falling while equity prices have been going up. Societe Generale strategist Albert Edwards, the market’s bear-in-chief, thinks this is a warning sign for equity investors, given the strong correlations between the two asset classes in recent years. But is it really?
At a recent presentation, Mr. Edwards highlighted a strong correlation between the performance of global equities and commodities as central banks responded to the financial crisis early phases. In theory, massive amounts of liquidity pumped into the global financial system by quantitative easing and other programs flowed straight into financial assets, boosting prices………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Commodities may be soft in USD terms, but for anyone living in South Africa or Turkey they are back to the record highs of the ominous summer of 2008. In contrast, in PLN and RUB they are as low as they have not been since 2010.
This divergence will have a significant impact on growth and inflation in 2014: weak pricing power means that higher commodity prices act as a tax on demand, slowing down growth and thus ultimately reigning in current account deficits and inflation. For now, markets focus primarily on the short-term inflation uplift, but we believe FX pass-through will prove self-deflating, and rebalancing will materialize………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The United States is suddenly awash in crude oil. From 2008 to 2013, domestic oil production rose by 2.5 million barrels per day — the biggest five-year increase in the country’s history. Last year, U.S. produced more oil than it imported for the first time since 1995.
So what does that mean for the rest of the world? Or for U.S. foreign policy? Well, for starters, it probably doesn’t mean that Americans can now safely ignore the Middle East. The U.S. economy is still heavily reliant on oil, and prices are still largely swayed by what goes on in the global markets………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The Energy Information Administration (EIA) is telling us that not only did the oil production renaissance decrease our reliance on imported oil, but it also was successful in stabilizing world oil prices and making energy cheaper for Americans.
Oil prices in 2013 were around the same average annual levels of the previous 2 years. Further new pipeline and rail infrastructure helped to alleviate crude oil bottlenecks in the United States, pushing West Texas Intermediate oil prices in 2013 to almost their 2008 level and keeping Brent oil prices in toe as the EIA’s graph below indicates………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The price that some of the world’s biggest oil producers charge for their oil fell last year for the first time since 2010, the Organization of the Petroleum Exporting Countries said Thursday.
Surging production in the U.S. as a result of the country’s shale-oil bonanza combined with sluggish growth in global demand to help ease oil prices last year. The decline came despite political upheaval in several Middle Eastern and North African countries that threatened the stability ofsupplies………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will cut crude shipments to the lowest level since late November as demand from Asia remains weak, according to Oil Movements.
OPEC, supplier of about 40 percent of the world’s oil, will reduce sailings by 660,000 barrels a day, or 2.7 percent, to 23.49 million barrels in the four weeks to Feb. 1, the researcher said today in a report. That compares with 24.15 million in the period to Jan. 4. The figures exclude two of OPEC’s 12 members, Angola and Ecuador………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

What is the correct way to model the future course of energy and the economy? There are clearly huge amounts of oil, coal, and natural gas in the ground. With different approaches, researchers can obtain vastly different indications. I will show that the real issue is most researchers are modeling the wrong limit.
Most researchers assume that the limit that they should be concerned with is the amount of oil, coal, and natural gas in the ground. This is the wrong limit. While in theory we will eventually hit this limit, because of the way fossil fuels are integrated into the rest of the economy, we hit financial limits much earlier………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Goldman Sachs Head of Commodities Research, Jeffrey Currie, was nothing but consistent in his 2014 gold price forecast and is sticking to his $1050 target for gold by end 2014 – a figure he first came up with in the first half of last year. Thus he feels that gold’s relatively strong start to the current year is likely to be shortlived and, as in 2013, gold will likely shed value throughout 2014.
Now, the principal problem for gold bulls with Currie’s forecasts is that they can tend to be self-fulfilling prophecies given the God-like status of Goldman Sachs in financial markets. Currie famously told clients to sell gold short in April last year – just two days before many big gold investors seem to have followed this advice and the gold price plunged………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Gold prices could benefit as equities struggle in the second half of 2014 in anticipation that the global economic expansion is nearing its peak and is approaching the end of its latest growth cycle, said one UK economist.
Simon Ward, chief economist at Henderson Global Investors, said he is seeing some evidence that market liquidity is starting to tighten, capacity constraints are emerging and there is a growing potential for higher inflation, all three factors are leading indications of slower growth………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Silver Investing News (SIN) reported last month in its 2014 silver outlook that most analysts see the white metal selling for about $21 per ounce this year. Since that time, not much has changed — in fact, both Moody’s Investors Service and Sharps Pixley have come forward with similar predictions.
However, some silver market watchers have higher hopes for the metal and believe that 2014 could bring increased silver market strength, as well as more impressive prices. Here’s a look at four of the factors they believe could make that happen………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Central bank gold demand may slip in 2014 from recent years, says expert analyst George Milling Stanley, but the “turnaround” from the previous 20 years of selling remains remarkable.
With four decades’ experience of the bullion market, plus genuine “insider” contacts across the central banking world, George Milling-Stanley was head of government affairs at the World Gold Council, the mining-owned market development organization, for 15 years………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Gold ended a 12-year bull run in 2013 after posting the largest annual decline for the metal since 1981. After such a bearish year, traders and investors are beginning to position themselves for what can be an uncertain year for gold futures in 2014. Uncertainty surround the tapering of the Fed’s quantitative easing program could still weigh on gold prices.
With gold futures currently trading around $1,241 analysts at major banks are expecting a sideways to down year for gold. UBS, HSBC, Barclays, Bank of America and Deutsche have all come out with their 2014 forecasts for gold prices, and it seems that they are expecting a lackluster year for gold. The average of the banks forecast says that gold should trade on average round $1,200 an ounce this year………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Commodities will fare better in 2014 than last year because of better demand prospects and a slower pace of supply growth, but investors in gold and silver should remain cautious and sell into rallies, says a new report from Barclays Capital Inc.
“We argue that commodity markets have not really been key beneficiaries of the Fed’s QE policy; thus, tapering in 2014 is unlikely to imply any meaningful pullback in commodity prices,” said analyst Sudakshina Unnikrishnan………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Modern life is dependent on industrial metals. If you are interested in making an investment that gives you exposure to public companies that provide base metals for a host of uses, consider the PowerShares DB Base Metals Fund (DBB).
DBB is an exchange-traded fund (ETF) that offers a way to tap into the prospects of several key metals. For example, aluminum is important for everything from transport to beverage containers, since it is light, rust-resistant and highly conductive………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

If you’re looking for an asset that’s as flexible as a stock with the diversity of an index mutual fund, the best investment option for you might be an exchange-traded fund. A Relative Newcomer to the Market.
The first ETFs were created in 1993, but they didn’t become popular until the early 2000s. ETFs track stock indexes, specific commodities, or other baskets of assets. So when you buy a share of an ETF, you’re investing in a (usually) diversified portfolio that tracks a particular commodity, industry or market, without dealing with the high costs and strict laws that are involved with buying all the individual assets separately………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Should you buy when there is blood in the streets? While the prospect of buying low may sound great, a beaten-up asset can always get battered some more. There’s no certainty when it comes to recognizing precisely when the bludgeoning will stop or when the knife will hit the floor.
There are times, however, when enough evidence comes to the forefront to make a rational re-entry. For example, few asset classes received as much “hate mail” as emerging market debt in the May-June tapering swoon of 2013………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

JPMorgan Chase & Co. (JPM) is leading a rebound in bank lending to mining and energy companies, which are taking out the most loans since 2011 to refinance debt as commodity prices slump and acquisitions slow.
Raw-material industries boosted borrowing by 17 percent last year to $684.7 billion, after a 22 percent drop in 2012, data compiled by Bloomberg show. The top lenders were U.S. banks JPMorgan at $57.1 billion, Wells Fargo & Co. (WFC) at $47.1 billion and Bank of America Corp. (BAC) at $37.8 billion. The figures reflect transactions involving more than one bank and include credit lines, project or term loans and trade finance………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Goldman Sachs Group Inc (GS.N) reaffirmed its intent to remain in the commodities trading business, deeming it “too important” to clients to exit, a top executive said on Thursday.
The bank’s restated determination to retain its vaunted J. Aron trading business, even as some rivals shed physical trading operations, comes one day after lawmakers at a U.S. Senate hearing pressed the Federal Reserve to quicken efforts to crack down on what they see as risky business………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Bank of England officials discussed trading practices around key foreign-exchange benchmarks with senior currency dealers 18 months before regulators opened formal investigations into alleged rate-rigging.
Records of a meeting in April 2012 released yesterday by the central bank show dealers discussed the rules they were subject to when trading close to the times when key market benchmarks, such as the WM/Reuters rates, are set………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The Czech central bank intends to keep the country’s currency weaker at just above 27 korunas to the euro through the end of the year, but after that the bank won’t prevent it from strengthening, the bank’s governor said late Thursday.
“As soon as that [exchange-rate] target is removed, it won’t bother us if the [koruna's] exchange range firms,” Miroslav Singer said at a conference. There have been questions about the central bank’s exit strategy from the exchange-rate target, of close to 27 korunas to the euro, set on Nov. 7………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

Japan has signed a carbon offset deal with Palau to allow Japanese companies to earn carbon credits by helping the small Pacific island nation cut its greenhouse gas emissions, Reuters reports.
Per the agreement, both nations will select representatives to operate the so-called Joint Crediting Mechanism. Japan already has nine such bilateral offset agreements — with Mongolia, Bangladesh, Ethiopia, Indonesia, Kenya, the Maldives, Vietnam, Laos and Costa Rica — and wants the UN to count credits earned under these agreements towards its emissions reduction goals………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The European Parliament’s environment panel gave its members until Jan. 24 to signal opposition to a measure that would alleviate oversupply of carbon permits, said two people with knowledge of the matter.
The procedure may speed up the scrutiny that the emergency carbon-fix regulation must undergo in the Parliament before it’s implemented, according to the people, who asked not to be identified, citing policy. Members of the panel can raise an objection to the measure, already approved by representatives of national governments, by noon next Friday………………………………………..Full Article: Source

Posted on 17 January 2014 by VRS |  Email |Print

The European Union’s climate and energy strategy for 2030 will not include a specific target on curbing emissions from transport, the fastest growing source of greenhouse gases in the bloc and the most expensive to cut.
Many in industry and some member states have pushed hard for a simplified EU climate framework after 2020, when current policies expire, that ditches existing sub-targets for sectors such as transport and energy………………………………………..Full Article: Source

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