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Commodities Briefing 22.Jan 2014

Posted on 22 January 2014 by VRS |  Email |Print

Canada’s national anthem celebrates “the true north, strong and free”. And, if not exactly free, its currency is also a lot cheaper than it was. Yesterday, the Canadian dollar, the loonie, weakened to more than C$1.10 to the US dollar for the first time since 2010, after falling 17 per cent in less than three years.
The bet against the loonie looks crowded, but it is only one of a group of widely disliked investments that include the Australian dollar, emerging markets and mining shares. All are fuelled by commodities, and it has become received wisdom that the commodity supercycle – a decade in which prices soared – is over……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

While Western financial giants have been exiting the high-risk, high-reward commodities trading business, capital-rich Asian firms, including state-owned banks and brokerages from China, have seized the opportunity to enter the market.
Western banks including JPMorgan Chase, the world’s largest by assets, and France’s Natixis have been retreating from the commodities business but have found no shortage of Asian players willing to take their place at the table……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Improvements in global growth are not yet leading to a meaningful increase in demand for commodities, at a time when supply remains ample. As a result, we expect prices to remain capped for now, although the Chinese recovery should gradually support demand for industrial metals. We believe that increasing supply thanks to shale discoveries will weigh on oil prices in the long term, while gold prices still lack an upside catalyst.
Commodity prices have remained under pressure even as the global economy has recovered and the global growth outlook continues to improve. Indeed demand for commodities has not picked up meaningfully, in part because Chinese demand has not sharply rebounded……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

International Energy Agency (IEA) forecasts growth in oil consumption of 1.3m barrels a day, with demand met from production by the US and Opec countries. Global oil demand will increase more quickly this year as economic growth accelerates, outstripping supply even as shale oil production in the United States reaches record highs, the west’s energy watchdog said on Tuesday.
The International Energy Agency (IEA) said world oil consumption would increase by 1.3m barrels per day (bpd) this year, 50,000 bpd higher than previously forecast……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

US demand for oil grew by more than China’s last year for the first time since 1999, according to the International Energy Agency, giving the strongest indication of how abundant energy supplies are driving an economic resurgence in the US.
The IEA – the developed world’s energy body whose forecasts are the gold standard for the energy market – said US oil demand rose by 390,000 barrels a day last year, or 2 per cent, reversing years of steady decline. Chinese demand rose by 295,000 b/d, the weakest in at least six years……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

The price of oil rose Tuesday after China’s central bank injected credit into the financial system to offset concerns about slower economic growth, and experts raised their forecast for global crude demand.
U.S. crude for February delivery rose 18 cents at $94.55 in midday trading on the New York Mercantile Exchange. The February contract expires later Tuesday and most trading has moved to the March contract, which was up 21 cents at $94.80……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Iraq was the only member of the Organization of Petroleum Exporting Countries to post a decline in oil production last month, the IEA said Tuesday.
The International Energy Agency, which has headquarters in Paris, said Tuesday oil production from the 12 members of OPEC declined 535,000 barrels per day in December year-on-year. OPEC’s December production, however, was 310,000 bpd higher than the previous month. …………………………….Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Leo Drollas, the head of the Saudi-backed, London-based Centre for Global Energy Studies in a 3 December interview with New Europe on the eve of the 4 December OPEC meeting, itemized several supply-side reasons why present high oil prices are not forever.
Apart from the USA’s record-breaking output of oil driven by its shale-oil production, Drollas said: “Next year, Iraqi oil will increase by 300,000 barrels a day, we think at least, there will be 250,000 more from Venezuela, there will be possibly 1 more million barrels from Iran, when Iran comes back, and Libyan oil should return”……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Gold in 2014 will not push much lower from current levels around $1,250, although investors hoping last year’s 28 per cent battering will bring a bounce back face disappointment, consensus estimates in a Reuters poll show.
Gold last year hit its lowest since August 2010 at $1,180.71 an ounce. That blew away expectations of analysts polled this time last year, who had forecast a modest 6 per cent rise from 2012’s average……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Gold will average $1,219 an ounce this year and gain as much as 11 percent from now, after posting its biggest annual decline in three decades, a London Bullion Market Association survey of traders and analysts showed.
The metal will reach $1,379 and trade above $1,067 through December, the mean response of 28 participants shows. Prices slumped 28 percent last year, the most since 1981, and averaged $1,411, the least in three years……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

After enjoying a relentless bull run that lasted 12 consecutive years, gold finally broke in 2013. Having become a darling of the investing world for most of the prior decade, gold’s almost 30% losses hit especially hard, as the precious metal finally saw a correction.
The downward spiral was brought on largely by a massive year for equities, as the S&P 500 saw its best annual return since 1997, prompting many to flee metals markets to try their luck with white-hot equities. Now that gold is sitting around $1,250 per ounce, the wild and crazy predictions for its future are just around the corner……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Gold analysts are more bearish than at any time since 2002 and expect an average price of $1,219 a troy ounce this year, according to a survey of industry forecasts by the London Bullion Market Association (LBMA).
The modest forecast price – lower than the spot price of $1,240 on Tuesday afternoon – is a reflection of the dismal recent performance of the yellow metal. After 12 consecutive years of price rises, gold tumbled nearly 30 per cent in 2013 amid a sell off in gold-backed exchange traded funds……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

The five banks that set the benchmark price for gold are meeting Tuesday as they seek an external audit of the processes they use, according to a person with knowledge of the matter.
The five have formed a steering committee to review the so-called “London fixings” amid intense regulatory scrutiny over possible manipulation of precious-metals prices. As spot gold is traded over the counter 24 hours a day and there is no central source for data on prices, each morning and afternoon in London a group of five market participants meets to determine a snapshot of the price, commonly known as the London fix……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Analysts taking part in the annual London Bullion Market Association survey look for gold and silver prices to be “broadly flat” in 2014 but look for “modest” increases in platinum group metals, the organization said Tuesday.
Collectively, participants in the survey look for gold to average $1,219 an ounce in 2014, which would be 0.9% lower than the first week of the year, the LBMA said. Gold closed 2013 at $1,201.50 an ounce, which was 28% lower than the first week of 2013 and ended 12 consecutive years of price growth. The average forecast range for 2014 was listed at $1,067 to $1,379……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

It is crystal clear to anyone willing to go a few steps beyond the headlines that massive intervention and ignorance of risk act as massive governors to progress, real economic growth and natural capital formation. Nevertheless, what is less clear is how these failures will manifest in precious metals — especially the silver market.
The catalyst for much higher prices will be of a monetary, rather than an industrial, demand-led series of events……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Slower Chinese demand growth and improving supply will drive price movements for the industrial metals complex in 2014, according to Capital Economics. The prices of almost all industrial metals fell last year as investors lost confidence in commodities as an asset class and the link between metals and equity prices broke down, Capital Economics said in its Commodities Analyst report.
A temporary reprieve in 2H13 was spurred by a lift in Chinese demand, but this will not last as China is aiming to restructure its economic growth away from investment and production towards consumption and services……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Slower Chinese demand growth and improving supply will drive price movements for the industrial metals complex in 2014, according to Capital Economics. The prices of almost all industrial metals fell last year as investors lost confidence in commodities as an asset class and the link between metals and equity prices broke down, Capital Economics said in its Commodities Analyst report.
A temporary reprieve in 2H13 was spurred by a lift in Chinese demand, but this will not last as China is aiming to restructure its economic growth away from investment and production towards consumption and services……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Investors are punishing commodity-rich countries yet again. As popular developed market funds like iShares MSCI United Kingdom (EWU) prosper, iShares MSCI Canada (EWC) and its heavy energy allocation keep the exchange-traded tracker languishing near 52-week lows.
Similarly, iShares MSCI Frontier Markets 100 (FM) continues attracting buyers, whereas copper king Chile via iShares MSCI Chile (ECH) has seen its fortunes evaporate over the course of three years……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Are investors getting less bearish on gold? They just staged the first inflow to the gold ETF in a month. SPDR Gold Trust (GLD) logged 7.5 tons in new holdings on Friday, according to SPDR. The inflow was the biggest for a single day since October 2012, according to Commerzbank’s commodity strategists, who are encouraged:
If this turns out to signal a trend reversal, it is likely to lend buoyancy to the gold price. The high outflows from the gold ETFs observed since the beginning of last year were one major reason for the weak gold price……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

A record global grain harvest has done nothing to help Jailos Kamuloni feed his family in Malawi, where costs have skyrocketed for the corn flour used to make the thick nsima porridge that people eat at almost every meal.
In parts of southern Africa, drought damaged crops and cut food supplies for countries lacking the resources to import cheaper grain from outside the continent. While corn futures in Chicago have plummeted to the lowest in three years, the price in Malawi jumped 20 percent in the past month……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Will this be the dollar’s year? The currency has been advancing steadily, if unspectacularly, so far in 2014, rising for six straight trading days, according to Bloomberg. In recent years, major currencies have resembled a battle of the seven-stone weaklings, with traders having good reasons to hate them all; the dollar because of quantitative easing, the euro because of break-up fears and the yen and Swiss franc because of aggressive intervention.
But the negative arguments on the dollar are melting away. The Fed has moved to taper QE; the US economy and stockmarket look robust, attracting portfolio inflows, the trade deficit has shrunk; and Congress seems unlikely to opt for another government shutdown over the deficit……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

The U.S. dollar rose against the Canadian dollar on Tuesday as a lack of major economic data turned the focus to a potential further reduction in monetary stimulus at the next Federal Reserve meeting.
Investors also looked ahead to a monetary-policy decision from the Bank of Canada due Wednesday. The Fed is likely to reduce its monthly bond purchases, part of its efforts to stimulate the economy, to $65 billion at the end of its two-day meeting on Jan. 29……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Europe’s depressed carbon markets are to be given an automatic ‘market reserve’ facility allowing at least 100 million carbon allowances – or 12% of the market – to be withheld or released to buoy prices, according to a document set for release on 22 January.
The plan is set out in a one page legal amendment to the Emissions Trading System (ETS) directive that EurActiv has seen. This would allow an ‘auto-backload’ of carbon allowances to be triggered “if the total number of allowances in circulation is lower than 400 million,” the paper says……………………………..Full Article: Source

Posted on 22 January 2014 by VRS |  Email |Print

Thanks to the Clean Development Mechanism (CDM), green technology and its industrial use became everyone’s pet project over the past decade. “CER (certified emission reduction, an emission unit or carbon credit issued by the CDM) trade was seen as a brilliant idea in its inception phase, as it introduced financial incentives for non-polluters, in a bid to achieve a kind of economic equilibrium between participating nations and states,” says Namita Vikas, senior president and country head, Responsible Banking, Yes Bank.
However, with the international price of a carbon credit falling over the past two years —from €24 to a meagre 84 cents now — business interest in clean technology is waning. “Without credits, it is no longer attractive for businessmen to adopt clean technology,” says Assaad W. Razzouk, group CEO and co-founder, Sindicatum Sustainable Resources, a consultancy for clean energy solutions…………………………….Full Article: Source

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