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Commodities Briefing 25.Feb 2014

Posted on 25 February 2014 by VRS |  Email |Print

Commodities are off to a wild start this year with extreme weather around the world playing a big part. Natural gas is leading the pack, up 30% off its January lows on a long stretch of extremely cold temperatures across the Midwest and East Coast.
Drought conditions in Brazil and California have sent coffee, sugar and cattle prices racing higher. Coffee is up 62%, its highest level since October 2012. Over the past three weeks, sugar is up 13%. Cattle is trading at record highs, up 7.5% over the past three and a half months………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The average cost of gasoline nationwide rose 12 cents to $3.41 during the past two weeks, according to a survey released Sunday. The increase was partially due to changes in crude oil dude to violence in petroleum-producing nations Venezuela and South Sudan, according to industry analyst Trilby Lundberg, reports the Associated Press.
The current price is still 38 cents per gallon lower than last year, but Lundberg said she expects further increases. The average price for a gallon of premium gas was $3.60, while premium gas was $3.75 and diesel averaged $4.01 per gallon. ……………………………………….Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

After gold’s strong price move at the start of the year, Pierre Lassonde, chairman of Franco-Nevada Corp. (FNV), looks for the yellow metal consolidate maybe $50 on each side of $1,350 an ounce in the coming months.
Lassonde was the keynote speaker at Gold Stock Analyst Investor Day over the weekend in Fort Lauderdale, Fla., put on by widely followed gold stock analyst John Doody………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Most people buy gold as a reaction to the uncertainty around them. Gold in a synonym for wealth and money even though in the modern world it is neither. In an economy where a recently founded vendor of chat software WhatsApp can be worth to Facebook around 14% of the annual gold production, gold for practical purposes has long lost its central place in the global economy.
Money, of which gold was the first iteration, is increasingly becoming more abstract and there is just not enough of it around to fund the liquidity needs of global money………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Gold investors relived by the yellow metal’s strong performance in February, have good reason to take the 7% rise this month as a good portend - historically, February is not a good month for gold. According to UBS, which looked at historical data from the mid-1970s to today, February is usually a weak month for gold returns, “although percentage declines are generally modest on average.”
Indeed, the bank notes, this is not the only seasonal trend that’s at odds with historical norms. “On the physical side, Chinese demand remained strong in February even after the New Year holidays, defying its typical seasonal post-holiday lull.”……………………………………….Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The gold price is being supported by fresh concerns over the strength of the rebound in the US economy, the world’s largest, and by continuing turmoil in emerging markets. “It remains to be seen if recent weakness in US economic data is really due to the weather or if it’s something investors should be more concerned with,” writes Everbright Futures macroeconomic strategist Sun Yonggang.
“Gold is getting some flows from risks in emerging markets but is looking increasingly overbought,” Yonggang notes, adding that increased gold prices “also turn off physical buyers, the most sensitive part of demand”………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Want to know where gold prices are headed? It might make sense to track the stocks of gold mining companies. In the recent past, these have served as good indicators, says CLSA’s Chief Equity Strategist Christopher Wood.
“The action in gold mining stocks is serving as a useful lead indicator for the price of bullion, with Newcrest Mining, for example, up 30 per cent year-to-date. Gold mining stocks were certainly a lead indicator for the decline in gold prices last year,” Wood said in his periodic ‘Greed and Fear’ report, released earlier this month………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Based on recent headlines, non-financially-aware observer could be forgiven for thinking mining gold is a sure way to lose money, not to make it. Take the following batch from Mineweb over the past couple of weeks: Barrick cuts reserves 26%; reports $10.34 billion loss.
Goldcorp reports $2.71 billion loss; cuts reserves 15%. Newmont Mining reports $2.5 billion loss for 2013. Kinross Gold reports $3B loss: 33% cut in GEO reserves - to name the most recent. Overall, the world’s top 5 gold miners between them made book losses of some $20.8 billion in 2013. The smaller members of the Top 10 gold mining club who have reported to date all also made book losses, but not quite on the same scale, commensurate with their smaller outputs………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

What are we looking for? How equity funds that invest in gold, silver and other rare metals have performed in the past year. The screen: We looked at the best-performing precious metals equity funds for the year ended Jan 31. U.S. dollar, segregated and duplicate versions of the funds were excluded, as were those with minimum investments of more than $25,000.
What did we find? It was a losing year for precious metals funds, but there could be a glint in gold assets in the coming year. “We’re now at a stage where we see some glimpse of stabilization, but we’re nowhere near the recovery levels expected after the liquidity crisis in 2008. So quite a bit uncertainty here,” said Ani Markova, lead portfolio manager of AGF’s precious metals fund………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The long anticpated supply tightening in zinc is emerging as recent zinc mine corporate data suggests, according to Barclays Plc. Barclays which tracks close to 20% of global supplies reported that major zinc producers have reported 4% lower production on a year on year basis with ouput contracting at half the mines.
“During 2013, zinc performed fairly better than its peers from the base metals complex, fetching a marginal negative return of 0.57%. In the year 2011, zinc prices plummeted by 24%, the most among other base metals on the back of supply surplus and high legacy inventory,” according to Nirmal Bang Commodity Year Book 2014………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

I’d characterize the copper market as being infected with “short-termism.” Mine supply grew quite spectacularly in 2013: between 6% and 7%. How sustainable is that growth? In a couple of years, we could easily have the same problem we had a decade ago, when mine supply lagged behind demand.
One-third of global copper supply comes from Chile. This country is increasingly constrained by power and water supplies; labor rates are rising as well. Chile’s state-owned copper enterprise, the Corporación Nacional del Cobre de Chile (CODELCO), produces about one-tenth of global copper, and it requires something on the order of $20–27 billion ($20–27B) in reinvestment over the next five or six years in order to maintain both current production and grow its production base. That will be quite difficult………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Steel prices in China have been close to all time lows, iron ore looks shaky as well, as demand falters amid worrying manufacturing data, and yet Chinese imports of the two most important commodities in the world are at record levels.
Saxo Bank’s Head of Commodity Strategy Ole Hansen has been analysing the situation. He’s spotted evidence that commodities are being used to finance loans, warping the markets, making it even more tricky to assess the true state of China’s economy………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Three straight years of negative returns for broad commodity benchmark indices, such as the Dow Jones-UBS Commodity Total Return Index, have led some investment advisers (and their clients) to begin questioning the rationale for including commodity futures ETFs in their asset allocation models.
Relatively tame inflation expectations seem to support these doubts, as commodities are often thought of as a hedge against inflation. However, the fact that inflation expectations are so low may actually highlight one of the most important reasons for maintaining (or adding) a strategic allocation to commodity futures ETFs: in order to hedge against unexpected inflation………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The rally in the gold price gathered steam on Monday, after data out late on Friday showed hedge funds increasing their bullish bets by over 30%. On the Comex division of the New York Mercantile Exchange, gold futures for April delivery hit $1,339.20, up more than $15.00 from Friday’s close and the highest since October 31.
Gold is up 11.7% in 2014 and after a dismal 2013 when the metal had the worst price performance in 32 years, the gains year to date have seen large bullion investors playing catch-up………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Thanks to rebounding prices in the commodities pits, gold and silver exchange traded funds are once again being favored by investors. ETF Securities, the ETF provider known primarily for its lineup of commodities funds, said its long gold ETPs last week saw $38 million of inflows, bringing inflows over the past two weeks to $46 million. The firm’s U.S.-listed gold ETFs include the ETFS Physical Swiss Gold Shares and the ETFS Physical Asian Gold Shares.
Last week, UBS boosted its forecast for gold in 2014 to a one-month forecast of $1,280 an ounce from $1,180 and the three-month outlook to $1,350 from $1,100. UBS analysts Edel Tully and Joni Teves upwardly revised their gold projection to an average $1,300 in 2014 from the previous estimate of $1,200, with a 2015 target of $1,200……………………………………….Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The U.S. ETF industry could grow to $15.5 trillion in assets within 10 years, eclipsing the mutual-fund industry, according to one new forecast. Is such a prediction too rosy? Why should you even care?
Experts on ETFs have a variety of views on those questions, with some basically saying “no way” to that growth forecast………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Natural-resource-based industries are very capital intensive, and hence extremely cyclical. It is not unreasonable to say that as a natural-resource investor, you are either contrarian or you will be a victim. These markets are risky and volatile!
Let’s talk about cyclicality first. Some of the cyclicality of these industries is a function of their being extraordinarily capital intensive. This lengthens the companies’ response times to market cycles. Strengthening copper prices, for example, do not immediately result in increased copper production in many market cycles, because the production cycle requires new deposits to be discovered, financed, and constructed—a process that can consume a decade………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

China’s secretive currency managers certainly know how to conjure up a storm. The usually predictable Chinese yuan took a dive over the past week, its first sustained weakness against the dollar since 2012. The People’s Bank of China has guided the yuan 0.5% weaker by moving its daily target rate lower. That is despite pressure from traders, who work within the currency’s narrow trading band, to let it strengthen.
It is a fast and big move for the tightly controlled currency. The freely traded Hong Kong flavor of the yuan, which is a leveraged reflection of its onshore cousin, has fallen a more dramatic 1.3%………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

Scotland’s First Minister Alex Salmond accuses George Osborne of “bluffing” and “bullying”, after the Chancellor ruled out the UK entering a currency union with an independent Scotland. Alex Salmond appears to have revealed his Plan B for an independent Scotland’s currency after saying that the country will keep the pound even if the UK won’t enter a currency union.
Mr Salmond addressed a gathering in Portlethen, Aberdeenshire and said that the currency debate was “not a question of keeping the pound” but about the circumstances in which it would be retained………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The UN’s carbon trading mechanism needs an “imaginative, even bold response” following a drop in the number of new project submissions last year and a fall in demand for carbon offset credits.
To date more than 7,400 emission reductions projects in 94 countries have been registered for the Clean Development Mechanism (CDM) and more than 1.4 billion Certified Emission Reduction (CER) carbon offset credits have been issued under the UN-backed scheme……………………………………….Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

California, the second-most polluting state in the U.S., sold 19.5 million carbon allowances at auction for $11.48 each, in line with analysts’ expectations.
Units of BP Plc (BP/), Chevron Corp. and Calpine Corp. were among the companies that qualified to buy permits in the Feb. 19 auction, a report posted on the state Air Resources Board’s website today showed. The agency doesn’t disclose the names of winning bidders. The state received 1.27 offers for every permit put up for sale………………………………………..Full Article: Source

Posted on 25 February 2014 by VRS |  Email |Print

The Emissions Trading Scheme which is supposed to do the ‘heavy lifting’ in our climate policy “could not lift one dry Weet-Bix out of its box”. This is the view of University of Canterbury forestry expert Professor Euan Mason who sees New Zealand’s initial attempt to mitigate the problem of climate change as being “on its last legs”.
At least a million pine and fir tree seedlings, which had been grown in response to the ETS scheme, were recently destroyed with herbicide or mulched and ploughed into the soil because they were unsold in the 2013 planting season………………………………………..Full Article: Source

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