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Commodities Briefing 03.Mar 2014

Posted on 03 March 2014 by VRS |  Email |Print

China’s coming for your water. Your food. Your oil. Your iron ore. The country has a “voracious appetite.” At least that’s the drumbeat you’ve been hearing in headlines over the last several years. With nearly 1.4 billion people and a surging economy, it’s easy to see why China’s resource demand has shaken world markets and generated outsized fears.
After all, oil prices spiked to an all-time high in 2008. Food prices hit a record high in 2011. True, China has launched an impressive series of projects to secure mines, farmland, and water resources, from Brazil to Zimbabwe to Papua New Guinea………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

At the time of this writing, tensions in Ukraine are escalating, with the US asking Russia to withdraw armed forces from Crimea and Europe on red alert. While Ukraine never had a simple political/geopolitical/economic situation for many centuries (Kiev is considered to be the first capital of Russia since the middle ages), the latest escalation took place in November 2013, when the now dismissed President, Mr. Janoukouvitch, decided to stop (economic) discussions with Europe.
It chose to rely on Russia for help (financial help in addition to lower gas prices). The current Ukrainian crisis is between Russia and Europe, and it could have profound consequences………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

February was a strong month for commodities, with the broad-based DJ-UBS Commodity index returning more than 5 per cent. This was more than the S&P 500 Index, which reached even a new record high thereby moving in the opposite direction of bond yields and the macro data. Some of the major themes and factors behind this performance were:
Adverse weather in Brazil and the US supporting multiple commodities from coffee and sugar to soybeans and WTI Crude. Concerns that growth in the world’s two biggest commodity consuming nations, US and China, are losing momentum………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Hedge funds increased their bullish bets on West Texas Intermediate oil to a record as rising flows of domestic crude to Gulf Coast refineries cut demand for more costly foreign grades.
Money managers bolstered net-long positions, or wagers on rising prices, on the U.S. benchmark by 2.2 percent in the week ended Feb. 25, Commodity Futures Trading Commission data show. The positions climbed to the highest level in CFTC data going back to 2006………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

It has been over a year since the near-collision of Israel and Iran, then in the midst of enhancing its nuclear stockpiles, drove oil prices up. As Ukraine’s Crimea region is invaded by Russian troops, the chances that oil prices will rise, and rise sharply, due to a regional conflict are back again.
It takes very little in terms of global political conflicts, weather, or tightened supply to press the price of crude higher. One big hurricane in the Gulf of Mexico, racing toward Texas refineries can trigger it. So can any hint that OPEC might throttle supply. Tensions in the Middle East seem to affect oil prices almost annually, if not more often………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Oil production from OPEC dropped to its lowest level in 2 ½ years according to a Bloomberg survey. Production dropped by 11,000 barrels per day from January to February, down to an average of 29.877 million barrels per day. OPEC’s production hasn’t been that low since June 2011.
Much of the lost production was due to a decrease in production in Saudi Arabia, as well as the ongoing political conflict in Libya and Nigeria that has forced capacity offline. Libya’s oil production dropped by 120,000 bpd in February, marking its ninth out of eleven months in which oil production dropped. Its daily output now stands at 350,000 barrels – the country has the ability to produce around 1.5 million bpd, as it did before its civil war………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Hedge funds raised bullish gold wagers to the highest in more than 14 months amid mounting concern that the U.S. economic recovery is weakening.
The net-long position climbed 25 percent to 113,911 futures and options in the week ended Feb. 25, the highest since December 2012, U.S. Commodity Futures Trading Commission data show. Net-bullish holdings across 18 U.S.-traded commodities advanced 16 percent to 1.45 million contracts, the most since April 2011. Coffee wagers reached a 33-month high………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Gold headed for the first back-to-back monthly gain since August as concern that the U.S. recovery may be losing momentum and turmoil in emerging markets boosted haven demand. Assets in bullion-backed exchange-traded products were set for the first monthly increase in 14 months.
Bullion for immediate delivery was at $1,332.61 an ounce at 9:26 a.m. in Singapore from $1,331.33 yesterday. Prices are up 7 percent this month and reached a 17-week high of $1,345.46 on Feb. 26. Holdings in ETPs are up 0.3 percent in February after declining last year for the first time since the first product was introduced in 2003, data compiled by Bloomberg show………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

According to a new academic paper, the London gold fix, which is used as the benchmark to value the metal by jewelers, miners, traders and central banks, may have been manipulated for about a decade by a group of bankers.
The study reveals “unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior….. the moves weren’t replicated during the morning call and hadn’t happened before 2004…”……………………………………….Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

The London gold fix, the benchmark used by miners, jewellers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.
Unusual trading patterns around 3pm in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behaviour and should be investigated, NY University’s Stern School of Business professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Gold mining companies still have a long way to go to recover from the significant falls of 2013. Newcrest Mining Limited shares for example are still down 50% on 12 months ago, while shares in Kingsgate Consolidated Limited and Silver Lake Resources Limited are down 65% and 72% respectively.
However before jumping in and buying shares in gold miners, here are three things every gold investor should know:……………………………………….Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

The dividing line between silver performing as a monetary asset versus an industrial commodity is tethered to a broken price discovery system, where unlimited position limits are held by the most influential of traders.
This fault line, at the heart of price manipulation, paints a dangerous and false perception that permeates the trading landscape - as well as the mainstream perception of money………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Simpler is often better for individual investors, so the new and fast-growing hedged exchange-traded fund raises a question: Is packaging institutional-style trades into ETFs and offering them at low cost to the masses democratic or dangerous?
These products let investors bet on an asset — Japanese stocks, for example — while getting rid of a risk in the trade that they don’t want, like exposure to the yen. After starting in equities, hedged ETFs have infiltrated every asset class and grown 1,000 percent to $15 billion since the start of 2013. And to answer the question, making these trades available to retail investors is democratic. And dangerous………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

If asked whether exchange traded funds are traded on exchange, you’d probably say something like “Yes, obviously. It’s in the name.” Well here’s a crazy thing: it turns out the majority of ETF trading in Europe is actually done off exchange.
It is estimated around two thirds of the market is done in private ‘over the counter,’ where typically an institution phones up a market maker to get a good price for buying a huge amount of ETF shares. This might not sound relevant for most of us smaller retail folk. And the techy speak can be a bit off-putting………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

The renminbi skidded in intraday trading on Friday but managed to recover to close at 6.1450 to the dollar, down 0.27% for the day. That resulted in losses of 0.9% for the week and 1.4% for the month, both records. The yuan, as the currency is informally known, is now at its lowest level in about ten months.
As Reuters reported, government intervention on Friday reached a “frenzied pitch.” The People’s Bank of China , the central bank, has been on a tear for a week and a half, driving down the currency by setting low daily reference rates—prices cannot vary more than 1% from the bank’s morning fixing—and by instructing its agents to buy greenbacks………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

It is hard to fathom quite why so many people have been surprised by the recent fall in the value of the yuan. Over the past couple of weeks, the mainland currency has fallen 1.3 per cent against the US dollar.
That might not sound like much, but for the yuan it is the most abrupt decline since its 1993 devaluation, and it confounded legions of analysts and investors who had confidently expected the currency’s strengthening trend to continue uninterrupted. Their confidence was misplaced. Despite all the talk about internationalisation and a greater role for market forces, the yuan remains neither fully convertible nor freely floating………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

History does not repeat; it rhymes. Current stability comes from confidence and force. We’ve all heard that cliché over and over. But to rhyme is to the use any words you choose. We can rhyme in paper or digits, but it is all backed by nothing.
There is a not-so-subtle difference between currency and legal tender. Legal tender implies both force and control. And it’s worthwhile to explore how far history can be re-expressed through technology. A currency is simply an IOU, a convenience ticket or token used to settle a debt. Or a transaction, representing a deposit or asset kept someplace else………………………………………..Full Article: Source

Posted on 03 March 2014 by VRS |  Email |Print

Freezing carbon charges and levies on flying are among the potentially high carbon policies to be advocated by the CBI today, ahead of this month’s Budget. The business group’s new formal Budget Submission urges chancellor George Osborne to “prioritise measures to boost business investment and trade” when he addresses Parliament on 19 March.
In a letter to Osborne dated 18 February, the CBI says the urgent need to invest in new energy infrastructure must be balanced against the costs borne by businesses and households, specifically highlighting how UK firms are currently at a competitive disadvantage due to the Carbon Price Floor………………………………………..Full Article: Source

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