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Commodities Briefing 19.Mar 2014

Posted on 19 March 2014 by VRS |  Email |Print

The next commodities boom could be in the agriculture sector with middle class incomes boosting the demand for food items such as meat, dairy, sugar and edible oils, an HSBC report said. This could present investment opportunities in agriculture, it said.
“It may, in fact, be the case that food prices have the potential to outperform relative to metals and energy prices in the coming years, as growing middle class incomes continue to boost demand,” the HSBC Global Research said in its latest report………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

So far this year, agricultural commodities have outperformed most other asset classes. While some have outperformed others in general, we have seen strong performances. In a market where investors are becoming jittery holding stocks after such a large increase in value, I suspect that some of that money is going to find its way into agricultural commodites and related assets.
This could be the catalyst that will drive agricultural commodities to a higher fundamental valuation, which is warranted given the fact that demand for these commodities is steadily increasing, while supply is not………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Commodities have outperformed stocks since the start of the year, but many investors have not benefited. Why? Because if there’s one category where most investment portfolios are lacking market exposure, it’s probably commodities.
Unless you live on a farm, most of us don’t have enough storage space for 150 barrels of crude oil (USO) or a herd of cattle (COW). Like any asset class, commodities have their advantages and drawbacks………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

World oil price could drop $10-$12 per barrel. Russia’s seizure of Crimea has prompted political leaders in Europe and North America to seek meaningful measures to convince Russia to pull back its troops.
In particular, they seek measures that would affect Russia immediately, putting internal pressure on the country’s leaders to stop their aggression while leaving the rest of the world unharmed. Some propose accelerating natural gas exports from the US to Europe. However, this is no better than computer “vapourware” because the gas would not arrive for years………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Iran exported more crude than allowed under Western sanctions for at least a fourth straight month in February, as ship loading data obtained by Reuters showed top clients again bought more than 1 million barrels per day (bpd) of Tehran’s oil.
The rise in sales to Iran’s main clients, mostly in Asia and including Turkey, comes after an agreement that eased some of the sanctions aimed at the OPEC member’s nuclear program. The November deal also freed up 4.2 billion US dollars in oil payments to Tehran, but it does not allow for shipments to increase………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

The Organisation of Petroleum Exporting Countries (OPEC) will cut crude exports this month to the lowest level since November as refinery demand slows in Europe and North America, according to tanker-tracker Oil Movements.
OPEC, responsible for 40 percent of global oil supplies, will decrease shipments by 1.1 million barrels per day (bpd), or 4.6 percent, to 23.6 million bpd in the four weeks to March 29, according to Oil Movements, reported Bloomberg………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

The international markets have witnessed lots of uncertainty of late, especially in respect of the Ukraine crisis. Traders have been shying away from traditional investments in the form of stocks in favour of gold and other safe-haven alternatives. The price of gold has risen sharply this year – in the region of 15%.
The recent referendum results confirm what investors and political commentators already knew: Crimea was always going to side with Russia. Since over 50% of the electorate in the region voted in favour of secession, it would typically be a binding resolution. However, it has largely been condemned as illegal owing to the ubiquitous presence of Russian military personnel and threats of violence. The markets have reacted to this uncertainty in the same way they always do – by buying gold………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

China has recently become the world’s largest consumer of gold. Uniquely, it also ranks as both the largest producer and the biggest importer of gold. Yet a big question surrounds the true state of the Chinese demand for gold; the answer would determine how global gold prices are likely to fare.
The expectation that Chinese investors will sustain a voracious appetite for gold has helped to spark a recent rebound in gold prices………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Royal Bank of Canada Capital Markets analysts Dan Rollins in Toronto and Jonathan Guy in London have come up with a detailed analysis of the gold market over the next few years comparing it with the big ETF driven gold price rally of 2005-2008.
Over this period, gold doubled in price from $450 to $900, and while the analysts are not putting exact price predictions into their prognostications, nor coming up with a precise timescale, the implication is there in their research that this could lead to a big gold price increase in the medium to long term………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Why is silver underperforming, and is this an opportunity or a sign of something else? While it is difficult to know why exactly silver is underperforming in just a two-and-a-half-month timeframe, the most obvious answer to this is that silver is not just a precious metal — it is also an industrial metal, and about half of silver’s demand comes from industrial applications while only about a fourth of silver demand comes from investors.
As we have seen this year, industrial metals such as copper and lead have underperformed, which signals economic weakness. If there is, in fact, economic weakness, then it follows that there will be less industrial demand for silver………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

So far this year, the price of gold has risen by about 15%, while the price of silver has risen by about 7.5% - a reversal of what we were experiencing this time last year. This brings the question of if gold and silver have finally overcome their troubles from last year. I’m of the opinion that they have, for reasons that I’ll argue in this piece.
First, one thing that I find disheartening about this trend, that’s supposed to be enjoyed, is that many seem to think that the positive trend will be short-lived, mostly pointing at the Ukraine crisis as the reason for which the prices of gold and silver is increasing………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

The areas around $1,470 for platinum and $770 for palladium potentially could act as magnets ahead of options expirations this week, traders said. Settlement for Nymex April platinum and palladium options is Wednesday. More options expiries occur next week, with Comex gold and silver expirations set for March 26.
Analysts said the number of open positions in options for platinum and palladium are small relative to the market and also compared to gold, thus expiries may not affect these metals as much as is the case for the yellow metal………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Three-months nickel on LMEselect Tuesday breached $16,000/mt for the first time since April 2013 on the back of Indonesia’s decision to ban the export of raw materials, including nickel ore. The increase in nickel prices has seen the metal shift from the worst performing metal on the London Metal Exchange in 2013, to the best performing metal so far in 2014.
Three-months nickel on LMEselect has risen by around 22% this year, from a low of $13,334/mt in January to a year high of $16,230/mt in March. David Wilson, director of metals research and strategy at Citi Research, said technical issues are supporting nickel prices from a heightened interest in the metal due to the Indonesian ban on nickel ore exports………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Nickel entered a bull market on speculation Russian supplies will be disrupted at a time when some shipments are already banned in Indonesia.
Last year’s worst performer among industrial metals trading on the London Metal Exchange is this year’s best, gaining 16 percent and on track for the first annual gain since 2010. Prices fell 24 percent in 2011 after touching $29,425 a metric ton in February that year, the highest since April 2008. Indonesia, the biggest producer of mined nickel, banned ore exports in January………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Copper price fell 13% so far this year due to various macroeconomic worries ranging from Chinese credit tightening concerns, Russia-Ukraine tensions, sluggish Japanese and US economic data that led to overall slide in industrial commodities.
In the last three session over the previous week, copper recorded one of its sharpest fallsof around 9% to settle at $6380 a tonne on the London Metal Exchange (LME) from $7220 a tonne. With this slide, copper hit the lowest level sinceJune 2010. Apparently, its demand is being questioned further as China , the world’s largest consumer, sees exports and inflation contracting at a fasterrate than expected………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

The strong rally in global stock markets was not a surprise after last Thursday’s 2.42 reading in the Arms Index .It signaled that the market was oversold on a short-term basis. The Dow Industrials led the S&P 500 while the oil service and semiconductor stocks were the strongest.
The market internals were pretty strong on Monday but another equally strong up day is needed to turn the short-term momentum positive. A weak rally with minimal price gains will make the market more vulnerable as we head into the end of the week………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

The International Stainless Steel Forum (ISSF) has released preliminary figures for 2013 showing that stainless steel melt shop production increased by 7.8% to 38.1 million metric tons (mmt). With the exception of Western Europe and Africa, all regions achieved positive growth.
Asia excluding China recorded a production of 8.8 mmt during 2013 corresponding to a y–o–y increase of 0.8%. But growth throughout the region ranged from +5.4% (India) to -3.7% (Taiwan, China). Production levels in Japan and South Korea remained unchanged………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Commodity exchange traded funds surged over the last three months after a lackluster 2013. With commodity-related ETFs and exchange traded notes (ETNs) back in the limelight, it is important for investors to understand how these products operate and how the IRS taxes these investment vehicles.
Commodity ETFs and exchange traded notes have been among the best performers year-to-date, with the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN rising 81.6% so far this year on the severe drought conditions in Brazil, the world’s top producer of coffee………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Following a lethargic start to 2014, inflows to exchange traded products are finally showing signs of life, but there are still an array of ETFs that investors have not been shy about pulling cash from.
“Thus far in 2014, ETF flows have been about as predictable as Alec Baldwin in front of a paparazzi’s lens. The overall year-to-date numbers, with inflows of $8.0 billion, are well below the +$10 billion monthly run rate we’re used to seeing from this portion of the money management industry………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

CME Group, the world’s leading and most diverse derivatives marketplace, announced today it will launch North American physically delivered Aluminum futures contracts to begin trading on May 5, 2014, pending all regulatory approvals.
This new contract will build on CME Group’s existing suite of base metals products, including the Aluminum MW U.S. Transaction Premium Platts (25MT) futures contract, which was introduced in April 2012. These new Aluminum futures contracts will offer global aluminum market participants a new tool for managing their exposure to volatile North American prices, while giving them access to physical aluminum at a number of CME Group-approved warehouses across the U.S. (Press Release)

Posted on 19 March 2014 by VRS |  Email |Print

Financing arrangments in China using commodities from copper to rubber as collateral to obtain credit may be unwound in 12 to 24 months, driven by increased yuan volatility, Goldman Sachs Group Inc. said.
As much as 1 million metric tons of copper and 30 million tons of iron ore could be released if the deals unwind, the bank said in a report today. The unwinding would be bearish “given relatively limited physical liquidity to absorb the shock,” analysts led by Jeffrey Currie wrote………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Work is moving forward on a new way for the foreign exchange market to set its “fixing” benchmarks, senior bankers say, after another week of revelations in the row over alleged market manipulation which has rocked the industry.
While there are substantial barriers to altering the fixing system — which is used to price trillions of dollars’ worth of investments and deals — the bankers say it is increasingly clear that an electronic-based solution is feasible. This could seek to match off and then resolve automatically the huge volumes of orders put in around the fixing with minimal human intervention, making foul play more difficult………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

New Zealand has become one of the first countries in the world to be allowed direct currency trading with Chinese, a move aimed at reducing the cost of business in the economic superpower. Prime Minister John Key announced the deal after a meeting with Chinese Premier Li Keqiang at the Great Hall of the People in Beijing last night (NZ time), the first day of his state visit this week.
The deal would “make doing business with China easier by reducing the costs of converting between the two currencies, and will stimulate trade and investment”, Key said. The announcement was a sign of “how close the relationship is growing”. Since he became prime minister, exports had quadrupled to $10 billion, he said………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Thousands of companies across China must start reporting their greenhouse gas emissions under a government plan to build a nationwide emissions database ahead of launching a carbon market.
The National Development and Reform Commission, the top economic planning agency, said on its website that all companies that emitted more than 13,000 tonnes of carbon dioxide equivalent in 2010 must report their future annual emissions of all six major greenhouse gases………………………………………..Full Article: Source

Posted on 19 March 2014 by VRS |  Email |Print

Sometimes, the Chancellor must feel like he just can’t win. When he introduced the UK’s top-up carbon tax - the carbon price floor - environmentalists called it costly and ineffective. Now that he’s announced it’s going to be frozen, the same groups are accusing him of abandoning the UK’s climate change agenda.
The carbon price floor is a top-up tax: it exists to bolster the existing EU price of carbon. Energy companies already pay to pollute under the EU emissions trading scheme (ETS), buying permits to emit greenhouse gases when they generate electricity. But the price of the permits crashed to a record low last year, meaning there’s much less of a financial incentive for companies to cut their emissions………………………………………..Full Article: Source

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