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Commodities Briefing 27.Mar 2014

Posted on 27 March 2014 by VRS |  Email |Print

If you were betting on the price of most commodities going up this year, your bet has likely paid off. Clashes over Crimea and drought in Brazil helped send prices of commodities from wheat to zinc higher in 2014 so far.
Out of roughly 27 active contract commodity markets tracked by analysts at Citi, close to two thirds increased in value during the first quarter to date, while fewer than 10 saw (mostly) marginal declines. As an asset class, commodities have done better than most other asset classes, after two years of underperformance, according to Citi…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Agricultural commodities have been strong performers since the start of the year. Good for the speculators, but does it does raise wider concerns that a global economic revival might end up being squeezed.
Analysts cite demand from China as being a major driver of agricultural prices. But fears the Crimean crisis could end up restricting Ukrainian grain exports have also sent them shooting higher. If supply constrictions are the primary driver, higher prices could yet dent global economic revival as consumers forced to pay more for food have less money to pay for other goods…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The commodity market, which had defied gravity during the last few years, is showing signs of slowing down. It is not a breather but a shift to a bear cycle. No doubt the “investors” have vanished and the herd mentality has gone out.
The standard explanation during the period of price surge was that the booming demand, particularly from China, was clashing with stagnant supply of energy, metals and agricultural produce. Talks of stagnant or falling demand are now in the favour…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Although Russia has shown its might through hosting the Winter Olympics, followed by its annexation of Crimea, it’s still in a precarious position because of its reliance on taxes collected from the oil and natural gas industry.
The country receives over half of its revenue from oil taxes, and the country needs Brent crude prices of over $110 to balance its budget this year. In the face of Russian aggression, is the United States subtly pressuring Russia by threatening to flood the crude oil market, leading to falling prices? Additionally, is this week’s conditionally authorized approval of Jordan Cove LNG facility to non-Free Trade Agreement countries another warning shot to Russia?………………………………..Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The mining industry may be in the doldrums but Robert Friedland, the executive chairman and founder of Ivanhoe Mines, remains undaunted and sees commodity prices bouncing back in two or three years.
We make no apologies for giving you yet more of him, as he tells the best stories in the sector. Of hard and soft rocks, mineral grades and so on, he gives you all that, but tells you why it is important, and where this stuff is being used…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Investors should always be cautious about recommendations from Goldman Sachs. There is a saying on the Street: The firm always takes the other side of the trade it is recommending to clients, as it did with subprime mortgages.
Now, Goldman thinks it’s a good idea to sell gold. “We see potential for a meaningful decline in gold prices … and reiterate our year-end $1,050 gold price forecast,” reads a recent report. In yet another report, Goldman digs into the mystery of Chinese commodity speculation and comes to the same conclusion. However, the logic is unsound…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The Australian government’s commodities forecaster expects resources export revenue to grow more than 60 per cent to $284.42 billion in the next five years as boomtime LNG and iron ore expansions supply what is expected to be sustained global growth.
But in real terms, which strips out inflation, the Bureau of Resources and Energy Economics has declared an end to a long stretch of resources revenue growth in four years…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Spain is already the world’s largest olive oil producer but now it’s looking to a very different kind of oil to pull it out of economic decline: petroleum. The discovery of two significant offshore deposits, and prospects for fracking in many areas, have triggered a black-gold rush, with demand for exploration permits up 35% since 2012.
A report published this week by Deloitte says the oil industry could create 250,000 jobs and constitute 4.3% of GDP by 2065. The report is based on an estimate of 2bn barrels of oil and 2.5bn cubic metres of gas…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Barack Obama pitches the US as a source of energy that would weaken the European Union’s dependence on Russia for oil and gas “in the light of what’s happened”. In response to the Russian annexation of Crimea, many European leaders have been torn between the desire to impose sanctions whilst also being heavily dependent on Russian energy exports.
On Wednesday, President Obama met with EU leaders to discuss exporting US natural gas to Europe, which could be an alternative to Russian exports…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Higher-grade crude yields larger volumes of premium products such as gasoline, but it doesn’t yield as many lower-value products due to chemical differences. In the past, refiners spent millions of dollars on equipment that would allow them to produce larger amounts of premium products from heavier and sourer crude.
As the economics maybe isn’t there to change existing capacity to accommodate lighter and sweeter crude, demand for crude from Kuwait, Colombia, Venezuela, and Saudi Arabia remains strong…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Barclays raised its 2014 gold forecast to $1,250 per ounce from $1,205 on Wednesday, saying the change comes after taking into account gold’s year-to-date performance.
The bank maintained it has not altered its overall view on the yellow metal and believed gold’s next move will be lower as the macro background that could accelerate prices sustainably has not changed though investor sentiment has stabilised. It forecast gold prices at $1,150 for 2015…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Average annual gold prices are expected to remain steady and stay above the lows seen at the end of 2013, said CPM Group Tuesday. The New York-based consultancy released its annual gold yearbook at Bloomberg’s headquarters during an event fittingly called, An Evening On Gold which featured a panel of gold experts. The yearbook is considered one of the industry’s most coveted staples for forecasting the metal.
Findings from CPM Group’s Gold Yearbook show gold prices averaged $1,409.43 an ounce in 2013, down 15.6% from the average gold price of $1,670.15 an ounce in 2012. This was the first annual average decline for the yellow metal in more than a decade…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Commodities specialists CPM Group forecast Tuesday that the decline in investment demand for gold will continue this year as “a tug of war between short and long term investors is expected to weigh on overall net additions to gold investment holdings,” which are projected to deteriorate from 30.9 million ounces in 2013 to 21.4 million ounces in 2014.
“The price sensitivity among longer term investors, renewed strength in equity and real estate markets, and weak demand from some major gold consuming nations could deflate the price of gold and drive away shorter term investors,” CPM advised in its Gold Yearbook 2014, which was released Tuesday afternoon…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The only way to hold gold in a portfolio is through physical gold kept close by rather than listed gold, according to Panthera Solutions’ Markus Schuller. Schuller, a recent guest speaker at Citywire’s Zurich and Geneva fund selector events, said investors should also steer clear of gold ETFs as access to the precious metal would become difficult in the event of another financial meltdown.
He told Citywire: ‘Gold is usually pitched as great inflation hedge, which is not backed by empirical evidence, at least not in the sense of seeing a rising gold price as soon as inflation starts rising.’………………………………..Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

After 12 years, gold bullion’s glorious bull run ended with a thud in 2013, retracing 30% and locking in the biggest annual decline since 1981. Many speculate that gold bullion prices melted in 2013 as investors tried to figure out when the Federal Reserve was going to be cutting its generous $85.0-billion monthly bond purchases.
Investors lean toward gold bullion and other precious metals as a hedge against both a weak U.S. dollar and inflation. A tapering of the Federal Reserve’s monetary policy suggests that the U.S. economy is getting stronger. While there was no real sign of sustained economic strength in 2013, just the idea that the Federal Reserve would have to start tapering at some point was enough to send gold bullion prices lower…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The price of gold has often had a negative correlation with the stock market and often it has served as a hedge against inflation and currency volatility. But, when investing in gold, it is important to remember what the much-hyped asset class is, and what it is not.
Having gold in your portfolio is a speculative play, since it does not yield income, dividends or distributions. But it is a good diversification tool…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

China’s Gold import from Hong Kong was reported to surge in February after more banks were permitted to import gold by the government amid the increasing demand for gold, the Chinese government gave authorized permission for more banks to carry out import of precious metals because of which Gold import in the country climbed a record high last month and is expected to continue.
According to expert analyst report, net import of China in February reached a total of 109.2 mt when compared to the 83.6 mt in January a year ago………………………………..Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

Dr. Copper is signaling that more danger is ahead. Copper, which is consumed for a wide variety of uses including manufacturing and construction, is said to have a Ph.D. in economics because of its ability to forecast economic activity. Hence the Dr. Copper moniker.
When prices of the red metal drop it often presages slower economic activity and lower stock prices. Benchmark contracts for copper have tumbled from around $3.38 a pound at the beginning of the year to about $3.00 recently. But that’s only part of the story…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

As Russia took full control over Crimea in the weekend, the situation turned even worse with the U.S. and European Union imposing various tough sanctions against the country. This has raised the possibility for Russia being trapped in recession soon this year, compelling many rating agencies to downgrade their outlook on Russia.
This is particularly true as the two major rating agencies – Standard & Poor’s and Fitch Ratings – reduced their credit rating outlook on Russia from stable to negative each………………………………..Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2013, a comprehensive survey of 207 European ETF investors. The survey was conducted as part of the Amundi ETF & Indexing research chair at EDHEC-Risk Institute on “Core-Satellite and ETF Investment.”
Among the key findings of the 2013 survey: Satisfaction has remained at high levels across most asset classes. There have been increases in satisfaction for corporate bond, commodity, real estate and sector ETFs, but satisfaction rates for ETFs based on the most liquid ETF asset classes are far more consistent compared to those based on illiquid asset classes…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The Canadian dollar ended higher Wednesday, catching a wave of positive sentiment for commodity currencies and other risk-sensitive assets that also buoyed the Australian dollar. The U.S. dollar is at C$1.1098 Wednesday, from C$1.1167 late Tuesday, according to data provider CQG.
Its session low at C$1.1089 marked its lowest point since March 17. The commodity bloc in general–the Canadian, Australian and New Zealand dollars–generally did well despite discouraging economic developments in China, said Vassili Serebriakov, forex strategist at BNP Paribas in New York…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The Fed’s decision to taper its monthly asset purchase program has been seen as bullish for the dollar, and in turn it has caused emerging market currencies to fall. In a new report called “The Myth of the great EM currency slump,” Societe Generale’s Klaus Baader writes that the reaction of different currencies has actually been diverse.
“A review of 12 Asia-Pacific currencies reveals that performances over the past two years have been highly diverse and contrary to the notion of a generalized sell-off across emerging markets,” writes Baader, looking at Asian currencies…………………………………Full Article: Source

Posted on 27 March 2014 by VRS |  Email |Print

The world is awash with sugar as Brazil sugar is being offered at deep discounts for export and new harvest a few weeks away. However, positive trends continue in ICE Raw Sugar futures for May delivery which is up 1.18% at US$ 0.171 a pound on possible El Nino impacting sugar production in Brazil later this year.But markets have calmed down after rallying to a four-month high of $0.1846 a pound.
In the short run, however, raw sugar is being offered at 10 points below ICE futures which suggests abundant stocks worldwide, a Reuters report quoting trade sources said…………………………………Full Article: Source

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