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Commodities Briefing 02.Apr 2014

Posted on 02 April 2014 by VRS |  Email |Print

Commodities are finally doing what they are supposed to do. Going up, yes, but more importantly, behaving unpredictably. Besides China’s growth, commodities’ popularity has owed much to the idea that their prices often move on random, unconnected events—war, for example—rather than just, say, economic forecasts. So, in theory, they help diversify a portfolio, enhancing risk-adjusted returns.
Prior to 2009, the Dow Jones-UBS Commodity Index’s 90-day correlation with the S&P 500 swung roughly between 0.2 and negative 0.2, close to zero and indicating no relationship. A score of one denotes lock-step correlation, negative one perfect inverse correlation………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

The head of one of the world’s biggest energy trader has said some of the regulation being imposed on financial markets could have “very worrying” side effects on commodities prices.
Paul Reed, chief executive of BP’s integrated supply and trading division identified a range of new threats from new regulations, including higher capital requirements and a push to using clearing houses to settle trades………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Many investment banks, with Goldman Sachs among them, say that the bull phase of the commodity super-cycle is over. Commodity super-cycles generally last 30 to 40 years. There is an initial 15 to 20 year phase where demand outstrips supply, and a later 15 year phase where supply outstrips demand.
In the first phase of the current commodity cycle, many metal, energy, and agricultural commodities have doubled in price since 2000. Over the past several years, however, prices have been, at best, range-bound. This has led to many market pundits declaring that the bull phase of the commodity super-cycle is over. So what’s causing prices to stay range-bound, and are there any compelling reasons to own commodity producers?…………………………Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

The commodities boom is over and you can have some money back. For investors in Japan’s biggest trading houses, Mitsubishi Corp. and Mitsui & Co., the payoff in dividends and stock buybacks could be as much as 300 billion yen ($3 billion) in the financial year beginning today, according to analysts who follow them.
As the China-led, decade-long rally in commodity prices fades, the traders have been left with excess cash and the need to boost their attractiveness to investors………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

The long-term outlook for global oil prices is lower, perhaps much lower, giving a strong boost to the U.S. economy while potentially crippling the economy of Vladimir Putin’s Russia. Vast new discoveries of oil and natural gas in the U.S. and around the globe could drive the oil price to as low as $75 a barrel over the next five years from a current $100.
The demand side, too, will put pressure on the supremacy of petroleum. For the first time in its 150-year history, the internal combustion engine can be run efficiently on alternative fuels from a number of sources, including natural gas. As these alternatives are increasingly introduced, global consumption of oil will slow its growth and flatten out………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Oil supply disruptions in countries such as Libya will support crude prices this year, said the chief executive officer of Vitol Group. Booming U.S. output means the world’s largest independent oil trader is looking to invest more there, he said.
Libya has “severe problems” and is producing “extremely little” crude, Ian Taylor said in an interview at the FT Commodities Global Summit in Lausanne, Switzerland. This is important for Europe, where oil demand has been higher than expected this year, he said………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

OPEC crude oil production dropped in March, led by declines in Angolan and Libyan output, a Bloomberg survey showed. Production by the 12-member Organization of Petroleum Exporting Countries slipped by 117,000 barrels a day to an average 30.293 million from 30.41 million in February, according to the the survey of oil companies, producers and analysts.
Last month’s total was revised 533,000 barrels a day higher because of changes to the Saudi Arabian, Iranian, Iraqi and Nigerian estimates………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

The next move for world oil prices is likely lower, as growing U.S. oil supplies outweigh some of the impact of the geopolitical tensions surrounding Ukraine. The U.S. oil boom is having a bigger impact on world oil prices, and now the release of more crude via the southern leg of the newly opened Keystone pipeline running from Cushing, Okla., to Port Arthur, Texas, is creating a gusher of new supply in the Gulf Coast.
“I’m pretty bearish crude prices because I see there’s a significant amount of supply out there, and I suspect U.S. supply is going to continue to grow through the course of the year,” said Andrew Lipow, president of Lipow Oil Associates. “I suspect by the end of the year, we’ll be producing close to 9 million barrels a day.”…………………………Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Gold demand stands at an “interesting crossroad” so far this year, with “numerous conditions triggering market demand,” Lear Capital’s Chief Executive Officer Scott Carter said.
Lear Capital expects an average of around $1,400 an ounce for the year. It even sees gold reaching $1,450 this year. Many analysts, however, forecast average 2014 gold prices below $1,300 an ounce. Barclays last week raised its average 2014 gold price forecast to $1,250 from $1,205………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Gold prices will bottom in 2014 before returning to a record within five years as weaker equities spur demand for a haven and physical buying from Asia strengthens, according to asset manager Pecora Capital LLC.
Bullion may drop to about $1,160 an ounce this year as the dollar advances as much as 5 percent, Boca Raton, Florida-based Pecora said. U.S. stocks that reached an all-time high last month are overvalued and will probably retreat when the Federal Reserve ends stimulus. In that scenario, gold could initially slide as money flows toward cash investments, before rebounding, it said………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Following last year’s dramatic gold sell-off BlackRock World Mining trust co-manager Catherine Raw is expecting a volatile but ultimately more stable gold price in the year ahead.
Speaking at the Fund Strategy Investment Summit in Pennyhill Park, Raw highlighted a number of crucial changes that have created greater stabilisation for the gold price since last year………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Gold is unlike every other commodity known to man. No, it’s not just that gold is shiny, malleable, or can be hammered into very thin sheets. Nor is it just that the metal is surprisingly heavy—a bar the size of your iPhone is about a kilogram or 2.2 pounds. The reason is not that gold is scarce (it’s not all that scarce). I refer to a unique property of gold that is man-made.
Nearly every ounce of gold ever mined is still in human possession. Think about that for a minute. Do we accumulate other commodities like that?…………………………Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Gold prices sank to their lowest level in seven weeks Monday, as investors continued to discount the possibility that the conflict in Ukraine would intensify. Gold for June delivery, the most actively traded contract, closed down $10.50, or 0.8%, at $1283.80. It was the lowest close for the precious metal since Feb 11.
Prices for gold are down more than more than 7% since March 14, as it became clear that the West would limit its response to Russia’s annexation of Crimea to a series of narrowly-targeted sanctions…………………………Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

While every now and again some analyst or other comments that perhaps palladium is outperforming gold, or platinum is, on the year to date both the pgms have moved up pretty well pari passu with gold overall.
All three metals are around 7-8% up since the beginning of the year. Indeed gold moved up substantially further during the height of the Ukraine crisis and while the pgms followed they did not quite do so to the same extent. As gold has fallen back though, the pgms have caught up again………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Natixis has forecasted $16,000 per ton for nickel in 2014 and risin to $17500 per ton in 2015 on Indonesia export ban on nickel ore and possible fall in supples. However, the market has substantial surplus in 2014 thus weakening the prospects of a bullish trend emerging.
The decision by Indonesian authorities, on 12 January, to ban exports of low-grade ore came as a major shock to the nickel market. Since then, as the market has digested the full implications of this move, nickel prices have rallied sharply, increasing to a high of over $16,000/tonne in March. …………………………Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Zinc prices will average $2,185 per ton in 2014, rising to $2,450 per ton in 2015 as the market progressively acts to ration near-term demand for the metal, as well as incentivising mining companies to increase investment in new mines over the coming years.
Zinc entered 2014 with some of the best fundamentals among the base metals. Exchange stockpiles declined by 380,000 tonnes last year, reflecting both an improvement in demand for zinc as well as constrained supply. International miners are struggling to raise zinc output against a backdrop of investment cutbacks and zinc mine closures. …………………………Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Mining companies, providing basic materials to fuel economies around the world, are unquestionably valuable economic contributors. But despite widespread demand for their products, mining companies may not be good investments for some investors. A common belief is that owning these companies gives shareholders exposure to growing commodities markets, a close proxy for the expanding global economy.
But in reality, mining companies’ profits don’t always track price gains in commodities markets, given the unpredictable operating costs and ongoing capital expenditures of running a mining business………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

One trading day remains unfinished in the first quarter, but here are the biggest winners and biggest losers so far this year among exchange-traded products. These lists are based on Morningstar data as of Friday’s close, and they exclude leveraged and inverse ETFs and ETNs (i.e. products that often have “3X” or “short” in their names).
Two coffee ETNs claim the top spots when it comes to best returns, and commodities-related ETFs in general dominate the top 10, taking six spots………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Until recently, the average investor has strained to discover how to invest in natural gas directly. Buying futures on the commodities market is both a complicated and expensive prospect, and very few small-cap investors have the resources or connections to do it. Fortunately, commodities-based ETFs have come along to fill that demand.
ETFs, or exchange-traded funds, are the progeny of mutual funds. Unlike mutual funds, however, they are priced in real-time rather than at the end of the day, making trading determinations much easier (and less vulnerable to institutional chicanery)………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Louis Dreyfus Commodities is taking steps to ensure that it is ready for either a stock market listing or a partial sale to a strategic investor, as one of the world’s largest food trading houses navigates a fast changing landscape for natural resources.
In a rare interview, Margarita Louis-Dreyfus, majority shareholder, said the 163-year-old trading house did not want to abandon its privately owned status and had no immediate plans for an initial public offering, but had to be ready for every eventuality………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Monetary authority asks several banks to conduct independent reviews of foreign exchange operations and submit the results. Hong Kong’s monetary authority has become the latest regulator to investigate a number of banks in the widening global inquiry into alleged manipulation of foreign exchange markets.
The news comes a day after Switzerland’s competition commission opened an investigation into several Swiss, US and UK banks, including JP Morgan Chase, Citigroup, Barclays and Royal Bank of Scotland, over potential collusion to manipulate currency rates in the $5.3tn-a-day market………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Carbon trading soared to a record on London’s ICE Futures Europe exchange as European Union emission prices headed for their biggest weekly decline in almost a year.
Traders bought and sold 124 million metric tons of EU carbon futures on ICE yesterday, taking this year’s total to 2.2 billion tons, a quarterly record. The benchmark December futures contract fell 17 percent this week, dropping to the lowest since Jan. 24………………………….Full Article: Source

Posted on 02 April 2014 by VRS |  Email |Print

Carbon permits pared gains as analysts said European Union data showed emissions from factories and power stations probably fell more than their predictions.
The benchmark December carbon contract advanced 8.7 percent to 5.11 euros ($7.05) a metric ton on ICE Futures Europe in London. The futures had risen as much as 12 percent after the EU data was released………………………….Full Article: Source

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