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Commodities Briefing 22.Apr 2014

Posted on 22 April 2014 by VRS |  Email |Print

Money is flowing back into commodity investments this year as the sector has broken out of lock-step with other asset classes and outperformed them, attracting investors who aim to diversify portfolios.
After $50 billion of net redemptions in 2013, total inflows so far this year into passive commodity index products and commodity-linked exchange traded funds (ETFs) have amounted to about $5.8 billion, according to estimates by Citi………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Should your investment portfolio have exposure to commodities? The problem with commodities is that most of us don’t have storage space in the garage for a herd of cattle or pork bellies. And even if we did, it still wouldn’t give us diversified exposure to other important commodity sectors like agriculture, energy and metals.
It’s true commodities have significantly lagged the performance of U.S. stocks over the past several years. But that doesn’t diminish their importance………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Stock markets aren’t doing much. But the commodities markets are selling off nicely. Palladium and platinum prices are leading metals prices lower. “In my opinion, palladium and platinum are the solutions to the pollution, and are also two of the most underreported commodities stories at the moment,” commodities guru Frank Holmes said.
“The long-term demand needs for palladium are enormous. The commodity is used primarily for catalytic converters in automobiles to aid in clean air emission, but can also be found in electronics, various other clean air and water systems, jewelry, chemicals and even dentistry.”……………………………………….Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

The International Energy Agency (IEA) has revised upwards its forecast for global oil demand growth in 2014 to a modest 1.5 per cent on the back of a more robust outlook for global economic growth, a report said. The IEA now sees demand rising by 1.4 mbpd (or 1.5 per cent) this year to approximately 92.7 mbpd, from 1.3 mbpd (1.4 per cent) last month, said the latest NBK Economic Update.
This represents a modest acceleration on last year, as global oil demand is estimated to have grown by 1.3 mbpd in 2013. All demand growth is projected to come from emerging economies, with non-OECD Asia accounting for almost half of the global increase………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Global crude oil supplies fell month-on-month in March by a steep 1.2 million b/d to 91.75 million b/d, with a decline in output from members of the Organization of the Petroleum Exporting Countries accounting for near 75% of the loss, according to the International Energy Agency’s most recent Oil Market Report.
Due to sharply lower supplies from Iraq, Saudi Arabia, and Libya, OPEC crude oil supplies in March fell 890,000 b/d to just 29.62 million b/d—the lowest level in 5 months. “Libyan and Iraqi outputs were down on worsening civil unrest and operational issues, respectively, while Saudi Arabia curbed supplies last month in the wake of weaker demand from refiners during the peak spring refinery turnaround period,” IEA said………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

At a time when Russia is saber-rattling and the Middle East is in turmoil, a welcome geopolitical trifecta could be in the making. The United States is poised to surpass Saudi Arabia and Russia as the world’s top oil producer. Canada’s oil sands have vaulted the country to energy superpower status.
Mexico is embarking on a historic constitutional energy overhaul that its president promises will propel the country’s economy. And there is no shortage of cheerleaders. “The North American production outlook is incredibly bright,” said Jason Bordoff, a former senior energy adviser in President Obama’s White House. “Everything we see on the ground suggests reasons to be optimistic.”……………………………………….Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Regardless of how the stand-off over Ukraine develops, one lesson is clear: excessive dependence on Russian energy makes Europe weak. And Russia does not sell its resources cheap – at least, not to everyone.
This, of course, is basic economics. A dominant supplier has the power to raise prices and reduce supply. The way to correct this market distortion is simple. Europe should confront Russia’s monopolistic position with a single European body charged with buying its gas………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Hedge funds lowered bullish bets on gold for a fourth week, the longest streak this year. The net-long position contracted to the lowest since mid-February as speculators sold bullion on signs of accelerating U.S. economic growth. The investors more than doubled bets on lower prices in the past month while reducing wagers on a rally in six of the past seven weeks.
Prices fell 7.5 percent since reaching a six-month high in March after tension in Ukraine eased and U.S. equities rallied to a record. The number of Americans filing for unemployment insurance payments held last week near the lowest level in almost seven years and retail sales in March increased more than economists forecast………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

A lack of investment interest in gold is starting to take its toll on the price, with an average of $1,225/oz forecast for 2014 and heading lower in 2015, GFMS said Thursday in its Gold Survey 2014.
The price forecast is 13% lower than the 2013 average of $1,411.23/oz. “The price is expected to post 2014 lows in mid-year, with a fundamentally driven rally thereafter, but this is likely to peter out in early 2015,” the Thomson Reuters/GFMS survey read………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

A recent report from Thomson Reuters GFMS has forecast an average gold price of $1,225 an ounce for 2014. The report has a bearish view on gold due to waning demand from investors.
While this will put pressure on prices, gold prices should find support at around $1,200 an ounce due to physical demand. In fact, a stronger price floor is one of the reasons for recent uptick in M&A activity in the gold mining sector………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Gold prices started the week under the key psychological barrier of $1,300 an ounce but managed to regain some momentum as Asian traders started to jump into the market.
“I think this buying right now is being driven by safe-haven demand as more traders come into the market,” said Victor Thianpiriya, commodity strategist at ANZ Research. “We saw another flare-up between Russia and Ukraine so this move appears to be a knee-jerk reaction.”……………………………………….Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Gold could easily be $100 higher one year from now, says Dennis Gartman, famed editor of the Gartman Letter. In the short-term, Gartman adds that gold will most likely not remain in its current $1300 territory.
“It can trade $25 to $30 dollars either side of there for a while,” says Gartman in an interview with Kitco News. “A year from now it will be $100 to $150 dollars higher - at worst it is $30 to $50 dollars lower but that is in dollar terms. I think in Yen terms it can be demonstrably higher. If you are going to own gold, own it in Yen terms … The bank of Japan has no choice but to expand the supply of reserves very aggressively.”……………………………………….Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

China is the world’s leading gold nation, having overtaken India last year, and the future is even shinier. Consumer demand will rise 25 per cent to 1,350 metric tonnes by 2017, the London-based World Gold Council said in a report this month.
In 2013, China accounted for 26 per cent of global private-sector gold demand. China is both the world’s largest jewellery and physical bullion investment market, and it has become a key driver of global demand………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Natural rough diamond prices may rise 5% to 10% in 2014 on recovering demand for jewellery in developed and emerging markets, the head of Belgium’s diamond lobby told Reuters in an interview.
The global market came under pressure in 2013 as a weakening rupee and tight credit conditions suppressed demand from the world’s biggest diamond polishing marker, India. Polished diamond prices increased in all categories in 2014 as trade volumes reached their highest level since early 2011, diamond market watcher Rapaport said………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

In my most recent piece covering the platinum group metals (PGMs), I argued that a backdrop of declining supplies from Russia and South Africa, combined with surging off-take from the automotive industry, looks set to drive palladium prices to the stars.
But while intensifying political tension in Ukraine has propelled the white metal skywards in recent weeks, platinum prices have failed to ignite to the same degree. Indeed, the former’s 13% advance since the start of February contrasts sharply with platinum’s 4% rise………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Copper had been one of the major underperformers among base metals in 2014, having declined over 10% and during the past week, it closed near the $6650 / MT mark. It was lower last week as well having declined over $20 from its previous close. Overall, major reason behind fall in past week and recently had been the Chinese economic growth.
China released its GDP andindustrial production numbers which just managed to stand in-line with estimate though monetary growth number disappointed. By looking at the equity market performance last week Chinese Shanghai equity index declined over 1.50% while rest of the world traded on a positive note………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Through April 15, 2014 the Powershares DB Commodities Index ETF (DBC) has outperformed the U.S. equity markets year-to-date, posting a positive 3.39% return versus the 0.17% gain for the SPDR S&P 500 (SPY) ETF and the drop of more than 2% for the Powershares QQQ ETF.
This is an extremely short period of time to evaluate performance but this could be the beginning of the next commodities bull market. Many commodity skeptics point to increased drilling and tepid demand for global energy as a reason not to own the asset class………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

The energy sector has been trading sharply higher, as rising oil and natural gas prices create a sturdy tailwind for many of these integrated service and exploration companies.
After a frightening dip in January, that tested the 200-day moving average, the Energy Select Sector SPDR (XLE) has rocketed to new all-time highs. In fact, XLE has now gained over four percent in the month of April and more than 13 percent since its February low………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Barclays is pulling out of commodities trading as its boss Antony Jenkins attempts to focus the investment banking arm on its most profitable and least controversial areas. Just days before Jenkins faces a storm of protests about bonuses at the bank’s annual general meeting, Barclays will tell staff in its commodities arm that large parts of the operation are to be shut down or sold off.
The future of the commodities business – one of the world’s biggest – is likely to figure in questions at Thursday’s AGM where much focus is expected to be on a decision to increase bonuses by 32% after a year when profits fell 10% and shareholders were asked to back a £5.8bn cash call………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Have you performed your portfolio spring cleaning yet? The major banks certainly have, with commodities products and services being scaled back in good measure. U.K.-based Barclays Bank will soon be joining other top tier banks including JP Morgan Chase and Morgan Stanley in combing through their commodities operations and weeding out the poorly performing segments.
Barclays, along with other major investment banks, expanded their range of commodity products and services during the bumper opening years of the century when everyone was looking for the newest exotic vehicles to trade………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Concerns about the arrival of a new El Niño weather phenomenon have increased in recent weeks. A possible new El Niño cycle has a major impact on the global commodities market. El Niño - a weather phenomenon that occurs once every five years on average - involves periodical warm ocean water temperatures off the western coast of South America which can cause climatic changes across the Pacific Ocean.
Its impact on harvests and the world varies; sometimes passing almost unnoticeable (such as in 2010) but it can also be felt worldwide………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Although China’s leadership recently announced that the RMB exchange rate would over time be liberalized, the exchange rate remains a controversial topic.
The RMB has been under scrutiny in recent days, since the U.S. Treasury yet again found China to be intervening excessively in exchange markets to keep its currency artificially undervalued. This is a complex issue that has its supporters and its opponents………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

India’s central bank might have found it difficult to stem the rupee’s sharp depreciation during the currency crisis of 2013 by using its foreign exchange reserves, with the country’s external liabilities far exceeding official reserves.
Reserve Bank of India’s Deputy Governor H R Khan had highlighted the importance of building foreign exchange reserves to deal with sudden outflows. “Intervention in the face of the sharp depreciation is a difficult choice for several reasons, including loss of reserves, particularly in a country like India where the external liabilities far exceed the official reserves,” Khan said………………………………………..Full Article: Source

Posted on 22 April 2014 by VRS |  Email |Print

Expectations for a surge in carbon permit prices in China’s newest emissions market of Hubei have sent speculative traders scrambling to make a profit, driving up trading volumes far in excess of the country’s other markets.
Just two weeks after its launch, the emissions market in the central province of Hubei has attracted far more investors than any of its rival emissions schemes………………………………………..Full Article: Source

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