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Commodities Briefing 28.Apr 2014

Posted on 28 April 2014 by VRS |  Email |Print

Commodity markets are becoming interconnected, with large global financial investors choosing to invest directly in these markets. With this comes the question of how one is to regulate markets which are truly global, with investors many a time being from outside national regulatory jurisdictions.
All these issues have been acknowledged by the G-20 and governments, and regulations will have to be made keeping in mind the constantly changing trading strategies in commodity markets that are increasingly becoming systemically important………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Commodity prices are on the rise, as gold, corn and other basic materials climb back from steep declines—and outpace U.S. stocks. The rebound may stir hopes that a longer-term boom has resumed after three rough years for natural resources, and a measured bet could pay off.
But for ordinary investors, commodities often are a raw deal. They should take a hard look before loading up. First, weigh whether you need the exposure. Perhaps the main reason investors hold commodities is to hedge against inflation. But inflation remains muted in the U.S………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

For longer-term investors, equity markets have generally remained the risk asset class of choice. However, with equities around the world now finding it hard to continue the bullish momentum of the last few years, investors are now looking to alternative markets to diversify risk, and for potentially better returns.
One such is commodities, which has performed well since the start of the year, with the Dow Jones Commodity index currently up 10%, compared with to just 2% for the S&P 500. In addition, and perhaps more significantly, many of the traditional correlations between equities, bonds, commodities and currencies, and in particular the risk-on-risk-off relationships, have all broken down as the financial markets continue to be distorted by quantitative easing………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Global farmers, fishermen, meteorologists and commodities traders are closely watching water temperatures in the South Pacific, waiting to see if the water will warm up this summer, a telltale sign of the El Niño phenomenon. According to the U.S. Climate Prediction Center, there is a roughly 65 percent chance that the climate pattern will develop, which could bring extreme weather conditions around the world. The last major El Niño event was in 1998.
Typically, El Niño brings drought to Australia, Asia and West Africa, which can wreak havoc on their commodity production, hurting those regions’ output of a wide range of commodities, including wheat, rice, coffee and cocoa………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

The blob, yearning for the sea, has oozed south. And now it is stuck there. Or, put a tad more prosaically, the spread between the prices of Brent and West Texas Intermediate crude oils has rebounded to about $9 a barrel two weeks after hitting a low for the year of less than $3.70.
The blob is the Midwestern glut of crude oil resulting from production arising from the shale boom running into logistical bottlenecks. These have eased somewhat, allowing that oil to migrate south from the storage tanks at Cushing, Okla., toward the Gulf Coast. However, because there is a ban on exporting U.S. crude oil, the barrels’ journey ends there………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

A future filled with inflation, creative government expropriations and changing borders in Eastern Europe. The Ukraine was not a local, spontaneous, organic event, but part of a larger pattern of social unrest in Brazil, Argentina, Thailand, South Africa, and across the Arab world, which share a common thread: A rising cost of living for at least two years before all hell breaks out.
When food costs rise dramatically, people ask, “Why is the wealth in my society being distributed to some other guy and not to me?” The question led to the overthrow of dictatorships in the Middle East and, in Ukraine, the answer was to join the EU. The Russians said, “No way.” If Ukraine joined the EU, it would mean NATO right on Russia’s border, which would be like a Cuban Missile Crisis for them………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

From the macro standpoint, we at Raymond James have been asking ourselves, “How and when will gas storage begin to replenish?” The answer to that question will dictate how the gas market reacts during the next three to six months. Clearly, the strength of the winter weather sales and the reduction in storage levels make us much more positive on 2014 gas prices than on 2015 gas prices.
We think there will be enough coal switching to keep gas prices from getting too frothy. We also believe the E&P industry’s ability to bring new supply to the system will help close the storage gap. So, while we recently increased our 2014 gas price deck, we left 2015 unchanged………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

In the 19th century, chemicals production depended largely on coal processing. But the increasing availability of petroleum and gas drove the industry into “petrochemicals”, a term that was first used in 1942 to distinguish its products from those obtained from coal.
The need for materials to conduct the Second World War drove Germany in 1940, followed by others, to produce synthetic rubber from petroleum fractions. The simpler and less expensive processes made manufacturers shift from coal to the new, flexible and inexpensive oil or gas feedstock………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Republicans, Democrats, and environmentalists all have favorite energy myths. Even Peak Oil believers have favorite energy myths. The following are a few common mis-beliefs, coming from a variety of energy perspectives. I will start with a recent myth, and then discuss some longer-standing ones.
Myth 1. The fact that oil producers are talking about wanting to export crude oil means that the US has more than enough crude oil for its own needs. The real story is that producers want to sell their crude oil at as high a price as possible. If they have a choice of refineries A, B, and C in this country to sell their crude oil to, the maximum amount they can receive for their oil is limited by the price the price these refineries are paying, less the cost of shipping the oil to these refineries………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Investors returned to gold just in time for the longest price rally in a month amid mounting tension over Ukraine.
Money managers increased their net-long position in gold in the week ended April 22, snapping a four-week retreat that was the longest this year. The metal climbed in the next three days, sending futures to the best start to a year since 2006………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

The catastrophe for financial markets now unfolding in the Ukraine will have a very positive upside for gold. If Russia invades eastern Ukraine this week what price will gold be by next weekend? $1,350? $1,400? Or much higher?
Only on Friday did the penny begin to drop on Wall Street in the final hours of trading. If the Russians have been orchestrating this crisis right from the start, what is their end-game? Are the 40,000 troops massing as close as a kilometre to the border just there for window dressing? Why do things keep getting worse on the ground in Ukraine?……………………………………….Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

William S. Kaye, the Senior Managing Director of the Pacific Alliance Group of Companies in Hong Kong says the motive is simple as a free-market price of gold would essentially cast the interventions for what they are and stabilize policy measures taken by Central banks.
However, he explains and predicts that the price suppression scheme can’t go on forever and that in the ‘end game’ the 100 fold paper gold market must eventually be settled with physical gold and that it will require an extremely high price of gold to entice owners of physical gold outside the banking system to be willing to meet that massive anticipated demand……………………………………….Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

A light will be shone on the secretive world of setting gold prices in a review launched by the UK Financial Conduct Authority (FCA), which is studying whether gold market benchmarks are operating properly in the wake of the Libor scandal.
The regulator has started to gather information from market participants about the London gold fix, the benchmark price used worldwide to price the precious metal. The FCA is visiting all five banks that hold seats helping to “fix” the price of gold twice a day, once in the morning and again in the afternoon. It may analyse documents and policies, interview traders and examine IT systems………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Precious metals rebounded late in the week after hitting their lowest levels in two-and-a-half months. This change in direction was the result of renewed safe haven demand following another outbreak of violence in the Ukraine.
A slightly weaker U.S. dollar over the course of the week and tumbling equity markets on Friday also provided support to metal prices as investors moved money out of risk assets and into defensive positions. This fresh buying led to key technical support levels being successfully tested for gold and silver, causing many short sellers to close out their positions………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Longer term investors in both Gold and Silver have no doubt become increasingly frustrated over the last few months, as first the metals gain some bullish momentum, only to see this promptly reversed with a return of bearish sentiment. For speculative traders of course, these short terms trends offer excellent trading opportunities, and the price action for both metals, at the end of last week, suggests yet another ‘mini trend’ now awaits.
And what happens with silver will be reflected in gold, which has followed a similar pattern of both price action and volume………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

The number of non-traditional ETFs has grown significantly in popularity in recent years. By 2009, there were over 100 non-traditional ETFs in the market place with total assets of approximately $22 billion. Since 2009, the number of non-traditional ETFs has since increased to more than 250 and continues to grow.
Many investors are familiar with the properties of typical ETFs that usually track and attempt to imitate the return of a benchmark, sector, or type of security. By contrast a leveraged ETF seeks to deliver two or three times the index or benchmark return the ETF tracks by employing leverage………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

When you think about using ETFs, the first thing you think about is, “What are my financial goals?” But you should also ask yourself, “Where do I want to invest?” And if you want exposure to U.S. markets, which benchmark represents that exposure? Do you want a narrow blue chip index or something broader?
Or do you want something tilted and more fundamental, so instead of using market cap, the index will be looking at underlying company sales, price-to-earnings ratio and dividends? You will find different benchmarks will have different biases. So the S&P 500, which most people understand, is a market-cap index………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Trend-following hedge funds have suffered further outflows amid weak investment performance, raising questions about their survival.
Commodity trading advisers, hedge funds that tend to follow trends in markets using computers to place bets, suffered their 10th consecutive month of net outflows in March, according to Eurekahedge, the data provider………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Commodity trading firms probably don’t pose systemic risks to the global economy as the companies draw increased scrutiny and banks step back from raw materials, Trafigura Beheer BV said in a report.
Trading houses, such as Amsterdam-based Trafigura, are smaller than banks and have less debt, according to the study, written by Craig Pirrong, a finance professor at the University of Houston. The firms use financial derivatives mostly to hedge their physical activities, rather than to speculate on price swings, Pirrong said in the report……………………………………….Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Criminal prosecutors from the U.S. Department of Justice have gone to London to interview individuals in connection with an investigation into traders’ alleged rigging of foreign exchange rates, a person familiar with the matter said.
The DOJ has conducted joint interviews of UK-based currency traders with the United Kingdom’s Financial Conduct Authority in London, the person said………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

China will expand a trial programme to make it simpler for multi-national firms to transfer funds within and outside the country, in a move that will further open its tightly controlled capital account.
The experiment, which began in 2012 in Beijing and Shanghai, came in response to growing demand from international companies operating in China for more freedom to use their growing amounts of yuan to boost the efficiency of their management of capital………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

Environmentalists and the nuclear industry are beginning a push to preserve old nuclear reactors whose economic viability is threatened by cheap natural gas and rising production of wind energy. They argue that while natural gas and wind are helpful as sources of electricity with little or no production of greenhouse gases, national climate goals will be unreachable if zero-carbon nuclear reactors are phased out.
The Center for Climate and Energy Solutions, an independent nonprofit group based in Washington that was formerly known as the Pew Center on Global Climate Change, plans to release on Monday a research paper that charts the decline of the industry………………………………………..Full Article: Source

Posted on 28 April 2014 by VRS |  Email |Print

During a visit to China to see firsthand how the world’s largest emitter of greenhouse gases plans to reduce emissions, European Union Commissioner for Climate Action Connie Hedegaard said all countries must do their part to fight climate change and that whatever commitments they make should be “legally binding.”
Hedegaard spoke during a news conference in Beijing, responding to a proposal in a recent United Nations report that would make emission-reduction commitments binding for developed nations but voluntary for developing ones………………………………………..Full Article: Source

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