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Commodities Briefing 30.Apr 2014

Posted on 30 April 2014 by VRS |  Email |Print

After several years of poor performance investors are warming to commodities. Helped by the return of volatility, strong returns and declining correlations with other asset classes, money has started to trickle back into the sector.
After a record $50bn of net redemptions in 2013, total inflows into passive index tracking and commodity-linked exchange traded funds this year have so far totalled just over $6bn, according to research by Citigroup. Agriculture, energy and bullion funds have led the way………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

As expected, the recent by some of the largest energy trading banks has created a temporary dearth of capability, and sometimes liquidity, in the international commodity markets. Born a child of the Financial Crisis and the BP Deepwater Horizon oil spill, and later ensconced into law through Dodd-Frank, the Volker Rule and other international regulations, the anti-bank sentiment amongst policymakers has driven many of the largest players into various stages of transition toward smaller footprints.
The likes of JP Morgan, Morgan Stanley, Barclays, Deutsche Bank and Bank America – to name a few – are staring at the exit signs for some or all of their business. This is not good………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

U.S. commodity regulators are inquiring about Wall Street banks’ recent push to remove parent-company backing of some overseas swaps. Scott O’Malia, a Republican commissioner at the Commodity Futures Trading Commission, said in an interview he has asked the agency’s acting chairman, Mark Wetjen, a Democrat, to issue a legal opinion as to whether any of the banks’ exercises have run afoul of the agency’s rules.
On Sunday, The Wall Street Journal reported that banks, including Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley, were changing the terms of some swaps made by their offshore units so they could avoid U.S. regulations, according to people familiar with the situation………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

A ‘hard landing’ of the Chinese economy could see the oil price plummet to as low as $50, information firm IHS has warned. Growth in the world’s second-largest economic is stumbling, and if the rate of expansion continues to fall the repercussions would be felt globally, IHS said. Such a scenario could see the gross domestic product of Middle East countries drop by up to 1 percent, IHS said.
“A China hard landing would mean the Middle East would experience weaker exports, lower tourism and business activity, and probably a resurgence of risk aversion by global companies due to this new deterioration of the global economic situation, just at the moment when they thought the situation was finally improving,” said IHS Chief Economist Nariman Behravesh………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

New U.S. sanctions on Russia that include asset freezes and travel bans on several top Russian officials, including Rosneft’s Igor Sechin, are raising the likelihood that Western companies with investments in Russia will be caught up in the economic feud.
BP, in particular, is significantly exposed. It used to be a major owner of TNK-BP, a joint oil venture in Russia, but agreed in 2013 to sell its holdings to Rosneft in exchange for a 19.75 percent stake in Rosneft itself………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

Government subsidies for renewable energy cause great consternation to those who believe in the sanctity of free markets. “If they can’t stand on their own feet, then why support them?” the argument goes.
But in actual fact, most energy sources are subsidised, and none more so than fossil fuels. Indeed in straight numerical terms, subsidies for oil, coal and gas far outweigh those for renewables………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

Here’s a quiz for you. Can you name the top three countries by proven oil reserves? The top spot may surprise you. It’s Venezuela. The number two spot is more obvious. It’s Saudi Arabia. What about number three?
You won’t get this one. But don’t feel bad about it. The energy industry has gone through big changes in recent years, and even bigger changes are on the way… It may surprise you to know that the country with the third largest proven oil reserves is Canada. That’s an impressive feat for a country often disparaged as being the 51st US state, and for its people’s fondness for putting bacon on pancakes………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

Deutsche Bank AG has failed to sell its seat on the London gold-fixing panel following a three-month search for potential buyers, raising fresh concerns about the credibility of the historic benchmark.
The German lender is one of five banks that set the twice-daily gold “fix”—a snapshot of the market price—in a process that has operated more or less unchanged since 1919. The bank had been looking for someone to buy its seat after announcing in January it was exiting the fixing panel as part of a wider scaling back of its commodities business……………………………………….Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

The gold price on Tuesday continued to hover below the $1,300 an ounce level, down more than $80 an ounce from 2014 highs reached mid-March. US investment bank Morgan Stanley added to the negative sentiment, forecasting the gold price to average $1,250 this quarter, decline to an average $1,168 in the second half of 2014 and weaken further to $1,138 next year.
The commodity analysts at Morgan Stanley are quoted in Barron’s blog that record demand from China “won’t be enough to keep gold’s price above $1,200 per ounce in the coming year, much less help it rise”………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

In addition to the latest excellent study of the Chinese gold market by the World Gold Council, we have received other reports on the Chinese gold market that differ with the conclusions drawn by the World Gold Council.
But we shouldn’t be surprised by this, not only because of the opaque nature of the Chinese gold market and the dearth of accurate statistics that are accessible. Which ones are right is critical for the conclusions each draw paint very different pictures of the future of the gold price………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

Average silver prices in 2014 are expected to slip to around $20.440/oz from the 2013 average of $23.750/oz because of rising supply and weaker investment demand, analysts with the New York-based CPM Group said Tuesday.
“Silver prices are expected to consolidate this year, with limited downside potential,” CPM analysts said in their annual Silver Yearbook 2014 report. “The sharp decline in silver prices during 2013 was one of the primary factors that helped drive demand in the price-sensitive jewelry sector higher………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

To say the least, 2014 has proven to be a difficult year for copper bulls. The metal has been drastically underperforming the major indexes such as the Dow Jones Industrial Average and the S&P 500. In addition the performance has also been lagging gold and silver.
Unfortunately, news from this past week isn’t providing much comfort and it appears that the pressure will continue to be to the downside over the short-term. From a trader’s perspective, the strategic move will be to take this underperformance and examine the influence that it is having on copper exporting nations such as Peru and Chile………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

One of the biggest advantages of an ETF over a mutual fund is the ability to trade intra-day without being held hostage to a single price. This makes ETFs a flexible tool for both long-term investors and short-term traders alike. However, with that flexibility comes an additional layer of risk that involves understanding the liquidity and execution elements that are critical to a successful entry or exit.
With an ETF, liquidity is provided by the underlying securities, market makers, associated participants, and investors that are purchasing or selling these funds………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

The Canadian dollar, along with the related exchange traded fund, has lagged behind other developed market currencies this year, as the U.S. becomes more energy independent and winter demand for Canadian exports falters.
The CurrencyShares Canadian Dollar Trust is down 3.6% year-to-date, more than twice the loss suffered by the PowerShares DB US Dollar Index Bullish Fund. The Canadian currency has depreciated 4.2% against a basket of 10 developed country currencies this year – it is the worst performer of the group, reports Ari Altstedter for Bloomberg………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

In the last six years there has been a very major secular shift—from which we are all suffering. We, the World Gold Council, the association of large mining companies, felt we had to increase the use of gold by securitising gold. So we introduced to the global securities markets the ability to buy gold as a trading stock called ETF, exchange-traded fund. That was previously unheard of.
Before ETFs, if you wanted to buy gold, you went to a bank and bought gold coins or a gold bar. But if you were an insurance company, and say your assets were $100 billion and you had to invest 5% of your assets in gold, you had to buy gold shares………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

Investors should consider risks associated with virtual currencies, including bitcoin, before trading in them, two U.S. regulators warned on Tuesday. The warnings are the latest in a string of advisories from U.S. state regulators, including Nevada and Maryland, as they look to toughen rules on the use of the controversial crypto currency.
“The value of virtual currencies is highly volatile and the concept behind the currency is difficult to understand even for sophisticated financial experts,” Andrea Seidt, president of the North American Securities Administrators Association (NASAA) president, said in a statement on Tuesday………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

The creditors of the collapsed Mt Gox have agreed to support a group of US investors who are trying to re-establish the Bitcoin exchange. Despite these problems, can crypto-currencies, such as Bitcoin revolutionise the way we pay for goods and services in the digital age?
After all, money is anything that can perform three basic functions: a medium of exchange to be used in the purchase and sale of goods and services; a unit of account to measure the value of goods and services; and a store of value that can be saved and spent at a future point in time………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

Traders’ enthusiasm for the European Union Emissions Trading System has slumped during recent years. But at the same time, there have been a variety of significant developments in carbon markets elsewhere around the globe.
The 1997 Kyoto Protocol cemented the status of cap-and-trade schemes as an internationally agreed method of cutting emissions of carbon dioxide (CO2) and other greenhouse gases. Since then, the European Union Emissions Trading System (EU ETS) – the world’s biggest carbon market by far, which was set up in 2005 – has undergone a rollercoaster ride………………………………………..Full Article: Source

Posted on 30 April 2014 by VRS |  Email |Print

The European Union can set its 2030 carbon goals as soon as October if the region’s governments agree to ease the cost for poorer countries to implement the policies, according to Poland’s climate negotiator.
The 28-nation bloc needs a “coherent” environment strategy for the next decade while ensuring its industry stays competitive worldwide, Marcin Korolec said in an interview. Poland in the past three years has twice vetoed EU ministerial statements on emissions goals that could lead to tighter greenhouse-gas reduction policies. A climate target decision by EU leaders requires unanimity………………………………………..Full Article: Source

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