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Commodities Briefing 08.May 2014

Posted on 08 May 2014 by VRS |  Email |Print

Two-thirds of commodity hedge funds lost money in the first quarter, extending last year’s dismal run, possibly because they bet against higher crop and energy prices in a rallying market, data from futures broker Newedge and banker HSBC showed on Wednesday.
Of some 120 commodity-focused funds in the United States and Europe that either trade on discretion or follow trends, about 70 finished lower in the three months through March, despite a run-up in the corn, wheat, soybean, arabica coffee, lean hog and natural gas markets, the data showed………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Unctad economists’ argument that bank withdrawals are loosening correlation between commodities and equities “doesn’t make any sense”, say analysts. Analysts have criticised the findings of two economists at the United Nations Conference on Trade and Development (Unctad), who claim the withdrawal of banks from commodity markets has driven down the correlation between commodities and other asset classes.
“To say that banks exiting creates a decorrelation doesn’t make any sense to me,” says Michael Haigh, New York-based global head of commodities research at Societe Generale Corporate & Investment Banking (SG CIB)………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Commodity futures market convergence is the process where prices in the spot and futures markets come together or converge at futures market expiration. Convergence occurs at the expiry date of every futures contract because of arbitrage. If spot prices remain below futures prices, a market participant could buy in the spot market and sell in the futures market and make a risk-free profit.
Similarly, if the spot price is above the futures price, a market participant can buy in the futures market, take delivery and sell in the spot market and earn a risk free-profit………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

John McCain, channeling America’s inner Mr. Hyde, has repeatedly stated that “the strategy of the US must be built in opposition to Russia’s gas strategy, as this will be the end of Putin and his empire”. Barack Obama promised to kick Gazprom out of Europe with American shale gas exports. However, there are hints that Russia may be silently preparing a countermove against the US with the help of a former American ally.
Qatar is generally considered a staunch supporter of Washington’s foreign policy but America’s plans to flood the global energy market with cheap LNG is a direct threat to the vital interests of Doha………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Oil companies with reserves in high-cost areas such as Canadian tar sands or deep water are at risk of committing too much capital to uneconomic projects, according to an environmental campaign group that works with investors to highlight the risks of climate change.
In a report to be published on Thursday, Carbon Tracker warned that policies to curb greenhouse gas emissions and improve energy efficiency would restrict future oil demand and prices, meaning that companies with high-cost production would find they could not earn acceptable returns on their investments………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Oil production in the Gulf of Mexico is on the road to recovery, with next year’s projected level on pace to end a four-year slump. The U.S. Energy Information Administration (EIA) said total crude oil production is expected to average 8.5 million barrels per day this year, a 14 percent increase from the previous year.
Much of the success story for U.S. oil has come from inland shale basins in Texas and North Dakota. For February, the last full month for which data are available from the EIA, Texas produced 81.8 million barrels of oil, a 24 percent increase year-on-year. North Dakota’s 26.6 million barrels produced in February was 22 percent higher than in February 2013………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Gold prices have probably peaked this year and could sink to their lowest since 2010 at $1,100 an ounce as the US economic recovery gathers pace, consultancy Metals Focus said on Wednesday.
Weakness is likely to set in after an impressive start to the year, it said, when gold rallied to six-month highs. But a replay of last year’s 28 per cent plunge, triggered by the U.S. Federal Reserve’s tapering of extraordinary stimulus measures, is not on the cards. The consultancy also forecast that an eventual easing of tensions in Ukraine would add to a bearish trajectory for the market………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

It’s been almost 30 months since the gold bull hit the dizzy heights of $1900/oz back in August 2011, sending many of us into raptures. However, it has been a very different story since then with gold slipping to a low of $1180/oz in June 2013 before bouncing higher to almost touch the $1400/oz level.
Fast forward to today and we have gold trading at around $1310/oz level, having tested the June bottom around Christmas time 2013. Many believe that the bottom is now in and the bull has resumed charge, with the bears being exhausted. We would like to agree with them but we are still of the opinion that a challenge to the June lows could still lie ahead of us………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Gold is not a commodity – or at least, it is unlike all other commodities, according to Smith & Williamson fund manager Ani Markova. Markova says that of all the commodities, precious metals is the category most likely to succeed in the short to medium term, and investors should be positioning their portfolios to benefit from this curve. Hers is a contrarian view.
The recent problems in the Ukraine would usually be a catalyst for gold prices to rise – when political and economic issues threaten markets, investors usually run for the perceived safehaven of gold. During the depths of the eurocrisis, the global recession and when banks threatened to default in the UK, the gold price soared………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

China’s gold consumption in the first quarter of 2014 eased significantly from last year mainly because of reduced demand for gift-related gold bars, experts said on Tuesday.
In the January-March period, gold consumption was 322.99 metric tons, rising 2.45 tons or 0.76 per cent year-on-year. Gold jewelry purchases jumped 30.2 per cent to 232.53 tons, while gold bar consumption slumped 43.56 per cent to 67.95 tons, the China Gold Association said………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

The new Gold and Silver Mining focus report from Metals Focus notes that the Russian Federation surpassed the U.S. as the world’s No. 3 gold producer in 2013, while South Africa regained the No.5 slot from Peru as it increased output marginally by 1% over strike hit 2012, while Peru’s output fell back by 3%. The No.1 and No.2 slots were retained by China and Australia respectively.
World gold production grew by around 5% compared with 2012 and Metals Focus anticipates a smaller further rise in global gold output in the current year, although the effects of the lower gold prices of the past two years may start to kick in in 2015 and we could start to see a period of secular decline in new mined gold output from 2015: Even if the gold price recovers as it will take time to re-implement deferred mining projects, or re-open shuttered operations………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Silver prices are nearly unchanged on the year, underperforming the rest of the precious metals complex, and with its sluggish price action, options volatility levels are near multi-year lows. Having such low volatility is unusual for silver, and one analyst said it’s a situation that’s unlikely to last.
Mike McGlone, head of U.S. research for ETF Securities, said 30-day silver options volatility is around 12% as of Tuesday’s close, coming just off a 10-year low made during last week’s price drop………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

The price of platinum slid and sister metal palladium sank nearly 3% an ounce on Wednesday after conciliatory words from Russia eased East-West tensions surrounding the conflict in Ukraine.
On the Comex division of the New York Mercantile Exchange, palladium futures for June delivery – the most active contract – in afternoon trade exchanged hands for $798.30 an ounce, down more than $20 and near the day’s lows………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Strong growth in Asia production and increase in European Union (EU) production after two years of decline, will raise total production of steel by 3% to 1655 mn tons in 2014, according to MEPS International.
MEPS estimates a growth of 2.6% for EU region at 170 mn tons. Steel manufacturing in Europe, excluding the EU and CIS, should reach 40 million tonnes in 2014 - a rise of 3.1 percent, year-on-year. Our 2014 forecast for steelmaking in the CIS has been downgraded in this issue and now stands at 108.5 million tonnes. This represents a slight decrease from the previous year’s outturn………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Mainland iron ore miners face a rising challenge from increased overseas supplies of raw material for steel and some higher-cost capacity will probably be forced to close, according to BHP Billiton.
The gain in global production is being led by Australia and Brazil and their new, low-cost output will displace marginal suppliers in China, Michiel Hovers, vice-president of iron ore marketing at BHP, said at an industry conference yesterday. Vale, the world’s biggest producer, plans to raise output by almost 50 per cent by 2018, said its global marketing and sales director, Claudio Alves………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Asset managers using smart beta strategies for exchange-traded funds could benefit from a surge of interest from advisers whose clients want different ways to invest, a Moody’s report has said. The five-page report, Promising Futures: Smart Beta Product Evolution Will Benefit Certain ETF Providers, states that managers whose franchises are centred around factor-based smart beta will benefit the most.
Smart beta uses a broader range of methods, such as equal weighting and weighting by dividends, to offer potentially higher value to investors than ‘simple’ smart beta strategies………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Singapore Exchange is ramping up its suite of commodities products by offering nine new derivative contracts, a move which underlines the bourse’s aim to cement itself as the region’s leading commodities market.
SGX has announced today that over the next two months it will introduce options-on-futures for iron ore and freight, coking coal derivatives and thermal coal derivatives. The bourse’s new contracts aim to reflect physical commodities flows in the region, allowing producers and consumers of Asian bulk commodities to hedge their positions and trade on a single platform in the Asian time zone………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

The contribution of commodities sales and trading to Grupo BTG Pactual SA’s profit will rise in coming quarters, Chief Executive Officer André Esteves said on Wednesday, underscoring the synergies the unit has with the investment bank’s trading desk.
A move to extend the offering and trading of specialized products for fixed-income, equities and currencies to commodities since late 2012 was shown to be “the right decision because we leveraged our synergies in a number of key areas,” Esteves said in a conference call to discuss first-quarter earnings………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

A currency union between an independent Scotland and the rest of the UK would not require the countries to sign up to tough rules on tax and borrowing, or a banking union, a prestigious research body has concluded.
The findings, by the National Institute for Economic and Social Research, runs counter to the Scottish and UK government’s acceptance that such a fiscal pact and union would be necessary………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

For years, the Turkish government has stuck to a currency policy that treated the Turkish lira’s value as a matter of national pride. Prime Minister Recep Tayyip Erdogan himself explicitly described the lira’s appreciation as a government objective. In ambitious remarks in 2009, he declared: “The Turkish lira will reach such a level that we’ll deal in Turkish lira on international markets. We are taking steps in this direction.”
In 2010, he further said: “The depreciation of the Turkish lira is not something I welcome. I believe that a Turkish lira capable of influencing other currencies will serve better the economy.” Ever since, Turkey has sought to maintain the Turkish lira’s dignity………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

While Jamie Dimon and Warren Buffett express doubts about bitcoin, executives running the financial industry’s back offices are looking at mimicking the virtual currency’s methods of moving money quickly and cheaply.
FIS, a provider of systems used by banks to handle payments, is examining whether a public ledger like bitcoin’s could help securely move funds on existing networks, Fred Brothers, the firm’s chief innovation officer, said in an interview. Fiserv Inc. (FISV), a provider of technology for payments and accounts, is examining bitcoin’s use of encryption to ensure transfers are secure, said Marc West, a senior vice president………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

Investors could spend up to $1.1 trillion over the next decade on oil projects and assets that never reach production if governments enforce measures to curb climate change, a report by Carbon Tracker Initiative said.
The Carbon Tracker report, released on Thursday, could help funds and other investors avoid putting their money in oil assets that remain buried forever. The $1.1 trillion, around 15 percent of the decade’s total global oil and gas spending at current rates, is earmarked for projects to 2025 that require a market price of at least $95 a barrel to break even………………………………………..Full Article: Source

Posted on 08 May 2014 by VRS |  Email |Print

As Congress continues to drag its feet over curbing carbon emissions, the rest of the world isn’t waiting to come up with solutions to tackle climate change.
The latest call for action on climate change came Tuesday in a comprehensive White House report on the dire consequences of inaction. Citing the diverse economic impact of climate change — from oyster growers in Washington state to maple syrup producers in Vermont — the National Climate Assessment warned that the bill for decades of unchecked carbon emissions is already coming due………………………………………..Full Article: Source

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