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Commodities Briefing 15.May 2014

Posted on 15 May 2014 by VRS |  Email |Print

Commodities as an asset class remain appealing as the global economic recovery extends into 2015, according to Goldman Sachs Group Inc.
The bank raised its 12-month allocation for commodities to neutral from underweight, analysts led by Jeffrey Currie and Damien Courvalin wrote in a report dated yesterday. They increased their three and six-month price forecasts for nickel and rolled the 12-month predictions for aluminum and zinc forward to higher levels………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

While the world has been writing epitaphs for Wall Street banks’ commodity trading desks, Wall Street has been counting its ­profits. Banks that held firm amid an industry pullback from energy, metals and agricultural markets – and even some that beat a partial retreat – mined a rich seam as North America’s coldest winter in three decades drove up energy prices, results show.
Citigroup, Goldman Sachs, Morgan Stanley and Macquarie flagged commodities trading as a bright spot in first-quarter earnings. Coalition, a consultancy which tracks banks’ performance, estimates revenues for the top 10 banks in commodities rose 20 per cent year on year in the three months to March………………………………………..Full Article: Source

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Senators are fearful that high-frequency traders are getting an unfair advantage and endangering the stability of the U.S. futures market, the financial exchange for trades of commodities like corn and gold. But industry experts warn against rushing to impose new regulations.
“These markets have changed dramatically over the years – for a 21st century market, we need a 21st century regulator,” said Sen. Debbie Stabenow, D-Mich., who called a hearing of the Senate Agriculture Committee she chairs to consider the issue………………………………………..Full Article: Source

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The price of U.S. oil climbed above $102 a barrel Wednesday amid ongoing tensions in Ukraine and an industry report showing crude stocks falling at a key U.S. storage hub. Much of the focus in energy markets remains centered on Ukraine, where the government has agreed to launch talks on decentralizing power within the framework of a European-backed peace plan.
However, pro-Russian insurgents who have declared independence in two eastern regions have not been invited. On Tuesday, officials said six soldiers were killed and nine injured in an ambush by the insurgents………………………………………..Full Article: Source

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Fracking might seem like a bright, inevitable future for plentiful, affordable natural gas. But it’s actually only one possible future. In places as diverse as France, Bulgaria and Quebec, where fracking is illegal, the future of natural gas is something else: a future of imported dependence. And that suits most of the world’s most powerful gas-producing nations just fine.
Remember that for some countries, such as Russia, gas is power. Not just electrical or transport power, but political power. These are places that had mapped out a future where natural gas was a central part of their economic sustainability and growth. Gargantuan sums of money are riding on the future of natural gas, trillions of dollars all told………………………………………..Full Article: Source

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As the US looks for levers to exert influence over Russia, energy is an obvious choice. Oil and gas generate more than 50 per cent of Russian federal government revenues, and Rosneft and Gazprom, the country’s two largest energy companies, are both state controlled.
The problem is that energy binds Russia to the rest of the world in a codependent relationship. Consumers – especially in Europe – need Russian oil and gas as much as Russia needs the revenue they bring in………………………………………..Full Article: Source

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For a nation where gold investment and ownership matters so very much, politicians in India have gone awful quiet about its de facto ban on gold imports during the current national elections, writes Adrian Ash at BullionVault.
Finally ending in Varanasi on Monday after four weeks touring the country, India’s elections are widely expected to land Bharatiya Janata Party (BJP) leader, Narendra Modi the prime minister’s job. The gold and jewelry industry in India – former world No.1 consumer nation, but with barely an ounce of domestic mine output – last year sided with Modi, and Modi sided with the two-million or so gold industry workers………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Is the recent rebound in gold too good to be true? After falling hard in 2013 – posting a decline of 28% – the precious metal managed to claw its way upwards to revisit $1,300 an ounce. Many analysts began to believe that the yellow metal was about to rally. As such, funds like the iShares Gold Trust once again saw inflows.
But some big-name strategists are saying that investors shouldn’t be buying into the bling just yet. There are more declines and better prices around the corner. And when they hit, investors should be buying all they can………………………………………..Full Article: Source

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Goldman Sachs reiterated its bearish view on gold and copper Wednesday, but raised its forecasts for a host of other base metals, saying improved U.S. economic activity will weigh on gold, although the Ukrainian conflict may delay the move of weaker gold prices.
“While we remain bearish on gold, escalating geopolitical tensions in Ukraine have offset stronger U.S. macro data,” Goldman said. The firm said it continues to see gold prices by year-end at $1,050 an ounce. The silver-price forecast remains at $17.50 an ounce………………………………………..Full Article: Source

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Following Wednesday’s news that the London silver fix is set for the chopping block in August, the question now is, could gold be next? CPM’s Jeff Christian says “it’s a possibility.”
However, before looking at the London gold fix, Christian said, in an interview with Kitco News’s Daniela Cambone, regulators and organizations like the London Metals Exchange, London Bullion Market Association will have to scramble to fill the potential void in the silver market………………………………………..Full Article: Source

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After 117 years, London’s silver fix will be set for the last time on Aug. 14. The demise of the fix, which is being scrutinized by regulators as part of a broader probe of financial benchmarks, leaves jewelers, miners and investors in need of a new way to price the metal for the first time since 1897.
“We will need to find a substitute,” said Lenic Rodriguez, chief executive of Canadian silver miner Aurcana Corp.”The silver price is very speculative and volatile so for accounting and planning purposes, the benchmark is good.”……………………………………….Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

The future of a 117-year-old global benchmark determining the price of spot silver is in doubt after its administrator said it would cease operations. The London Silver Market Fixing said it would stop operating the process from 14 August. However, it said a rival firm was interested in taking it over.
It comes after Deutsche Bank, which with HSBC and Bank of Nova Scotia sets the price, said it was quitting. Deutsche Bank said in April it would leave the process, but said on Wednesday it had postponed its departure until 14 August………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

The April 2011 silver price spike was NOT a bubble. The January 1980 silver price blow-off was a bubble, and it was materially different from the April 2011 price spike. I fully expect a bubble in silver – someday – but that day is months or years into the future.
Prices for food, energy, silver and gold are going up – broadly speaking – along with the national debt, money supply, and similar measures of debt and credit. Since we KNOW national debt will increase for the foreseeable future, plan on the prices for food, energy, silver, and gold increasing similarly………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

The precious metals complex looks a little discombobulated lately, with each metal playing from a different page of sheet music. Gold, after hitting a six-month high of $1,391 mid-March, quickly lost over $100 in two weeks to below $1,280 by the start of April, and has been stuck in a sideways range since then.
Silver, after hitting a four-month high of $22.04 at the end of February, has been dropping ever since, losing more than 11% to its current $19.50………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

The markets may be sitting at near all-time highs, but they’re not the only asset class in town. You might not realize it, but the metals have been booming recently. Jonathan Hoenig of CapitalistPig hedge fund has been on this trade for months, and he still says there’s room for more upside.
In Hoenig’s mind there’s a number of reasons why the metals have been rallying recently, not the least of which is instability in Ukraine. But more broadly, the strength in stocks is helping base metals, Hoenig says, but what makes them a great diversified investment is that they are not totally correlated to stocks and precious metals like gold and silver………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Despite a recent recovery in London Metal Exchange copper prices, market analysts were still bearish this week on the metal’s price for the rest of this year, based on factors such as a surge in supply and a weak Chinese construction sector.
Analysts at Goldman Sachs forecast copper prices would sink to $6,200/mt by the end of the year, compared with a price at $6,845/mt as of early Wednesday trading………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

A new gold-backed exchange-traded fund launching this week boasts a unique characteristic: individual investors can take delivery of physical gold — in small bars or coins — in exchange for shares of the Merk Gold Trust.
Set to start trading Friday under the ticker OUNZ, the Trust, at first, seems similar to other exchange-traded funds that hold gold bullion in the form of bars — most notably the world’s largest gold-backed ETF, the SPDR Gold Trust. But Merk Investments refers to its offering as a “deliverable gold ETF” and is betting that it’s filling a previously unmet need………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Volatility is at multi-year lows for the Euro, yet the EUR/USD–and by extension the CurrencyShares Euro Trust–is very close to a major breakout point, as is the Yen. The Canadian and Australian dollars are seeing an uptick in volatility, compared to a year ago, and have also begun significant and potentially long-term trends.
Currency trusts provide a way for non-forex traders to participate in these moves, in an asset that trades like a stock………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Clean or renewable energy stocks have seen choppy trade since a couple of months as investors are fleeing high growth and high beta stocks on valuation concerns and profit-taking activity.
While the sluggish trend that stemmed from the broad sell-off could continue in the near term, the long-term outlook seems bright. This is especially true as global warming and high fuel emission issues are leading to rising popularity of clean energy sources……………………………………….Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

US dollar has become stronger on economic recovery expectations but also on worsening scenario in Germany and Eurozone. The Zew Indicator of Economic Sentiment fell 10.1 points to 33.1 points (historical average 24.7 points). The economic expectations for the Eurozone has also lost ground in May. The respective indicator declined by 6 points and stands at 55.2 points. The indicator for the current economic situation in the Eurozone gained 4.9 points reaching a level of minus 25.6 points.
Zew Institute noted that the decline of economic expectations should be seen against the backdrop of astorng economic development in the first quarter of 2014. Already there are indications that Germany will no tbe able to maintain this fast pace of growth………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

George Osborne reinforced his opposition yesterday to a currency union with an independent Scotland and warned Alex Salmond that the alternative of using the the pound without an agreement would be “disastrous” for the new nation’s financial services sector.
In a bullish performance in front of a Westminster committee, the chancellor defended his decision to rule out a sterling zone………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

When Nigeria announced recently that it had become Africa’s biggest economy, you could be forgiven for thinking that oil was the only reason. After all, Nigeria is the biggest oil producer in Africa. What many people didn’t realize was the growing role of agriculture in boosting Nigeria’s economy – and the lives of its large rural population.
I’ve seen close-up how hard it can be to succeed in agriculture – not only when I was president but also during the 35 years that I have been a farmer myself. So I’m proud that Nigeria is emerging as a leader in agricultural transformation in Africa………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Goldman Sachs kept a downbeat view on prospects for agricultural commodity prices even as it raised expectations for raw material values as a whole, but acknowledged that it may prove too gloomy on softs and livestock.
The investment bank raised to “neutral” from “underweight” its rating on commodities, saying that prospects for further price falls had been diminished by a recent erosion in values and the prospect of strong economic growth in countries such as the US………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Prices for European Union pollution rights are the most volatile among major commodities from oil and gold to wheat, contributing to a trading exodus from the world’s biggest carbon market.
The CHART OF THE DAY shows price swings surged to the highest in nine months on April 2, with prices falling more than 10 percent four times this year. Carbon trading on the ICE Futures Europe exchange in London plunged 37 percent last month in the biggest decline since 2011………………………………………..Full Article: Source

Posted on 15 May 2014 by VRS |  Email |Print

Emissions of greenhouse gases from installations participating in the EU Emissions Trading System (EU ETS) are estimated to have decreased at least by 3% last year, according to the information recorded in the Union Registry.
Climate Action Commissioner Connie Hedegaard said: “The good news is that emissions declined faster than in previous years even as Europe’s economies started to recover from the recession. However, there is still a growing surplus of emission allowances that risks undermining the orderly functioning of the carbon market………………………………………..Full Article: Source

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