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Commodities Briefing 05.Jun 2014

Posted on 05 June 2014 by VRS |  Email |Print

From the middle of the last decade, large banks world-wide got involved in business far removed from their traditional lending activity – trading in physical commodities. Currently, these banks are retreating from this activity. The shift is empowering commodity trading houses to consolidate their control over supply chains for food, oil and metals.
Commodity traders are rapidly expanding from the traditional intermediary business model of buying and selling, where margins are very thin, to “asset-backed trading models”, where they are investing in production, processing, and logistics………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

The Conference Board of Canada’s latest barometer of the economy shows Canada’s short-term outlook is becoming ever more dependent on commodities. The newest composite leading index for April rose by 0.4 per cent—twice the pace of March—but shows the trigger for growth was almost exclusively on the commodity export side.
Higher resource prices contributed to an eighth consecutive month of growth in the Toronto stock market, with the Bank of Canada commodity price posting the biggest gain in three years at 2.4 per cent………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Think interest rates are going to head higher soon with the Federal Reserve’s bond tapering program? Keep dreaming… The Fed is still buying tens of billions of dollars in bonds, which will continue to drive down rates. And the money supply is still increasing – just at a slower pace.
So the 10-year U.S. Treasury bond – which is yielding just under 2.5% – is bound to head lower still. Of course, the United States isn’t the only country seeing lower rates…The bond yield in Germany and France is actually more than 100 basis points below the United States’ 2.5%………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Global oil prices could go up by $15 per barrel in about 10 years, if the Middle East doesn’t invest more in its oil fields, the International Energy Agency says. The IEA also reports the world may find itself more reliant on Middle East investment for shale oil production.
If the Middle East fails to invest adequately in its oil fields, global oil prices could spike by an additional $15 per barrel in the 2020s. That comes from the International Energy Agency in a new report assessing global energy investment needs through 2035……………………………………….Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

The miracles of modern engineering and, specifically, fracking and deepwater drilling are rapidly changing the risk-reward assessments of petroleum investment. When OPEC members meet in Vienna next week, the organization is scheduled to offer its latest assessment of global demand and projected production. And closer to home, U.S. oil titans are aligning with Mexico’s Pemex to secure access to new crude oil.
As I reported in an earlier post, there’s good reason for Mexico’s newfound optimism and popularity. At the time, Pemex, the state-run oil monopoly and world’s fourth largest producer, had just discovered three deep-water deposits in the Gulf of Mexico, with an estimated 26.5 billion barrels of crude oil. And there’s no doubt about the high quality of that crude………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Attempts by traders to move benchmarks to protect digital derivatives contracts - as was seen in Barclays’ recent fine by the FCA - could be a routine occurrence, industry insiders have warned.
Last month, Barclays was fined £26m for failing to adequately manage conflicts of interest as well as systems and controls failings, after a former trader placed orders to influence the London Gold Fixing and avoid paying out on a digital exotic options contract on the price of the yellow metal………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Gold traders will keep track of the direction the U.S. dollar and euro take after the European Central Bank meets Thursday, as how the two currencies react will determine gold’s direction.
There’s some uncertainty about what the ECB will do because it has several options available to adjust monetary policy. General expectations among currency analysts are that the ECB will cut refinancing rates between 10 to 15 basis points and likely cut the deposit rate to minus 0.1%………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

China, the world’s largest bullion consumer and producer, is considering allowing the use of offshore yuan in gold trading in the Shanghai free-trade zone.
The Shanghai Gold Exchange, the country’s biggest physical bourse for the metal, is proposing to let holders of offshore yuan accounts trade the three contracts it will offer, including bullion of 99.99 percent purity, according to a draft of the plan obtained by Bloomberg News………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Spot gold prices in India are hovering around Rs. 27,000 per 10 gm, the lowest in over four months. The catalyst for the fall has been the recent easing of some import restrictions from the Reserve Bank of India. Also, traders anticipate a further fall in gold prices if the Narendra Modi government decides to rewind some of the import restrictions imposed by the earlier government.
Easing of Import Restrictions: The Reserve Bank of India last month removed some curbs on imports of gold. This led to a fall of Rs. 800 in gold prices on May 22, its biggest one-day fall this year. The RBI expanded the number of private agencies that can import the precious metal while also allowing banks to provide gold loans to the sector………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Silver could be poised to benefit from a strong upward move, according to a report by ETF Securities, although some expect gold to outperform. ETF Securities argues that increasing demand, such as a 17 per cent year-on-year jump in China, and falling supply means prices could be set for a strong upward move.
The firm sees silver as a leveraged play on gold and expects investors to opt for this tactic, due to its above-ground scarcity in comparison to the yellow metal. Silver supply has declined in the past year, despite improvements in mining, after the recycling rate dropped to its lowest since 1999………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

I’m getting increasingly worried about silver. Just three years ago it launched itself majestically towards the $50 mark like a rocket-powered astronaut. Ever since it’s been lurching about like a directionless drunk.
Now – and not for the first time – it’s staring over the precipice at $18. The question is – it is going to topple over? Silver – a great investment story, but never quite delivers……………………………………….Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Palladium has turned out to be a standout metal in recent days and has outperformed other precious metals, especially gold and silver which are steadily falling. While strong demand and weak supply have combined to push palladium prices to new highs, the performance of platinum has been somewhat weak.
Platinum prices fell, but surely not as much as that of either gold or silver. If anything, the price differential between platinum and gold is widening and currently stands at around $200 an ounce. Prolonged strike in South Africa from early this year has provided support from the supply side to the two industrially-oriented precious metals………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

The iron ore price bounced back overnight as Chinese steel mills dipped into the market, but observers are not convinced the bulk commodity has found its bottom. The spot price for iron ore jumped 2.2 per cent to $US94.60, moving further away from a 20-month low hit on Friday. The commodity is still down nearly 30 per cent since the start of the year.
The spot rise came on the back of cargo purchases from Chinese mills, traders said. The purchases remained relatively small due to the oversupply of iron ore in May………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Copper prices are expected to rebound on the international market on the back of increased activity in the construction and utility sectors in China and the United States. Stanbic Bank managing director Charles Mudiwa said the demand for copper in China and the USA will require Zambia to increase its copper production.
He, however, said increased copper production to meet the growing demand in China and the USA will depend on reliable electricity supply………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

If you want to trade in and out of gold, the highly liquid SPDR Gold Shares (GLD) is the right choice. It sees $700 million of volume a day. If you want to hold for a while, the expense ratio matters more than trading volume, and iShares Gold Trust (IAU) is a better deal. The iShares product, though, changes hands at the rate of only $25 million a day.
Our ten-year holding cost reflects both expenses and the bid/ask spread. (Securities lending, important in portfolios of small-company and foreign stocks, doesn’t play a role in commodity funds.) Only one currency portfolio qualifies for the cheap-ETF rankings (maximum expense ratio, 0.4%)………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

2014 marks the fifth year of the current bull run, as markets try to extend their winning ways for a sixth consecutive 12-month stretch. Just last month, the S&P 500 cracked 1,900 for the first time, a major psychological level that a number of analysts took as a bullish sign.
The year as a whole, however, has been relatively rocky, with equities struggling to maintain a definitive direction. This has led to a resurgence in interest in commodities and fixed income, two asset classes that mainly sat on the sidelines for the market run-up……………………………………….Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

While traders lament low and stagnating volumes in equity products, at least trading activity has been robust and interesting in recent sessions in both Commodities and Fixed Income markets.
Both DBC (PowerShares DB Commodity Tracking, Expense Ratio 0.93%) and GSG (iShares GSCI Commodity Indexed Trust Fund, Expense Ratio 0.75%) have seen recent outflows in the $200 million range which is not huge, but notable. Both funds are off recent highs considerably (DBC about 3%) inside of two months trading, and both funds are now in danger of trading at their 200 day Moving Averages………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

One of the biggest providers of exchange traded funds has entered the race to develop a new global silver price benchmark when the 117-year-old London silver fix is disbanded in August.
ETF Securities, which pioneered gold-backed ETFs and oversees $19bn in assets, said on Wednesday that it had submitted a detailed proposal to the London Bullion Market Association (LBMA), and was consulting market participants………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Who’s got the best deal in exchange-traded funds? If it’s large-capitalization U.S. stocks you want, there’s no better choice than the Schwab U.S. Broad Market index fund (ticker, SCHB). Putting $10,000 into that for a decade will cost you only $49.
You want long-term bonds? The cheap product is from Vanguard Group, whose Long Term Bond Index fund (BLV) costs $171 over a decade for a $10,000 investment………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

The commodity markets regulator has launched a fresh attempt to rebuild volume on domestic commodities exchanges, after their credibility was dented by last year’s failure of the National Spot Exchange.
The regulator said it had asked its capital market counterpart to require companies to disclose their commodity trading positions on domestic futures markets, seeing this as a way of boosting the credibility of those markets, in turn boosting activity. Volumes at the commodity exchanges tumbled after NSEL, an exchange run by promoters of the Multi Commodity Exchange defaulted on payments………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Citi has won the award for best commodity derivatives house from Energy Risk, the highly-respected commodities publication. The Energy Risk Awards celebrate excellence across the global commodity and energy markets and are determined by a judging panel consisting of the Energy Risk editorial team and external industry experts.
“We are delighted and honoured to have been recognised by Energy Risk with this award. It underlines the progress that Citi has made in the last several years in building a commodities business that is not only an industry leader but also the right business for Citi in the new regulatory environment,” said global head of commodities Stuart Staley………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

The European Commission and the European Central Bank have approved Lithuania’s application to join the euro currency union, positioning the Baltic state to become the bloc’s 19th member.
Lithuania is set to adopt the euro currency in 2015, following a decision by the European Commission and European Central Bank on Wednesday. The largest of the Baltic states and the last one to join the euro, Lithuania has managed to fulfill all of the requirements of joining the common currency, from tempering inflation to keeping its government deficit in check, the Commission said………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

The Brazilian government on Wednesday took steps that could shore up its sinking currency, in a move possibly aimed at controlling inflationary pressures. Brazil’s Finance Ministry reduced the reach of its 6% IOF financial-transactions tax in a bid designed to encourage local firms to obtain financing abroad. The IOF now applies only to international loans and bonds with maturities of 180 days or less, down from 360 days.
Analysts say the measure will give companies, particularly smaller ones, greater ability to raise cash abroad. In bringing foreign currency into the country, they’ll create more demand for Brazilian reais………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

America’s push to cut carbon-dioxide emissions is partly intended to spur other large emitters—especially China—to cut their own emissions more aggressively to tackle climate change. But will it work?
Other countries already have national policies aimed at cutting carbon-dioxide emissions, and they are much further along than the U.S. The world’s largest system for trading emission allowances is operated by the European Union, which covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines. And some countries have implemented carbon taxes………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

EU carbon dioxide allowances are expected to trade in a range of Eur5-10/mt ($6.80-13.60/mt) on average in the period to 2020, according to a majority of carbon market participants in a survey released May 28.
“In Europe, while price expectations for the EU Emissions Trading System continued to fall in this year’s survey, the rate of decline is slowing, suggesting that some participants see the downward trend stabilizing,” said the International Emissions Trading Association, which commissioned the survey………………………………………..Full Article: Source

Posted on 05 June 2014 by VRS |  Email |Print

Interstate emissions trading programs are likely to provide the most cost-effective carbon dioxide reductions under power plant standards proposed by the Environmental Protection Agency, Administrator Gina McCarthy said June 3.
“Clearly it’s much more cost effective with other states,” she told Bloomberg reporters and editors. “So it would not surprise me if states took a close look at whether they can marry with others, whether it’s a cap-and-trade program or other mechanism, I don’t know.”……………………………………….Full Article: Source

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