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Commodities Briefing 20.Jun 2014

Posted on 20 June 2014 by VRS |  Email |Print

Commodities rose to a nine-month high as crude advanced after a government report showed U.S. inventories shrank and amid concern that violence in Iraq will disrupt supplies from OPEC’s second-largest producer.
The Standard & Poor’s GSCI Spot Index (SPGSCI) of 24 raw materials increased as much as 0.3 percent to 665.5475, the highest level since Aug. 29. The gauge added 2.4 percent this month and was at 665.3918 by 12:44 p.m. Singapore time today. West Texas Intermediate oil climbed as much as 0.5 percent in New York………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Those who loaded up on gold, oil and other commodities a few years ago in anticipation of raging inflation related to quantitative easing are likely very disappointed. As most investors probably know, commodities have trailed stocks pitifully in recent years. The Dow Jones-UBS Commodity Index (DJ-UBSCI), which tracks a group of 20 commodities, fell 6.5% a year for the past three years, while the S&P 500 gained 17.6% annually during the same period.
But one of the nice things about investing is just about everyone gets a chance to be right if they wait long enough… and commodities investors may finally be having their day………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

It was May 5, 2011, Osama Bin Laden had just been captured and killed, and general instability in the Middle East was on the uptick. Surface logic might dictate a spike in oil prices, and BlueGold Capital Management co-founder Pierre Andurand had an $8 billion dollar oil position that was set to soar in value assuming a rise in the price of crude.
The problem for Andurand, as Kelly reported, was that oil prices were declining sharply, so much so that the London-based Frenchman instructed his traders to sell out of their bullish position. As he put it amid a bloody day for his fund, “Sell a few hundred million worth! See how the market takes it.”……………………………………….Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

A panel of commodities traders have warned the CFTC it could hurt end users. Commodities experts have rallied against a plan by the US derivatives watchdog to limit speculative positions on commodities, arguing the rules would harm legitimate end users who use the products to hedge.
The US Commodity Futures Trading Commission (CFTC) hosted a public roundtable on Thursday comprising all five members of the agency, including the new chairman Timothy Massad. But experts at the roundtable argued that the commission does not understand the complexity of physical commodity hedging, and called for a hedging exemption for corporates and end-users to allow them to manage their risk effectively, free from unnecessary regulation………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Should we be worried about a major spike in oil prices—and summer gas prices—because of the sectarian conflict in Iraq? It’s an important question in the markets right now, because every $10 increase in the price of oil shaves 0.5 percent of global growth. I’m cautiously optimistic for the moment that the answer will be: no.
Oil, as I’ve written before, is amongst the most fear driven commodities. Supply and demand are supposed to rule markets, but every time there’s a major conflict in the oil rich Middle East—from the Iranian revolution to the Gulf War—prices go up about 30 percent higher than they should be, regardless of the facts on the ground………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Industrial commodities. The current increase in the price of oil is obviously related to the turmoil in Iraq, and concerns that ISIS will disrupt the country’s oil production. As a result, the CRB raw industrials commodity spot price index has been falling recently. The price of gold hasn’t budged much, suggesting that the risks of higher inflation attributable to the recent rise in oil prices are offset by the risks of a recession.
Stock prices. The S&P 500 was highly correlated with crude oil prices from 2008-2012. Since then, the two have decoupled, with stocks rising to new record highs since March 28, 2013, while the oil price has been moving sideways in a volatile range………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

The recent OPEC meeting was a non-event to the extent that most of the world media failed to show up to cover the meeting. No wonder. A roll over of the existing 30 million barrels per day (bpd) was expected and what happened was exactly like before in similar meetings.
For quite some time, the organization under the leadership of Riyadh, has managed to come with a new working formula devoid of typical political maneuvering — namely, freezing discussions on quotas, keep an eye on the demand and supply fluctuations and adjust whenever necessary by pumping more oil or cut some, and at the same time leave the price to be determined by the market………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

The European Union is almost on track to reach its goal of improving energy savings by a fifth by 2020 and may consider a significantly higher target for the next decade, according to a draft European Commission document seen by Reuters.
Energy efficiency has risen up the agenda in Europe as member states seek ways to reduce dependency on imported fossil fuels in the context of the Russia-Ukraine crisis, which has led to the cut-off of Russian gas to Ukraine………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

With tensions in Iraq escalating to the point that President Obama said he would deploy up to 300 military advisers to the country, investors sent prices of gold and oil surging in Thursday trading. Gold, the classic safe-haven trade, reached its highest point in two months as oil, whose Iraqi production could see pressure if ISIS (Islamic State of Iraq and Syria) militants move the conflict to the south of Iraq, surged to its highest price of the year.
Bolstered by a drop in the dollar and the Federal Reserve’s reticence to raise interest rates — not to mention the situation in Iraq — gold gained 3.7% in Thursday trading and surged to its highest price in two months. Gold futures, which hit as high as $1,322 an ounce during its regular trading session, settled at $1,314.10 for the day, its highest level since April 14. Spot prices, too, closed at $1,314 an ounce………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

A discussion by gold buyers and sellers across the market on ways to reform or replace London’s global price benchmark, known as the “fix”, will be held next month by the World Gold Council. The discussion comes as gold and silver fixes, along with other commodity benchmarks, face increased scrutiny by regulators in Europe and the United States following the London Inter bank Offered Rate (Libor) manipulation case in 2012.
WGC, a gold mining industry group, said on Wednesday bullion banks, refiners, fund firms, central banks and mining companies had been invited to the forum, with a first meeting scheduled for July 7 in London. Britain’s financial conduct authority will attend the discussion forum as an observer………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

The cost of building a mine has increased significantly over the last decade, from US$560 per ounce of gold production capacity in 2004 to more than $2,300/oz last year, says a new report by SNL Metals & Mining. Based on data from mines currently under construction, capital costs are expected to peak this year at almost $2,400/oz, according to an article by SNL metals analyst Kevin Murphy.
“The three-year-running-average capital cost of capacity follows behind the trend set by the gold price,” said the SNL report, Strategies for Gold Reserves Replacement. “When gold prices increased sharply in 2006, producers responded by approving construction of more capital-intensive projects, which began at earlier gold prices.”……………………………………….Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

India is now, according to The World Gold Council (WGC), the world’s second biggest consumer of gold, having been surpassed by China. However, India remains a major player in the gold market. In this article, I will look at the importance of India in the gold market.
In India, gold is religion. India’s love affair with gold is timeless, spanning centuries, even millennia. Roman historian, Pliny, lamented some 1800 years ago how India, the sink of precious metals, was draining Rome of gold, an appellation that resonates even today. Indians see the metal as a symbol of purity, prosperity and good fortune………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

The market for rare earth metals represents the ultimate paradox. Rocketing prices a few years ago sent manufacturers scrambling for lower-cost alternatives, causing the bottom to fall out of virtually every rare earth mining stock.
The weakest junior miners were forced to shutter their doors. But a 60% spike in praseodymium prices is a surefire signal that demand is back. Hold your applause, though…While much higher prices make the handful of surviving rare earth explorers immensely attractive, another pricing panic could simply lead to demand destruction all over again………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

China’s imports of copper and iron ore may drop due to an alleged financing scandal, as banks withhold credit and customs officials tighten checks on incoming shipments, metals traders say.
Western banks are looking into allegations that a Chinese trading company illegally pledged metals as collateral to more than one lender. The operator of Qingdao Port, the eastern Chinese port where the metals are stored, has confirmed that Chinese authorities are investigating allegations of fraud relating to stockpiles of metals………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Demand for refined copper will overtake the current surplus by 2019, says Zimtu analyst Derek Hamill. “Copper supplies are likely to exceed demand in 2014 and 2015; we further expect this situation to persist for 2016 and 2017,” Hamill writes in a report titled Multi-Year Global Copper Market Outlook.
Copper demand is intensifying due largely to continued urbanization and industrialization in Asia, particularly China and India. Hamill also notes that copper mining economics are “changing dramatically” because of rising operating costs, higher regulatory hurdles and declining grades, and that should increase prices………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Commodities in general have been under pressure for the last couple years. This can be seen by looking at the GCC Greenhaven Continuous Commodity ETF which holds a basket of resources. The weekly chart has formed a bullish bottom pattern, and as of last January it looks as though it’s now building a basing pattern.
Overall commodities are in the very early stages of a stage 1 basing pattern and it looks as though it will be a few more months before any significant breakout will occur. But there could be some early entry points if you know what to look for… A few days ago I talked about how commodities tend to perform well near the end of a bull market in the United States stock market. I also pointed out which hot index was going to benefit from this………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

With gold futures up 2.3% and over $1,300 per troy ounce today, gold exchange traded funds, both the physically-backed and equity-based varieties, are garnering plenty of attention.
However, silver ETFs are not playing second fiddle to gold funds. The iShares Silver Trust and the ETFS Physical Silver Shares are up 4.6% and 4.8%, respectively, compared to a 3% for the SPDR Gold Shares. Volume in SLV and SIVR is already more than double the daily averages for both ETFs………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

You might have missed this one, but it’s notable. Online investment management company Covestor said this week it is building portfolios of ETFs for free. Look out, smalltime financial advisors!
The wall of investment-management fees has been crumbling for some time. Wealthfront, another firm offering basic, pre-set ETF portfolios, last year said it would manage up to $1 million for 501(c) nonprofit organizations for free. Fees after the first million: 0.25%. The firm recently surpassed $1 billion in assets under management………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

It looked an ambitious project when the bourses of Paris, Amsterdam and Brussels joined forces in 2000 to create a pan-European union of stock exchanges. They then acquired the London International Financial Futures and Options Exchange (LIFFE) and Portugal’s Bolsa de Valores.
After seven years of independence, Euronext disappeared into the maw of the New York Stock Exchange, which in turn was bought by IntercontinentalExchange (ICE) in November 2013. ICE has now spat out Euronext, minus LIFFE and its derivatives business. Defining its new role is almost as big a challenge as Euronext faced in the heroic days of its founding………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Germany’s top financial regulator recently investigated internal controls at Deutsche Bank AG’s commodities unit, according to a person familiar with the probe. The regulator, BaFin, sent a letter to the bank outlining its findings in April, this person said. It’s not known whether the regulator found deficiencies in the bank’s processes or instructed the bank to make any changes. It is also not known what prompted the investigation.
Deutsche Bank AG said in December that it would exit most of its commodities trading business. Changes to bank regulations have made it tougher for banks to generate profits from commodities trading………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Media discuss China’s role in international finance after a key currency clearing deal with London. The Bank of England on Wednesday appointed one of China’s “big four” banks as the Chinese currency clearing bank in London. The announcement was made as Premier Li Keqiang signed various business deals with the UK during his visit.
Lu Zhengwei, chief economist at the Industrial Bank Co, tells the Global Times the deal “will help the yuan gain recognition before it expands its presence in the area [EU]“. Echoing similar views, the Southern Metropolis Daily says the deal is a “first step towards internationalisation of the yuan”………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

The Swiss National Bank on Thursday reiterated its pledge to intervene in the foreign-exchange market to prevent the Swiss franc from strengthening beyond 1.20 to the euro, saying the limit remains the “right tool” to curb upward pressure on the currency.
The Zurich-based central bank, which introduced the minimum exchange rate in September 2011, also held its target range for the three-month London interbank offered rate, or Libor, a key interest rate, at 0.0% to 0.25% for the 12th successive quarter………………………………………..Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Uncertainty over the European Commission’s preferences for a 2030 energy efficiency target continue. A leaked impact assessment suggests it favours a binding EU-level reduction of at least 30 per cent with no national targets. But commission President Jose Manuel Barroso and energy commissioner Günther Oettinger are said to favour a non-binding 27 per cent goal. See paragraph five onwards for updates.
Does Vladimir Putin secretly want you to get your walls insulated? He certainly seems to be doing his best to encourage strong EU energy efficiency legislation. But if the EU does raise its ambition on energy efficiency as part of its 2030 climate and energy package, UK energy saving policies would also have to become much more ambitious. How big a task would it be to meet an EU energy saving goal, and how would the UK go about it?……………………………………….Full Article: Source

Posted on 20 June 2014 by VRS |  Email |Print

Southwest China’s Chongqing launched its carbon trading market on Thursday, marking the operation of all seven approved pilot schemes in the country. Sixteen transactions worth more than 4.45 million yuan (723,577 U.S. dollars) and involving gas emission quotas of 145,000 tonnes were reached within half an hour after trading started at 9:30 a.m.
A total of 254 companies with carbon dioxide emissions exceeding 20,000 tonnes each year were selected for the trading market. The government will impose emission quotas for them annually………………………………………..Full Article: Source

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