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Commodities Briefing 01.Jul 2014

Posted on 01 July 2014 by VRS |  Email |Print

After years of losses and investor pessimism the sun finally shone on commodities in the first half of 2014. The Dow Jones-UBS index, which tracks the prices of 21 commodities, delivered total returns of 7.1 per cent, outpacing US equities, 10-year Treasuries and high yield corporate bonds.
But the clouds could quickly gather again if this year’s big improvement in performance fails to entice long-term investors back into commodities, say analysts. “There’s a lot resting on what happens in the second half of this year, in terms of the long term viability of commodities [as an asset class],” says Kevin Norrish, commodities strategist at Barclays………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

The nearly $9 billion (CHF8 billion) fine imposed on French bank BNP Paribas could have a major impact on the Geneva commodities sector, according to one expert. The violations arose mainly from the bank’s Geneva-based trade finance unit that has greased the wheels of the explosive growth of commodities trading in the region.
Trade finance is a specialist banking service that provides credit to traders. The funding is vital for plugging the financial gap between traders buying a commodity in one part of the world and receiving payment once the goods have been successfully shipped to another country………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

The prices of Australia’s export commodities headed lower in June for the sixth month in a row. That left the RBA’s commodity price index, in foreign currency terms, at its lowest level since March 2010, and 32 per cent below its July 2011 peak.
The biggest contributor to the 1.8 per cent fall in June, a repeat of the decline in May, was a drop in the price of iron ore, the RBA said. Rural commodity prices also fell, but the price of base metals rose. The RBA’s price index is based on preliminary estimates of prices received for bulk commodities in recent months………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Australia still has the Union Jack on its flag and the British queen on its coins, and was once described as the US “deputy sheriff” in Asia, but the real dependency relationship is with China. Nowhere is this reality made more clear than in the quarterly outlook by the Bureau for Resources and Energy Economics (BREE), the government agency responsible for commodity exports and other forecasts.
In the 2002-03 fiscal year, the biggest buyer of Australian resource and energy exports was Japan, which took 15% and 39% of the respective totals, according to BREE’s Resources and Energy Quarterly published June 25………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Are mispricing and the opacity of commodities trading in Switzerland contributing to Africa’s underdevelopment? The world’s poorest continent remains heavily dependent on natural resources and so is extremely vulnerable to manipulations in the price of the commodities it extracts and exports, with very real consequences for its economies.
Switzerland is a global hub for trade in commodities, and so exerts a significant influence on Africa’s development. But critics say the way commodities are traded through the country is shrouded in opacity and this ultimately deprives developing regions such as Africa of revenue………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

The oil price could spike to $150 per barrel briefly if the conflict in Iraq hits operations in the country’s major southern oil fields, Société Générale (SocGen) has warned. A report by the bank noted that this kind of supply shock could affect up to 2.6 million barrels per day of Iraqi oil exports, CNBC reported.
A disruption of this scale could then spark a co-ordinated release of strategic oil reserves by member states of the International Energy Agency, although SocGen acknowledged this was an unlikely event. Meanwhile, Saudi Arabia could also put more oil onto the market to mitigate the impact on the global economy………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

The growth in oil production in the United States is forecasted to cause financial strain on oil exporters by lowering oil prices; as Edward Morse put it, “Lost market share and lower prices could pose a devastating challenge to oil producers dependent on exports for government revenue.”
Such statements are common, but they are not very credible. Even if we assume that oil prices will fall (they have not yet), the financial impact on oil exporters will vary—and many oil exporters are much better prepared to cope with lower oil prices than in the 1980s………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

OPEC’s oil output has fallen in June from May’s three-month high, a Reuters survey found on Monday, as fighting in Iraq closed its largest oil refinery and technical problems slowed its southern exports.
The slight decline underlines how unrest and outages in the Middle East and Africa are taking their toll on OPEC supply, just as the International Energy Agency is highlighting a greater need for OPEC oil in the rest of the year………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

It stands to reason that one of the effects of the turmoil in Iraq will be a change in oil prices. Indeed, the violence in OPEC’s second-largest producer has already sent oil prices to 10-month highs.
A recent report from the International Energy Agency (IEA) put it well: “While Iraq’s production is huge, so are the political hurdles it is facing — and nothing provides a clearer example of that risk than the military campaign.” Yet this is no time to panic. For one, Iraq is not the only dark cloud hovering over the world oil market………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Gold climbed to a three-month high on Tuesday as a softer dollar and escalating violence in Iraq increased the metal`s appeal, boosting inflows into the top bullion-backed fund.
Spot gold climbed to USD 1,332.10 an ounce, its highest since March 24, and was flat at USD 1,327.41 by 0240 GMT. It gained nearly 1 percent in the previous session. The metal posted its second straight quarterly gain for the quarter that ended on Monday, and June was also its best month since February………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Barrick Gold hit $55 per share and is now at $18, a decline of 67%! Likewise, Newmont’s high is $70, and it now trades hands near $25, down 64%. Goldcorp is “only” down 50% and Freeport-McMoRan is down about 40%. Freeport is also a very large copper producer, so that has helped it outperform those other pure-play gold majors.
With many of the majors’ stock prices down by a half to two-thirds, the first question to ask is how much did the underlying gold price decline? From about $1,900/oz. to today’s roughly $1,300/oz., gold is down about 30% from its 2011 peak. Yet, Barrick and Newmont, off by more than 60% each, are down twice as much as the gold price. How could that be?……………………………………….Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Gold remains elevated above $1300 per ounce and provides a selling opportunity as prices are unlikely to sustain over a longer time frame. Barclays noted that gold prices still have the possibility of a slow return to $1370/85 per ounce levels. Price forecasts: Q2 2014:$1250/oz, 2014: $1250/oz.
Macro environment remains bearish despite recent gains on geo-political tensions whether it be Russia-Ukraine or Iraq. Barclays expects a rise in US payrolls this week by 250,000 which is higher than 217,000 of May………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

In a recent article, we explored the impact on the platinum and palladium markets of the five-month-long miners’ strike in South Africa and postulated that one reason the price did not respond robustly to the loss of supply – South Africa does after all supply some 40% of global platinum – was due to inventory levels held in European vaults.
Consider, for a moment, the loss of nickel ores from Indonesia over a similar time frame which has resulted in a 50% price increase to its yearly peak in May and is still some 30% above Jan 1 prices as of today………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Some investors are turning bullish on copper prices, brushing aside concerns sparked by a probe into the metal’s place in China’s financial system. Instead, these investors are focusing on a rebound in manufacturing world-wide, which they expect will boost copper demand broadly. Increasing consumption by factories will offset any decline in the use of copper as collateral to back loans as a result of the probe, these investors say.
China is the world’s biggest copper consumer and importer, though how much of the metal goes to manufacturers is unclear. Copper prices hit a four-month high on Monday. Futures have recouped almost all of their losses from early June, when news broke that Chinese authorities were investigating allegations that a trading company in the port of Qingdao took out numerous loans against the same stock of metal………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

“Zinc is to be the next big base metals play for investors,” said Scotiabank economist Pat Mohr Monday in the latest edition of the Scotiabank Commodity Price Index.
“A pick-up in China’s Flash Purchasing Managers’ Index for June to 50.8 from 49.4 in May and a broad-based improvement in U.S. industrial activity (+4.3% yr/yr, centered in autos, business equipment and materials) lifted market sentiment,” she observed……………………………………….Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

The commodities market and related exchange traded notes have been outperforming a slew of broad asset classes this year as investors turned to hard assets for diversifying their portfolios.
The Dow Jones-UBS Commodity Index, which follows 21 commodities, rose 8.1% this year, outperforming broad U.S. equities, 10-year Treasury bonds and high-yield corporate debt, reports Neil Hume for Financial Times………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Even as BlackRock Inc is set to amass $1 trillion in exchange-traded fund assets in its iShares business, U.S. retail investors increasingly prefer to send their money to low-cost leader Vanguard Group, highlighting a weak spot for the world’s biggest money manager.
With $998 billion in ETF money, BlackRock has more than the next contenders, Vanguard and State Street Corp, combined. But the company has struggled to compete with Vanguard, known for its investor-friendly low-cost investing, for Mom and Pop’s nest eggs. Retail investors now account for more than half of the $1.8 trillion in ETF assets under management in the U.S, according to consulting firm PwC………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Hedge funds ended a run of bearish positioning on agricultural commodities as a massive switch in sugar exposure, towards bets on price rises, trumped further downbeat holding on grains.
Managed money, a proxy for speculators, raised its net long position in futures and options in the top 13 US-traded agricultural commodities, from cotton to cattle, by approaching 55,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Technically, all transactions using digital or alternative currencies had been illegal in California until Monday. California lawmakers approved a bill Monday that lifted an outdated ban on the use of bitcoin and other alternative currencies, as more states seek to clarify and revise virtual currency laws.
AB 129, which Governor Jerry Brown had signed on Saturday, will ensure that “various forms of alternative currency such as digital currency” will be legal in purchasing goods and transmitting payments, according to the bill’s text. The bill reflects the growing use of digital currencies, revising Section 107 of California’s Corporations Code that prohibits use of “anything but the lawful money of the United States.”……………………………………….Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Some businesses have reportedly refused to accept new bank notes circulated in Kuwait from Sunday. Customers have complained that some sales people were unaware that the new plastic notes had been introduced, blaming a lack of awareness and preparation.
Kuwait joined only a handful of countries in the world to use the more durable banknotes, which are made from polymer and last significantly longer than paper currency because they are resistant to heat, water, humidity and dust………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Louis Redshaw, the former head of carbon, coal and iron ore trading at Barclays investment bank, has launched a London-based advisory firm to help companies manage their risks stemming from carbon trading.
Redshaw Advisors, which will also provide carbon finance for client firms, is banking on a return to growth for the world’s emissions trading markets, many of which have been hit by low prices and falling demand in the wake of the global economic crisis………………………………………..Full Article: Source

Posted on 01 July 2014 by VRS |  Email |Print

Clive Palmer’s extravagant, duplicitous foray into the carbon tax debate highlights the gullibility, naivety and inflexibility of the Greens and their dogmatic fellow travellers on the issue of what to do about climate change. In this case, the well-understood principle of “overshoot and collapse” refers not to former US vice-president Al Gore’s much-hyped environmental tipping points, but to the political overreach of the global-warming true believers.
The Greens, who refused to sign up to Labor’s emissions trading scheme, and Labor, which imposed the world’s most expensive carbon price on the nation, have only themselves to blame if, as seems likely, Australia is left without a meaningful carbon abatement policy………………………………………..Full Article: Source

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