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Commodities Briefing 15.Jul 2014

Posted on 15 July 2014 by VRS |  Email |Print

What can you do in your business about commodity price volatility? I’ve written recently about Commodity Prices: Basics for Businesses That Buy, Sell or Use Basic Materials and Commodities Prices: Why Do They Shoot Up And Then Collapse? If commodities are important to your business, can you hedge away your challenges? And if you can, should you?
Investors may find the underlying analysis useful as they think about how they trade. Businesses can have basically three relationships with commodities: producers, users or traders This article is about producers; the others relationships will be covered in subsequent articles………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

The rally that started at the beginning of this year is quickly reversing. While not all of the gains have been given back (yet), the truth is that the current price conditions are not looking that good for commodities. Continuous Commodity Index has now fallen below its 200 day moving average, something that rarely happened during 2001-08 and 2009-11 bull markets.
The more common CRB Index is also not too far off either. Let us look at some of the individual commodities that represent four major sub sectors: energy, industrial metals, grains and softs. We start with the granddaddy of all commodities and a barometer of global economy, Crude Oil. Personally, I prefer to use Brent Crude Oil, as it represents global demand and supply story a lot better. As you may recall from a few weeks back, we were discussing a technical breakout in Brent Crude Oil out of its multi-year triangular consolidation pattern……………………………………….Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Looking ahead few years, global demand for oil will continue to increase because of rising prosperity in emerging economies. Supply, however, will still remain constrained. Soon, the world will not be able to produce all the oil it needs as demand is continually rising while supply is falling. According to International Energy Agency (IEA), oil consumption will rise by 56% between now and 2040, with China and India responsible for half of this increase in consumption.
Global oil demand for 2013 will probably be around 91.3 million barrels per day (mb/d). Demand will grow to 92.6 mb/d in 2014, according to the IEA……………………………………….Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

America’s oil boom continues at breakneck speed. Last week the Bank of America released figures showing that the U.S. is now the world’s leading oil producer, overtaking both Saudi Arabia and Russia.
Ways of extracting “tight” oil and gas from shale rock and other unconventional sources have revolutionized energy production. In the first half of this year the U.S. produced 11 million barrels of oil a day………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

During the April-September summer driving season this year in the US, regular gasoline retail prices will average $3.66/gal, 8¢/gal higher than last year and 4¢ higher than projected last month, according to a forecast from the US Energy Information Administration in its July Short-Term Energy Outlook (STEO).
As lower refinery margins more than offset higher crude oil prices, regular gasoline retail prices are projected to fall from an average of $3.68/gal during the second quarter to $3.64/gal during the third quarter. EIA expects regular gasoline retail prices to average $3.54/gal this year and $3.45/gal in 2015. This compares with the agency’s forecasts of $3.50/gal this year and $3.38/gal in 2015 in last month’s STEO………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

There are growing signs the rally in gold will be sustained, with gold prices continuing to defy the bearish predictions of a number of analysts and investment banks, including Goldman Sachs.
Furthermore, with gold prices remaining above $1,300 per ounce, growing demand and falling supply and a number of billionaire investors including George Soros making large bets on the precious metal and beaten down gold miners, now may just be the time to make a bet on gold. But the key question for investors is how to make that bet, so let’s take a closer look at three ways to invest in gold………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Gold prices (Monday) fell sharply by 2.3% for the biggest one-day drop of 2014. U.S. gold futures for August delivery were down $30.70 at $1,306.70 an ounce – their biggest one-day drop since December. Spot gold fell $33.50 at $1,305.50 an ounce.
The sell-off happened quickly following the Comex futures market open in early U.S. trading according to Kitco, suggesting a big sell order hit the futures market at that time………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Gold’s $30-plus drop today — the biggest daily decline of the year — serves as a powerful reminder that the market for the yellow metal remains vulnerable to shifts in investor mood. And that does not bode well for gold’s near-term prospects. That’s because there’s more bullishness than bearishness today among the gold traders I monitor, which, in turn, means it’s more likely that shifts in mood will cause gold to fall than to rise.
Consider the average recommended gold-market exposure among a subset of short-term gold-timing newsletters tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). The average currently stands at 23.3%………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Gold appears bullish towards $1370 per ounce and then $1430 an ounce levels, according to Barclays. It said that recent gains in precious metals look toppy. Therefore, selling on any gold price rallies is suggested especially when it is expected that legs of support to give and to expose gold on the downside.
“We caution against interpreting recent strength in investor flows as a long-term shift in sentiment, as gold still represents healthy selling opportunity,” according to Barclays………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

The Chinese expression “Real gold is not afraid of the melting pot” suggests that if you have genuine quality, then you will not fear adversity. Well, in that sense, the London gold fix, an institution with a history going back nearly 120 years, is facing its own test as regulators question whether or not the process is “fit for purpose”.
The gold fix is in essence a benchmark price that is derived twice a day from actual trades all concentrated into a short space of time to determine an objective price for gold. Of course, prices are also being set in trading outside the London fix, but these prices are subjective, as they are posted by individual banks………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Citi Research looks for gold to stabilize for the rest of 2014 and is most bullish on palladium among the precious metals. The bank has revised its forecast to $1,300 gold in 2014, followed by $1,365 next year.
“Essentially we see stabilization in gold prices through this year in a $1,290/oz.-$1,350/oz. range, with stronger physical market activity from retail investors, ETF (exchange-traded-fund) flows and central banks essentially limiting any potential downside moves,” the bank said………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

The first half of the year 2014 is history. Time for a quick evaluation of the metals’ performance. Obviously, Sharelynx offers the best in class charts to answer our question. Palladium is by far the best performer among the precious metals. Since the start of this year it’s price has increased with 18% (approximately) while the second performer (silver) added 10% to its price.
The other three metals have a very similar percentage rise over 6 months. Silver has been the laggard till early June when it accelerated its rise in a very short time span. This is the “restless” characteristic of silver………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

A sudden pullback in gold and silver prices after a month’s rally sent precious metal miners lower on Monday. Gains in the two commodities have been fuelled by improving economic activity, particularly in China, as well as the resurgence over the past week of euro area fears and discord over when the Federal Reserve will first raise interest rates.
Spot gold, which has climbed more than 7 per cent since the start of June, tumbled 2.5 per cent to $1,305.51 an ounce while silver prices slid 3 per cent. Analysts with Credit Suisse said bullion movements over the remainder of the year would be tied to Fed chairwoman Janet Yellen’s view of the economy and how the central bank normalises monetary policy………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Copper recently reversed sharp price falls seen earlier this year, but fresh headwinds could push the metal lower in the second half, Capital Economics said in a note.
“We expect renewed weakness in the copper price later this year as mine supply picks up and Chinese copper imports continue to fall due to waning demand from financing deals,” said Caroline Bain, senior commodities economist at Capital Economics………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Commodity ETFs have a place in every portfolio, just not a big place. Of all the investments in the market, the one area that tends to generate the most controversy is commodities. Some long-term portfolio managers insist that the cyclical nature of commodities, along with their high volatility, suggest they have no place in your portfolio. Others, including myself, believe commodities do have a place in a long-term portfolio.
I don’t think you should allocate massive amounts to commodity investments, but there is a reason to have them. Enough studies have been done that show portfolio risk declines somewhat to make me a believer……………………………………….Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Global commodity exchange-traded products (ETPs) saw a second consecutive quarter of inflows in Q2 2014 as increasing confidence in China’s economic outlook and global economic recovery boosted commodity prices and investor demand for commodity exposure.
Inflows totalled $275 million, up from $271 million of inflows in Q1 2014, according to ETF Securities, a leading provider of commodity ETPs. The combination of inflows and higher prices pushed assets under management in commodity ETPs at the end of Q2 2014 to $123.3 billion from $122.4 billion at the end of Q1 2014………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

The minutes of the FOMC meeting released last week suggested that the central bank is likely to maintain its accommodative policy stance in foreseeable future, even after it winds down its asset purchase program. With waning rate hike worries, stocks are likely to continue their slow, upward march.
Economic data in general has been surprising to the upside of late, indicating that the economy gained momentum in the second quarter after coming out of the deep freeze earlier this year. At the same time, while the labor market is improving, wage pressures are missing, suggesting that the Fed will not be in a hurry to change its monetary stance………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

ETFs, like mutual funds, are a good way to get exposure to many individual stocks without taking positions in any one of them on an individual basis. But unlike mutual funds, ETFs trade throughout the day, just like the underlying holdings.
So while making an investment in an ETF is a good way to get broad exposure to stocks, bonds or commodities without taking on specific risk, calculating performance may be a bit tricky………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

World agriculture must create short and long term adaptation strategies to cope with climate change accelerating the water cycle. This is the finding of an Organisation for Economic Co-operation and Development (OECD) report that sees rainfall periods being longer and more intense in the years to come.
The recent paper Impact of Climate Change on the Water Cycle and Implications for Agriculture has tipped higher latitude areas for more rain in winter and summer. Drier summer weather is expected for mid-latitude and subtropical areas……………………………………….Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

As we know every year certain very angry US politicians get together to insist that the President must declare China to be a “currency manipulator”. The thought is that the country artificially keeps its currency low in value against the dollar, thereby boosting exports from China to the US.
This is presumed to be to the detriment of US industry (although those politicians do overlook how it benefits US consumers). There may even be some truth to the complaints. But what interests is, well, imagine that China became entirely free market about the value of the yuan? Just allowed anyone who wanted to to buy and or sell how ever much they wanted, to be allowed to ship money in or out of China as they wished? The assumption is that the yuan would climb in value but I’m not so sure………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

We all know the U.S. dollar is the de facto world reserve currency. And if you’ve been reading my column for a while, you also know its status is being seriously challenged. China and Russia have taken the biggest steps to that end so far.
But it seems we may already be in the planning stages to consolidate currencies, with the ultimate goal of establishing a single currency for the entire planet. Hard to envision, but the signs are there. That’s something not meant to benefit you or me, but there are ways to leverage this intensifying trend to your advantage………………………………………….Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Britain will expand funding for a programme to help coal-rich South Africa develop a carbon trading market in an attempt to rein in its rising greenhouse gas emissions. The British High Commission in Pretoria last week said it will fund a pilot emissions trading programme from next year to help companies prepare for a 120-rand-per-tonne ($11.21) carbon tax that is expected to come into force in 2016.
The value of the grant was not disclosed. The launch of South African’s carbon tax, which would apply to major emitters including steel giant ArcelorMittal, utility Eskom and petrochemical group Sasol, was delayed by one year to allow more time for planning and consultation with stakeholders………………………………………..Full Article: Source

Posted on 15 July 2014 by VRS |  Email |Print

Switzerland threatened on Monday to raise its tax on greenhouse gas emissions from the energy sector by 40 per cent if companies regulated by the country’s emissions trading system do not meet government-imposed targets this year.
The Swiss environment ministry said the tax would jump to 84 francs ($94.25) per tonne of carbon dioxide (CO2) in 2016, from 60 francs currently, if power-related emissions are reduced by less than 22 per cent below 1990 levels by the end of this year……………………………………….Full Article: Source

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