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Commodities Briefing 04.Aug 2014

Posted on 04 August 2014 by VRS |  Email |Print

Iraqi insurgencies, repeated clashes between Western powers and Russia first over Crimea, then Ukraine, while another bloody conflict raged in Gaza. The cocktail of high explosives for commodities is there, but 2014 has never the less been rather uneventful from a market perspective (so far at least).
Like the Forex market, commodities are struggling to make meaningful moves. Now, as August begins, we’re looking at severely low commodity volatility the like of which has not been seen this side of the millennium. Using the S&P GSCI index to gauge the commodity spectrum, we find that annual volatility is currently running below 10 per cent at 9.3 per cent, less than half the annual average since 2000 at around 22 per cent – even 2013 was more volatile………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Commodities have slipped further down the league table of asset class performance over the past week. The destruction in returns during July has been concentrated in the agricultural and energy sectors. In the event of signs of a further acceleration in US economic activity, Deutsche Bank expect precious metal returns will be the next commodity sector to suffer declines.
Energy: The rapid decline in crude oil inventories at Cushing helps to explain the tightness in WTI fundamentals. However, this inventory drawdown may draw to a close after the summer as pipeline infrastructure starts bringing additional crude into Cushing. Meanwhile, weak physical demand for crude oil has trumped geopolitical risks and facilitated a recovery in refinery margins in the US Gulf Coast and Northwest Europe………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

New Zealand commodity prices fell for a fifth straight month in July, led by whole milk powder, reflecting a build-up of inventory in China and a strong milk production season for dairy farmers. The ANZ Commodity Price Index declined 2.4 last month and is now 9.8 percent below its February peak, while milk powder tumbled 12 percent and dairy product prices fell more broadly.
The slide in global dairy prices this year prompted Fonterra Cooperative Group to slash its forecast farmgate milk payout for 2015 to $6 a kilogram of milk solids, from an initial estimate of $7/kgMS. It also attributed the decline in dairy prices to a build-up of inventory in China but expressed some confidence that prices would recover at some stage. Westland Milk Products cut its forecast payout two days later………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

It’s been a busy week in energy, particularly on the geopolitical front, with Washington at a loss over exactly whose side to take in the Iraq-Kurdish oil showdown, the implications of new sanctions against Russia unclear at best, and continued conflict and chaos in Iraq, Syria and Libya that has speculators reaching the limits of their predictive powers.
On Monday, a Texas judge ordered US Marshalls to seize a tanker carrying a million barrels of Kurdish oil off the US coast—at the behest of the Iraqi authorities in Baghdad–but two days later the story is that the tanker is too far offshore to be in Texas’ jurisdiction, so some more time has been bought for the Kurds to sell their wares on the international market………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

The debate over whether we are running out of oil sometimes resembles the medieval controversy over how many angels could dance on the head of a pin. By redefining the size of the pin and the agility of the angels, today’s “peak oil” proponents have managed to continue the argument.
The characters have changed though. Matthew Simmons, author of Twilight in the Desert, casting doubt on Saudi oil production, died in August 2010, and the Oil Drum website closed down last September. New disputants, including economist James Hamilton from the University of California, and Stephen Kopits, the managing director of the consultancy Douglas-Westwood, argue that oil production is limited by geology and is a severe drag on economic growth………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

The U.S. energy industry is booming. As new technologies make oil easier and more affordable to extract, the United States is poised to become the world’s leading oil producer as soon as 2015, according to a 2013 study by the International Energy Agency. At the same time, proven oil reserves — the estimated quantities of oil that can be extracted under existing conditions — have also risen. In 2012, the U.S. had more than 30.5 billion barrels of proven oil reserves, up 15% from the year before.
Ten states accounted for nearly 80% of the U.S. proven oil reserves as of the end of 2012. Texas was the state with the most proven reserves, totaling more than 9.6 billion barrels of oil, or close to a third of all U.S. reserves. Based on the U.S. Energy Information Agency (EIA) data on proved oil reserves, these are the most oil-rich states in the country………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Mergers and acquisitions (M&A) activity is escalating among junior oil and gas companies as they attempt to diversify exploration risk and secure cash flows, according to EY’s latest quarterly report on the sector.
Barry Fraser, executive director at the accountancy firm’s Aberdeen practice, said: “Deal making is back on the agenda, with funding for development opportunities at the heart of acquisition and farm-out activity.” One example, according to EY, is the proposed acquisition of Mediterranean Oil and Gas by fellow Aim-quoted company Rockhopper Exploration………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Gold loving India is hoarding Swiss gold, and recently accounted for 42% of total gold and silver leaving Switzerland. According to the Swiss government, its total value of exported gold, silver and coins in the month of June stood at 3.9 billion Swiss franc ($4.3 billion), of which India accounted for 1.63 billion francs ($1.8 billion).
Indian demand for gold has taken overall Swiss exports this year to to 32.1 billion francs. And out of that total, gold exports alone to India hit 7.3 billion francs, or roughly 23% of the market………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

The gold price tried to regain the psychologically important $1,300 an ounce level on Friday after slightly disappointing jobs number out of the US and a losing streak on Wall Street sent investors back into gold. On the Comex division of the New York Mercantile Exchange, gold futures for August delivery closed at $1,295 an ounce, up $12 from Thursday’s trading session.
The US economy added 209,000 jobs in July – the sixth straight month of 200,000-plus gains for the first time since 1997 – but the unemployment rate edged up to 6.2% from 6.1%. The below-forecast numbers hurt the dollar which usually move in the opposite direction of the gold price………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

This week, former Congressman Ron Paul said gold could go to infinity. Many people will be tempted to buy gold based on his prediction. It’s certainly exciting to think about the upside, the profit potential. Who doesn’t want to buy whatever’s going up? However, in the case of gold, there is a serious error in this thinking.
Dr. Paul has put his finger on something very important. The government is abusing its credit, and borrowing itself into oblivion. If this continues, then the value of the government’s debt and currency will drop, probably quite rapidly. This means the price of gold will skyrocket………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Hedge funds reduced bets that gold would rally from the longest retreat in a year as U.S. economic growth exceeded analysts’ estimates.
Money managers cut their net-long position by 10 percent in the week through July 29, the most since June, U.S. government data show. Prices dropped for a third week, the longest slide since July 2013. The decline helped to erase almost $610 million from the value of exchange-traded products backed by the metal………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Base metals stocks, like gold stocks, nowadays offer some enormous investment opportunities. They fell so low, along with most base metals prices that, particularly with the improved economic recovery in the U.S. and in some other nations, and with China showing some positive growth indications again, there is relatively little downside remaining.
Indeed base metals stocks have been some of the best performers so far this year as they have risen off their nadirs. And in the junior sector in particular, selective stock picking – i.e. those with good projects, the finances to survive any continuing price malaise and successful management teams – should, like similarly placed gold juniors, ultimately pay off in spades………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Goldman Sachs said it expects copper to underperform other base metal prices over the next 12 months, citing the red metal’s heavy exposure to China’s property sector, which it expects to remain bearish this year and next. The bank also said copper has entered a once-in-20-year supply cycle, which started in the second half of 2012 and is set to last through to 2016/17, following a decade of high capital expenditure investment in the industry, raising trend supply growth to about 4-5 percent from about 2 percent over the past decade.
Goldman lowered its 2015 average copper price forecast to $6,400 per tonne from $6,600, in a note to clients dated July 23. The investment bank also cut its 2016 outlook to $6,600 per tonne from $7,000 partly due to expectations of lower marginal production costs. Goldman Sachs, however, said it is bullish for nickel, zinc and aluminium on a 12-month view………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

The surcharge that copper buyers are expected to pay to secure the metal in Europe declined to a 15-month low amid weak summer demand and ample supply, according to three people who trade the market. The spot premium is about $90 a metric ton delivered to Rotterdam in the past month, said the people, who asked not to be identified because they aren’t authorized to speak to the media.
That compares with $110 as of July 4. The surcharge, which ranged as low as $75 and as high as $100, is the lowest since April 2013. Traders cited slow demand in Europe as factories shut for summer vacations. Better availability of scrap metal further curbed demand for refined copper, they said………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

While the aluminum price was the strongest price performer among industrial metals in July, zinc again enjoyed a stellar month, rising almost 8% over June. The price of zinc rose to a near-three year high of $2,416 a tonne last week as the base metal continues to benefit from expected supply cuts due to the scheduled closures of Australia’s Century, Namibia’s Skorpion and the Lisheen mine in Ireland.
Lisheen and Black Mountain, both controlled by London-listed Vedanta, also suffered production disruptions this year, further boosting the price of the base metal………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

As global banks and trading houses fire off lawsuits over their estimated $900 million (534 million pounds) exposure to a suspected metal financing fraud in China, the tangled legal battle to recoup losses is set to drag on for years and hinder a swift recovery in metal trade.
HSBC is the latest bank to launch legal action since Chinese authorities started a probe into whether the firm at the centre of the allegations, Decheng Mining, used fake warehouse receipts to obtain multiple loans………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Mom and pop investors hoping to emulate the investment savvy of Wall Street’s wealthiest like Warren Buffett and Carl Icahn will have a new way into markets on Friday when the latest low-cost exchange-traded fund tracking the stock picks of big name investors begins trading.
The Direxion iBillionaire ETF, set to trade under the ticker “IBLN,” is the latest in a handful of similar ETFs that have come to market in recent years, all packaging the holdings disclosed quarterly by top managers into instruments that are more accessible to Main Street investors………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Like New Year’s Eve, “American Idol” and the movie “Avatar,” some ETFs are grossly overrated. There are 80 ETFs in the U.S. with more than $5 billion in assets. The vast majority of them earned their assets by providing good exposure to different markets at a reasonable cost.
A few behemoths, though, are seriously flawed or needlessly expensive. They stay as big as they are because they were first to market and, thanks to all those assets, are easy to trade in and out of at a good price………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

India’s commodity markets will see the debut of forward contracts later this month, a move termed as an attempt to create a national agricultural market. The National Commodity & Derivatives Exchange Ltd (NCDEX) will launch forward contracts based on two commodities—sugar and maize— by the third week of August after receiving a go-ahead from the commodity market regulator.
Commodity market participants say that the introduction of forward contracts could be a game-changer, as it reduces counter-party risk and keeps out speculators, besides creating a central platform for forward trading in agricultural commodities………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

All modern currencies are fiat. The numeraire of the moment floats in a cesspool of policy designed for management and intervention. Money and value become hollowed out concepts. The eventual return to a sound relationship between human productivity and the value of money will be unloved, to say the least.
In the geopolitical front now we are witnessing countries move away from the U.S. Dollar, like Russia (and China more recently). But we are seeing an aggressive attempt to maintain its influence - often appearing to dovetail with other geopolitical motives………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Ghana, the country that epitomised the ‘Africa rising’ narrative of strong economic growth and improved governance, is to seek help from the International Monetary Fund. The reversal of fortunes underlines the challenges the continent still faces. The west African nation will turn to the fund for financial assistance after its currency plunged roughly 40 per cent this year against the US dollar, making the cedi the worst performing currency in the world in 2014.
Ghana is the second sub-Saharan African country to turn to the IMF for help this year, after Zambia announced in June that it would seek talks with the Washington-based multilateral body………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

The Eurasian Economic Union of Russia, Belarus and Kazakhstan might adopt it’s a common currency unit, the Rossiiskaya Gazeta newspaper writes in its Monday issue. The daily cites Bembya Khulkhachiyev, director of the Eurasian Economic Union’s financial policy department, as saying that the Union was planning to make a wider use of the national currencies of the three member states with an eye to create a common payment system. If these tasks are solved successfully, the issue of a common currency unit might be raised, he said.
Currently, the Eurasian Economic Union, according to Khulkhachiyev, makes 50% of internal settlements in roubles, 40% - in U.S. dollars, eight to nine percent - in euros. The share of other currencies barely reaches one percent………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

Amid concerns over its dwindling commitment to climate initiatives, South Korea should muster the political will to follow through on its international pledges to curb emissions and the green growth initiative, the chief of the U.N. Office for Sustainable Development said.
Seoul has taken credit for promoting “green growth” as a global agenda. In 2009, the country vowed a voluntarily cut in its greenhouse gas emissions by 30 percent from projected levels by 2020 and funnel billions of dollars into related research and programs, including a carbon trading system. Korea is now home to such international agencies as the Green Climate Fund and the Global Green Growth Institute………………………………………..Full Article: Source

Posted on 04 August 2014 by VRS |  Email |Print

The National government’s refusal to restrict cheap international units under the Emissions Trading Scheme (ETS) has caused significant damage to the carbon forestry sector according to new figures released today says Labour’s Climate Change spokesperson Moana Mackey.
“Only 0.3% of units surrendered under the ETS in 2013 were forestry units. This is just 141,253 units compared to the 5,325,191 surrendered in 2010. “99.5% of units surrendered by polluters to meet their obligations were international units. “It is also deeply concerning that more than 700 foresters left the scheme last year………………………………………..Full Article: Source

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