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Commodities Briefing 07.Aug 2014

Posted on 07 August 2014 by VRS |  Email |Print

Global uncertainty, coupled with the strength of the Chinese markets, is leading U.S. investors back into commodities. Investors put more money into commodities ETFs and ETNs in July than they have in any single month over the past two years, according to ETF.com., which provides research on exchange-traded funds and exchange-traded notes.
The lift came as Chinese markets — and, in many cases, the funds tracking them — notched their best gains since late 2012, raising hopes that the world’s second-largest economy will support demand for the industrial metals used to manufacture cars, buildings and consumer electronics bought by the country’s growing middle class………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

The ability of commodities to offer uncorrelated returns has historically given them status as an important diversifier, but has this reputation been irreparably damaged by structural change in the years since the financial crisis?
Before 2009 correlations between commodity prices and stock markets were close to zero, cementing their reputation as reliable portfolio diversifiers. While gold is a more obvious diversifier, other precious metals, industrial metals, oil and agricultural commodities continue to be used to broaden a portfolio’s mix from stock, bonds and cash………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Investment banks are making deep cuts in commodities, but they are not departing from the market entirely. Hammered by slender revenues, cumbersome regulation and higher capital requirements, banks are continuing their retreat from the commodity market. The latest example is Credit Suisse, which on July 22 announced it would exit its commodities business, citing the need to reduce risk-weighted assets under Basel III capital rules.
While this has been going on, commodity trading houses and oil majors have expanded their trading businesses, providing a keen sense of contrast. The trend was capped by the $3.5 billion sale of JP Morgan’s physical commodities business to Switzerland-based trading house Mercuria – a deal agreed in March………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Amid war and rumors of war, it seems odd that oil prices have dropped so far in August. That might be because another war could be brewing: within OPEC. Saudi Arabia on Wednesday released September official selling prices for its oil. It offered bigger discounts for Asian and U.S. buyers compared to August’s levels, while raising prices for Europe.
As energy economist Phil Verleger pointed out in a recent report, this could indicate a growing battle for market share. Rising U.S. shale oil output has caused American imports of oil from West Africa to plummet from an annualized average of two million barrels a day in late 2007 to about 300,000 barrels a day currently. That forces countries such as Nigeria to push their barrels towards other markets, such as Asia—putting them in direct competition with Saudi Arabia and other OPEC members in the Middle East………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Since sanctions were announced at the end of last month, those monitoring the oil industry have questioned whether the restrictions placed on Russia by the EU and the US are just a piece of “theatre” without any meaningful impact. And with good reason.
The restrictions apply to the “sale, supply, transfer or export [of certain technologies] in connection with a project pertaining to deep sea drilling, arctic exploration or shale oil”………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Violence has returned to key oil-producing countries Iraq and Libya after a brief period of calm. Shelling and firefights between militias over the control of a key airport in Tripoli have hurled Libya back into a state of emergency, punctuating several weeks of escalating violence in the troubled North African country.
In mid-July, the Libyan government appeared to gain more control over the country’s restive provinces when it secured a deal with rebels in the east, which led to the reopening of the major ports of Es Sider and Ras Lanuf. The accord led to a drop in oil prices as investors anticipated an immediate influx of several hundred thousand barrels of oil per day to global markets………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Australian Perth Mint gold and silver sales declined during July this year, as per latest figures from Perth Mint. Perth Mint gold bullion coins and bars sales for July down to 25,103 ounces from sales of 39,405 in July last year. For silver, July sales totaled 577,988 ounces, down from 586,358 sold in the same month last year.
According to HSBC, Perth Mint July data show a decline in sales of gold bullion coins and bars, but lower prices lately may help revive demand. US Mint data last week showed a 49% year-on-year decline in gold coin sales to 35,500 ounces………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Gold prices rose to their highest level in nearly two weeks on Wednesday, as worries grew over economic weakness in the euro zone and tensions between Russia and the West.
Gold for December delivery, the most actively traded contract, rallied $22.90, or 1.8%, to $1,308.20 a troy ounce, the highest settlement price since July 21. The contract posted the biggest one-day percentage gain since June 19. Italy fell back into recession for the third time since 2008, data showed Wednesday, signaling that the euro zone’s recovery has hit a major stumbling block………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Investors commonly assume that rising interest rates adversely impact the gold price, and vise versa. They believe that a rising interest rate environment is indicative of a strong economy, which is supposed to drive investors out of gold and into the stock market. They further assume that investors will want to exchange their gold, which has no yield, for stocks and bonds, both of which have yields and generate income.
But this intuition is unfounded, at least when tracking the Fed Funds Rate since the Nixon abandoned the gold standard (i.e. after August 15th, 1971). Since then, a rising Fed Funds Rate has usually coincided with rising gold prices, and vise versa………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

The top performing precious metal of 2014 is beginning to come under pressure. Since reaching its highest level in almost 14 years three weeks ago, palladium, used in catalytic converters that clean car exhausts, has dropped more than 4 per cent. It fell as much as 0.9 per cent to $835.90 a troy ounce on Wednesday, underperforming sister metal platinum as well as gold and silver.
Analysts say there is no fundamental reason for the recent weakness other than profit-taking by investors who have built large positions in palladium, a byproduct metal produced from platinum and nickel mines………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Precious metal prices remain volatile and this has seen the precious metals mining sector fall out of favour with investors. But there are signs that a sustained rally in precious metal prices is imminent. For the year to date both gold and silver prices have remained relatively flat. But with growing demand along with supply shortages, geopolitical instability in Europe and the Middle East, and Wall Street making big bets on precious metals, I expect to see a sustained rally shortly.
Typically, the preferred means of gaining exposure to precious metals is to invest in gold, but for a variety of reasons I believe silver is a superior investment at this time, offering investors superior potential upside………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

A Moody’s report reveals a rising risk of default for some smaller miners, amid volatile commodity prices. The report cites recent defaults by Mirabela Nickel and Midwest Vanadium as examples of the risk factors afflicting smaller miners.
Moody’s warns that gold miner St Barbara has the highest risk, out of the companies it rates, of defaulting on its debt, with a Caa1 negative rating. The ratings agency says the main risk factors are challenges with getting projects completed on time and on budget, the unpredictable nature of ore bodies, having one or two major customers, limited cash reserves and volatile markets………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

While the everyone is busy scrambling in the equities space, base metals and related exchange traded funds are rising on demand for industrial metals and declining inventories of zinc and aluminum.
The PowerShares DB Base Metals Fund, which evenly splits its portfolio with aluminum, copper and zinc futures, has gained 4.2% over the past month and increased 12.3% over the last three months. LME aluminum futures were trading around $2,029 per metric ton. The iPath Dow Jones-UBS Aluminum Subindex Total ReturnSM ETN is up 5.0% over the past month and up 13.8% over the last three months………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Active investors are always looking for a unique way to gain an edge in their portfolios, and following stocks with insider activity can be one way to highlight strong company conviction. When corporate executives are reinvesting in the companies they govern, they tend to believe in the long-term growth story and value proposition of their business.
One way to track stocks with insider activity is through an ETF that’s designed to highlight companies with favorable corporate insider buying trends (as determined by public filings) and analyst upgrades………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

The UK government will look into how virtual and digital currencies could or should be regulated, the UK Chancellor of the Exchequer said at the launch of a fintech industry body in London.
Speaking Wednesday at the launch event of Innovate Finance in Level39, Canary Wharf’s Group accelerator for fintech startups, George Osborne said the government will look at the potential virtual and digital currencies have for encouraging innovation in the UK’s financial sector, as well as the potential risks………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

First Minister Alex Salmond warns that without the pound an independent Scotland would refuse to take its share of UK debt and claims debate was a success for Yes camp. Alex Salmond today continued to refuse to name his Plan B currency for a separate Scotland after holding a post-mortem discussion with advisers over his surprise defeat in the independence TV debate.
The First Minister arrived an hour and a half late at a conference for businessmen who support separation this morning, his first public engagement since he lost the STV showdown with Alistair Darling………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Retaliating for U.S. sanctions over Ukraine, Russia will ban or limit all American agricultural products for up to a year, a Kremlin official said Wednesday. All fruits and vegetables from the European Union will also be locked out, the country’s agricultural and veterinary watchdog told RIA Novosti. Produce from Canada and Japan will also be blocked.
The complete list of banned products, to be announced Thursday, will be “very substantial,” said Alexey Alekseenko, an assistant to the head of the Federal Service for Veterinary and Phytosanitary Surveillance………………………………………..Full Article: Source

Posted on 07 August 2014 by VRS |  Email |Print

Australia’s repeal of its carbon laws is the culmination of some sorry chapters in Australian politics and policy, but is by no means the end of the story. The repeal represents a tragedy for Australian politics, a travesty for public policy and a train wreck for climate action. But there are significant remnants among the wreckage.
The last decade has seen Australian politics dominated by greed, self-interest, poor judgment and rotten luck. Despite this, a working and credible climate policy emerged. By establishing a bipartisan consensus for emissions trading in July 2007, the then-prime minister, John Howard, responded to years of growing climate concerns and business calls for greater carbon policy certainty………………………………………..Full Article: Source

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