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Commodities Briefing 18.Aug 2014

Posted on 18 August 2014 by VRS |  Email |Print

Oil and gold fell this week, with demand for the commodities pressured by strains in the global economy. OIL: Prices slid on a slew of downbeat economic data from around the world, analysts said. The sharp falls in oil prices on Thursday coincided with the release of data showing growth in the eurozone stalled in the second quarter. Germany, the bloc’s No. 1 economy, shrank by 0.2 percent and France, the second-largest, had zero growth for six straight months.
Prices also came under pressure from a string of disappointing Chinese data on Wednesday and signs of weak demand, especially in the US, which said crude stockpiles rose for the first time in seven weeks………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Commodities have been getting crunched and I believe it has rather serious implications for both the global economy and worldwide monetary policies. The withering of commodity-based price increases is likely to have a significant impact on headline inflation.
Oil is dropping particularly hard, but copper is at multi-month lows; agriculture commodities such as corn, wheat and soybeans have tumbled and broad-based commodity indices are on their backs………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Hedge funds extended the longest bearish streak for soybeans in eight years as improving crop conditions bolster prospects for a record harvest in the U.S., the world’s largest grower.
Money managers have been betting on declines for five straight weeks, the most since October 2006. The U.S. on Aug. 12 raised its outlook for domestic production that was already forecast at an all-time high. The bumper harvest will swell global inventories to the biggest ever………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Whereas most primary commodities have dropped drastically in price, crude oil remains as much as $100 per barrel. It is in effect a result of manipulative actions and is unlikely to be sustained over the long term.
The Organization of Petroleum Exporting Countries (OPEC) has been driving the high oil prices through manipulative behaviors such as limiting oil production quotas. With the current pricing mechanism, oil is only partially affected by the relationship of supply and demand. Despite the regime change in Egypt and factional conflicts over Libyan oil fields, instability in the world’s most oil-rich region has little to do with today’s high energy prices………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

An uncertain investment climate in oil-exporting Middle Eastern countries may lead to a two million bpd shortfall and a $15 jump in oil prices by 2025. Forget North America’s shale revolution, the world needs Middle East oil for long-term sustainability and to quench growing global demand for fossil fuels.
The International Energy Agency’s (IEA) latest report on global energy investments notes that while unconventional crude oil and natural gas reserves from North America have snared the majority of investments over the past decade, the Middle East will be crucial to meet the energy demand of a fast-growing world………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Oil prices are now too low for most OPEC countries to cover their spending needs, a Reuters survey shows. Although the cost of getting oil out of the ground is low in most countries in the cartel, growing social spending and ambitious infrastructure plans mean many oil producers now earnless from their oil sales than they need to fund their budgets.
The weighted average of oil prices collected by members of the Organization of the Petroleum Exporting Countries was $106 a barrel last year - just enough to cover the average budget requirements of the group, according to figures compiled by one team of analysts, who declined to be identified. But oil prices are falling, and the OPEC crude oil basket price was just $100.88 a barrel on Wednesday, the OPEC Secretariat calculates………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Here’s a Dutch phrase for you, Gouden Eeuw. No, nothing to do with the currently controversial topic of cheese, it rather means Golden Age. Nowadays, the Netherlands is best known for “whacky-baccy” and a liberal take on life – it is a significant trading economy but hardly a global leader. However, in the 17th century it was the USA of its day, the foremost economic and maritime power in the world in a time when size did not matter.
Holland did this by being the first European power to gain a foothold in Asia, including a monopoly on trade with Japan through the Dutch East India Company and dominating inter-European trade, fuelled by cheap energy from Windmills. Then everybody went nuts, completely insane actually or “krankzinnig” as they would say themselves………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

The world has changed. Even two years ago, with a war going on by proxy between Russia and Ukraine, we’d have seen a ten dollar rally in the price of crude, not prices below $97, like we’re seeing today. Add to that the Iraq crisis in the North, the continuing Syrian conflict, the destabilization in the oil producing countries of Libya and Egypt and you’d have been shocked - at least in 2011 - to see prices go decisively under $100 a barrel and act badly there. What’s going on here?
One long-term trend in the oil market and one very short-term trend have made the difference between a price that ’should’ be higher, but is in fact going lower. We need to really understand those changes to track where oil prices will go next and where those underlying oil stocks are headed………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Lost in the debate about exporting U.S. oil and natural gas is any mention of America’s greatest energy export. Coal. And while legislators, corporations, environmentalists and others argue over pipelines, refineries, tariffs and trade agreements in the oil and natural gas industries, the U.S. sends tons of coal to eager customers all over the globe. Coal usage is at a 45-year peak, and Europe and Asia will take every ounce we can export…
Oil, natural gas, and renewable energy sources may be the ones in the spotlight, but King Coal is still king………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Gold moved higher in the initial part of the week and closed lower on Friday as news of the EU reviewing the sanctions on Russia began to surface. At $1,304.7 per troy ounce, gold was down 0.3 per cent for the week. It was trading at $1,319.3/ounce on Thursday.
The number of people filing for jobless claims in the US rose more than expected last week. The US Labour Department reported that the claims rose to 3,11,000, against the expected 2,95,000. Weak economic data from the Euro Zone also helped gold prices inch up………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Gold fell the most this month on signs of waning investor demand from the US to China. The metal pared losses amid rising tensions in Ukraine. Violent conflicts in the Middle East and Eastern Europe helped boost prices 8.6 per cent this year.
Investors haven’t been enticed by the gains, sending open interest in New York futures and options to the lowest since 2009 and money managers have trimmed their bullish wagers. Demand for the precious metal fell 16 per cent in the second quarter, led by declines in India and China, the World Gold Council said this week………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Why could September be fateful for the precious metals complex? First, consider its history within the current secular bull market. The years 2005, 2007, 2009 and 2010 have seen very important breakouts in either or both gold and gold stocks in the month of September.
Conversely, September marked important peaks in 2008 as well as in each of the past three years! Currently, Gold and more so the gold miners are consolidating their recent gains just below very important resistance. This consolidation figures to end before the end of September which means September will produce another important inflection point………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

The silver-pricing method begun during the reign of Queen Victoria ends on Thursday in London as the $5 trillion market shifts to a more transparent process and regulators expand scrutiny of how commodity benchmarks are set.
An electronic, auction-based mechanism will replace a ritualised negotiation among a few traders that’s been in place for 117 years. Silver becomes the first of the precious-metals markets to ditch a daily “fixing” procedure where dealers agree to a price over the telephone. Revamps also are planned this year for fixings in gold, platinum and palladium………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

The diamond monopoly is over, writes Paul Zimnisky in his study of worldwide diamond industry, but he wonders how concentrated the industry remains: For the majority of the 20th century the diamond industry was conspicuously controlled De Beers, hoarding of over 80% of the worlds rough diamond supply in an attempt to manage global supply and thus prices.
However, a series of events over the last two-and-a-half decades reduced De Beers controlling share to 35%. In a monopoly one seller dominates the entire market. In an oligopoly a small number of large sellers dominate the market. While an oligopoly does consists of multiple players, the sellers can still individually set production quantities and prices and significantly influence the market………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

There is no country more important to the rare earth metals industry than China. It’s the world’s top producer and consumer – at 90% and 70%, respectively. However, its rare earth industry recently received an unfavorable decision by the World Trade Organization. The WTO ruled that China had used export restrictions on rare earths to control key markets, push prices higher, and force the global industry to move operations to China.
This led directly to a Chinese government decision to undertake dramatic changes in its domestic rare earths industry………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

The aluminium market is perking up, with the average price per tonne on the London Metal Exchange rising to over $2,000 now from $1,693 in February 2014. While the primary reason for this is high physical delivery premium, the supply-demand dynamics are also brightening.
This is due to a long waiting period and a court battle looming over the metal, owing to warehouse rules on delivery. In the last few years, warehouses registered with the LME were witnessing bottlenecks after metals such as aluminium were used as a financing tool………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

M&A and capital raising activity remained subdued over 1H 2014 - down 69% year-on-year, according to the latest analysis from EY. This was largely the consequence of a continuing commitment to capital discipline and a lack of urgency over investment, given the relative lack of competition for assets.
Improving signals of economic growth in the US and the apparent subsidence of a looming emerging markets crisis have lowered broader market volatility. However, they failed to offset ongoing concerns surrounding growth in China and further near-term commodity price volatility………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

A proposed spinoff by BHP Billiton Ltd. of about US$15 billion in assets signals the start of a new round of disposals as the biggest mining companies adapt to the end of a boom for commodities. With Anglo American Plc fielding offers on a weekly basis for mines and Rio Tinto Group last month dumping Mozambique coal assets for a fraction of what it paid three years ago, producers are streamlining in the wake of China-led minerals demand that drove record profits as metals prices soared.
Mining companies have been sharpening portfolios as commodity prices retreat and after poorly timed acquisitions in a decade-long US$616 billion investment spree led to asset writedowns and management clear-outs………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Price wars continue in the exchange-traded fund market as providers seek to gain market share in Europe. However, investors say costs are just part of the puzzle when it comes to choosing an ETF. At the end of last month, Deutsche Asset & Wealth Management became the latest ETF provider to slash costs for investors by releasing a product that tracks the MSCI World index and has a total expense ratio of 0.19%, the lowest yet for a European-listed ETF offering global equity exposure.
It is the latest of the company’s low-cost “core” range of db X-trackers ETFs launched in February. The range includes ETFs tracking the FTSE 100, DAX and Euro Stoxx indices, charging 0.09%, and the MSCI USA index Ucits ETF, which charges 0.07%. The FTSE product, the cheapest on the market, has a TER less than a third of the 0.3% of the existing db X-trackers that cover the same index………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Just when one might have thought all the available niches for exchange-traded funds had been occupied, a couple new ones appear on the market. The most recent one tracks the stock holdings of 10 highly successful investors, such as Warren Buffett, David Einhorn and Carl Icahn.
iBillionaire Index ETF identifies the holdings of these iconic investors by examining their quarterly 13F filings in which investors overseeing more than $100 million in U.S. equities must list their equity holdings. The filings are due no later than 45 days after the end of the quarter………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

The commodity market regulator has told the government that the fraudridden National Spot Exchange (NSEL) should be merged with the parent Financial Technologies (FTIL) - an unprecedented proposal which could be bitterly resisted by various stakeholders of FTIL, a listed, profitable company.
A merger would transfer NSEL’s liabilities of more than Rs 5,000 crore to FTIL that has so far financially ring-fenced itself from the scam at the spot exchange which defaulted and stopped operations a year ago………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

Many countries agree that the U.S. politicizes the dollar by punishing nations who don’t abide by U.S. sanctions. With this American approach comes isolation, and the risk of the dollar being replaced as global currency.
It’s not going to happen tomorrow, in a year or even five years. But it’s conceivable, even likely, that within ten years, the U.S. dollar will cease to become the reference currency for international transactions. The reason for this is that the U.S. government and American judges have politicized the dollar to an extreme in a world where the country backing it is no longer as dominant as it once was………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

When you’re traveling overseas, it’s easy to get hit with extra fees and expensive exchange rates in switching currencies. Some currency-exchange kiosks in airports and tourist areas offer bad rates, taking more of your money. And some credit cards and banks can add fees when you buy something with your credit card.
Your best bet is to bring a credit card that doesn’t charge currency-exchange fees, and some cash for backup. Don’t carry wads of cash. Your credit card offers protection against fraudulent charges and can be replaced if lost or stolen (unlike cash)………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

As China lays down plans for a national carbon trading scheme, the world’s biggest emitter of greenhouse gases risks repeating mistakes made in carbon trading in Europe by flooding its pilot markets with free permits.
The European Union’s scheme, the world’s largest, suffered a collapse in prices hurting its credibility when the EU gave away too many permits just as the global financial crisis was slashing demand and in turn curbing pollution levels………………………………………..Full Article: Source

Posted on 18 August 2014 by VRS |  Email |Print

The Prime Minister’s key business adviser, Maurice Newman, has two preoccupations, perennially aired in these pages. He believes global warming is a hoax and, by extension, initiatives such as Australia’s now-defunct emissions trading scheme are unnecessary. And he thinks inequality doesn’t matter — or if it does, then the solution is weakening labour laws and cutting the top tax rates.
He could not be more wrong. Climate change and inequality represent major threats to our quality of life, which is why many developed nations believe they should be central to the G20 meetings in Brisbane………………………………………..Full Article: Source

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