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Commodities Briefing 21.Aug 2014

Posted on 21 August 2014 by VRS |  Email |Print

While international oil prices sit at a one-year low, concerns that Russian geopolitical tensions will drive up energy prices seem to have eased. But fears over the future of the Russia-Ukraine crisis are pushing another commodity to highs not seen in more than a decade.
Palladium futures prices opened the week at nearly $895 per ounce—their highest level since Feb. 22, 2001—on trader fears that exports from Russia could be limited by sanctions, experts tell CNBC. And despite analysts’ observations that those worries are not entirely rational, many are still predicting that the metal, used in catalytic converters, will rise to $1,000………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

While there are more opportunities to trade commodities these days, investors remain reluctant to jump on board, citing a lack of understanding about what they are as a key reason. Commodities include products such as gold, silver, oil, wheat, sugar, cattle and pork bellies. OANDA senior technical analyst Stuart McPhee says he finds retail investors aren’t generally interested in trading commodities.
“Anecdotally, when you talk about trading something like sugar or wheat, people say they don’t understand it and wouldn’t know how to trade it. Our trading activity reflects this.” This is despite there being more ways to trade them, he says………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

The California Public Employee Retirement System (CalPERS) is the largest U.S. public pension fund. It provides retirement, health, and financial benefits to more than 1.6 million public employees. With $295 billion in assets under management, CalPERS has long been viewed as a bellwether in the industry.
It tends to be an early adopter of alternative assets, too, setting the trend for the entire investment community. In October 2007, for example, the fund initiated its commodities program as a way of diversifying its portfolio – a move that helped establish commodities as a mainstream investment………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Global mining investors have been demanding greater returns following a period marked by failed acquisitions and spending on mine expansions that flooded metals markets. After a decade of explosive price gains fueled by Chinese demand, often defined as the commodities supercycle, mining companies are contending with slower growth by spurning mergers and cutting costs.
“The supercycle ain’t over, China is still buying, demand for commodities hasn’t tapered off, it’s even higher than it’s ever been,” Glencore Plc’s billionaire Chief Executive Officer, Ivan Glasenberg said. “The demand is pretty good. We’ll grow. We may do acquisitions where you’re not creating more supply in the market.”……………………………………….Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

With fall right around the corner, farmers are gearing up to harvest one of the largest crops in history. Corn production for 2014/15 is forecast 172 million bushels higher at a record 14 billion bushels. USDA’s first survey-based corn yield forecast, at a record 167.4 bushels per acre, is up 2.1 bushels from last month’s trend-based projection.
In Mid-June, more than 581 farmers across the country took part in AgWeb’s 2014 Equipment and Machinery Research survey. Participants were surveyed on product questions across eight categories, including: tractors combines, sprayers, irrigation, grain storage, implements, tillage and financial sectors………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Nymex crude oil futures have dropped 3% in two days to $94.48 per barrel and they’re down 10% from a year ago. The bad news in this drop is the implication of soft global demand when many economists were looking for a lift in worldwide economic growth. The good news is that markets have weathered months of grisly conflicts in the Middle East and Ukraine and the supply worries that come with the shooting.
If Iraqi and Kurdish forces continue to push back Islamic State forces which are deeply opposed to advanced economy values, or if Russian and Ukrainian adversaries cool off, market angst about Middle East and Russian energy supplies could further dissipate………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

I learned from Art Laffer that government is the 800lb gorilla in the economy and that investors can profit from changes in government policies. But a practitioner has to accept the framework – that government policies drive incentives as much or more than any other single driver. The charts that follow should prove that out.
They show how a proposed change to the RFS ethanol mandate drove corn prices down 30% almost instantaneously. Similarly, in 2008, oil prices plunged at the mere suggestion that a moratorium against drilling on the outer continental shelf (OCS) might end………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

A leading figure in Scotland’s energy industry has voiced concerns over the country’s oil and gas reserves. Wood Group founder Sir Ian Wood said he expects the effect of a decline in North Sea production to be felt as early as 2030.
Sir Ian told the Press and Journal’s Energy Voice that he has “no allegiance to any party or campaign” but said he believes First Minister Alex Salmond’s estimates of North Sea reserves are too high. Sir Ian said: “I believe the debate should not be about nationalism, but growth and economic success, and the quality of life for citizens and all that goes with that………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Another important player in the gold market at the moment is Russia. Their intentions are more realistic and not as ambitious of those of China. However, Russia sees gold as a valuable monetary asset that will protect the ruble in the continuing currency wars.
This is why, Russia has been one of the largest buyers of gold in recent months (see chart) - largest sovereign buyer and one of the largest buyers in general. Although we do not know how much gold the People’s Bank of China is quietly accumulating. Russia now looks set to become the world’s second largest producer of gold, after China and surpassing current world number two gold producer Australia………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

The numbers are in… In the second quarter of 2014, world central banks bought 117.8 tonnes of gold bullion compared to 92.1 tonnes a year earlier—a jump of 28%. Central banks have been net purchasers of gold bullion for 14 consecutive quarters!
According to the World Gold Council, “Economic and geopolitical events throughout the world are sources of ongoing instability and uncertainty. Such events reinforce the requirement for appropriate risk management by central banks through holding gold reserves for asset diversification.”……………………………………….Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Gokulasthami, one of the major festivals celebrated across Maharashtra and some parts of South India, has now got a touch of gold, underscoring what some expect will be stronger second half for gold demand in India as the festival season ramps up.
If anything attracts Indians, it is gold, and gift prizes of gold pots, and gold coins, and even gold plated decorations rouse the masses. The tradition of Dahi Handi festival on Gokulashtami, celebrated across India on August 18 and 19 this year, relates to a human pyramid breaking an earthen pot filled with buttermilk suspended high above the ground, sometimes well over 50 feet above the ground………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Jim Rogers once quipped that he waits to invest until “there’s a pile of money just sitting there in a corner and I can walk over and pick it up.” In other words, an asset that’s deeply undervalued, widely ignored, with potent fundamentals ready to kick in. Is there such an opportunity in any of the precious metals right now?
One could make a case for all of them, given the likelihood of high inflation and the mainstream largely ignoring the industry. But there’s one metal in particular that I think will deliver the most fireworks………………………………………….Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Palladium’s powerful performance in this year has garnered a lot of market attention, but one research firm said it expects the metal’s current rally to lose momentum during the second half of the year.
In a report released Wednesday, Caroline Bain, senior commodities economist at Capital Economics, said the firm is lowering its year-end price forecast for palladium to $800 per ounce, from their previous forecast of $875………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Platinum futures listed on Nymex were trading lower at $1,434.00 an ounce on Wednesday, while September palladium contracts fell sharply to a low of $869.65 an ounce as recent optimism about the prospects for the sector evaporate.
Palladium futures trading on New York’s Nymex hit an all-time record intra-day futures price above $900 an ounce on Monday on supply fears as tensions between the West and Russia over the latter’s involvement in Ukraine escalate………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

World crude steel production totalled 137 million tonnes (Mt) in July 2014, for the 65 countries reporting to the World Steel Association (worldsteel), according to the association. This indicates an increase of 1.7% compared to July 2013.
China’s crude steel production for July 2014 was 68.3 Mt, up by 1.5% compared to July 2013. Elsewhere in Asia, Japan produced 9.3 Mt of crude steel in July 2014, the same level of production as in July 2013. South Korea produced 5.9 Mt of crude steel in July 2014, up by 6.2% on July 2013………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Pension and sovereign wealth funds are not traditionally big investors in ETFs because of concerns over cost, flexibility and restrictions on buying listed securities. But that may be about to change as providers look to woo big institutional investors.
Of the 3,367 institutional buyers of exchange-traded funds (ETFs) across 50 countries in 2012 only 1% was a pension fund, while investment advisers accounted for 60%, according to consultancy ETFGI. Meanwhile few sovereign wealth funds admit to buying ETFs and some are decidedly negative about the products. For example, the $850 billion Government Pension Fund of Norway - the world’s largest sovereign wealth fund - states: “The fund does not invest through ETFs.”……………………………………….Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

For many, exchange-traded funds represent the vanilla part of the financial product market. While it’s true most track a common equities index such as the ASX 200, more unusual ETFs are now starting to emerge.
As Ilan Israelstam, head of strategy, BetaShares notes, the ETF market has broadened significantly over the past few years to move beyond traditional index trackers. “A number of products have been launched that provide cost-efficient access to investment strategies that were only previously available to larger investors or through unlisted funds,” he says………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

The summer months are generally regarded as a seasonal period of strength for oil prices and energy stocks. The considerable demand for energy consumption peaks with the summer driving season, as cyclical forces impact this heavily traded commodity. In addition, this year we are in the midst of geopolitical unrest throughout the Middle East and Eastern Europe. Both of these regions are well-known producers of crude oil and natural gas.
The combination of these factors should be pressing energy prices higher amidst fears of energy supply concerns coupled with seasonal demand trends. Instead, the opposite effect is occurring and it’s impacting several key ETFs………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

As the Fed winds down its third iteration of quantitative easing here in 2014, it is not difficult to imagine the same type of market tantrum alongside a few troublesome economic data points. There are many signs of a weak U.S. economy beyond the aforementioned consumer sentiment gauge and the abysmal retail sales numbers.
There may be no greater sign of trouble around the bend than what is happening to key commodities like copper, oil and livestock………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

The expert behind Alex Salmond’s currency plan has admitted the UK might not agree to share the pound in a formal monetary union with an independent Scotland. Crawford Beveridge, the chairman of the expert panel which drew up currency options for an independent Scotland, said the proposed currency union remained the best option.
But he told an audience in Glasgow that the argument over the currency had become political rather than economic and the UK might not behave “rationally” in negotiations following a Yes vote………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

In a move that has dismayed the Australian Bitcoin community, the Australian Tax Office (ATO) has provided tax guidance declaring that the crypto-currency Bitcoin is not actually a currency at all, but an asset like shares.
This has a number of consequences for both consumers and businesses wanting to buy, sell and exchange Bitcoins in Australia, which has led some Bitcoin commentators to warn that the rules will drive Bitcoin business offshore and generally stifle the growth of its use in Australia………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

With prices hitting a 5 month high of €6.50 today, established energy intelligence provider ICIS Tschach predicts a sustained increase in the price of European Trading Scheme (ETS) allowances. On current trajectories, prices are expected to hit double digits and a two-year high by year’s end. Such an increase would be a worrying trend for those with significant compliance obligations, especially large, carbon-intensive industrials.
Since the beginning of the EU ETS’s Phase 3 compliance period at the start of 2013, the market has been oversupplied with allowances, leading to a sustained period of trading within a €3-6 corridor. Now however, a number of factors are converging to push prices consistently higher………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

Environmental campaigners are bracing to take on big business over whether Europe should follow California’s lead and include road transport in the EU carbon market.
Bringing transport - Europe’s biggest source of greenhouse gas emissions after the power sector - into the EU Emissions Trading System (ETS) could bring down the costs the car industry faces in meeting existing regulation as well as tackling the oversupply on the carbon market. Environmental campaigners, however, say such a move would undermine more-effective policies………………………………………..Full Article: Source

Posted on 21 August 2014 by VRS |  Email |Print

NextGen Climate Action, the outside group run by billionaire environmentalist Tom Steyer, took a new tack in its attempts to bolster Democrats’ chances in the Iowa Senate race this week. Its first ad, you migh recall, was a mini-play suggesting that Republican Joni Ernst had sold her soul to some shadowy cabal of dudes worried about tax breaks or something. The new ad is more to the point.
Iowans don’t need clarification on the subtext. By cozying up to Big Oil, the ad suggests, Ernst displays disloyalty to ethanol — a biofuel that is usually made from corn and which the government has mandated be included in fuel mixes………………………………………..Full Article: Source

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