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Commodities Briefing 22.Aug 2014

Posted on 22 August 2014 by VRS |  Email |Print

Jumpy commodities markets are taking hedge funds for a wild ride. A spate of unpredictable U.S. weather, a surprise record harvest and even a pig virus are giving commodities traders exactly what they craved: volatility. But a few big names are on the wrong side of this summer’s topsy-turvy moves.
Unlike in years past, when star managers scored megapaydays in high-profile markets such as oil and gold, some of the biggest winners in recent months are in commodities like corn, soybeans, natural gas and electricity………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Spot prices of Brent crude oil averaged $107/bbl in July, marking the 13th consecutive month in which the average price has ranged $107-112/bbl. Compared with the volatility seen as recently as 2 years ago when Brent spot prices ranged as high as $125/bbl in March 2012 to as low as $95/bbl in June 2012, this price stability has been remarkable, according to the US Energy information Administration.
Implied volatility—a measure of expected price variation—for the near-month Brent futures contract has averaged 18% over the past 12 months compared with 28% during the previous 24 months………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Bloodshed in Iraq, sanctions on Russia, conflict in Palestine. If you had asked market participants at the start of the year what would happen to the oil price if such events coincided, few would have predicted it would stay near $100 a barrel.
But since rising to $115 a barrel in mid-June, amid initial fears that fighting with Islamist militants in Iraq would result in major stoppages, the front month price of Brent crude has since dropped to 14-month lows………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

China’s demand for natural gas will more than triple over the next 35 years, according to a new report from the U.S. Energy Information Administration.
Natural gas demand in China is projected to hit 17.5 trillion cubic feet (tcf) in 2040, a greater than three-fold increase from the 5.2 tcf of demand in 2012. There is a big question mark over how the country will meet that need, but the EIA says the vast majority of it will come from two sources: domestic production and liquefied natural gas (LNG) imports………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

The development of a sustainable, long-term solution to meeting the world’s energy needs is one of the defining issues of our time. The risks of getting our energy policies wrong are considerable and the consequences large, as numerous conflicts have occurred as a result of competition for resources.
If we don’t do something significant to facilitate greater cooperation regarding energy, future conflicts are inevitable. Energy security can briefly be defined as “adequate, affordable and reliable supplies.” As climate security and energy security are inextricably linked, I would hasten to add that there is no energy security without climate security. Indeed, cost-effective mitigation and adaptation strategies– namely, tackling the causes and effects of climate change – must be at the heart of energy policy………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

An improving U.S. economy and growing expectations for an early rate hike will drag gold prices lower by the end of the year, but the impact will be limited says commodity economists at a leading macro-economic research firm.
Caroline Bain, senior commodity economist at Capital Economics said, in an interview with Kitco News, that they are currently in the process of revising their year-end price target for the yellow metal lower; the firm’s current price target is $1,400 an ounce………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Scott Winship, portfolio manager of the Investec Global Gold fund, explains why gold is set to build on a strong first half of the year. In recent months there has been renewed investor interest in gold, with the first half of 2014 seeing the gold price rise by 10 per cent.
Investors have also tempered their gold ETF selling year on year. Last year saw global gold ETF holdings decline by 33 per cent as investors priced in tapering of QE and higher interest rates, but this year has seen a change in sentiment as year-to-date ETF holdings have only declined by 1.8 per cent………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Today, our prediction for the high side in 2014 is $1,350/oz for gold and $22/oz for silver. In other words, we see silver potentially trading up to $22/oz this year but do not imply in any way that we expect silver to average $22/oz this year.
We think gold and silver have performed relatively well this year and showed strength toward the end of the second quarter. My feeling is that stronger gold and silver prices that we have seen earlier than anticipated this year is a reflection of global political tensions and maybe just a reminder that we are not out of the woods as far as U.S. economic performance is concerned. Earlier is better, and so we look for gold and silver prices to retain most of their gains in the third quarter………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

So now we have had three days of the new LBMA Silver Price – the new name for the London Silver Fixing given that the term ‘Fix’ is somewhat discredited in modern-day parlance. The banks involved in the old system, which had fallen to two, wanted to withdraw from it, in part because they felt the process, even if it was a totally honest system, which it probably was, could lay them open to having to defend expensive, and probably spurious, lawsuits and the London Bullion Market Association took upon itself to go out and set up some kind of new silver benchmarking process at very short notice.
And is this new process any more transparent than the old one – one of the main charges laid against the old Silver fixing process. The answer so far is probably not!……………………………………….Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Five months after the U.S. Mint began producing coins made with platinum, sales have all but collapsed as investors continue to favor gold and silver.
“It’s not considered a currency,” said Jason Carstensen, a medical-sales representative in Ventura, California, who spends about $2,000 a month on coins. Gold and silver have value as hedges against a devaluation of the dollar, while platinum is viewed as an industrial commodity, he said………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Copper and zinc shrugged off weak Chinese manufacturing and trade data on Thursday, building on strong gains made in the previous 24 hours. Factory activity in China, which consumes more than 40 per cent of the world’s industrial metals, hit a three-month low in August, according to HSBC’s latest PMI figures.
Separate customs data showed that China’s refined copper imports dropped in July to 244,959 tonnes, the lowest since May 2013 and a 16 per cent fall year on year. The decline in imports was partly a result of the probe into suspected metals financing fraud at Qingdao port………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Copper rose to a one-week high on Wednesday as robust US housing data overnight boosted sentiment and buyers in top metals consumer China took advantage of low prices to build stocks. Housing starts in the United States surged to an eight-month high in July, suggesting a house market recovery was back on track after stalling in the second half of last year.
Copper is used mostly in the construction industry for cables, electric wiring, plumbing and in heating and ventilation systems. Three-month copper on the London Metal Exchange hit a one-week high of $7,019 a tonne, before paring gains to close at $7,010 a tonne, up 2.1 percent. The price had fallen to $6,821 last week, its weakest since June 23………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

What counts for an economy that primarily depends upon its consumers? Family income needs to increase beyond inflation. Otherwise, families find themselves with less purchasing power and, ultimately, those families spend less.
Since the U.S. economic recovery effectively began in July of 2009, inflation-adjusted wages have actually dropped 3%. In other words, at least in terms of purchasing power, families are no better off than when the recession had concluded………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

With the broad stock market continuing to hit new highs despite worries of a correction, investors have been getting a tad worried. That has them looking towards various alternative asset classes to help stem the volatility and diversify their portfolios. Everything from long/short strategies to commodities have become common holdings for investors.
However, one alternative asset classes remains absent from many investor’s assets. Currency trading or foreign exchange (Forex) shouldn’t be ignored by retail investors, especially now that there are a host of products that allow Regular Joes access to the once-guarded realm, such as exchange traded funds (ETFs)………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Investors looking to build a portfolio of ETFs may get caught up in the analysis of the fund provider, fees and tax structure. When selecting an ETF, however, the single most important determining factor is how the index is constructed.
The makeup of the underlying portfolio of assets is key because it determines how the ETF will react to a variety of market conditions. This includes the security selection, weighting methodology and ongoing changes to the fund construction over time………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Basic materials sector-related exchange traded funds are reaching new highs as expanding global economies demand basic inputs to fuel further growth. The Materials Select Sector SPDR added 0.1% Wednesday, trading at an intra-day high of $50.49. The largest materials ETF is up nearly 10% this year.
The materials sector ETF tracks a broad range of companies that operate in chemicals, metals, mining, paper, forestry, containers, packages and construction materials. “Most of these companies sell into commodity markets and are susceptible to cyclical demand,” according to Morningstar analyst Alex Bryan………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

For its creation of new commodity indexes, as well as the array of products it has created for Asian investors based on commodities, Societe Generale is this year’s Structured Products’ commodities house of the year.
Over the past year, commodities as an asset class has undergone a dramatic change, as the strong correlation between commodities and other asset classes that emerged during the global financial crisis began to ease and fundamental factors in the underlying commodities re-emerged in late 2013 as the primary drivers of price………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

ICAP, the world’s largest interdealer broker, has opened a coal derivatives trading desk in Singapore in a move that highlights the growing importance of the Asian city-state as a commodities trading hub amid robust Chinese demand for coal. It is another sign of London-based ICAP’s ambitions to tap increasing demand in Asia for hedging of physical purchases of commodities.
In May the company launched an electronic trading platform for iron ore swaps in Singapore, in part to capture demand from Chinese traders………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

There is nothing like coming home from a great trip abroad thinking you had been really savvy about sticking to your budget only to be hit with unexpected currency-exchange fees on your bank statement and credit card bill.
Almost every overseas traveler needs to exchange currency at some point during his or her trip. If you don’t know the tricks, it can be extremely expensive………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

Voters based in England do not want to enter into a currency union with the independent country if a yes vote prevails in September’s referendum, a new survey has revealed. The Future of England Survey 2014 published this week worked alongside polling agency YouGov to consult 3695 English voters on their views of Scottish independence
Individuals based in England, Wales and Northern Ireland are unable to vote in the Scottish referendum on independence even if they were born in the country. The Scottish government has set out plans for an independent Scotland to share the pound with the rest of the UK in a formal currency union but UK chancellor George Osborne has since issued a warning alongside the other main party leaders that the UK government would not enter into this type of union with the newly independent country………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

London is the fastest-growing hub in Europe for bitcoin users. The much-hyped virtual currency is changing hands in pubs, cafés and e-boutiques across the capital. Does it herald a cashless future or is it a no-cash flash in the pan?
There is nothing old about The Old Shoreditch Station café, a £1 coin’s throw away from Silicon Round-about, the home of East London’s Tech City. It’s about as cutting edge as a café can get. It’s not the menu — although the cappuccinos are religion-changingly good — it’s the price. They don’t charge for caffeine in silly old cash or credit cards. They take something new: bitcoins………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

The Beijing municipal government will add 120 companies to its emissions trading scheme from 2014, bringing in sectors like public transport in a bid to strengthen control over the city’s rapidly growing greenhouse gas emissions.
The capital is one of seven cities and provinces in China that have launched pilot carbon markets ahead of a national scheme within 2020, as the world’s biggest-emitting nation seeks to limit its impact on global warming………………………………………..Full Article: Source

Posted on 22 August 2014 by VRS |  Email |Print

California carbon emission permits fetched $11.50 a tonne at the cap and trade program’s eighth auction, bringing the total amount raised for the state to more than $833 million, officials said on Thursday.
As expected, California sold all of the nearly 22.5 million allowances it offered to cover emissions this year. Oil refineries, cement manufacturers and other large carbon-emitting businesses snatched up 88 percent of the allowances offered, according to data released by the California Air Resources Board, the program’s regulator………………………………………..Full Article: Source

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