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Commodities Briefing 26.Aug 2014

Posted on 26 August 2014 by VRS |  Email |Print

It all started so well: a surprise drop in Treasury yields, expectations of accelerating economic recovery, and more than a dash of geopolitical turmoil. Yes, 2014 was shaping up to be a good year for commodities. And indeed, the first half was more than acceptable. At 7.1%, the recently renamed Bloomberg Commodity Index (formerly the Dow Jones- UBS index) had its best six-month period since the latter half of 2010 and its best first half since that of 2008, when the supercycle’s ascent seemed unstoppable.
Fast forward all of eight weeks and the good times are over. Commodities as a whole are now in negative territory for the year. Their lead over the S&P 500 has flipped to an 8.5 percentage point disadvantage. And while August may traditionally be a month of thin trading, there is good reason to think summer will set the tone for the rest of the year………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Most financial advisors suggest that their clients diversify across asset classes, with only the percentages of stocks, bonds, gold and other assets as a matter for debate. I won’t wade into the latter discussion, but the charts suggest that commodities as an asset class may be ready to play a greater role.
The Thomson Reuters CRB index, also known as the CCI index, may have found a bottom. As the Standard & Poor’s 500 reached the 2000 milestone Monday, investors should consider that commodities could be the next opportunity………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

One of the main commodity indexes, the Bloomberg Commodity Index is in the red for the first time year-to-date as equity markets post record highs, analysts said.
The Bloomberg Commodity index, formerly known as the DJ-UBS commodity index, is down only about 0.25% year-to-date, but this comes “after commodities outperformed all other global asset markets during the first half of 2014 for their strongest start to a calendar year since 2008,” said analysts at Citi Research………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

The global oil price is market driven, fluctuating with supply and demand and the Organization of the Petroleum Exporting Countries or the International Energy Agency should not try to control it, the chief of Saudi Arabia’s state oil producer said.
“I share … the belief that this is a market driven business, it’s not OPEC, the IEA, and consumers that should be in the business of trying to control the market,” Khalid Al-Falih, the chief executive of Saudi Aramco, told a conference in Norway on Monday………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Europe has limited options for finding natural-gas supplies from outside of Russia despite tensions over Ukraine, the International Energy Agency’s chief executive, Maria van der Hoeven, said on Monday. “In the short term, Europe has very, very little means to diversify its gas imports,” Ms. van der Hoeven said on the sidelines of the Offshore Northern Seas energy conference. “As far as we can see, Russian gas will be needed in Europe.”
About a third of Europe’s gas supply comes from Russia and a fifth is supplied by Norway, while other key sources include imported liquefied natural gas and producers like the Netherlands and the U.K., Ms. van der Hoeven said………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Oil remained under pressure from plentiful supplies and October Brent crude eased 18 cents to $102.11 a barrel. WTI crude lost 18 cents to $93.47 a barrel. As tensions around the globe continue to escalate oil supplies remain higher than expected.
Federal Reserve Chair Janet Yellen on Friday nodded to the concerns of some Fed officials about the sustained level of monetary policy stimulus, even as she stressed the need to move cautiously on raising rates. In a stronger language than he has used in the past, ECB President Mario Draghi on Friday stressed the central bank is prepared to respond with all its “available” tools should inflation drop further………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Gold has slid during this past week on mounting fears of interest-rate hikes. Between the latest FOMC meeting’s minutes and the Fed’s annual Jackson Hole Economic Policy Symposium, American futures speculators’ rising-rate phobias have been whipped into a fever pitch. They worry gold will be crushed when the Fed eventually starts normalizing rates. But history shatters this fallacy that rising rates are gold’s nemesis.
Today there is a near-universal belief among futures traders that rising interest rates are very bearish for gold. The underlying logic is simple. When interest rates rise, so do yields on bonds and cash in the form of money-market funds. This makes bonds and cash relatively more attractive to investors than gold, which yields nothing. Therefore they jettison their gold holdings to migrate capital back into bonds and cash………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Gold is likely to find limited support on the downside in the absence of firm physical demand coupled with muted investor appetite, a report by Barclays said. Gold prices dropped to two-month lows, remaining below the $1300/oz mark last week following stronger-than-expected data from the US and hawkish comments from the Fed.
In the US, key data released last week were stronger than expected, ranging from existing home sales, the Philly Fed manufacturing index, the Conference Board’s index of leading indicators, to the weekly unemployment claims. The August employment report (due September 5) is likely to show solid employment growth of 200k and the unemployment rate to decline 0.1%, to 6.1%………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Gold held close to its lowest in two months on Monday, as the dollar marched higher after central bank heads signaled that interest rates were set on a diverging course in the United States, Europe and Japan.
At a gathering of central bankers in Jackson Hole, Wyoming, Federal Reserve Chair Janet Yellen nodded to the concerns of some Fed officials about the sustained level of monetary policy stimulus, even as she stressed the need to move cautiously on raising rates. The heads of the European Central Bank and Bank of Japan pledged more policy stimulus, which weighed on the euro and the yen versus the US currency………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Investors are exiting the Gold market on speculation that signs of sustained U.S. economic growth will push the Federal Reserve closer to raising interest rates, cutting demand for bullion as an inflation hedge.
Hedge funds reduced their bullish gold bets for the third time in four weeks and open interest in New York futures and options are near the lowest in five years, U.S. government data show. Prices tumbled 2 percent last week, the most since late May, erasing $1.2 billion from the value of exchange-traded products backed by bullion………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

A combination of labour issues, various spats with government and a number of operational issues are not yet behind Lonmin, Impala Platinum and AngloPlats and investors should be wary of committing to buying shares despite a recent recovery.
Lonmin in particular was one of the big movers in Europe last week, rising just over 5%. But Peter Garny, head of equity strategy at Saxo Bank was not convinced. He told clients: “Our quant model remains significantly more bearish than consensus with a 12-month return target of only 2% compared to 31% based on 25 sell-side analyst estimates……………………………………….Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Large speculators cut their net-long gold futures and options holdings on the Comex division of the New York Mercantile Exchange in the latest Commodity Futures Trading Commission data for the week ended Aug. 19, reversing some of the gains established in the last report.
The retreat came as geopolitical fears subsided and pushed the yellow metal under $1,300 an ounce during that timeframe. Platinum group metals activity was mixed, with large speculators adding to bullish palladium holdings and dropping platinum. These traders continued to trim net-long silver positions and cut their exposure in copper, too………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Zinc and nickel will probably lead advances in base metals next year as global demand outstrips production, according to Paul Crone, chief investment officer at Citrine Capital Management LLC.
Zinc may rally to $2,500 to $2,700 a metric ton, as much as 15 percent higher than last week, said Crone, who manages more than $200 million at the New York-based hedge fund and has traded metals for a quarter of a century. Nickel may rise 23 percent to $23,000 as Indonesia’s ban on raw ore exports cuts supply, Crone said in a phone interview on Aug. 21………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

OK, so what’s happening on the LME’s largest contract, primary aluminum? The cash to three months spread is down to just $17/ton and 118,850 tons of metal sitting in the exit queue at Vlissingen, Netherlands, has just been put back on the market according to a Thomson Reuters report by Andy Home.
According to Home’s report, the front part of the LME curve has been tightening for several weeks now, to the point that the shortest-dated spreads are currently in backwardation. The LME is periodically distorted by major players taking massive positions on certain key dates and manipulating prices as a result………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Peru is set to become the world’s second-largest copper miner, behind neighbouring Chile, thanks to a $20bn pipeline of Chinese mining projects, according to senior officials in Lima. Last month’s $7bn acquisition of Glencore’s Las Bambas copper project in Peru by China Minmetals’ MMG subsidiary has reinforced the links between the two countries, as Beijing seeks to secure more resources to drive economic growth.
MMG’s Las Bambas deal means Chinese backers are now behind one-third of all Peru’s new mining investments by value, estimated by the country at $61bn………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Navigant Research’s report, Renewable Energy in the Mining Industry, summed up the state of the global mining business: “In the last decade, increased demand from countries such as China and other emerging economies pushed the price of many metals and minerals upward, which stimulated investment in the mining industry.
More recently, the global economic downturn and the collapse in a number of metal and mined commodity prices forced the mining industry to scale back investment into new mine sites, reduce operating mine lives, and scale back their investment into more capital expenditure-heavy renewable energy.”……………………………………….Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Assets in ETF managed portfolios remained flat in the second quarter, according to a new report. But a dive beneath that bland finding reveals a more interesting nugget about this fast-growing subindustry: Investor dollars are increasingly concentrated in the hands of a select few firms.
The 10 biggest asset managers in the ETF space hold roughly 75% of industry assets compared with 67% a year ago, says Morningstar’s second-quarter study on the ETF managed portfolio marketplace, released Friday. Overall, their portfolio strategies held $102 billion in assets, up 28% from $80 billion in the year-earlier quarter………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

The world’s largest ETF issuer, BlackRock, is closing 10 target-date ETFs for lack of interest. And that’s a shame. The ETFs have been efficient, low-cost vehicles providing a complete long-term investment solution. Funds like the iShares Target Date 2020 ETF (TZG) delivered thoughtful allocation to broad asset classes like stocks and bonds, as well as diversified exposure within each asset class.
Better yet, these funds were built for the long haul, dynamically adjusting their allocations over time, gradually reducing risk. The “target date” in the name refers to the intended retirement date of the investor………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Egypt plans to launch the first and biggest commodities exchange in the Middle East in the coming period, said Minister of Supply Khaled Hanafy. The Egyptian minister further elaborated in a telephone interview with Al-Hayat TV channel on Saturday, that Cairo city would be the hub of contracting, trading, receiving and distributing the grains.
Such new accumulative markets will prevent monopolies and provide more transparency in the cost of goods………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

A cyclical bull market in commodities began right after the start of the new millennium. Many commodity prices zoomed to new actual all-time highs, not adjusted for inflation. Consider that crude oil, which peaked at $41.15 per barrel prior to 2004, reached over $147 in 2008. Today it remains over the $90 per barrel level — more than double the pre-2004 high.
Gold traded at a high price of $850 an ounce in 1980; in 2011, it shot up to over $1,900 and remains north of $1,200 today. The examples go on and on — copper and other base metals; agricultural commodities and some soft commodity prices all saw new dizzying heights over the past decade………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Nobel prizewinner Joseph Stiglitz also accuses Scotland’s finance sector of using scare tactics over independence. Prof Joseph Stiglitz, the Nobel prize-winning economist, has accused David Cameron’s government of bluffing over its opposition to a currency union with an independent Scotland.
Stiglitz boosted Alex Salmond’s repeated insistence that a formal sterling zone was the best option by accusing the no campaign of deliberately stoking up fear and anxiety among Scottish voters as a short-term tactic in the referendum………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

Carbon pricing systems around the world are delivering economic benefits and addressing climate change. But more needs to be done to raise political and corporate support. A dangerously warming planet is not only an environmental challenge, it’s a fundamental threat to efforts to end poverty and could put prosperity out of reach of millions of people. If you need further evidence, read the recent Fifth Assessment Report from the Intergovernmental Panel on Climate Change.
So what do we do about it? There is general agreement among economists that a price on carbon is part of an effective strategy to avert dangerous climate change. A strong price signal directs finance away from fossil fuels and towards a suite of cleaner, more efficient alternatives………………………………………..Full Article: Source

Posted on 26 August 2014 by VRS |  Email |Print

European carbon prices edged lower in thin trade on Monday ahead of an increase in supply from government sales of carbon allowances. Front-year EU Allowance (EUA) futures closed at 6.34 euros, down 4 cents on Friday’s settlement.
Liquidity was poor with around 4 million allowances of all vintages changing hands across all platforms as many traders were absent from their desks due to a national holiday in Britain………………………………………..Full Article: Source

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