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Commodities Briefing - Archive | March, 2012

Warren Buffett and investing in gold

Posted on 26 March 2012 by VRS  |  Email |Print

In Warren Buffett’s letter to Berkshire Hathaway shareholders released in late February, 2012, Mr. Buffett expressed his skepticism with respect to the investment merits of gold. He stated that gold is a favorite of investors who fear almost all other assets, especially paper money.
What motivates most gold purchasers is their belief that the ranks of the fearful will grow. As “bandwagon” investors join any party, they create their own truth - “for a while“. “What the wise man does in the beginning, the fool does in the end.”……………………………………….Full Article: Source

Gold: Where are the buyers?

Posted on 26 March 2012 by VRS  |  Email |Print

The dollar was sent higher by the weaker economic data out of China and Europe and gold suffered again given its relatively high reverse correlation to the greenback during the past couple of weeks, said Saxo Bank in a research note.
According to Saxo Bank, the Eurozone debt crisis seems to be re-igniting with Spanish benchmark 10-year bond yields rising back above 5.5 percent for the first time since January………………………………………..Full Article: Source

A beginner’s guide for understanding the role of gold in your financial future

Posted on 26 March 2012 by VRS  |  Email |Print

Throughout these past several turbulent years, you have likely heard about investing in gold. Even with the increased exposure gold investments have received - as well as its place as one of the oldest ways people have accumulated and protected wealth - many Americans are still in the dark about the basic reasons why investing in this precious metal is important to their future.
A substantial number of Americans own gold in some form, but few are aware of the benefits of investing in it………………………………………..Full Article: Source

China’s “rare earths”, and the hypocrisy of the Obama administration

Posted on 26 March 2012 by VRS  |  Email |Print

As is well known now, the Obama administration recently joined the EU and Japan in a lawsuit filed at the World Trade Organization over China’s alleged restrictions on the export of rare earth elements.
For those who’ve properly ignored what until now should have been a non-story, “rare earths” are metals essential for the production of everything from smart phones, to hybrid cars, to military equipment………………………………………..Full Article: Source

Rare earth news: Commodity wars

Posted on 26 March 2012 by VRS  |  Email |Print

A dispute has developed between China, the US, EU and Japan over Rare Earth exports, this dispute, simmering below the surface for some time now, has come to the surface as a full fledged feud, and has escalated to the WTO.
The United States, European Union and Japan recently filed a joint complaint before the WTO, accusing China of rationing exports of 3 Key raw materials, including Rare Earth metals………………………………………..Full Article: Source

Why the miners have fallen into a pit

Posted on 26 March 2012 by VRS  |  Email |Print

Hope you made the most of it, because the resources boom is losing its mojo for anybody who holds mining shares. Commodity prices are down, though, as the Reserve Bank keeps insisting they’re still ”elevated”, which doesn’t sound too reassuring.
The sharemarket is telling BHP Billiton and Rio Tinto, in that subtle way it has of slashing prices, to stop digging and pay bigger dividends………………………………………..Full Article: Source

Hedge funds make wrong-way bets for a fourth week: Commodities

Posted on 26 March 2012 by VRS  |  Email |Print

Hedge funds wagered the wrong way on commodity prices for a fourth consecutive week, boosting bullish holdings just before reports showing a contraction in manufacturing from China to Europe drove prices lower.
Money managers lifted combined net-long positions across 18 U.S. futures and options by 2.9 percent to 1.17 million contracts in the week ended March 20, Commodity Futures Trading Commission data show………………………………………..Full Article: Source

Euro gains versus yen on prospect of combined rescue fund

Posted on 26 March 2012 by VRS  |  Email |Print

The euro rose for a second day against the yen on prospects the single-currency region may agree to combine two rescue funds to halt the spread of its sovereign-debt crisis.
The 17-nation euro gained before a report forecast to show German business confidence held at the highest level since July. The greenback gained against the Japanese currency before a U.S. report this week that may show manufacturers probably received more orders for durable goods in February………………………………………..Full Article: Source

South Africa to back renminbi as international currency in BRICS Summit

Posted on 26 March 2012 by VRS  |  Email |Print

The South African government will endorse the Chinese renminbi as the new global currency during the incoming BRICS Summit in India, media reports said Sunday.
The South African government will take some steps in the BRICS Summit to challenge the US dollar’s supremacy in the world financial structure, especially in the trade and investment in the emerging markets, reported Xinhua, citing the South African Sunday newspaper City Press………………………………………..Full Article: Source

Turning point in the currency war

Posted on 26 March 2012 by VRS  |  Email |Print

A counteroffensive of sorts may be underway this year in what has seemed like a one-sided “global currency war” as developing economies slow, western money-printing pauses and the heat comes out of pumped-up emerging market currencies.
The three-year-old “war”, as Brazil dubs the devaluationist policies of developed nations seeking relief from home-grown credit crunches, may well just come full circle and burn itself out as a result………………………………………..Full Article: Source

Commodities fall on worries about global economy

Posted on 23 March 2012 by VRS  |  Email |Print

Most commodity prices fell Thursday after new reports signaled economic slowdowns in China and Europe, creating fresh worry that global demand could moderate. Metals, oil and some agricultural crops all finished lower. Palladium took the biggest hit, ending the session down 5.5 percent.
A Chinese manufacturing index compiled by HSBC was the latest in a series of reports indicating slower growth in the world’s second-largest economy. The index declined to 48.1 in March from 49.6 in February. Figures below 50 indicate that manufacturing is contracting………………………………………..Full Article: Source

Analysts’ divide over China, commodities widens

Posted on 23 March 2012 by VRS  |  Email |Print

Investment banks are increasingly disagreeing over the outlook for commodities, and by extension the anticipated road ahead for metal prices and more broadly the global economy.
The divisions have emerged at the Credit Suisse Asian Investment Conference and the Mines & Money forum both being held this week in Hong Kong, where fears of a slowdown in the Chinese economy have been in sharp focus………………………………………..Full Article: Source

Don’t get sucked into commodity blindness, warns Invesco manager

Posted on 23 March 2012 by VRS  |  Email |Print

Investors taking a one size fits all approach to commodities face being caught out in 2012, according to Invesco’s Scott Wolle.
Wolle, who manages the $3.2 billion Invesco Balanced Risk Allocation fund, said risk aversion and increased talk of a slowdown in global growth had caused investors to turn to a risk-off approach in relation to commodities. This, he said, was ill-advised………………………………………..Full Article: Source

Top picks in commodities processors

Posted on 23 March 2012 by VRS  |  Email |Print

Fourth-quarter capital spending in the primary commodities-processing industries served by our stocks remained favorable and 2012 spending should again increase. This report tracks nearly $750 billion in capital spending in the key commodities-processing end-markets.
The global oil and gas, chemical and power markets are the three largest commodities-processing end-markets served by our six process industrials stocks. We track the capital spending of many companies in these verticals globally………………………………………..Full Article: Source

Commodities in steep contango

Posted on 23 March 2012 by VRS  |  Email |Print

Contango is simply an unavoidable phenomenon of the commodity market; at some point almost all commodities will fall into this pattern. For those unfamiliar with the term, contango simply refers to a scenario in which near month futures are cheaper than those expiring further into the future, creating an upward sloping curve for future prices over time.
Traders and investors need to keep a close eye on futures curves, as they can have a drastic impact on positions while also presenting opportunities for lucrative trades………………………………………..Full Article: Source

CITI: We’re at the end of the commodity supercycle

Posted on 23 March 2012 by VRS  |  Email |Print

As if we haven’t had enough of this commodity/ iron ore/ steel super-cycle thing in the past few days, Citi is acknowledging that the end will come. While some point to the fact that the apparent intensity of use for steel (in terms of kg per capita) for China is still well below some other countries at their peak, Citi reckons that in terms of “value in use”, China is already above most of the developed world.
In other words, while consumption of commodities in terms of volume still lags behind many countries, the value of the commodities China is consuming has already been higher than most countries. ……………………………………….Full Article: Source

Iraq ascendant as power shifts in OPEC

Posted on 23 March 2012 by VRS  |  Email |Print

Amid the threats to global oil supplies caused by the Persian Gulf confrontation between the United States and Iran, the longtime oil-power rivalry between the Islamic Republic and a resurgent Iraq is mounting.
Industry analysts say that, spurred by the international sanctions aimed at choking off Iran’s oil exports, this will likely mean Iraq will push Iran out of its position as the oil cartel’s second-biggest producer after Saudi Arabia………………………………………..Full Article: Source

OPEC exports to rise in 4 weeks to April 7: Analyst

Posted on 23 March 2012 by VRS  |  Email |Print

Seaborne oil exports from OPEC, excluding Angola and Ecuador, will rise by 360,000 barrels per day (bpd) in the four weeks to April 7, an analyst who estimates future shipments said on Thursday.
Exports will reach 23.63 million bpd on average, up from 23.27 million bpd in the four weeks to March 10, UK consultancy Oil Movements said in its latest weekly estimate………………………………………..Full Article: Source

IEA says not planning any coordinated action on oil supplies

Posted on 23 March 2012 by VRS  |  Email |Print

The International Energy Agency isn’t planning a coordinated release of emergency oil stockpiles among its 28 member nations, the agency’s chief said. It is premature to speculate about “unconfirmed rumors” regarding individual inventory releases by member countries, Executive Director Maria van der Hoeven said.
The Paris-based IEA advises oil-consumer nations including the U.S., Japan, U.K. and Germany on energy policy………………………………………..Full Article: Source

Crude oil prices and the ‘peak oil’ environment

Posted on 23 March 2012 by VRS  |  Email |Print

Peak Oil can be defined at least 4 ways but one way is simple: Peak Oil is when supplies and stocks are tight enough, relative to demand, to make price slides short and price hikes long, until and unless the economy tilts into recession or by policy decision in response to a dysfunctional and parasitic bank, finance and insurance sector is either pushed or allowed to fall into recession.
The most recent example of this was in 2007-2008 culminating in US Nymex oil prices at around $145 a barrel, with little or no difference between Brent and WTI prices………………………………………..Full Article: Source

BarCap banks on gold as prices hit 2-month lows

Posted on 23 March 2012 by VRS  |  Email |Print

Gold prices are at their lowest since January but Barclays Capital expects the metal to rally around 15 percent to a lofty $1,850 an ounce by the second quarter due to inflation worries.
Copper should rise more strongly than many other commodities if the U.S. economy and global business confidence continue to grow and top metals importer China shows more proof of being headed for a soft economic landing, BarCap said on Thursday………………………………………..Full Article: Source

Why gold can go the distance

Posted on 23 March 2012 by VRS  |  Email |Print

Gold’s been knocked down lately, but several enduring factors have conditioned the yellow metal for an inevitable comeback. Since the beginning of 2012, gold has trailed its precious metals peers, gaining only about 6% compared to double-digit returns for silver and platinum.
At the end of February, gold was especially hard hit, following Ben Bernanke’s announcement that there would be no additional quantitative easing and the European Central Bank offering additional LTRO loans to banks………………………………………..Full Article: Source

Gold consolidates but vulnerable due to rising yields, slack physical demand: UBS

Posted on 23 March 2012 by VRS  |  Email |Print

Gold is consolidating and has held $1,640-an-ounce support, but nevertheless remains “vulnerable” after its recent pullback, said UBS in a research note.
“Upside drivers are lacking and physical markets have yet to show a convincing response to lower prices. With U.S. Treasury yields still hovering near the recent highs, and U.S. data still beating expectations on balance, any gold recovery is likely to be limited,” UBS added………………………………………..Full Article: Source

Klapwijk: ‘Buy this gold dip’ before $2,000/oz.

Posted on 23 March 2012 by VRS  |  Email |Print

Gold has broken below recent support at $1,640/oz. and reached as low as $1,632.45/oz. this morning – below its recent low and its lowest price since January 16.
Gold looks like it will go lower on technical weakness and the next level of support is $1,600/oz. Below that again support is at $1,523/oz. – the low seen December 29………………………………………..Full Article: Source

India: Bullion traders on ‘indefinite’ strike to protest duty hike

Posted on 23 March 2012 by VRS  |  Email |Print

Bullion and jewellery traders in various parts of the country went on strike for the sixth straight day today to protest the hike in import duty on gold and excise levy on unbranded jewellery.
Bullion traders in Kanpur have joined the indefinite strike to protest the excise duty hike. Around 368 jewellery stores remained closed there leading to heavy losses. Traders have threatened to take to street if the Centre did not roll-back the duty hike………………………………………..Full Article: Source

India, China gold jewelry demand is expected to decline in 2012, 2013

Posted on 23 March 2012 by VRS  |  Email |Print

Mixed interest in gold among institutional and retail investors. Interest in gold was revived at the start of the year, BNP Paribas in a commodity briefing.
“Since gold initiated its price correction at the start of March, sentiment shows a lack of directional conviction. The market appears divided between the potential for the recent correction to unfold further and a potential rebound off the current levels,” BNP added………………………………………..Full Article: Source

Palladium may decline on ‘trend momentum’

Posted on 23 March 2012 by VRS  |  Email |Print

Palladium, which had its biggest drop this year, may decline an additional 7.8 percent, according to technical analysis by Shaun Osborne, the chief foreign-exchange strategist at TD Securities Inc.
Prices may drop to $600 an ounce in the next few weeks after yesterday falling below the 100-day moving average for the first time since early January, a move some investors view as a signal for further declines, Osborne said………………………………………..Full Article: Source

Commodity ETFs break key technical levels on China data

Posted on 23 March 2012 by VRS  |  Email |Print

Commodity markets responded strongly on Thursday to news that the HSBC China Purchasing Managers Index fell to 48.1 in March from 49.6 in February. The decline in the Index implies that a recovery in the growth rate of China’s economy will not happen any time soon.
Traders assumed that China’s purchase of a wide variety of commodities will slow significantly………………………………………..Full Article: Source

Taking a fresh look at equity commodity funds

Posted on 23 March 2012 by VRS  |  Email |Print

Investors’ interest in commodities has exploded over the past 10 years. Whether they’re looking for diversification, an inflation hedge, or to speculate on rising prices, investors have plowed hundreds of billions of dollars into commodity-related offerings, both mutual funds and exchange-traded funds.
A decade ago, commodity-related funds (at that time, only the open-end equity energy, precious metals, and natural resources categories existed) held just $10 billion in assets………………………………………..Full Article: Source

Hedge funds seeking 15pct returns may try CO2 market, DIW says

Posted on 23 March 2012 by VRS  |  Email |Print

Hedge funds seeking annual returns on investments of 15 percent may enter the European Union carbon market after prices plunged 59 percent in the past year, according to DIW Berlin.
The plunging price may be enough to attract some new investors to the market, even as supply threatens to overwhelm demand over the next few years, said Karsten Neuhoff, an energy and climate policy specialist at the provider of economic research in the German capital………………………………………..Full Article: Source

Mauritius futures exchange’s trade sales increase 38pct in year

Posted on 23 March 2012 by VRS  |  Email |Print

Global Board of Trade Ltd., a Mauritian-based foreign-currency and commodity-futures exchange platform, said volumes grew 38 percent in the past year as it attracts interest from countries including South Africa and Cyprus.
Average daily sales on the exchange increased to $30.8 million last month from $22.3 million a year earlier, the Ebene, Mauritius-based company said in an e-mailed response to questions yesterday. Potential investors in Kenya and Dubai have also expressed an interest in trading on the exchange, Managing Director Joseph Bosco said……………………………………….Full Article: Source

China signs $31bln currency exchange deal with Australia

Posted on 23 March 2012 by VRS  |  Email |Print

China and Australia have signed a currency swap agreement in a bid to promote bilateral trade and investment. It will allow for the exchange of local currencies between their central banks, worth up to 30bn Australian dollars ($31bn; £20bn) over three years.
The deal is expected to reduce cost for businesses, as they will be able to settle trade terms in local currency………………………………………..Full Article: Source

Analysis - Turning point in the currency war

Posted on 23 March 2012 by VRS  |  Email |Print

A counteroffensive of sorts may be underway this year in what has seemed like a one-sided “global currency war” as developing economies slow, western money-printing pauses and the heat comes out of pumped-up emerging market currencies.
The three-year-old “war”, as Brazil dubs the devaluationist policies of developed nations seeking relief from home-grown credit crunches, may well just come full circle and burn itself out as a result………………………………………..Full Article: Source

Brazil wins round one of currency war

Posted on 23 March 2012 by VRS  |  Email |Print

In the so-called “war” to keep its currency at weaker levels, Brazil easily has won the first round on the strength of its endless salvos from raising taxes to daily market interventions.
Market consensus now puts the Brazilian central bank’s new defensive line for the dollar against the Brazilian real at BRL1.80, up from the BRL1.70 level of last month. The cost of such policy meddling can be seen in the slowdown in capital flows to the country, especially from portfolio investors………………………………………..Full Article: Source

Russian ruble becomes emerging currency star

Posted on 23 March 2012 by VRS  |  Email |Print

Russian-ruble trading is suddenly the hottest corner of the ever-growing emerging-markets currency landscape. Boosting the ruble’s use is a burgeoning oil market and more flexibility from Russia’s central bank, with the bank’s lighter touch in the foreign-exchange market a primary force.
Russian-ruble futures contracts traded on markets run by CME Group nearly tripled in 2011 from the previous year………………………………………..Full Article: Source

Banking regulation may hurt hedging in commodities, study finds

Posted on 22 March 2012 by VRS  |  Email |Print

Services in commodities hedging provided by banks will shrink and the terms will be stricter because of new regulations adopted since the global financial crisis, Greenwich Associates said.
Regulations such as Dodd-Frank and Basel III will establish stricter capital reserve requirements and require mandatory central clearing for over-the-counter derivatives that will reduce bank profits, the Stamford, Connecticut-based researcher said……………………………………….Full Article: Source

For energy hedgers, lending key to picking dealers

Posted on 22 March 2012 by VRS  |  Email |Print

Andrew AwadLarge companies looking to hedge their exposure to rising energy costs are employing a larger number of banks to execute their commodity trades due to tighter credit markets, a survey released by Greenwich Associates showed on Wednesday.
The consultancy’s global survey of more than 300 large firms showed that their relationship with their lenders is now almost as important as the bank’s commodity market expertise, with airlines and large industrial companies putting an increasing premium on access to credit……………………………………….Full Article: Source

European banks ‘trying to resolve commodities crunch’

Posted on 22 March 2012 by VRS  |  Email |Print

Banks across Europe are making preparations to create a new programme in order to try to resolve the ongoing problems in the continent’s commodities sector.
According to the Financial Times, lenders - including the major French firms BNP Paribas and Societe Generale - are currently attempting to come up with a new type of securitised vehicle that will bundle together commodity trading houses………………………………………..Full Article: Source

Re-securitising commodities financing

Posted on 22 March 2012 by VRS  |  Email |Print

French banks are stepping back into funding commodities trades, after pulling back on lending last year due to a dollar liquidity shortage. But this time, it’s securitised. As the FT reports: Commodities bankers and industry executives said the securitisation would allow the industry to access fresh credit.
But investors have been cautious about the new products, which the French banks including BNP and Societe Generale want to launch by the end of the year………………………………………..Full Article: Source

Australia: Positive outlook eases investor fears

Posted on 22 March 2012 by VRS  |  Email |Print

The government’s commodities forecaster has boosted medium-term iron ore production and price forecasts, defying concerns that a slowdown in China will weigh on mining revenue and that prices could be in for a sharp decline.
The Bureau of Resources and Energy Economics forecasts that iron ore prices will fall from about $US140 a tonne to $US109 in the next five years, putting it among the more bullish forecasters………………………………………..Full Article: Source

China no threat to foreign commodities - analyst

Posted on 22 March 2012 by VRS  |  Email |Print

Data analysts Raw Materials Group on Wednesday defended Chinese investment in foreign resources projects, stating that the Asian major’s effect on the resources industry was less than popularised.
Speaking at the second day of the Global Iron and Steel Conference, in Perth, Raw Materials Group chairperson Magnus Ericsson said that Chinese investment accounted for only 1% of all the minerals produced around the world………………………………………..Full Article: Source

Japan to hold commodities talks with EU and US

Posted on 22 March 2012 by VRS  |  Email |Print

The Japanese government has announced it will hold talks with the EU and US in a bid to find alternatives to the rare earths minerals monopolised by China.
Discussions are due to take place next Wednesday (March 28th), with Japanese authorities determined to reduce their dependence on the rare earths commodities, AFP reported………………………………………..Full Article: Source

High-frequency trading distorts commodities prices

Posted on 22 March 2012 by VRS  |  Email |Print

High-frequency traders have caused U.S. commodity futures prices to disconnect from market fundamentals of supply and demand since the 2008 financial crisis, according to one of the authors of a forthcoming U.N. report.
Also known as black-box players, they plug algorithms into computers to generate numerous, lightning-speed automatic trades that are designed to make money from arbitrage on razor-thin price differences and movements………………………………………..Full Article: Source

Venezuela says Iran sanctions threaten oil market stability

Posted on 22 March 2012 by VRS  |  Email |Print

Venezuelan oil minister says Western sanctions against Iran’s oil sector are “detrimental” to the stability of world oil prices and should be discussed by OPEC member states.
Speaking to reporters during a visit to Venezuela’s oil-rich area along the eastern Orinoco river basin on Wednesday, Rafael Ramirez noted that Iran sanctions are “a direct aggression on an oil producing country.”……………………………………….Full Article: Source

Saudi supply and swooning demand

Posted on 22 March 2012 by VRS  |  Email |Print

The latest movement in Brent and WTI crude following the mild retreat after the Saudi oil minister Ali Naimi said on Tuesday that his country stood ready to increase production if necessary. We want to note something quickly about his comment that “high prices are unjustified today on a supply demand basis”.
Obviously geopolitics has much to do with oil price movements lately, but Naimi’s explanation doesn’t entirely jive with what some analysts are saying………………………………………..Full Article: Source

Has the earth ever run out of a natural resource?

Posted on 22 March 2012 by VRS  |  Email |Print

“Has the Earth ever run out of a natural resource?” This intriguing question was posed to me nearly two years ago by producer Niall McGee of Canada’s Business News Network (BNN).
Many of you are aware that I am a frequent guest on BNN speaking about supply and demand fundamentals of commodities and evaluation of junior resource companies………………………………………..Full Article: Source

Physical gold demand sluggish as strike drags

Posted on 22 March 2012 by VRS  |  Email |Print

Gold demand in India stayed weak, the world’s biggest consumer of the yellow metal, as prices edged higher as a protest against duty hikes on bullion entered its fifth day on Wednesday.
The strike, which started on Saturday, is in protest over a series of measures taken by the government, which includes hiking of import duty along with an excise on non-branded jewellery………………………………………..Full Article: Source

Gold trades steady; investors turn negative

Posted on 22 March 2012 by VRS  |  Email |Print

Gold traded broadly steady on Wednesday, as a boost from a modestly stronger euro against the dollar offset slow consumer demand and an erosion in holdings of the metal in exchange-traded products.
Holdings of gold in the world’s largest ETPs fell by more than 100,000 ounces, following outflows from most of the major funds, marking the biggest one-day decline in three months, reflecting some of the investor shift away from bullion………………………………………..Full Article: Source

India gold imports to touch $100 bln by 2015/16, impose higher import duty: ASSOCHAM

Posted on 22 March 2012 by VRS  |  Email |Print

The value of gold imports by India, the largest importer of the yellow metal, is expected to touch $100 bn by 2015-16, according to Associated Chamber of Commerce and Industry (ASSOCHAM).
“The recent hike in customs duty to four per cent will not be enough to control gold imports. Every ounce of imported gold means that the country’s savings flow out to other countries and create jobs there”, the report says while adding that $100 billion imports will put pressure on India’s current account and widen the deficit. As such ASSOCHAM advises higher import duty on gold………………………………………..Full Article: Source

Gold price unlikely to break 2011 peak: CPM

Posted on 22 March 2012 by VRS  |  Email |Print

Gold prices are unlikely to exceed its intraday peak hit in 2011, CPM Group stated ahead of its release of the “Gold Yearbook 2012”on March 27, 2012. Gold prices had hit an all time highs around $1920/oz in 2011, but has failed to break through the level ever since.
Meanwhile, demand for gold is seen easing on improving investor sentiment. US economic data has bee mostly encouraging, indicating a possible strong recovery and is attracting investors into the equity markets………………………………………..Full Article: Source

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