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Commodities Briefing 12.Nov 2010

Posted on 12 November 2010 by VRS |  Email |Print

From Economist.com: The charge-sheet against commodity speculators is flimsy. Investors have certainly acquired more of a taste for commodities over the past few years. According to Barclays Capital, around $320 billion of institutional and retail money is now devoted to commodities, compared with just $6 billion a decade ago. That sum does not include hedge funds, whose involvement is significant but difficult to quantify.
Fund managers, who allocated a pittance to commodities a few years ago, now put up to 5% of their cash into them. Commodities diversify portfolios: in theory, at least, price moves are uncorrelated to shares and bonds……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Economist.com: Institutional investors and hedge-fund bosses do not deserve the attention they are getting. They are far duller folk than their caricatures and the offences they are accused of crumble on closer examination. There is almost no evidence to connect speculators to the commodity-price spikes that they are routinely blamed for creating.
And what little distortion speculators may cause is soundly trumped by the service they provide. In particular, they supply liquidity and price information that makes futures markets more efficient. Speculators plug the gap when the hedging requirements of raw-material producers and buyers do not coincide, offering a counterparty for trades that might otherwise have no takers……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From WSJ: Is the latest surge in commodity prices a tanker (or bulk carrier) half empty or half full? Optimists might argue that the asset class is responding to a global economic revival and, particularly, to demand emanating from booming emerging markets. In other words, rising prices are a barometer of economic health.
What’s more, because commodities tend to be priced in dollars and because the U.S. currency has been depreciating almost universally, the impact on economies beyond the U.S. should be minimal, except in countries which peg their currencies to the dollar, where it will prove to be inflationary……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Thestreet.com: Commodities have become so overheated, it seems investors will go anywhere and risk anything to try to take advantage of the monster moves. Recently, we saw another small commodity fund, Peak Ridge Capital, go bust and get sued for $40 million dollars by Morgan Stanley , its broker and clearing dealer.
What’s interesting about Peak Ridge is that it’s connected, at least marginally, to a great rogue of commodity trading, Brian Hunter……………………………………….Full Article: Source

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From Bloomberg: Precious metals including gold and agricultural commodities may extend gains in the coming months as a declining dollar and tight supplies boost demand, according to Deutsche Bank AG.
A lot of agricultural commodities including corn, soybeans and wheat are “still cheap” even after recent rallies, Michael Lewis, global head of commodities research, said in an interview……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Procurementleaders.com: New research shows that global commodity markets continued to gain in October as investor sentiment was buoyed up by the likelihood of further rounds of quantitative easing. Credit Suisse Asset Management notes that the Dow Jones-UBS Commodity Index Total Return rose 4.98% in October, bringing the year-to-date performance to 5.92%.
Overall, 13 of the 19 index constituents increased in value. Agriculture commodities were pushed higher by tight supply levels and poor weather conditions - seen most prevalently in cotton and sugar……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Advisorone.com: The managed futures industry has always suffered a kind of identity crisis that is reinforced in popular culture as well as by our own nomenclature.
Images of the Chicago and New York exchange pits from the 1980’s and 90’s featuring open outcry, hand signals, pit runners and the prospect of fortunes made and lost on beans or oil are far more stimulating to the public’s imagination than the reality of today’s largely computer-driven, trend following trading systems……………………………………….Full Article: Source

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From Indiatimes.com: Oil prices will rise to between $90 and $95 a barrel next year and may even spike to $100, Dallas-based energy investor T. Boone Pickens forecast on Thursday.
Pickens, who has been campaigning to wean US consumers off foreign oil and get them to shift to locally plentiful natural gas as a transportation fuel, made the oil price forecasts in a monthly report, which estimated that expenditure on US oil imports during October topped $28 billion. ………………………………………Full Article: Source

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From Businessweek.com: The weakening dollar could trigger a steady rise in the price of crude, sending it over $100 next year. Oil prices have hovered around $78 a barrel most of the year, providing little excitement as other commodities, including copper, gold, and cotton, have enjoyed record runups.
Global economic growth has not been brisk enough to drive up oil demand substantially, U.S. inventories have been ample, and the Saudis have been pumping enough to guarantee a plentiful supply……………………………………….Full Article: Source

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From Marketoracle.co.uk: Growth of world oil demand stays difficult to forecast, but is surely positive because the global economy is growing. Due to the European debt crisis, there is a strong potential for renewed speculation against the euro, with a quick knock on to falling us exports (due to a stronger dollar) and further hesitant growth of the US economy.
Under almost no circumstance can we give any credibility to claims by the Obama administration that growth could attain 3% or more by early 2011 on an annual basis, but oil demand of the US is unlikely to fall……………………………………….Full Article: Source

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From Telegraph: Oil prices came within cents of hitting $90 (£56) per barrel, as the world’s cartel of producing countries predicted that industrial demand is about to leap.
Brent crude futures touched $89.80 per barrel in London on Thursday, before retreating slightly as European markets fretted about the dangers of rising sovereign debt……………………………………….Full Article: Source

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From Torontosun.com: Oil prices are at a 25-month high and approaching $90 US a barrel, raising the question of whether the Organization of the Petroleum Exporting Countries will raise output.
The 12-member OPEC which pumps more than a third of the world’s oil, has kept its oil output target at 24.84 million barrels per day (bpd) for almost two years since announcing a record supply cut after prices slumped in 2008……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Bloomberg: The Organization of Petroleum Exporting Countries raised its 2011 forecast for global oil demand as industrial consumption recovers in developed countries including the U.S. and Germany.
OPEC expects oil demand to grow by 1.2 million barrels a day to 86.95 million barrels next year, according to the producer’s monthly report today. That’s 120,000 barrels a day more than last month’s forecast……………………………………….Full Article: Source

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From Reuters: The European Union has unveiled plans for a single European energy market, a 1 trillion-euro ($1.38 trillion) strategy to achieve energy security and cut fossil fuel emissions. The 10-year plan would include upgrades to the continent’s aging pipelines and build infrastructure that allows energy to flow across borders from one end of Europe to the other.
The new system also will help the expansion of renewable energy supplies across the continent, the EU said……………………………………….Full Article: Source

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From Hardassetsinvestor.com: Ever since the election results were tallied and the dimensions of the Federal Reserve’s second round of quantitative easing were laid out, gold prices have gyrated wildly. A precipitous plunge, followed by a screaming ascent to new nominal highs, left traders reeling.
The moves prompted analysts to wonder anew if the gold market was staging another run-up, or was in fact stumbling about in the terminal stages of a decade-long bull run. Talk of a bubble burst in gold prices also resurfaced……………………………………….Full Article: Source

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From Commodityonline.com: Decades and centuries ago, no one would have done without a hard money standard. The founders wrote in the Constitution that only Gold and Silver could be legal tender. Today our fiat monetary system is firmly in place. Although it has wrecked a once healthy economy, you’d be considered a pagan in mainstream academia if you wanted to abolish it in favor of the gold standard.
As our monetary system has evolved, it has become ill and more ill. During the first major crisis with hard money, the government devalued paper money and raised the value of Gold……………………………………….Full Article: Source

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From Resourceinvestor.com: So did gold’s first foray over $1,400 mean we’re going back to a gold standard? Nope. Not in the West, nor anytime soon anywhere, and for three simple reasons.
First, gold prices aren’t high enough. Second, modern governments don’t hold enough of the stuff – not for their tastes, at least. And third, the pace of physical monetization, out of jewelry and mined ore into coin and large-bar form, just isn’t great enough. Yet……………………………………….Full Article: Source

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From Mineweb.co.za: Having registered new all-time highs over and over again in the past few weeks, gold is certainly vulnerable to a price setback, and a substantial one at that. The influx of speculative buying that has contributed to the upward price spike will inevitably lead to profit taking and possibly a sizeable price correction.
Much hinges on the strength of physical demand in key world markets, which through Monday has remained firm in the face of higher prices……………………………………….Full Article: Source

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From Cnbc.com: The Federal Reserve is flooding the world with dollars as a way to keep American exports competitive, Cramer said Thursday. With the trade barriers keeping many of our products out of our trading partner’s countries, while at the same time imports from overseas keep flooding into the US, Chairman Ben Bernanke may think he has no choice.
His plan has been the topic of discussion at this week’s G-20 meeting, as other countries complain about the move. Regardless of the strategy’s merits, though, it’s doing a number on the greenback’s value, which is why Cramer thinks investors should own another currency as a hedge. “Buy gold,” he told viewers during Thursday’s “Mad Money.”………………………………………Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Commodityonline.com: Recently we saw some commotion and upheaval in a number of markets including gold and silver, the US dollar, the bonds, commodities and even stocks to a lesser degree. The turmoil in the gold and silver pits was attributed to the fact that they raised the margin required for silver futures contracts. We’ve seen this all before.
Gold and silver get up a real head of steam and they raise the margin requirements. That in itself wouldn’t be so bad, but it’s hard to call this anything but manipulation……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Etftrends.com: At one time, long before exchange traded funds (ETFs) came into the picture, commodities were for institutions and others with the time and monetary resources to play the futures markets. Today, you (yes, you) can have commodities in your portfolio, too.
These days, commodities have a home in any well-diversified portfolio, Mitch Tuchman for U.S. News & World Report says. They offer several benefits:………………………………………Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Reuters: Inflation-wary investors worried about low returns in basic U.S. fixed-income and equity funds are flocking to some of the newest highly specialized exchange traded funds focused on exotic locations and products.
Investors are piling into new ETFs focused on precious metals, Indonesian stocks and global companies active in lithium mining, according to data compiled by Lipper, a unit of Thomson Reuters……………………………………….Full Article: Source

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From Dailyfinance.com: Headlines about record gold prices are drawing investor attention to precious metals. Not surprisingly, precious metals ETFs (exchange-traded funds) have seen substantial money inflows over the last year.
Since the start of the year, about $8.4 billion has poured into commodities precious metals ETFs, with another $1 billion added to equity precious metal ETFs (funds that track mining companies), according to the most recent Morningstar fund flows update. More than $98 million of investor capital flowed into the commodities precious metals ETFs category in October……………………………………….Full Article: Source

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From Pionline.com: CalSTRS approved a $150 million investment in commodities, a fraction of the $2.5 billion commodities investment the board was considering as recently as September, confirmed Ricardo Duran, spokesman for the $138.6 billion West Sacramento-based system.
“The reason for the decision to go with the smaller amount is that this is a new direction for the fund,” Mr. Duran said in an e-mail response to questions. “With that in mind, the members of the investment committee wanted to take a prudent approach to investing in this strategy……………………………………….Full Article: Source

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From Arabnews.com: The US dollar is still far from — nor do we forecast it to cross — the key 1.50 mark vis-à- vis the euro, last crossed in late 2009 when oil prices were about $10 lower than they are now.
As a result, we do not anticipate the return of “hot money” speculating on a change in currency policy away from dollar pegs or revaluations……………………………………….Full Article: Source

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From Aljazeera.net: Now we have ‘a war’ in the financial pages of the newspapers and you can thank Brazil for that. By most accounts, it was recently the Brazilian finance ministry that first coined ‘currency war’ in relation to the monetary face-off between China and the US taking place at the G20 in Seoul. The ‘currency war’ term has stuck.
Now Brazil is going to try to act as unofficial mediator between the two superpowers……………………………………….Full Article: Source

Posted on 12 November 2010 by VRS |  Email |Print

From Theglobeandmail.com: Lots of pixels are being spent on a debate these days over whether the price of gold should be measured in real (after inflation) or nominal (before inflation) terms. That is, in nominal terms, gold is near a record high, but in real terms it languishes about 40 per cent below its 1980 high point.
Turns out, gold isn’t the only asset facing this issue. Alex Bellefleur, financial economist at Brockhouse Cooper, applied some of the same thinking to agricultural commodities. These commodities – things like cotton, wheat, soybeans and rice – have been rising on expectations that the Federal Reserve’s policy of printing money to buy U.S. government bonds (known as quantitative easing) will drive down the value of the U.S. dollar. But are they expensive?………………………………………Full Article: Source

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