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Commodities Briefing 17.Dec 2014

Posted on 17 December 2014 by VRS |  Email |Print

A slowdown in Chinese manufacturing and a sustained effort by OPEC to make shale oil extraction unprofitable have been just two of the factors which have been crushing commodities prices. On December 12, China’s National Bureau of Statistics reported that industrial production increased only 7.2 percent in November, on a year-over-year basis.
While that might be acceptable elsewhere in the world, the reading fell short of economists’ expectations of a 7.5 percent increase. China’s government had been anticipating that economic expansion during 2014 would remain at 7.5 percent. More recently, the People’s Bank of China has lowered its sights to 7.4 percent expansion for this year, followed by a slowdown to 7.1 percent growth in 2015……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Sen. Carl Levin has introduced a bill seeking to crack down on trading on inside information in physical commodities, the first such legislation limiting Wall Street banks’ ability to deal in physical markets from crude oil to aluminum.
The bill, co-sponsored with Republican John McCain, is seen as the Michigan Democrat’s parting swipe at Wall Street before he retires in January. He has previously accused Goldman Sachs and other banks of manipulating physical commodity markets……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Australia’s fiscal outlook has weakened due to lack of support for spending cuts in the Senate and a sharp decline in key commodities prices that eroded the country’s terms of trade in 2H14, says Fitch Ratings. Further deterioration in commodities prices or continued objections to spending cuts in the Senate would pose risks to the fiscal outlook.
But Australia is still well positioned relative to other ‘AAA’ rated sovereigns due to its low general government debt ratio and government commitment to fiscal consolidation. The Treasury’s Mid-Year Economic and Fiscal Outlook (MYEFO), published on 15 December, identified two key factors behind the deterioration in the Australian fiscal position since the release of the 2014-2015 budget in May……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Oil’s fall below $60 a barrel to five and a half year lows gathered pace on Tuesday after data showed Chinese factory activity had weakened. ICE January Brent — the international oil benchmark — dropped $1.45 to $59.61 a barrel in afternoon trading, after falling as low as $58.50 a barrel. This is almost half the level it reached in mid-June.
China’s manufacturing sector shrank for the first time in seven months in December, according to figures released on Tuesday, adding to a series of data releases pointing to slowing economic growth in the world’s largest oil importer……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Lower oil prices are good for some countries, and bad for others. But there are a handful of oil-dependent economies where things could get especially ugly. Crude prices were lower Tuesday after OPEC repeated its refusal on Monday to cut oil output despite fears of a looming glut and a UAE official rebuffed calls for an emergency meeting to fix prices.
The recent stance marks an about-face from the cartel’s decades-old policy of tightening supplies in order to support prices. Since peaking at just over $100 a barrel this summer, prices have fallen by more than 40 percent, including a slide last week that wiped out about $8, or more than 10 percent……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

The price of oil has been falling since June but the pace of oil’s price decline has accelerated since about mid-November. You may have noticed cheaper gasoline prices at your local gas station as a result. From this standpoint the falling price of oil is a good thing.
On the other hand the falling price of oil has been putting downward market pressure on high yield bonds. But what does the falling price of oil have to do with high yield bonds? It turns out–a great deal. High yield bond portfolios contain many debt issues of U.S. energy companies……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Core Gulf OPEC oil producers signaled this week they are prepared to wait as long as six months to a year to see the market stabilize, quashing hopes for any quick intervention to stop the price rout that took crude to under $60 per barrel.
Some OPEC watchers had identified $60 as a potential red line at which the group, which produces a third of global oil, was expected to send a signal to the market that the decline had been too fast and too steep……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

OPEC has no plans to intervene in the oil market to shore up sagging crude prices, the Kuwaiti oil minister said Tuesday, as Brent crude breached the $60 mark. “At OPEC’s meeting in November, we took two decisions,” Ali al-Omair said at a lecture in Kuwait City.
“The first was to keep the production ceiling unchanged and the second to hold the next meeting in June. So far, nothing has changed and there are no calls for holding an emergency meeting,” Omair said. He declined to answer a question on what price would force the Organisation of Petroleum Exporting Countries to step in to bolster the market……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

After breaking through a bearish trendline at the beginning of last week, Gold benefited from some USD profit-taking and managed to climb its way back up the charts. However, the yellow metal found resistance at $1238 preventing entry to $1240 and current technicals indicate this could be a psychological ceiling in the current Gold market.
The $1238 level also represents a 50.0 fib level from the previous high ($1344) to the previous low ($1131) and the metal finding resistance at the 50.0 fib level twice last week does suggest the Fibonacci levels are in play. If this is the case, technical traders would likely be bearish below $1238 and looking at a potential entry opportunity if Gold manages to break through this resistance. …………………………………….Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Gold is unquestionably the most frustrating trade I’ve ever tried to make in 20 years of investing. The main problem is there is simply no way to predict gold prices or even attempt to ballpark where gold prices might go in any given time period. Gold prices are subject to so many crosscurrents that trying to trade the yellow metal has always flummoxed me.
About the only thing you can count on with respect to gold prices are a few indicators that might give you a leg up in trading. We may have confirmation of direction from those indicators in the next few days. You just need to decide if you want to go long, go short or stay away from gold altogether. I suspect that whichever way gold breaks, it is likely to be for a significant time period……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

The conventional view is that Fed money creation is necessarily bullish for gold and that a tightening of monetary conditions beginning with the cessation of Fed money creation is necessarily bearish for gold. It’s strange that this view is popular given that gold was clearly hurt more than helped by the QE program that extended from October of 2012 through to October of this year.
If gold is now going to be hurt by a ‘tighter’ Fed, the implication is that regardless of what the Fed does it’s bearish for gold. If the Fed aggressively pumps money into the economy, it’s bearish for gold. If the Fed stops pumping money, it’s bearish for gold. If the Fed not only stops pumping money but starts hiking interest rates, it’s astronomically bearish for gold!…………………………………….Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

In the past 12 months, gold has traded as high as around $1,380 an ounce and as low as about $1,140 an ounce. From its starting point at around $1,220, though, the change is just $10 an ounce at the current price around $1,210. Since June, when oil prices started falling and the dollar began strengthening, gold has lost about $100 an ounce.
Silver is down about $5 an ounce, from around $21 to around $16 since June. From their June prices, then, gold is down about 8% and silver is down about 25%. The story is significantly different for gold and silver mining companies. Rising mining costs and low prices have plagued the miners for more than two years, and share prices have dropped by 50% to 75% over that time for the firms we are looking at now…………………………………….Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

The metal may inch towards $6,950/tonne. Base metals have witnessed a lot of ups and downs this year due to geo-political tensions arising out Russia -Ukraine standoff in the first half, followed by faltering growth in China during the second half.
Although efforts have been made by the People’s Bank of China, they have not been enough to contain the falling trend in base metals. In addition to this, the euro zone, possibly, slipping into a third recession since the resurfacing of financial crisis, has been a matter of concern……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

We all know that individual, as well as institutional investors have only one goal, which is to make a return on their investment (a profit). This is not the purpose of government nor should it be.
However it should be the goal of government to spend money wisely and, if that is so, then to spend some of the money it receives from its taxpayers on the research and development of technologies that have applications not only to the military (providing the security function of government) but also to the civilian economy for maintaining and improving public health and the general quality of life of that government’s citizens…………………………………….Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

The market for battery electric and hybrid vehicles is growing slowly but steadily – from 0.4% in 2012 to 0.6% in 2013 and 0.7% in 2014 (year-to-date) in the United States alone.
Consumers buy these vehicles despite lower gas prices out of a growing conscience and concern for the environment. With this strong attraction to alternative energy, grows the demand for lithium, which is predominantly mined and imported from countries like Bolivia, Chile, China and Argentina……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

China’s leading rare earth producer – Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. to give its full name – is set to further tighten its grip on the industry. Baotou’s giant mine in Bayan Obo, Inner Mongolia near Baotou City, produces the bulk of the world’s rare earths and does so as a byproduct of iron ore mining.
SMM reports Baotou will merge with five smaller rare earth firms to establish the China North Rare Earth Group Co. Baotou will acquire shareholdings in Baotou Feida Rare Earth Co., Baotou Jinmeng Rare Earth Co., Baotou Hongtianyu Rare Earth Magnets Co., Wuyuan Runze Rare Earth Co., and Xinyuan Rare Earth Hi-Tech & New Material Co……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

There’s no shortage of cliches used to describe the rapidly expanding exchange-traded fund industry — it’s growing like wildfire, like weeds, like kudzu. ETFs are definitely an invasive species in the financial services world, and for many investors a welcome one, thanks to their low costs and targeting of niche, hard-to-access investing areas.
And, yes, the industry is getting really big: Assets hit $2 trillion in 2014 as $196 billion in new cash rolled in. The pace of new ETF launches has also picked up, and the 196 new offerings in 2014 is a 29 percent jump over 2013. There are now ETFs for about everything you can think of — and 1,000 more in registration with the Securities and Exchange Commission……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Each week our experts dish out the latest profit plays and asset-protection moves for our Money Morning Members – all for free. Today we want to do something different. Rather than provide a roundup of last week’s stock picks, we’re going to focus on 10 exchange-traded funds (ETFs) our experts like right now.
They are among the best low-cost ways for you to profit from next year’s top trends.”The great thing about ETFs is that you get a lot of potential upside while also greatly diversifying away your risk,” Money Morning Defense & Tech Specialist Michael A. Robinson, a 30-year tech market veteran, said Dec. 11……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

The global equity landscape is at an interesting crossroads as we make our way into 2015, with many individual countries and sectors showing marked divergences. The drop in commodity prices this year has been the obvious factor in widening the gap between the strongest and weakest names around the world.
Economies such as Russia, Venezuela, and Brazil, which rely heavily on oil production to support their burgeoning market infrastructure, have been crushed under the weight of falling prices over the last six months. Conversely, developed countries with consumer-focused capital systems such as the United States have continued to show low volatility and relative strength when measured on a global scale……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

Economic and political headwinds are battering Russia whose currency has been weakened by the freefalling oil price and western sanctions. The Russian central bank raised interest rates to 17% in an attempt to prevent the rouble’s collapse. But the dramatic move failed to stem the decline, with the currency hitting new all-time lows against the dollar.
Russia’s central bank has taken the drastic step of raising its main interest rate to 17%, a rise of 6.5 percentage points. The announcement – made around 1am local time – is a desperate attempt to restore confidence in the rouble, which has almost halved in value against the dollar in six months. Last week, the central bank raised rates by 1%, but this failed to calm jitters about an economy that is suffering from falling oil prices and western sanctions……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

With the rouble on extremely shaky ground, it is far from certain that the IMF would be willing to come to Russia’s rescue. If you’ve never witnessed a currency crisis, here’s how they usually go, in six simple steps:
1. Your currency gradually creeps downwards. This can happen over a matter of months as your current account deficit - the country’s ledger with the rest of the world - deteriorates. 2. Suddenly, overnight, investors panic. Their withdrawals of money from your country, until now a steady stream, become a flood……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

The decline of the ruble is the result of Western policy. The question now is how will Putin respond? The Russian economy was already in the running for having the worst year in 2014, sandwiched somewhere between Congressional Democrats and Sony Entertainment Pictures.
Then the price of oil—the commodity upon which the Russian economy is built—began to fall sharply, draining the nation’s economy of foreign money and crimping its growth. This dynamic drove the ruble sharply lower, culminating in an 11% drop on Monday, which forced Russia’s central bank to raise interest rates by a whopping 650 basis points, all but assuring a deep and painful recession in 2015……………………………………..Full Article: Source

Posted on 17 December 2014 by VRS |  Email |Print

After 11 full days of intense negotiations, the 20th annual United Nations Framework Convention on Climate Change “Conference of the Parties” (COP20) held in Lima, Peru ended with proposals deemed too weak by climate campaigners.
The results, which will lock us to at least 3 to 4°C, do not merely show a lack of progress in the talks, it proved that the convention could not offer the right solutions to the millions of people that are already being affected by climate change, like those in the Philippines and vulnerable small-island states. The process, in its current state, does not and will not offer appropriate actions to those who will be affected in the future — the whole planet……………………………………..Full Article: Source

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