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Commodities Briefing 07.Jan 2015

Posted on 07 January 2015 by VRS |  Email |Print

Australia’s trade deficit widened in November from October as falling prices for key resources such as iron ore overshadowed rising commodity export volumes as mining companies continued to ramp up production.
The seasonally adjusted trade deficit widened to A$0.93 billion from a revised A$0.88 billion in October, according to the Australian Bureau of Statistics. It is the eighth trade deficit in a row. Economists had been expecting a shortfall of A$1.6 billion in November………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Commodities Supercycle: In the past decade, the rise in commodity prices have undone the decline of the previous century, rising to levels not seen since the early 1900s. Despite current declines, research by McKinsey Global Institute shows that demand for energy, food, metals, and water should rise inexorably as 3bn new middle-class consumers emerge in the next two decades. The global car fleet, for example, is expected almost to double, to 1.7bn, by 2030.
The plunge in the price of oil has got the greatest attention globally but several other key commodities have also been falling. Brent crude, the international benchmark and US oil, known as West Texas Intermediate (WTI), lost more than half of their value since mid-2014 and on Monday WTI fell below $50 a barrel for the first time since April 2009, before finishing the day at $50.05………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Oil isn’t the only commodity that’s gotten cheaper. From nickel to soybean oil, plywood to sugar, global commodity prices have been on a steady decline as the world’s economy has lost momentum. That lower demand helps explain, in part, why nearly everything from crude oil to cotton has been getting cheaper.
Sure, some commodity prices are rising. Local supply constraints have pushed prices higher in some parts of the world; transportation costs can also have a big impact on local prices. In the U.S., for example, a drought in California caused the price of vegetables and other food products to spike last year………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

With US crude falling below the $50 mark for the first time in nearly six years, some traders are betting on $20 a barrel. It’s textbook economics: falling demand and rising supply. The United States has ramped up domestic oil production, by investing in highly-polluting fracking projects. US oil production increased by around 48% between 2008-13, taking output to 11m barrels a day by early 2014.
At first, the US surge in output was offset by supply disruptions elsewhere: western sanctions on Iran, turmoil in Iraq and Libya . But some supply problems have abated. Last month, Iraq’s oil exports were at their highest since 1980. Russia produced more oil in 2014 than at any time since the collapse of the Soviet Union………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Oil prices dropped this week below $50 a barrel for the first time since April 2009. What do those dropping prices mean for the markets? For jobs? For GDP? And for you? National economics correspondent Josh Zumbrun and Brian Baskin, commodities and emerging markets editor, answered your questions about plummeting oil prices in a Q&A on Facebook. Below are excerpts from that exchange.
Question: “Oil price drop is mostly demand-driven. Weaker global demand, more U.S. independence, and China and India demanding less oil. So it has resulted in overproduction, so the glut of oil caused prices to fall down drastically.” Zumbrun: “That’s probably one factor. But it’s impossible to ignore the role of supply. Just look at this chart of U.S. oil production. There’s a huge supply shift here:……………………………………….Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

The refusal by OPEC to cut production in the face of prices plunging to 5½-year lows shows the cartel is looking to put a lid on the U.S. fracking boom, former Wells Fargo Chairman and CEO Richard Kovacevich told CNBC on Tuesday.
U.S. crude prices were lower again in early Tuesday trading—below $49 a barrel at one point—following Monday’s 5 percent drop in New York to lows not seen since April 2009. The price collapse has been pressuring stocks, which saw the Dow Jones Industrial Average fall 331 points Monday, the worst session in three months………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

In recent days, I have encountered a few questions related to gold and whether it would be right time to invest. In November, we had expected an uptrend in gold in the beginning of New Year and now the break of $1200 resistance levels, analysts may be watching for the next breach at $1230, 1250 upto $1280 per ounce levels.
Time and again I have told that gold price in India is basically a function of global spot prices plus import duties and local taxes. Gold demand has been fairly inelastic in the country with higher prices only raising the urge to buy more so that they don’t end up buying at still higher prices………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

What happened in 2014 -Gold ended the year not far below its opening levels, but symbolically at least it’s the first back-to-back decline since 1998. After a torrid 2013, gold 2014’s highs and lows were 20% or $237 apart, making it the quietest year since 2008. Managed money seemed to lose interest in trading gold.
Volumes on paper market were down except for a few flurries towards the end of the year and a couple of, let’s call it, interesting trading patterns. Gold’s much-admired safe haven status took a beating. Russia, Ukraine, Iraq, Syria failed to persuade investors that gold would protect them from geopolitical carnage………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Well there’s nothing like being optimistic at the start of a New Year and there are certainly many factors to be optimistic about if you are a gold bull. Gold demand remains strong – notably in China and India with those countries alone probably accounting for 100% or more of new mined gold at the moment.
At the end of this article we will make some not very scientific predictions on the final levels for the gold and silver prices at year end 2015 – perhaps to have these totally shot down in flames when the year end comes. It is always easy to be wise after the event. China (as per data from the Shanghai Gold Exchange withdrawals figures) is looking to perhaps see full year 2014 demand come to a little over the 2,100 tonne mark, thus only a fraction below last year’s record of 2,181 tonnes. So much for the almost incessant mainstream media reports throughout 2014 of a collapse in the Chinese gold market!……………………………………….Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Gold and silver prices have jumped since the start of 2015 as safe haven and dollar diversification plays. But this will be nothing compared to the upside gain to come as financial markets really lose it. Precious metal investors know from long experience that when gold prices go up silver does even better and vice-versa.
Silver is in a tighter market than gold and with a smaller available supply then a rise in demand has a disproportionate impact on its price. It’s also an alternative to gold as prices rise because it is cheaper. The gold-to-silver price ratio is historically very high at the moment at 75, so silver prices have plenty of room to outperform and close up this gap………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

What happened in 2014 -Silver had everything going for it in 2014. Apart from receiving a shot in the arm from Indian gold import curbs and becoming real cheap versus the yellow metal, the silver price was supposed to be boosted by rising fabrication demand.
Chinese imports were surging as silver used in solar panels more than made up for decline in the photographic industry. And batteries were on everybody’s brains from Tesla gigafactories in the US to giant electricity storage programs in China………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Gold prices are set to remain low in 2015, as South Africa’s platinum miners continue to recover from the 2014 strike. Most metals face re-strained prospects due to the expected slowdown in growth in China, a major resource importer. The gold price plummeted 28% in 2013 and hit a four-year low to reach $1,171.10 per ounce on 31 October.
This was two days after the US Federal Reserve ended its five- year bond-buying programme. Gold had held appeal as an inflation hedge during that period. Decreasing demand from China, the world’s largest gold consumer, coupled with expected interest rate rises in 2015, also depressed prices. US-based Citi Research revised its gold forecast for 2015 to $1,225, down from $1,365………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Nickel prices climbed, capping the biggest two-day rally in a month, on speculation that increased economic stimulus will boost demand in China, the world’s biggest user of industrial metals.
China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year as policy makers seek to shore up growth that’s in danger of slipping below 7 percent, said people familiar with the matter. In the second half of 2014, nickel dropped 20 percent amid concern that growth in the Asian nation was slowing………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Despite controlling some 70% of production, China has quietly conceded its inability to control the market for rare earth elements, which are used in a variety of high-tech devices and manufacturing processes.
China’s announcement that it will end export quotas on the elements comes after an August WTO finding that the limits violated global trade rules. But the real nail in the coffin was the power of the market: China didn’t appeal the decision because the quotas did little to affect the market for the metals………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

The China Iron and Steel Association expects the country’s iron ore import prices to ease this winter as domestic steel mills maintain low steel output ahead of and during the festive season, the association said Monday, January 5, in its latest market analysis.
Demand for iron ore is unlikely to improve and an oversupply will persist, resulting in a moderate softening of prices, especially for imported cargoes, the report said. Iron ore imports meet about 70% of China’s total steelmaking demand………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

The giant Chilean Escondida mine produces more copper than anywhere on earth. Some 1.2m tonnes emerge from the BHP Billiton-run facility each year. For the largest miners, Escondida also serves as a key measure for world copper output.
To meet global demand over the next decade, the industry “will have to add the equivalent of a new Escondida every 15 months”, says Jean-Sebastien Jacques, head of copper at Rio Tinto, which owns a minority stake in the mine. First Quantum, a mid-tier copper miner, says that if China, India and Brazil were to reach EU levels of copper use by 2020, it would imply nine new Escondidas………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Over the past three months, nearly all of the worst performing exchange traded funds have direct ties to oil. Wade through the commodities plays such as the iPath S&P GSCI Crude Oil Index ETN (NYSEArca: OIL) and the United States Oil Fund (NYSEArca: USO) and the trail of tears includes scores of country ETFs and sector funds.
Oil services ETFs are predictable members of that less-than-illustrious list. The Market Vectors Oil Service ETF (NYSEArca: OIH), iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ), SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) entered Tuesday with an average 90-day loss of 27.6%, firmly positioning oil services stocks and ETFs as a hated asset class………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

After a strong run-up last year, the U.S. stocks were off to a weak start in 2015. The relentless slide in crude oil, political turmoil in Greece, the tumbling Euro, and strong dollar weighed on investors sentiment, bringing volatility back to the market.
Oil price continued to fall in the New Year, plunging more than half of its value since its peak in June 2014. U.S. oil fell below $49 per barrel for the first time since April 2009 while Brent crude slid to less than $52 per barrel. Higher U.S. shale output as well as record oil production from Russia and Iraq raised fears of global glut……………………………………….Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

With markets hovering around all-time highs, alternative exchange traded funds that help diversify risk and volatility could begin to attract more attention, but market observers require more education.
“Should the average investor have exposure to alternative investments? Yes and no,” Douglas Kobak, certified financial planner and principal of Main Line Group Wealth Management, said in a CNBC article. “‘Alternatives’ is such a nebulous word, and it encompasses so many strategies.”……………………………………….Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Hedge funds reduced their bullish positions on grains and coffee, and raised bets on sugar price falls to the highest in 17 months - but ended 2014 far more upbeat on agricultural commodities than they began it.
Managed money, a proxy for speculators, reduced its net long in Chicago-traded soft red winter wheat futures and options in the week to last Tuesday for the first time in five weeks, data from the Commodity Futures Trading Commission regulator shows………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

As the price of oil continues its relentless and seemingly unstoppable march down towards $50 a barrel, there has been growing chaos in the Russian financial system. The partial calm of late December, after heavy Central Bank intervention succeeded in putting a temporary halt to the currency’s swoon, has decisively ended.
Earlier today the risk of insuring Russian government bonds against default rose to the highest level since the worst days of the 2009 financial crisis, reflecting widespread concern among investors that “a cut in the nation’s credit rating to junk is imminent.” Perhaps market sentiment about Russia could get worse, but it’s hard to see how………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

There was something touching in the symbolic funeral in Vilnius held for the Lithuanian currency, the litas, which received its resting notice as the country formally adopted the euro on January 1. The litas had been in use between 1993 and 2014. If you had asked Nigel Farage of Britain’s UK Independence Party about the service, he would probably have suggested they were burying the wrong one. (The colourful populist insisted on a mock burial of the euro in 2011.)
Moving over to the euro was always a thorny issue. A November poll suggested that 39 percent of the population was against it. Their grounds of suspicion were well founded. While supporters of the euro’s adoption believe – and in this, it is very much a belief – that the adoption of the currency will lead to easier foreign loans and investments – the converse may actually be true………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

Carbon trading in China could almost double in 2015, analysts say, as more companies come up against curbs on climate pollution. It is the first year all seven regional carbon market pilots, designed to make polluters pay, are up and running.
Some 24 million tonnes of carbon dioxide equivalent were traded under these schemes in 2014, according to Thomson Reuters, with a value of €123 million. That will rise to 40 Mt in 2015, the research agency forecasts. “Historically, Chinese companies did not have to report on carbon emissions,” analyst Hongliang Chai told RTCC………………………………………..Full Article: Source

Posted on 07 January 2015 by VRS |  Email |Print

South Korea will open a carbon trading system next week after years of delay, but the road ahead remains bumpy due to resistance from the business community and weak confidence in the nascent program.
The Korea Exchange (KRX), the nation’s main bourse operator, will begin the cap-and-trade system on Jan. 12 with 525 local companies to join global efforts to curb greenhouse gas emissions to 30 percent below business-as-usual (BAU) levels over the next five years………………………………………..Full Article: Source

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