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Commodities Briefing 09.Jan 2015

Posted on 09 January 2015 by VRS |  Email |Print

From Opec to Glencore, the outlook for the year ahead. Commodities as an asset class: Making long-only investments in commodity futures came into vogue about a decade ago, based on the premise that they offered inflation protection and equity-like returns without being correlated to stock markets.
On that score, this premise has certainly held true: with inflation modest, the Bloomberg Commodity Index has dropped 27 per cent in the past five years in an unflattering lack of correlation with soaring equities. Watch for more portfolio managers throwing in the towel on commodity indices and virtual silence in world capitals about problems caused by speculators………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Commodities are sirens: alluring, yet dangerous. When prices are high, politicians in commodity-exporting countries rejoice. Proceeds from the export of oil, gas and metals fill state coffers. Foreign cash floods in and well-paid jobs are created. Such countries’ governments often neglect other parts of the economy, believing that the good times will never end. But they always do.
As commodity prices tumble, many countries are learning what happens when an economy is too reliant on natural resources. Venezuela, with the world’s largest oil reserves, is on the verge of defaulting. Brazil and Norway, two other big oil exporters, have seen their growth forecasts cut. The Russian president, Vladimir Putin, will watch his economy shrink by 5% in 2015, according to central-bank estimates. His government’s debt is likely to be downgraded to “junk” status………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Commodities were the worst performing asset class for the third year running in 2014. Investors, including some of the world’s largest pension funds, have seen billions of dollars of wealth disappear as a result of investing in commodity index products over the last decade.
So it is essential to understand what went wrong to help prevent a similar problem recurring in future. “Facts and fantasies about commodity futures,” first published in 2004 by Gary Gorton and Geert Rouwenhorst, proved one of the most influential research papers in 21st century finance………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

The performance of commodities depends largely on what happens in China, Europe and the US. It will be another four or five years before commodity prices enter their next cycle and we start seeing an upward trend in prices again, says Cadiz Corporate Solutions Mining Specialist Peter Major. Last year saw most commodities finish below their January starting price and, with the global economic growth outlook showing minimal upturn, there will be more of the same in 2015.
“I don’t see gold going up. I definitely don’t see palladium going up. I think silver, zinc and lead look a bit cheap and copper is neutral to slightly pricy. But everybody is still happy to produce copper at current prices,” says Major. The gold price is still hovering around the $1,200 per ounce mark and will likely remain thereabouts or go lower………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Crude oil’s freefall from $100 a barrel to under $50 has struck at the heart of a core belief in the markets: that Saudi Arabia would always ride to the rescue. Oil traders can agree on only one thing about when the second-biggest price rout on record will be over: not yet.
Crude oil’s freefall from more than $100 a barrel last summer to a near six-year low under $50 a barrel has been unrelenting, shocking traders and baffling analysts who have all but given up trying to pinpoint the bottom of the market. The scale of the uncertainty reflects a market stripped of a core belief that has underpinned prices for the past decade: that top oil exporter Saudi Arabia would always ride to the rescue………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Funds tracking oil experienced large inflows last month as US investors bet on a recovery in crude prices. Almost $1.7bn was ploughed into oil exchange traded products in December, according to ETF Securities, as US crude prices approached $50 a barrel for the first time in five and a half years.
“This is clear indication that investors are buying into the price dip,” said Nitesh Shah, analyst at ETF Securities, an investment group which runs some of the biggest exchange traded commodity funds. “They are taking a contrarian view.”……………………………………….Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Saudi Arabia and its Gulf OPEC allies are showing no sign of considering cutting output to boost oil prices, even though they dipped below $50 a barrel this week.
OPEC decided against limiting production at its last meeting on Nov 27, despite misgivings from non-Gulf members, after Saudi Oil Minister Ali al-Naimi said the group needed to defend market share against U.S. shale oil and other competing sources………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

When OPEC blames everyone else for a glut that’s sent oil prices to the lowest in 5 1/2 years, it’s not without some merit. The CHART OF THE DAY shows crude production in the U.S. increased 75 percent over the past 5 years while output from the Organization of Petroleum Exporting Countries grew 5 percent.
Canada boosted supplies by 42 percent while Brazil pumped 24 percent more, according to data from New York-based Energy Intelligence Group. Brent crude collapsed by 48 percent in 2014, its biggest price slide since 2008, as OPEC resisted calls to cut output amid a global surplus that Qatar estimates at 2 million barrels a day………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Leading fund manager claims that after its three-year slump gold has ‘bottomed out’ - but not many agree. Top fund manager Evy Hambro, who runs one of the most popular funds focused on gold and gold mining shares, is predicting the precious metal will recover from its three-year slump in 2015.
Since the summer of 2011 when it peaked at $1,900 the price of gold has fallen almost 40pc to trade today at around $1,200 (£800). Mr Hambro’s fund - the £1bn Blackrock Gold and General - has fared worse, losing investors more than half their money over the past three years………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

HSBC has raised its average gold price forecast for 2015 should the growing strength of the dollar and geopolitical fears burnish its safe-haven qualities, it said. It now sees gold averaging $1,234 per ounce this year, up from its previous forecast of $1,175, it said in a note on Thursday. It also sees gold in a trading range of $1,120-1,305 in 2015.
The bank left its 2016 forecast unchanged at $1,275 and introduced a 2017 forecast of $1,275.“The possibility that the forex market is under-estimating the risk of destabilizing currency moves is an important element… gold prices may gain modestly in 2015, even in the face of a stronger US dollar,” it said………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Jim Rogers Gold outlook for 2015 according to a recent youtube video is for the gold price to halve from its all time high during 2015, which implies a drop from its April 2011 high of $1923 to $960 as the following extract illustrates -
“We have a lot of people who bought gold in the last 14 years. Gold has not had a proper correction for a long long time and in my view until there is a proper correction Gold cannot make a bottom and start over.” “Gold has not been down 50% in many years and that is not normal, most things go down 50% every 3 or 4 years, it’s just the way markets work.” “If Gold were to go down 50% that would be $960″………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Declines in precious metals prices drove a drop of more than $20 billion in commodity exchange-traded product holdings in 2014, according to ETF Securities Ltd. Assets under management in commodity ETPs fell $20.6 billion to $101.5 billion by the end of the year, according to a report published by the Jersey, U.K.-based company today.
Some 70 percent of the decline was attributable to precious metal ETPs, the value of which slid $14.8 billion to $79 billion. Record inflows into energy products, mostly crude oil, in the final quarter partially offset the annual decline in global ETP values.“With the Federal Reserve having pushed out of quantitative easing and looking to interest rate hikes and as the dollar rallied quite considerably, gold has just been an unfavored asset,” Nitesh Shah, an associate research director at the company, said……………………………………….Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Investors are betting the price of copper will fall further as the US dollar continues to strengthen and global economic growth shows few signs of recovery. Yet a reduction in mine supply last year has left the market almost balanced, meaning any pick-up in demand or further supply reduction could tip the price into positive territory, leaving those short the metal on the wrong side of the trade.
At 16 per cent of the London Metal Exchange market, the largest market in the world for metals trading, contracts betting that copper will fall are at the highest level since the exchange started publishing the data in July. On the Shanghai Futures Exchange, the number of similar contracts has jumped by 180 per cent since the beginning of December………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

We are updating our commodity price forecast by marking-to-market our short-term and medium term prices. The most meaningful changes were for copper, nickel and molybdenum in 2015/16 and thermal/HCC coal throughout the whole forecast period and long term. DCM’s commodity preferences are n>Ni>Cu>coal (bulks). The new reality driving the adjustment to our forecast prices is the on-going strength of the U.S. dollar, the slowdown in the global economy (deficient demand), and lack of supply discipline.
The lessons learned from oil’s price collapse, is that there needs to be a significant reduction in supply before prices can rebound. Copper prices may suffer a similar examination in 2015. Given the recent flow of funds, we do not expect base metal stocks to outperform until the U.S. dollar peaks (first U.S. rate hike?). So investor patience will be tested. We expect strong trading rallies in 2015 as risk/reward attractive, especially if the U.S. dollar corrects………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

In a space in which there are too many “lost years” of late, we cannot deem 2014 as anything but yet another lost year, especially for the Rare Earth space. Let’s hope it will be the last of such periods. The first half was pretty good with many, including ourselves, calling a turn in fortunes but this was a more generalized improvement linked to a better vibe in the mining space in general.
It was certainly not linked to price appreciation in Rare Earths or indeed, in any of the specialty metals. REE prices remained firmly stuck were they were with the Chinese sending out vibrations that didn’t give much hope for improvement either………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Investors have flooded into oil related exchange-traded products at record levels according to data from ETF Securities. The data indicates investors are already using the recent oil market rout as an opportunity to rotate exposure at attractive price levels.
Much of the money going into oil ETPs has come from reductions to gold exposure. Gold ETPs saw $3.1bn of withdrawals, the largest quarterly withdrawals in a year. US investors accounted for 78% of this as confidence in the US recovery grew. Commodity sector performance generally continued to deteriorate in Q4 2014, confirming it as the worst year for the asset class since the financial crisis………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Commodity performance continued to deteriorate in Q4 2014, marking the worst year for the asset class since the global financial crisis. A perfect storm of factors – the combination of strong supply across most commodity sectors, concerns about demand from China and a strengthening US Dollar – depressed prices and saw global AUM drop US$9.2bn in Q4 to US$101.5bn from Q3 2014.
Net flows into commodity ETPs were neutral and the AUM decline was entirely driven by price movements. Investors now appear to be looking at the current environment as an opportunity to increase cyclical commodity exposures, rotating away from more defensive exposures like gold………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

Declines in precious metals prices drove a drop of more than $20 billion in commodity exchange-traded product holdings in 2014, according to ETF Securities Ltd. Assets under management in commodity ETPs fell $20.6 billion to $101.5 billion by the end of the year, according to a report published by the Jersey, U.K.-based company today.
Some 70 percent of the decline was attributable to precious metal ETPs, the value of which slid $14.8 billion to $79 billion. Record inflows into energy products, mostly crude oil, in the final quarter partially offset the annual decline in global ETP values………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

It will be very difficult to avoid deflation and promote growth in 2015 and beyond without major changes to the global monetary system, some of which are unthinkable right now. Policy makers in Asia and Europe are already devaluing their currencies, apparently driven by the failure of low interest rates to stimulate investment and by the recognition that the U.S. is the only place that is showing real growth.
Making their exports cheaper, they believe, will help their economies grow. The problem is that if every country devalues its currency, no one wins. And if devaluations become more aggressive and disorderly, it could create great systemic risks world-wide. Dollar borrowers would struggle to find liquidity. U.S. corporations would see their export markets evaporate………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

One of the great things about exchange-traded funds is that they put institutional-quality tools within reach of every investor. Take the Schwab U.S. Equity ETF: The fund charges 0.04 percent per year, and provides exposure to essentially every stock listed on a U.S. exchange. You can’t get much better than that.
One of my favorite developments along these line in recent years is the advent of currency-hedged ETFs. In 2015, I think they can be critical tools for investors. Most investors don’t realize it, but when you invest in international stocks, currency movements have a huge impact on your returns………………………………………..Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

A huge aircraft hangar in Boden, in northern Sweden, big enough to hold a dozen helicopters, is now packed with computers—45,000 of them, each with a whirring fan to stop it overheating. The machines work ceaselessly, trying to solve fiendishly difficult mathematical puzzles. The solutions are, in themselves, unimportant. Yet by solving the puzzles, the computers earn their owners a reward in bitcoin, a digital “crypto-currency”.
The machines in Boden are in competition with hundreds of thousands more worldwide. The first to solve a puzzle earns 25 bitcoins, currently worth $6,900. Since bitcoin’s invention in 2008 by a mysterious figure calling himself Satoshi Nakamoto, people have increasingly traded it for real money, albeit at a wildly varying price……………………………………….Full Article: Source

Posted on 09 January 2015 by VRS |  Email |Print

While the falling price of crude oil is giving consumers cheaper energy, it’s threatening long-term global pollution-control efforts. Reduced national income from energy taxes and “a low-growth economic environment” might spur countries to curtail their emissions-curbing pledges for after 2020, leading to more emissions of carbon for a longer time, said Zoe Knight, head of HSBC Holdings Inc.’s climate change center in London.
These proposals will be submitted under a United Nations climate-protection process starting in March. Public money “for funding low-carbon energy scale-up and energy-efficiency retrofits could be scarcer,” Knight said……………………………………….Full Article: Source

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