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Commodities Briefing 26.Jan 2015

Posted on 26 January 2015 by VRS |  Email |Print

A few brave investors are betting the gloom oppressing global commodity markets is on the verge of lifting. The world’s farmers, mining companies and oil producers spent billions of dollars over the last decade to increase output. The result: huge surpluses and sharply lower prices for commodities ranging from oil to sugar to iron ore.
The magnitude of the decline has exceeded the expectations of the vast majority of investors and analysts. The Bloomberg Commodity Index, tracking 22 commodities, fell for a fourth straight year in 2014 and is down 3.1% this year. But some investors see the seeds of a recovery in daily reports of plunging prices. They are buying some of the hardest-hit commodities, in a bet that low prices will quickly force producers to cut back, erasing the global surpluses behind the multi-year slide………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Hedge funds boosted bearish wagers on oil to a four-year high as U.S. supplies grew the most since 2001. Money managers increased short positions in West Texas Intermediate crude to the highest level since September 2010 in the week ended Jan. 20, U.S. Commodity Futures Trading Commission data show. Net-long positions slipped for the first time in three weeks.
U.S. crude supplies rose by 10.1 million barrels to 397.9 million in the week ended Jan. 16 and the country will pump the most oil since 1972 this year, the Energy Information Administration says………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

The Tories must know their strategy has failed. But, unlike the governments of the 1970s, the energy market has saved them. I have taken part in many a pub discussion about the perennial question of whether governments lose elections or oppositions win them, or a mixture of both. If ever a postwar British government deserved to lose an election it is this one. That is why the Labour party has got to get its act together, and soon.
The gravamen of the charge against this government is that, for all the triumphalism about a long-delayed period of economic growth, it woefully mishandled the economy when it came in – and plans an assault on our already deteriorating public services, if it is re-elected, that would quite seriously threaten the social fabric of the nation………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Oil prices have collapsed in stunning fashion in the past few months. The spot price of Brent crude reached $115 a barrel in June, and was above $100 a barrel as recently as September. Since then, it has plummeted to less than $50 a barrel.
There is a sharp split among energy experts about the future direction of oil prices. Saudi Prince Alwaleed bin Talal recently stated that oil prices could keep falling for quite a while and opined that $100 a barrel oil will never come back. Earlier this month, investment bank Goldman Sachs weighed in by slashing its short-term oil price target from $80 a barrel all the way to $42 a barrel………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

It is in the interests of the Organisation of the Petroleum Exporting Countries to slow that process. The situation is analogous to chemotherapy: OPEC hopes low oil prices will curtail shale before they destroy its own finances. That explains why the death of Saudi Arabia’s King Abdullah is unlikely to mean a shift in strategy. But OPEC could be in for a longer struggle than many expect.
Oil’s collapse is affecting drilling. By Friday, the US rig count had fallen by 15 per cent since its most recent peak in September, according to Baker Hughes. Meanwhile, surveying 50 North American exploration and production companies that have ­issued guidance so far, Tudor, Pickering, Holt & Co finds their aggregate capital expenditure budget for 2015 is about a third lower than last year………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

The latest SGE withdrawal figures show withdrawals of 70 tonnes for the week ending Jan 16th – the third highest weekly figure ever. The recent rise in the gold price, now standing at just below the $1300 mark, does not yet appear to have put a dent in Chinese gold demand as represented by withdrawals from the Shanghai Gold Exchange (SGE).
Indeed it appears to be picking up even further in the weeks ahead of the Chinese New Year which falls on February 19th this year. If demand continues at the current rate, January will be a very strong month indeed despite the loss of a few trading days at the beginning of the month for the calendar New Year………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Lenin, the implacable Russian revolutionary, despised gold. He thought it should be used to build public lavatories. I was of much the same persuasion early in my career. The yellow metal’s economic utility seemed to me minimal in the light of its declining industrial uses. As an investment it was and remains entirely speculative because it yields no income.
And since the introduction of index-linked government bonds, any merits it might have as an inflation hedge have become less relevant. Certainly gold has been a very erratic store of value in recent decades. Anyone who bought gold at the peak of the gold bull market in the early 1980s saw their investment lose 80 percent of its value in real terms over the next 20 years………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

The new year has ushered in a remarkable and unexpected turn of events for gold. It is up significantly in four of the seven top currencies (the euro, British pound, Australian and Canadian dollars), up respectably in two others (U.S. dollar and Japanese yen) and down slightly in the last (Swiss franc).
The significant gains in gold’s value in a very short period of time demonstrate amply the value of gold as a hedge, not just against inflation, but against sudden currency devaluation and systemic financial and economic risks as well. In short, it is important to see that gold owners in these countries got the protection they sought against adverse circumstances when they first purchased the metal. In short, gold has performed as advertised………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Some of you might think that Gold has already passed its first big test in 2015 by price being up better than 9% in this young year, despite the Dollar’s rising as well. But regular readers know such positive correlation with the Buck is not a big deal for us, our having demonstrated time and again in these updates that Gold plays no currency favourites.
Moreover, last April we wrote a Gold Update similarly entitled “Gold’s First Big Test In 2014″: ’twas just before StateSide Tax Day, which a year prior in 2013 infamously marked the unrelenting unraveling of Gold’s price from the 1600s down into the 1100s in just over 11 weeks………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Investors’ desire for precious metals is deepening after Mario Draghi’s $1.3 trillion pledge drove gold to a five-month high and silver to the brink of a bull market. Their buying helped boost the value of exchange-traded products backed by gold and silver by $8.94 billion this month, the most since September 2012, data compiled by Bloomberg show.
Hedge funds and other speculators in futures are the most bullish on gold in two years and have bet more on silver in all but two weeks since the start of November. At a time when the price of almost every other commodity is sinking, silver and gold are having their best start to a year in more than three decades………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Platinum is cheaper than gold, which is the opposite of what’s usually the case. The supply side of platinum is bad and will get worse if prices do not improve. Demand for platinum can only increase while substitutes become less attractive.
Platinum is one of the best known precious metals. While not as popular as gold and silver, there are some people out there who consider platinum to be an alternative candidate to those two metals………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

What is the sound of one hand clapping? It’s supposed to be a question without an answer, a test posed by the master to the disciple in the Zen journey towards enlightenment. But it’s also as good a description as any of the current state of global aluminium production.
The one hand clapping is that of the non-China world, where producer discipline has tamed supply sufficiently to drag the market into a state of deficit. Such enlightenment has taken several years to achieve and marks only the very first step towards correcting the mistakes of the past. These still weigh heavily over the aluminium price in the form of millions of tonnes of accumulated surplus………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Consumers aren’t the only ones fueling up on cheap oil prices. Investors are adding energy stocks to their portfolios as West Texas Intermediate crude oil is showing signs of stabilizing. The Energy Select SPDR exchange-traded fund, which tracks energy companies in the S&P 500, is up 6.9% from its intraday low Jan. 13, outpacing broader market gains and oil itself, which are both up about 3% in the same period.
Oil, which has largely been in free fall since June, has weighed on major indexes, added volatility to markets and hammered the shares and earnings of many publicly traded energy companies. The Energy ETF has held up relatively well, falling 29% from June to January on the back of oil’s 59% plunge………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Exchange traded fund assets will double to $5 trillion (Dh18.3 trillion) by 2020, according to a detailed study by PwC, far outstripping the asset growth of traditional fund managers, which have come under increasing pressure to prove their worth. The consultancy calls the growth a “game changer” for the asset management industry.
“All financial services firms should consider developing an ETF strategy,” said Nigel Brashaw, a partner at PwC. “This may be an obvious choice for firms planning to manage, service or distribute ETFs, but it is also important for firms competing in an environment that is increasingly shaped by ETFs.”……………………………………….Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

Not too long ago, the Swiss National Bank (SNB) gave up the peg it had maintained for years between its franc and the euro. Market reaction was sudden. Within minutes of the announcement, the franc, or swissie as it is called in currency-trading circles, rose almost 40 percent against the euro. Several articles in the financial media described these events as the start of a “currency war.” That is a catchy phrase.
It is nonetheless misplaced. Recent and likely currency moves are much less a matter of targeted, warlike policies than they are a reflection of economic and financial fundamentals that have continued, and for the time being at least will continue, to favor the swissie and the dollar over the euro and most other currencies. The only targeted currency policy was Switzerland’s efforts to keep its franc cheap, and the central bank’s action signals defeat, not the start of a war………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

The Chinese currency yuan, or renminbi, continues its ascent among international payment settlements, trade and currency investment, ratings agency Fitch said in their latest report. A rapidly expanding network of offshore yuan clearing centers has facilitated direct access to China’s onshore financial markets, Fitch said.
“We expect the proliferation of these offshore clearing centers to drive greater issuance of dim sum bonds by both Chinese and non-Chinese governments, financial institutions and corporates in 2015,” it said. Dim sum bonds are yuan-denominated bonds issued outside the Chinese mainland. They originated in Hong Kong and the term comes a style of essentially Cantonese cuisine that involves a variety of small delicacies………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

As quantitative easing spreads from country to country, investors are left nervous and discouraged: and stagnation follows. There is every sign that the European Central Bank’s €1.1 trillion stimulus package is going to unleash a long period of beggar-thy-neighbour currency wars. Maybe not quite in the way that wrecked the global economy in the 1930s – triggering retaliatory trade tariffs and sending industrial production spiralling downwards.
But enough to dampen the enthusiasm of exporting companies which might be thinking of expanding output. This is a war that pits the central banks of the world’s major trading blocs against each other and, as currencies yo-yo in value, creates a nervousness and caution among investors that can create years of stagnation………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

The UK coffee-shop business is booming and with the number of outlets set to top 20,000 in 2015, we ask… is coffee the new tea? In the West coffee consumption is about a third of tap-water consumption. After petroleum, coffee is the second-most traded commodity in the world.
More than 7 million metric tons are produced annually. Coffee is grown more than 70 countries around the equator in Latin America, South-east Asia and Africa. Every year more than 400 billion cups of coffee are drunk worldwide………………………………………..Full Article: Source

Posted on 26 January 2015 by VRS |  Email |Print

The takeaway line from the Stern Review, Sir Nicholas Stern’s (now Lord Stern) investigation into climate change and what, if anything , we might do about it, is that climate change is the largest market failure the world has ever seen. My argument here is that this simply isn’t true. No, this doesn’t mean that I think the Stern Review itself is wrong. I think there’s a lot that is wrong with it, certainly, and I have since I first read it on the day it was released.
The estimations of future emissions are far too high, it has, to put it mildly, an interesting way with discount rates and I’m deeply unimpressed with the way it deals with the capital cycle. However, at another level I agree with the report. Climate change is happening, we’re causing it, something should be done and that something is a carbon tax………………………………………..Full Article: Source

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