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Commodities Briefing 24.Feb 2015

Posted on 24 February 2015 by VRS |  Email |Print

As the Chinese return from their New Year celebrations, commodities traders and industry executives will be wondering what the year of the sheep holds for the sector. Why is Chinese growth on the minds of commodities traders? China has been the most important factor in commodities demand in the past decade.
The commodities “supercycle” that started in the early 2000s was largely driven by the country as investment in infrastructure, property, and factories producing exports for the globe required increasing imports of raw materials. Beijing’s 2009 stimulus further prolonged the demand, with loose credit encouraging the use of metal as collateral for loans………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Scotiabank’s monthly index of commodity prices has plunged to its lowest since January 2007. The bank says global economic conditions are better than during the 2008-09 global downturn, but an extended period of sub-par growth has increased competition and pushed down commodity prices.
Scotiabank says a recent spike in the U.S. dollar against most currencies has also contributed to the decline. The bank’s broadest commodity price index fell to 100.9 points in January, down 8.6 per cent from December and down 27.9 per cent from January 2013………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The commodities futures market underwent changes in 2003 with many policy reversals. But option-based derivatives are yet to gain ground in commodities. Though the Forward Contract (Regulation) Bill, 2010, has provisions for option trading, its execution requires considerable attention from the regulator, commodity exchanges and market participants.
The government can replace the price support scheme with minimum guaranteed price (MGP). Policy makers are passive on the adoption of option-based trading despite the benefits. Option can be over-the-counter and exchange-traded. Similar to the futures, option requires at least two parties to exercise the contract. Exchange-traded option can help to mitigate counter-party credit risk as the contract will be more standardised in nature………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Predicting the oil price is a bit of a mug’s game. There are simply too many variables involved to make any kind of meaningful, definitive forecast. What we do know is that, despite a recent upturn, the price of oil has slumped almost 50% since last summer following the longest-running decline for 20 years.
And we know why - US shale oil, and to a lesser extent Libyan oil returning to the market, has pushed up supply while a slowdown in the Chinese and EU economies has reduced demand. Add to the mix a strong US dollar making oil more expensive in real terms, pushing demand even lower, and you have a recipe for a plummeting oil price………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The oil price fell again today after a week of small gains and losses in which a barrel of Brent crude hovered around the $60 mark. A strengthening dollar and concerns about long-term oversupply offset reduced output due to freezing weather and industrial action in the US, Reuters reports.
But the oil price remains at little more than half its peak in June last year, and some analysts predict it may yet fall far lower. Others claim the price has now bottomed out. Last week, Bloomberg’s A. Gary Shilling predicted the possibility of oil at $10 per barrel – a far cry from the predictions of T. Boone Pickens, who towards the end of last year anticipated a return to an oil price of $100 within 12 to 18 months………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries has no plans to hold an emergency meeting amid falling oil prices, according to a delegate from the group. Crude prices have dropped almost 50 percent from a June peak as OPEC refused to cut production and U.S. output reached a three-decade high.
There have been no concrete discussions about holding an emergency meeting, said the delegate, who asked not to be identified because the group’s talks are private. OPEC’s next regular meeting is on June 5. Brent futures dropped $1.32 to $58.90 on the London-based ICE Futures Europe exchange………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

It was another down day in the oil market: Crude prices fell more than 2 per cent on Monday, with WTI finishing Feb. 23 below US$50 a barrel for the first time in almost two weeks. For a moment, things looked like they might go the other way. Opec President Diezani Alison-Madueke said in a Financial Times report on Monday that she would call an emergency meeting of the Organization of Petroleum Exporting Countries if prices continue to fall. Oil prices reacted sharply to the news-until they fell again.
In addition to being Opec president, Alison-Madueke serves as Nigeria’s oil minister, and cheap oil has helped sow crisis in Nigeria. The Nigerian currency, the naira, is at all- time lows against the US dollar, terrorist attacks by the Islamist group Boko Haram have worsened, and national elections were recently postponed more than a month………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Judging by the barometer of hedge-fund interest, there’s less to get excited about in gold these days. Even as Greece battled with its creditors to avoid default and keep the euro zone intact, speculators retreated from the metal used as a haven from economic and political upheaval. Money managers cut their net-long wagers by the most in 15 weeks, U.S. government data show.
The strengthening dollar and record valuations for global equities are diminishing bullion’s appeal as a store of wealth. As the combined market capitalization of stocks thundered through $67 trillion last week and the dollar traded at its highest level in at least a decade, this month’s losses in exchange-traded products backed by gold reached almost $4 billion………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Gold has historically proven to be a very desirable metal, never losing its appeal. This precious metal’s attributes, including malleability, resistance to corrosion and tarnishing, and glitter, makes it ideal for all kind of jewelries. But there is certainly more to gold, which is also a ripe investment option.
Gold investors buy gold bullion and official coins as a hedge against inflation or a safeguard against the collapse of paper assets such as stocks, bonds and other financial instruments. Even though gold seems to have lost its luster in recent times as an investment option, there are plenty of reasons to be optimistic about the gold mining industry for both the short and the long term………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

It is often claimed that copper prices are a reliable barometer of the global economy’s health. Those who monitor the metal closely are sharply divided over its condition. As of Monday, copper’s spot price on the London Metal Exchange had fallen nearly 10% since the start of the year. Even so, the metal has staged a partial recovery from a five-year low reached on Jan. 29, rising 5.1% from that low to $5,672 a ton on Monday.
The whipsawing in prices has been mirrored in the shares of major copper producers. Chile-based Antofagasta PLC’s stock fell 13% in January but has since recovered the lost ground………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Three exchange-traded fund industry experts recently discussed how alternative ETFs work and what investors should look out for. Jackie Chin, Managing Director of ETF Platform Management at Charles Schwab; Kevin DiSano, Executive Vice President at IndexIQ; and Mike McGlone, Head of Research at ETF Securities were a part of Charles Schwab’s most recent “Every Third Friday” conference call.
“In this market environment with stocks at all-time highs, bonds at all-time highs with interest rates where they are, it’s certainly a good opportunity to look at these types of investments,” DiSano said………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The slump in the euro is reshaping the landscape for exchange-traded funds that buy stocks in the region, catapulting one with built-in currency hedges to the verge of becoming Europe’s biggest equity ETF.
The WisdomTree Europe Hedged Equity Fund has a market capitalization of $11.2 billion, up more than 10-fold from a year ago. It trails the Vanguard FTSE Europe ETF by just $1.2 billion after adding $8 billion since the start of the fourth quarter. The ETF has surged 14 percent over the last year, while its peer with no currency protection has declined 6 percent………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Central banks are not waging a currency war. Their actions, which may seem warlike on the surface, arise from far more benign motives. Many Central Banks have mandated inflation targets, and in most regions inflation is below target. With a slowing global economy, there had been few ways to keep inflation up to code.
But a turn in U.S. monetary policy has made it possible for Central Banks to meet their policy goals by reflating their domestic economies. Part of the issue is that the central banks who have missed their goals are the global economic heavyweights, whose policy shifts have a more potent effect on global markets than others. Europe is struggling with high unemployment, deflation, and a Greek epic with seemingly no end………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

Ukraine’s battered national currency has plummeted some 10 per cent as the central bank scrambles to strengthen currency controls in its latest bid to halt the slide. The average rate for the hryvnia - currently the worst performing currency in the world - tumbled to 30.55 before nudging back up slightly to 29.56 by 1500 GMT (0200 AEDT Tuesday)
The hryvnia lost some 50 per cent of its value in 2014 as east Ukraine collapsed into conflict following the ouster of pro-Russian president Viktor Yanukovych last February. The pain has continued with the currency plunging even faster since the start of the year as fierce fighting flared again in the eastern industrial heartland. ……………………………………….Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The Australian dollar is back below US78c as commodity prices fall and the US dollar bounces back from last week’s fall. At 7am (AEDT), the local unit was trading at US77.97c, down from US78.36c on Monday.
OM Financial senior client adviser Stuart Ive said the US dollar fared well despite new data showing that US sales of existing homes tumbled 4.9 per cent in January. “A stronger US dollar means weaker commodity prices and that’s really what is weighing on the Australian dollar for the time being,” he said………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The UK and eight other member states yesterday reiterated their call for the European Union to deliver urgent reforms to the EU emissions trading scheme (ETS), in a bid to bring an end to the long-standing oversupply of emissions allowances in the market. The joint ministerial statement was signed by Energy and Climate Change Ministers from the UK, Germany, the Netherlands, Sweden, Denmark, Slovenia, Luxembourg, Malta, and Norway.
It welcomes the European Commission’s recent proposals to introduce a new Market Stability Reserve (MSR) that would control the number of allowances in the market, but argues that the bloc cannot wait to launch the new mechanism until 2021, as currently proposed………………………………………..Full Article: Source

Posted on 24 February 2015 by VRS |  Email |Print

The Climate Department of China’s National Development and Reform Commission (NDRC) recently published an article entitled “Regarding the Fundamental Conditions and Operational Thinking Behind the Promotion and Establishment of the National Carbon Emissions Rights Trading Market” (National Market Plan).
This is significant as it addresses some basic questions that many observers have been asking about China’s anticipated national carbon trading market, and lays out a roadmap of how China plans to develop this market over the coming years. At this moment, much remains to be done in terms of liquidity and efficiency for this market to achieve its real potential………………………………………..Full Article: Source

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