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Commodities Briefing 28.Apr 2015

Posted on 28 April 2015 by VRS |  Email |Print

Can commodities continue their early year rally? After spending most of 2014 sinking, prices for commodities such as oil have steadily climbed in the past few months, leading analysts to speculate whether the commodity bear market is finally at an end.
The picture is certainly looking brighter, said Julian Jessop, economist at Capital Economics, but there are three key risks that could prevent a real commodity turnaround in the coming months. The first one is the ongoing strength of the U.S. dollar, which has reached its highest level in more than a decade………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Commodity funds manifest inferior risk-adjusted return, relative to other asset classes. Absence of conclusive superior risk-adjusted returns for portfolios holding commodity funds. Commodity performance as an investment varies by the particular fund (proxy) used. Commodities are a relatively new asset class. (They are new at least with respect to domestic equities.)
That is, it was only within the last dozen years that a lay investor could get their hands on a commodities mutual fund. And as with many new investments, the fledgling commodities fund history has been relatively volatile; the previous bull run has turned bear………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Bank of America Merrill Lynch has revised upward its oil price forecasts for 2016, but said it remained bearish amid oversupply, weak demand from emerging markets, a return of U.S. shale production and expectations of a deal on Iran.
The bank raised its outlook for Brent next year to $62 per barrel from $58, but kept its WTI outlook unchanged at $57, as it expects only a moderate draw in global inventories. For 2015, BofA saw Brent averaging $58 per barrel and WTI at $53. The bank had previously forecast Brent at an average of $52 this year, and WTI at $50………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Investors last week pushed the number of bets that oil prices would rise to a record high, even as some market observers worry prices could slip in the short-term. Net long positions taken by large investors in futures and options contracts that the price of Brent crude oil would increase rose 3.2% during the past week, according to the Commitment of Traders report from Intercontinental Exchange Inc.
That pushed the total number of bets that oil prices will rise to a net 271,929 contracts, the highest level since the report was first prepared in 2011. With a contract equivalent to 1,000 barrels of oil, that represents the equivalent of nearly 272 million barrels of crude oil at stake………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Unlike the 1980s, electricity prices should hold firm, but we should not be complacent about fixing our energy policy. The recent oil price collapse seems like a replay of a bad 1980s movie that we’ve seen before. If we are not careful, we’ll be doomed to make the same mistakes we made last time, allowing our domestic oil and gas producers to wither, watching energy imports soar, prematurely stunting the growth of alternative fuel sources, and tossing conservation and efficiency by the wayside.
If we are smart we’ll seize this opportunity to double-down on good energy policies and support all of our domestic energy producers so that we’re prepared for the next time oil prices spike………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Saudi Arabia, the world’s biggest oil exporter, will meet any demand for its crude as the kingdom seeks to keep customers happy and maintain a balanced market, Prince Abdulaziz bin Salman, the deputy oil minister, said.
The oil market is in “excellent” condition, he told reporters on Monday in the eastern city of Khobar, without elaborating. Benchmark Brent crude has gained 13 percent this year and was trading 9 cents lower at $65.19 a barrel at 4:39 p.m. in London………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Whisper it, but the next challenge for financial markets and policymakers may not be deflation, but the remarkable surge in oil prices from the six-year low touched in January. Since then, Brent crude futures have risen 45 percent. If that is sustained or even increased throughout this year, inflation next year could rise significantly, posing questions for policymakers largely committed to ultra-loose policy.
No fewer than 27 central banks around the world have eased monetary policy to some extent this year in a battle against deflation, slowing growth or both. These measures have ranged from interest rate cuts to bond-buying “quantitative easing” programs. All have been in response to the fall in inflation rates and inflation expectations driven by the 60 percent collapse in oil prices over the latter part of last year………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

The world already knows that the Organization of Petroleum Exporting Countries, or OPEC, can change the fate of the international oil price. By producing close to 40 % of the world’s combined crude oil, OPEC’s oil exports represents about 60% of the total petroleum traded internationally.
In spite of having such clout, 2014 has been kind of odd for the cartel as there was a considerable drop in OPEC’s revenues. As per Energy Information Administration, OPEC earned close to $730 billion in net oil export revenues in 2014, which was a decline of 11% from 2013. Low oil prices and reduction in the net oil exports were the major factors behind this decline. This was the cartel’s lowest revenue earning since 2010………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

As candidates for the 2016 U.S. general election gear up for a White House run, one villain of recent campaign cycles will be conspicuously absent: the cartel known as OPEC. With the U.S. oil boom helping the world’s largest economy churn out more than 9 million barrels per day (bpd), its highest in about three decades and up 80 percent since 2008, energy prices appear to be sidelined as political theater.
Should current trends continue-prices of Brent crude and West Texas Intermediate are trading near their lowest levels in nearly 10 years-energy prices are unlikely to figure prominently in the coming presidential election………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

After a swift surge in late March and early April, gold prices have turned around, losing some 2 percent in the past two weeks. And the pros say that with a general lack of fear in the market, there’s little reason to jump into the yellow metal just yet.
“Equities markets are again at all-time highs and keeping safe-haven gold buying to a minimum, as there is clearly no fear,” Bill Baruch, senior market strategist at iiTrader, wrote in a note to clients. The lack of fear is also weighing on the CBOE Volatility Index, which generally measures how much investors are willing to pay for insurance on the S&P 500………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Gold has outperformed silver on a risk-adjusted basis since the GFC. Our fair value model suggests that neither gold or silver are overpriced, with greater relative value in silver. We see some short-term price risk in both commodities: slightly more in silver.
Unanticipated increases in US interest rates (and the USD) could favor silver relative to gold. Gold and silver have been in an overall uptrend since 2008. Over the last 6.5 years, gold has returned an average 9.0% p.a. with a volatility of 18.8%. Silver has returned 15.4% p.a. over the same period with a volatility of 35.2%………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Gold futures settled at their highest level in about two weeks on Monday, buoyed by weakness in the U.S. dollar as talks between Greece and its international creditors dragged on and investors awaited the outcome of this week’s Federal Reserve meeting.
Gold for June delivery on Comex GCM5, jumped $28.20, or 2.4%, to settle at $1,203.20 an ounce. Prices, which ended Friday at their lowest level in five weeks, haven’t settled at a level this high since April 10, based on the most-active contracts………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

I’m looking for information on adding gold and silver to my investments. What are the advantages and disadvantages of buying coins? What about gold and silver stocks or mutual funds?
“We think gold and other precious metals can play a part in a well-diversified portfolio, but our preference is to own the stocks or the mutual funds that would give you that exposure,” says Joe Franklin, a certified financial planner and president of Franklin Wealth Management in Hixson, Tenn………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Pure-play silver miners, a niche investment market popular with retail investors, are moving up the endangered list. Buffeted by a 68 percent plunge in the price of silver since 2011, miners who traditionally made most of their money from silver are increasingly diversifying into gold, buying mines that have been put up for sale and looking to acquire more.
In addition to spurring deals in the precious metals space, the trend is reducing investment avenues for those wanting to take a bet on a commodity that often outperforms gold when bullion is rising………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Gold jewelers are betting the Indian Akshaya Tritiya festival will buoy demand for bullion. Jewelers expect the festival could drive up sales by as much as 30 percent over last year’s level. Already, gold imports are estimated to have hit 125 tons in March, compared with just 55 tons in February and twice the amount imported a year earlier, suggesting jewelers have stocked up well.
The holy day of Akshaya Tritiya, which fell on April 21, is considered by Hindus as an auspicious day to purchase gold. It is the nation’s second biggest bullion-buying festival. After a two-month hiatus, Russia’s appetite for buying gold is back. The nation increased foreign reserves of bullion to 39.8 million ounces as of April 1, compared with 38.8 million ounces a month earlier………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

A huge event is playing out in the commodities markets right now. Most people don’t know about it. It’s not gold. It’s not oil. And it’s not iron ore. This is an event taking place close to Australia’s borders that’s set to impact one key — and niche — area of the resources sector.
And if I’m right about the importance of this event, it could see the demand for this one key commodity take off, as soon as June this year. What am I talking about? Let me explain…This is a story about nickel. Most people have heard of nickel, but many have no idea about its importance. The most important thing you need to know about it is that China is hungry for high-grade nickel………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

China’s plan to remove an export tax on aluminum bars and rods from May 1 has the Japanese market divided, sources said Monday, April 27. Although rods and bars are a small market — China exported 2,114 mt to Japan in 2014 — the products have a wide range of uses in the cable, construction and automotive sectors. So the end of China’s export tax could have ripple effects, they said.
Japan’s 2014 imports included those by an extruder that used Chinese rods and bars to produce window frames and sliding doors for high-rise buildings………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Exchange-traded funds, or ETFs, that invest in U.S. oil futures are showing signs of outflows in a negative signal for a monthlong crude-price rally, Nicole Friedman reports. An inflow that began in January, as oil prices continued to fall, totaled roughly $6 billion through mid-March, when U.S. crude hit a six-year low, according to Macquarie Group Ltd.
But the ETFs, which can be bought and sold like stocks and include the $3.1 billion United States Oil Fund LP, have registered about $2.7 billion of investor outflows in April. Traders and analysts say crude prices are vulnerable to a pullback following a 32% run-up since March 17. Also, many ETFs will sell futures contracts near their expiration and buy later-dated contracts, which currently are more expensive than front-month contracts………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Some 34% of officials at defined benefit plans, foundations and endowments say they use ETFs or ETNs, and of those, one-quarter plan to increase their usage, a new Pensions & Investments survey shows.
Among non-users, about 14% of those surveyed say it’s “somewhat likely” they would begin to invest via exchange-traded funds and notes within the next year, according to the survey. Among defined contribution plan officials, 10% reported using ETFs or ETNs………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

With planting conditions improving across the U.S. Midwest, hedge funds are betting that harvests this year will compound a global crop surplus and worsen losses for corn, soybean and wheat prices.
Corn seeding is already ahead of last year’s pace, and recent rains that hampered sowing in some areas will give way to drier conditions this week, according to MDA Weather Services. In the Great Plains, winter-wheat conditions are better than they were in 2014. Record crops in Argentina and Brazil are adding to soybean supplies as U.S. farmers are forecast to plant the most acres ever next month………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Russia’s central bank said late on Monday that it opposed restrictions on using foreign currency in Russia. Russia’s Security Council earlier on Monday proposed measures aimed at reducing the use of foreign currency in Russia and boosting the use of the rouble in international settlements.
The Security Council gave few details about the measures it had proposed to limit the use of foreign currency in a brief statement on its website. The central bank responded by saying its position was that such restrictive measures were “inadvisable”………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

Look no further than trading in the Chinese yuan if you want to see how challenging coming years are likely to be for China’s policy makers and the global economy. The yuan has risen against the dollar this year despite growing slack in the Chinese economy and the pain a strong currency inflicts on its export sector.
The gains reflect the scarce options facing Beijing as it shifts from an economic model centered on exports and subsidized investment to one where growth is fueled by consumer spending. Everyone—China, the U.S., the entire world—needs that transition to happen, but it won’t be easy………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

A new proposal from Latvia, holder of the EU presidency, puts forward a date of Jan. 1, 2019 to start reforms of the Emissions Trading System (ETS), according to EU sources, as part of efforts to seal a compromise deal.
The latest proposal says a Market Stability Reserve, to hold surplus carbon allowances, should be set up in 2018 and start operating from Jan. 1, 2019, two years earlier than the European Commission’s original proposal. It also says unallocated allowances, surplus because of factory closures, should be transferred to the reserve in 2020. The EU sources, speaking on condition of anonymity, said the date was circulated in a proposal from the Latvian presidency on Friday………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

The Australian Greens want the nation to slash carbon emissions by up to 50 per cent by 2025 and be carbon neutral in 25 years. The party laid out its post-2020 emissions reduction targets on Monday ahead of this year’s United Nations climate change summit, where it is hoped a global agreement can be reached.
The targets are more ambitious than those proposed by the government’s independent climate body, the Climate Change Authority, which wants a 30 per cent cut on 2000 levels by 2025. That target raised government eyebrows, with Environment Minister Greg Hunt’s office labelling the recommendation the “largest reduction in emissions intensity in the world”………………………………………..Full Article: Source

Posted on 28 April 2015 by VRS |  Email |Print

The UK’s Labour Party is the most likely major political party to banish the country’s controversial carbon tax on power generators if its wins the forthcoming general election on 7 May, according to a leading UK energy policy expert.
Wholesale power prices for affected delivery periods jumped when the policy was announced. Consequently its repeal would see an immediate tanking of the market as power generation costs for fossil-fuelled producers plummeted. The carbon price floor (CPF), which puts in place a set penalty for carbon emissions from power producers, was introduced by the government to boost investment in low-carbon power generation such as renewables and nuclear………………………………………..Full Article: Source

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