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Commodities Briefing 18.Sep 2015

Posted on 18 September 2015 by VRS |  Email |Print

The biggest collapse in commodity prices in a generation is giving some investors the best returns of any asset class. Over the past 12 months, eight of the 10 best-performing US exchange-traded funds were securities that benefited from declines in raw-material prices, with five more than doubling their money, according to data tracked by Bloomberg on more than 1600 ETFs across asset classes, including equities, fixed income and mixed allocation.
With commodity prices languishing near a 16-year low because of excess supplies, money has been flowing out of funds linked to metals, crops and energy. But for the investors that took on more risk with leveraged short bets, the payoff has been big. The VelocityShares Daily 3x Inverse Crude ETN, by far the top gainer, surged 241 per cent over the 12 months through Wednesday as oil prices tumbled 50 per cent in New York…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Call it “All Quiet on the Commodities Front”. Which is not a bad thing; as this is being written before the Federal Reserve makes its decision on whether to lift interest rates, this feeling of calm is probably a good thing. A lack of volatility – one hopes – means that the Fed won’t scare the commodity horses (in either direction).
And there’s even good news on the rare earth front with Reuters reporting that China’s demand for these elements “is likely to soar more than 50% over the next five years”. Chen Zhanheng, vice-secretary general of the Association of China Rare Earth Industry, told a conference in Shanghai this week that domestic consumption was expected to rise nearly 9% this year to 97,700 tonnes, and would end the decade at nearly 150,000 tonnes, up from 90,000 tonnes in 2014…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Whenever elections loom in Peru, presidential hopefuls distance themselves from the mines and energy projects that form the backbone of the country’s economy. Ollanta Humala, the current president, won in 2011 by attacking the mining industry for failing to consult with local communities and turn over more benefits to them.
And that was at the height of a commodities boom that supercharged Peru’s growth rate. Pedro Pablo Kuczynski, an early favorite in the race to succeed Humala, doesn’t even mention mining in his campaign literature for the 2016 presidential election. “People don’t like mines, and there’s no getting around that,” says Kuczynski, a longtime politician and former Wall Street investment banker…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

A glut of crude may keep oil prices low for the next 15 years, according to Goldman Sachs Group Inc. There’s less than a 50 percent chance that prices will drop to $20 a barrel, most likely when refineries shut in October or March for maintenance, Jeffrey Currie, head of commodities research at the bank, said Wednesday in an interview in Lake Louise, Alberta. Goldman’s long-term forecast for crude is at $50 a barrel, he said.
Goldman cut its crude forecasts this month, saying the global surplus of oil is bigger than it previously thought and that failure to reduce production fast enough may require prices to fall near $20 a barrel to clear the glut. Prices may touch that level when stockpiles are filled to capacity, forcing producers in some areas to cut output, Currie said Wednesday…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

OPEC is assuming the oil price will rise gradually to $80 a barrel in 2020 as supply growth outside the group weakens, a slower recovery than several member nations have said they need. The average selling price of the Organization of Petroleum Exporting Countries’ crude will increase by about $5 annually to 2020 from $55 this year, according to an internal research report from the group seen by Bloomberg News.
Iran and Venezuela said they would like to see a price of at least $70 this month and most member countries cannot balance their budgets at current prices. “It’s much harder for OPEC to lift prices” after the revolution of U.S. shale oil, said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB, which forecasts Brent crude at $73 by the end of the decade. “Eighty dollars by 2020 is pretty close to consensus view.”………………………………..Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

The oil-price crash remains painful and may be far from over, but top oil forecaster Ed Morse offered some hope Thursday to Canada’s gloomy oil industry — a recovery by 2017 as the “weeding out” of uneconomic production runs its course.
Still, Morse’s relative, medium-term optimism has its limits. The rebound won’t mean a return to the heyday of the North American energy renaissance because new technologies that enabled production from the oilsands in Canada, shale oil in the United States, and deepwater fields will continue to change the oil business and keep prices in check. Don’t count, then, on US$100 a barrel oil making a comeback any time soon…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Falling oil prices will cause big problems for oil and gas companies both this year and next, Moody’s Invesors Service has warned. Morningstar analysts forecast oil to stablise at $70 over the long term – but today Brent sits at just $47 a barrell. Commodities have been a difficult place to be for investors over the past few years. After an incredible bull run to the beginning of 2011, in which the price of oil reached $147 a barrell, natural resources have disappointed since.
After the global recession the diversification benefits of commodities, buoyed by demand from China, made the sector attractive to retail investors. Funds such as BlackRock Gold & General saw considerable inflows. In 2009 the fund, run by Evy Hambro returned 40% to investors, followed by 42% the following year. However in the five years since, the fund has lost a considerable sum, down 21% year to date thanks not just to the recent oil price fall but wider natural resources losing value ………………………………..Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

The Organisation of Petroleum Exporting Countries (Opec) should work with non-member countries to cut more than two million barrels of over supplied oil in the market to stabilise it, former energy minister of Qatar told reporters in Fujairah.
“I think Opec should and must work with other major oil producers like Russia, Norway and Mexico to cut over 2 million barrels of oversupply. Opec cannot do it alone, no more. Opec share in the market dropped. In the 1990s, we were the biggest producers, now we are not,” said Abdullah Bin Hamad Al Attiyah…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

When it comes to gold prices, don’t pay attention to the short-term fluctuations. Instead, stay focused on long-term and just look at the supply and demand situation. Saying the very least, the precious metal has a shiny future ahead.
Here’s what is really needed for gold prices to go down; massive increase in supply, major discoveries, and mining companies starting to produce more. On the demand side, the buyers must decline substantially. If you follow the gold market closely, you will know this isn’t happening. We are seeing quite the opposite, actually…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Leave it to the Federal Reserve to help break a 2000-year-old dynamic in the gold market. When Fed policy makers left US interest rates unchanged near zero per cent on Thursday they cited stubbornly low inflation, and bullion rose to a two-week high. Lower consumer prices have historically been a thorn for gold, which attracts buyers as a store of value.
But since the lack of inflation is allowing the central bank to wait longer before tightening monetary policy, that relationship is getting flipped. The evidence can be seen in the link between bullion and inflation expectations, measured by the 10-year Treasury break- even rate. The 120-day correlation has turned negative, signalling the assets are starting to move in opposite directions…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Gold rose to a two-week high on Thursday after the Federal Reserve said it held U.S. interest rates steady following a two-day policy meeting, sending the dollar index to a three-week low. The U.S. central bank’s decision was a nod to concerns about a weak world economy, saying that an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade.
It left open the possibility of a modest policy tightening later this year. Spot gold was up 0.8 percent at $1,127.80 an ounce, after rising to $1,130.35, the highest since Sept. 3. It rose 1.3 percent on Wednesday in its biggest daily jump since Aug. 20, helped by data showing U.S. consumer prices unexpectedly fell in August…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

The market expects gold to go lower as the Fed raises interest rates. That’s because gold pays no interest, unlike bonds. In fact, more than $2.6 billion was wiped from the value of gold exchange-traded products (ETPs) in just three weeks as investors awaited the Federal Reserve’s meeting. Ouch!
And in all, since gold entered a bear market in April 2013, a whopping $54 billion in value has bled out of gold ETPs. Holdings in bullion products fell to 1,508.2 metric tons on August 11. That’s the lowest since 2009. As the saying goes, trying to catch a falling knife is a good way to end up with bloody fingers…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Miners can look forward to better mid-term prospects as prices of metals in the world market are seen to recover by 2019, experts said at the Mining Philippines 2015, a three-day international conference organized by the Chamber of Mines of the Philippines.
Mining and metals market expert Julia Ralph said at the conference that the price recovery would be led by base metals, such as gold, silver, platinum, aluminum, copper, lead, nickel, tin and zinc. Zinc and nickel will recover very strongly while lead and copper will have a mild improvement, she said. ………………………………..Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

The huge volume of steel product imports into Latin America originating from China is a subject of growing concern, the president of the Latin American steel chamber, Alacero, said Thursday. Martin Berardi said the steel and metal-mechanic sector is worried about the influx of Chinese products in what it sees as unfair trade conditions.
“China’s steel exports to Latin America reached 9 million mt [in 2014], the equivalent to 13% of the regional steel consumption. These shipments grew 70% in just two years,” Berardi said. In 2013, direct imports to Latin America totaled 5.3 million mt, with indirect imports of 6.5 million mt. ………………………………..Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, can now be accessed by U.S. investors via an exchange traded fund with Thursday’s debut of the iShares MSCI Saudi Arabia Capped ETF. The iShares MSCI Saudi Arabia Capped ETF is the first dedicated ETF for the Arab world’s largest equity market.
The new Saudi ETF was made possible by the kingdom’s efforts to open its financial markets, though on a somewhat limited, to foreign investment in a bid to reduce the economy’s dependence on oil. The iShares MSCI Saudi Arabia Capped ETF follows the MSCI Saudi Arabia Investable Market Index (IMI) 25/50 Index. Though Saudi Arabia is home to some of the largest oil reserves in the world, the country’s major oil producers are private, state-controlled companies so KSA and the MSCI Saudi Arabia Investable Market Index (IMI) 25/50 Index are not as energy-heavy as some investors might suspect…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

This week the topic du jour in the investment world is the pending monthly meeting of the Federal Reserve Open Market Committee, otherwise known as “The Fed”. Market watchers are split over whether this will be the big moment when the Fed decides to re-initiate a cycle of fiscal tightening. Essentially we are waiting for the Fed to lift the overnight lending rate from 0 to 0.25% or thereabouts.
The big debate of course is whether this is the perfect time to move the needle. Hawks point towards the statistically sound labor and economic data in the United States that has been trending higher for years. Doves on the other hand are firmly entrenched in worries over commodity deflation, emerging market weakness, currency instability, and tepid inflationary statistics…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Virtual money is officially a commodity, just like crude oil or wheat. So says the Commodity Futures Trading Commission (CFTC), which on Thursday announced it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform.
“In this order, the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities,” according to the press release. While market participants have long discussed whether Bitcoin could be defined as a commodity, and the CFTC has long pondered whether the cryptocurrency falls under its jurisdiction, the implications of this move are potentially numerous…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Currency traders wondering how to navigate the Federal Reserve’s rate decision on Thursday should look to the U.S. stock market as a guide, according to Citigroup Inc. “The rule of thumb is that you trade European currencies and safe havens if the market response is anomalous – tighten and equities rally, or sound dovish and equities fall,’” Steven Englander, global head of Group-of-10 currency strategy at Citigroup in New York, wrote in a note.
“If the market reaction is in the standard direction – rates and equities move in opposite directions – you buy and sell currencies with betas at opposite ends of the spectrum,” he said…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

China’s policymakers think they can stem a rapid rundown of their foreign exchange reserves and ease pressure on the currency by pump-priming the economy to meet this year’s growth target, sources involved in policy discussions said.
Beijing will channel funds mainly into infrastructure projects, including railways, roads and airports, and the central bank will cut interest rates and bank reserve requirements, policy insiders say, reigniting fears of reverting to an old stimulus playbook at odds with an official drive to reform the economy…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

China’s devaluation of the Yuan on August 11 has sent panic waves across global financial markets and brought back memories of the Asian financial crisis of 1998 when similar situations prevailed. The biggest fear was this adding to the uncertainty in global financial markets. Additionally, China’s manufacturing data released in August further dampened the sentiments, triggering a fear of certain collapse across global markets.
Data released in September showed that factory output in China grew by 6.1 per cent from the year before. This is well below the forecasts of 6.4 per cent. Growth in fixed asset investment slowed to 10.9 per cent for the year to date. This is a 15-year low…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

Though some will call us “deniers,” the truth is we are merely global warming skeptics. We’re not skeptical of climate change, though, because we know the climate has been changing since the beginning and will continue to change throughout time. We’ve made this point several times. What we’re skeptical of is man’s role in that change. Maybe there is an anthropogenic factor.
But it’s impossible to say with any degree of certainty just how much of an impact, if any, man makes. The climate is too complex, the variables too numerous. But for the sake of argument, let’s say that due to man’s carbon dioxide emissions, Earth is warming at the rate the alarmists claim it is. What should we do? Those driving the global warming scare want to sharply cut human carbon dioxide emissions…………………………………Full Article: Source

Posted on 18 September 2015 by VRS |  Email |Print

The South Australian Government has been exploring the concept of a state-based emissions trading scheme and three other states have indicated their interest, InDaily can reveal. South Australian Environment Minister Ian Hunter told InDaily he had raised the idea of an interstate ETS with ministerial counterparts from Victoria, Queensland and New South Wales earlier this year, and that they had been receptive.
Hunter said that if the Federal Government was “adamant” on rejecting a market-based mechanism for reducing carbon emissions, an interstate scheme “might be a reasonable option”. However, he said he hoped new Prime Minister Malcolm Turnbull would embrace a national ETS, so that an interstate scheme wouldn’t be necessary…………………………………Full Article: Source

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