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Commodities Briefing 21.Mar 2016

Posted on 21 March 2016 by VRS |  Email |Print

A massive run-up in several groups of raw materials has traders, speculators, and the producers of commodities wondering if our U.S. economy has finally turned the corner. Instead of focusing on fears of deflation, the focus has shifted to the opposite investment debacle – how to adjust and invest as prices rise.
The value of gold, the world’s benchmark for inflation, is up a whopping $200 per ounce since mid-December with the rise in silver and copper not far behind. Crude oil, the foundation of most of the Western world’s economies, bottomed around $26 per barrel in January and exploded over 50 percent in value as of Friday at $40………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Africa is the most commodity-dependent continent on earth, but in the East African Community, Kenya is the least dependent. Africa’s economies increasingly need to create a hospitable environment for companies in the manufacturing and services sectors, Michael Armstrong, the Regional Director, Institute of Chartered Accountants in England and Wales (ICAEW) for Middle East, Africa and South Asia said last week.
He said this will drive growth, as the old models of growth driven by exports of raw materials are out-dated. Within the East Africa Region, Kenya’s economy should expand by around 6% during the 2017 to 2020 period thanks to its relatively diversified economy and comparatively low commodity dependence bonding well with the country’s economic growth outlook………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Tougher market share limits on food commodities traded in the European Union from January 2018 are needed, the bloc’s executive body said in a letter this week. Position limits come under the umbrella of a new EU law called Markets in Financial Instruments Directive (MiFID II), with rules being fleshed out by the European Securities and Markets Authority (ESMA).
MiFID II is the biggest overhaul of EU securities rules in a decade, designed to apply lessons from the 2007-09 financial crisis when food prices hit record highs, with some policymakers blaming speculators and hedge funds………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

There is no doubt that China’s ongoing growth slowdown has had far-reaching effects on the global economy. But its role in the sharp fall in commodity prices that has occurred since 2014 – an outcome that has been devastating for commodity-exporting countries, including once-dynamic emerging economies – is more limited than the conventional wisdom suggests. In fact, China’s slowdown is only a part of the commodity-price story.
To be sure, there is a clear correlation between Chinese GDP growth and commodity prices. In the early 2000s, when Chinese growth accelerated, commodity prices rose sharply; since China’s slowdown began in 2011, energy prices have fallen by 70%, metals prices by 50%, and agricultural commodity prices by 35%………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Saudi Arabia faces a stark choice: either let markets crush American frackers or watch American frackers crush markets. After testing the upper twenties for a couple times, oil prices have staged a huge rally lately, trading above the $40 mark. Energy companies have rallied along, helping major Wall Street averages race towards new highs.
But the oil rally may not last for too long. Saudi Arabia won’t let it last, in our opinion. Once, Saudi Arabia liked higher oil prices. The higher the better, as it will bring more revenues to the royal coffers. That was back in the old good days when Saudi Arabia was the world’s largest oil producer and OPEC’s boss………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Saudi Arabia is considering options to shift from fossil fuels both as the main source of income and main energy source. Riyadh is focusing on renewable energy sources such as solar power in preparation for a post-oil global economy, Oil Minister Ali al-Nami said at a conference in Berlin.
However, the minister estimated that the world will rely on fossil fuel for at least another 50 years. “There is no way in the next 50 years” that the world will abandon extracting the fuels, al-Naimi said, adding that “by the way, they are not that bad.”……………………………………….Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Kuwait expects the price of crude oil to rise to $50 per barrel and said the Gulf Arab state exports about 2.1 million barrels per day, state news agency KUNA said citing a senior official.
“Kuwait exports around 2.1 million barrels of crude oil per day, and it’s expected that the price will reach $50 per barrel during 2016,” KUNA said, citing Nabil Bouresli, managing director of international marketing at Kuwait Petroleum Corp (KPC)………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Oman’s Minister of Oil and Gas Dr Mohammed bin Hamad Al Rumhy on Sunday said he is confident of crude oil prices recovering after a meeting of Opec and non-Opec members scheduled to take place in Qatari capital Doha to decide on freezing output.
According to Dr Al Rumhy, oil prices might recover by 25 per cent by the end of the year, from the current level of around $37 per barrel for Oman Crude. He said the oil producers will first have to agree or will have to reach an understanding on freezing production before the proposed meeting on April 17………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Next month’s gathering of oil ministers from OPEC and non-member countries is fixating traders. But the real re-balancing in the market is already underway — and much of it is taking the form of involuntary production cuts from OPEC members.
Speculation that the meeting in Doha will lead to a production freeze has been a boon for oil, helping to drive a 40% rise in Brent since the idea was first mooted just over a month ago, to more than $42 a barrel………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Silver has been outperforming gold lately, causing a decline in the gold-silver ratio, say HSBC and Commerzbank. This ratio measures how many ounces of silver it takes to buy an ounce of gold. Early Friday, Comex May silver hit a high of $16.17 an ounce that was its most muscular level since October.
Silver has been helped lately by dollar weakness and improvement in industrial base metals, Commerzbank says. “Because silver has noticeably outperformed gold of late, the gold-silver ratio has decreased from almost 84 at the end of last month to a good 78, its lowest level since early February,” Commerzbank says in an early-Friday research note. As of a late-Thursday HSBC report, the ratio was at 79. “We think it may narrow further, implying that silver will gain on gold,” HSBC says………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

We’ll defer to The Clash to sum up the dilemma facing investors in local gold stocks after the sector’s recent virile surge: should I stay or should I go now? Stay? There will be trouble if global economic growth improves and monetary authorities start to ratchet up interest rates, which is guaranteed to kill the mood for gold.
Even some of the most ardent gold bulls concede the sector’s valuation looks toppish. Go? Investors miss out on the spoils of a sector that is enjoying unprecedented profit margins, courtesy of the depreciated Aussie dollar and tumbling costs………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

The adage that a diamond can be a best friend has lost some sparkle in recent years. Dampened by dollar appreciation, an increase in stocks of rough stones and weakened consumer demand, the global diamond market has hit headlines of late, thanks to tumbling prices.
In fact, the average, inflation-adjusted price of top-quality stones has weakened by as much as 80 percent in the past 30 years, according to the Rappaport Index, an industry benchmark, suggesting that the free fall in a material once considered a timeless store of value has been in effect for some time. The prospects for gold, also long considered a haven for investors, are not glittering either………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

So far this year, gold has been the frontrunner in the rally by precious metals. It has also performed in line with our beginning-of-the-year forecasts. The first upside target for gold for the year at $1,155/ounce and the second at $1,200 have been hit, though more quickly than expected.
Gold has (year-to-date) delivered 19 per cent returns while silver is up 16 per cent. Oil prices, which were at $37/barrel when we wrote the 2016 outlook for gold, slipped to $26/barrel by February and are now at $40/barrel, up 8 per cent. The US dollar index has dropped 4 per cent to 94.8. So where is the metal headed?……………………………………….Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

According to a study of private capital in the resources sector from industry tracker Preqin, finds half of investors in the mining and metals sector will deploy more capital this year despite two-thirds of institutional investors displaying less appetite for the sector compared to a year ago.
The pullback comes after fundraising for natural resources investment reached record levels in 2015, with 74 funds raising a total of $67.8bn. In total natural resources investment firms have $400 billion assets under management. Of this $243 billion represent unrealized value with the remaining $157.3 billion so-called dry-powder capital ready to invest. The vast majority is destined for North America………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Commodity exchange-traded funds listed in Europe had record inflows in February as European ETFs have gathered net inflows for 17 consecutive months. The consultancy ETFGI said in its February 2016 global ETF and ETP industry insights report that commodities ETFs/ETPs listed in Europe had net inflows of $2.66bn (€2.4bn) last month, beating the previous record of $2.12bn in September 2012.
In total ETFs/ETPs listed in Europe gathered net inflows of $2.92bn in February, marking net inflows for 17 consecutive months. Deborah Fuhr, managing partner at ETFGI, said in a statement: “February was another volatile month for equity markets which drove investors to invest net flows into government bonds and gold.”……………………………………….Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Competitive monetary easing, or the so-called currency wars, remains the most-watched market theme at the moment, and that will not change this week. Revived by talk of an unofficial agreement among central banks and finance ministers at last month’s G20 meetings in Shanghai, the idea of a global move to stop the US dollar from strengthening too much is gaining some currency among commentators.
A strong greenback might not only derail the US recovery, but could also prove disastrous to emerging markets already grappling with weak commodity prices and all manner of structural and political challenges………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Egypt’s central bank is weighing tougher regulations on foreign-exchange dealers, part of a broader effort to crack down on the black market and to end a hard currency shortage that’s impeding economic growth.
The bank wants to reduce the number of foreign-exchange bureaus from more than 140 and introduce measures to improve transparency, said a person familiar with the matter, who asked not to be named because they’re not authorized to speak to the media. Central bank Governor Tarek Amer declined to comment when contacted by Bloomberg………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Amid renewed concerns of falling carbon prices, a French “non-paper” has reportedly been circulated calling for changes to the “Market Stability Reserve” established under the EU’s Emissions Trading System (ETS). The non-paper, obtained by the Carbon Pulse media outlet, is an informal proposal that is said to be under discussion among other member states and other key players.
The EU ETS allows members of the 28-nation bloc, along with Norway, Iceland, and Liechtenstein, to trade carbon emissions, then auction off extra, unused emissions through an “allowance” system. The scheme has been in place since 2005………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

Recently Canada and the United States forged a new agreement on controlling methane, building on existing efforts by the two nations’ states and provinces. Last month, for example, Ontario introduced climate change legislation and draft rules for a cap-and-trade program. These are smart steps that provide the foundation for an effective approach to address climate change and foster continued, clean economic growth throughout the province.
In California, we’ve been effectively operating the world’s most comprehensive cap-and-trade program for a number of years. And despite initial fears from some, the sky has not fallen. Rather, our story has been one of success………………………………………..Full Article: Source

Posted on 21 March 2016 by VRS |  Email |Print

A British decision to leave the European Union represents a major threat to the success of the Paris Agreement in Europe, according to the Chair of the Committee on Climate Change (CCC) Lord Deben. Speaking at an event in London late last week hosted by the think tank IPPR, Lord Deben warned ‘Brexit’ would be a major setback to climate action, hampering both Britain and the European Union’s ability to decarbonise.
“I’m quite clear that if Britain left the European Union it would put this back, as far as us and the rest of the European Union, very, very considerably,” he said of efforts to slash emissions across the bloc. “Brexit is a real threat to Paris, and we have to accept that because we cannot allow ourselves to go backwards in the mechanisms which we have created for working together.”……………………………………….Full Article: Source

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