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Commodities Briefing 19.Apr 2016

Posted on 19 April 2016 by VRS |  Email |Print

Citigroup has called an end to the commodities rout which has sent shockwaves through the global economy, and pummelled the balance sheets of mining giants. “There is growing evidence that virtually all commodities have stared at a price bottom and are groping for a return to normal,” Citigroup analysts wrote in a note.
They said a lot of this will depend on the growth prospects of China, which is the world’s biggest consumer of raw materials. While the end of the year looks “constructive”, they flagged significant obstacles on its road to recovery………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The collapse of talks in Doha on April 17 among major oil producers aimed at freezing output levels and curbing the global supply glut has renewed broader concerns about the state of the global commodities market.
The meeting of the Organization of the Petroleum Exporting Countries as well as non-OPEC oil producing nations in the Qatari capital was called to freeze oil production at the levels of early 2016, an agreement that would have been the first global oil deal in about 15 years. But Iran’s withdrawal from the talks at the last minute triggered Saudi Arabia’s refusal to sign the draft agreement to halt production at January levels………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Commodities have had a pretty humbling run recently. In fact, Bank of America Merrill Lynch calculates that long-term returns are now running at the weakest pace since… 1933. Time for the tide to turn? Chief investment strategist Michael Hartnett at the bank writes:
The most bullish argument for commodities today is “humiliation”. Similar to stocks in 2009, the rolling return from commodities is currently at a multi-decade low, indeed the lowest since 1933. And commodity producers and Emerging Markets at least offer the potential for lower rates and higher earnings per share over the medium term. The secular upside for commodities is thus greater than downside. We like gold………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Commodities offer Canadian investors the chance to add diversity to their portfolios — which usually include a mix of cash, stocks and bonds — because they tend to generate returns on a different basis than the other asset classes.
But there are a lot of reasons why the prices of commodities fluctuate: seasonality, global or regional economic growth, supply and demand, the U.S. currency, the weather and geopolitical conflict, among others. This complex dynamic is tough for investors, especially novice ones, to decode and then properly time. So yes, there is money to be made in commodities, but can mom and dad stomach the ups, downs and unknowns?……………………………………….Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Oil prices are under pressure following the failure of OPEC and major non-OPEC producers to agree on a production freeze at Sunday’s meeting in Doha. We expect Brent crude prices to drop toward $30 a barrel during the current quarter but recover to $55 a barrel in 12 months as the oversupply of oil dissipates towards the end of this year.
Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman reiterated before the Doha talks that the Kingdom would not freeze its output without Iran’s participation………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Global oil prices slumped on Monday after rising tensions between the world’s largest crude producers derailed plans to tackle the market’s crippling oversupply by freezing oil production levels.
Brent crude tumbled from almost $45 a barrel late last week to under $41 on Monday after the third high-profile failure of the Organisation of Petroleum Exporting Countries (Opec) to agree on a deal to manage the global glut of oil………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The Doha oil meetings yielded no news of a production freeze. So why aren’t oil prices down more? Oil prices are down Monday after major crude producers failed to reach a deal to freeze production. But they’re not actually down by that much.
The U.S. crude oil benchmark fell more than 6% when the market opened, but it’s since walked back those losses and was recently down by just 2.4% at $39.41 a barrel. If it settles at that level, it wouldn’t even be one of the 10 biggest daily drops this year, in percentage terms………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The collapse of OPEC talks with Russia over the weekend makes absolutely no difference to the balance of supply and demand in the global oil markets. The putative freeze in crude output was political eyewash.
Hardly any country in the OPEC cartel is capable is producing more oil. Several are failed states, or sliding into political crises. Russia is milking a final burst of production before the depleting pre-Soviet wells of Western Siberia go into slow run-off. Sanctions have stymied its efforts to develop new fields or kick-start shale fracking in the Bazhenov basin………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

After months of preparation, talks between producers in Doha failed to deliver anything to end the global oil glut. Yet, Kuwait has managed that by itself in just a few days.
A labor strike that began Sunday has slashed the Persian Gulf nation’s output by 60 percent, shuttering 1.7 million barrels a day — slightly more than the surplus sloshing around world markets in the first half of the year. That oversupply caused prices drop to a 12-year low in January………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

After months of preparation, talks between producers in Doha failed to deliver anything to end the global oil glut. Yet, Kuwait has managed that by itself in just a few days.
A labor strike that began Sunday has slashed the Persian Gulf nation’s output by 60 percent, shuttering 1.7 million barrels a day — slightly more than the surplus sloshing around world markets in the first half of the year. That oversupply caused prices drop to a 12-year low in January………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Several of the world’s largest oil producers failed to reach an agreement to freeze output to help alleviate a glut of global crude supplies, but the Organization of the Petroleum Exporting Countries may soon need to start discussing an increase in output instead.
The logic is a bit hard to grasp, but not that difficult if you look at some of the reasons why producers couldn’t come up with a deal to cap production—and why oil prices didn’t end up taking that big of a hit on Monday………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Gold Prices rose Monday morning in London as oil prices stabilized from a sharp plunge following news that major producer nations had failed to reach an agreement on cutting output this weekend in Doha, Qatar, writes Steffen Grosshauser at BullionVault.
European stock markets recovered early losses but Asian equities closed sharply lower, plummeting from the highest weekly close in four months as Shanghai’s SSE Composite and Tokyo’s Nikkei 225 lost 1.4% and 3.4% respectively. Silver retreated to around $16.22 from Friday’s peak of $16.37 per ounce, its highest level since June 2015………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

“Analysis suggests a -0.5% real rate would imply a $1,380/oz gold price and a -1.0% real rate $1,546/oz” — that’s according to RBC’s April 10 Global Gold Outlook note, which takes a look at how lower real interest rates, coupled with a dovish Fed will impact the gold price.
Consumer prices in the United States rose 0.9% year-on-year in March of 2016, indicating that inflation is reemerging after a long period of dormancy. This should have sparked a more hawkish tone from Federal Reserve policymakers. However, the recent significant global volatility in January and February has left the path for rate hikes in 2016 much more uncertain and led to a sudden dovish turn by the FOMC……………………………………….Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

China will launch a new contract today to set a “benchmark” price for gold bullion in the world’s biggest producer and consumer of gold, as part of efforts to increase its influence in pricing of the precious metal.
The yuan-denominated gold fix will be launched on the Shanghai Gold Exchange this morning, with the benchmark price at 257.97 yuan (US$39.83) per gram, said a statement released by the exchange yesterday. Eighteen banks and bullion traders have been chosen as initial market makers for the fix, including 10 Chinese lenders, Standard Chartered Bank, Australia and New Zealand Banking Group and six domestic and international bullion traders including Switzerland-based MKS Gold Ltd, the exchange said………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The gold bear market is all over, this according to one well-known metals research firm. Speaking with Kitco News on Monday, Phil Newman, co-founder of the London-based firm Metals Focus also added that he sees improving prices throughout the year.
‘[L]ike many other people we see the bear market as over. Prices will continue to improve over 2016 and beyond this year,’ he said. Newman, a longtime gold forecaster, added that short-term, gold could weaken due to the uncertainty surrounding the rate hikes of the Federal Reserve………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

One known forecaster remains bearish on gold, even if he expects this quarter to be a little more exciting for the metal. Barnabas Gan, commodity economist for Oversea-Chinese Banking Corp. (OCBC), said he is sticking to his bearish calls for gold, looking for the metal to end the year at least $100 lower from current prices.
“We remain firm on our call for the FOMC to inject two more rate hikes this year, with the first one to come likely as early as June 2016,” he said in the OCBC’s latest commodities report released Friday………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Citi Research looks for gold to remain underpinned in the current quarter but cautions that strength could abate later in the year. “We believe current price momentum may begin to ease after this quarter, averaging $1,200/oz for the year as a whole,” the bank says.
Citi lists a 60% probability of its base-case scenario, which would be gold holding current levels and maintaining a bid “as lingering risk aversion supports ongoing gold inflows in the second quarter, perhaps countered by better risk appetite in other asset classes, particularly oil and equities in 2H16.”……………………………………….Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The global iron ore market faces increasingly severe oversupply, according to Citigroup, which said the commodity’s gains will probably be reversed in the second half. Gains in production, including from miners that restarted output after this year’s rally, coupled with likely losses in steel prices, will combine to hurt iron ore, the bank said in a quarterly commodities report received Monday.
While iron ore’s price declines may have been delayed, they’re still coming, analysts led by Ed Morse wrote. Iron ore surged 23 per cent in the first quarter as Chinese mills ramped up output to take advantage of a rebound in steel prices, and some supply was disrupted in Australia. ……………………………………….Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Copper prices have risen, reversing earlier losses as funds bought base metals on the back of a weaker US dollar and offset the selling triggered by tumbling oil and global equities.
London Metal Exchange benchmark copper ended up 0.4 per cent at $US4,827 a tonne from an earlier session low of $US4,758. “Copper wasn’t hammered like oil and stocks earlier today. That’s a positive sign,” a copper trader said………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The 16% gold price in 2016 has sent stock market valuations soaring higher and the improved margins have provided gold counters with more flexibility in terms of their finances. As a result, the need to complete deals in order to secure much needed funds has become less urgent.
Isser Elishis, chief investment officer of North America’s Waterton Global Resource Management told Bloomberg the best investment opportunities are currently in base metals and that he expects to do half-a-dozen transactions in this space this year………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

If a mutual fund had a younger cousin, it would be an exchange traded fund (ETF). An ETF is like a mutual fund in that it offers investors a pooled investment in stocks, bonds, and other assets. But that’s where the similarities end.
You can buy and sell ETFs any time during the trading day. But with mutual funds, you have wait until after the market closes. “There are advantages and disadvantages to that,” says Drew Voros, Editor-in-Chief at ETF.com………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

For better or worse - ETF and ETNs are supposed to replicate. Commodities are making a comeback. Never count on a name. Fine print regulation - Weak transparency. Lesson: The danger of leverage - Look under the hood.
The commodities markets are like a pyramid. At the very top of that structure is the physical commodity itself. As you move from the top lower, market vehicles purporting to replicate performance are derivatives of the physical commodity itself………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Exchanges hope to capture a larger share of derivatives trading, on demand from emerging markets. Trading in commodity and currency derivatives surged on the world’s exchanges last year as traders in emerging economies used futures to hedge themselves against rising market volatility.
Overall volumes for exchange-traded derivatives rose 12 per cent to 23.4bn contracts in 2015, the first increase in four years, according to annual data collated by the World Federation of Exchanges, a trade association for 200 market infrastructure operators………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

China’s commodities exchanges got a boost from last year’s rout in raw-material prices as investors piled into bets on everything from steel and soybean meal to iron ore.
Trading in commodities on the Dalian Commodity Exchange and the Shanghai Futures Exchange surged to more than 1 billion contracts last year, according to the World Federation of Exchanges. Trading in Dalian climbed 45 percent last year as the Shanghai transactions rose 25 percent in 2015, the group said in a report released Monday………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Failure by oil producers to reach production deal had triggered selloffs in currencies of commodity exporters. The currencies of several commodity-exporting nations rose Monday even though oil producers failed to reach an agreement on curbing output over the weekend.
The dollar was recently down 0.2% against the Canadian dollar at C$1.28 after being up as much as 1.3% earlier in the day. The Australian dollar rose 0.3% to $0.7745. On Sunday, oil producers that supply almost half the world’s crude met to negotiate a production freeze intended to strengthen prices………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Norway’s sovereign wealth fund has shielded the krone from the steeper falls suffered by the Russian ruble. When oil price gyrations hit currencies, it’s good to have a cushion to soften the blows. Norway has a big cushion, a 7.5 trillion kroner ($906 billion) sovereign fund.
After this Sunday’s summit in Doha failed to secure an agreement among oil-producers to curb crude supply, the oil price fell and the currencies of the big crude exporters fell with it. When crude later rebounded, these currencies followed suit………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

The EU should impose a minimum EU ETS price to create more certainty for investors and counter a recent trend that has allowed it to become a “betting shop for policy decisions”, German researchers recommended.
Researchers from think-tanks Mercator Research Institute, the Potsdam Institute, and the Berlin Technical University, examined 29 political events over 2008-2014, and published their findings in the Journal of Environmental Economics and Management………………………………………..Full Article: Source

Posted on 19 April 2016 by VRS |  Email |Print

Forest And Bird have joined other environmental groups calling for the Government to overhaul the Emission Trading Scheme. A report released from the Morgan Foundation reveals New Zealand business have been buying fraudulent carbon credits form Russia, with the knowledge of the Government.
Forest and Bird’s Geoff Keey said the overhaul should start by getting rid of dodgy, possibly corrupt carbon credits. He said our government is undercutting our future by allowing the use of these credits to continue………………………………………..Full Article: Source

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