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Commodities Briefing 01.Jul 2016

Posted on 01 July 2016 by VRS |  Email |Print

Commodity prices surged this quarter by the most in over five years, driven by rallies in oil, sugar and gold, as supplies become tighter in many sectors and investors warm to an asset class shunned for years.
The strong gains have occurred despite the uncertainty surrounding last week’s vote by the UK to exit the European Union. “We do not anticipate that Brexit itself will derail the structural supply/demand-led rebound in commodity prices heading into 2017,” analyst Aakash Doshi at Citi said in a note this week………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

The 2016 financial year was a year of two halves, with a severe downward shift in prices followed by a period of relative stability, but experts are warning the path to recovery is unlikely to be smooth.
The collapse of iron ore and oil prices persisted in the first half of the financial year, with a raft of other commodities following suit in what some industry executives dubbed the worst industry downturn in many years………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Halfway through the year, commodities are enjoying a broad advance and are on track to break a five-year streak of annual losses. Analysts said the climb is likely to continue through the end of the year, but some don’t expect the second-half rally to be quite as impressive as the gains seen over the last six months.
Upside moves this year have been led by sugar SBV6, -3.14% and lean hogs with futures prices for crude and gold also rebounding sharply after big declines over the past two years or more. Cattle and coal meanwhile, are among the biggest decliners………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

After the UK became the first European Union member nation to exit the bloc following a referendum on 23 June, oil futures inevitably got caught up in the market melee that ensued. Trailing a wider equities market sell-off, and a weakening of G10 currencies – excepting the yen – oil futures endured short calls for two successive sessions following the vote.
Yet, at end of the kerfuffle and week on from the Brexit vote – both Brent and WTI front month contracts continue to lurk just below the $50 per barrel mark, unable to mount either a sustained climb above it, or slide into a decline substantially below it………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Trading in commodity markets might have resumed relative normality following Brexit turbulence, but one investment bank has detailed the downside risk that the oil price could still face.
“We believe the increase in macro-economic uncertainty (following the Brexit vote) raises downside risks to global GDP (gross domestic product) growth expectations,” a global commodities research team at JPMorgan, led by Scott Speaker, said in a note Wednesday………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Total returns for a basket of 22 raw materials are over 20% since the start of January. Oil prices have risen around 34 per cent in the last six months, on target for the best start to the year since 2009 and helping commodities outperform other major asset classes during the first half of the year.
Data show total returns from the Bloomberg Commodity Index, which tracks returns from 22 raw material contracts, are over 20 per cent. This compares to global bonds, at about 9 per cent, and global equities that are down almost 3 per cent………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Most oil market pundits will tell you how hard it is to predict where the black stuff is heading. And while Goldman Sachs is the most influential commodities bank, like pretty much every forecaster, it has been known to get things wrong.
Now it’s said that crude could trade below its $50 forecast in the second half of 2016 due to higher-than-expected output from Organisation of Petroleum Exporting Countries (Opec) member Nigeria, Bloomberg reported………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

The surge in gold prices after Britain’s vote to quit the European Union will deal a further blow to demand in India, the second-largest consumer, and may cut imports to the lowest in seven years, said Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation.
Purchases from overseas are seen slumping to about 700 metric tons this year, Bamalwa said by phone from Kolkata on Wednesday. That’s a decline of 23 percent from 2015 and the smallest since the country imported 559 tons in 2009, data from the London-based World Gold Council show………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Gold prices settled lower on the day Thursday but logged its biggest two-quarter percentage increase since 2007, as investors piled into the metal amid global economic uncertainty and the U.K.’s vote to leave the European Union.
Gold futures rose some 24% over the last two quarters, the best two-quarter performance since the fourth quarter of 2007, and advanced nearly 7% in the second quarter. The strong gains come even as futures for August delivery, the most actively traded contract on Thursday, settled down nearly 0.5% on the day, to $1,320.60 a troy ounce on the New York Mercantile Exchange………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

The story of the year in financial markets has been gold’s underdog rally from multi-year lows. Can it last? Heiko Ihle at Rodman & Renshaw says that yes, indeed, the rally can continue. The analyst sees a “paradigm shift in sentiment for the gold market” and outlines three factors that we feel should “not only support gold at current levels,” but “potentially continue to push prices higher going forward.”
The SPDR Gold Shares (GLD) added 0.2% to $126.14 in recent trading. Here’s more: “The next bull market in precious metals and precious metal related equities has begun. Our updated price deck of $1,300 per ounce gold and $17.50 per ounce silver reflects what we believe to be the dawn of a new era.”……………………………………….Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Economic upheaval. Monetary shenanigans. Cashless society and computer hackers. The reasons to own physical precious metals are legion, in light of the truism that governments and their paper currencies rise and fall, but gold always has intrinsic and universal value.
Individuals have long chosen to own gold coins and other precious metals because it serves as a storehouse of wealth and a solid, tangible investment………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Gold Prices held tight at this week’s opening level on Thursday in London, trading at $1317 per ounce as the rebound in Western stock markets stalled and the leadership race for both the UK’s ruling and opposition political parties grew yet more fractious. The US Dollar and Japanese Yen eased further back however from last week’s ’safe haven’ surge following the UK’s shock Brexit vote.
Major government bond prices also eased, edging 10-year US Treasury yields up to 1.50% per annum from this week’s new 4-year lows. The British Pound meantime continued to edge higher on the FX market, but held 10% down from this time last week………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

After an unexpected rally in the first months of 2016, iron ore should fall back below $50 a tonne in the second half of the year as more of the bulk commodity hits an oversupplied market, a Reuters poll showed.
But prices should still be up on the year, analysts say, thanks to an early-year rally in Chinese steel futures that spread to iron ore and helped the raw material recover from a three-year slide. Iron ore emerged largely unscathed from the selloff that hit financial markets last week after Britain voted to exit the European Union………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Optimism continues to reign in the basic materials sector year to date, but investors are overestimating the sustainability of recent commodity price rallies. The basic materials sector remains severely overvalued, with a market-cap weighted price/fair value estimate of 1.26 as of May 31.
The reasons for rallies in steel, iron ore, and gold differ, but we don’t expect any of the price gains to hold. Limited impact from steel trade cases and significant oversupply will bring pain to steelmakers and iron ore miners, respectively, in the second half of 2016. The recent Brexit vote helped extend the 2016 gold rally as interest rate hikes are potentially delayed through the second half of the year……………………………………….Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

The SPDR Gold Shares, iShares Gold Trust and ETFS Physical Swiss Gold Shares and rival gold exchange traded products have been in focus as investors look for safe-haven plays in a post-Brexit world. That could be a sign of more upside to come for already gold and the related ETFs.
Some analysts still believe that is possible gold ascends to $1,500 per troy ounce. Gold bullion prices have surged almost 20% this year as the Fed previously signaled it would slow the pace of interest rate normalization this year – higher interest rates typically weigh on gold prices since the hard asset provide no yield and would become less attractive to higher-yielding conservative debt assets in a rising rate environment………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

Gold is a go-to commodity during troubled times, and exchange-traded funds (ETFs) have made it easier than ever to hedge a portfolio. For example, the SPDR Gold Trust experienced over $1.3 billion in net inflows in the days following Britain’s decision to leave the European Union as investors sought a safe-haven asset class.
Investors in these ETFs don’t need to worry about trading futures contracts on margin or storing physical gold bullion. Of course, there are many different types of gold ETFs for investors to consider. Physical gold ETFs hold actual gold bullion in giant vaults, which provides investors with direct exposure to the commodity’s price………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

In the wake of Brexit, investors expected the traditional safe-haven currencies, the yen and Swiss franc, to soar. But it was the Brazilian real that really took off. An unlikely safe-haven, the real has risen by 4% against the U.S. dollar since last Thursday, the day the British voted to leave the European Union.
The Japanese yen is up a less impressive 2% and the Swiss franc was actually about 2% lower than a week ago, in part due to the Swiss central bank intervening to prevent the currency from surging………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

The pound is at risk of fading from the top ranks of central-bank asset holdings following Britain’s decision to leave the European Union. The world’s foremost reserve currency a century ago, sterling has been overtaken by the dollar and the euro, mirroring the U.K.’s waning influence in the global economy.
Now its 5 percent share of foreign-exchange reserves is in danger of shrinking further because of Brexit, compounded by forces including China’s push to bolster the international role of the yuan………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

One thing is for sure, the Chinese yuan just had its worst drop on record ever since the last currency in 1994. The yuan lost 2.9 percent against the dollar since the end of March to 6.64 on June 30.
Another sure thing: Brexit didn’t help as the yuan devalued almost one percent in a single day on the Monday after the historic vote. This is where the certainties end and where speculation and confusion starts………………………………………..Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

What does the UK’s shock vote to leave the European Union mean for energy and climate change? Speaking simultaneously on Wednesday morning at separate events in London, Amber Rudd, secretary of state for energy and climate change and Andrea Leadsom, energy minister, both sought to offer reassurances that UK energy and climate commitments would continue.
Rudd said, in unscripted comments added to her planned speech: “We made a clear commitment to acting on climate change in our manifesto last year. That will continue.”……………………………………….Full Article: Source

Posted on 01 July 2016 by VRS |  Email |Print

The record warm start to the year will be the new normal within the next few generations, scientists say. The first six months of 2016 have been the warmest since records began, but these temperatures may soon seem on the cold side, climate scientist James Renwick says.
“We’re going to see more and more of these record warm months and years and in 50 years’ time this year’s record warm might be normal or even cool. What we think of as warm now is going to be average in a generation or so.”……………………………………….Full Article: Source

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