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Commodity hedge funds bear longest losing streak on record

19 Jul

Funds betting on commodity price moves have lost money every month since January, their joint longest losing streak on record, raising more doubts about their ability to make money at a time when the commodity “supercycle” may be over.

The average fund slid 3.58 percent in the first six months of the year, according to a widely watched Newedge commodity index. Funds have only suffered five consecutive losing months once before, in 2002-2003, the index shows.

Hedge funds market themselves as capable of making money in all markets, yet funds trading commodities as varied as gold, grains and gas, have failed to turn an annual profit in the last three years.

The weak performance will put more pressure on the industry to lower fees and introduce clawbacks, which enable investors to reclaim some performance perks paid to hedge fund managers in boom times if the returns they hope to achieve fail to continue.

Worries about cooling demand in key markets like China, and a huge shift in the supply-side from shortage to glut, has sent prices tumbling in recent years, and left many warning that the end of the commodity “supercycle” – the long period of rising commodity prices – is here.

“Historically most of these funds have been a levered beta play on the commodity cycle, or in some cases arbitrageurs of commodity spreads,” Michele Gesualdi, portfolio manager at hedge fund investor Kairos, said.

“The end of the supercycle has hurt the first area, while the volatility and discrepancies that have arisen in forward markets have made life difficult for the second.”

Adding to the sector’s woes, hedge funds which trade other asset classes such as equities have rebounded this year, including those that trade mining and energy shares.

The USD 1 billion fund of Clive Capital, a firm which trades oil and ran about USD 5 billion at its peak, is down 3.5 percent to June 28, performance data shows. Krom River’s Commodity Fund has lost 4.4 percent to end-June, while Brevan Howard’s Commodities Strategies Fund is off 2.5 percent to June 28.

Krom River’s chief executive Itay Simkin said that despite falling prices, commodities were still a very good investment due to production problems, urbanisation, decent economic growth rates and a lack of forward investment in mining.

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Other funds mentioned in this story either declined to comment or could not immediately be reached for comment.

Funds trading bullion are nursing some of the heaviest losses. Gold has tumbled this year on expectations the U.S. Federal Reserve will cut back on its money-printing programme, which had driven gold to record highs.

John Paulson, the billionaire U.S. investor, has seen his gold fund, his smallest with USD 300 million in assets, plunge 23 percent in June and is down 65 percent this year.

Despite the losses, most managers are not down as much as commodity prices this year – the 19-commodity Thomson Reuters-Jefferies CRB index fell 5.7 percent through end-June.

Some have also shone. After losing 30 percent in 2011 and 7.6 percent and a big chunk of his assets in 2012, Mike Coleman’s Merchant Commodity Fund is up 24.2 percent this year.

But the bigger concern for commodity funds is proving they can consistently make money amid a sustained downward trend in prices.

The problem, investors and managers say, is that the long, gradual trend of rising prices has been replaced with shorter, more uncertain trends, in which prices can plunge suddenly, making it difficult to profit from their slide.

Commodity prices, down 22 percent from a 2011 peak, have entered bear market territory, while volatility – which some funds thrive on – has also fallen, challenging managers further.

India fourth biggest in Crude Steel production for third year: Minister

13 Jun

Chairing the meeting of the Parliamentary Consultative Committee attached to his Ministry here on Wednesday, he said that the crude steel production in India has grown by 4.3% in 2012. He also said that capacity of steel production in the country has increased from 66 million tonnes in 2009 to about 90 million tonnes in 2012.

NEW DELHI: India’s Union Minister of Steel, Beni Prasad Verma has said that India continues to hold the 4th position in global crude steel production for the past 3 years.

Chairing the meeting of the Parliamentary Consultative Committee attached to his Ministry here on Wednesday, he said that the crude steel production in India has grown by 4.3% in 2012. He also said that capacity of steel production in the country has increased from 66 million tonnes in 2009 to about 90 million tonnes in 2012. The functioning of Steel Authority of India Limited (SAIL) was the agenda of the meeting.

Verma apprised the committee members that the per capita steel consumption has risen to 60 kg in 2011-12. The Minister stressed on the importance of conserving raw material resources in the country and elaborated on the measures taken by the Government.

SAIL, a Maharatna PSU under the Ministry of Steel, is today the 7th World Class Steel Maker as per World Steel Dynamics. SAIL’s production of saleable steel has been 12.4 million tonnes, which is 112% of rated capacity. SAIL has five integrated steel plants that are undergoing expansion and modernization, the expansion activities of Salem Steel Plant of SAIL have already been completed.

The members were briefed about the global and domestic steel scenario, functioning of SAIL and its performance on various parameters. Details of marketing initiatives and modernization and expansion plan were also discussed.

They were informed that the company achieved profit after tax of Rs. 2170 crore during the year 2012-13. Some of the members complimented SAIL on its working, while some expressed concern over the progress of expansion plan and profitability of the company.

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Natural gas drops as supplies rise in line with expectations

31 May

Natural gas prices dropped in U.S. trading on Thursday after official data revealed U.S. supplies grew in line with expectations.

In the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD4.021 per million British thermal units, down 3.91%.

The commodity hit a session low of USD4.013 and a high of USD4.184.

The U.S. Energy Information Administration said in its weekly report earlier that natural gas storage in the U.S. in the week ending May 24 rose by a healthy 88 billion cubic feet, broadly in line with market expectations.

Read more: Natural gas drops as supplies rise in line with expectations.

Commodity bets: Buy gold & silver, sell crude

7 May

Dharmesh Bhatia of Kotak Commodities suggests buying MCX gold around Rs 26,900 per 10gm with a stop loss at Rs 26,800 per 10gm and a target of Rs 27,350-27,500 per 10gm.

Sumeet Bagadia of Destimoney Commodities advocates buying MCX zinc on dips around Rs 101 per kilogram levels. Bagadia says, “Keep a stop loss for this trade at Rs 99 per kilogram for a target of Rs 103-104.50 per kilogram”.

Shreekanth Jha of PJ Commodity Ventures advises selling MCX crude around Rs 5,250 per barrel with a stop loss above Rs 5,300 per barrel for a target of Rs 5,150 per barrel.

Renisha Chainani of Edelweiss recommends buying MCX silver with a stop loss at Rs 45,200 per kilogram and a target price of Rs 46,000 per kilogram.

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Gold ticks lower as equities gain, ETFs plunge

7 May

Gold eased on Tuesday, losing its shine as an alternative investment after stock markets rallied on hopes for a steady US recovery, and as holdings on bullion exchange-traded funds slipped to their lowest in more than three years.

gold updates

Although physical buying has helped gold rebound from a 2-year low hit in April, daily outflows on ETFs reflect investors’ sagging interest in the metal, which has fallen more than 12 percent in 2013 after rising for each of the past 12 years.

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Gold eased USD 3.70 an ounce to USD 1,465.19 by 0451 GMT. It rose to a near three-week high of USD 1,487.80 on Friday on safe-haven buying spurred by a cut in interest rates by the European Central Bank and the Fed’s decision to stick to its stimulus programme.

“I think sentiment is quite mixed. Physical demand supports gold but you can see some liquidation in the market,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

“Gold in the medium-term is still a little bit bearish. You can see holdings on SPDR are still down about 3 to 4 tonnes every day.”

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.31 percent to 1062.30 tonnes on Monday — the lowest since August 2009. In terms of ounces, holdings fell to 34,153,901.

Gold plunged to around USD 1,321 on April 16, its lowest in more than two years, after a drop below USD 1,500 and fears of central bank sales led to a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds.

The price drop ignited a buying frenzy in Asia and other parts of the world, leading to a shortage of gold bars, coins and nuggets in Hong Kong, Singapore and Tokyo, and helping the metal stage a rebound.

But gold’s failure to revisit the psychological USD 1,500 level suggested that funds were still on the sidelines.

US gold for June delivery was at USD 1,464.90 an ounce, down USD 3.10.

“We expect the physical demand to support the market, but (that) could prove difficult to maintain in the face of rallying equity markets, ETF outflows and speculative financial shorts,” said ANZ in a report.

“Additionally, global inflation concerns that could support gold are benign. We expect to see a pick-up in prices through the second half of 2013, where gold should trade in the mid-high 1,500 an ounce area.”

ANZ, which cut commodity price forecasts on Tuesday, sees gold averaging at USD 1,573 in 2013 and USD 1,648 in 2014.

“However in the near term, the tide is moving out and gold is likely to drift lower before finding a base from which to recover,” it said.

Spot gold is expected to revisit its May 1 low of USD 1,439.74, according to Reuters technical analyst Wang Tao.

In other markets, Asian shares were capped on Tuesday by caution over weak global growth data, but Japanese equities scaled a near five-year peak after the Standard & Poor’s 500 Index closed at a record high overnight.

Source: Moneycontrol

MCX Goldm August contract gains

6 May

GOLDM prices on MCX gained. At 11:04 hours IST, MCX GOLDM June contract was trading at Rs 27089 up Rs 122, or 0.45 percent. The GOLDM rate touched an intraday high of Rs 27100 and an intraday low of Rs 26980. So far 5018 contracts have been traded. GOLDM prices have moved down Rs 3052, or 10.13 percent in the June series so far.

MCX GOLDM July contract was trading at Rs 27235 up Rs 148, or 0.55 percent. The GOLDM rate touched an intraday high of Rs 27244 and an intraday low of Rs 27130. So far 728 contracts have been traded. GOLDM prices have moved down Rs 2765, or 9.22 percent in the July series so far.

MCX GOLDM August contract was trading at Rs 27425 up Rs 191, or 0.70 percent. The GOLDM rate touched an intraday high of Rs 27425 and an intraday low of Rs 27350. So far 288 contracts have been traded. GOLDM prices have moved up Rs 75, or 0.27 percent in the August series so far.

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Source: moneycontrol

Gold heads for biggest weekly gain since late 2011

26 Apr

Gold rose to its highest in more than a week on Friday , heading for its biggest weekly gain since October 2011, after a surge in physical demand in Asia helped pluck the metal from a 2-year trough.

FUNDAMENTALS

* Spot gold added USD 4.06 an ounce to USD 1,471.05 by 0025 GMT after posting its biggest daily rise since June last year on Thursday. Gold plunged to around USD 1,321 on April 16, the lowest in more than two years, in a sell-off that surprised ardent gold investors and bulls.

* US gold futures for June delivery stood at USD 1,471.00 an ounce, up USD 9.00.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.25 percent to 1,090.27 tonnes on Thursday from 1,092.98 tonnes on Wednesday. The current holdings are at their multi-year lows.

* Turkey, one of the world’s biggest gold buyers, has imported more of the precious metal in April than in any month since last July following a surge in domestic demand after gold prices hit a two-year low last week.

* Premiums for gold bars soared to multi-year highs in Asia after a spate of physical buying ran down supplies, with dealers in top consumer India expecting a surge in imports this month/

* Russia and Turkey raised their gold reserves in March, the International Monetary Fund said on Wednesday, increasing their holdings ahead of a spectacular plunge in prices this month.

MARKET NEWS

* The dollar recovered from losses to trade higher against the euro on Thursday as resilience in the US labor market allayed some concerns about the nation’s economic recovery, with many analysts expecting more gains ahead for the greenback.

* Japan’s Nikkei average advanced in early trade on Friday after strong US company earnings and resilient labour market data boosted Wall Street, although the benchmark was holding just below the 14,000-mark, a level not seen since June 2008.

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Source: Moneycontrol