Tag Archives: Commodity Trading Tips

Oil Continues to Fall in Asia

25 Jul

Oil futures traded modestly lower during Thursday’s Asian session, extending losses incurred during U.S. traded Wednesday.

On the New York Mercantile Exchange, light, sweet crude futures for September delivery fell 0.29% to USD105.29 per barrel in Asian trading Thursday despite some encouraging U.S. real estate data.

In U.S. economic news out Wednesday, the National Association of Home Builders/Wells Fargo builder sentiment index climbed to 57 this month from 51 last month. The July reading reading is the highest since January 2006. Readings above 50 indicate builders view the market as good.

New home sales advanced 8.3%, the best rate in five years. The seasonally adjusted rate was 497,000 units. Economists expected 484,000. May’s sales rate was also revised up to 459,000.

Even solid weekly inventories could not help oil higher in Asian Thursday. On Wednesday, the U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 2.8 million barrels in the week ending July 19, exceeding expectations for a decline of 2.4 million barrels.

Total U.S. crude oil inventories stood at 364.2 million barrels as of last week.

Traders appear to still be concerned about economic data out of China last night that serves as further proof manufacturing activity in the world’s second-largest economy is slowing. China’s HSBC manufacturing PMI fell to an 11-month low of 47.7 in July, from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6.

The U.S. and China are the world’s two largest oil consumers.

Elsewhere, Brent futures for September delivery fell 0.14% to USD106.91 per barrel.

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Perpetual volatility: Will investors abandon Gold?

24 Jul

mcx gold tradingGold futures are weighing and responding in earnest to the Ben Bernanke Congressional testimony of the last week. While the futures look comfortable in dealing with the anticipation that the Fed would not taper as soon as the markets had thought, lending it some buying appetite, the prospect of a tapering lingers with an uneasy calm.

“There’s still a bit of a thirst for the metal,” Jonathan Barratt, chief executive officer of Barratt’s Bulletin said to Bloomberg.

“Given that Bernanke has already suggested that tapering will only occur when they’re very comfortable with the economic outlook, we’re going to see tapering on the agenda but it’s going to be some time before it actually starts,” he added.

Gold on the Comex for delivery on August 13 was seen trading at $1,338.85/oz, a gain of $4.15 or 0.31% as of 10.05 AM IST.

The multi-billion Dollar question used to be this: When will the US Federal Reserve start to taper? After a series of testimonies this year, the answer looks very much elusive. The Fed could not be blamed on this, because they are doing what that is mandated out of them.

The Fed do own the trigger of shooting the Quantitative Easing measures point-blank. Only thing is that they cannot pull it at their will. In fact, having started this whirlpool of money printing, a genie is out, which is refusing to go into the bottle.

The markets have in effect become QE fetish to such an extent that it would be difficult to pull the trigger on QE execution. Playing to the gallery is imperative in a politicized economy.

Now, the mult-billion Dollar question is if the QE measures would be tapered at all? High profile leadership at PIMCO, world’s biggest institution investing in bond markets, believe that the ultra-loose monetary policy may continue until it is 2016.

That is no walking distance from 2013!

The fact remains that gold futures would see extended periods of volatility as data releases occur every time. The Fed has clubbed the QE measures to a recovery in job markets, housing markets and a moderate and healthy inflation. Each data release in this category, fluctuating as each one is, would take the futures on a roller coaster ride.

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Any negative sign is taken for a point to rally up and any positive sign on economy could be interpreted as a point to rally down in gold. Now imagine that happening all the way to 2016! That is a perfect incentive for investors to abandon gold. Especially when there are other less volatile instruments to conduct trade and make money.

But, at some point in time, all these QE measures would have to be curtailed. That would be the time when markets would see the perfect storm.

Gold near one-month high as dollar slips

23 Jul

A weaker dollar supported bullion prices, but stricter Indian import rules and continued outflows from exchange-traded gold funds could cap gains

goldGold was trading near its highest in a month on Tuesday after gaining 3 percent the session before and breaking through key resistance at the USD 1,300 level.

A weaker dollar supported bullion prices, but stricter Indian import rules and continued outflows from exchange-traded gold funds could cap gains.

 FUNDAMENTALS

* Spot gold was down 0.08 percent at USD 1,334.01 an ounce by 0020 GMT, while US gold fell USD 2.50 to USD 1,333.50.

* Gold hit a one-month high of USD 1,338.91 on Monday, as speculators fearing a reversal of the recent downward price trend rushed to buy back bearish bets.

* Bullion prices have garnered support from Federal Reserve chief Ben Bernanke’s assurance last week that the US central bank would be careful in scaling back its USD 85 billion monthly bond purchases.

* September is still the most likely time for the Fed to announce that it will trim its monthly bond purchases, according to a Reuters poll taken after Bernanke’s congressional testimony last week.

* Analysts have slashed their 2013 gold and silver price forecasts after sharp falls earlier this year and expect them to remain weak in 2014 as the United States reins in monetary stimulus, a Reuters poll showed on Monday.

* India’s central bank moved to tighten gold imports again on Monday, making them dependent on export volumes with an eye to reducing a record current account deficit, but offered relief to domestic sellers by lifting restrictions on credit deals.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.13 percent to 931.26 tonnes on Monday.

* A group of indigenous Chileans asked the Supreme Court to revoke the environmental license of Barrick Gold Corp’.

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Gold rises to 1-month high on weaker US dollar

22 Jul

Gold hit a high of USD 1,314.49 an ounce, its highest since June 20, and stood at USD 1,312.24 by 0024 GMT, up USD 16.50

mcx goldGold jumped more than 1 percent to its highest level in a month on Monday as the US dollar slipped against other currencies, with gains in Japanese bullion futures adding extra support.

Gold hit a high of USD 1,314.49 an ounce, its highest since June 20, and stood at USD 1,312.24 by 0024 GMT, up USD 16.50. Gold last week posted its second weekly gain after the Federal Reserve’s assurance the timing of any tapering in economic stimulus is not set in stone.

US gold rose 1.49 percent to USD 1,312.10 an ounce. The most active June 2014 gold contract on Tokyo Commodity Exchange rose as high as 4,243 yen a gramme, its highest since June 20, because of a weaker yen.

Hedge funds and money managers raised their bullish bets in gold and silver futures and options in the week to July 16, while they trimmed net shorts in copper, a report by the Commodity Futures Trading Commission showed on Friday.

China’s central bank removed controls on bank lending rates, effective Saturday, in a long-awaited move that signals the new leadership’s determination to carry out market-oriented reforms.

SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.29 percent to 932.46 tonnes on Friday from 935.17 tonnes on Thursday.

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Cheap Gold and Silver prices – the deal of a lifetime?

20 Jul

Eerily, perhaps the worst precious metals market sentiment currently exists that has been observed since the early 1970’s.

mcx gold silverThe gold and silver markets have fallen dramatically in the wake of the FOMC signaling an end to its controversial Quantitative Easing or QE programs. The pricing in of such FedspeakQE taper-talk has also triggered a yield spike in southern Europe that could deepen that region’s existing debt crisis.

Furthermore, sharply rising interest rates have resulted as billions of investors exit perhaps the largest financial bubble ever seen. The end of cheap real estate refinance has finally arrived as mortgage rates are now approaching five percent.

Rising government bond rates mean more money that will increase the chances of stealth inflation. The Fed acting to crush the effects of inflation may even lead to more money printing.

Other background factors

In addition, rising oil prices have been cutting in to already lofty equity valuations, as fallout from the “Black Swan” in the Gulf of Mexico expands. Gasoline prices are already rising.

The public has also been caught largely off guard by embroiling social unrest in various parts of the world. This dissatisfaction is indirectly the result of exporting inflation that is collateral damage from currency depreciation wars.

A dead precious metals mining sector has been cutting off any “perceptual” idea of supply as paper metal prices are now well below the cost of production. New supply matters little for gold. For silver, by the time the sector catches up with demand, there will be no silver left.

Precious metal prices suffer despite bullish fundamentals

Offset by an unprecedented and record breaking surge in physical demand for silver, from silver coins to international demand. Yet, eerily, perhaps the worst precious metals market sentiment currently exists that has been observed since the early 1970’s.

Bullion banks are currently long buyers by every indication, yet they are still maintaining a concentrated short position in the futures market. This could be an intentional effort to suppress physical metal prices by selling paper so that they can accumulate real metal more cheaply.

In short, it is unfathomable how low the precious metals markets are by any measure. Technically, the market could still go lower, but does this change the likelihood that investors have now been presented with what seems to be the precious metal buying opportunity of perhaps multiple lifetimes?

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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.

Oil Down Slightly in Asia

18 Jul

Oil futures traded modestly lower in the early part of Thursday’s Asian session as traders in the region digested a swath of key central bank and data points out of the U.S. Wednesday.

On the New York Mercantile Exchange, light, sweet crude futures for September delivery fell 0.14% to USD106.21 per barrel in Asian trading Thursday.

Crude traded slightly higher Wednesday in the U.S. after the U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 6.9 million barrels in the week ended July 12, blowing past expectations for a decline of 2 million barrels.

mcx crude oil

Total U.S. crude oil inventories stood at 367.0 million barrels as of last week. The report also showed that total motor gasoline inventories increased by 3.1 million barrels, confounding expectations for an decline of 0.5 million barrels.

Oil also got a small lift after the Fed’s Beige Book business survey, which encompasses the central bank’s 12 regional banks, showed manufacturing expanded in most regions since the last report. The report showed modest growth across 11 districts with Dallas showing strong growth.

In other economic news out Wednesday, the Commerce Department said U.S. housing starts fell 9.9% to a seasonally adjusted annual rate of 836,000 unit in June, the lowest reading since August 2012. Analysts expected starts to rise to 959,000 units. Bad weather was cited as one of the reasons for the slack reading.

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Meanwhile, Angola, a member of the Organization of Petroleum Exporting Countries, forecast its daily output for September will be 1.67 million barrels, well below the 2 million barrels per day target. The country expects to pump 1.7 million barrels a day next month. Angola is Africa’s second-largest oil producer behind fellow OPEC member Nigeria.

This year, Angola has averaged about 1.72 million barrels per day in production, below the daily average of 1.9 million barrels for Nigeria. Angola is banking on new offshore discoveries to boost output in the future.

Elsewhere, Brent futures for September delivery inched down 0.04% to USD108.63 per barrel on the ICE Futures Exchange.