Commodity Blog

Archive for March, 2008

The refined copper market was in a 40,000-tonne deficit in 2007 compared with a surplus of 290,000 tonnes a year earlier, according to the March report by the International Copper Study Group (ICSG).
The deficit of some 300,000 tonnes in the first half of last year was mostly offset by a surplus of around 260,000 tonnes in the second half, ICSG figures showed.
Total world refined copper usage increased to 18.19 million tonnes last year, a rise of 6.5% when compared with 2006, while total refined production rose by 4.5% to 18.15 million tonnes from 2006, with China again the biggest contributor to growth. Other major contributors were Chile, India and the USA.
World usage growth was largely driven by China, where apparent consumption grew by 36% as net imports rose by 134% to about 1.4 million tonnes.
Consumption in three other major consuming regions — the USA, the EU-15 and Japan — fell by 3.3%. Usage in the rest of the world fell by 1%, said ICSG.
World mine production last year increased by 3% to 15.5 million tonnes from around 15 million a year before, while concentrate production was up by 2%
Significant technical disruptions to production resulted in limited production growth, largely owing to problems with labour unrest, said ICSG.
Mine production was up by 13% in Africa, 2% in Asia and 6% in Latin America, but down by 2% in Europe, 0.6% in North America, and 2% in Oceania.

Gold N.Y. Spot $ 0932.5
Silver N.Y. Spot $ 17.9
Lead LME Cash $ 1.3027
Copper LME Cash $ 3.8715
Zinc LME Cash $ 1.0546
Nickel LME Spot $ 14.12
Aluminum LME Spot $ 1.3340
Platinum N.Y. Spot $ 1985.00
Palladium N.Y Spot $ 437.00
Oil WTI Cushing $ 105.80
Natural Gas (Henry Hub)($/MMBtu) $ 9.80

CAD/USD $ 1.017
AUD/USD $ 1.0898
USD/AUD $ 0.9176
USD/CAD $ 0.9855
CAD/USD $ 1.0147
EUR/USD $ 1.5774

Gold N.Y. Spot $ 0946.80
Silver N.Y. Spot $ 18.05
Lead LME Cash $ 1.2358
Copper LME Cash $ 3.7444
Zinc LME Cash $ 1.0387
Nickel LME Spot $ 13.17
Aluminum LME Spot $ 1.2973
Platinum N.Y. Spot $ 1985.00
Palladium N.Y Spot $ 452.50
Oil WTI Cushing $ 103.40
Natural Gas (Henry Hub)($/MMBtu) $ 9.28
Mid-Columbia (US$/MWh) $ 71.97

CAD/USD $ 1.0160
AUD/USD $ 1.0875
USD/AUD $ 0.9195
USD/CAD $ 0.9826
CAD/USD $ 1.0177
EUR/USD $ 1.5726

It’s official.Commodity prices are no longer a safe one-way bet. Their resilience is waning as risk aversion takes the driver’s seat. Their saving grace? Investors are saying they’re still reluctant to be caught short.
Commodities prices have been in a tailspin as market participants began adopting the view that a fire sale of Bear Stearns (ticker: BSC) was only a precursor to scads more bad news in the financial sector. They were right.
Gold and copper areeach down 12% from the all-time highs seen on March 17 and March 6, respectively, while crude has fallen 11% from its March 17 high. London International Financial Futures Exchange sugar and cocoa are off 25% and 21%, respectively, from recent highs, while Chicago Board of Trade wheat has slipped nearly 20% since March 13. Still, prices mostly are above year-ago levels.
The exodus of investment money comes as hedge funds question whether the speculative premium in commodities, especially in metals, is such that long plays — bets that prices will rise — no longer justify the risk.
Says HSBC analyst James Steel: “The slump in commodity prices is evidence that investors are reassessing likely commodity-demand levels — and therefore also prices — after the recent run-up, with it no longer assured that commodity-price appreciation is a safe bet.”
Commodities have been attracting the largest share of investment lately. While it’s difficult to quantify the exact worth of this money flow, consensus estimates calculate that around $30 billion of fresh investment has entered commodities since the start of this year. Macquarie Bank says this potentially increases total investments in commodities by speculators in general to as much as $172 billion now, versus $142 billion at the end of 2007.
Despite the selloff, it would be wrong to suggest that commodity prices are in an irreversible downtrend; analysts say that it would take just one more banking disaster to trigger dollar weakness and a fresh round of buying in commodities, which now look comparatively cheap.
Gold, in particular, benefits at times of risk aversion, putting the precious metal into an altogether different bracket. And the scarcity of commodities, with products suffering from extremely low stocks, is set to attract investors when the dust settles.
This conundrum has left investors scratching their heads over what to do next. Few are willing to go short, lest they miss the boat if prices rally.
Observes UBS analyst John Reade: “The markets are still clearly in a binary mode, swinging from believing that either critical aspects of the international financial system will collapse and more banking failures are on the way, or this scenario will not materialize, and the process of gradual recovery has begun.”
The only thing that is certain is extreme volatility, analysts say. If a further decline occurs across several other asset classes, commodity positions run the risk of being liquidated to fund margin calls elsewhere. In the interim, brokers say the current wave of profit-taking is a healthy development.
From an intraday high of $1,017.50 set on March 17, Comex April gold futures tumbled 9.6%, to end the week at $920 an ounce. A rebounding dollar and heavy sales of gold futures by speculative funds were blamed for the drop, which marked an 8% dip from the previous week’s close. — Andrea Hotter is a commodities news editor for Dow Jones Newswires in London.

Gold N.Y. Spot $ 0921.80
Silver N.Y. Spot $ 17.09
Lead LME Cash $ 1.1998
Copper LME Cash $ 3.5326
Zinc LME Cash $ 1.0247
Nickel LME Spot $ 12.83
Aluminum LME Spot $ 1.2524
Platinum N.Y. Spot $ 1880.00
Palladium N.Y Spot $ 433.00
Oil WTI Cushing $ 101.90
Natural Gas (Henry Hub)($/MMBtu) $ 8.59
Mid-Columbia (US$/MWh) $ 66.67

CAD/USD $ 1.0184
AUD/USD $ 1.1039
USD/AUD $ 0.9059
USD/CAD $ 0.9738
CAD/USD $ 1.0269
EUR/USD $ 1.5368

Commodities plunged, capping the biggest weekly drop in five decades, on speculation that slower global growth will curb demand for energy, metals and grains.
The Reuters/Jefferies CRB Index of 19 commodities tumbled 8.3 percent this week, marking the steepest drop since at least 1956. After reaching records this week, gold plummeted as much as $129 an ounce and crude oil tumbled more than $13 a barrel.
“We started to see a speculative frenzy in commodities,” said Brian Hicks, who helps manage $1.5 billion at U.S. Global Investors Inc. in San Antonio. “Growth is going to be quite muted, and that does not bode well for commodities.”
Slowing global growth signals commodity demand will “soften,” the International Monetary Fund said this week.
The weighted UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials had gained 20 percent this year before the week began, reaching a record on Feb. 29. The gauge climbed in each of the past six years, more than tripling in value.
The rally may be coming to an end as the U.S., the world’s largest economy, slips into a recession, damping global expansion, said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois.
“Commodities were a bubble” that is now bursting, Kaplan said. “Prices will go lower than you can believe.”
The CRB index fell 6.56, or 1.7 percent, to 381.74 in New York. On March 17, the gauge plunged 4.6 percent, the most in five decades. It dropped 4.1 percent yesterday.
‘Recession Fears’
“Global-recession fears are causing selling pressure in all commodities,” said James Mound, head analyst for MoundReport.com, a commodities newsletter, in Palm Coast, Florida. “The markets are focusing on want-based items instead of need-based items.”
Investor demand for commodities led to a ”buying orgy,” Paul Touradji, founder of the $3.5 billion hedge fund Touradji Capital Management, told clients on March 10. Commodities “have all gone parabolically higher on frenzied money flow,” he said.
A slumping dollar and less-attractive returns on equities and bonds boosted the appeal of commodities as a hedge against inflation and an alternative investment, said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. Investors are now selling raw-material futures to raise cash, he said, citing demands for investors to put up more collateral.
Margin Calls
“There’s a lack of liquidity to cover margin calls,” Smith said. “There’s a panic in the market that’s taken hold very quickly. We could see commodity prices continue to tumble.”
Gold futures for April delivery fell $25.30, or 2.7 percent, to $920 an ounce on the Comex division of the New York Mercantile Exchange. The price reached a record $1,033.90 an ounce on March 17. The precious metal plunged $59 yesterday.
The dollar has rebounded this week from a record against the euro and a 12-year low against the yen.
Crude-oil futures for May delivery fell 70 cents, or 0.7 percent, to $101.84 a barrel on the Nymex. The price soared to a record $111.80 a barrel on March 17.
Oil probably will fall toward $90 a barrel this spring as the slowing U.S. economy encourages traders to exit commodity markets, Goldman Sachs Group Inc. analysts including Jeffrey Currie said in a report today.
“The oil-price slump, along with all the other commodities, resulted from the dollar staging a rally, so the large funds flowed out of the commodities complex,” said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. “Investors have found a trigger to focus more on fundamentals.”
Cocoa plunged more than 9 percent today, and wheat tumbled 8.1 percent. Soybeans and corn dropped almost 4 percent. Among the 26 commodities in the UBS Bloomberg index, only cattle and hogs gained this week.
There are 361 commodity funds that had $98 billion in assets as of Feb. 28, compared with 345 funds with $80 billion at the end of 2007, James Proudlock, commodity product head for Europe, Middle East and Asia at JPMorgan Securities Ltd., said at a sugar conference yesterday in Geneva.
The money flowing into commodities was “absolutely enormous,” Proudlock said.

Gold futures were down $24 an ounce on Thursday after the $59 tumble on Wednesday. Oil futures briefly fell beneath the $100 a-barrel level for the first time in three weeks.

Oil is under pressure as demand appears to be slowing. Some serious volatility in the markets.

Gold N.Y. Spot $ 957.80
Silver N.Y. Spot $ 18.80
Lead LME Cash $ 1.2789
Copper LME Cash $ 3.7240
Zinc LME Cash $ 1.0841
Nickel LME Spot $ 13.43
Aluminum LME Spot $ 1.2977
Platinum N.Y. Spot $ 1912.00
Palladium N.Y Spot $ 464.50
Oil WTI Cushing $ 106.20
Natural Gas (Henry Hub)($/MMBtu) $ 9.09

CAD/USD $ 1.0002
AUD/USD $ 1.0775
USD/AUD $ 0.9281
USD/CAD $ 1.0062
CAD/USD $ 0.9938
EUR/USD $ 1.5697

Wow what a day one of the single largest declines in price of gold, canadian dollar, oil in the last 40 years.

Gold N.Y. Spot $ 1011.70
Silver N.Y. Spot $ 20.55
Lead LME Cash $ 1.3245
Copper LME Cash $ 3.7916
Zinc LME Cash $ 1.1249
Nickel LME Spot $ 14.15
Aluminum LME Spot $ 1.3293
Platinum N.Y. Spot $ 2075.00
Palladium N.Y Spot $ 511.50
Oil WTI Cushing $ 107.00
Natural Gas (Henry Hub)($/MMBtu) $ 9.86
Mid-Columbia (US$/MWh) $ 75.58

CAD/USD $ 0.9941
AUD/USD $ 1.0852
USD/AUD $ 0.9215
USD/CAD $ 1.0132
CAD/USD $ 0.9870
EUR/USD $ 1.5765

GOLD — the world’s most popular treasure — is sparkling brighter than ever.
The price of the precious metal has climbed above $US1000 an ounce for the first time and many experts predict it will keep rising.
But that does not mean it’s time to sell all your jewellery for a handsome profit or start buying gold bars to store under your bed.
For starters, a typical 1kg gold ingot will cost you more than $37,000, and if burglars found one in your house they could use the dense metal as a weapon.
Gold hit $US1001 an ounce in offshore trading early yesterday, boosted by gloom in global financial markets, a weak US dollar and supply issues.
Seen as a haven in times of economic turmoil, gold has been marching upwards since 2001, when it was just $US258 an ounce.
Savings & Loans Credit Union chief economist Tony Fioretti said while jewellery was generally not heavy enough to reflect gold’s gains, other gold investments had benefited from uncertainty in global financial markets.
“Gold will probably head a little higher, but how high it goes is hard to say,” he said.
Stockbroker Wesley Legrand said the world’s biggest gold producers had signalled the price was heading higher because they were spending millions of dollars cancelling their forward sales contracts so they could sell their gold at its current and future price instead.
Global gold production has not been enough to meet rising demand, particularly from India — the world’s biggest gold consumer — and elsewhere in Asia.
People invest in gold in two main ways — owning gold bullion directly and owning shares in gold companies.
“Gold bullion itself is a store of wealth, while gold shares offer a potential return on your investment,” Mr Legrand said.
Bullion can be bought from and stored at the Perth mint — a safer option than keeping it at home. There are also securities traded on the stock exchange that represent gold bullion.
Owning shares in gold miners is the easiest way to get exposure, but your investment is affected by other factors such as company performance.
Shares in Australia’s biggest gold producer, Newcrest Mining, have climbed from $3 to $37 in the past six years.
Gold bullion can be bought directly from the Perth Mint or other bullion dealers. Gold bars and coins are popular choices.
The Perth Mint also has a certificate program which allows legal title to gold stored at the mint. The minimum investment for this is $5000.
Gold securities — which represent a fraction of an ounce of gold — are traded on the stock exchange under stock codes such as GOLD and ZAUWBA.