Saturday, June 21, 2014

Ncdex launches crude contract with fixed rupee rate

Ncdex launches crude contract with fixed rupee rate

The National Commodity and Derivative Exchange has launched International Brent Crude Oil and Light Sweet Crude Oil futures contracts which will be free of currency fluctuation.
The exchange rate of the currency will be locked in at the launch date of the contract and it will be applicable for the entire tenure of the contract. The final settlement price, anchored to crude contracts of the Intercontinental Exchange (of US), will be based on the currency exchange rate fixed at the contract launch.
The intention matching contract attempts to integrate international price discovery markets with the Indian futures market and eliminate currency distortion to provide a simple and perfect hedge option to domestic companies and value chain participants.
Since contract prices will move in tandem with international prices, the final settlement price will be simple and transparent, said Ncdex in a press statement on Friday.
Samir Shah, Managing Director, Ncdex, said the contract is ideal for small consumers and hedgers who cannot hedge in the Indian commodity market on account of the huge movement in NDF (non-deliverable forward) markets in the evening, which does not reflect the true picture of underlying.
“This unique contract would help oil companies hedge their price risk without distortions created by currency fluctuations. We are, therefore, expecting healthy participation from physical market players,” he said.

Friday, June 20, 2014

Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds

But, but, but... Janet Yellen didn't say precious metal valuations were within historical norms? Gold and Silver are surging today (and have done since the FOMC press conference all-clear) with the latter having its best day in months and back at 3-month highs... Intriguingly, just as we warnedgold and silver have been on a significant tear since the Qingdao CCFD probe began (as synthetic hedges are unwound - which dominate pricing in PMs) while copper and iron ore and so on have all fallen (as the reality of no real demand leaks into these commodities).

Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds

Is the CCFD unwind having its impact?
Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds

As we commented previously:
When we previously contemplated what the end of funding deals (which the PBOC and the China Politburo seems rather set on) may mean for the price of other commodities, we agreed with Goldman that it would be certainly negative. And yet in the case of gold, it just may be that even if China were to dump its physical to some willing 3rd party buyer, its inevitable cover of futures "hedges", i.e. buying gold in the paper market, may not only offset the physical selling, but send the price of gold back to levels seen at the end of 2012 when gold CCFDs really took off in earnest.

In other words, from a purely mechanistical standpoint, the unwind of China's shadow banking system, while negative for all non-precious metals-based commodities, may be just the gift that all those patient gold (and silver) investors have been waiting for.  This of course, excludes the impact of what the bursting of the Chinese credit bubble would do to faith in the globalized, debt-driven status quo. Add that into the picture, and into the future demand for gold, and suddenly things get really exciting.
Here's our previous epxlanation of gold's move... if we are right that somehow China managed to push gold lower via gold CFDsthen the unwind pushes gold higher:
Gold Hits $1300, Silver Surges To 3-Month Highs As China Rehypothecation Ponzi Unwinds

Here's how that might work:
In the gold markets, the paper or synthetic 'demand/supply' dominates pricing as opposed to the non-precious metals which have at least a grain of fundamental sense to them still

Throughout 2012/2013 - as the gold CFDs were booming, Chinese demand for physical gold was soaring as the price plunged (due to the forward hedging required in the CFD transactions which pressured gold swaps/futures lower and thus dominated pricing)

As CFD unwinds hit en masse, these flows must unwind (cover hedges and ensure the underlying physical is there... and if not buy it)

This will pressure gold futures prices higher and because unlike in non-precious commodities where spot markets wag the tail of the futures markets - spot gold will likely be dragged higher also (as we know the demand for the physical has been high).
So unlike in the industrial commodities - where the CCFD unwind drives prices down as the image above shows, thanks to synthetic manipulation and domination of the paper gold (and silver) market, the opposite occurs in PMs.

Who Just Bought Half A Billion Dollars Of Gold Futures?

Who Just Bought Half A Billion Dollars Of Gold Futures?
Presented with little comment aside to note the surge in gold since Yellen gave markets the all-clear yesterday. It seems someone decided the open this morning was an opportune time to take on half a billion dollars of gold exposure...

Gold price on insane surge after massive trade

Gold price on insane surge after massive trade
The gold price scaled $1,300 an ounce for the first time in more than a month, after comments by US Federal Reserve chair Janet Yellen yesterday and a huge buyer lit a fire under traders.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery – the most active contract – jumped to a day high of $1,322.00 an ounce, up $49.30 or nearly 4% from yesterday's close.
After months of subdued trade on gold futures markets volumes surged on Thursday leaping past 210,000 contracts – double recent daily averages – by mid-afternoon.
As the chart shows, after a steady climb throughout the morning, during lunchtime volumes suddenly spiked with more than 2.9 million ounces (82 tonnes) changing hands in three big chunks in the space of 15 minutes.
Gold built on its gains from there to settle at $1,320.40, the the best one day performance for the metal since September last year.
The chart looks almost like the inverse of the trading pattern on April 15 this year when exactly year to the day of 2013's $200 shocker another strange gold price plunge occurred.
Gold's positive move started yesterday after Yellen, speaking at the latest meeting of the Fed's interest rate committee, said she was comfortable interest rates could stay low for a considerable period, which sent the dollar tumbling against the euro and pound sterling.
Gold and the US dollar usually moves in the opposite directions and gold's perceived status as a hedge against inflation is also burnished when central banks flood markets with money.
Monetary expansion, particularly since the financial crisis, has been a massive boon for the gold price. Gold was trading around $830 an ounce when previous chairman Ben Bernanke announced the first program of quantitative easing in November 2008.
After months of subdued trade on gold futures markets volumes surged on Thursday
The QE program together with other stimulus measures saw the balance sheet of the Fed cross the $4 trillion mark in January, up 400% in seven years.
The US has not been alone in printing money and together with the Bank of Japan, the European Central Bank and the Bank of England, more than $15 trillion of easy money is now sloshing around in the system.
Earlier this month the ECB took the unprecedented step of moving rates into negative territory.

Copper demand to overtake surplus by 2019: Zimtu

Copper demand to overtake surplus by 2019: Zimtu
Demand for refined copper will overtake the current surplus by 2019, says Zimtu analyst Derek Hamill.
"Copper supplies are likely to exceed demand in 2014 and 2015; we further expect this situation to persist for 2016 and 2017," Hamill writes in a report titled Multi-Year Global Copper Market Outlook.
Copper demand is intensifying due largely to continued urbanization and industrialization in Asia, particularly China and India.
Hamill also notes that copper mining economics are "changing dramatically" because of rising operating costs, higher regulatory hurdles and declining grades, and that should increase prices.
"Over the 10 year forecast period, copper price are likely to rise as capital costs and regulatory risks for large scale mining development projects have become significant hurdles deterring investment into future production."
Read the full report below or download the PDF.

Thursday, June 19, 2014

Aluminum Rising Production Cuts Creating Demand

Aluminum Rising Production Cuts Creating Demand
A strong demand outlook for aluminum will offset oversupply and lend support to prices in 2015, according to Caroline Bain, senior commodities economist at Capital Economics.
BNAmericas reported that the aluminum market has been in surplus from 2007 to the present due to large increases in capacity in China and the Middle East. Chinese production grew 6% last year and output is expected to grow by 10% to slightly more than 26Mt compared with demand of 25.8Mt in 2014, according to CRU Group. Major manufacturers UC Rusal and Alcoa have been cutting back their own production to deal with the Chinese oversupply
Rising 1.7 percent to close at INR 111.35 ($1.85) per kilogram, the cash price of primary Indian aluminum experienced the biggest change for Tuesday, June 17. The cash price of primary aluminum weakened by 1.1 percent on the LME, settling at $1,802 per metric ton. On the LME, the aluminum 3-month price declined 1.0 percent to $1,843 per metric ton.
Chinese aluminum prices were mixed for the day. The cash price of Chinese aluminum moved yesterday. After a few changeless days, prices dropped 0.8 percent to CNY 13,260 ($2,129) per metric ton. The price of Chinese aluminum scrap held steady at CNY 12,250 ($1,967) per metric ton. The price of Chinese aluminum billet continues hovering around CNY 13,590 ($2,182) per metric ton for the fifth day in a row. The price of Chinese aluminum bar saw little movement at CNY 14,200 ($2,280) per metric ton.

Lead Price: Bearish Signals Mean No Need to Make Commitments

Lead remains near its lowest levels of the last year. This doesn’t come as a surprise after the bearish signals that lead gave in March and the industrial metals sector, in general, remaining weak.


Lead Price: Bearish Signals Mean No Need to Make Commitments

“Lead prices might keep gaining support during the coming months. However, the uptrend is far from strong, and we still don’t see lead trading above $2,500 per metric ton on the LME. It might make sense to wait until prices show real strength before making long-term commitments.”
Indeed, the technical picture looks more bearish than it looked at the beginning of the year. We recommend lead buyers not to take long-term positions unless prices break above $2,250/ton. Attempting to purchase on the dips when there is no foreseen risk is not a good buying strategy.
By reading the market and understanding when a metal is likely to have upside momentum, buyers can set price targets, manage their risk exposure and reduce costs without depending on subjective opinions that try to guess which direction prices will take.
 What This Means For Metal Buyers
Lead seems incapable of reaching new highs. Buyers might not need to take long-term positions through the rest of the year. We would recommend that buyers not worry about price fluctuations unless prices break above $2,250/t.