Commodities News

Though records suggest that gold prices have been growing for some time now,but after the Standard & Poor’s recently stripped off the US ofits pristine credit rating, gold is looking even better as aninvestment. Most US investors nowadays fear risk while investing inany other commodity with proven track records. With the murky pictureof the US economy, especially the housing market and the employmentsectors, the soaring gold prices is forcing those who have not yetbought a position in gold to do so before the prices spiral out ofcontrol. Most people who want to avert the risk of falling in debt inthe near future think of investing in gold as this is a safe haventhrough which they earn income in any economic condition. Someanalysts are of the opinion that price of gold will double from itspresent price of around $1,719 as the demand for gold will severelyrise in the coming few years. Since the credit downgrade few weeks ago, the price of gold...

Now that Gold has broken out to its all-time nominal high, we have a Showdown with Great Opportunities enabled by, but at the same time threatened by, Great Challenges. Consider: “On June 30, QE2 ended with a whimper. The Fed’s second round of “quantitative easing” involved $600 billion created with a computer keystroke for the purchase of long-term government bonds. But the government never actually got the money, which went straight into the reserve accounts of banks, where it still sits today. Worse, it went into the reserve accounts of FOREIGN banks, on which the Federal Reserve is now paying 0.25% interest. Before QE2 there was QE1, in which the Fed bought $1.25 trillion in mortgage-backed securities from the banks. This money too remains in bank reserve accounts collecting interest and dust. The Fed reports that the accumulated excess reserves of depository institutions now total nearly $1.6 trillion. Interestingly, $1.6 trillion is also the size of the federal deficit… If the intent of “quantitative...

One of the oft-cited reasons for investing in commodities is that they have historical returns comparable to stocks while having a low correlation to the stock market. The problem is that this statement is patently false. Yes, commodities used to have low correlations to stocks. But that was before the era of “financialization” and securitization. In their 2011 paper “Index Investment and Financialization of Commodities,” Princeton University Professor Wei Xiong and Renmin University of China Professor Ke Tang prove empirically what many of us in the profession have long suspected: Commodities and commodity stocks are becoming more highly correlated to each other and to other asset classes. Furthermore, while the prices of individual commodities have always been volatile, commodity prices as a whole have also become far more volatile in recent years. The question begs to be asked: Why? Tang and Xiong place the blame on the slew of ETF and mutual fund products that offer stock investors passive, indexed access to commodities. Whereas...

August Crude has advanced nearly $7/barrel in just over the last week but the next hurdle will be the 40 day MA at $98. On a settlement above $98 we see little in the way of resistance until $102. The resiliency in the distillates should keep Crude moving higher in the short run…in my opinion. Natural gas closed lower by 3% today near its lowest level in one week. As long as $4.18 holds on a closing basis in August we still suggest bullish exposure. Our favored play with clients has been purchasing September call spreads anticipating a trade 6-8% higher than current levels. Today's lower close in stocks will be the first negative session in the last eight days as is looks like a 6% appreciation in one week the bulls need a rest. Aggressive traders can sell into this strength as we feel a trade back to 1275 is in the cards in the September contract. We started initiating this...

Horizonte Minerals (LON:HZM), the AIM and TSX quoted exploration and development company working in Brazil, has begun a 3,000m diamond drilling programme at its Falcao gold project in the southern part of the Carajas mining district in northern Brazil, in joint venture with industry giant AngloGold Ashanti (NYSE:AU). The news pushed the Horizonte share price up by 2.5% to 15.5p. Broker FinnCap said it expected the results of the drilling to be announced towards the end of Q3 and reiterated its valuation of 36 pence per share. Falcao lies over a structurally complex window on the eastern end of the Serra da Inaja Greenstone Belt. The initiation of the 3,000m drilling programme follows detailed soil sampling, geologic mapping and an aeromagnetic and radiometric survey conducted in October 2010, which confirmed a 300m to 600m wide zone at greater than 50ppb with isolated results as high as 13.5 grams per ton of gold. The current drilling programme has the objective of testing the...

An article on BespokeInvest about the Platinum-to-Gold ratio today drew my attention. I therefore wanted to get to know more about this ratio. I knew that the ratio had been trading around 2 over the last 10 years, which was why I invested heavily in Platinum and its little sister metal Palladium in December 2008 and early 2009 when prices crashed, and Platinum became cheaper than gold (the ratio thus dropped below 1). When the economy rebounded, the ratio rebounded to 1.50, but the last couple of months, it has been declining again, and is approaching 1 again, as it is currently at 1.13 with gold prices around 1546 and Platinum around 1742. I thus started to dig deeper and found historical data at kitco.com I created an excel sheet with monthly average prices since 1968 which is available for download HERE. Below you can see some interesting charts that resulted of some calculations in the Excel sheet. The first chart is the nominal absolute price difference between one...

After writing an article about the Platinum-to-Gold ratio, I decided to do more with the excel sheet, like calculating correlations and plotting the price charts for example. In this article, I will just focus on the Gold price. Here we go, the Monthly average Gold Price since January 1968: It looks a bit bubbly, right? If you think this looks like a bubble, then please have a look at this Log-scaled chart, which looks far from bubbly: The thing I observed was that the price action in Gold from early 2000 until today was similar to the price action from 1968 until April 1979. Let me show you: One might argue that the price action from 1972 until 1975 is not similar. I agree. However, the correlation between the gold price from 1968 until 1979 and the gold price from early 2000 until today is an amazing 89,65%. Now what else did I notice? That the price action from November 1975 until April 1979 is almost exactly the...

Equities China’s surprise hike in reserve requirements sent China’s markets lower, as the Shanghai Composite fell .9% and the Hang Seng slid .7%. Korea’s Kospi gained .5%, and in Japan, the Nikkei edged up .3% as Honda Motor rallied 2% despite a weak profit forecast. European markets sank as the market focused on Greek’s debt troubles. The FTSE fell 1%, and the DAX dropped 1.3%, while the CAC40 tumbled 1.5% after Moody’s placed several leading French banks under review for a downgrade, due to their exposure to Greek debt. On the political front, Greece’s prime minister offered to resign to allow for the formation of a unity government. US market tumbled, as the debt concerns combined with weak economic data sent investors running. The Dow dropped 179 points to 11897, the Nasdaq fell 1.8%, and the S&P 500 lost 1.7%. The VIX rose to 21.7, the highest level since March, as the ‘market fear’ indicator jumped 16.8% S&P 500 is Approaching March Lows Pandora’s IPO...

Equities Strong industrial production data from China help lift Asian markets. The Nikkei gained 1.1% to 9548, the Kospi climbed 1.4% and the ASX 200 rose .5%. China’s Shanghai Composite rose 1.1%, but the Hang Seng closed down .1%. Inflation data from China showed inflation rose to 5.5% in April, the highest level in nearly 3 years. After the close, China’s central bank raised reserve requirements by .5% in an attempt to slow inflation and growth. European markets bounced, as the upbeat Chinese data reassured investors that the global economy’s recovery is on track. The DAX rose 1.7%, the CAC40 rose 1.5% and the FTSE rose .5%. In the US, the markets rallied, as the Dow rose 123 points to 12076 and the Nasdaq climbed 1.5%. Best Buy shares rose 4.6% after beating earnings estimates, and GT Solar surged 9.5% after raising its outlook. Nasdaq Jumps 1.5% as Equities Rally JC Penney named Ron Johnson, former head of Apple’s retail operations, as CEO.   The...

Northern Oil and Gas (NYSE: NOG) today announced recent completion results and current drilling activity. Northern Oil participated in the Mustang #1-22H, a successful Bakken test well operated by Slawson Exploration in Mountrail County, North Dakota. Northern Oil controls a 39.56% working interest in the well, which had an initial production rate of 1,829 barrels of oil per day ("BOPD"). Northern Oil's BOPD rates do not take into account flared natural gas production. The well had an initial tubing pressure of 1,900 psi on an 8/64th choke. In an important extensional discovery into eastern Montana, Northern Oil participated in the Tveit 25-36 #1H, a successful Bakken test well operated by URSA Resources in Richland County, Montana. Northern Oil controls a 39.54% working interest in the well, which had an initial production rate of 501 BOPD. Northern Oil recently participated in the Alamo #2-19-18H, a successful Bakken test well operated by Slawson Exploration in Mountrail County, North Dakota. Northern Oil controls a 29.98% working...