Australian (ASX) Stock Market Forum

"The best place to be is in commodities"

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May 24, 2013
>>> That Was The Week That Was … In Canada <<<
By Our Canadian Correspondent

Minews. Now, over to our Canadian Correspondent for a look at how the Canadian markets performed this past week.

CC. Disappointing manufacturing data out of China and worries that the United States will turn off its quantitative easing spigot prompted another wild trading week for resources-related stocks.

On top of the macroeconomic developments, Barrick Gold came out with some more bad news on Friday that investors simply shrugged off.

Once all the trading was done this past week, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had rallied 1.46 per cent, while the TSX Gold Index had added 4.69 per cent.
...

Source >>> www.minesite.com
 
May 25, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. It looks like it was another tough week for your market?

Oz. It was, and it wasn’t. That might be a confusing answer, but is easily explained: most commentators focused on the movements of the major indices and ignored those that we follow, the metals and mining index and the gold index. They either barely moved, or rose fractionally.

Minews. How interesting. Why the divergence?

Oz. In a word, currency. What happened last week was something we’ve been waiting for all year, a sharp fall in the value of the Australian dollar, or a rise in the US dollar.

Whatever explanation you prefer the result is the same, higher income for Australian exporters on conversion when they sell in US dollars, which is essentially what they all do.

Minews. Let the numbers tell the story.

Oz. As you mentioned first, the Australian market as measured by the all ordinaries index had a torrid time, falling by 3.2 per cent, following a sell-off in bank and retail stocks. The metals and mining index was virtually flat, or down one-tenth of a percentage point if you’re a stickler for accuracy. The gold index was up 1.2 per cent, largely because gold is a perfect hedge against currency movements.

Minews. And the dollar itself?

Oz. It dropped to around US96.5 cents, which is a hefty fall on the US$1.05 that it was trading at four weeks ago. More interestingly, there is now a widespread expectation that the Australian dollar will quickly fall through US90 cents and perhaps much lower. Indeed one forecaster is tipping a long slide down into the US60 cent range.

Minews. Is that seen as a bad thing?

Oz. Yes and no. Exporters would like it, but inflation will get a boost and a fall of that magnitude will certainly signal the end of the mining boom as we have known it. It might, however, trigger a fresh influx of international money getting into position for the next resources rush because the fundamentals of a rising Asia have not gone away, and rising Asia needs minerals and metals.

Minews. So much for the philosophy, time for prices, starting with gold, please.

Oz. Overall, the gold sector could correctly be called mixed. That modest 1.2 per cent rise in the index was largely attributable to a three per cent rise from the sector leader, Newcrest (NCM), which added A43 cents to A$15.12.

Among the other risers were: Troy (TRY), up A9 cents to A$1.77, Regis (RRL), up A24 cents to A$3.84, Intrepid (IAU), up A2.5 cents to A29 cents, Beadell (BDR), also up A2.5 to A64.5 cents, Medusa (MML), up A4 cents to A$2.37, and Papillon (PIR), up half a cent to A74.5 cents. Also better off was Australian Mines (AUZ), which rose A0.2 of a cent after receiving further encouraging assays from its Yargarma project in Nigeria.

Offsetting the rises was an even longer list of equally modest falls, including: Perseus (PRU), down A9 cents to A$1.05, Kingsgate (KCN), down A2 cents to A$1.55, Gryphon (GRY), down A1.5 cents to A19.5 cents, Evolution (EVN), down A6 cents to A79 cents, Northern Star (NST), down A5 cents to A67 cents, and Kingsrose (KRM), down A5.5 cents to A41.5 cents.
...

Source >> www.minesite.com
*****
 
:)There can be great opportunities in the short run, medium run and long run in some soft, agri and food based commodities such as corn and tea due to demand and supply mismatch time to time. Initially many analysts expected one of the biggest harvests for corn in 2012.Instead corn production went down dramatically due to drought and there were bullish trend for corn market in 2012. Similarly there were uptrends for tea market as well.

In some period output for some soft and food based commodities can go up in first half of the year and output can go down dramtillcally in the second half of the year. For example If we don’t see improved weather pattern in the second half of this year inventory level can go down for some commodities. Year end lower inventory level means higher prices for the commodity.

In good time or bad times people cannot postpone eating food such as cereal, meat, grain, and drinking coffee, tea, coco and milk. There will be great demand for all types of food and hot beverages in the coming decade not only in developed world, but also in emerging world and frontier world. There will rapid rise in population in countries such as India, Pakistn, Indonesia, Bangladesh and China. Therefore there will be improved market for all types of food such as rice, corn, meat, coffee, tea, salt, milk, potato, timber and Australasian fruits etc.

In addition other commodities such as metals and gas also will have great demand from Asian region in the long run. However there will be less demand for different commodities at different period due to different reasons and as result prices will go down in the short run and medium run.

In short time to time there will be opportunities’ in all types of markets such as commodity market, stock market and other markets.

My ideas are not a recommendation to either buy or sell any security or currency. Please do your own research prior to making any investment decisions.
 
Dairy market rally 'well and truly over'

The dairy rally is "well and truly over" for now, given the breaking of drought in New Zealand, the top milk exporter, and some economic uncertainties, National Australia Bank said.

The decline in dairy prices, which have tumbled 9.3% at GlobalDairyTrade from last month's record high, will set a trend, given signs of loosening fundamentals.
...

http://www.agrimoney.com/news/dairy-market-rally-well-and-truly-over--5880.html
 
Commodities investing is volatile, promising big gains and capable of big losses. But this volatility can work in our favor in a broad investment portfolio. If we invest part of our money in commodities we can offset risks associated with stocks, bonds and cash.

There is no set formula for the best time to buy commodities, just like stocks. It really depends on an investor’s time horizon and investment goals.

Buying cheap is often the best option in my opinion if we have a long-term investment horizon.

If we take gold market the price of gold reached $850 an ounce in 1980, which was an extraordinary price for the time. Gold prices reached multi-years lows in 1999 near $250 an ounce. Gold prices subsequently mounted a decade long rally dwarfing the previous record high in 1980.

Remember that commodities are often considered a hedge in an investment portfolio.

Analysts argue that prices of many commodities may not have much further to fall. I agree with this because some soft, food and beverage commodities are damn cheap. Some are cheaper than water

Following are two Commodity Investments to Profit from Population Growth

Food commodities will jump
Energy commodities will power up

In short it is time to buy cheap commodity stocks with great potential and commodities with demand and supply mismatch and emerging commodities.Finally I believe we can expect rally in some commodities and commodity stocks in the second half of this year.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions.
 
drillinto said:
Commodities: Sand and gravel for construction

Australia is Top 10 >> http://www.mapsofworld.com/minerals/world-sand-and-gravel-producers.html

US Data >> http://minerals.er.usgs.gov/minerals/pubs/commodity/sand_&_gravel_construction/mcs-2013-sandc.pdf
Click to expand...

Another two important emerging commodities to follow. Thank you for the link.

I believe there will be great opportunities in some commodity stocks listed in developed, emerging and frontier markets during next six months to 12 months. I think current bull market in global stocks market can pause or can have pull back during next six months. Therefore money will flow back to some commodities, some sectors in global stock markets and selected stocks markets in frontier world. At least we will see strong short term rally in some commodity and commodity stocks. Even gold can go up.

As I said before this is the time to rotate and identify the next most bullish sectors, stocks, commodities and currencies.

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please do your own research prior to making any investment decisions
 
June 01, 2013
That Was The Week That Was … In Australia
By Our Man in Oz

Minews. Good morning Australia. Your mining market seems to have gone against the grain and crept a little higher last week.

Oz. It did, but most of the improvement was confined to the bigger companies, and to a handful of gold stocks. The small end, which we follow, remained very subdued with a raft of stocks setting fresh 12-month share price lows.

Like the rest of the world investors in the Australian market remain focussed on the changing macro picture of government finances. The great unknown is: what happens when the artificial pump priming, or money printing, comes to an end.

Minews. And you’ve also got to contend with the end of your mining boom.

Oz. That too, but interestingly that’s starting to shape up as yesterday’s story. Most of the stock market pain has already been inflicted, with some of the smarter chaps in the room starting to look at the relative value of mining stocks over other assets classes and coming out in favour of miners.

Minews. You mean the Goldman Sachs calculation that Australian banks are now 40 per cent more expensive than miners.

Oz. That’s certainly a starting point to what could be a rotation of funds away from low yield and safe haven investments back into assets with greater growth prospects, especially those which have been heavily sold down.

Minews. You believe a bit of that was evident last week in the Australian market?

Oz. It was at the top end, where the big miners led a modest rise of 0.7 per cent in the metals and mining index while the financials index declined by 2.3 per cent and the all ordinaries slipped one per cent lower. BHP Billiton (BHP) and Rio Tinto (RIO) rose by a fraction over one per cent for the week.

The gold index slipped 0.6 per cent lower, but that was almost entirely due to a fall of A61 cents by sector leader Newcrest (NCM) which closed the week at A$14.51.

Minews. How soon before that slight improvement flows through to the mid-tier miners and small explorers?

Oz. That is the key question and a betting man would probably not expect much this calendar year but next year could see the start of a revival.
...

Source >>> www.minesite.com
*****
 
June 03, 2013
Be Careful What You Wish For: Bond Yields Fall As The US Economy Shows Signs Of Recovery
By Rob Davies

Mining investors might have been focussing on the 10 per cent drop in iron ore prices over the past week, but the real news was in a different asset class.

Iron ore prices have tumbled to US$110 a tonne, down 30 per cent from their peak of US$158.90 in February.

That fall really reflects the slower rates of growth now being recorded in China, India and Brazil.

Brazil is growing at a slower rate because iron prices are falling because China is growing at seven per cent not 10 per cent.

All that is logical.

What is more important, though, is the massive sell-off in bond markets.

It started in Japan two weeks ago when yields shot up to one per cent for 10 year money. Last week the contagion spread to the US where US Treasuries dropped sharply to offer a yield of 2.2 per cent.

The 10 per cent drop in a week is bad enough, but it is worth recalling that these instruments were only offering a yield of 1.5 per cent last summer so the decline from the peak is quite dramatic.

The reason for this fall is actually good news because there are increasing signs the US economy is recovering and, as a consequence, the US Federal Reserve may soon be able to stop spending US$85 billion a month on US debt.

But without that support from the buyer of last resort the question is who will underpin the market.

Because the US debt market is the single largest asset class in the world, and is used as a benchmark for others, it has ramification in just about every other capital market.

The first impact was to push the dollar higher and that weakened gold to US$1,394 an ounce.

It did not, though, depress base metals. They moved higher in anticipation of this stronger US growth and resulted in the LME Index gaining 1.2 per cent to 3,170.

What no one knows, and can never be known until sometime in the future, is if this is the start of the big move out of bonds into other assets.

On the face of it this should be good news for commodity investors because some of the flow will go into hard assets and some will go into equities, including miners, and that will provide more capital for resource exploration and development.

There is a downside though.

This retraction effectively increases the risk free rate, though perhaps not after inflation.

That raises the economic hurdles that new projects have to meet before getting approval. Although that may go hand in hand with higher returns arising from stronger metal prices.

What is certainly does is make it cheaper to buy income, at least in nominal terms, and that may deter some from looking around at other asset classes for alternative sources of income.

The biggest uncertainty of all is what this development means for inflation. It has already had an impact in Japan where a falling yen has started to push up prices of imported goods.

In the same vein the fall in the rand to a four year low against the dollar will have a negative impact on prices in that country which is so reliant on the mining industry.

While many have been arguing that bonds have been too expensive for too long, and deserve to be sold, some wishes may have unforeseen consequences if they come to pass.

Source >>> www.minesite.com
*****
 

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