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"The best place to be is in commodities"

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I believe Commodity super cycle not over. It is taking some break. It can last another 16-20 years.

Factors to watch: Population growth and rapid urbanization

There will be cycles within super cycles.

As I said before different commodities will rise at different times. Then there are opportunities for both traders and investors.

Not all commodities needed to be consistently high all the time.

We had some of the greatest rally in gold, silver corn, coffee, palm oil and natural rubber etc. in the past. We will have mega commodity rally in some other commodities including emerging commodities in the coming decade.

At the moment lot of people are talking about there will be great demand for gold due to jewellery sector. In the long run if we analyse demographic changes in India and China there will be less demand for jewellery. One child policy in China and preference of having boys more in Asian family also will affect for gold market. Fewer women in the future in some Asian countries in the future mean less demand for jewellery.

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.
 
NY: Precious Metals Up Sharply
11 July 2013 at 10:35 ET

Precious metals are leading commodities today with Sept silver up 4.5% at $20.03/oz
and Aug gold up 2.9% at $1282.90/oz.

Sept copper is +3.3% at $3.19/lb.
 
July 13, 2013

That Was The Week That Was ... In Australia
By Our Man in Oz

Minews. Good morning Australia. The recovery on your market that we discussed last week seems to have continued.

Oz. It did, and if anything it got even better, with investors developing confidence in sectors other than gold which has been the big revival story down this way.

When we last spoke the gold index on the ASX had just staged a remarkable 10.6 per cent rise.

That was followed over the latest five trading days by a rise of another 9.4 per cent. Add those two numbers and you get a 20 per cent lift in just two weeks.

Minews. Yes, but a 20 per cent lift off a low base.

Oz. That’s true, but I don’t think there are many investors who would complain about an upward move like that.

Gold, however, was only part of last week’s story because the improved mood was reflected in iron ore, copper and nickel, though price movements in those sectors were mixed, a trend shown in the metals and mining index which rose by 5.4 per cent.

What’s interesting to investors looking for trends is that if you add the latest rise in the metals and mining index with the 2.4 per cent of the previous week you can see an overall mining recovery in the order of 7.8 per cent over the past two weeks, which is less than half the pace of gold but close to double the pace of the all ordinaries, possibly signalling the start of the keenly-awaited mining recovery.

Minews. Is the recovery sustainable?

Oz. Perhaps, but it will also be volatile as the world adjusts to a leadership change in the growth stakes, with the US leading the way, China following and Europe still behaving like a ship’s anchor.
...

Source >> www.minesite.com
*****
 
Majority of commodity stocks are now selling below their panic low prices achieved in March of 2009. In addition if I am correct commodity stocks have underperformed the broader markets since April of 2011. They have been in a deeper cyclical bear market than the commodities themselves. For example Gold ETF has gone down more than gold. Soft commodity stocks and ETFs have gone down more than some soft commodities. We can find great value in these food based commodities now. I think the broader developed equity and bond markets are generally overvalued in some markets. Undervalued commodity stocks have a strong probability of delivering positive returns in the future

We are in a longer-term secular bull market in commodities and commodity stocks. Now we are having cyclical bear markets in commodities and commodity stocks. Even in cyclical bear market there can be bull stocks and bull commodities.

Timing is very important. After more than two years of underperformance by commodities and commodity stocks, I believe we are at the bottom in terms of valuations and prices for commodity stocks.

There is a contrarian opportunity in commodity stocks. Some commodity stocks with demand and supply mismatch, emerging commodity stocks will out perform other stocks in the coming years.

In short I am bullish on commodity stocks and there can be strong rebound in commodity stocks sooner than later.

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.
 
July 15, 2013

As Metals Rebound, Choose Your Worry: Inflation Or Deflation?
By Rob Davies

The high level of volatility in capital markets is in large part because investors cannot decide if they should worry about inflation or deflation.

Despite the gargantuan sums of money created by central banks around the world, inflation has resolutely stayed around two per cent in most of the major economies.

It was the dawning realisation that deflation was still the biggest threat to the global economy that was the main reason for the sell-off in commodities this year.

Evidently some investors thought the trend had gone too far by the middle of last week, and received some encouragement in that view from Fed Chairman Ben Bernanke when he said that policy would remain accommodating until all the signs were green.

That was enough to give commodity markets a reason to rally. Base metals, as measured by the LME Index, rose three per cent to 3,026.

Even gold rallied, by 4.7 per cent to US$1,279 an ounce.

The future course of capital markets largely depends on whether fears that QE-induced inflation will drive prices up, or whether overcapacity and austerity resulting from lower government spending will depress values. Evidence can be found to support both arguments.

Alcoa, as usual, was the first miner to kick off the results season, and although it made a loss because of plant closures it is still confident of a seven per cent increase in aluminium demand this year.

That suggests growth will be good and capacity reductions will help maintain prices. Indeed, some of the 2.6 per cent jump in aluminium prices to US$1,789 a tonne was undoubtedly due to this news.

On the other hand the professional gloomsters at the IMF have reduced their forecast for world growth this year, mainly because of reduced activity in developing economies.

China has joined in by casually admitting it is expecting to only grow at seven per cent in 2013 instead of the 7.5% it was bandying around only a few months ago.

That difference might look like a rounding error to most analysts but the nuance is being examined very closely by sinologists. It is also important to commodities, given China’s leading role in commodity consumption.

Moreover, Lombard Street Research points out that Germany’s reliance on exporting manufactured goods to China means it also vulnerable to a Chinese economy growing more slowly.
And Germany is Europe’s large consumer of metals.

But what was interesting about the rally last week in metals and mining was the sudden recall that this sector still generates huge amounts of cash.

The valuations of the large miners seemed to be discounting an outright Chinese recession, yet metal and commodity prices are nowhere near factoring in that sort of scenario.

It is quite possible for markets to exaggerate the negative possibilities of slow and anaemic growth.

That of course means that if conditions are not quite as apocalyptic as forecast there is scope for quite a strong rally as bears adjust to better conditions. That is what seems to have happened last week.

It does not though answer the fundamental question of whether to worry about inflation or deflation. Maybe the answer is to worry about both, but just on different weeks.

Source >>>>> www.minesite.com
 
the commodities boom has mostly been driven by the energy/ resource sector. This may or may not be winding down, but I think raw food/ agriculture has been relatively flat and could be the next boom.. Thoughts?
 
My view on commodity market.

Globally commodity stocks are cheaper than commodity themselves now.
Always there is demand for things. People will eat and drink during good and bad times.

Climate change will create demand for some things in the future.

Less arable land will create short supply in some commodities in the future

Labour shortage in some countries will reduce output in some commodities in the coming years.

Finally we cannot forget growing populations in Asian and African countries.

They will need more commodities in the future.

Cash rich strong commodity companies can survive in good and bad times as long as they have demand and market for their products.

We always use commodity and things in our life. Can we live without having food and drink? Can we run our cars, homes and schools without having commodities? Can we build houses and other building and develop towns and infrastructure without having commodities? It is true there are cycles for different commodities, stocks, currencies and other assets at different times. We should have some idea about these cycles as well.

Based on my study I am bullish on both stock and commodity market in the coming decade. As I said before it is time to identify next most bullish markets, sectors, stocks, commodities, currencies and other things. I believe globally consumer staples sector will lead the market in the coming decade.

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.
 
July 20, 2013
That Was The Week That Was ... In Australia
By Our Man in Oz
...

Minews. Over now to minor metals to wrap up our new and snappy review of the market.

Oz. There was a modest upward trend among the minor metals. Base (BSE) led the titanium stocks with a rise of A1.5 cents to A39 cents.

Alkane (ALK) was the best of the rare earth stocks with a rise of A3 cents to A45 cents.

Syrah (SYR) was the pick of the graphite stocks with a rise of A8 cents to A$2.26, while the vanadium producer Atlantic (ATI) added A5 cents to A25 cents.

Minews. Thanks Oz.

Source >> www.minesite.com
*****
 
22 July, 11:18 am (NY time)

Precious metals soared higher this morning, led by strength in silver prices.
Aug gold rose above $1300, while Sept silver rose above $20/oz.
In current trade, gold is +2.7% at $1327.20 and silver is +4.8% at $20.39/oz.
Sept copper is +2.0% at $3.20/lb.
 
July 22, 2013

Is China Heading Towards A Recession?
Rob Davies

The old cliché was that if America sneezed the rest of the world caught a cold.

But these days commodity investors monitor every twitch in China to analyse how it might affect them.

Even though China’s second quarter GDP growth came in at a respectable 1.7 per cent - an annualised rate of 6.8 per cent - the inner temple priests at Lombard Street Research have peered through the fog and believe the real rate of GDP actually declined by 0.2 per cent in that period.

Lombard Street cites declines in steel and industrial production to support its case, although it concedes electricity output did grow.

It seems its views are shared by most commodity investors, because the LME index declined by 0.6 per cent over the week to finish at 3,007.

That goes against the rule of thumb that a weak dollar is good for metals, given that the US currency wobbled then eased back over the week.

Lombard Street Research is quite trenchant in its view that weak external demand, an overvalued currency, poor corporate profits and high real interest rates will cause more damage in the third quarter, leading to an another period of negative growth for China.

Two of those in a row would be a recession.

The research house also believes that China has no choice but to reform its economy, despite the pain it might inflict in the short term.

One small step in that direction was taken last week when the People’s Bank of China removed the floor on interest rates.

That itself won’t make much difference. However, when it feels strong enough to lift the cap on interest rates too, the impact could be quite dramatic.

Current rates of six per cent could look quite tame if, or when, the cost of money goes up.

No one is quite sure what the effects might be. Certainly, commodity investors will be sensitive to how Chinese hoarders of metal inventory might react.

If they decide to liquidate stockpiles at a time of weak demand, metal prices could react quite sharply.

This slowdown is already triggering a response from the mining industry. Rio Tinto, for example, has slashed its exploration budget in the first half of 2013 to US$542 million, from US$1,025 million last year.

Where that money is going is probably a good guide to selecting junior exploration stocks.

They are likely to be joint venture partners for the majors and doing the heavy lifting of exploration mapping and drilling.

So it is good to read that 44 per cent of the expenditure is going on copper, and 16 per cent on diamonds and minerals. The small amount - just six per cent -going into iron ore won’t affect juniors too much as they tend not to get too involved in this sector.

Nevertheless, the first shipment of copper from Oyu Tolgoi in the quarter is a reminder of the importance of scale in mining now.

Juniors may be good at finding metal but few, even Bob Friedland, the seed investor in Oyu Tolgoi, have got the capacity or expertise to spend the US$6.2 billion over the seven years it has taken to build this one.

China may be experiencing a recession right now but large mines like Oyu Tolgoi will undoubtedly see many over the course of their lives.

During its projected 50 year life copper will certainly trade below the current price of US$6,919 a tonne, but it is new mines like this one that will cope with lower prices better than most.

Source >>> www.minesite.com
 

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