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"Monetary Bazooka" Gooses Commodity Bulls

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Posted by Hard Assets Investor

on Friday, 14 September 2012 16:30

Commodities surged broadly after this week’s Fed announcement of QE3. Only corn ended the period in the red due to the latest supply and demand data from the USDA.  Stocks, as measured by the S&P 500, rose 2 percent to the highest levels since 2007. The stock index is now up almost 17 percent year-to-date.

The Federal Reserve unveiled what some characterized as a “monetary bazooka” in this week’s policy decision. The central bank said it would buy $40 billion worth of mortgage-backed securities per month, indefinitely. The purchases will begin today. Total purchases could conceivably end up at over $1 trillion.

On the other hand, it could be much less. But in either event, the U.S. Central Bank has made it clear it will provide an extremely accommodative monetary backdrop as long as economic growth remains sluggish. Commodity bulls couldn't have asked for more.

Week In Review: Gold, Silver, Platinum Jump After Unprecedented Fed Move; NatGas Spikes 12%

 

Macroeconomic Highlights

The Federal Reserve unveiled what some characterized as a “monetary bazooka” in this week’s policy decision. The central bank said it would buy $40 billion worth of mortgage-backed securities per month, indefinitely. The purchases will begin today.

The Fed also extended its pledge to keep its benchmark overnight interest rate—the federal funds rate—near zero from late 2014 to mid-2015.

Importantly, the central bank promised to add to purchases if the labor market doesn't improve.

The open-ended nature of QE3 and the Fed's flexibility in terms of adding to purchases if growth doesn't improve is a particularly bullish combination for commodities. Total purchases could conceivably end up at over $1 trillion. On the other hand, it could be much less.

But in either event, the U.S. Central Bank has made it clear it will provide an extremely accommodative monetary backdrop as long as economic growth remains sluggish. Commodity bulls couldn't have asked for more.

Picture 1

.....read page 2 HERE

 



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Energy & Commodities

Uranium Sector Review: Exploration, Development & Production Companies

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Posted by John Wilson - Resource Capital Research

on Wednesday, 12 September 2012 08:12

Highlights:

  • Sector fundamentals remain positive in the mid and long term.
  • The Merrill Lynch Uranium Equity Index is up 2% in the past month and 12% in the past 3 months, broadly in line with global equity markets.
  • The spot uranium price is US$48.00/lb, having breached the US$50/lb support level in July.
  • Price weakness is resulting primarily from the protracted delay in Japanese reactor restarts.
  • Partially offsetting the impact of reduced demand from Japan and Germany has been Chinese inventory purchases where 26 reactors are due to enter operation by 2015.
  • The contract price is US$60.25/lb (Aug 31).
  • Over 80 new nuclear power reactors are expected to be commissioned by 2018.
  • Demand for uranium is expected to increase from around 164mlbspa U3O8 in 2011 to 226mlbspa by 2020 and 280mlbspa by 2030 (WNA

.....download & read the entire 25 page .pdf report HERE which includes the following topics below,  or continue reading the more detailed Overview beginning with Equity Market Performance:

 

  • Reserves, Resources and Historic Mineralisation
  • Valuation and Performance Data
  • Uranium Price Fundamentals
  • Selected Uranium Sector Performance Charts

 

Exploration, Development and Production Companies

 

  • Aura Energy Limited
  • Black Range Minerals Limited
  • Energy Resources of Australia Limited
  • [Laramide Resources Limited
  • Paladin Energy Limited
  • Peninsula Energy Limited
  • Toro Energy Limited

 

Equity market performance

The Merrill Lynch Uranium Equity Index (a global basket of uranium equities) is up 2% in the past month and 12% in the past 3 months, broadly in line with global equity market performance. We expect neutral uranium equity market performance over the next 6 months with downside risk to surplus utility uranium disposals and uncertainty around the anticipated release of the Japanese energy policy to 2030.

In the past month, ERA is down 8% and PDN is up 2%. Paladin reported record production for FY2012 (6.9mlbs U3O8, +21% yoy), and is continuing to make good progress on operational cost reductions at LHM and KM and strengthening its balance sheet, though overall performance remains leveraged to the low uranium price.

 Uranium price and market outlook

The spot uranium price is US$48.00/lb (10 Sep), down US$2.75/lb from US$50.75/lb in June, having breached the US$50/lb support level in July. Price weakness is resulting from the protracted delay in Japanese reactor restarts with 48 of the 50 operable reactors offline nearly 18 months after the Fukushima accident. These offline reactors account for estimated foregone uranium demand of around 18mlbspa, equivalent to around 11% of 2011 global demand (164mlbs U3O8).

Japan restarted the first 2 nuclear reactors in July 2012 (one on July 1, the other July 24). Despite the initial restarts, the spot price is expected to remain under pressure into 2013, reflecting the ongoing impact of reactor shutdowns and closures in Japan and Germany with potential utility surplus dispositions. The spot market is also impacted by Japanese renegotiation of ongoing delivery contracts for surplus supply.

 Additional reactor restarts are expected to occur over a 2 year timeframe - from 2012 to 2014. Market expectations are for 10 to 15 reactors to restart by late 2013 comprising the newest reactors in the most secure locations. Restarts are slower than initially expected, in part reflecting an increasingly vocal domestic opposition to nuclear power in Japan.

Partially offsetting the impact of reduced uranium demand from Japan and Germany has been Chinese inventory build where 26 reactors are due to enter operation by 2015.

The long term contract uranium price is US$60.25/lb (August 31) a modest pullback from US$61.25/lb (May-July), and has increased from a recent low of US$60/lb in Feb-Mar ‘12.Market participants suggest the August price pullback reflects slow seasonal summer trading. Nonetheless, it is surprising given the significant project deferrals and delays recently announced accounting for 40m-45mlbspa U3 O8  and which support potential for market tightness midterm, viz: Olympic Dam, Kintyre and Yeelirrie.

Strong growth in nuclear reactors is expected to continue, particularly in Asia, post Fukushima, with Chinese expansion expected to continue to lead the pack. China’s official installed nuclear capacity projections are 70-80 GWe by 2020, 200 GWe by 2030 and 400-500 GWe by 2050. This compares with a 12 GWe capacity today (15 reactors).

Demand for uranium is expected to increase from around 164mlbspa U3 O8  in 2011 to 226mlbspa by 2020 and 280mlbspa by 2030 (WNA).

As at 1 September 2012, there were 483 nuclear power reactors planned or proposed globally; up 1 unit from March 2011 (pre Fukushima). 171 units are planned or proposed in China, 56 in India, 41 in Russia, 26 in the USA, and 13 in Ukraine. Globally, 65 reactors are currently under construction and over 80 new reactors are expected to be commissioned by 2018.

There is potential for a supply gap to open up in the uranium market midterm due to declining supply from existing mines, deferral of new mining projects, the anticipated reduction in secondary supply with the termination of HEU at the end of 2013, and ongoing demand growth.

Kazakhstan production growth:  Kazakhstan affirmed in July that it intends to lift uranium production by around 15mlbspa to 65mlbspa U3 O8  by 2015, up 28% over 2011 production (50.6mlbs). Reported production 2Q12 was 13.1mlbs, up 9% over 1Q12. Kazak production in 2012 is expected to reach 55mlbs (+9% yoy). The 2015 production target is contrary to earlier official Kazak statements that production would remain capped at ~50mlbspa till market conditions improved.

.....download & read the entire 25 page .pdf report HERE which includes:

  • Reserves, Resources and Historic Mineralisation
  • Valuation and Performance Data
  • Uranium Price Fundamentals
  • Selected Uranium Sector Performance Charts

Exploration, Development and Production Companies

  • Aura Energy Limited
  • Black Range Minerals Limited
  • Energy Resources of Australia Limited
  • [Laramide Resources Limited
  • Paladin Energy Limited
  • Peninsula Energy Limited
  • Toro Energy Limited

Picture 3

 


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Energy & Commodities

Marc Faber: Why Industrial Commodities Will Continue To Fail

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Posted by David Bettencourt via ETF Daily News

on Monday, 10 September 2012 14:21

Jared Cummans: Marc Faber, who shares the moniker “Dr. Doom” with Nouriel Roubini, has made a name for himself not only from his intelligence, but also from his outspoken and often controversial views. Faber has recently predicted a 100% chance of a U.S. economic recession and says that he is simply waiting for things to fail. To put things lightly, he is something of a bear, as he often points out the faults of the economy or singles out failing sectors. It seems as though he has done it again, but this time with industrial commodities, namely industrial metals [for more industrial metals news and analysis subscribe to our free newsletter].

Commodities like copper, steel, aluminum, and others have struggled as of late given the shaky economic indicators from around the world. Faber notes that“industrial commodities will remain under pressure due to the fact that the Chinese economy is slowing down considerably”. While it is important to realize that the Chinese are intentionally subduing some of their growth; it has been a rising issue for investors around the world for some time now. China’s GDP growth has been dropping for nearly two years, worrying many that this dominant emerging market is beginning to slow down.

Of course, slowing down still holds a growth rate of more than 7.6%, a figure that looks quite robust when set next to the U.S. growth rate of just 2.3%. But the shrinking figure is still worrisome, as China is the one of the world’s largest consumers and producers of industrial metals like copper among others. If China were to cut its demand prospects from something like copper or steel, it could have devastating impacts on the commodities themselves, according to Faber’s theory. Below, we outline several options to make a play on Faber’s prediction [see also Why Bill Gross Thinks The Fed is Ruining The Economy].

  • DB Base Metals Fund (NYSEARCA:DBB): This product invests in futures for aluminum, zinc, and copper, with each commodity receiving an equal weight. The fund has roughly $315 million in assets and trades nearly 90,000 times each day.\
  • DJ-UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC): For those looking to single out copper exposure, this fund will be the most popular option. JJC invests solely in front-month copper futures and trades more than 55,000 every day [see also Three Commodities to Bet With Buffett].
  • Rio Tinto (NYSEARCA:RIO): Rio is one of the largest mining firms in the world, giving you an indirect exposure to a firm whose revenues will be directly impacted by the prices of the commodities they extract. The company’s main outputs are iron ore, copper, coal, and aluminum among others.

Via David Bettencourt of ETF Daily News

Written By Jared Cummans From CommodityHQ  Disclosure: No Positions.

CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.

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Energy & Commodities

Keith Schaefer special report from Sept 8th broadcast

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Posted by Keith Schafer

on Friday, 07 September 2012 16:32

Keith Schaefer crop 2

Keith Schaefer, editor of the Oil & Gas Investment Bulletin joined Victor Adair on the Money Talks Show Saturday Sept 8th. To listen to the interview with Keith it begins at the 1.20 minute mark on the player below and continues through to the 18th minute.

If you prefer click here to download the podcast.

As an added bonus Keith has agreed to make his most recent stock report available to our readers at no cost. If you are looking for aggressive growth and can take the risk, this is a stock that Keith Schaefer recommends:

CLICK HERE to get this special stock pick.



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Energy & Commodities

Crude Oil Recommendation - The ECB & Risk Appetite Analysis

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Posted by Market Vitals via Black Swan Capital

on Friday, 07 September 2012 11:11

Quote
“Slumps are like a soft bed. They're easy to get into and hard to get out of.” – Johnny Bench

Of Interest
At last, Japan may be about to abandon its disastrous Keynesian consensus (Telegraph)
China splurges £100bn on infrastructure projects (Telegraph)

Commentary
US August Nonfarm Payrolls missed significantly – 96,000 vs. 125,000 or so expected. June and July payrolls were revised lower. Everyone is leaning towards more QE3. The euro is surging higher. Risk appetite is on. We are watching crude oil.

crude0907

US August Nonfarm Payrolls missed significantly – 96,000 vs. 125,000 or so expected. June and July payrolls were revised lower. Everyone is leaning towards more QE3. The euro is surging higher. Risk appetite is on. We are watching crude oil.

Yesterday, on the back of the ECB announcement, crude oil was up big – more than 2%. But by the end of the day, it had given it all back after failing to test recent highs. We’ve been watching crude the last two weeks because it has approached a logical, technical stopping point. A downturn based on technicals would be playable; a downturn based on technicals and fundamentals would be substantial. [Note: price has generally moved sideways the last two weeks. The likelihood of a sharp downturn in crude decreases the longer this sideways consolidation pattern lasts.]

After yesterday’s big reversal we would expect to see follow-through weakness in crude. Before the report this morning, crude was higher. After the report, crude moved lower ... perhaps the bears were pressuring price based on yesterday’s big reversal. But the bears are no longer in control at time of writing – crude is higher again. UPDATE AT TIME OF PUBLISHING: Crude oil has reversed again and is now notably lower.

Action
Crude oil has the clout to lead broad risk appetite, especially if it turns to the downside while markets are trading on the hope of QE3 sooner than later. We are watching for this potential. At 3:30 PM Eastern today we’ll see the latest Commitment of Traders report from the CFTC. Already the large speculators are nearing an extreme net long position in crude. Only February saw a larger position. February is when crude oil’s price topped out. The speculators tend to be wrong at extremes. We recommend keeping some skin in the game with the PowerShares DB Crude Oil Double Short ETN (DTO) to play for a downturn in crude price.

 

Note: If you would like more information on this publication you can contact us at info@blackswantrading.com or view our offerings at our website: www.blackswantrading.com

Black Swan Capital’s Currency Currents is strictly an informational publication and does not provide personalized or individualized investment or trading advice. Commodity futures and forex trading involves substantial risk of loss and may not be suitable for you. The money you allocate to futures or forex trading should be money that you can afford to lose. Please carefully read Black Swan’s full disclaimer, which is available at http://www.blackswantrading.com/disclaimer



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