Cotton to lose buyer which helped it to record top

by Agrimoney.com

Cotton, which surged above $2 a pound in New York for the first time, could be about to lose a large source of buying power - although even then, it is not clear that the fibre is in for a fall, yet.

Part of the reason behind the surge in the spot cotton contract to a record high 204.02 cents a pound on Thursday has been buying by smaller US mills who purchased through the so-called "on call" mechanism, Hightower Report analyst Terry Roggensack said.

Cotton bought on call, typically from larger mills, is priced later, with a deadline of the first notice day of the relevant futures contract which kicks off the expiry process.

"You have mills which bought in December, January, early February, who have been waiting for a break to fix the price. But it hasn't come," Mr Roggensack said.

"Now they are having to price at these levels. They're screwed."

'Relieve the pressure' 

Mills' scramble to cover positions was part of the reason why cotton futures rose the exchange maximum for a second successive session on Thursday, Mr Roggensack said.

The Ice exchange halted trading in cotton options, after prices hit twice the maximum rise of 7.0 cents a pound allowed in the fibre's futures.

The performance took the gains in cotton futures in the last three sessions to nearly 10%, and its jump over the last year to 170%, as measured by New York's near-term contract.

And the coming of first notice day on Friday would "relieve that buying pressure" from the on-call purchasers.

US vs world prices 

Nonetheless, that did not mean cotton's rally was over, he added, noting that world prices were still higher than New York futures prices.

The Cotlook A index, based on a basket of physical prices, stood up 7.0 at a record 226.50 cents a pound. On the Zhengzhou exchange in China, the top cotton consumer, importer and producer, futures rose nearly to 35,000 a tonne, equivalent to 240 cents a pound.

"As long as world values stay above US values, there will still be demand for US cotton," Mr Roggensack said.

Indeed, official data on Thursday showed US cotton exports totalling nearly 290,000 running bales, including both the current season and 2011-12, at the top end of market forecasts.

They have now reached 96.9% of the total that the US Department of Agriculture has forecast for the whole year, to July, implying that the official estimate for American inventories at the end of the season will need to be revised lower again.

At the current estimate for year-end stocks, at 1.9m bales of 480 pounds apiece, is already the lowest for at least 50 years.

Correction ahead? 

However, Commerzbank analysts issued a warning that the rally was sowing the seeds for its own destruction, by prompting a surge in cotton growing and rebuilding supplies.

"Given the expected substantial expansion of acreage this year, the supply outlook should brighten significantly in the coming months," the bank said.

"This should contribute to a sharp fall in prices over the year."

US sowings are expected to rise by roughly 15%, with the China Cotton Association pegging the rise in China at 9.8%.

Brazil, where sowings in Mato Grosso state have surged by an estimated 60% to 671,100 hectares, is forecasting a 64% jump to 2.0m tonnes in domestic production.

 
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Soybean seedings to set US record, says Deere

by Agrimoney.com

Deere & Co entered the furore over preliminary official estimates for US spring plantings by coming out with its own forecasts – pegging sowings of soybeans even larger at a record high.

The tractor maker agreed with the US Department of Agriculture's forecast on Monday that domestic corn sowings will hit 92.0m acres this year.

However, it raised the bid on soybean acres by 1.0m acres to 79.0m acres, easily surpassing the record 77.5m acres set two years ago.

The extra area would come at the expense of wheat, for which seedings were estimated at 55.5m acres, 1.5m acres below the USDA figure, and the lowest – excluding last year's historically low total – for nearly 40 years.

Factoring in the high rate of winter wheat sowings, this figure implies a fall of 1.8m acres in spring seedings – or a rich rate of replanting with other crops of winter wheat areas struggling with a dearth of rainfall.

'Every available acre' 

Overall, Deere concurred with a USDA estimate of an extra 9.3m acres being allocated to the major four crops, including cotton.

Deere & Co 2011-12 US seeding and yield forecasts Corn: 92.0m acres, 163.4 bushels per acre Wheat: 55.5m acres, 44.8 bushels per acre Soybeans: 79.0m acres, 43.8 bushels per acre Cotton: 13.0m acres, 830 bushels per acre

"Obviously it's early – too early to know the ultimate outcome," Susan Karlix, manager of Deere investor communications, told analysts.

"That said, our base case calls for planted acres to increase, driven by strong global demand and historically low carryover stocks.

"Good profitability creates an incentive for farmers to plant on every available acre."

However, unlike USDA officials, Deere appeared to back ideas of cuts to sowings of more minor grains, highlighting that its consultants, Informa Economics, had estimated total plantings to major crops expanding by 7.4m acres.

Christmas wish list 

Indeed, it is the USDA's estimate of a total US sowings rising by 10m acres that has caused particular doubt among analysts, and is being blamed in part for a sell-off in crops that continued on Wednesday for a third day.

USDA baseling US seeding and yield forecasts Corn: 92.0m acres, 162.0 bushels per acre Wheat: 57.0m acres, 43.8 bushels per acre Soybeans: 78.0m acres, 43.5 bushels per acre Cotton: 12.8m acres, 820 bushels per acre

"Most in the trade are anticipating acres to be up 6m-7m acres," US Commodities said.

At Market 1, Mike Mawdsley said: "It is like plugging in your Christmas list, waking up and all the acres you want have come out."

And at Benson Quinn Commodities, Brian Henry said that while "78m acres of soybeans isn't out of the question, a 10m-acre increase in total planted acres is in question".

While some 4m acres of land has been released from conservation programmes over the last three years, only about 1m acres of that was suitable for corn or soybeans, Jerry Gidel at North America Risk Management said.

Yield question 

He also took issue with Deere's forecasts of bumper yields, with the forecast for corn pegged at 163.4 bushels per acre, 1.3 bushels per acre below its record high, and for soybeans 0.2 bushels per acre from its all-time high.

Estimates of corn yields of 163-64 bushels per acre were "ridiculous" this early in the season, when regression analysis suggested lower figures.

"An estimate of 161 bushels per acre you can defend with your life," he said.

 
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11 Smart Places to Invest Your Money Now

By STEVE ROSENBUSH

The financial markets and the economy are entering new territory, creating new risks and opportunities for investors.

America's slow recovery is gaining momentum, unemployment is declining, and there are even signs that inflation will start to pick up. And while it will be years before before consumers and the federal government fully repair their broken balance sheets, housing prices recover, and the majority of the unemployed get back to work, for the first time since 2007, the financial landscape is no longer defined primarily in terms of the crisis. The economy is moving forward.

As all economic transitions do, this moment of change is creating new possibilities in the financial markets. As the landscape shifts again, it's important that investors understand where the opportunities are and where they can put their money. Here are 11 areas experts think you should consider right now:

1. Commodities

As the global economic recovery accelerates, fears of deflation have been replaced with concerns about inflation. The prices of commodities and raw materials such as gold, oil and agricultural products have been rising for some time, but businesses have largely been unable to pass those higher costs along to consumers. That may change. While few experts believe inflation is likely to be a major problem, it can't be ignored.

"We are not big inflation bears right now, but that is not the point," says Seth Masters, chief investment officer for blend and defined contribution strategies at asset manager AllianceBernstein. "Even if there's only a 10% or 20% chance that inflation becomes serious, that is a big problem for investors. It will be bad for stocks and very bad for bonds, so it makes sense to have some protection against inflation, even if that is not the central case," he warns.

Real assets such as commodities can provide protection in an inflationary environment, says Kristi Mitchem, a senior managing director at asset manager State Street Global Advisers.

Rather than looking for the next hot commodity, invest in a broad range of commodities by tapping a mutual fund or an exchange-traded fund. "Investors should be well-diversified in commodities," says Mitchem.

Allocation toward real assets will vary depending upon the age and risk tolerance of the investor, but Mitchem says something in the 10% to 15% range is probably suitable for a broad range of people.

2. REITs
Certain kinds of real estate investment trusts can provide a hedge against inflation as well, according to Masters. REITs that are comprised of 15-year leases may provide no protection at all. "But a hotel REIT that is based on room rates that can be adjusted as the market demands may be very sensitive to inflation, although that is not always the case," Masters says.

3. Inflation-Protected Bonds
Inflation eats away at the value of traditional fixed-income securities, because the dollars you earn in interest aren't worth as much as they were when you made the investment. Over the years, financial institutions have created a number of products that shield credit from the ravages of inflation. TIPS, or Treasury Inflation-Protected Securities, are one way to go about this. TIPS offer a fixed interest rate, but the amount of principal fluctuates, as does the actual amount of interest the investor collects. At maturity, TIPS should be worth at least as much as they were when they were purchased.

Investors can also purchase I-bonds, a form of savings bond in which the interest rate, not the principal, fluctuates over time. Step-up bonds, in which the interest rate rises every year, can be found in the corporate and government agency credit markets.

4. Australian Dollars

The U.S. Treasury market was a huge beneficiary of the global flight to quality during the financial crisis. Soaring demand drove down interest rates and funded the stimulus that helped bring America out of recession. But now, the Treasury market is saturated with supply -- just look at the record $1.65 trillion 2011 deficit it's funding -- and demand as falling as the global economy recovers.

There are alternatives to U.S. Treasuries, though. "One way to hedge it is with the Australian dollar," says Steve Persky, managing partner of Dalton Investments, a $1.1 billion hedge fund based in Los Angeles. Australia came through the financial crisis without falling victim to the credit pressures faced by the U.S. and much of Europe. Its debt-to-GDP ratio was an estimated 22% last year , compared to 59% for the United States. Furthermore, its proximity to China and the other Asian growth markets is expected to help the country boost its GDP by 4.25% this year .

5. Municipal Bonds
Given the level of alarm about the municipal bond market, investors might wonder if putting money into this sector is akin to buying subprime mortgages in 2007. Yet most issuers in the municipal bond market will repay their obligations without any problem.

Muni bonds yields -- say, 4% for 10 year bonds -- are attractive, especially considering their tax-free status. The question is how to protect yourself from weaker issuers. John Taft, the CEO of RBC U.S. Wealth Management ( RBC ), says he prefers general obligation bonds and revenue-backed bonds that are linked to essential services such as water and sewer service, not special projects. Some experts suggest that larger issuers with higher ratings tend to be safer, but Taft believes that independent research by an investor or analyst before buying is key.

6. Large-Cap Stocks

In the midst of the financial crisis, investors fled the equity markets and credit prices soared. As the first signs of the recovery took hold, investors began moving back into stocks. The Standard & Poor's 500 is now at 1,330 -- up nearly 100% from early 2009.

Yet there's still opportunity in stocks, even if a market correction occurs. "Large-cap stocks are relatively undervalued," Taft says. The S&P 500 index of large companies is up 24% over the last 52 weeks, while the S&P SmallCap 600 index is up 35% over the same period of time.

7. Dividend Stocks
Research shows that dividend paying stocks tend to beat the long market. According to that theory, it's always a good time to invest in them. Wharton finance professor Jeremy Siegel researched the S&P 500 from 1957 through 2009 and found that the top 100 dividend yielding stocks had an annualized return of 12.5% over the entire period, while the 100 companies with the lowest dividend yields returned 8.8%.

"Dividends are issued by quality companies that have a history of cash on their balance sheets -- and they are often large-cap companies, which are currently undervalued," Taft says.

8. Health Care and Consumer Staples
Investors who cycle out of the broad market in springtime and shift into defensive stocks such as health care and consumer staples tend to beat the market, according to Sam Stovall, chief investment officer of S&P Equity Research Services.
The S&P 500 has returned about 6.1% a year since 1995. But if this simple rotation -- undertaken in April and lasting for six months -- is employed, investors' returns are boosted to 9.7%, according to Stovall. He says the results are even more pronounced among smaller companies. The spring defensive rotation boosts the return to 12.5%, compared to 9.7% for the broad market of smaller companies.

What accounts for this seeming mystery? Stovall says the broader market tends to perform better during the end of the year and late winter, thanks to the availability of bonus money, tax returns and other forms of liquidity. The rotation provides a defense against a traditional seasonal downturn for equities.

9. Stocks with Low Debt-to-Equity Ratios
If inflation picks up -- as many experts believe it will -- "investors may want to take a look at companies with low debt-to-equity ratios," Stovall says. As the cost of debt capital rises, companies with cleaner balance sheets will have less exposure. The debt-to-equity ratio for the broad market is 51%, but several industries have much lower ratios, including tech, with a ratio of 28%. "Tech companies tend to become self-funding because their median profit margins are high, at 15.4% compared to 9.2% for the broad market," Stovall says.

Other sectors with low debt to equity ratios include energy, with a ratio of 39%, and industrials, with a ratio of 46%.

10. Oversold Stocks

For the technically minded investor, there are standards measures that suggest when stocks are under- or over-sold. The relative strength indicator, for example, tracks stocks' performance over the last 14 days and ranks them on a scale of 0 to 100. Scores below 30 suggest that a company may be oversold.

Stovall said that as of Feb. 15, investors might want to consider these stocks with RSI's under 30: Celgene ( CELG ), CVS Caremark ( CVS ), Dreamworks Animation ( DWA ), Family Dollar Stores ( FDO ) -- now the target of a $7.6 billion takeover bid by investor Nelson Peltz -- and Peoples United Financial ( PBCT ).

11. Cash

Finally, most experts say its wise to keep a certain amount of your assets in cash. "There is nothing wrong with keeping 10% or 15% in cash," Taft says. "Warren Buffett always said to wait for the home-run pitch. That is how you make money."

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Surging Gold Demand a “Global Phenomenon” – Chinese Demand for Silver “Voracious”

By GoldCore.com

Israeli comments led to dollar weakness and gold, silver and oil rallying yesterday. The Israeli government described the Iranian warships move into the Suez canal as a “provocation” and hinted at a possible response.

Gold in USD – 10 Day (Tick)
An example, if one was needed, about how precarious the geopolitical situation in the Middle East is and how markets continue to underestimate the risk of military conflict.

Besides the very strong fundamentals, gold is looking better and better technically. After a 4 month period of correction and consolidation gold remains below levels seen last October (see chart below).

Gold bounced off support seen at the 150 day moving average and is now above the 100 day moving average. It is only 3.5% below the nominal record high of $1,423.75/oz seen in early December 2010.

Gold in USD – 1 Year (Daily) and 150 Day Moving Average
Even more important is the significant increase in demand seen in India, China and globally as people buy gold to protect themselves from macroeconomic risk and deepening inflation.

The World Gold Council reports that the increase in investment demand is a ‘global phenomenon’, reporting a 19% year-on-year rise across the world in its most recent report this morning.

In China alone, gold investment demand jumped 70% last year as Chinese people bought gold as a store of value. Demand is projected to grow a further 40 percent to 50 percent this year and jewelry demand will expand by 8 percent to 10 percent this year.

Gold imports by India, the largest buyer of gold in the world, climbed to a record of 918 metric tonnes in 2010, driven by a surge in jewelry demand with Indians continuing to buy jewelry as a store of value.

Reuters quoted a leading Chinese executive from Industrial and Commercial Bank of China (ICBC) (1398.HK) (601398.SS), the world’s largest bank by market value, as saying that demand for gold was growing at a voracious pace due to surging inflation.

Zhou said that the huge increase in Chinese demand seen last year would happen again in 2011 due to a “choppy stock market” and concerns about how rising interest rates will affect property markets.

Perhaps most importantly and rarely mentioned in the western media is the fact that the Chinese government is encouraging their citizens to buy physical gold and silver bullion having banned gold ownership from 1950 to 2003 (see video).

“Unlike the property market, investment in the gold sector is something the government is encouraging,” Zhou said.

Zhou said there was also voracious demand for silver, with ICBC bank alone selling about 13 tonnes of physical silver in January alone, compared with 33 tonnes in the whole of 2010. Were that demand to continue then demand for silver from ICBC alone could be as high as 156 tonnes this year. This would be a 370% increase on 2010.

Given the degree of demand for silver in China and internationally the forecast that silver could reach $36 an ounce this year, by Bloomberg analysts, is looking very conservative.

Those continuing to calling gold and silver “bubbles” continue to ignore the facts and the many, many extremely important developments in the gold and silver bullion markets.

Gold

Gold is trading at $1,377.75/oz, €1,017.01/oz and £854.68/oz

Silver

Silver is trading at $30.59/oz, €22.58/oz and £18.98/oz.

Platinum Group Metals

Platinum is trading at $1,825.50/oz, palladium at $835.00/oz and rhodium at $2,400/oz.

News

(Bloomberg) — China Investment Gold Demand to Grow 40-50% This Year, WGC SaysChina’s gold investment demand will grow 40 percent to 50 percent this year, Wang Lixin, the China representative for the World Gold Council, said today. The country’s jewelry demand will expand by 8 percent to 10 percent this year, he said.

(Bloomberg) — China’s Gold Investment Demand Jumps 70%, Council SaysGold investment in China jumped 70 percent last year and consumption by the jewelery sector gained to a record as investors stepped up purchases of the precious metal as a store of value, said the World Gold Council.

Investment demand jumped to 179.9 metric tons last year, surpassing Germany and the U.S., as buyers sought out gold bars and coins, according the London-based industry group. Demand from the jewelry sector was 400 tons, it said.

Gold reached a record $1,431.25 an ounce on Dec. 7 and soared nearly 30 percent last year as the dollar dropped and investors sought a store of value amid currency debasement. China’s consumer prices increased 4.9 percent in January from a year earlier, exceeding policy makers 4 percent inflation ceiling for a fourth month, data showed this week.

“The main motivation behind this demand has been concern over domestic inflation pressure and poor performance of alternative investments, combined with expectations of further gold price gains,” the council’s report said.

Bullion gained 0.3 percent to $1,379.50 at 3:34 p.m. in Shanghai.

Consumption in China, the second-largest buyer, may gain 15 percent in the first half, fueled by growing demand for alternative investments and a hedge against inflation, the China Gold Association’s deputy chairman Zhang Bingnan said last month.

China displaced South Africa as the world’s biggest gold producer in 2007. Imports through October rose almost fivefold from the total shipped in the previous year to 209 tons, according to the Shanghai Gold Exchange. Mine output reached a record 340 tons last year, the China Gold Association said.

The Industrial and Commercial Bank of China Ltd, the world’s biggest lender by market value, started physical-gold linked savings accounts in December in an initiative with the World Gold Council. Account openings surpassed 1 million with over 12 tons of gold stored on behalf of investors, it has said.

(Bloomberg) — Gold, Silver ‘Appealing’ as Long-Term Investments, Burns SaysGold and silver look “extremely appealing” for long-term investments as world currencies struggle to maintain their value, Pan American Silver Corp. Chief Executive Officer Geoff Burns said.

Pan American expects Argentina’s Chubut province to overturn a ban on open-pit mining this year to be able to develop the company’s Navidad silver deposit, Burns said today on a conference call.

(Bloomberg) — Pan American Silver Shifts Assets to Canadian DollarsPan American Silver Corp., the world’s fourth-largest silver producer, said it’s shifting its currency holdings into Canadian dollars, betting the U.S. dollar may fall further.

The world’s reserve currencies are struggling to maintain their value amid “ridiculous” debt levels, Chief Executive Officer Geoffrey Burns said today on a conference call with analysts. Gold and silver look “extremely appealing” as alternative long-term investments, he said.

“We diversified some of our currency holdings into Canadian dollars away from U.S. dollars to provide more stability in the event we do see continued weakness in the U.S. dollar,” Burns said. “It’s not just the U.S. dollar — the euro, the Japanese yen are going to have extreme difficulty hanging onto their long-term values as a commodity of trade.”

The dollar fell against most of its major counterparts today, while gold rose to the highest price in almost five weeks on speculation that the accelerating pace of inflation will boost demand for the precious metal as an investment hedge. Wholesale prices rose for a seventh straight month in the U.S., led by higher prices for fuel.

Gold futures for April delivery rose $1, or 0.1 percent, to settle at $1,375.10 an ounce at 1:34 p.m. on the Comex in New York. Silver futures for March delivery fell 6.7 cents, or 0.2 percent, to $30.629 an ounce.

Vancouver-based Pan American expects Argentina’s Chubut province to overturn a ban on open-pit mining after local elections in March, allowing the company to develop its Navidad silver deposit, Burns said. The company’s silver output will fall to 23 million ounces this year from 24 million ounces in 2010, he said. Industria Penoles SA, BHP Billiton Ltd. and KGMH Polska Miedz SA are the world’s largest silver producers.

(FT) — Investors look for a silver liningThe mint ratio, which shows how many ounces of silver it takes to buy an ounce of gold, is close to its lowest levels since 1998, currently about 45. Why?

With gold near a record high the simple explanation is that silver has been performing even better of late, driven by increased demand rather than any supply contraction.

Silver tends to hang on to gold’s coat tails when gold is stronger, during periods of inflation or political turmoil, perhaps. But gold’s recent gains have come at a time of improving economic fundamentals, so silver, which has a tight industrial demand correlation, has enjoyed extra impetus.

Another boost has come from retail investors who would rather spend their $200 on roughly five 1-ounce American Eagle silver coins, than one 10th-of-an-ounce gold coin. Doubtless the “penny-share syndrome” also applies a bit here too – when smaller priced assets are perceived as providing better opportunity for gains.

This is possibly why the US mint sold a record 6.4m Eagle silver coins in January, a 78 per cent increase on the previous year, when silver was more than 40 per cent cheaper. Gold sales were up 57 per cent over that period.

(Bloomberg) — Impala Platinum Sees 2011 Palladium Deficit of 560,000 OuncesImpala Platinum Holdings Ltd. said global palladium demand may outstrip supply by about 560,000 ounces this year. Platinum supplies may exceed demand by about 20,000 ounces in 2011 while the rhodium market may have a 55,000 ounces surplus, Impala said in a copy of a presentation posted on its website today.

(Bloomberg) — Gold Jewelry Demand Is ‘Still Very Strong,’ Council’s Grubb SaysGold jewelry demand is “still very strong,” after rising last year, World Gold Council managing director Marcus Grubb said on Bloomberg TV today.

“I certainly think we will see another very strong year for gold” this year, he said.

(Bloomberg) — Gold Jewelry Demand in India is Strong, World Gold Council SaysGold demand in India for jewelry is “outstanding” and high prices are no longer “a barrier” for consumers in the world’s largest user of bullion, according to Ajay Mitra, managing director of the World Gold Council for India and the Middle East.

Demand will stay “robust” this year, he told reporters in Mumbai today.

(Bloomberg) — Gold Imports by India Reach Record on Jewelry SalesGold imports by India, the largest user, climbed to a record in 2010, driven by a surge in jewelry demand and amid expectations that the 10-year rally in prices would extend, according to the World Gold Council.

Purchases totaled 918 metric tons, according to provisional data released by the producer-funded group today. That exceeds the projection of about 800 tons made last month by Ajay Mitra, the group’s managing director for India and the Middle East.

Bullion advanced 30 percent last year, reaching a record $1,431.25 an ounce on Dec. 7, as investors bought the metal as a protector of wealth. Jewelry demand in India jumped 69 percent in the year to the highest ever, helping drive global demand to a 10-year peak, according to the council.

“India was the strongest growth market in 2010,” said the report. “The rising price of gold, particularly in the latter half of the year, created a ‘virtuous circle’ of higher price expectations among Indian consumers, which fuelled purchases, thereby further driving up local prices.”

Fourth-quarter imports rose to 265 tons from 204 tons a year earlier, the group said. Jewelry demand gained 47 percent to 210.5 tons and investment demand grew 15 percent to 74.40 tons. Total demand in the period climbed 37 percent to 284.9 tons, according to the report.

Consumer demand for bullion in India rallied 66 percent in 2010 to 963.1 tons by volume from a year earlier and more than doubled in value to $38.2 billion, the council said.

(Reuters) — China gold demand growing at “explosive” pace: ICBCDemand in China for physical gold and gold-related investments is growing at an “explosive” pace and its appetite for the yellow metal is poised to remain robust amid inflation concerns, said an Industrial and Commercial Bank of China (ICBC) executive.

ICBC (1398.HK)(601398.SS), the world’s largest bank by market value, sold about 7 tonnes of physical gold in January this year, nearly half the 15 tonnes of bullion sold in the whole of 2010, said Zhou Ming, deputy head of the bank’s precious metals department on Wednesday.

“We are seeing explosive demand for gold. As Chinese get wealthy, they look to diversify their investments and gold stands out as a good hedge against inflation,” Zhou told Reuters.

“There is also frantic demand for non-physical gold investments. We issued 1 billion yuan worth of gold-price-linked term deposits in 2010, but we managed to sell the same amount over just a few days in January this year,” Zhou said, adding that such deposits would easily exceed 5 billion yuan ($759 million) this year.

Gold imports into China soared in 2010, turning the country, already the largest bullion miner, into a major overseas buyer for the first time.

The surge, which comes as Chinese investors look for insurance against rising inflation and currency appreciation, puts the country on track to overtake India as the world’s top gold consumer and a significant force in global gold prices.

Gold prices jumped 30 percent in 2010 and struck an all-time high of $1430.95. Spot silver surged 83 percent last year and is currently hovering at around $30 per ounce.

Zhou said China’s gold demand could grow at a stronger pace this year compared with 2010, as a choppy stock market and moves by Beijing to rein in property speculation and purchases means more investors will pile their cash in bullion investments.

“Unlike the property market, investment in the gold sector is something the government is encouraging,” he said.

Beijing has encouraged retail consumption and announced last August measures to promote and regulate the local gold market, including expanding the number of banks allowed to import bullion.

“China has a centuries-long cultural attraction to gold and because we have started at such a low base, I think demand growth will likely stay strong for quite some time,” he said.

Zhou said there was also voracious demand for silver, with the bank selling about 13 tonnes of physical silver in January alone, compared with 33 tonnes in the whole of 2010.

The scale of China’s gold demand, which has increased on average at a double-digit clip over the past decade, has caught the market by surprise. Data showed China imported 209 tonnes of gold the first 10 months of last year, versus 333 tonnes by India for the whole year.

The bank on Tuesday launched its second physical gold investment product, which sells gold bars to investors, which can be resold for cash through ICBC based on real-time gold prices.

The WGC said ICBC’s introduction of this gold investment could lift China’s gold retail investment by 10 to 15 percent in 2011 from about 170 tonnes last year.

(Bloomberg) — U.S. Mint’s Silver Suppliers Treasure Precious Metal’s RallyThe value of contracts for supplying silver to the U.S. Mint has surged along with the precious metal’s rise in the world market, according to data compiled by Bloomberg.

The federal agency that makes coins for circulation and investment paid at least $693.1 million to two of its main silver suppliers in the 2010 fiscal year, a 66 percent increase over 2009, the data show.

“For a small company, the government’s a good long-term customer to have,” Tom Power, chief executive officer of Sunshine Minting Inc., said in a Feb. 4 telephone interview. The Coeur d’Alene, Idaho-based company is the Mint’s primary supplier of silver blanks for bullion coins, which are sold to investors.

The increase in payments to Sunshine Minting and Stern Leach Co. of Attleboro, Massachusetts, a unit of London-based Cookson Group Plc, has coincided with silver’s rally as investors bought precious metals in the economic decline and to protect against Europe’s financial crisis. Spot silver has more than tripled to $30.785 an ounce through Feb. 15 from $8.967 on Nov. 20, 2008, its lowest settlement in the last five years.

Over the past 11 years, the U.S. Mint has spent at least $2.1 billion on contracts with its two main suppliers of silver blanks, or unstamped coins, according to data compiled by Bloomberg. About 80 percent of that was paid to Sunshine Minting.

Little Competition
Sunshine Minting works on five-year rolling competitive-bid contracts with the Mint, said Power. All 58 unique contracts the agency exercised in fiscal year 2010 to buy silver from the Idaho company were open to competition, according to the Federal Procurement Data System. In 24 cases, Sunshine was the only bidder, the data show.

“The production of blanks for the Mint is not easy, so there’s not a lot of competition,” Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois, said in a telephone interview Feb. 10. “It’s only two or three companies that have the equipment to do this and are willing to jump through all the loops that the U.S. Mint wants,” such as product specifications and payment schedules, he said.

The Mint purchases silver on the open market “at prevailing prices” to produce bullion, Mint spokesman Michael White said in an e-mail Feb. 8.

“The volume of bullion coins, gold and silver, produced and sold by the U.S. Mint are at peak levels since 2008,” White said. “As the price of gold and silver fluctuate, the value of blanks orders reflects that fluctuation.”

The Mint sold 35.8 million ounces of gold and silver bullion coins last year, up 30 percent from 2009, according to the agency’s annual report.

Sunshine’s Rise
Sunshine Minting’s sales to the Mint totaled $10.2 million in fiscal year 2000, the start of a rapid escalation in federal contracts that reached $579.1 million last year, according to the data compiled by Bloomberg.

Stern Leach, another major silver supplier to the Mint, experienced a similar upswing in sales to the federal government. The company’s contracts totaled $114 million last year compared with $70.4 million in 2009 and $10.7 million in 2005.

A spokesman for Stern Leach in Attleboro, Massachusetts, who refused to be identified, said Feb. 3 it is company policy to decline interviews with the news media.

Bullion Boom
The Mint’s sales of silver bullion coins jumped 77 percent to $660 million in fiscal year 2010, according to the annual report. Bullion products made of gold brought in $2.2 billion last year, up 69 percent from the previous year.

“They try to balance their supply and demand, and demand has been very, very strong, so of course they buy more,” Kaplan said. “Right now they’re making a fortune.”

White said the Mint is required by law to pass its metals costs onto the buyers of products such as bullion coins so that it can operate at no net cost to taxpayers.

“By law, the U.S. Mint must sell silver bullion coins at a price equal to the bullion value of the coin at the time of the sale, plus production costs,” White said.

The agency’s more public role is to produce coins and sell them to the Federal Reserve’s district banks at face value, yielding a so-called seigniorage profit that is sent back to the Treasury’s general fund.

Higher metal costs and a shift to production of less profitable, lower denomination coins brought the Mint’s seigniorage from circulation down 30 percent in fiscal year 2010, from $428 million to $301 million, according to its annual report.

Silver could reach $36 an ounce this year, according to a Bloomberg survey of analysts.

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Survivor Trading System - Trades of 16 February

I trades di Survivor System del 16 Febrraio. I risultati real-time di Survivor e di alcuni altri nostri trading systems sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp

Trades of Survivor System on 16 February. Real-time results of Survivor and our some other trading systemsare available at the following link: http://www.box.net/shared/5vajnzc4cp

Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.

Copper Trend

Dopo aver terminato un ciclo completo, i prezzi del Copper hanno ritracciato con un classico ABC, al termine del quale il nostro Super Commodity System ha preso un buon Buy set-up, chiuso con un buon guadagno in prossimità della trendline superiore del canale rialzista di lungo periodo. Una buona base di prezzi per veder ripartire un nuovo ciclo rialzista si trova tra 437 e 424.

After completing a full cycle the Copper prices have retraced a classic ABC, after which our Super Commodity System took a good Buy set-up, closed with a good gain on the upper trendline of the long-term bullish channel . A good base to see prices re-start a new bull cycle is between 437 and 424.

 

Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.

The Real Problem With Inflation Isn't on Wall Street

By VISHESH KUMAR

Last summer, many on Wall Street feared that the budget woes of the tiny Greek economy would threaten the very existence of the European Union and throw the world back into a brutal recession.

Then, what in hindsight proved to be a run-of-the-mill mid-recovery consolidation and slowdown phase was heralded as setting the stage for a double-dip recession . Soon, many high-profile investors were saying a brutal deflationary spiral awaited the U.S. economy.

Of course, none of these dire forecasts played out that way. But a new bogeyman is already being created as the prior fears drift away. As commodity prices post sharp gains, rampant inflation is supposed to torch corporate profit margins , destroy stock values and throw the economy into another tailspin, judging by the slew of recent news reports.

Most Pain at the Lower Rungs

But as with the prior bouts of alarmism, investors will be better served by taking a levelheaded approach. Pundit prognostications aside, inflation remain at benign levels. Companies and most consumers should be able to deal with rising commodity prices far better than the current howls over inflationary prospects would imply.

And the real concern about inflation tends to get overlooked in the overall hysteria: the harsh toll that rising prices could take on those at the lowest end of the country's socioeconomic spectrum.

It's true that inflationary pressures are rising. Wholesale prices excluding food and energy lifted at the fastest pace in two years last month, according to government data released Wednesday.

But that should hardly be surprising. The economy is witnessing a fairly sharp rebound, after all. Economists at Goldman Sachs (GS) see U.S. GDP expanding as much as 5% this year, while Deutsche Bank (DB) sees it possibly rising closer to 6% under the right circumstances.

Don't Overlook the Slack in the Economy

It would be odd not to see some inflationary pressures under these conditions, and investors should keep things in perspective.
"Although the recent pickup in some commodity prices is showing up in the core PPI, inflationary pressures remain quite low for now," analysts at Ned Davis Research wrote in a note to clients Wednesday. "We continue to expect low consumer inflation in the intermediate term, mostly due to the large amount of slack in the economy."

For one thing, the role commodity prices play in the actual costs of products may be far less than many think. Some back-of-the-envelope calculations, for example, imply that the price of wheat accounts for only 12% of a loaf of bread's cost.

That's in line with analyst estimates that wheat and corn combined account for only 14% of the cost of goods sold by General Mills (GIS) , and that company seems to be coping with rising commodity prices just fine through modest pass-through price increases.

Any eventual toll on most consumers is likely to be modest as well. Necessities like food, gas, clothing, personal care products and cleaning and laundry supplies account for less than a quarter of U.S. household spending.

Wrong Time to Cut Heating Oil Assistance

Rather, the real worry about rising commodity prices should be about how households at the lowest end of the income distribution will cope. Analysts at JP Morgan (JPM) estimate that households in the bottom fifth of income distribution spend 9% of after-tax income on gasoline, compared to less than 2% for those in the top fifth.

President Obama's approach of talking tough but making only cosmetic budget cuts may make sense broadly . But cutting back on assistance with heating oil to the poor is particularly misguided at this juncture.

Wall Street's current preoccupation with inflation may prove as ephemeral as many other jitters have recently. But far worse, the fallout for the most vulnerable corners of Main Street, meanwhile, continues to get overlooked.

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Coffee prices perk up towards 14-year highs

by javier.blas@ft.com

Coffee roaster executives used to sit down once a year with retailers to discuss prices. On rare occasions, they sat down twice a year. Currently, however, they are holding discussions almost once a month.

“It is crazy. I have never seen anything like this in my 25-year career,” one senior coffee executive recently told me.

A closer look at the market reveals that current prices are not only the highest since 1997, but also that coffee has not traded at its current level for more than a week since the price jump of 1975-77, which was triggered by a frost that destroyed Brazil’s crop.

The industry is split about what lies behind the rally. Some roasters believe that speculative funds have taken prices well above what the fundamentals of supply and demand warrant. But other consumers – and the majority of traders and coffee brokers – say that supply shortages are leading the price increase.

Colombia has suffered a string of bad crops, in part due to heavy rains. Output plunged last year to a 33-year low of 7.8m 60kg bags, down by nearly a third from 11.1m bags in 2008. The market was betting that supplies would recover to closer to 10m bags this year, but as the crop advances, traders have scaled down their expectations to about 8.5m bags. The shortage of high-quality Colombian beans is keeping the market tense.

The problems in Colombia were well known, but traders have recently been wrongfooted by low supplies from Brazil, the largest producer of arabica coffee. Traditionally, prices in New York trade at premium to the local BM&FBovespa futures market in São Paulo. But recently Brazilian prices have surged above those of New York, a clear sign that the country’s crop is not nearly as large – and probably of lower quality – than previously thought.

Meanwhile, stocks at producing countries – the traditional cushion in a tight market – are at their lowest level since the International Coffee Organisation started tracking the statistics in the early 1960s. Stocks registered with New York’s coffee exchange have also fallen sharply over the past year and a half. With physical beans from Colombia and Central America trading at a significant premium to the New York contract, traders are unlikely to deliver to the exchange’s warehouse any time soon, so registered inventories are likely to fall even lower this year.

The strength of the arabica market has opened an unusually large arbitrage with the lower quality robusta coffee bean, which trades in London. The price difference has surged to the highest level since 1997 and is approaching an all-time high. In theory, the large price difference should encourage roasters to blend more robusta coffee at the expense of arabica, helping to rebalance the market. But the industry’s flexibility to blend has changed over the past 20 years with the arrival of premium products such as Nestlé’s Nespresso, which require high-quality beans. So roasters will continue to buy expensive arabica, sidelining cheaper robusta and, in effect, making the price arbitrage largely unworkable.

So, enjoy your morning espresso – and rush for a refill. At current wholesale prices, retailers are likely to push for another round of price increases very soon.

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Demand for Silver, Platinum ETFs in India

by commodity Online

Demand for exchange traded funds (ETFs) in precious metals other than gold is growing in India, as bullion experts say that the country requires more funds in commodities like silver and platinum.

India is the largest importer and consumer of gold in the world. And Indian households own the largest chunk of physical gold in the world, in the form of gold jewellery coins, bars etc. But Gold ETFs got introduced in India only four years back.

Some eight Gold ETFs have been performing well and giving excellent returns in the last four years. But the regulatory rules have so far prohibited various companies from launching ETFs in precious metals like silver and platinum.

"As of today, government rules do not allow us to launch such investment schemes on silver and platinum. But when there is an opportunity, we will definitely try to explore," Reliance Capital Asset Management Ltd CEO Sundeep Sikka told reporters. Reliance on Wednesday launched a Gold Savings Fund.

ETFs in commodities are yet to make a deep investment sense in India, even though eight mutual funds have launched Gold ETFs in the last two years. India is the largest gold consuming and importing nation in the world and Indian households own the largest quantity of physical gold.

Spurred by the success of Gold ETFs in the last two years, several companies in India have chalked out plans to launch Silver ETFs.

According to Prithviraj Kothari, Managing Director, Riddisiddhi Bullions Ltd (RSBL), Silver ETFs will be embraced by investors in India as Gold ETFs are doing extremely well in the country.

“At present, only Gold ETFs are offered for Indian investors, but that also has seen phenomenal growth during past few months. Volumes in gold ETFs are posting over 100% growth for past several months. This shows that awareness about retail investment products like ETFs is gaining momentum and we can expect further growth in it,” Kothari said.

Even though several companies have been wanting to start Silver ETFs, the launch of the exchange traded funds in the white metal has been stuck in regulatory frameworks.

“Unlike Gold ETF, it has not been an easy sailing for Silver ETFs in India. The matter has stuck into regulatory disputes. Typically, ETFs operate in a format similar to equities, as they are traded on equities exchanges. While Gold ETFs are regulated by equities market regulator, Securities and Exchange Board of India (SEBI), the Silver ETFs are argued to be regulated by Forward Markets Commission (FMC), the commodities market regulator in India. We are awaiting for a approval from the regulators but nothing so far has been received. The matter is currently with the Indian Central government,” Kothari said.

Mumbai-based Benchmark Mutual Fund which was the first company to start a Gold ETF in 2007 and has the largest collection of more than five tonnes may be the first to launch Silver ETFs also in India.

Benchmark Mutual Fund officials said that the company is all set to launch Silver ETFs in India as soon as the government approval comes. “We are ready to launch Silver ETFs any day. We want to spread the ETF investment options to several commodities in India. After Gold ETFs, it is now the turn of Silver ETFs,” a senior Benchmark official who did not want to be named told Commodity Online.

Silver like gold is a hot investment in India. Jewellery chains across India are promoting silver as affordable and modern jewellery in place of gold.

India’s silver imports, which in US dollar terms were $309.8m in June 2010, up 854% on the year, while in the first six months of 2010 they are up 579%, at $1.69bn. India’s appetite for silver has been boosted because gold has become too expensive at current prices.

Globally, with gold prices having just scored a new all-time record high and with silver futures prices still not even close to the all-time high, many investors reckon silver futures are still a buying opportunity with still more upside price potential in the coming weeks and months.

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Major portion of China’s wheat crop remains at risk

by Commodity Online

China’s continuing drought that hit its major wheat producing province of Shandong showed no signs of easing despite recent snowfalls.

The FAO said two-third of China’s vast wheat crop is at risk due to the winter drought. The affected areas in the northern plains of China produced over 75 million tonnes of China’s total production of 112 million tonnes of wheat last year.

Any shortfall in Chinese production would have serial effects on availability and prices of wheat around the world, FAO said in an alert issued in Rome.

But China differs with FAO’s assessment and put the figure at 42%. Chen Lei, deputy director of China’s office of statye dlood control and drought relief headquarters, has said that the total wheat area under drought is 101.28 million mu (6.75 million hectares), while only 15.06million mu (1.35 million hectares) is severely affected.

Though Chinese officials have repeatedly expressed concern about the advancing drought, there has been no indication the government considered the situation as bad as depicted by the FAO.

“The FAO grabbed a lot of headlines. But if you look closely it has kept its forecast on China’s wheat output unchanged at 112 million tonnes. It is only saying that the situation will be severe if the winter drought is followed by another one in spring,” a senior Bejing-based official pointed out.

A sharp reduction in wheat yield might force the cash-rich Chinese government to go shopping which might result in a major hike in world prices. But China still has a stock of 60 million tonnes of wheat and may not rush to buy vast quantities until there is another round of drought.

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