Commodities: The week that was; Ben Bernanke steals the show
His words marked the futures in gold and silver. Both these metals exhibited significant volatility over the course of last week tracking his testimony.
US Federal Reserve Chairman Ben Bernanke stole the show last week. He was indeed a show-stopper as far as the markets were concerned as he testified before the US Congressional House and Senate. Markets awaited and sat on the sidelines with bated breath as the testimony and Q&A sessions progressed.
His words marked the futures in gold and silver. Both these metals exhibited significant volatility over the course of last week tracking his testimony.
Ben Bernanke said two vital things.
Firstly, the tapering of QE measures would happen when the economy exhibits robust job creation and inflation getting close to 2% mark. This, he has been saying in US English, though in different styles all along the course of QE measures. But the tone of his voice and what his testimony said between the lines did move the markets.
"Bernanke appeared to scale back some of the more aggressive comments regarding curtailment of QE and focused on additional monetary stimulus for the remainder of this year," Jonathan Butler, an analyst at Mitsubishi, said to CNBC.
The report from Reuters noted that the Federal Reserve still expects scaling back of QE measures later in 2013; however has the option of changing plans should the economy changes track, the outlook gets shifted, the report noted.
"Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," he told the U.S. House of Representatives Financial Services Committee in remarks prepared beforehand on Wednesday.
“If the outlook for employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2 percent, or if financial conditions -- which have tightened recently -- were judged to be insufficiently accommodative to allow us to attain our mandated objectives, the current pace of purchases could be maintained for longer,” Bloomberg News said quoting Bernanke statement.
Secondly, Bernanke admitted that he did not understand gold prices.
“Nobody understands gold prices and I don’t really pretend to understand them either.” Bernanke has been excessively frank as he testified before the US Senate Banking Committee on Thursday.
“Gold is an unusual asset. It’s an asset that people hold as a sort of disaster insurance,” he continued to add.
“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” he said.
Weird!
Now, if Ben Bernanke who has been instrumental in taking gold to $1900 highs by announcing trillions of Dollars in printing, if Bernanke who sits above 13,452,810.551 fine troy ounces of gold, he being the US Federal reserve Chairman and the custodian of gold reserves held by the Fed, cannot understand gold prices, who else would?
One may argue that you do not have to be a mechanic to drive a vehicle; you just have to be a good driver. And Ben Bernanke looks like he is. Perhaps, Bernanke was trying to score a point. He may want to say that paper gold prices or futures prices reducing is a sign that gold demand and investor anxiety is depleting, which means economy is on the path to growth.
Now we have heard a lot about Ben; now how about Brent? Brent and for that matter WTI crude oil are in backwardation, the latter, according to Barclays, “is currently trading in its widest front month backwardation since before the financial crisis began…”
“Our view is that the steep backwardation in WTI may well turn out to be somewhat transient, reflecting a perception of increased demand and takeaway capacity in what is a seasonally strong period, but which may not last,” report from Barclays said.
Meanwhile, Thursday saw natural gas futures rallying on weather report.
Sunday shock
India did receive a Sunday shock as petrol prices were hiked by Rs1.55. This coupled with Monday shock of heightened inflation rate of 4.8% for June and the RBI declaration that it would consider the same in formulating monetary policy due month-end ensured a blitzkrieg start for the Indian week.
Meanwhile continuing rains have reportedly hampered pepper spot trade in Idukki as latest news shows. Low stocks can help cotton prices to appreciate in a matter of month.
US weather agencies said that they expect India would see relentless monsoon showers in North even as other regions may experience some relief. With Kharif sowing in full steam, moong prices may take a dent even as higher prices have driven soya plantings to record levels.
POSCO exit from Karnataka
POSCO, the South Korean steel major and a formidable presence in the global steel sector landscape decided to exit a $5 billion steel mill project at South Indian state of Karnataka on Tuesday, citing problems of land acquisition and local resistance.
"We will proceed with a steel mill project in Odisha, which is making progress. The latest move will make us more focused on the project," POSCO spokeswoman Kim Ji-young said to Reuters.
“See, POSCO came to India for free iron-ore resources. As long as that hope is alive, POSCO would continue to stick around,” said Rakesh Arora, Metals-Mining expert with Maquarie India.
Ironically, the day POSCO decided that it would exit the $5 billion Karnataka steel mill project was the day when India's Finance Minister decided to give a red carpet welcome to 100% FDI in telecom.
Also, Arcelor Mittal, two days later exited the Rs.40,000 cr Odisha project citing land acquisition issues and lack of assurance on captive iron ore security.
Detroit destruction
Detroit, used to be the Auto-capital of the world, filed for bankruptcy protection in US as it found impossible to honour its debt obligations. If approved of by the Court, the city could start to sell some of its assets and address the debt obligations.
However, to get approved of bankruptcy protection is in itself a tedium which can take around 90 days; besides there is no guarantee that the Court would approve of Chapter 9 filing.
The authorities there have to prove that, they are indeed eligible for the same; that the city, given its financial conditions has no other way out other than filing for bankruptcy under Chapter 9.
In the meantime city services like water supply, garbage removal etc. should also work. Wages too will have to be paid. The Mayor of city has assured residents and employees on both these counts.
“Detroit's case is a matter of grave concern, said Professor Chintmani Mahapatra at Centre for Canadian, US and Latin American Studies, Jawaharlal Nehru University, New Delhi. “The situation shows the internal economic illness in the US' economic system,” Mahapatra added.
SharetipsExpert.com offers free commodity tips for traders, which help traders to get huge profit in commodity trading. Get now and make good profit!
US Federal Reserve Chairman Ben Bernanke stole the show last week. He was indeed a show-stopper as far as the markets were concerned as he testified before the US Congressional House and Senate. Markets awaited and sat on the sidelines with bated breath as the testimony and Q&A sessions progressed.
His words marked the futures in gold and silver. Both these metals exhibited significant volatility over the course of last week tracking his testimony.
Ben Bernanke said two vital things.
Firstly, the tapering of QE measures would happen when the economy exhibits robust job creation and inflation getting close to 2% mark. This, he has been saying in US English, though in different styles all along the course of QE measures. But the tone of his voice and what his testimony said between the lines did move the markets.
"Bernanke appeared to scale back some of the more aggressive comments regarding curtailment of QE and focused on additional monetary stimulus for the remainder of this year," Jonathan Butler, an analyst at Mitsubishi, said to CNBC.
The report from Reuters noted that the Federal Reserve still expects scaling back of QE measures later in 2013; however has the option of changing plans should the economy changes track, the outlook gets shifted, the report noted.
"Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," he told the U.S. House of Representatives Financial Services Committee in remarks prepared beforehand on Wednesday.
“If the outlook for employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2 percent, or if financial conditions -- which have tightened recently -- were judged to be insufficiently accommodative to allow us to attain our mandated objectives, the current pace of purchases could be maintained for longer,” Bloomberg News said quoting Bernanke statement.
Secondly, Bernanke admitted that he did not understand gold prices.
“Nobody understands gold prices and I don’t really pretend to understand them either.” Bernanke has been excessively frank as he testified before the US Senate Banking Committee on Thursday.
“Gold is an unusual asset. It’s an asset that people hold as a sort of disaster insurance,” he continued to add.
“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” he said.
Weird!
Now, if Ben Bernanke who has been instrumental in taking gold to $1900 highs by announcing trillions of Dollars in printing, if Bernanke who sits above 13,452,810.551 fine troy ounces of gold, he being the US Federal reserve Chairman and the custodian of gold reserves held by the Fed, cannot understand gold prices, who else would?
One may argue that you do not have to be a mechanic to drive a vehicle; you just have to be a good driver. And Ben Bernanke looks like he is. Perhaps, Bernanke was trying to score a point. He may want to say that paper gold prices or futures prices reducing is a sign that gold demand and investor anxiety is depleting, which means economy is on the path to growth.
Now we have heard a lot about Ben; now how about Brent? Brent and for that matter WTI crude oil are in backwardation, the latter, according to Barclays, “is currently trading in its widest front month backwardation since before the financial crisis began…”
“Our view is that the steep backwardation in WTI may well turn out to be somewhat transient, reflecting a perception of increased demand and takeaway capacity in what is a seasonally strong period, but which may not last,” report from Barclays said.
Meanwhile, Thursday saw natural gas futures rallying on weather report.
Sunday shock
India did receive a Sunday shock as petrol prices were hiked by Rs1.55. This coupled with Monday shock of heightened inflation rate of 4.8% for June and the RBI declaration that it would consider the same in formulating monetary policy due month-end ensured a blitzkrieg start for the Indian week.
Meanwhile continuing rains have reportedly hampered pepper spot trade in Idukki as latest news shows. Low stocks can help cotton prices to appreciate in a matter of month.
US weather agencies said that they expect India would see relentless monsoon showers in North even as other regions may experience some relief. With Kharif sowing in full steam, moong prices may take a dent even as higher prices have driven soya plantings to record levels.
POSCO exit from Karnataka
POSCO, the South Korean steel major and a formidable presence in the global steel sector landscape decided to exit a $5 billion steel mill project at South Indian state of Karnataka on Tuesday, citing problems of land acquisition and local resistance.
"We will proceed with a steel mill project in Odisha, which is making progress. The latest move will make us more focused on the project," POSCO spokeswoman Kim Ji-young said to Reuters.
“See, POSCO came to India for free iron-ore resources. As long as that hope is alive, POSCO would continue to stick around,” said Rakesh Arora, Metals-Mining expert with Maquarie India.
Ironically, the day POSCO decided that it would exit the $5 billion Karnataka steel mill project was the day when India's Finance Minister decided to give a red carpet welcome to 100% FDI in telecom.
Also, Arcelor Mittal, two days later exited the Rs.40,000 cr Odisha project citing land acquisition issues and lack of assurance on captive iron ore security.
Detroit destruction
Detroit, used to be the Auto-capital of the world, filed for bankruptcy protection in US as it found impossible to honour its debt obligations. If approved of by the Court, the city could start to sell some of its assets and address the debt obligations.
However, to get approved of bankruptcy protection is in itself a tedium which can take around 90 days; besides there is no guarantee that the Court would approve of Chapter 9 filing.
The authorities there have to prove that, they are indeed eligible for the same; that the city, given its financial conditions has no other way out other than filing for bankruptcy under Chapter 9.
In the meantime city services like water supply, garbage removal etc. should also work. Wages too will have to be paid. The Mayor of city has assured residents and employees on both these counts.
“Detroit's case is a matter of grave concern, said Professor Chintmani Mahapatra at Centre for Canadian, US and Latin American Studies, Jawaharlal Nehru University, New Delhi. “The situation shows the internal economic illness in the US' economic system,” Mahapatra added.
SharetipsExpert.com offers free commodity tips for traders, which help traders to get huge profit in commodity trading. Get now and make good profit!
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