Natural Gas - Commentary 19 Sept 2010

Natural gas has gained steadily over the week, rising 6.69% to trade at $4.02 per million British Thermal Units (MMBTUs) on Thursday morning. Concerns that tropical cyclones in the Gulf of Mexico may hamper gas production supported prices earlier in the week. Tropical Storm Karl may hit wells in the western region of the Gulf of Mexico, while Hurricane Igor is moving towards the Bermuda area with Category 4-force winds. Natural gas has performed horribly over the year as excess supply has suppressed gas prices. Yet there are some bright spots that exist, which should see prices rebound at some point. From an environmental perspective, natural gas emits 30% less CO2 compared to burning petroleum and 45% less CO2 than burning coal. In that respect, gas may benefit as economies push towards more carbon-friendly energy sources and begin to implement stricter carbon capping schemes. Research firm Empa recently conducted a study for the Swiss Federal Office for the Environment where they compared the CO2 emissions from hybrid cars and natural-gas–powered vehicles. They found cars powered by natural gas were better for emissions when driving on motorways, while hybrids performed better for inner-city driving. However, with hybrid technology still in its early stages and gas readily available, a move towards gas-powered vehicles, especially for trucks and buses that travel long distances, could have immediate benefits in reducing CO2 emissions. Demand for liquefied natural gas (LNG) is also set to rise in the long term as Asia and Europe start to see their domestic gas production begins to trail demand. According to gas producer Total, committed natural gas projects account for only 25% of the LNG that these regions will require in 2020. In the short term, demand for natural gas is set to increase as we approach winter and as the need for heating increases during the cooler months

Gold - Commentary On 19 Sept 2010

Gold reached an all-time high of $1274.95 per troy ounce this week as heightened economic uncertainty and quantitative easing speculation encouraged investors to increase their exposure to the precious metal. The US dollar has seen broad declines over the past week and could depreciate further if the Fed announces another round of quantitative easing. The Federal Reserve will meet on 21 September to discuss its policies and a pro–quantitative-easing tone may provide the impetus for further gains in gold. Goldman Sachs chief US economist Jan Hatzius earlier this week reported that further quantitative easing could be initiated as early as November. After the Japanese government intervened to weaken the yen on Wednesday, Japanese investors may seek shelter in gold on fears that further intervention may be on the cards. Gold has also traditionally been thought to be a good hedge against inflation, and with inflation in the UK not budging at 3%, there could be an influx of UK investors buying more bullion. The bullish sentiment was echoed by precious metals researcher GFMS, which hasn't ruled out the possibility of gold rising to $1350 this year as investment demand outstrips jewellery use. Notwithstanding this, demand for gold from the jewellery market is also expected to remain strong leading into the end of the year as gift-giving ahead of various religious festivities props up buying. This week also saw the last major gold miner close out its gold hedging positions. AngloGold Ashanti announced on Tuesday that it plans to raise around $1.5 billion to close out its hedging contracts, which were a major burden for the company as it locked in the price it received for gold at around $450 an ounce. This latest move will allow AngloGold Ashanti to benefit from future price increases in gold. This may be interpreted as a bullish signal as it suggests the miner is confident gold prices will rise further. On the other hand, it could also be considered a bearish move if you take the view that the company is closing out its previous hedge contracts in order to re-hedge at today's prices due to a belief that gold prices have peaked and will decline in the future. However, this seems unlikely as the fundamentals driving gold prices remain firmly intact.

Commodity Options Soonnnnn!

India's cabinet on Thursday approved amendments in forward contracts regulation, allowing exchanges to launch options in the commodity market, the government said in a statement.

The cabinet cleared the way to allow commodities exchanges to launch options on Thursday, a move which should boost liquidity in markets which have already attracted international investors.

"New products like options will be allowed in the commodity market," a statement issued by the government said after cabinet approved amendments to a regulatory bill. "This will benefit various stakeholders including the farmers."

The bill now goes to parliament for approval, the statement said. The Forward Markets Commission would be the regulator for the exchanges and will have autonomy, the statement said.

International investors Goldman Sachs and Intercontinental Exchange have already bought small stakes in Indian exchanges.

India's commodity market regulator, B.C. Khatua, told Reuters he expected to see institutional financial players in the futures markets after the changes.

Last month, the market regulator said India's Reliance Anil Dhirubhai Ambani Group planned to buy a stake in the Indian Commodity Exchange, a leading bourse for trade in metals including gold, while Jaypee Capital wanted to acquire 26 percent in the National Commodity and Derivatives Exchange.

Great News for Indian Commodity Traders as it paves way for hedging & better strategic trading.


Best Wishes :-)


Jai Jinendra