-- Posted Monday, 15 September 2008 | Digg This Article
| Source: GoldSeek.com
GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR
SOVERIGN WEALTH FUND INVESTMENT IN COMMODITIES
Sovereign wealth funds have invested almost $20bn in commodities futures, according to fresh data from US regulators. It confirms for the first time the presence of state-owned vehicles in the commodities market. The Commodity Futures Trading Commission, said in a report SWFs accounted for about nine per cent of the $200bn invested in commodities indices at the end of June. Bankers have in the past said the secretive SWFs were investing in commodities – with some buying gold to hedge against the US dollar and others, particularly the Middle East-based ones, investing in agriculture.
SWFs’ investment in the commodities market attracts attention because of fears about control of strategic assets. Most state-owned investment vehicles draw their income from their countries’ exports of raw materials such as crude oil, natural gas or copper. As commodities prices have risen in the past years, the SWFs’ cash-in-hand has soared.
In future SWF investments will dictate the movement of commodities. Regulations to control SWF investment will be useless as they are state controlled.
CFTC REGULATIONS
The Commodity Futures Trading Commission said it was imposing “enhanced control” on dealing by Wall Street banks and forcing them to publish new data on their positions. The CFTC’s measures will focus on swaps – private contracts between investment banks and clients such as hedge funds or airlines that provide an exposure to commodity prices without investing directly in futures. The swap market is mostly unregulated, which some lawmakers in Washington have described as a loophole for speculators and blamed for high oil prices. Swap dealers also receive exemptions for speculative positions limits that apply to other speculators in the commodities markets. Regulations will not alter the long term bull phase in commodities. They can only reduce the pace of the rise in commodities. Supply side imbalances remain in the long term which cannot be controlled. The logic is simple: Global population continues to riseà Area under cultivation on key food products continues to fall due to rising demand for bio fuels in case of commodities and lack of new sources of supplies in case of metals and energiesà This will result continued long term investment demand in commodities along with high volatility à Greater physical demand+investment demand will support prices with the average long term prices for commodities rising with the passing of each year.
MARKETS TODAY
The US dollar weakened and precious metals rose after Lehman Brothers prepared to file for bankruptcy as Barclays Plc and Bank of America Corp. abandoned talks to buy the U.S. securities firm and Wall Street prepared for its possible liquidation. In 2008 precious metals have benefited from uncertainties in the global financial services sector and should rise for the rest of the week. Unless Lehman Brothers is nationalized by the US government gold and silver will continue to rise.
Intra day volatility will rise in commodities and foreign exchange markets. I still believe silver is a great long term investment even better than gold. In the next two to three months silver should rise at least ten percent from current prices. Crude oil will trade with a softer bias on slower global growth.
COMEX SILVER DECEMBER
Intra day silver targets $1220+ as long as it holds $1080 and $1040 holds.
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice.Prepared By Chintan Karnani. Website www.insigniaconsultants.in
-- Posted Monday, 15 September 2008 | Digg This Article | Source: GoldSeek.com
