Commodity Corner

Views on commodities and energy

from Global Investing:

There’s oil in them thar wealth funds

Some interesting new data on sovereign wealth funds from State Street Global Advisors, a huge fund firm that does a lot of business with them. Most interesting, perhaps, is that the vast majority of sovereign wealth fund money comes from oil and gas revenues rather than from countries building up large foreign reserves from other trade, eg China.

    -- The U.S. firm identified 37 major sovereign wealth funds worth a total of $3 trillion. -- More than two-thirds, or 70 percent, of that money came from oil and gas interests. -- Of the 37, all had at least $3 billion in assets. -- Eight of them had more than $100 billion. -- Only 13 of the 37 funds were not based on commodity wealth. -- Asia had the largest number of SWFs at 13. -- The 10 funds based in the Middle East had nearly half the wealth, or 46 percent, between them.

These funds, incidentally, are becoming more like mainstream investment companies by the day. State Street says they are eventually going to turn into the equivalent of large public sector pension funds and could well start becoming more active as shareholders in companies in which they invest.

from MacroScope:

Running out of resources

Oil prices are more than double the December-February troughs and commodity prices generally are going up as the market cheers signs of an economic recovery.

Jeremy Grantham, chairman of U.S.-based money monager GMO, warns that the world is running out of resources in the long run yet is not correctly pricing the fact.

from MacroScope:

Gold to go

Automatic teller machines (ATMs) -- 500 of them -- dispensing pieces of gold will be available around Germany, Switzerland and Austria by the end of this year.

That at least is the plan of German precious metals online trading company TG-Gold-Super-Markt.de. The ATMs, to be located at airports, railway stations and shopping malls, are intended to accustom ordinary people to the idea of investing in a physical asset such as gold, the thinking goes.
 
Thomas Geissler, the company's chief executive, said the gold ATMs might even improve relations between the sexes.
 
"I have yet to meet a woman who does not like a gift of gold. It's better than flowers. Flowers are more expensive. They wilt and you (as a man) don't get as many points at home as if you bring gold," he said.
 
A prototype ATM on display for a one-day marketing test at the main railway station in Frankfurt, Germany's financial capital, did indeed reward your correspondent with a 1-gramme (0.0353 ounce) piece of gold.
 
It cost the equivalent of $42.25 -- a 30 percent premium over the spot market price.

Correlation Between Oil and Equities Markets

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oil-vs-stock-market

Oil prices have been trading in an unusually strong positive correlation with equities markets over the past few months on hopes that signs of an economic recovery could mean a boost for energy demand.

But with oil and product inventories swelling and little sign of demand improving in the United States and other big developed economies, analysts warn that the linkage may be hard to maintain, especially if U.S. motorists cut back on vacations this summer.

from Global Investing:

Gold offers double-edged shine

It was Goldman Sachs who famously predicted oil prices to reach $200 a barrel last year, but there are a school of bullish investors who forecast a substantial rally in gold.

Take Gold and Energy Advisor, which predicts gold will soon reach $2,500 an ounce (from today's $895) then to $5,000. The Florida-based firm argues that gold is the only asset class that’s not only private (as opposed to state-owned), but also liquid, portable, fungible, divisible, and valuable enough that a small amount can store a massive amount of wealth.