Global ETF News Older than One Year
ETFS Precious Metals Weekly: Gold Shrugs off CME Margin Hike, Hits New All-Time High of $1800/oz
August 15, 2011--Gold spot price hits record high above $1800/oz as central banks pledge continued loose monetary policy to prop up flagging global growth. The US Fed pledged to keep official rates at rock-bottom levels until 2013, the ECB stepped
in to purchase Italian and Spanish bonds and the Swiss and Japanese central banks intervened to weaken their currencies. Short selling equity bans were introduced in France, Spain, Italy and Belgium after shares in European banking giant Societe
Generale slumped back to credit crisis levels last week.
CME raises gold futures trading margin requirements 22%, but volatility levels suggest more modest impact than May’s silver margin hikes. Current gold price volatility is approximately half the levels seen in the sharp run up in silver margins prior to May, although historical patterns suggest scope for a possible further 15% rise in margins. Such a cumulative rise would still be less than half the hike in silver margins seen in May. It also comes against strong fundamental price drivers for gold – e.g. ongoing sovereign debt uncertainty, extraordinary monetary easing and strong central bank and strategic investor demand.
Precious metal speculative futures positioning cut after gold, palladium positioning hit records prior to gold futures margin hike. COMEX silver net speculative futures positioning dropped back to half its peak levels over the past year as NYMEX platinum and palladium counterparts were also dialled back down to around 1 year average levels. COMEX gold net speculative futures positioning saw a modest drop below previous peaks in H2 2010, though still above long run average.
Gold price rallies to record above $1800/oz as growth fears continue to stalk markets ahead of key European leaders meet next week. German chancellor Merkel and French president Sarkozy meet on Aug 16 to discuss European governance as the contentious issue of creating jointly sold ‘Eurobonds’ gathers momentum. European leaders are looking to individual governments to ratify the €440 billion European Financial Stability Facility (EFSF) by as early as September to relieve the ECB of front-line bond purchasing responsibilities. Private sector appetite for European sovereign debt remains extremely weak, with market speculation that France’s AAA rating could come under threat last week as investors begin to increasingly question debt servicing capabilities of the larger European economies.visit www.etfsecurities.com for more info
Source: ETFS Securities
External Adjustment and the Global Crisis -IMF Working paper
August 15, 2011--Summary: After widening substantially in the period preceding the global financial crisis, current account imbalances across the world have contracted to a significant extent.
This paper analyzes the factors underlying this process of external adjustment. It finds that countries whose pre-crisis current account balances were in excess of what could be explained by economic fundamentals have experienced the largest contractions in their external balance. External adjustment in deficit countries was achieved primarily through demand compression, rather than expenditure switching. Changes in other investment flows were the main channel of financial account adjustment, with official external assistance and ECB liquidity cushioning the exit of private capital flows for some countries.
view the IMF working paper-External Adjustment and the Global Crisis
Source: IMF
LCH.Clearnet Goes Exclusive With Markit
August 15, 2011--LCH.Clearnet, the embattled Anglo-French clearing house, has entered into exclusive negotiations with Markit, the credit information and market infrastructure provider, regarding a potential takeover of the clearing house,
according to two sources familiar with the situation.
The LCH.Clearnet management approached shareholders at the end of June to seek permission to enter into exclusive discussions with ...
Source: Wall Street Journal
ETF Securities-Research Update: CME Hikes Gold Margins 22% - What Does it Mean for the Gold Price?
August 12, 2011--Summary:
The CME raised margin requirements on COMEX gold futures positions 22% effective 11 August 2011. The
increase has been compared to the margin requirement increases on COMEX silver futures in May 2011 that
precipitated a sharp fall in the silver price during that period. Below we take a closer look at the current
situation and assess the likelihood of a similar situation developing for gold.
Key points:
The CME increased margin requirements on US gold futures positions by 22%. The hike went into effect at
the end of trade on 11 August 2011. There is some concern that the rise may be a precursor to more
aggressive margin increases that might spark a sell-off similar to the silver price correction in May 2011
following an 84% increase in COMEX silver futures margin requirements in the April-May period.
Based on current volatility levels, gold margin requirements are unlikely to be increased as sharply as those for silver in May. On our calculations, based on current volatility, average gold margin requirements have the potential to be increased by up to another 16% or so, bringing total margin increases to around 38%, less than half the rise faced by silver futures investors in May. Over the past two and a half years, similar levels of volatility have historically been associated with an average margin requirement equivalent to around 4.2% of the front month gold futures price. After the most recent increase, the ratio stands at approximately 3.6%, indicating a possible 0.6% further increase as a proportion of current futures pricing if the historic relationship between volatility and margin requirements hold. This would be equivalent to a total potential average margin requirement rise of around 38%.
visit www.etfsecurities.com for more info.
Source: ETF Securities
Brent crude recovers as traders spot opportunity
August 12, 2011--Commodities rebounded to end a tumultuous week at a higher level than where they began, as investors and companies interpreted the slide in prices as a buying opportunity.
Brent crude oil, the global benchmark, rallied nearly $10 a barrel from a low of $98.74 a barrel on Tuesday to close at $108.03 on Friday. Over the week, Brent was down just 1 per cent.
Source: FT.com
Oil Shocks in a Global Perspective: Are they Really that Bad?- IMF working paper
August 11, 2011--Summary: Using a comprehensive global dataset, we outline stylized facts characterizing relationships between crude oil prices and macroeconomic developments across the world. Approaching the data from several angles, we find that the impact of higher oil prices on oil-importing economies is generally small: a 25 percent increase in oil prices typically causes GDP to fall by about half of one percent or less.
While cross-country differences in impact are found to depend mainly on the relative size of oil imports, we also show that oil price shocks are not always costly for oil-importing countries: although higher oil prices increase the import bill, there are partly offsetting increases in external receipts. We provide a small open economy model illustrating the main transmission channels of oil shocks, and show how the recycling of petrodollars may mitigate the impact.
view the IMF Working paper-Oil Shocks in a Global Perspective: Are they Really that Bad?
Source: IMF
Gold pulls back from $1,800 record high
August 11, 2011--Gold dropped from record highs above $1,800 a troy ounce on Thursday as short-term traders pulled out of the market amid a rally in equities.
The fall was amplified by an announcement late on Wednesday from CME Group, which owns the Comex exchange in New York, that it would raise margin requirements – or the amount of cash investors must set aside in order to hold futures positions – for gold futures trading by 22 per cent at the end of Thursday.
Source: FT.com
Markets carnage wipes out $4 trillion
August 11, 2011--About $4 trillion has been wiped off the value of world stocks this month on concerns the eurozone debt crisis is spreading to Italy and Spain and hurting Europe's banking system, and the global economy is falling into recession.
The sum wiped off the MSCI All-Country World Index - about one-seventh of its value - is almost equivalent to the size of the combined economies of Italy, Spain, Portugal, Ireland and Greece.
The sell-off this week knocked nearly $1.6 trillion off the market capitalisation of the global benchmark after last week's $2.5 trillion loss
Source: FIN24
Emerging market bubble more likely in equities than debt, says FSI
August 11, 2011--A bubble is less likely to develop in emerging markets debt than in equities, according to First State Investments (FSI).
Gary Withers, FSI's regional managing director for EMEA, told IPE: "Due to the inflow of money and high level of returns, we have been concerned about asset bubbles potentially developing on the emerging markets equity side.
Source: IP&E
Crude oil prices have plunged for the third time in three months
Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market - August Oil Market Report
August 11, 2011--Crude oil prices have plunged for the third time in three months, reviving all the old clichés about roller-coaster volatility. In passing, we note that just as a certain asymmetry in pump prices is often remarked upon, so too policy makers seem rather less concerned with price volatility when it is to the downside (although arguably there are bigger problems to worry about with financial meltdown on the horizon).
Brent and WTI futures at the time of writing are flirting with lows near $100/bbl and $80/bbl respectively. Brent at $125/bbl back in late-April seems a long time ago. Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market and raised fears in some quarters of a double-dip recession.
From an oil market standpoint, perceived wisdom is that this must inevitably mean weaker oil demand to come. With extra crude volumes now hitting the market after OPEC boosted supply and the IEA released emergency stocks, this has been sufficient to sharply weaken prices. Lower energy input costs are well and good, but not if they are achieved at the cost of another economic crisis. Arguably, political paralysis has played a greater role in the current situation than has the financial sector. Either way, earlier bullish oil market prognoses are being hastily re-examined.
Our own base case demand trend remains remarkably unscathed, partly since our view of 2011 demand growth was already below that of some of our peers. That said, our global 2011/2012 GDP growth assumption in excess of 4% might seem optimistic in the present climate. Downward adjustments to recent US and Chinese demand data carry forward through 2012. But there are inter-fuel substitution offsets, notably in Japan.
Source: IEA
