Gas Bears Boost Bets on Catastrophic Surplus An employee passes gas cylinders stored on racks at Calor Group Plc's

distribution center in Coryton, U.K. An employee passes gas cylinders stored on racks at Calor Group Plc's distribution center in Coryton, U.K. Photographer: Chris Ratcliffe/Bloomberg Gas Bears Boost Bets on Catastrophic Surplus Daniel Acker/Bloomberg The natural gas fired 1200-megawatt Kendall Energy power plant, owned by Dynegy Inc., stands in Minooka, Illinois, U.S. The natural gas fired 1200-megawatt Kendall Energy power plant, owned by Dynegy Inc., stands in Minooka, Illinois, U.S. Photographer: Daniel Acker/Bloomberg Gas Bears Boost Bets on 'Catastrophic' Surplus A Halliburton Co. natural gas drill stands in a gas field outside of Rifle, Colorado, U.S. A Halliburton Co. natural gas drill stands in a gas field outside of Rifle, Colorado, U.S. Photographer: George Frey/Bloomberg Hedge funds turned bearish on U.S. natural gas for the first time in eight weeks as a surplus and warmer-than-normal weather pushed the price of the heating fuel to the lowest level in more than two years. The funds and other large speculators switched from bets that futures will rise to a bearish, or short, position of a net 10,344 futures equivalents in the week ended Jan. 10, according to the Commodity Futures Trading Commissions Commitments of Traders report on Jan. 13. Natural gas plunged 13 percent last week on the New York Mercantile Exchange, the biggest decline since August 2009, after forecasts showed above-average temperatures through January. Stockpiles in the week ended Jan. 6 stood at 3.377 trillion cubic feet, 17 percent above the fiveyear average, the U.S. Energy Department reported on Jan. 12. The funds that got short are feeling good right now, Kyle Cooper, director of research for IAF Advisors in Houston, said in a telephone interview on Jan. 13. As long as it stays this warm, prices have to go lower. With this type of weather, the storage surplus becomes catastrophic. Natural gas for February delivery fell 5.2 cents to $2.941 per million British thermal units on the Nymex in the week covered by the report and dropped another 9.2 percent to $2.67 on Jan. 13, the lowest settlement price since Sept. 3, 2009. The contract fell for sixth day today, dropping 12.2 cents, or 4.6 percent, to $2.548 at 10:59 a.m. in New York.

Seasonal Record Storage slipped 95 billion cubic feet in the week ended Jan. 6, compared with a five-year average decline of 128 billion, the Energy Department reported. Inventories rose to an all-time high of 3.852 trillion cubic feet on Nov. 18. Supplies may reach a seasonal record of 2.4 trillion cubic feet in March, which is when heating demand usually ends and producers begin piping more gas into storage, Cooper said. Unless production falls or cold weather bolsters demand, prices will drop to $2.40 per million Btu, and perhaps below $2, as gas overflows storage caverns and clogs pipelines, he said. This is a situation that has never been seen before, Cooper said. If we hit 2.4 trillion, youre looking at storage capacity constraints by July or August where you literally have system problems because the system is so full. Mild Weather U.S. gas production will rise to an all-time high next year amid rising output from shale formations, according to Energy Department estimates. Marketed gas output will average 67.34 billion cubic feet a day in 2012, up 2.2 percent from this year, the departments Energy Information Administration said in its Jan. 10 Short-Term Energy Outlook. Forecasts have shown higher temperatures, Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland, said in a Jan. 13 telephone interview. His predictions for January heating degree days, a measure of demand for fuel during cold weather, fell by 115, or 12 percent, to 822 from his Dec. 30 estimate of 937. Its nowhere close to what we were expecting, Rogers said. Its making everyone question whether there will be any cold weather this winter. Heating demand will be 4.4 percent below normal in the U.S. through Jan. 20, and 6 percent below normal in New York, David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri, said in a report to clients on Jan. 13. About 51 percent of U.S. households use gas for heating, according to the Energy Department. Managed Money Hedge funds and other large speculators, including commodity pools and commodity-trading advisers, switched in the week ended Jan. 10 from a net-long position of 14,318 the previous week. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps and ICE Henry Hub Swaps. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel. In other markets, funds increased oil wagers on rising prices by 1,365 to 201,672 contracts in the seven days ended Jan. 10.

They boosted positions in gasoline to the highest in records going back to 2006. Bullish bets advanced by 3,929 futures and options combined, or 5.8 percent, to 71,282 in the week ended January 10, the CFTC said. Bets that heating oil will rise increased by 3,841 futures and options combined, or 15 percent, to 30,103, the data showed.

China Hoarding of Gold Turns More Traders Bullish

China Gold Hoarding Turns More Traders Into Bulls
Gold jewelery is displayed at a precious metals store in Beijing. China overtook India in the third quarter as the largest gold-jewelry market, according to the World Gold Council. Gold jewelery is displayed at a precious metals store in Beijing. China overtook India in the third quarter as the largest gold-jewelry market, according to the World Gold Council. Photographer: Nelson Ching/Bloomberg Gold traders are the most bullish in two months after mainland China imported the most metal ever from Hong Kong and investors bought U.S. bullion coins at the fastest pace in more than two years. Eighteen of 23 surveyed by Bloomberg expect the metal to gain next week, the highest proportion since Nov. 11. Mainland China imported almost 102.8 metric tons in November, valued at about $5.4 billion, trade data on Jan. 11 showed. The U.S. Mint said it sold 85,500 ounces of American Eagle gold coins in the first 12 days of January. Fullmonth sales would reach 213,750 ounces at that pace, the most since December 2009. Bullion rallied 6.2 percent since plunging to within 1 percentage point of a bear market on Dec. 29, on mounting concern that economic growth is slowing and European leaders are failing to contain the regions debt crisis. Holdings (.GLDTONS) in exchange-traded products backed by the metal are heading for the biggest weekly expansion since midNovember and are within 2 percent of an all-time high, data compiled by Bloomberg show. The thing thats caught peoples minds is the massive increase in Chinese buying, said Ross Norman, chief executive officer of Sharps Pixley Ltd., a brokerage handling physical bullion in London. Gold has demonstrated time and time again its ability to hold purchasing power. It looks expensive and people talk about bubbles, but its not.

World Index
Bullion rose 10 percent last year on the Comex in New York, beating the 1.2 percent drop in the Standard & Poors GSCI Total Return Index of 24 commodities and the 9.4 percent

decline in the MSCI All-Country World Index of equities. Treasuries returned 9.8 percent, a Bank of America Corp. index shows. The metal fell almost 19 percent from its record closing price of $1,891.90 an ounce on Aug. 22 through Dec. 29, taking it below its 200-day moving average for the first time since January 2009. Prices closed above the moving average on Jan. 10 and settled at $1,630.80 in New York today. Holdings in bullion-backed ETPs reached 2,357.3 tons yesterday, valued at $124.1 billion and exceeding the reserves of all but four central banks. China overtook India in the third quarter as the largest gold-jewelry market, according to the World Gold Council. The gain in imports from Hong Kong may be a sign the central bank is adding to reserves, according to Sharps Pixleys Norman. The Peoples Bank of China last made known its gold reserves of 1,054 tons more than two years ago. Call Options There were 8,002 call options traded on Jan. 11 giving holders the right to buy the metal at $2,200 by July, and the six most widely held holdings are for calls at 22 percent above prices today, Comex data show. Options traders are making fewer bearish bets against the SPDR Gold Trust, the biggest gold- backed ETP, than at any time in the past 20 months. Gold is also benefiting from concern the euro zone will tumble back into recession. Germany, the regions biggest economy, shrank roughly 0.25 percent in the fourth quarter from the third, the Federal Statistics Office said Jan. 11. The euro region will contract 0.2 percent this year, compared with growth of 1.6 percent in 2011, the median of 21 economist estimates compiled by Bloomberg show. The rebound in gold is being threatened by a strengthening dollar, which rose to a 15month high against six major currencies this week. The 30-week correlation coefficient between the greenback and bullion is now at -0.43, data compiled by Bloomberg show, with a figure of -1 meaning the two always move in opposite directions.

Housing Stagnant
Global equities climbed today to the highest level since mid-November, and the U.S. Federal Reserve said Jan. 11 that the economy improved last month across most of the country even as hiring was limited and housing remained stagnant. Gold was held back toward the end of last year because of dollar strength and people having more confidence in the U.S. economy, said Carole Ferguson, an analyst at Fairfax IS in London. If people feel the U.S. economy will pull the whole world up a little bit, then you could see gold being very flat to trading down.

Hedge funds and other money managers have become less bullish, cutting bets on higher prices by 56 percent since the beginning of August. They reduced their net-long position to 110,594 futures and options in the week ended Jan. 3, the lowest since January 2009, U.S. Commodity Futures Trading Commission data show. The last time the position was that low, prices climbed about 17 percent in the next four weeks.

Benchmark Contract
Ten of 22 traders and analysts surveyed by Bloomberg expect copper to fall next week and three were neutral. The metal for delivery in three months, the London Metal Exchanges benchmark contract, declined 21 percent last year and gained 5.3 percent this month to $8,000 a ton. Raw sugar retreated 27 percent last year and settled at 23.84 cents a pound today on ICE Futures U.S. in New York, and a 2.3 percent gain this month. Six of 11 people surveyed expect prices to gain next week. Fourteen of 22 anticipate higher corn prices, while 15 of 24 said soybeans will advance. Corn fell 7.3 percent this month to $5.995 a bushel after increasing 2.8 percent in 2011. Soybeans are down 4.1 percent this month at $11.5825 a bushel after sliding 14 percent last year. You have a potential disturbance factor which is the euro crisis, said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. Investors are optimistic that the global growth rates are still high enough to support demand and commodity prices.
Gold survey results: Bullish: 18 Bearish: 3 Hold: 2 Copper survey results: Bullish: 9 Bearish: 10 Hold: 3 Corn survey results: Bullish: 14 Bearish: 5 Hold: 3 Soybean survey results: Bullish: 15 Bearish: 5 Hold: 4 Raw sugar survey results: Bullish: 6 Bearish: 3 Hold: 2 White sugar survey results: Bullish: 5 Bearish: 3 Hold: 3 White sugar premium results: Widen: 4 Narrow: 5 Neutral: 2

http://www.reuters.com/article/2012/01/16/us-china-ironore-platformidUSTRE80F06520120116 China Launches First Physical Iron Ore Trading Platform

China launched its first physical iron ore trading platform on Monday in the latest move by the world's biggest iron ore consumer to strengthen its pricing power over a raw material long dominated by giant foreign suppliers. The China Beijing International Mining Exchange (CBMX) launched the online platform together with the China Iron & Steel Association (CISA) and the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters. Unlike rivals, trade in iron ore derivatives such as swaps and futures will not be permitted in order to "better reflect the price based on actual supply and demand," Wang said. The exchange earlier said banks and financial organizations would not be allowed to participate in a bid to stem speculation. China's major steel mills -- Baosteel, Hebei Steel, Wuhan Steel, Shougang and Angang -as well as large iron ore traders including China Minmetals and Sinosteel have already agreed to become sponsor members of the platform. However, none of the major foreign iron ore suppliers have yet become members, CISA's Wang told reporters.