Analysis Topic: Commodity Markets - Metals, Softs & Oils
The analysis published under this topic are as follows.
Tuesday, July 27, 2021
Gold Investors Wavering / Commodities / Gold and Silver 2021
By: Zeal_LLC
Gold has been sucking wind this summer, trudging along after getting slammed by a distant-future-rate-hikes scare. The resulting lower prices have really damaged psychology, leaving investors wavering on gold. Their recent capital inflows have reversed into modest selling, contributing to unusual weakness in this leading alternative asset. But investment demand should roar back in this inflationary environment.
Gold entered summer 2021 with strong upside momentum, in a young upleg that had just powered up 13.5% in 2.8 months by early June. This current interrupted upleg is the fifth of gold’s secular bull, and the previous four averaged big 33.3% gains. Gold was progressing nicely until the June 16th meeting of the Fed’s Federal Open Market Committee. The FOMC was expected to do nothing, and that’s what it did.
In a nothingburger monetary-policy decision, the FOMC left its zero-interest-rate policy and $120b per month of quantitative-easing money printing in place indefinitely. There were no hints that either of these hyper-easy policy stances would be changed anytime soon. The leveraged gold-futures speculators who dominate gold’s short-term fortunes should’ve yawned at that, and gone back to enjoying lazy summers.
But with every other FOMC decision, the Fed releases a Summary of Economic Projections that shows where individual top Fed officials expect to see certain economic data in coming years. That includes their outlooks for the federal-funds rate, which are gathered in a scatter chart known as the “dot plot”. In mid-June’s version, 6 out of 18 top Fed officials thought there might be two quarter-point hikes into year-end 2023!
That was about 2.5 years into the future, an eternity away in the markets. And the dot plot has proven a notoriously-inaccurate FFR predictor anyway. That very afternoon the Fed chair himself warned that the dots are “not a Committee forecast, they’re not a plan. ... the dots are not a great forecaster of future rate moves.” He said they should “be taken with a big grain of salt.” Jerome Powell advised to ignore the dot plot!
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Sunday, July 25, 2021
Gold’s Behavior in Various Parallel Inflation Universes / Commodities / Gold and Silver 2021
By: Arkadiusz_Sieron
The current high inflation could theoretically transform into hyperinflation, disinflation, stagflation, or deflation. What does each mean for gold?Inflation, inflation, inflation. We all know that prices have surged recently. And we all know that high inflation is likely to stay with us for a while, even if we assume that the CPI annual rate has already peaked, which is not so obvious. But let’s look beyond the nearest horizon and think about what lies ahead after months of high inflation, and what consequences it could have for the gold market.
From the logical point of view, there are three options. Inflation rates could accelerate further, leading to hyperinflation in an extreme case. They could remain more or less the same, resulting possibly in stagflation when the pace of GDP growth decelerates. And, finally, the rates of annual changes in the CPI could slow down, implying disinflation, or they could even become negative – in this scenario, we would enter the world of deflation. So, which of these “flations” awaits us?
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Friday, July 23, 2021
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? / Commodities / Gold and Silver Stocks 2021
By: P_Radomski_CFA
It seems that choosing GDXJ to short the PMs was a good decision – juniors closed the day at new 2021 lows. Will our profits only grow from now on?
Gold’s yesterday’s intraday attempt to rally was not bullish. On the contrary, it was what usually happens right before a big slide. Especially given the USDX’s breakout.
Let’s start with the latter.
Thursday, July 22, 2021
Powell Gave Congress Dovish Signs. Will It Help Gold Price? / Commodities / Gold and Silver 2021
By: Arkadiusz_Sieron
Powell admits that inflation is well above the Fed’s target, but he still considers it transitory. Gold increased in response – only to fall again.Last week, Powell testified before Congress. On the one hand, Powell admitted in a way that inflation had reached a level higher than expected and is above the level accepted by the Fed in the longer run:
Inflation has increased notably and will likely remain elevated in coming months before moderating.
It means that the Fed was surprised by high inflation, but it doesn’t want to admit it explicitly. Instead, Powell admitted that inflation would likely stay at a high level for some time. The obvious question here is: why should we believe the Fed that inflation will really moderate later this year, given that the US central bank failed in forecasting inflation in the first half of 2021?
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Thursday, July 22, 2021
What’s Next For Gold Is Always About The US Dollar / Commodities / Gold and Silver 2021
By: Kelsey_Williams
Since the origin of the Federal Reserve in 1913 the US dollar has lost ninety-nine percent of its purchasing power.
Not coincidentally, but in direct reflection of the dollar’s loss in purchasing power, the price of gold has multiplied one hundred fold from $20.67 oz to $2060 oz as of August 2020.
The chart (source) below shows the ever-increasing price of gold over the past century…
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Tuesday, July 20, 2021
Gold Asks: Has Inflation Already Peaked? / Commodities / Gold and Silver 2021
By: Arkadiusz_Sieron
Inflation surged in May, and some worry that it has already reached its peak. Has it indeed? This issue is key for the Fed and the gold market.Inflation has soared recently. The CPI annual rate surged 5% in May, which was the fastest jump since the Great Recession. However, the Fed officials still maintain that inflation will only be temporary. Some of the analysts even claim that inflation has already peaked, and it will decelerate from now on. Are they right?
Well, they present a few strong arguments. First, there is no doubt that the recent rise in prices has been partially caused by the problems with the supply chains. But, luckily, the bottlenecks are short-lived phenomena, and they always resolve themselves, i.e., by the magic of market mechanism. The best example may be lumber prices which were skyrocketing earlier this year but which have recently declined, as production surged in response to rallying prices.
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Friday, July 16, 2021
Inflation Soars, Powell Remains Unmoved. What about Gold? / Commodities / Gold and Silver 2021
By: Arkadiusz_Sieron
The CPI surged 5.4% in June, but Powell still sees inflation as transitory. For now, gold has risen under the dovish Fed’s wing amid higher inflation.Did you think that 5% was high inflation? Or that inflation has already peaked? Wrong! Inflation rose even further in June, although it was already elevated in May. Indeed, the consumer price index surged 0.9% in the last month, following a 0.6% jump in May. It was the largest one-month change since June 2008, during the Great Recession.
Importantly, the Core Price Index, which excludes food and energy, also rose 0.9%(after a 0.7% increase in the previous month). It shows that inflation is accelerating not only because of higher energy prices but also due to more structural, underlying trends.
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Thursday, July 15, 2021
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why / Commodities / Gold and Silver 2021
By: Lorimer_Wilson
For the past two years at this juncture, the Precious Metals Sector has risen sharply in a month-long up cycle for Silver and with the high inflation expectations going forward a similar ramp up for the Precious Metals Sector is a real possibility.
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Thursday, July 15, 2021
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? / Commodities / Gold and Silver 2021
By: Arkadiusz_Sieron
The ECB adopts a new inflation target. Is the European Central Bank mimicking the Fed or doing its own thing? The revolution in central banking is spreading. Following the Fed, the European Central Bank has also modified its target. Last week, after an 18-months review of its monetary policy framework, the ECB published a statement on its monetary policy strategy, deciding to change its goal from “below but close to 2%” to a more symmetric aim of “2% inflation over the medium term”. The most important part of the statement is below:The Governing Council considers that price stability is best maintained by aiming for two per cent inflation over the medium term. The Governing Council’s commitment to this target is symmetric.
The symmetry means that the ECB considers both overshooting and undershooting as equally bad. In the previous framework, the ECB clearly believed that downside deviations from inflation were less harmful than upside deviations.
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Thursday, July 15, 2021
NASA And Big Tech Are Facing Off Over This Rare Gas / Commodities / Investing 2021
By: Submissions
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Wednesday, July 14, 2021
Is This The Best Way To Play The Coming Helium Boom? / Commodities / Investing 2021
By: Submissions
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Tuesday, July 13, 2021
Gold: High Time to Move Out of the Penthouse / Commodities / Gold and Silver 2021
By: P_Radomski_CFA
Gold’s days in a glamorous apartment at the top of the PMs’ building are numbered. We’d better prepare for a rapid elevator ride to the first floor.
The Gold Miners
With the gold miners essentially running laps on the treadmill, the HUI Index, the GDX ETF, and the GDXJ ETF are working extremely hard but making little progress. And with the gambit resulting in ‘one step forward, two steps back,’ frustrating exhaustion has mining stocks questioning their every move. To that point, even though the trio transitioned from the conveyor belt to the stairs in recent weeks, history shows that slow climbs often culminate with elevator rides lower. Should we expect a different outcome this time around?
Gold ended the week in the green (up by $27.30), but the HUI Index was stuck in the red (down by 1.39). This is extremely noteworthy, as a similar divergence occurred at the end of May. For context, when the yellow metal rallied by $28.60 in a week back then, the HUI Index fell by 1.37 index points.
In the following weeks, the HUI Index declined by about 50 index points, while gold declined by about $150.
Tuesday, July 13, 2021
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days / Commodities / Gold and Silver 2021
By: Lorimer_Wilson
The U.S. Dollar recently corrected upward but now appears ready to continue its move downward and this should light a fire under the price of Silver and see it undergo a 30-day run to around $38 per troy ounce as illustrated in the chart below.
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Friday, July 09, 2021
FOMC Minutes: A Confirmation of Fed’s Hawkish Shift? / Commodities / Gold and Silver 2021
By: Arkadiusz_Sieron
The latest FOMC minutes were… mixed. The discussion between hawks and doves continues giving gold no comfort. Who will gain the upper hand?Yesterday, the FOMC published the minutes from its last meeting in June. Investors who counted on some clear clues are probably disappointed, as the minutes can please both hawks and doves. Indeed, the report showed that the Fed officials are divided on their inflation outlook and the appropriate course of action. The dovish side believes that the recent high inflation readings are transitory and they will ease in the not-so-distant future, while the hawkish camp worries that the upward pressure on prices could continue next year:
Looking ahead, participants generally expected inflation to ease as the effect of these transitory factors dissipated, but several participants remarked that they anticipated that supply chain limitations and input shortages would put upward pressure on prices into next year. Several participants noted that, during the early months of the reopening, uncertainty remained too high to accurately assess how long inflation pressures will be sustained.
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Friday, July 09, 2021
Gold: The Tapering Clock Is Ticking / Commodities / Gold and Silver 2021
By: P_Radomski_CFA
With the FED increasingly hawkish and the USDX rising from the ashes, don’t be fooled by the recent upswing in gold. The bears are getting ready.
With the reflation trade getting cut off at the knees, the only asset class not feeling the pain is U.S. equities. However, while shorts capitulate and send the U.S. 10-Year Treasury higher (and the yield lower), the flattening of the U.S. yield curve screams of a potential recession. However, while the development is bullish for the USD Index and bearish for the PMs, investors are putting the cart before the horse.
To explain, while the U.S. 10-Year Treasury yield languishes in its depressed state, J.P. Morgan told clients on Jul. 6 that the Treasury benchmark is roughly three standard deviations below its model-implied fair value. For context, J.P. Morgan believes that the U.S. 10-Year Treasury yield should trade at roughly 1.60%, and, given the three-sigma underperformance, standard normal probabilities imply a roughly 99.9% chance that the Treasury benchmark will move higher over the medium term.
Thursday, July 08, 2021
The Silver Bull Is Not Transitory / Commodities / Gold and Silver 2021
By: The_Gold_Report
Peter Krauth of Silver Stock Investor delves into the silver market and discusses why it "looks primed to rally strongly on the back of multiple drivers."
Transitory. That's something we've been hearing a lot lately.
At its latest FOMC meeting the Fed naturally decided to keep the fed funds rate target at 0.25%.
It also decided not to mess with the $120 billion monthly bond buying program to help "support the flow of credit to households and businesses." Par for the course.
Meanwhile inflation numbers of the previous four months have been anything but typical. The Fed's favored Personal Consumption Expenditures Price Index has soared: in February it was 1.6%, March 2.4%, April 3.6% and in May 3.9%.
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Wednesday, July 07, 2021
The Rise of Precious Metals and Commodities / Commodities / Gold and Silver 2021
By: Monica_Kingsley
S&P 500 closed Friday on a strong note, and as the holiday-shortened week is usually accompanied by positive seasonality, it would be reasonable to expect extension of gains. Is therre any show stopper at the moment? Credit markets are strong and in a risk-on mode – but what about the odd strength in long-dated Treasuries? Are the stock traders getting it right – or the bond ones? Remember that such divergencies can take a long time to resolve, and don‘t require immediate action. It‘s the same with the Industrials and Transports in the Dow theory. So, don‘t jump to S&P 500 bearish conclusions just yet.
The stock market advance is characterized by improving market breadth, and a fresh push of reflationary trades. It would have been all too easy to lose one‘s cool post the June FOMC, and declare value to have topped – while tech amply helped by heavyweights powers the S&P 500 advance, value performance ain‘t too shabby. Even financials are weathering relatively well the retreating yields pressure, counterbalanced by the Fed relaxing share buybacks and dividend rules. Real assets including energy are surging again, and the Fed‘s bluff is being called.
Little wonder when all the central bank did, was influence inflation expectations, and precisely nothing about current inflation – let alone pressures in the pipeline. I‘ve discussed the cost-push pressures building up, leading to inflation becoming unanchored. Add job market pressures beyond the difficulties in hiring, and the issue grows more persistent. While it‘s not biting overly noticeably for the financial markets to take notice the way they did in Mar and early May, left unattended, inflation would come to bite in the not so distant future. The takeaway is that with the constant redefinitions of what transitory should mean now, the concept of Fed as inflation fighter is subject to well deserved mockery.
Look for the lull in Treasury market to continue, it‘s almost goldilocks economy as the monetary and fiscal support rivals wartime footing circumstances. Makes you wonder what would be on the table if we were faced with a recession. Thankfully, that‘s not on the horizon – we‘re in multi-year economic expansiona that won‘t end with the tapering or tightening games this year or next, not in the least.
Wednesday, July 07, 2021
HUI Gold Stocks: The Illusionist's Trick Left Investors Speechless / Commodities / Gold and Silver Stocks 2021
By: P_Radomski_CFA
The gold miners’ 2021 gains prompted a standing ovation among investors. However, they didn’t notice a magic trick until everything vanished.
The Gold Miners
After the HUI Index plunged by more than 10% and made all of its 2021 gains disappear, the magic trick left investors in a state of shock. But while Mr. Market still hasn’t sawed the HUI Index in half, the illusionist is likely gearing up for his greatest reveal. Case in point: while the Zig Zag Girl captivated audiences in the 1960s, the HUI Index’s zigzag correction leaves little to the imagination. And with the recent swoon a lot more than just smoke and mirrors, the HUI Index’s short-term optimism will likely vanish into thin air.
To explain, despite the profound drawdown, the HUI Index hasn’t been able to muster a typical relief rally. Moreover, with ominous signals increasing week by week, if history rhymes (as it tends to), the HUI Index will likely find medium-term support in the 100-to-150 range. For context, high-end 2020 support implies a move back to 150, while low-end 2015 support implies a move back to 100. And yes, it could really happen, even though such predictions seem unthinkable.
Tuesday, July 06, 2021
US Dollar Strength Holding Back Precious Metals for Now / Commodities / Gold and Silver 2021
By: MoneyMetals
Gold and silver bulls attempted to start a rally last week, but prices were capped by a strengthening U.S. Dollar Index.The buck has been advancing strongly against foreign currencies over the past month. Currency traders are encouraged by the Federal Reserve’s apparent plans to taper asset purchases and begin raising interest rates way out in 2023. Dollar buyers also seem convinced that the recent inflation spike is transitory.
That’s a huge speculative assumption on the part of anyone who holds U.S. currency. The big question investors will have to answer for themselves is whether high inflation is transitory or a strengthening U.S. dollar is transitory.
Monday, July 05, 2021
Gold Price Summer Doldrums / Commodities / Gold and Silver 2021
By: Zeal_LLC
Gold, silver, and their miners’ stocks suffer their weakest seasonals of the year in early summers. With traders’ attention normally diverted to vacations and summer fun, interest in and demand for precious metals usually wane. Without outsized investment demand, gold tends to drift sideways dragging silver and miners’ stocks with it. Long feared as the summer doldrums, they’ve really moderated in recent years.
This doldrums term is very apt for gold’s traditional summer predicament. It describes a zone surrounding the equator in the world’s oceans. There hot air is constantly rising, spawning long-lived low-pressure areas. They are often calm, with little prevailing winds. History is full of accounts of sailing ships getting trapped in this zone for days or weeks, unable to make headway. The doldrums were murder on ships’ morale.
Crews had no idea when the winds would pick up again, while they continued burning through their limited stores of food and drink. Without moving air, the stifling heat and humidity were suffocating on these ships long before air conditioning. Misery and boredom were extreme, leading to fights breaking out and occasional mutinies. Being trapped in the doldrums was viewed with dread, it was a very trying experience.
Gold investors can somewhat relate. Like clockwork trudging through early summers, gold starts drifting listlessly sideways. It often can’t make significant progress no matter what trends looked like heading into June, July, and August. As the days and weeks slowly pass, sentiment deteriorates markedly. Patience is gradually exhausted, supplanted with deep frustration. Plenty of traders capitulate, abandoning ship.
June and early July in particular have often proven desolate sentiment wastelands for precious metals, devoid of recurring seasonal demand surges. Unlike most of the rest of the year, the summer months simply lack any major income-cycle or cultural drivers of outsized gold investment demand. Yet three recent summers have been big exceptions to these decades-old seasonals, and 2021’s could still prove another.
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