Close: London Session | Forex, Metals, Oil, Agriculture August 13, 2020

Agriculture

In July, rising prices for soybeans, dairy products, corn, vegetables, cotton, and fruit more than offset falling prices for meat, nuts, and wheat. Sugar prices at upper mill and naka level ruled steady on Thursday on less than expected demand. Over two decades ago Jay got his start at the Kansas City Board of Trade in the Wheat Futures pit. The Bombay Sugar Merchants Association spot rates (₹/quintal): S-grade 3,300-3,382 and M-grade 3,410-3,590.

Currencies

The dollar is on its back foot, slipping against all the major currencies but the New Zealand dollar. The dollar traded above JPY107 for the first time nearly three weeks yesterday, but could not sustain the move today. A tight monetary policy would not only deflate asset bubbles but would strengthen the dollar, which would pose a problem for emerging market debt denominated in dollars. The New Zealand dollar is trading within the ranges seen yesterday, but look for a retest on the low it saw near $0.6525.
The dollar extended a decline and oil advanced.US futures edged lower the morning after the S&P 500 finished a mere 0.2% from its highest point on record yesterday. Adjusted earnings were reported at $61 million, or $3.09 per share, or closer to $2 per share if little over a dollar in stock-based compensation is adjusted for. A disappointing increase would likely spur dollar sales and an unwind of some of this week’s increase in yields.
Gold Daily Given that both the dollar and US futures are down, and the VIX is rising, this latest price decline could be nothing more than profit-taking. Read the view Turkey has only one way to avert new crisis The lira has fallen by almost a fifth against the dollar this year. The Australian dollar approached the high for the week (~$0.7190), but demand fizzled, leaving it flat near $0.7165.

Metals

(Federal Reserve Admits Gold Price Manipulation) An update by Chris Powell of GATA is very convincing and explains clearly the rationale behind gold price manipulation. In 2002 when gold was $300 per ounce, MAM recommended to its investors to put 50% of their investment assets into physical gold stored outside the banking system. (Gold Manipulation: It’s Much Bigger Than You Think) The Fed admitted in 2009 that the gold price was manipulated. Holdings in paper gold are 9 times the total amount of gold available in the world.
We often call these digital trading mechanisms for gold “paper gold”. The drop in the gold price may well have been due to consolidation of the price, which had previously increased rapidly. Whether talking about bullion, futures, or miners, pretty much any type of gold or silver investment was paying off big. The manipulator, if there was one, could have then proceeded to buy back gold at a much lower price than Friday morning and make a nice profit.
Traditionally, the price of gold moves due to a combination of fairly simple factors: supply, demand, and investor behavior. In this context, some may remember Centamin’s merger attempt with Endeavour Mining, a company active on various gold projects in West Africa at the end of last year.

Oil

Oil prices dipped after the International Energy Agency lowered its 2020 oil demand forecast. Oil is a global commodity, and Asian demand is not the most important factor in setting the global oil price. 70-75% of Saudi Aramco’s crude oil sales head to Asia, so the company is set up to benefit more from rising Asian oil demand. Yesterday, the oil markets advanced after the markets learned that the US crude oil supplies fell for the third consecutive week. Aramco’s cost of production is so inexpensive that even when the price of oil is down, Aramco can lift its profit by selling more oil to Asia.
Oil rose for a second day on signs of improving demand, as crude stockpiles fell for the third week in a row. The agency also revised down its 2021 global oil demand estimate by 240K barrels per day to 97.1M bpd. However, without higher prices and without the demand to sell markedly more oil, investors should not expect great news. Not only was the global economy in question, but collapsing oil prices led to dirt-cheap bunker fuel prices.
The IEA similarly lowered its 2020 oil demand forecast following unprecedented travel restrictions.

United States

The only reason the Fed would even consider raising rates would be so that they could have the ability to lower them again when the next recession comes. The US government has proposed changes that would allow more water to flow through showerheads, after president Donald Trump said his hair needs to be “perfect”. The top line was below the level Wall Street would like to see, but adjusted profit appeared to be remarkably strong, as it even surpassed the consensus estimate.
This trend is likely to continue at least this year on the Fed’s easy money policy and provide a boost to the homebuilder stocks. Bond yields are a little lower across the board, with the US 10-year pulling back three basis points to around 0.65% (SPTL). Bond yields are a little lower across the board, with the US 10-year pulling back three basis points to around 0.65%. The Treasury Secretary, Steven Mnuchin together with the White House economic advisor, Larry Kudlow said yesterday that Donald Trump’s administration is considering cutting capital gains taxes.
I thought I would take some time today, therefore, to share with you what I have learned from my experiences, travelling the storied roads of Wall Street. “The items are the post office and the $3.5 billion for mail-in voting,” Mr Trump told Fox Business Network, saying Democrats want to give the post office $25 billion. Even though sawmills are lifting production, rebounding new home construction and a booming home improvement market in the US are keeping supplies tight.

China

However, a small item in its balance sheet caught analysts’ attention, and some argue this could represent bond purchases by the PBOC. This is either ignorance of how YouTube works or indifference to donors money ending up in Beijing or Moscow s pockets, said Ben Dubow, chief technology officer of Omelas. It’s the strongest signal yet that the manufacturing industry expects Washington-Beijing trade hostilities to fragment global supply lines. The U.S. Treasury Department said it was targeting Lam for “implementing Beijing’s policies of suppression of freedom and democratic processes” in the former British colony.
Beijing has bought only 5% of the energy products needed to meet the Phase 1 first year goal of $25.3 billion. Tensions between the U.S. and China also have intensified over Beijing’s sweeping national security law it imposed on Hong Kong this summer.

Europe

An escalation will likely come in the fall when the EU is expected to win WTO approval to level its own tariffs over subsidies to Boeing (NYSE:BA). The U.S. hit Germany and France with extra tariffs on some goods to squeeze the EU into settling a dispute over illegal subsidies to Airbus. Said French Finance Minister Bruno Le Maire: If there isn t a rapid resolution, the EU must prepare to retaliate, to retaliate firmly and in a united way. Conservative MPs are putting pressure on Boris Johnson to beef up his much-criticised plans for the climate emergency, including an earlier ban on fossil fuel cars.
Outgoing member Lyndsay Hopkins, who posted a picture of her card, said: “I was disappointed in Theresa May but Boris Johnson is on another scale. During the same eight-week run, the ECB’s balance sheet has grown by around 755 billion euros. News of his departure came as Boris Johnson was to meet his National Security Council.

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