Close: London Session | Forex, Metals, Oil, Agriculture July 29, 2020

The iPath Bloomberg Cocoa Subindex Total Return ETN product (NIB) follows the price of cocoa futures higher and lower. According to Africa.com, approximately two million cocoa farmers in the Ivory Coast and Ghana are hurting because of the low price of cocoa beans. Moreover, the lack of income from the cocoa business could undermine governments in the region as cocoa is one of the primary revenue-producing crops. Nearby cocoa futures on the Intercontinental Exchange rose to just shy of $3000 per ton in mid-February, the highest price for the soft commodity since August 2016. A falling dollar and rising pound tend to be bullish for the price of ICE cocoa futures. In June 2017, the price of cocoa fell to a low of $1769 per ton, the lowest level for the soft commodity since 2007. The most direct route for a risk position in cocoa is via the futures and futures options that trade on the Intercontinental Exchange. The cocoa price had been falling from February through July, but the soft commodity appears to have reached a bottom, and a recovery could be on the horizon.

 

For those looking to participate in the market without venturing into the futures arena, the iPath Bloomberg Cocoa Subindex Total Return ETN product (NIB) provides an alternative. Cocoa futures in the US, like many other commodities, use the US dollar as its pricing mechanism. In August 2019, nearby ICE cocoa futures fell to a low of $2089 per ton. A weak dollar tends to support the price of commodities, and cocoa is no exception. The price pattern is a constructive sign for the cocoa market. However, while others recovered, the selling pressure remained in the cocoa futures arena. Farmers could turn to other more profitable crops, creating a long-term shortage of cocoa beans if they do not receive a living wage. September cocoa futures rose from $2092 on July 8 to a high of $2307 on July 28 or 10.28%. At first, cocoa fell with many other commodities and other asset markets.

NIB did an excellent job tracking the price of cocoa. The West African countries of the Ivory Coast and Ghana supply over 60% if the world’s annual supply of cocoa beans. Coronavirus has weighed on the demand for cocoa beans over the past months.

Here’s the one-year performance of the dollar against the euro, yen, Canadian dollar, and British Pound. Ergo, the intent is to reduce upward pressure on the dollar as foreign countries seek dollars to satisfy dollar debt obligations. As a net importer, a weaker dollar is inflationary and a stronger dollar deflationary. While there are plenty of dollar bulls amidst a global dollar shortage, they have been incorrect in their bullish outlook thus far. The US dollar continues to trade heavily against the Canadian dollar. Evidence of above-average market activity around Fed meetings is indicated by measures of volatility, like the average-true-range (ATR), recently taken for gold, the Dow Jones, and US Dollar Index. The Turkish lira remains under pressure, and the dollar is within a whisker of TRY7.0, while the euro is holding below the record high set on Monday near TRY8.2175. Goldman Sachs put out a note yesterday that warned on the dollar’s reserve currency status as Congress closes in on another round of fiscal stimulus.

 

[the_ad id =”38490″]Emerging market currencies are mostly higher on the back of the dollar’s pullback, but the Turkish lira continues to struggle. FOREX: The U.S. dollar fell to a two-year low as pressure built on the Federal Reserve to strike a dovish policy stance amid a surge in coronavirus cases. The WSJ Dollar Index, which tracks the U.S. currency against those of major trading partners, fell 0.3%, extending its decline this month to 3.1%. Meanwhile, the U.S. dollar just recently touched two-year lows, as investors see interest rates remaining low and the road to recovery perhaps taking longer than initially projected. Moreover, if people were losing confidence in the dollar, then why would they see the euro as a safe haven? The dollar is weaker against all the major currencies, and the greenback fell further below JPY105 that was violated in the North American session yesterday. This disparity was almost entirely due to the two million dollar additional loan loss provision added in the current quarter.

One could argue that gold price is reflecting a sudden drop of confidence in US dollar. The Australian dollar firmed to new highs for the year as it approached without yet trading at $0.7200. Any hint about additional action could further weaken the dollar, while reluctance to act could push it higher. Goldman was out with a note yesterday about growing warnings on the end of the dollar’s global reserve status. Similar to the current state of the Treasury market and interest rates, deciphering the U.S. dollar movement and its meaning are ambiguous.

At any rate, we believe that gold and gold miners are currently very undervalued and expect the price to increase rapidly over the next few years. Hubert is an independent gold and silver analyst who specializes in fractal analysis and the fundamentals of gold and silver . … more Hubert is an independent gold and silver analyst who specializes in fractal analysis and the fundamentals of gold and silver . Medusa’s gold recovery rates at Co-O came in at 95.8%, and this was the highest quarterly gold recovery rate in the past two years. It’s worth noting that this was one of the highest realized gold prices in Q2 among Australian gold producers, as most are quite prudent with their hedging. The VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) is up 42% year-to-date and many of the junior miners that we hold in the Gold Stock Bull portfolio are up 100%. That’s what I wrote five years ago about gold and gold mining stocks. Long-term gold bulls do not understand why market participants are surprised by the rise in gold.

 

Gold prices hit another record Monday, with the precious metal now up 27% this year, while Silver prices have also surged. The one silver lining was that the company’s average realized gold price jumped 9% sequentially, offsetting the minor headwind from lower production. Gold has already climbed to a new record high, and silver, copper, and crude oil have all made impressive price recoveries. It’s not just the price of gold and silver that warns of inflation, but the ratio of the two prices. (Source: Company Presentation) Medusa Mining released its fiscal Q4 and FY2020 results last week and reported quarterly gold production of 21,900 ounces at all-in sustaining costs of $1,116/oz. National Bank of Canada raises target price to C$3 from C$2.5, citing strong gold price and improved economic returns. Miners see their profit margins increase at a faster pace than the gold price, which often results in leveraged gains.

[the_ad id =”38490″]However, from around the same time, the Gold price took almost three years to double, thereby only catching up very late in the game. I have been bullish on gold since 2014, as I have always thought that money printing would reduce the purchasing power of money, pushing precious metals prices higher. For clues about where the price of gold might head next, the ETF flows are the best way to interpret the market’s positioning. However, I think that we should not confuse fundamentals catalysts with FOMO, and I tend to be skeptical about any asset going parabolic, including gold and silver. Of course, there are all types of variables that could impact the price trajectory for gold, but this gives us a rough idea of the potential ahead.

Still, the crude oil draw gives oil bulls a leg up and, if confirmed by the Energy Information Administration, should send oil back towards the mid-forties. Talk of a stimulus stall is holding crude oil back a bit after a surprisingly bullish 6.829 million barrel crude oil draw. The company consistently moves millions of barrels of oil on a daily basis, and regardless of the price of that oil, extracts a toll. Although production is expected to recover, and even exceed historical heights in the next few years, looking out longer term, oil sands growth will decelerate. Oil prices rebounded this morning with WTI rallying off $41 as traders shrugged off a surprising gasoline build (demand questions) and focused on API’s reporting a large crude draw. Even in 2016, when the great Fort McMurray wildfire caused operations to temporarily shutter across the oil sands, annualized output still managed to exceed that of the prior year. “API proved supportive for oil prices after showing a surprise fall in crude stockpiles,” said Kevin Solomon, an analyst at brokerage StoneX.

 

Should the Government of Alberta ease its regulated curtailment, oil sands output could rise nearly 500,000 b/d from 2020 to 2022 (over 300,000 b/d higher than 2019). Oil prices rose after a surprise drop in U.S. crude inventories. For example, pre-dividend free cash flow for the four largest oil sands producers increased three-fold from 2014, an average of more than $USD2.5 billion each in 2019. Oil products are also of interest as second wave fears of the coronavirus could impact demand. Rail was Canada’s oil lifeline in recent years when cheaper pipelines ran full and crude had no other exit from landlocked Alberta. The Permian Basin in west Texas has staggering potential to drive the United States even further into providing the oil and gas needed by an energy-hungry world. Instead, 2020 will mark the single largest production drop in the history of the Canadian oil sands-an industry that has almost always seen year-on-year additions.

Natural gas and oil define the quality of our modern day-to-day lives – and the energy required is essential. Benchmark U.S. oil prices, which were moderately higher before the data were released, added slightly to those gains afterward. This is much too high of a valuation as a 3.0x unhedged EBITDAX multiple at mid-$40s oil would value Chaparral at around $360 million. In 2019, IHS Markit projected Canadian oil sands output to reach 3.9 mmb/d in 2030 and now we expect it could reach about 3.8 mmb/d. Since 2014 the decline in upstream oil sands spending has led to a steady reduction of the number of projects in development. Before COVID-19, 2020 had the potential to mark a turning point in the Canadian oil sands.

Mr Trump last week said and other administration officials said they would send federal law enforcement officers to Chicago, Albuquerque, New Mexico, and Kansas City. Senior Trump administration personnel and national security council members were also said to have discussed the threat for some months, said The Times. It’s also a story for the FX market, because the US consuming and others producing is a weak USD story and also one of global business as usual. But what if we told you You see, most inexperienced investors focus on the most speculative part of the market – namely, tech stocks, listed on the NASDAQ. The combination of good export buying in general and the buying inside the US due to the Coronavirus has made the market short old crop Rice. With the big rush into the hot tech stocks since March 23, the NASDAQ index has risen to new record highs. Since inflation is, by definition, a monetary policy outcome, changes in market-based interest rates used to inform the Fed itself on the appropriateness of their policy stance.

 

[the_ad id =”38490″]To the downside, I suppose the government could display fiscal restraint and the Fed could raise interest rates and reduce their balance sheet. While stocks ended lower on Tuesday amid concerns over stimulus negotiations, U.S. futures inched into the green overnight as traders awaited the Fed’s latest policy decision. Recent Fed-speak threatens even more aggressive policy actions, including yield curve control and higher inflation targets. The stock began to sell off in late February along with the rest of the market once the COVID-19 panic hit the US. As addressed in the article “Fed Stimulus Has Created The Cobra Effect,” the failure of the market to “break out” of the June highs raises our risk. During Tuesday’s New York session, US investors dumped equities on weaker than expected corporate results and the US’s escalating coronavirus case count. If the Fed has our back and if Pelosi is right about “the stock market floor”, then why not taking risks?

Ahead of the trial, markets were mixed overnight, with Asian stocks seeing a varied session as investors fretted about tonight’s US Fed announcement. Virus latest: President Trump said the medical community’s warnings against using hydroxychloroquine for Covid-19 were politically motivated. Those claims were denied on Sunday when Mr Trump said neither he nor vice president Mike Pence were told about the bounties placed on American soldiers in Afghanistan. Source: Wall Street Journal Lions Gate could also sell its business at a premium to one of its larger competitors with an established foothold in OTT and movie industries. Donald Trump and senior members of his administration say talks about a fifth coronavirus recovery bill have yielded little progress. It is meant in particular to help those who borrowed in the $550 billion market for mortgages that are packaged into bonds and sold to Wall Street.

Nevertheless, people in Beijing, Washington and elsewhere would do well to reread the history books, lest our generation also “sleepwalks” into a global conflict. The Asia Times reported several days ago that Beijing has admitted that its 2.4-kilometer Three Gorges Dam spanning the Yangtze River in Hubei province “deformed slightly” after record flooding. Most of the infections were tallied in Urumqi, the capital of China’s far-western Xinjiang Province, while one case was reported in Beijing. But for Beijing to warn the world that the coronavirus, which has now killed almost 650,000 people and infected over 16 million, could be. But thanks to Beijing’s heavy-handed response to the outbreak, the mainland economy has already returned to growth. Beijing also remain high amid China’s tighter grip on Hong Kong and the UK’s phasing out of Huawei gear. The reason: an EU view that Beijing should make more concessions to level the playing field for European businesses.

 

He immediately alerted the authorities in Beijing.

It has been a well-known fact that the banks of the ECB never recovered as fully as American banks following the Great Recession. A day after the ECB requested eurozone banks suspend their dividends until January 2021, big lenders across Europe posted their earnings. The European Union is quietly playing down the prospect of reaching a deal with China this year to open up the Chinese market more to foreign investors. By geography, orders from the EU were down 14%, orders from the Americas were down 23%, and orders from Asia were down 5%, with orders from China up 3%. They’re also in talks to sell the shot to the U.S., EU and global organizations. The non-binding verdict for EU governments means external borders remain closed to people from most countries for at least two more weeks. Sanofi and GlaxoSmithKline are in talks to sell their vaccine to the U.S., EU and global organizations. After the 31st round of negotiations last week, the EU stressed a need for Chinese concessions rather than the year-end target date for an overall agreement.

 

[the_ad id =”38490″]Global Headlines Merkel s succession | The Wirecard scandal is emerging as a significant factor in the battle to control Germany after Chancellor Angela Merkel steps down. Meanwhile, the EU is determined to expand its arsenal of defensive tools to counter China s trade and investment expansion. Since then, however, the 27-nation EU has been frustrated by what it says is China s reluctance to match rhetoric about pursuing fairer policies with action. The EU and the U.K. reached a deal with Gilead for supplies of the company’s antiviral drug Veklury, the brand name for remdesivir. Comments by ECB officials today have not broken new ground. Also, the ECB has not exhausted its policy tools and is prepared to do more if necessary. The plan gained appeal thanks to a coincidence in the EU calendar. That gave Chancellor Angela Merkel reason to schedule an EU-China summit in Germany for September.

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