Daily Close | Forex, Metals, Oil, Agriculture November 20, 2020

Agriculture

Source: visualizedanalytics In the soybean market, as a commodity market, the price is formed on the basis of the balance between supply and demand. This means almost functional dependence: Source: visualizedanalytics And in this context, it should be noted that the price spread between soybeans and corn is already close to abnormal. In August, the USDA forecast assumed a surplus of 2.5 million tons for the global soybean market in 2020/2021. But, more importantly, the stock-to-use ratio ratio in the US soybean market tends to decrease.
Therefore, in the long run, there is the relationship between the values of the stock-to-use ratio and the average price of the soybean futures. Source: visualizedanalytics Funds’ current net position on soybean (CBOT) still close to the historical high. Source: Goodfon The Teucrium Soybean Fund (NYSEARCA:SOYB) provides investors unleveraged direct exposure to soybeans without the need for a futures account.
Source: TradingView At the moment, the soybean futures price approaching a seven-year high. Therefore, the decision to invest in this fund should be made after analyzing the soybean market. Source: visualizedanalytics The correlation between corn and soybean remains above 80%. Source: visualizedanalytics So, I think that the Soybean ETF will rise to $18.5 in December. This will complicate further growth in the price of soybeans. Reports indicate that some Cotton could have been damaged in Georgia and the Carolinas and into eastern Virginia due to the excessive rains caused by the hurricanes.
less image source General Comments: Cotton was a little lower on speculative selling.

Currencies

This is being done to satisfy the market’s demand for safe dollar denominated assets. Those guys closely watch the US dollar, which is oversold and due to mean revert higher. The US dollar resistance at $94.60, which I pointed out a while back, has held well. To say the Fed is intentionally crashing the US dollar seems misguided. Yet, today the value of the dollar is about 9% higher than it was when QE began.

Metals

Sporting the highest average gold prices ever seen, last quarter promised to be a banner one for mid-tier gold miners. Mid-tier gold miners produce between 300k to 1m ounces of gold annually, more than smaller juniors but less than larger majors. But even if these parallel gold and gold-stock corrections haven’t matured and climaxed yet, speculators and investors need to stay abreast on the mid-tier gold miners’ fundamentals. Later on in 2008, he began researching areas of the gold and silver market that, curiously, the majority of the precious metal analyst community have left unexplored.
For 18 quarters in a row now, I’ve painstakingly analyzed the mid-tier gold miners’ latest quarterly results right after they are reported. The mid-tier gold miners also largely held the line on costs, further ramping exploding profits. Their unique mix of sizable diversified gold production, material output-growth potential, and smaller market capitalizations is ideal for outsized gains.
It has evolved to be dominated by mid-tiers, miners yielding quarterly gold output of 75k to 250k ounces. The mid-tier gold miners’ stocks are in this sector’s sweet spot for upside potential. These gold miners’ symbols are listed, some of which are from their primary foreign stock exchanges. Higher prevailing gold prices have proven a huge fundamental windfall for mid-tiers, as their latest quarterly operating and financial results reveal. The mid-tier gold miners have enjoyed outstanding performance this year.
As Bloomberg reported, some of these sellers have recently capitalized on record high gold prices in order to soften the blow of the coronavirus pandemic.
These gold miners trade in the US, Australia, South Africa, China, Canada, and Mexico making amassing this data somewhat challenging. With the Bitcoin and Crypto prices moving back to highs, we see more financial talking heads suggesting that Bitcoin is now an alternative to gold. Ironically the leading mid-tier gold-stock benchmark and trading vehicle is the misleadingly-named GDXJ VanEck Vectors Junior Gold Miners ETF.
Until this past quarter, we have to go back nearly a full decade for a time when central banks were net sellers of gold. Gold is selling off because American stock traders are dumping gold-ETF shares and gold-futures speculators’ positioning remains excessively-bullish. The World Gold Council said that Turkey and Uzbekistan have been among the biggest sellers, with Russia indicating it sold in Q3, its first time in 13 years. This ETF essentially weights gold stocks by their market capitalizations.

Oil

A modest decline in natural gas prices can probably be offset by improved oil prices (which are currently relatively low) though. The company will steadily increase that, and not only is it well positioned at current prices, it has significant room to increase profits if oil price recovers. Gulf Arab producers and all other higher-cost oil producers and will be the ones that will pump the last barrel of oil on earth. The Gulf oil producers are now actively managing supply to the oil market after demand crashed in the pandemic.
We expect oil prices to continue a short and steady recovery from current prices, with some potential spikes, helping to drive long-term shareholder value. The massive dividend of Aramco cannot fund the widening budget gap of Saudi Arabia if oil prices remain low beyond 2021, Moody’s said last month. Although ARC’s production is mostly natural gas, around 40% of its projected 2021 revenue still comes from oil and condensate.
The sooner the market balances, the sooner the Middle East petrostates may be able to breathe a sigh of relief and enjoy the coveted higher oil prices. Yet, in the near to medium term, higher oil prices will depend on the pace of demand recovery. If oil prices drop to $30/barrel, the company is essentially worthless. The major oil producers in the Gulf then rushed to raise debt via sovereign and corporate debt issuance. ARC’s 2021 development activities will be primarily (although not exclusively) focused on its natural gas assets at Dawson and Sunrise, as natural gas prices are reasonably good now.
Natural gas prices are reasonably strong right now, so there is limited long-term upside for natural gas from current levels. The introduction of anti-Russian sanctions in 2014, as well as the collapse of oil prices, have led to a GDP decline in 2015 by 2.8% YoY. The shares were largely abandoned, as we had previous written, as oil prices plunged with the OPEC+ slow reaction to the demand impact of Covid-19.
It’s worth noting here the company has >$2 billion in Hess Midstream (NYSE:HESM) one of the best oil crash midstream performers.
Oman and Bahrain, whose finances are on a more precarious footing than those of the larger oil producers in the region, also tapped bond markets this year. Crude oil prices (CL1:COM) responded better to vaccine news this week, flirting with $42/barrel. However, the debt binge will come to an end sooner or later, and the Gulf oil economies will find themselves in an all-too-familiar position. Hess Corporation’s risk is oil prices.

United States

The past two weeks’ vaccine news has certainly helped give investors additional hope for normalization in the US economy, sending them to buying stocks that would benefit the most. If the demand declines (velocity of money increases), while the Fed is still increasing the money supply, then that’s when real inflation begins. Remember: In other words, while Mnuchin’s action may lead to an adverse impact for the broader economy, it is perversely stimulative for the markets.
Yet, the students want any Trump consultant or official to face an immediate, preemptive hold depending review of their background. The letter disregards the many fellow citizens — and presumably students — who supported the Trump Administration. That same spread can also be used to help determine the health of the US economy. The company is a U.S. clearing house, which provides stability and financial integrity on Wall Street by implementing risk management principles.
Yet, the students are demanding a special rule for Trump officials. The size of the Fed’s balance sheet increased from about $1 trillion to almost $7 trillion during this time. Yes, the Fed is increasing the supply of dollars (M2), but it’s in direct proportion to the increase in demand for those dollars. Mnuchin said the Fed would not get treasury funding. I have two answers to this question – the coronavirus and Fed’s action (I wrote about this earlier). I take it as being fairly obvious that certain companies – say, Tesla (NASDAQ:TSLA), Nikola (NASDAQ:NKLA) – aren’t being valued wholly and entirely on their pure financials.
To begin with, among the main blue chips in Nasdaq, Alphabet was the hardest hit by the current crisis. Healthcare stocks were one of the main losers after Amazon (NASDAQ:AMZN) made waves with the launch of a pharmacy business. President Trump and President-elect Biden are showing little signs of coordinating the distribution of two vaccines developed by Pfizer (PFE) and Moderna (MRNA).
Despite the Fed’s best efforts, productive investments or increases in the labor force participation rate failed to appear. College Fed Challenge is a team competition for undergraduate students. Over the proceeding 12 years, the Fed would go on to do QE 2, 3, and then 4 in response to COVID. The Fed swaps bank demand deposits for bonds with banks.

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