Daily Close | Forex, Metals, Oil, Agriculture October 13, 2020



In the soybean market, as a commodity market, the price is formed on the basis of the balance between supply and demand. 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: Goodfon The Teucrium Soybean Fund (NYSEARCA:SOYB) provides investors unleveraged direct exposure to soybeans without the need for a futures account. Of course, the biggest buyer is China: Source: apps.fas.usda.gov The latest WASDE report was again positive for the soybean market.
Therefore, the decision to invest in this fund should be made after analyzing the soybean market. At the moment, the soybean futures price is already well above its five-year range. Thus, a significant decline in US soybean stocks is expected. At the same time, the USDA forecasts that the US will export 59.87 million tons of soybeans this season. General Comments: Wheat markets were mostly a little lower as a round of speculative long liquidation hit the pits.
These areas are trying to plant the next Winter Wheat crop but the dry weather and the dry soils are keeping farmers out of the fields. Ideas are that most of the Cotton crops in the region have open bolls now and that some significant damage might have been done due to wind and rain.


lower dollar, lower US real rates), we think that the long positioning in the gold futures market may increase, pushing prices higher. A dynamically managed euro fixed-income portfolio that combines higher quality government and investment-grade bonds with higher-yielding credits has the potential to generate worthwhile amounts of income with modest risk. Still, we believe euro fixed-income markets offer active investors attractive opportunities and worthwhile income.
* So, while the US market may offer a wider range of opportunities, we also see specific favorable areas in the euro markets. We also believe that the crossover area of the euro fixed-income market is well-placed-that’s the lowest-rated BBB segment of investment grade and the highest-rated BB part of HY. The US dollar bond markets offer an enormous range of investments and a great opportunity for active security selection. We believe several important factors are aligning to support the euro fixed-income markets and create attractive opportunities for investors.
The key is to dynamically adjust exposure to duration and high quality bonds to manage risk, while harvesting the higher-income generation of euro HY through accurate security selection. However, euro fixed-income markets also provide attractive valuations together with the ability to diversify US exposure. Whilst it may not matter in the shorter term, we think emerging markets currencies are cheap, particularly versus the U.S. dollar.
The euro HY market also has a much lower exposure to the volatile energy sector (2% versus 13% for the US). Many investors access exposure to euro markets through global fixed-income portfolios, but typically these have an allocation bias to the US. Several key things are going right, in our view, with fundamental, technical and valuation factors all aligning to support euro bond investors. Euro HY is denoted by BBG Barclays Euro HY Index, US HY is denoted by BBG Barclays US HY Index.
The euro HY market also offers a strong credit quality profile. The company has been exposed to forex translation since it sells globally, meaning it is beholden to many different currencies and their relative value against the dollar.
SGOL has resumed its uptrend since late September, which we mainly attribute to the halt in the dollar strength. Aggressive central bank action has “normalized” the situation, and we continue to have a reasonable hope for U.S. dollar stability (or, dare we say weakness) in the coming quarters. This adds a third mandate to the Fed’s current “dual mandate” of promoting a stable dollar and full employment.
We think that subordinated financials can offer high compensation for the risks involved and that the Additional Tier 1 (AT1) bonds of the stronger euro-area banks look particularly attractive.


We discuss gold prices through the lenses of Aberdeen Standard Physical Gold Shares (SGOL). Source: Bloomberg, Orchid Research However, we think that the COVID-19 shock has resulted in a new trading regime, in which gold prices should trade higher in the long run. This should push the COMEX gold spot price higher (even though it already trades at a high level), which should, in turn, boost SGOL. The COMEX gold price looks fairly valued based on the positive relationship between prices and ETF positioning.
Gold futs tumbled back below $1900… Silver tanked below $25… Oil price rebounded modestly today with WTI back above $40 ahead of tonight’s API inventory data… : We expect speculators to increase their net long exposure to COMEX gold due to the friendly macro environment. This is a positive fundamental force for the gold spot price, which should consequently exert upward pressure on SGOL. But it seems that the reflationary trade is back, hence the renewed upward pressure in gold prices and SGOL.
Source: Orchid Research ETF investors increased slightly their gold holdings (+3 tonnes) in the week to October 9, according to our estimates. In any case, we believe that a “buy on the dips” strategy in gold should be profitable in the long run. In his Forbes article, The 10 Minute Gold Standard, Nathan Lewis writes: “…when the value of the currency is too high compared to the standard [i.e. the price of gold determined by the central planners], you increase the supply.
The Fund physically holds gold bars in vaults based in London (UK) and Zurich (Switzerland) custodied by JP Morgan. The firm manufactures stainless steel seamless pipes, tubes and stainless steel bars. There is even a movement for a gold standard of sorts based on it. Wenzhou, China-based Huadi was founded to design and manufacture steel pipe and related products for use in a variety of end markets and in over twenty countries worldwide. The market opportunity for steel pipe is robust in the long-term, however, the Covid-19 pandemic has negatively impacted demand in the near term.
This should translate into positive gold ETF flows.
Lastly, there are signs that raw material costs are beginning to climb as Chinese demand is reported to be pushing up the price of copper, zinc, and lead. If this continues, there will be a much higher silver price, relatively soon.


The main drivers for this expected growth are a continued increase in oil & gas production, which is a major source of demand. The outbreak of the Covid-19 pandemic has reduced demand in key industries such as manufacturing, oil & gas and construction. Goldman is even predicting higher oil prices on the back of a Democrat win which is ironic because progressives are in favor of green power more than the GOP. About 20% of DNB’s business lending is to segments of the economy at higher risk from the pandemic, including a significant contribution from oil/gas and shipping borrowers.
The energy index rose 0.8 percent in September as the index for natural gas increased 4.2 percent. Most buyers are only asking for their term contract, which means no one is buying any extra crude. But in our view, the bigger news that’s coming over the next several weeks will be how much crude China starts to buy. Considering that Brent is in the $40s, drawing down storage makes no sense, so we have high confidence that China’s buying will start at the beginning of November.
They are said to be Chinese coast guard ships which have refused to relocate since approaching a Japanese fishing vessel three days ago, AP reports. This is likely going to propel Brent timespreads higher along with prices. Investing in individual securities during one of these market hyper-growth periods is like shooting fish in a barrel. In fact, the increase was better than the crude results.
Current margins are supportive of a move close to $50/bbl Brent, which appears likely if China returns in size. This also has been confirmed via lower tanker rates.

United States

When the Fed creates new money, it distorts the market signals sent by interest rates, which are the price of money. In the Fed’s latest policy meeting, Chairman Jerome Powell kept U.S. interest rates near zero and pledged to keep rates at lower levels until the end of 2023. Federal Reserve Chair Jerome Since inflation occurs whenever the Fed creates new money, Powell and his supporters want a policy of never-ending inflation. Then around the time that the US west coast comes online, we see a continued rise in price but a drop in basis back to where we started.
Fed stimulus is particularly helpful to very large publicly traded companies who can borrow by issuing bonds to the public market. Then, in late August, the US added 24 Chinese companies to its list of those banned from buying American goods, citing the companies’ alleged links to Chinese military projects. As a result, cash levels have collapsed 1.5% in past 6 months, the fastest drop since 2003 as everyone was forced to chase markets thanks to the Fed.
The US government also cites concern about the data security of millions of users of Chinese social media platforms as another factor in its curbs on TikTok and WeChat.
This legislation also requires the Fed to shape monetary policy with an eye toward eliminating racial disparities. Last summer, the Supreme Court rejected Trump’s argument that his financial records from the Mazars USA firm should be protected from the subpoena because of his status as president. Stocks tumbled on the news, which is hardly a surprise given that President Trump and even Dr. Fauci have hailed these types of therapeutic as critical in saving lives.
The US government also seeks greater scrutiny of Chinese companies listed on US exchanges. If the Trump administration gets their way in banning popular Chinese apps like WeChat or TikTok from the App Store, it could result in a worldwide iPhone shipments plunge. Because US-China tensions may escalate in the run-up to the US elections on November 3, we think caution is warranted. PSTL’s leverage is reasonable, but the company will likely need to be embraced by the unsecured credit market before it is taken seriously by Wall Street.
Additionally, Democratic challenger Joe Biden’s widening lead in the polls over President Donald Trump is also driving the stocks higher. Sure, Donald Trump may be wildly waving the pom poms, but no serious economist or investor thinks the economy is poised for greatness. The Fed’s focus on consumer inflation ignoring housing, while averaging medical costs with those on company plans and Medicare is just plain wrong.
Chinese sales of 5G iPhones could hit a snag as tensions between Washington and Beijing continue to accelerate ahead of the US presidential elections. Thus, major companies, mostly those that are publicly traded, can actually take advantage of the Fed’s activism in real-time.


With the recent crackdown by Beijing on Hong Kong, this advantage may be under some question as to the terms under which these businesses may operate. The ensuing standoff has resulted in formal diplomatic protests lodged to Beijing by Japan. China refers to the Senkaku islands as Diaoyu – which Beijing claims as its own.


The European Union (EU) recovery plan signals a new phase in eurozone integration, suggesting lower political risk. This area represents a “sweet spot” benefiting from relatively attractive yields and the support of the ECB purchase programs. In our view, investors are still betting on the anticipation of a favorable outcome in meeting upcoming Brexit deadlines. Today, ECB member Knot also said growth in Europe seems to be slowing. The FTSE 100 has enjoyed a similar rebound this October despite ongoing Brexit uncertainty.
Source: Bloomberg EUR and GBP dropped as Brexit talks breakdown…