Daily Close | Forex, Metals, Oil, Agriculture September 02, 2020



Soybeans surged as high as $9.66 per bushel in overnight trading Sunday, hitting our $960 per bushel target. Data Source: Reuters/Datastream Corn should be weak heading into harvest, but it is less than 10 cents away from July’s swing high of $3.63 per pound instead. December $3.60 corn calls will be worth at least $3,750 should the December futures contract hit our $4.35 per bushel target prior to option expiration on November 20, 2020. The market is still reacting to which way Wheat prices are going here and overseas, with Black Se prices higher yesterday.
About half of the Argentine Wheat belt is too dry and wire reports indicate that production in the worst areas could be 50% of normal. With 81 days left until expiration, the December 2020, close-to-the-money $3.60 corn calls are reasonably priced, offered at $650 each as we write this. We believe corn could be the next commodity to pop, following soybeans. General Comments: Winter Wheat markets were higher with the Chicago Winter Wheat markets leading the charge on fund buying.
Russian Winter Wheat yields have improved over time as harvesters move into areas that had better growing conditions. Minneapolis Spring Wheat were also higher, but encountered producer selling to close with smaller gains. Other commodities like natural gas and coffee have popped nicely since then as well. It is still dry in France and Russia and now Spring Wheat areas of Russia are being affected.
Spring Wheat continues to develop under good growing conditions in both the US and Canada. Trends in the Winter Wheat markets have been up.


The weakening US dollar, production cuts worldwide, and falling inventories and output in the US all support the price of crude oil. Low interest rates for a prolonged period will boost the stock market and commodity prices, depreciate the dollar, and help businesses, home buyers, etc. Families that were looking at calculators or a new smartphone last year are now looking at bigger dollar items like laptops, tablets, chromebooks, desktops, wireless earbuds and smart speakers.
The dollar index fell below its critical technical support level at 93.395, the September 2018 low, and made a lower low at 91.99 on August 31. A falling dollar is bullish for commodity prices, and crude oil is no exception. Agricultural commodities could mimic metals and soar – especially if the current downward trickle of the dollar turns into a torrent, lifting all boats in the process.” We believe the results will be the same – a weaker dollar and commodity price inflation.
The dollar index fell to a new medium-term low on August 31. The US dollar is the world’s reserve currency and the pricing benchmark for most commodities. Source: Bloomberg The dollar rallied today, extending yesterday afternoon’s surge… The million-dollar question for investors is how much of the economic recovery is already priced into stock prices with the SPY up 59.1% since late March. He began his professional career at Bear, Stearns & Co. and later co-founded a multi-billion-dollar hedge fund firm headquartered in Santa Monica, California.


There isn’t a whole lot of open interest left on COMEX for silver, but we could see more standing for delivery as the month rolls on. Recently in early August, gold and gold mining stocks have made a minor top and have been gradually pulling back since that high. I don’t expect this to be a huge month like July, but it could be a nice one that keeps silver around $29-$30. Gold had some nice delivery early on in September as well, but not to the extent silver did.
Precious metals like gold, silver and platinum are money substitutes because they are stores of value. Data Source: Reuters/Datastream This quote from our August 19 blog post sums up our thinking: “Silver and gold are the strongest commodities on the board right now.
Since late March 2020, the leading gold and silver stocks have soared. October has some interesting potential for gold, and we could see it punch through and stay above $2,000 an ounce then. So have gold and silver. They also have industrial uses, but other metals like copper and rare earths are more broadly used in industry. Gold is also a historical substitute for paper money.
Source: Bloomberg Silver futures too, having tagged $29… The VanEck Vectors Gold Miners ETF (GDX) peaked on August 5th, 2020 at $45.78 a share. Copper appreciated to over $3 per pound for the first time since 2018.


Source: CQG In August, nearby October crude oil futures traded in a range from $39.89 to $43.78 per barrel, a far cry from the price action earlier this year. As for the possibility more pain could be headed to the oil and gas industry, read our latest piece tilted “The Real Reason The Oil Rally Has Fizzled Out.” The prices of both nearby WTI and Brent crude oil recovered to over $40 per barrel, but the trajectory of the recovery slowed in late June. WTI fell to a price that was over $56 per barrel below Brent because it is a landlocked crude oil.
The price of October NYMEX crude oil futures moved from $39 on July 30 to a high of $43.78 on August 26 or 12.3%. The fund summary and top holdings of UCO include: Source: Yahoo Finance SCO is the inverse product that appreciates when the price of crude oil declines. Demand remains the critical factor for crude oil that could shift a crawling bull into a plunging bear in the blink of an eye. Source: EIA Over the same period, the EIA reported a decline of 38.2 million barrels of crude oil.
Source: API Since the week July 24, crude oil stocks have dropped by 34.965 million barrels. The price action in crude oil has been as exciting as watching paint dry over the past weeks. Shares of oil dropped sharply today with WTI crude trading as low as $41.33 as of the late lunch period. The trend is marginally higher, but there is little excitement in the crude oil market. The trend is always your best friend in markets, and it remains higher in crude oil.
The technical picture continues to support higher oil prices, and the trend is always your friend in futures markets. Exxon is expected to sell a 50% stake in the Bass Strait oil and gas joint venture in southeastern Australia, which Reuters estimates could fetch upwards of $3 billion. Rising inflation is a bullish factor for the price of crude oil. NYMEX crude oil recently rolled from September to October futures. We also write daily and weekly reports, covering key variables in U.S. natural gas market (supply, demand, storage, prices and more).
Source: Bluegold Research estimates and calculations Overall, over the next 15-day period, total natural gas demand (consumption + exports) is expected to average 83.6 bcf/d (adjusted for probability).
Now, with Brent crude contracts trading around $45.90 per barrel on Wednesday morning, a company spokesperson told Reuters it’s currently evaluating a new program to ax worldwide jobs.

United States

The Fed’s loose monetary policy is likely to inflate the stock market bubble some more and investors may start chasing stocks in the near term. The Fed’s ultra-loose monetary stance is likely to boost the stock market and make investors chase stocks some more. Last week, the US central bank told markets they are willing to tolerate higher inflation rates over the coming months. Second, short volatility bets are a big threat, as many investors (especially structured funds) believe that selling puts has become risk-free thanks to the “Fed put” (see Stranger Things).
The Fed only controls short-term rates and I don’t doubt Powell’s commitment, but investors determine long-term rates based on demands for credit and expectations for inflation. The Fed has pledged to keep interest rates low even after the economy recovers and inflation crosses 2%. But this sounds like it would be done with Microsoft (NASDAQ:MSFT), and it is not clear what the exact drivers for growth would be for Walmart.
A prime example would be Netflix (NASDAQ:NFLX), with a long-term score of 255, a short term score of 315 and an overall Compounder Score of 568. While I try to avoid discussing politics as much as possible, I believe that in addition to a growth bottom, cyclical stocks need a Trump win in November. Had it done so, it would unveil that the US debt picture, already catastrophic, is now simply apocalyptic. At this point of the bubble, the US central bank may have already lost control, which means that a financial collapse might be unstoppable.
Right now, OZK’s future yields are not looking good so long as the Fed holds its interest rates to near zero. Do not get confused by the stock market rebound: the Nasdaq mania is not the anticipation of a strong recovery. For comparisons, Facebook (NASDAQ:FB) trades with a 29.2 one-year forward P/E and offers investors a much better growth profile. Even and (Nasdaq: ) added (Nasdaq:) with BK’s “Impossible Burger” and DD’s beyond sausage used for breakfast sandwiches has given vegetarians a trendy and healthy meat alternative option.
Giants like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), as well as technology-driven consumer firms such as Amazon (NASDAQ:AMZN) and Alibaba Group (NYSE:BABA), continue to do well through the COVID-19 pandemic. The Times also notes that “Smaller studies in Denmark, Poland and the US also found a link between antisocial personality traits and a determination to ignore safety codes.”
President Trump has responded to the crisis earlier this week and said his adminstration will support struggling carriers.
Therefore, you should not bet on a massive stimulus plan from the PRC that would save the US economy. That’s how an activist Fed has created a yield-seeking bubble and the issuance of a mountain of low-grade debt that puts 1929 to shame.


However, he was severely criticized by his successor Xi Jinping who claimed that such measures were responsible for China’s financial imbalances.


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