Daily Close | Forex, Metals, Oil, Agriculture September 16, 2020

Currencies

The dollar is practically … By Darrell Delamaide/Investing.com – Sep 16, 2020 14 Will FOMC Be Good Or Bad For The U.S. Dollar? The company’s dollar based net retention rate stood at 110%, a positive result indicating growing revenue from each customer cohort. Hence, the question that has been haunting investors’ minds is: has the euro run its course against the US dollar? PD’s dollar net retention rate came in at 116% (versus 121% in the previous quarter).
On cue, on Sept. 2, the dollar fell below its January low against the yuan, securing plays on its weakness. The rand versus the US dollar ratio was this in 2020 versus 14.18 in 2019. Since then, though, the dollar’s course has been downward. (2016), Eikon Reuters Hence, we think that it could be interesting to go long the euro against the British pound and the Swiss franc. That is a play on dollar weakness. A dollar bought 6.85 on Jan. 12 of this year. Consider the US dollar against the Chinese yuan.
Bentley’s dollar-based revenue retention rate was 110% in the most recent period.

Metals

Harmony Gold differs slightly from Sibanye Stillwater because it produces platinum, palladium, and Rhodium with much smaller gold production. The bottom line is that the company generates free cash flow with lower gold production and even slightly lower average grades yearly. Barrick Gold (NYSE:GOLD) is experiencing a lot of trouble in PNG with its Porgera mine. Source: ItnewsAfrica The South African Harmony Gold Mining (HMY) is mainly a South African gold miner compared to Sibanye Stillwater (NYSE:SBSW).
It is impressive progress, especially for next year’s gold price, now above $1,950 per ounce. The project outlines an open-pit and underground operation for the first four years, with average annual gold production peaking at 203,000 ounces annually in FY2024. Gold production was in 2020, down year over year. If the gold price can resume its positive upside and cross again $2,000 per ounce, I believe HMY will cross the resistance and eventually retest $7.50.
It was a good improvement due to a significant increase in gold price realized, which was per ounce in 2020, up 13.5% from 2019. Therefore, on an initial capex to average gold production standpoint, KOTH is an exceptional project and stacks up great relative to peers. We can see that the economics improve dramatically at a A$2,500/oz gold price [US$1,825/oz], with the After-Tax NPV (8%) jumping to A$726~ million. Conversely, if gold cannot hold above $1,900 per ounce, we may experience a breakdown with a retest of the lower that I see between $4.50 and $4.00.
Given the updated FS’ satisfactory economics and a clear path to Red 5 achieving mid-tier gold producer status within 24 months, I see the stock as a Hold. In April this year, the government of Papua New Guinea has decided not to extend the mining lease for the Porgera gold mine. Gold could stay relatively supported, however, with the Federal Reserve looking likely to let inflation moderately overshoot its 2% average objective.
The gold production for 2020 was a total of including three segments: The investment thesis has not changed from my preceding article.
However, the gold sector is very volatile, and I recommend trading about 30% of your long-term position to profit from the volatility and lower your risk. The average gold price received during 2020 was versus $1,287 in 2019. Also, Harmony is active in Papua New Guinea, where it owns the Hidden Valley mine, an open-pit gold and silver mine. (Source: Company Presentation) The above table takes a look at the project from a gold sensitivity standpoint.

Oil

It has restored production after curtailments due to low oil prices, but appears to need WTI oil to reach sustained prices in the upper $40s to restart drilling activity. This assumes a $2.50 oil differential, 92% oil production and $1.50 per Mcf as a realized price for natural gas. Ring’s high debt burden means its stock is effectively an out-of-the-money option on higher oil prices, with $50s WTI oil being more ideal to support that debt burden. Ring Energy still needs improvements in oil prices as low-$40s WTI oil isn’t enough for it to restart drilling activity.
At high-$40s WTI oil, Ring may restart drilling activity, while $50s WTI oil appears to be a solid price for it. From Ring’s comments, it appears that upper-$40s WTI oil may be acceptable for it to start drilling again, although $50s WTI oil would be ideal. The 92% oil split is higher than Ring’s current production split, but the divestiture of its Delaware Basin assets will increase its oil percentage.
Ring’s capex budget would probably be voluntarily kept minimal if oil prices were low enough for its borrowing base to be reduced again though. The main risk with Ring’s debt situation is that oil prices remain stagnant and Ring’s borrowing base gets reduced again. Weaker demand and significantly lower oil prices are holding down consumer price inflation. It would be a bold move, given sentiment on oil & gas today, and not one I expect, but also not completely inconceivable to me.
That oil price is probably only enough for Ring to pay down its debt at a similar pace as anticipated borrowing base reductions though. Not only has the XLE been underperforming the broader market over the past few months, but it has been doing so despite the strong recovery in oil prices. The main risk with Ring Energy now is that WTI oil prices remain stuck in the low-$40s or below for a prolonged period of time. As a modest aside, I’ll be curious to see if Caterpillar shows any interest in Weir’s oil & gas business.
At $40 WTI oil, the realized price for Ring’s production drops to $35.22 per BOE. At $45 WTI oil, Ring would realize around $39.82 per BOE for its production using the same parameters mentioned above. At $50 WTI oil, Ring would realize approximately $44.42 per BOE for its production. Thus it’s evident that $40 WTI oil is not a good longer-term price for Ring, although the same can be said for many producers. Since natural gas production has fallen, it has done so at a faster pace than the declines seen in demand which is resulting in normalizing inventories.

United States

Specifically, the Fed will replace the reference to a “symmetric 2 percent inflation objective” with a reference to “inflation that averages 2% over time.” According to Fed Chairman Powell, important statement changes were made today to clarify their long term commitment to low rates. If we look at a 5-10-year average of the PCE price index that the Fed follows, we would argue that a 2.4.% inflation targeting regime has been introduced. Nevertheless, the Fed might reflect its new inflation regime within its statement.
Contrary to some expectations that the Fed could push forward the average maturity of its purchases, the Fed did not do that (this time).
The Wall Street firm sees Peloton’s market value doubling to $60 billion from $30 billion over the next four years, with an annualized return of 19%. Source: Unsplash VIG has tracked its index, the NASDAQ US Dividend Achievers Select Index, near perfect, even surpassing index performance depending on the time frame. The Fed will still be keen to impress that the recovery will continue to be protracted, and risks to both growth and inflation are to the downside.
The 74-year-old Halper who split his time between his Virginia farm and teaching at Cambridge, approached several Trump campaign aides during the 2016 US election . While the US economy bottomed in Q1 of 2016 – based on leading indicators – it took 12 months until machinery production was up year on year. Improvements are also expected in tomorrow’s Philadelphia Fed survey and housing market reports. In late August, Jerome Powell, the Fed chairman, said that the US Central Bank will let inflation run higher than 2%.
In any case, if the Fed wants to be seen as credible in its fight for inflation, the USD simply needs to weaken from here. President Donald Trump has the authority to sign off on a deal, but continuing concerns from national security officials could sway his decision. The Fed announcement also revealed intent to continue purchasing Treasury securities and agency mortgage-backed securities at least at the current pace.
The remarks were particularly notable given that the Fed’s July meeting minutes had heavily leaned against the policy. Interestingly, two Fed officials dissented from the latest FOMC decision as they opt for greater flexibility on policy going forward. Thus in the US, BofA notes that the second spike in cases was curbed with relatively moderate changes in behavior, slowing but not stopping the economic recovery. A (much) weaker USD will be a focal point in the Fed’s fight for higher inflation.
The Wall Street Journal’s Statement Tracker shows changes since the last meeting.

Europe

Furthermore, the outcome of Brexit remains highly uncertain, with markets divided over whether a deal between the UK and EU will be agreed or not. Even if a Brexit trade deal is agreed, there is still significant uncertainty surrounding its implementation. & and SELL USD (over time).. 1.20 will likely hold in EUR/USD this year due to a dovish ECB.

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