Agriculture
USDA said that net weekly Upland Cotton export sales were 519,600 bales this year and 0 bales next ear. General Comments: Cotton closed a little lower on ideas of weak demand. It also covers the commodities market daily focusing on in-depth technical developments in GOLD, CRUDE OIL, SILVER, CORN & WHEAT.
Currencies
However, with borders closed and less property investment interest from abroad as a result of COVID-19 – this could well mean less demand for the Kiwi dollar going forward. less The greenback fell the most against the euro and the New Zealand dollar and was the most resilient versus Aussie and Sterling. In this regard, both the Kiwi and Aussie dollar could see a further rise against the greenback for the time being. Source: Bloomberg The Dollar was clubbed like a baby seal today after extending its post-Powell gains overnight (perfectly tagging unchanged on the week before dumping)…
The resurrection of the Fed’s RP program helped smooth day-to-day spikes, with the dollar, stocks, bonds, and gold all lower… From that perspective, we have seen the stronger rally in the Aussie dollar up till now, but there may be more upside built into the Kiwi. Source: Bloomberg meaning a decline in stocks has been accompanied by depreciation of the yen vs the dollar.
Initial Capex [ATNIC] ratio at a $1,450/oz gold (GLD) price to assess how much money each project delivers for each dollar spent. The buzz was white hot for Snowflake (SNOW) and that shook loose anyone with a dollar to want to participate. But the exact dollar figure on these is difficult to pinpoint. As long as there is demand for safe dollar-denominated assets, the risks of inflation are low.
The resurrection of the Fed’s RP program helped smooth day-to-day spikes, with the dollar, stocks, bonds, and gold all lower… From that perspective, we have seen the stronger rally in the Aussie dollar up till now, but there may be more upside built into the Kiwi. Source: Bloomberg meaning a decline in stocks has been accompanied by depreciation of the yen vs the dollar.
Initial Capex [ATNIC] ratio at a $1,450/oz gold (GLD) price to assess how much money each project delivers for each dollar spent. The buzz was white hot for Snowflake (SNOW) and that shook loose anyone with a dollar to want to participate. But the exact dollar figure on these is difficult to pinpoint. As long as there is demand for safe dollar-denominated assets, the risks of inflation are low.
Metals
In first place, the iShares Physical Gold ETC (IGLN) provides investment exposure to physical gold and is valued based on the London Bullion Market Association (LBMA) gold price. less When someone asks what the price of gold is, the answer depends on which gold market he means. This does not suggest that the Troilus Gold Project will not get built, nor does it suggest that Troilus Gold is a bad stock. For years, gold traded between $1,200/oz to $1,400/oz so the benefits of gold were ignored.
In the course of the last year, the copper miner has seen a huge benefit from the higher gold prices. Annual gold sales will slump to 0.8 million ounces this year and surge to 1.6 million ounces in 2022. Therefore, even though Troilus Gold has a much more substantial annual production profile (246,000 ounces vs. 175,000 ounces), it costs 62% more to build. The market will start focusing on the price of gold sending the stock much higher. Intermediate and longer term, we remain constructive on silver due to very similar factors as gold (perpetual fiat printing, prospects for higher inflation, enormous debt loads, etc.).
The market generally ignores the sales of copper by-products despite the soaring prices of gold. However, while the production profile and mine life are quite impressive, the economics across most other metrics are inferior to undeveloped gold projects owned by peers. Regardless, the estimate actually places gold prices next year at $500/oz above the amounts utilized by Freeport-McMoRan for EBITDA targets.
Based on the fact that the industry average for gold projects is $726/oz, with Silvercrest (SILV) the lowest at a gold-equivalent cost of $564/oz, Troilus’ costs are relatively high. Meanwhile, the company has a massive global gold resource of 8.11 million ounces and is valued at just $14.18/oz based on this resource. According to Freeport-McMoRan, the company gets a $70 million boost to EBITDA with every $50 increase in gold prices.
The company now provides estimates of EBITDA reaching $7 billion in 2021/22 based on gold at $1,800/oz with copper at $3/lb.
less Gold prices have been relatively stagnant in the last few weeks despite notable volatility in other markets. These figures are well below the industry average of closer to 0.40x and $40.00/oz for undeveloped gold projects. While the longer-term outlook for gold remains constructive in my opinion, the current landscape seems to lack the necessary ingredients to stage a confident run higher. At copper of $3.25/lb and gold at $2,300/oz, EBITDA might reach $9 billion placing the stock at an EV/EBITDA of only 3.5x.
In the course of the last year, the copper miner has seen a huge benefit from the higher gold prices. Annual gold sales will slump to 0.8 million ounces this year and surge to 1.6 million ounces in 2022. Therefore, even though Troilus Gold has a much more substantial annual production profile (246,000 ounces vs. 175,000 ounces), it costs 62% more to build. The market will start focusing on the price of gold sending the stock much higher. Intermediate and longer term, we remain constructive on silver due to very similar factors as gold (perpetual fiat printing, prospects for higher inflation, enormous debt loads, etc.).
The market generally ignores the sales of copper by-products despite the soaring prices of gold. However, while the production profile and mine life are quite impressive, the economics across most other metrics are inferior to undeveloped gold projects owned by peers. Regardless, the estimate actually places gold prices next year at $500/oz above the amounts utilized by Freeport-McMoRan for EBITDA targets.
Based on the fact that the industry average for gold projects is $726/oz, with Silvercrest (SILV) the lowest at a gold-equivalent cost of $564/oz, Troilus’ costs are relatively high. Meanwhile, the company has a massive global gold resource of 8.11 million ounces and is valued at just $14.18/oz based on this resource. According to Freeport-McMoRan, the company gets a $70 million boost to EBITDA with every $50 increase in gold prices.
The company now provides estimates of EBITDA reaching $7 billion in 2021/22 based on gold at $1,800/oz with copper at $3/lb.
less Gold prices have been relatively stagnant in the last few weeks despite notable volatility in other markets. These figures are well below the industry average of closer to 0.40x and $40.00/oz for undeveloped gold projects. While the longer-term outlook for gold remains constructive in my opinion, the current landscape seems to lack the necessary ingredients to stage a confident run higher. At copper of $3.25/lb and gold at $2,300/oz, EBITDA might reach $9 billion placing the stock at an EV/EBITDA of only 3.5x.
Oil
Despite the fact that crude oil stocks rose by almost 2,436 kilolitres over the past five months (22% growth), they still remain below the 5-year average level (-764 kilolitres). At 496 MMbbl, commercial crude oil stocks are still above the 5-year average (+59.3 MMbbl) as well as above last year’s level (+78.9 MMbbl). A recovery in market sentiment, indicated by stagnating selling pressure across major stock indices, likely helped provide buoyancy to crude oil.
Crude oil could struggle to extend its rebound, however, as the commodity clashes with a critical zone of technical resistance around the $41.00-price level. However, in its latest STEO report, the EIA has revised higher its crude oil production forecast – particularly, in the near term (September-December). Crude oil was jawboned higher with commentary stating ‘further necessary measures may be needed’ in light of slumping demand as the global economic recovery stalls. EIA currently expects U.S. crude oil production to average 11.09 MMbbl/d over the next 16 months (September 2020-December 2021).
Yesterday, the Energy Information Administration (EIA) reported a crude oil inventory draw of 4.4 million barrels (MMbbl) for the week to September 11. Source: EIA, Bluegold Trader estimates and calculations Crude oil production potential has been significantly damaged. – include kerosene, kerosene-type jet fuel and distillate fuel oil (does not include gasoil, diesel and marine bunker gasoil).
– include residual fuel oil only (does not include non-energy residual products such as tar and bitumen). less Crude oil has clawed back recent losses over the last three trading sessions. We also provide a daily technical analysis update for WTI oil + a detailed daily report on natural gas fundamentals. Top energy ministers comprising the JMMC gathered to discuss latest oil market outlook and review production quota compliance. Source: Ministry of Economy, Trade and Industry Domestic sales of crude oil products in India have plunged by 15.9% y-o-y in August to 14.39 million tons (-1.17 MT m-o-m).
Crude oil stock in stationary VLCCs has dropped from an estimated 120 MMbbls in mid-August to less than 60 MMbbls today. Crude oil stocks reached 13,276 kilolitres (+0.09% y-o-y). Crude Oil looks to strengthen further as it looks to resume its broader uptrend. All in all, CRUDE OIL remains biased to the upside medium term. The inventory of old wells is growing faster than the inventory of new wells, while the number of active oil rigs is down some 74% y-o-y.
Crude oil could struggle to extend its rebound, however, as the commodity clashes with a critical zone of technical resistance around the $41.00-price level. However, in its latest STEO report, the EIA has revised higher its crude oil production forecast – particularly, in the near term (September-December). Crude oil was jawboned higher with commentary stating ‘further necessary measures may be needed’ in light of slumping demand as the global economic recovery stalls. EIA currently expects U.S. crude oil production to average 11.09 MMbbl/d over the next 16 months (September 2020-December 2021).
Yesterday, the Energy Information Administration (EIA) reported a crude oil inventory draw of 4.4 million barrels (MMbbl) for the week to September 11. Source: EIA, Bluegold Trader estimates and calculations Crude oil production potential has been significantly damaged. – include kerosene, kerosene-type jet fuel and distillate fuel oil (does not include gasoil, diesel and marine bunker gasoil).
– include residual fuel oil only (does not include non-energy residual products such as tar and bitumen). less Crude oil has clawed back recent losses over the last three trading sessions. We also provide a daily technical analysis update for WTI oil + a detailed daily report on natural gas fundamentals. Top energy ministers comprising the JMMC gathered to discuss latest oil market outlook and review production quota compliance. Source: Ministry of Economy, Trade and Industry Domestic sales of crude oil products in India have plunged by 15.9% y-o-y in August to 14.39 million tons (-1.17 MT m-o-m).
Crude oil stock in stationary VLCCs has dropped from an estimated 120 MMbbls in mid-August to less than 60 MMbbls today. Crude oil stocks reached 13,276 kilolitres (+0.09% y-o-y). Crude Oil looks to strengthen further as it looks to resume its broader uptrend. All in all, CRUDE OIL remains biased to the upside medium term. The inventory of old wells is growing faster than the inventory of new wells, while the number of active oil rigs is down some 74% y-o-y.
United States
After 7 years of zero percent interest rates, the Fed started draining liquidity from the market in December 2015 by tightening rates 25 basis points. These possibilities present the picture that the Fed will have to move beyond market liquidity problems to deal with market solvency problems. Technically, we could have a new chair by then, but most don’t think the new chair or new members will have different worldviews from the current Fed. Sure, rates will remain low for years, the Fed has “QE infinity” in play, but the Federal Reserve could have been more dovish, in my view.
It is also possible that, as the year ends, the stock could get a boost from potential green investment drive from Europe and the US.
In the latter part of the expansion, the inflation rate was lagging below the Fed’s 2 percent target rate. Then, as a result, the Fed dusted off their RP operations program and entered the market for the first time in years. So this is not the start of a bear market, the Fed is not going to raise rates ever again (kidding but almost). Over the next four years, the Fed continued to tighten and launched QE runoff, letting the SOMA portfolio shrink, effectively putting more Treasurys back into the market.
If the Fed is successful, this TIPS could be a stellar investment, even with a real yield deeply negative to inflation. Nonetheless, past periods of similar market concentration have been followed by short-term corrections like we experienced in the NASDAQ this past week. In the 1960s, the relationship became a part of Federal Reserve thinking, and has remained a part of Fed policy-making, one way or another, ever since.
Policy essentially remained unchanged as expected, but it felt like the Fed could have provided a more dovish tone in their assessment. Just when the Fed was draining liquidity, more Treasurys were coming into the market via QE runoff and new issuance. To this end, I wonder if the Fed is promoting a stance that is too “dovish”, running the risk of upsetting market expectations down the road. Our CEO discusses some of the Fed’s latest decisions and why he does not anticipate the Fed changing course anytime soon in this quarter’s market outlook.
The latest run for momentum ended abruptly last week as the NASDAQ 100 Index fell into correction territory over just three trading days. Interest rates, which are determined by the Fed, have an extraordinary impact on both the health and growth of the economy. “The Fed’s stress tests earlier this year showed the strength of large banks under many different scenarios,” Vice Chair Randal K. Quarles said.
Source: Think or Swim, Ameritrade Nasdaq futures made a new low this morning below the key 11K support level.
It is also possible that, as the year ends, the stock could get a boost from potential green investment drive from Europe and the US.
In the latter part of the expansion, the inflation rate was lagging below the Fed’s 2 percent target rate. Then, as a result, the Fed dusted off their RP operations program and entered the market for the first time in years. So this is not the start of a bear market, the Fed is not going to raise rates ever again (kidding but almost). Over the next four years, the Fed continued to tighten and launched QE runoff, letting the SOMA portfolio shrink, effectively putting more Treasurys back into the market.
If the Fed is successful, this TIPS could be a stellar investment, even with a real yield deeply negative to inflation. Nonetheless, past periods of similar market concentration have been followed by short-term corrections like we experienced in the NASDAQ this past week. In the 1960s, the relationship became a part of Federal Reserve thinking, and has remained a part of Fed policy-making, one way or another, ever since.
Policy essentially remained unchanged as expected, but it felt like the Fed could have provided a more dovish tone in their assessment. Just when the Fed was draining liquidity, more Treasurys were coming into the market via QE runoff and new issuance. To this end, I wonder if the Fed is promoting a stance that is too “dovish”, running the risk of upsetting market expectations down the road. Our CEO discusses some of the Fed’s latest decisions and why he does not anticipate the Fed changing course anytime soon in this quarter’s market outlook.
The latest run for momentum ended abruptly last week as the NASDAQ 100 Index fell into correction territory over just three trading days. Interest rates, which are determined by the Fed, have an extraordinary impact on both the health and growth of the economy. “The Fed’s stress tests earlier this year showed the strength of large banks under many different scenarios,” Vice Chair Randal K. Quarles said.
Source: Think or Swim, Ameritrade Nasdaq futures made a new low this morning below the key 11K support level.
China
– The situation has gotten worse in Q3 due to ongoing ASP declines coupled with polysilicon price increase caused by shortages due to GCL factory blow-up in Xinjiang.
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