Open: New York Session | Forex, Metals, Oil, Agriculture August 03, 2020

Chicago-traded corn futures fell nearly 7% during July, but hedge fund managers have not materially changed their views toward the yellow grain since the first week of the month. MARKET NEWS U.S. wheat futures fell as much as 1% as ample supplies and concerns over international demand weighed on prices.

While a stronger dollar may undermine U.S. corporate overseas revenues relative to the rest of the world, the direct impact of a stronger currency tends to dominate. With this in mind, continued dollar weakness looks highly likely to lead to a reversal in the multi-year U.S. equity outperformance relative to the rest of the world. Create the currency and expect unpredictable levels of price inflation collapsing the dollar’s value; or don’t create the currency and expect global loan implosion.
The relative performance of U.S. stocks versus the rest of the world tends to in part track the performance of the U.S. dollar. Then came the paper dollar currency which for Americans could not be converted into physical gold, while sovereign foreign countries maintained that privilege. Forex traders said foreign fund outflow, a strong dollar, muted domestic equities and rising Covid-19 cases dragged the local unit down. The last retreat from gold backing the dollar occurred in 1971, when the gold window was closed to foreign sovereigns.
An upbeat number may help lift the dollar in the short-term, though investors may favor the Japanese yen as a safer bet in the weeks to come. The rupee plunged 20 paise and settled below the 75 per US dollar level on Monday tracking negative domestic equities and strengthening American currency. With lower yields, there is lower carry to be earned by parking in the dollar, so the currency would be expected to weaken.

Below is the ranking of gold mines by production, where I will name the gold mine and the owner of the mine, followed by production. Proven and probable reserves are important because you don’t want to invest in a gold mine if it doesn’t believe it has very much gold left to mine. This doesn’t necessarily mean that Barrick Gold and Newmont Gold are the best investments, but you can tell that they did have the strongest United States operations in 2019. The Hod Maden feasibility should be completed by the end of this year, with first gold production expected in 2023.
(Source: Author’s own processing, using data of Seeking Alpha and Sandstorm Gold) Sandstorm’s cash position increased to $44.2 million in Q2. As a result, the attributable gold production declined, pulling down the revenues and operating cash flow. On the opposite end of the spectrum, there are companies that just started their first gold mine and are in the exploration and development phase of their second.
In a sign of growing investor fear, the price of gold neared $2,000 an ounce towards the end of the week. A current headline says “fears of currency debasement drive gold price higher”. (Source: Author’s own processing) In May, Sandstorm Gold introduced an At-The-Market (ATM) program under which it can issue new shares worth up to $140 million in total.

Malaysian palm oil futures surged as much as 3%, mirroring solid gains in Dalian palm oil and rival soy oil, with better July exports also aiding sentiment. Saudi seaborne crude exports for last week were seen at 30.3 million bbl (4.3 million bpd) compared to the revised 53.0 million bbl (7.6 million bpd) the week prior. However given the economy is bouncing back and cap-ex cuts will reduce oil supply, I believe COP to be one of the more attractive investments in the oil sector.
While COP will endure a downturn better than peers, low oil prices are still bad for all oil companies. Curtailed oil production faced a $27 price, so if they can earn $37, that’s nearly $300 million of future incremental cash flow on these barrels. Petrobras refined 2 million liters of soy oil in one of its Southern refineries, resulting in 40 million liters of renewable diesel. Ultimately, the company does not want to produce too much oil in a low-price environment with the market facing severe over-supply, preferring to defer production.
Critically, the company is much better positioned than during the last oil crisis of 2014-2016 thanks to years of balance sheet improvement.
Executive Chairman Richard D. Kinder acquired 300,000 shares of this oil & gas midstream company, paying $14.14 per share for a total amount of $4,241,610. Ultimately, an oil company cannot control the price of a commodity but it can control what it spends and how much it produces.

President Trump, though, floated the idea of an outright ban on the app Friday night, citing national security concerns. Further news on the deal will likely come sooner rather than later, as Reuters reported on Sunday that Trump has given ByteDance 45 days to make a deal. Today s Must Reads Cyber rattling | The Trump administration will announce measures shortly against a broad array of Chinese-owned software deemed to pose national-security risks.
Microsoft CEO Satya Nadella spoke with Donald Trump about how to secure the administration’s blessing to buy TikTok’s operations in the U.S., Canada, Australia and New Zealand. Jeffrey Young on Trump s promise two weeks ago to sign a new health-care plan in two weeks. Clorox said net sales rose to $1.98 billion from $1.63 billion in the fourth quarter ended June 30, beating Wall Street expectations of $1.87 billion. A stringent lockdown may deliver a faster recovery, Fed dove Neel Kashkari said, and may be preferable to waiting for a vaccine.
The Fed’s failure to buy additional debt with its simultaneous creation of dollars would cause massive loan defaults that could crash the global banking system. As Star Bulk (NASDAQ: SBLK) President Hamish Norton explained during a Marine Money virtual forum in June, “What may be legal today may not be legal in five years. Microsoft (NASDAQ:MSFT) said in a blog post that it will move quickly to pursue discussions with TikTok parent ByteDance (BDNCE), aiming to complete negotiations by Sept. 15.

Meanwhile, President Xi Jinping is accelerating his push for a China that can stand on its own feet.

In light of the collapse in EU sales, the ACEA has revised lower its sales forecasts for 2020, to a 25% decline from a 2% decline previously in January. British fleets are keen to reclaim their seas, and EU counterparts risk losing prime fishing grounds. In this instance having your troops deep in the heartland of the EU away from the Russian front makes no sense. This quickly arrives to affect the weaker countries of the European Union and soon affects all of Europe.
The Brexit noise is likely to stay subdued until new negotiations in September. All major EU markets posted significant declines, including Spain (-50.9%), Italy (-46.1%), France (-38.6%), and Germany (-34.5%).