Email of the day on silver's outperformance
With the ongoing downdraught in gold prices, silver seems to be holding its ground very well. Could this be partly due to its industrial uses?
David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities
Eskom on the brink as outages again spiral to record levels
This article from Moneyweb.co.za may be of interest to subscribers. Here is a section:
A bigger looming problem is where Eskom is going to find another R7 billion for diesel for the rest of the year. It was provided with ‘fiscal support’ (read: a bailout) of R21.9 billion in Finance Minister Enoch Godongwana’s February budget.
By July, Eskom’s debt owed by municipalities stood at R49.1 billion – an R8.2 billion increase since September 2021. The total amount was ‘only’ R9.5 billion in 2017.
Shoddy maintenance = unavailability
Oberholzer also admitted on Monday that the work done by Eskom and its contractors’ maintenance team is simply not up to standard. He said that units will often break down shortly after undergoing maintenance. This is due to a “lack of skills” both internally and at contractors. One might describe this skills crisis at the utility as ‘acute’.The coal fleet has not been able to generate more than 19 500MW sustainably since Friday morning, and last achieved over 21 000MW on Thursday morning.
Crop Prices Touch Two-Month High as Food Supply Concerns Mount
This article from Bloomberg may be of interest to subscribers. Here is a section:
A US crop report Monday showed a surprisingly large cut in the country’s soybean stockpiles following a hot and dry summer. Drought also is sinking the French corn harvest to its smallest in three decades and has curbed sugar supplies from South America.
“The damage has been done,” said Peter Collier, market analyst at UK-based CRM AgriCommodities. “It’s now beginning to be quantified.”
The weather challenges, combined with Russian President Vladimir Putin’s recent criticism of the Black Sea crop-export deal, highlight how fragile global supplies are. The Bloomberg Agriculture Spot Index, which tracks crops including wheat, sugar and soy, climbed for a second straight day Tuesday to its highest level since late June.
Gold Slides as Hotter US Inflation Keeps Hawkish Fed on Track
This article from Bloomberg may be of interest to subscribers. Here is a section:
“A shockingly hot inflation report pulled the rug for gold as investors are now starting to price in more Fed tightening. A 75-basis-point rate increase is a done deal for September and it is starting to look like we might not see a downshift in November,” said Ed Moya, senior market analyst at Oanda.
Gold fell 1.1% to $1,706.18 an ounce at 9:42 a.m. in New York, after slumping as much as 1.6% earlier. The Bloomberg Dollar Spot Index rose 0.7% after falling 0.4% on Monday. Spot silver, platinum and palladium also fell.
Billionaire Forrest's Hydrogen Unit to Speed Expansion Plans
This article from Bloomberg may be of interest to subscribers. Here is a section:
The unit expects to begin output of green hydrogen from 2024 at a small scale in the hundreds of thousands of tons, before quickly ramping up to hit its 2030 goal, he said. Fortescue has announced agreements over future supply deals with companies including Germany-based E.ON SE and JC Bamford Excavators Ltd. in the UK.
“When I think about how big this market is, it’s as big as replacing the entire fossil fuel market in the world, and it’s real now,” Hutchinson said, speaking on the sidelines of a government-hosted jobs and skills summit.
Forrest told investors earlier this week he’d been approached by fund managers over a potential $20 billion separate listing of FFI, though the firm argues there’s better value in retaining the hydrogen developer alongside the world’s No. 4 iron ore exporter.
“Once we get going at scale and just looking at the projects we have, it’s enormous,” according to Hutchinson.
The 2022 euro area supply crisis
Thanks to a subscriber for this report from Nomura may be of interest to subscribers. Here is a section:
The price of Germany’s electricity over the next year has climbed over $1000pb in Brent oil energy equivalent terms. This is far from normal. It’s a crisis that stems not only from restrained energy supply from Russia but a series of unfortunate issues elsewhere too. In addition to energy restraints, the euro area is facing the full brunt of climate change with flash floods and record droughts, combined with slowing trade with China and US recession risks. However, we think the bigger challenge Europe will face this winter is not inflation, but stagflation. Altogether it’s why we expect EUR/USD to fall to 0.90 this winter, inflation to climb further to multi-decade highs before peaking, GDP to decline over the coming year and the ECB to first raise rates in response to higher inflation, and then cut next year as the energy-induced recession continues. Will Germany run out of gas? Probably not. That's due to LNG supply, but even more due to falling industrial demand. High prices and falling demand of an essential such as energy is not good for growth, but it gives hope that blackouts in Germany won't be the story of early 2023.
Copper and Aluminium Pace Metals Retreat on China Lockdown Fears
Copper and aluminium futures tumbled along with other industrial commodities on concerns that virus lockdowns in China will hurt demand and as supply constraints in the Asian powerhouse eased.
Beijing’s ongoing battle to contain virus outbreaks is damaging confidence in the nation’s economy, with the Covid Zero policy causing many US companies to delay or cancel investments. That’s on top of a property crisis that’s taken a hefty toll on metals demand in the top consumer.
Prices of copper, seen as a bellwether for economic growth, have wavered in recent weeks after recovering from a 20-month low in July as traders weigh supply constraints against a darkening outlook for demand. Outside China, Europe’s energy crisis is set to undercut consumption, while higher US Federal Reserve interest rates are pressuring non-yielding assets like metals.
Email of the day on when gold does best:
Your stated position on Gold, is that it did well in a low interest rate environment but is struggling now in the face of rising interest rates and strong US Dollar.
But surely with inflation hard wired into system, we are still in a relatively low interest rate environment, as interest rates should be around about 11% to effectively reduce inflation.
I have bought more gold today, regardless of outcome of the FED meeting today.
Ruminations on natural gas
Larry Summers on Inflation and 'the New McCarthyism'
This interview has some interesting nuggets. Here is a section on male employment:
We have a large number of people who are estranged from our economy. In 1960, 5% of men were not working between the ages of 25 and 54. Today it’s more like 15%. If 15% of men are not working at any point in time, then a quarter of the people will have been out of work for a year or more over a four or five-year period. That’s destructive to the economy's productive potential. It’s destructive to their families. It’s destructive to the areas in which they live. It’s destructive to the moral fabric of our national life.