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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities

Looks Like There's a Whale Snapping Up Gold Bullion Below $1,800

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That would suggest that whoever is buying is able to buy in scale, leave little footprint in the market and then take delivery and store the metal in secure, invisible vaults. And that points strongly toward a sovereign buyer.

Central banks normally declare to the IMF the amounts of metal they have on their books. But there are precedents where this has been done with some delay. Between 2009 and 2015, China reported no change in holdings, only to reveal that it had bought 53 million ounces of metal over the period.



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Euro-Zone Inflation Unexpectedly Hits Record, Pressuring ECB

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Euro-area inflation unexpectedly accelerated to a record, overshooting expectations by the most in at least two decades and heaping pressure on the European Central Bank to pare back pandemic stimulus more quickly, like its counterparts in the U.S. and the U.K.

Consumer prices jumped 5.1% from a year ago in January, up from 5% in December. The median estimate in a Bloomberg poll of 44 economists saw a reading of only 4.4% and none predicted inflation gaining pace.

The euro climbed 0.3% against the dollar to $1.1305 while German bonds pared gains to leave the 10-year yield one basis point lower at 0.03%.

While slowing in Germany and France, the euro zone’s two biggest economies, the spike in energy costs pulled price growth higher across the 19-member currency bloc as a whole. It was more than a percentage point higher than analysts predicted in Italy, where it accelerated to 5.3%.

Stripping out energy and other volatile components like food, core inflation was 2.3%, down from last month’s 2.6% reading.



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Email of the day on Saudi Arabia

Your rather surprisingly positive reportage from Saudi Arabia awakened my interest in their stock market.  I found to my surprise that it is nearly perfectly correlated with a broad commodities index. This is not because it is just the oil price, as that takes up only a small part of the commodities index, and oil companies take up only a small part of the Saudi stock market.  The two markets I am comparing are IKSA and COMF, both in London.  Do you have any ideas about why this correlation is so tight?

It would be nice if you would revisit the market from time to time and give us your opinions on it.



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Nickel Is Gripped by a Supply Squeeze That Keeps Getting Worse

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The nickel market is showing more signs of stress. Stockpiles held by the London Metal Exchange extended their decline on Tuesday, with the last increase coming in October. Buyers are paying a massive premium for immediately deliverable futures.

The key cash three-month spread, which briefly eased on news of additional shipments from Tsingshan Holdings Group Co., notched new highs on Monday. Contracts for immediate delivery are trading at a $508-a-ton premium to those in three months, the highest such premium since a historic squeeze in 2007.

While the squeeze last month was focused on near-dated contracts, in recent days it has spread through the curve. That shows the market is now pricing in tighter nickel supplies for longer, amid strong demand from stainless steel producers and battery manufacturers.



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Brazil Analysts See Inflation Further Above Central Bank Target

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Brazil analysts raised their 2022 inflation expectations further above target for the third week in a row as the central bank prepares to lift its interest rate into double digits at Wednesday’s policy meeting.
Inflation will hit 5.38% in December, above the prior estimate of 5.15%, according to a weekly central bank survey published on Monday. Analysts also lifted their 2023 year-end consumer price forecast to 3.50% from 3.40%. 

Policy makers led by Roberto Campos Neto are expected to deliver their third consecutive 150-basis point rate hike this week, lifting the benchmark Selic to 10.75%. Inflation slowed less than expected in mid-January, as factors including global supply-chain disruptions pressured prices of transportation and
durable goods. Analysts see borrowing costs at 11.75% in December. 

The central bank risks missing this year’s inflation target of 3.5%, which has a tolerance of plus or minus 1.5 percentage points.



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Email of the day on the green revolution

Thanks for the great service pulling the noise out of market trends for us. We especially enjoy what my wife affectionately calls the “Big Picture Long-Winded” Friday recordings. Regarding the possible rotation into the renewable/green economy do you have any ideas on Industries/companies that could benefit from the build out? Or would the safer play be directly in the commodities needed for the grid, vehicles, batteries, and such? Hoping to get to another Chart Seminar before too long.



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Value Stocks, U.S. Dollar Among Top Trades After Hawkish Fed

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“The Fed’s latest update is net negative for risk assets, as it seems to show that the Fed has a lower strike put than we thought - in other words Powell would be comfortable to allow further market weakness and volatility without intervening,” said Altaf Kassam, EMEA head of investment strategy and research at State Street Global Advisors.

“Investors should continue to avoid developed markets government bonds as there is only downside there. We are rotating into defensive equities, long-dated U.S. Treasuries, commodities and VIX futures - Volatility will be here for a while.”



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The New Agri-Giant Invading the U.S. Heartland

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Viterra is already the world’s largest wheat trader, thanks to its investments in major exporting regions including Canada, Australia, Argentina, and the former Soviet Union. If Gavilon in the U.S. is added to that impressive portfolio, it will be the kind of concentration — and power — that governments worry about. Indeed, Beijing may be even more concerned about the deal than Washington. China, which is spending billions of dollars to build its own state-owned agricultural trading house, is unlikely to welcome further consolidation in an industry it relies on to feed more than one billion people.

Regulatory concerns aside, the deal is a steal. Glencore, founded by the late U.S. fugitive Marc Rich in the 1970s, built its agribusiness through acquisitions. In 2012, it beat out ADM and purchased Canadian grain trader Viterra Inc. for 6.1 billion Canadian Dollars ($4.8 billion). Today, Glencore controls just under 50% of the enlarged Viterra business, with 49% owned by two Canadian pension funds and a residual percentage controlled by the staff.



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These Investors Are Sticking With Gold Despite Easy Money Ending

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The end of an easy-money era should normally spell bad news for gold. But right now, fund managers are keeping their holdings.

At a time when equities and Bitcoin -- often touted as digital gold -- are sinking as loose monetary policy draws to a close, bullion exchange-traded fund holdings are proving resilient. Despite expectations for multiple U.S. interest-rate hikes this year, bets for real rates to stay negative and demand for an inflation hedge are supporting the appeal of the time-honored haven.

Christoph Schmidt, who heads DWS Group’s 20 billion euros ($22.6 billion) Multi Asset Total Return team, is among those in no rush to sell and who has helped keep prices from falling.

“I would not expect our gold position to change in the foreseeable future,” said Frankfurt-based Schmidt, who has 8% of his funds in gold. “We don’t see a dramatic change in the interest-rate environment.”



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Bitcoin billionaire Mike Novogratz says plunging crypto will have a hard time rallying until stocks find a base

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Billionaire investor Mike Novogratz has said cryptocurrencies will struggle to pull out of their sell-off if stocks keep falling, as he urged investors not to buy the dip.

Prices for bitcoin, ether and other digital currencies have fallen sharply across the board as they track Wall Street's rout in tech stocks, driven by pressure from rising bond yields.

"Crypto will have a hard time rallying until stocks find a base," Novogratz, CEO of investment company Galaxy Digital, tweeted late Thursday.

Novogratz pointed to the sharp fall in the Russell index, which is down almost 10% year to date, saying there are 1.2 trillion bad equity longs above the market.

"This is now a bear market," he said, adding: "Sell rallies.  Don't buy dips."



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