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Category - Precious Metals / Commodities

    DoubleLine Round Table Prime 1-6-20 - Segment 3: Best Ideas

    This third part of the round table may be of interest to subscribers.

    Citi Says Palladium in Total Disconnect, Jump In After Slump

    This article by Ranjeetha Pakiam for Bloomberg may be of interest to subscribers. Here is a section:   

    The raw material used in autocatalysts has soared in the opening weeks of 2020 amid a sustained global deficit, with the extraordinary rally seeing prices hit records day after day before a pullback on Tuesday. Over the past 15 years, mine supply of palladium has shrunk by 1 million ounces, or 12%, while demand has risen 4 million ounces, or 57%, according to estimates from UBS Group AG. Palladium’s sister metal, rhodium, has jumped too.

    “Commodity prices can completely disconnect from their marginal cost of production when inventories run down to critical levels, and this is precisely what is occurring in palladium and rhodium at present,” Citi said. “Palladium has for some time now presented the hallmarks of a genuinely tight market, including an extreme backwardation.”

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    Fiat Chrysler and Foxconn plan Chinese electric vehicle joint venture

    This article from Reuters may be of interest to subscribers. Here is a section: 

    Fiat Chrysler and Foxconn plan Chinese electric vehicle joint venture - This article from Reuters may be of interest to subscribers. Here is a section:

    FCA last month reached a binding agreement for a $50 billion tie-up with France’s PSA (PEUP.PA) that will create the world’s No. 4 carmaker. FCA said that the proposed cooperation was initially focused on the Chinese market.

    It “would enable the parties to bring together the capabilities of two established global leaders across the spectrum of automobile design, engineering and manufacturing and mobile software technology to focus on the growing battery electric vehicle market,” it said.

    FCA said it was in the process of signing a preliminary agreement with Hon Hai, aiming to reach final binding agreements in the next few months.

    However, it added there was no assurance that final binding agreements would be reached or would be completed in that timeframe.

    Foxconn has been investing heavily in a variety of future transport ventures for several years, including Didi Chuxing, the Chinese ride services giant, and Chinese electric vehicle start-ups Byton and Xpeng.

    Foxconn also has invested in Chinese battery giant CATL and a variety of other mostly Chinese transportation tech start-ups.

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    Precious Metals 2020 Outlook

    Thanks to a subscriber for this report Credit Suisse which may be of interest. Here is a section:

    Hydrogen May Start Replacing Natural Gas Before 2050, Snam Says

    This article by Vanessa Dezem for Bloomberg may be of interest to subscribers. Here is a section:

     

    “There is already a transition going from coal to gas, which is very beneficial for the environment,” Alvera said. “The next step of the transition is getting away from oil and replacing to gas. After we do that phase one, we can ramp up electrolyzers and have green gas.”

    The executive’s view about hydrogen reflects concern within the gas industry that governments are moving to limit fossil-fuel emissions and will hit gas soon. That raises the risk that the investments they’ve made in pipelines, compressors and storage tanks could become stranded assets.

    In Italy, Snam decided to double the amount of hydrogen it blends into the grid to 10%. Alvera believes hydrogen could supply a quarter of Italy’s energy demand by 2050 and announced in November a new round of investments to boost transition toward clean energy.

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    Germans Rush to Buy Gold as Draft Bill Threatens to Restrict Purchases

    This article from biocoin.com may be of interest to subscribers. Here is a section:

    In a tweet posted Wednesday, precious metals consultant and analyst Dan Popescu shared a picture of a long line of people waiting in front of “Degussa store to buy gold in Köln.” Popescu described, “From Jan. 1, 2020, the limit to buy gold anonymously drops from €10,000 down to €2,000. Only two years ago the limit was €15,000.” One user posted his own photo and replied “This is me line at Degussa in 23rd. The employees said they haven’t seen anything like it before.” To give an idea of the relatively small amount of gold €2,000 (~$2,224) can buy, even a 50g gold bar is currently too expensive.

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    China Iron Ore Imports Surge to Near Record as Shipments Swell

    This article by Krystal Chia for Bloomberg may be of interest to subscribers. Here is a section:

    Iron ore imports by China surged in December to the second-highest volume on record as mills boosted purchases ahead of the earlier Lunar New Year and Australian supply picked up.

    Inbound shipments totaled 101.3 million tons last month, just shy of the record 102.8 million tons in September 2017, according to customs data. The end-of-year surge saw full-year imports increase 0.5% to 1.07 billion tons.

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    Gold's Next Big Bull Market May Be Upon Us

    This article by John Authers for Bloomberg may be of interest to subscribers. Here is a section:

    If gold’s implicit prediction is right, it has two implications. The first and most important one is a belief that inflation is at last due to return, after many false alarms. The second is that gold is now settled in a bull market. 

    So, is gold good value? The metal doesn’t throw off any income streams, and has very few industrial uses, so it is very hard to come up with a measure of fair value. But the following chart, using data drawn up by Charlie Morris of Catley, Lakewood and May in London, is a heroic attempt to arrive at one. Morris devised a formula for fair value using the consumer price index and the average of 10- and 30-year inflation expectations. This indicator briefly showed that gold was wildly overpriced during the worst of the 2008 crisis, a phenomenon that may have been driven by the illiquid markets of the time, that created an unrealistic inflation forecast. Exclude this incident, and we see a steady bull market for gold from 2005 to 2011, followed by a steady bear market, where it moved to a discount. In the last two years, it looks as though it may have started another bull market. By Morris’ calculations, gold is now about 11% over fair value. 

    Gold is still far from the confident prediction of runaway inflation that it briefly produced for a few years after the crisis, even though it is buoyed by safe haven demand at present, along with seasonal interest in gold jewelry, notably from China where the lunar new year is almost here, and by resumed interest from central banks.

    On the supply side, gold-mining groups are merging, creating a reasonable hope of avoiding over-supply in the near future. So, if this move in gold prices is confirmed by a move down in real yields, followed even by an increase in inflation, then this could be part of a bull market to match the one from 2005 to 2011. The critical question is whether the gold market proves to be right this time in its forecast of inflation.

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    Iron Ore Set for 'Major Surplus' as Inventories Build, Citi Says

    This note by Krystal Chia for Bloomberg may be of interest to subscribers. Here it is in full:

    The global iron ore market “is expected to shift into a major surplus with inventories expected to recover to pre-Brumadinho levels by early 2021,” Citigroup Inc. says in note, referring to the Vale SA operation that experienced a dam burst last year.

    “We maintain our directional convictions on iron ore and coking coal, while acknowledging that big price moves might not happen until post-Chinese New Year,” bank says in note, which in part recaps analysis on bulks market issued last month

    “Most market participants agree that iron ore prices will likely drift lower during 2020, with the primary debate being about the timing and extent of any sell-off,” bank says

    “Concerns about 1Q Australian supply-disruption risks and weak Brazilian exports are already reflected in iron ore prices,” it says

    After Lunar New Year, “we see iron ore supply recovering and potential profit-taking by Chinese steel longs,” Citi adds

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