• Home/
  • Precious Metals / Commodities

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

    China's Economy Slows Again, Adding Pressure for Policy Action

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

    Industrial output rose 4.4% from a year earlier in August, the lowest for a single month since 2002, while retail sales came in below expectations. Fixed-asset investment slowed to 5.5% in the first eight months, with the private sector lagging state investment for the 6th month.

    The data add support to the argument that policy makers’ efforts to brake the slowing economy aren’t sufficient as the nation grapples with structural downward pressure at home, the risk of yet-higher tariffs on exports to the U.S. and now surging oil prices. Nomura International Ltd. said this all raises the likelihood that the People’s Bank of China will cut its medium-term lending rate on Tuesday.

    Read entire article

    Crops Surge as China Moves to Increase U.S. Farm Purchases

    This article by Millie Munshi and Michael Hirtzer for Bloomberg may be of interest to subscribes. Here is a section:

    China is encouraging companies to buy U.S. farm products, and will exclude them from added tariffs. Many crop prices are heading for their best week since at least June on optimism that Beijing and Washington are inching toward a deal. The year-long trade spat has undercut farmer profits and boosted debt levels in the U.S. as Chinese demand fell off.

    There was evidence of fresh Chinese buying Friday as the U.S. government reported 204,000 tons of soybeans sold to the Asian nation, the first such announcement in more than two
    months.

    “We are hopeful that this apparent gesture of goodwill by China leads not only to more sales of U.S. pork, but that it contributes to a resolution of U.S.-China trade restrictions,” said David Herring, a North Carolina hog farmer and president of trade group National Pork Producers Council.

    Read entire article

    Draghi Faced Unprecedented ECB Revolt as Core Europe Resisted QE

    This article by Jana Randow for Bloomberg may be of interest subscribers. Here is a section:

    The unprecedented revolt took place during a fractious meeting where Bank of France Governor Francois Villeroy de Galhau joined more traditional hawks including his Dutch colleague Klaas Knot and Bundesbank President Jens Weidmann in pressing against an immediate resumption of bond purchases, the people said. They spoke on condition of anonymity, because such discussions are confidential.

    Those three governors alone represent roughly half of the euro region as measured by economic output and population. Other dissenters included, but weren’t limited, to their colleagues from Austria and Estonia, as well as members on the ECB’s Executive Board including Sabine Lautenschlaeger and the markets chief, Benoit Coeure, the officials said.

    Read entire article

    U.S. Stocks Rise After Jobs Report, Before Powell: Markets Wrap

    This article by Randall Jensen and Vildana Hajric for Bloomberg may be of interest to subscribers. Here is a section:

    U.S. stocks edged higher, and Treasuries inched lower after a mixed jobs report fueled bets the Federal Reserve will cut rates in two weeks. The dollar declined.

    The S&P 500 headed for its second weekly gain as investors keyed on underlying strength in the report that signaled a solid labor market that isn’t too strong to deter further central bank easing. Megacap technology stocks weighed on benchmarks after New York opened an antitrust probe into Facebook Inc.

    The 10-year Treasury yield erased most of its earlier gains, while the dollar headed for its fourth straight fall following the payroll numbers. Chairman Jerome Powell is set to make public remarks Friday. Crude sank toward $55 a barrel in New York.

    Read entire article

    The Diversity of real Assets: Portfolio construction for Institutional Investors

    Thanks to a subscriber for this report from PGIM which may be of interest. Here is a section on gold:

    We treat gold as a separate real asset type due to its well-accepted role as a store of value. Gold enjoyed more than a 10-fold price increase from the 1970s through its peak reflecting a period of rapid inflation. During periods of inflation uncertainty, investors seek gold as an inflation hedge.41 Similarly, gold may be a good recession hedge. In 2007-2008, while the S&P 500 was down -18.5% gold was up 16.6%, and in 2001-2002, while the S&P 500 was down -17.2% gold was up 12.1%. Investors can invest in physical gold but that incurs storage and insurance costs. Investors can also invest in COMEX gold futures (which trades the gold equivalent of 27m ounces per day). The roll yield on gold futures has been only slightly negative (-0.2% from 1996 to 2017). Investors may also invest in gold mining stocks and can enter into gold royalty agreements. Although gold is an under-owned institutional asset, some institutional investors such as government pension funds have target allocations to gold-related assets (including derivatives).

    Read entire article

    Why Peak gold is Fake News

    This article by Mickey Fulp for Kitco.com may be of interest to subscribers. Here is a section:

    However, the following chart illustrates the severe decline in production, i.e., peak gold, by the six largest gold miners. This particular group of companies has gone steadily downhill from an all-time high of 955 tonnes, or over 40% of world production in 2006, to a multi-decade low of 705 tonnes, or 22.5% of world production in 2017.

    So not only are majors declining in the numbers of ounces (-26% over 12 years), they have also lost a significant share of the world gold mining market (-18%):

    We have shown that the current narrative promulgated for peak gold applies to the major gold miners only and not for the gold mining industry as a whole. That said, the data presented above cover a relatively short time frame of 19 years: the end of a bear market for gold (2000-2002); a long bull market cycle (2003-2012); a relatively short but deep bear market (2013-2015); and a lower, range-bound gold price over the past three years (2016-2018).

    To fully assess the idea of peak gold, I submit we must take a much longer-term view and determine what factors drive mining of the yellow metal.

    According to the USGS, world gold production increased from 386 tonnes in 1900 to 3150 tonnes in 2017. That is an eight times increase and an average gain of 1.8% per year:

    Read entire article

    Indonesia Set to Halt Nickel Ore Exports From End December

    This article by Wahyudi Soeriaatmadja  for the Straits Times may be of interest to subscribers. Here is a section:

    Energy and Mineral Resources Minister Ignasius Jonan said on Friday that the nickel export curbs are "in line with President Joko Widodo's directives".

    Indonesia's current account deficit reached US$31.1 billion (S$43.2 billion) in 2018. The widening deficits were an issue Mr Joko's political opponents frequently played up during his presidential campaign ahead of the April election. Mr Joko will be sworn in on Oct 20 to begin his second and final five-year term.

    A senior government official had earlier argued that Indonesia could have recorded even higher deficits had the country not boosted efforts to climb up the value chain in the iron and steel sector, encouraging investors to build plants at home to process raw nickel into intermediate products such as stainless steel slabs.

    Read entire article

    RBA Says Household Debt Could Complicate Future Rate Decisions

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

    Reserve Bank of Australia comments in 2019/20 corporate plan released on website Friday.

    “Over 2019/20 to 2022/23, the structure of the Australian economy will continue to evolve and economic shocks -- which, by definition, are not forecastable -- will occur. Movements in asset values and leverage may be more important for economic developments than in the past given the already high levels of debt on household balance sheets”

    “Especially in the context of weak growth in household income, high debt levels could complicate future monetary policy decisions by making the economy less resilient to shocks”

    “The flexible medium-term inflation target is the centerpiece of the monetary policy framework in Australia and has been well established for more than two decades. Since the early 1990s, it has provided the foundation for the bank to achieve its monetary policy objectives by providing an anchor for inflation expectations. The bank will remain alert to new developments that may have a bearing on the framework for monetary policy”

    Read entire article