• Home/
  • Precious Metals / Commodities

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

    Controversial New Milk Shakes Up Big Dairy

    This article by Mike Cherny for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Both are following the success of a2 Milk Co., a New Zealand-based company that has found fans in its home country, as well as Australia and China, and has recently entered the U.S. market. The company’s revenue is expected to grow some 70% in the year ending in June, according to S&P Global Market Intelligence. It already has more than 10% of the milk market in Australia. A similar share in the U.S. would be about $1.5 billion in annual sales, according to Euromonitor International.

    A2 milk differs from regular milk because the latter contains both A1 and A2 proteins. Supporters of A2 milk contend it is the A1 protein that causes indigestion for many people, a problem that lactose-free milk won’t solve. Skeptics say there hasn’t been enough independent research to show there is any real benefit to A2 milk, which is naturally produced by cows with a particular set of genes. A DNA test can determine which cows in a herd produce A2-only milk.

    Although the science behind so-called A2 milk remains disputed, the entry of big companies into the market shows how changing consumer preferences create new opportunities that dairy giants can’t afford to ignore—especially as profits have been eroded in recent years by everything from almond milk to dairy-free ice cream. In the U.S., traditional milk sales have fallen about 7% annually on average over the last four years, according to the most recent data from Nielsen.

    Read entire article

    Email of the day on what to own in the latter stages of a bull market

    Hello Eoin, Whatever age you happen to be, it is always salutary to lose a parent. A constant pillar in one's life has gone and no more questions can be asked. It brings into relief one's own fragility and mortality in a way that few, if any, other deaths will do. I hope your mother's passing was a comfortable one. My condolences to you and your family.

    While it is probably improper to revert immediately to business, I am sure you will want to re-immerse yourself in the observation and interpretation of markets without delay. On this basis, I have a question:

    Given that we believe we are heading for monetary contraction, a rise in interest rates and accelerating inflation how should we be positioning portfolios? Banks and resources should be well bid for the time being and Japan should benefit from inflation.

    But how about India, China and the other economies of North and South East Asia? What sectors and markets are best avoided? At what point does one accumulate cash? Gold is much talked about as an inflation hedge but that will be a shooting star - it might soar in the near future but it will then weaken once more. It is to be regarded as a hedge or a trade, not as an investment - at least that's my view.

    In my own portfolio, I've trimmed China and India, reduced or eliminated high flying 'big-tech' stocks (but not touched PCT), increased my Japan weighting and increased cash. I'm probably underweight gold. I plan to accumulate more cash but at this stage, I've no idea what holdings I shall reduce or sell over the coming months. Providing one is not losing money, investment is fun but over the next two or three years, I suspect there will be plenty of opportunities to lose money which we should try to avoid. It's a tough time for you and you have plenty on your plate but if you care to comment on these musings it would be much appreciated. All best.

    Read entire article

    Trade War and its effects on commodities

    Thanks to a subscriber for this report by Barnabas Gan from OCBC which may be of interest. Here is a section:  

    Historical charts of gold

    History is not repeated but it does tend to rhyme. One of the biggest factors behind gold’s advance from the early 2000s was because of a lack on faith in the ability of fiat currencies to hold their value. The growth of markets like China and India then contributed an additional demand driver.

    I am intrigued by the similarity in the saucering base formations gold put in during the early 2000s and what it is doing now. History need not repeat itself but these charts are certainly evidence that this is not the first-time gold has put in a lengthy period of ranging.

    Smaller gold miners like St Barbara, Evolution Mining are outperforming at present as production ramps up and costs are kept under control.

    Metal Matters

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

    Funds turn buyers again on Comex
    The net long fund position (NLFP) has up until recently been declining, but this has mainly been a result of stale long liquidation, as seen by the drop in the black line in the chart above. But, while the longs have cut exposure (until recently); shorts have not been getting bearish, as seen by the declining red line. This has suggested longs have grown impatient as Gold prices have failed to break higher, but lack of upside has not encouraged bears to increase exposure. More recently, fund longs have started to increase exposure again. The gross long fund position has climbed to 259,032 contracts as of 27th March, from a recent low of 223,882 contracts. The NLFP has returned to 203,354 contracts from a low of 148,731 contracts on 20th March. This latest change was driven by 35,150 contracts of fresh buying and 19,473 contracts of short-covering.

    Investors increase exposure to ETFs
    Holdings in Gold ETFs are edging higher with investors adding 18.5 tonnes in March. Holdings now stand at 2,162 tonnes, up some 39 tonnes so far this year. Holdings averaged 2,068 tonnes in 2017. Given the lukewarm investor interest in Gold ETFs, it may be that the market is waiting for prices to break higher above the $1,366-$1,388/oz resistance area before increasing exposure.

    Read entire article

    Email of the day on guest publications and lithium miners

    What are your current views on lithium and lithium miners?

    I continue to enjoy your tour de force reporting and analysis. Nothing stops you, not even airline travel. Amazing.

    Read entire article

    Saudi Arabia Is Said to Signal Ambition for $80 Oil Price

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

    Saudi Oil Minister Khalid Al-Falih has also sounded increasingly hawkish in public, suggesting that OPEC should keep tightening the oil market even through the cartel is close to meeting its goal of cutting crude inventories in industrialized countries back to their five-year average.

    In an interview in New York last month, he said today’s price near $70 a barrel hadn’t been sufficient to stimulate investment in the industry, which remains significantly below levels seen before 2014’s price crash.

    "That tells me that the pricing signals that have come out of the recovery haven’t been sufficient," he said, without giving a target for prices.

    The Saudi Ministry of Energy didn’t immediately respond to a request for comment.

    Domestic Policy
    Riyadh’s desire for higher prices is driven by domestic policy imperatives. Although Saudi Arabia’s budget deficit has narrowed sharply as oil has recovered, Prince Mohammed has set out an ambitious and expensive economic and social reform program. He also needs to pay for the kingdom’s increasingly drawn-out military entanglement in Yemen.

    While there’s little indication the Saudis are prepared to deepen their oil cuts to achieve $80, at the very least the aspiration suggests they’ll keep with the current measures until the price goal is closer. Riyadh is counting on declining Venezuelan oil production, the likely imposition of new U.S. sanctions on Iran, and continued demand growth to absorb U.S. shale production.

    Read entire article

    Two major crop scourges are hybridizing to produce a new mega-pest

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

    Helicoverpa armigera, commonly known as the cotton bollworm, and Helicoverpa zea, the corn earworm, are two types of very hungry caterpillar that cause billions of dollars of damage to crops every year. Corn, cotton, tomato and soybean are just some of the many crops these pests can attack, with the cotton bollworm having developed resistance to all pesticides targeted at it.

    In 2017, an eight-year project that mapped the entire genome of both caterpillars was completed. The study was designed to help researchers identify specific genes that cause the pests to become resistant to pesticides. A new paper has now been published showing evidence that the two moths are clearly hybridizing in a variety of novel ways.

    "No two hybrids were the same suggesting a 'hybrid swarm' where multiple versions of different hybrids can be present within one population," says one of the researchers on the study, Tom Walsh.

    Read entire article

    Goldman Sachs: 20 Years Left of Mineable Gold

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

    "The combination of very low concentrations of metals in the Earth’s crust, and very few high-quality deposits, means some things are truly scarce." He wrote in the report.

    King notes that the intention behind the report was to highlight the areas of scarcity, and demonstrate how scarcity is the ultimate driver of value and investment.

    "Perhaps unsurprisingly, these are the so-called precious metals (and diamonds), and that their value is derived from the fact they are rare." He writes, "Gold has been used as a measure of wealth for more than 4,000 years, as the ancient Egyptians soon worked out that gold was not only shiny and heavy, but rare."

    He adds that the relative scarcity of the commodity, and "the market’s belief that new discoveries will be limited, is what drives the price of these super-rare commodities."

    King’s report falls in line with the forecast made last year, estimating that 2015 will be the year when gold production would reach its peak in the mining industry, a concept known as Peak Gold.

    Read entire article