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

    Cotton Is Set for "Epic Showdown" Between Hedge Funds and Mills

    This article by Marvin G. Perez for Bloomberg may be of interest to subscribers. Here is a section:

    Hedge funds are abundantly optimistic about cotton prices. But just as the excitement escalates, farmers are gearing up to increase plantings in the U.S., the world’s top exporter.

    Cotton has been the recent star of the crop world, with prices heading for a third straightly monthly gain. The advance was underpinned by demand that’s poised to increase to the highest since 2008. That captured the attention of investors, who have piled into speculative wagers that futures will keep climbing. But it’s also caught the eye of American farmers who are in the midst of making planting decisions at a time when grain prices have stayed historically low.

    U.S. cotton plantings this year will probably reach the highest since 2011, a Bloomberg survey showed. The rising acreage could be why commercial traders such as textile mills have taken the opposite approach of hedge funds and are holding a huge short position, or bets on falling prices.

    “The market is setting up for another epic showdown between speculative longs and trade shorts, and at this point it is still anybody’s guess who will prevail,” said Peter Egli, the Chicago-based director of risk management for Plexus Cotton Ltd.

    “This could turn into a drawn-out process, with prices moving in a narrow band for another two or three months before a final blow.”

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    Cobalt Market report

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

    Mining Supply

    Thanks to a subscriber for this note by Jim Sinclair which refreshes the mining supply cliff argument for gold mining which has been a mainstay of the gold market for as long as I can remember at least. Here is a section: 

    Please review the charts below "Mine Supply since 1970 and Projection to 2030" produced by Dan Popescu via Thomson Reuters Eikon.  These charts indicate that in the coming years, the mine supply will be reduced by half of its supply during 2018.  Mr. Popescu is an independent gold/silver analyst whose projections in the mining supply are consistent with my own.  Few investors understand the gold industry, and the reasons for the approaching decline are numerous and industry specific.  An understanding of the gold mining industry is necessary in order to understand why the mining supply of gold is dramatically and rapidly shrinking.  Junior gold producers and new miners will have an almost impossible task to achieve what Tanzanian Royalty has already achieved thus far.  The analysis to support these charts is dry and complex subject matter, which I hope to provide in the most easily understandable read...  

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    Gold ETF Holdings at new recovery high

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

    Global holdings in gold exchange-traded funds soared to the highest level since 2013 as investors got behind a rally in the metal. Most of the inflows were into SPDR Gold Shares, a U.S.-based ETF favored by money managers with a short-term view for its relatively high liquidity and narrow bid-offer spread. Gold has jumped 2.4 percent this year, touching the highest price in four months, as the dollar fell, Chinese consumers stocked up for the Lunar New Year and signs of global inflation picked up.

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    South African Police Reported to Get Gupta Arrest Warrant

    This article by Paul Vecchiatto for Bloomberg may be of interest to subscribers. Here it is in full:

     

    South Africa’s Hawks police unit has obtained an arrest warrant for at least one of the members of the politically connected Gupta family, City Press reported.

    The unit is now waiting for prosecutors at the National Prosecuting Authority to sign the warrants so that the arrests can be made, the Johannesburg-based newspaper reported on its website, citing an official at the Hawks it didn’t name. The official couldn’t say which of the three Gupta brothers -- Ajay, Atul or Rajesh -- would face arrest.

    Former Public Protector Thuli Madonsela had ordered an inquiry into allegations that the Guptas may have influenced the appointment of cabinet members in President Jacob Zuma’s administration and received special treatment for a coal business linked to the family and one of the president’s sons.

    This was part of Madonsela’s report about state capture, a term used to describe influence over government appointments and the awarding of state contracts.

    Zuma and the Guptas have denied wrongdoing.

    “We have not applied for an arrest warrant against any member of the Gupta family,” Hawks spokesman Brigadier Hangwani Mulaudzi said by phone from Johannesburg. “We are investigating a number of cases related to the issue of state capture, some of which have passed their stage-one levels, and we are awaiting direction from the National Prosecuting Authority.”

    Ajay Gupta didn’t immediately respond to a phone call and text message seeking comment.

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    Precious Metals 2018 Forecast Silver

    Thanks to a subscriber for this report from ScotiaBank focusing on silver which may be of interest. Here is a section: 

    Russia Kicks Off Currency Buying Spree With $4.5 Billion Program

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

    Russia’s Finance Ministry will buy about $4.5 billion in foreign currency over the next three weeks, increasing purchases after changes aimed at further limiting the economy’s dependence on oil.

    The amount of additional budget revenue earned in January from oil and gas is expected at 257.1 billion rubles ($4.5 billion) as a result of higher crude prices, the Finance Ministry said on Wednesday. Under a so-called budget rule, the entire windfall will be spent on buying foreign currency in the domestic market, with daily purchases at 15.1 billion rubles from Jan. 15 to Feb. 1, it said in a statement.

    The operations will help insulate the economy from the ups and downs in crude and shield the ruble’s exchange rate from volatility. The government is absorbing all revenue earned when Russia’s Urals export blend is above $40 a barrel, channeling the excess income into its sovereign wealth fund.

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    Year-end Review and Outlook

    Thanks to a subscriber for this report from M Partners focusing on the Canadian mining sector. Here is a section:

    World's No.1 Miner Is Building an EV Hub It Doesn't Want to Keep

    This article by David Stringer Bloomberg may be of interest to subscribers. Here is a section:

    “The investment in Nickel West makes sense regardless,” said James Eginton, an analyst at Sydney-based Tribeca Investments Partners Pty, a BHP shareholder that’s urged the producer to extend its suite of commodities to tap rising battery demand. Efforts to refocus the business will either boost the value of a sale, or lift the unit’s cashflow if the assets are retained, he said.

    BHP began building a nickel sulphate plant at Nickel West in recent weeks and is considering a slate of further expansions to make it the largest source of the material and a hub for other battery ingredients. It’s aiming to sell 90 percent of output into the battery supply chain by about 2021, from less than a third at the end of last year. Global nickel demand could more than double by 2050, fueled in part by rising electric vehicle sales, Bloomberg Intelligence said in a June report.

    The world’s biggest mining companies are ratcheting up their response to the booming demand for battery raw materials.

    Rio Tinto Group is developing a lithium project in Serbia, while Glencore Plc plans to double production of cobalt and is effectively “a one-stop-shop” for investors seeking exposure to EV gains, Sanford C. Bernstein Ltd. said in a note this month.

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