Cobalt: Solving for a Supply-Constrained Market
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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities
Stock Wobble No Help to Gold as Market Bets on U.S. Rate Hike
This note by Eddie van der Walt for Bloomberg may be of interest to subscribers. Here it is in full:
Falling stock prices and geopolitical risks haven’t done much to support gold amid expectations of tighter U.S. monetary policy.
Metal for immediate delivery fell to the lowest in four months at $1,252.44 an ounce in London, having dropped every day this week as traders factor in an increase in interest rates this month as a near certainty. Prices declined despite growing volatility in equity markets, with the S&P 500 Index losing ground in four of the last five sessions.
“The rate hike is now looming and people are suddenly realizing that gold may not be the most attractive long position at the moment,” said David Govett, head of precious metals trading at Marex Spectron in London.
Bullion is heading for the the first back-to-back annual advance since 2012, but traders recently have dented those gains. Higher rates and a change in leadership at the Fed have outweighed deepening geopolitical risks, including the threat of war on the Korean peninsula and a third intifada in Israel.
“People’s memories are short and their pockets not so deep,” Govett said.
The Future of Nickel: A class act
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Copper Falls to 2-Month Low on Worries of Slowing China Demand
This article by Yuliya Fedorinova for Bloomberg may be of interest to subscribers. Here it is in full:
“Industrial metals prices will consolidate due to a marked slowdown in China’s metals consumption growth,” BMI Research wrote in an emailed note.
China’s frenzied construction of roads, bridges and subways is set for a major slowdown, adding a headwind to economic growth in 2018. Fixed-asset investment in infrastructure will grow 12 percent next year, according to the median estimate in a Bloomberg survey, down from almost 20 percent in the first ten months this year.
All 18 economists in the survey anticipated a moderation, adding to reports by Morgan Stanley, Goldman Sachs Group Inc. and UBS Group AG predicting a similar trend.
Adding to the selloff is speculation that metals prices have overshot fundamentals in the recent run up. Nickel has retreated 13 percent since early November, giving up some gains from earlier in the year.
"The recent rally in nickel was mostly due to expectations of increased use of the metal in batteries, which will definitely realize some day, but right now stainless steel, not EVs, is still major consumer of nickel and its market driver," Boris Krasnojenov, an analyst at Alfa Bank in Moscow, said by phone.
Email of the day on cannabis investments
Could you add and / or analyze the Cannabis Marijuana ETF isin code CA44054J1012? I'm sure the sector is of interest
Email of the day on total known holdings of gold
The chart for Total Known ETF holdings of Gold has started to accelerate upwards in the last few days. Could you comment as to whether this is significant.
After Sudden Rout, China Stock Traders Question Beijing Put
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For Sun Jianbo, president of China Vision Capital Management Co. in Beijing, valuations among large-cap shares are too expensive for state-backed funds to intervene.
The CSI 300 traded at its highest level relative to the broader Shanghai Composite Index in at least 12 years at the start of this week as investors flocked to large caps such as Moutai and Ping An Insurance (Group) Co."There’s no need to prop up the market yet," Sun said. "A lot of big caps are still expensive and it would do more harm than good to state-backed funds if they buy now."
The divergence between large-cap shares and the rest of the market may be one reason why the government took aim at Moutai. Before Xinhua warned last week that gains in the liquor maker were excessive, the stock had more than doubled this year.
Platinum industry expects supply deficit in 2018
This article by Valentina Ruiz Leotaud for mining.com may be of interest to subscribers. Here is a section:
In its latest Platinum Quarterly report, the World Platinum Investment Council predicts a deficit of 275 koz of the precious metal for 2018 caused by an increase in jewellery and industrial demand.
Overall supply is probably going to drop by 1% next year “due in part to a 2% reduction in South African mine supply compounded by closures in the second half of 2017,” the report states.
In the third quarter of 2017, production from Zimbabwe declined to 95 koz owing to furnace maintenance work, while Russian supply fell to 185 koz, which is lower than the 205 koz produced in Q2’17. “Overall, global refined production for Q3’17 is estimated at 1,495 koz, which is a 4% reduction from Q2’17 and an 8% fall year-on-year.”
When it comes to next year’s overall demand, the WPIC says it is going to grow by 2% when compared to 2017. In particular, platinum jewellery demand will rise by 3%, which would represent its first spike since 2014. Behind this recovery is the double-digit growth in the rapidly expanding Indian market.
Global Gold Outlook
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A closer look at the assumptions of the theory
The obvious conclusion for gold investors would be to celebrate the coming era of skyrocketing gold prices, as supply dwindles, and the greatest gold rush of all time ensues in the markets. Such a scenario sounds very enticing. However, instead of taking the news at face value, it is worth examining the matter in more detail and understanding what the decline in production actually means for gold in the mid- and long-term.One of the main problems with most peak gold analyses and projections is that they are based on estimates of known mineable reserves of gold. However, the number of known reserves increases over time as new discoveries are made thanks to technological and scientific advances. Even as the currently operational mines might be slowly exhausting their reserves, new projects and potential discoveries remain untapped.
In this context, “peak gold” can be seen as the gradual depletion of the current, relatively easily accessible deposits. Once these are completely mined, the industry would be forced to move on to new locations that are currently not preferred, because they either involve higher production costs or present other challenges. Nevertheless, higher gold prices would motivate miners to seek out and explore new discoveries and deposits, as well as invest in research and new technologies.
Furthermore, one must bear in mind that the gold market is extensive and quite complex. Currently, the precious metal is being mined in every continent except Antarctica. However, as gold traditionally holds its value and does not corrode, it also has a strong recycling industry, refining and re-smelting the metal, which accounts for 1/3 of the total supply on average.
Therefore, “peak gold” can be viewed as a temporary supply restriction, which would trigger gold price increases in the mid-term. But it also has a much more important aspect to it: over the long term, the depletion of mines currently in operation translates to a “gap-up” of the gold price, as the production costs for new discoveries are drastically lifted. In other words, “peak gold” might not mean the end of our gold supply, but it could introduce a whole new average price range and “price floor” for gold.