3 Airline Stocks Ready for Takeoff

Coronavirus-induced stay-at-home orders and border closures have wreaked havoc on the airline industry in 2020. Furthermore, a move to remote working during the pandemic threatens to significantly reduce corporate travel moving forward. Philanthropist and Microsoft co-founder Bill Gates recently said he expects business travel to disappear by over 50% longer-term. “My prediction would be that over 50% of business travel and over 30% of days in the office will go away,” Gates told the New York Times’ Dealbook conference, per CNBC.

However, over the past month, airline stocks have flown back into favor with investors after successful COVID-19 vaccine breakthroughs give hope that pre-pandemic travel levels may return as more people take to the skies. Below, we take a look at the three largest airline stocks by market capitalization.

Southwest Airlines Co. (LUV)

The Dallas-based low-cost carrier operates over 700 aircraft in an all-Boeing 737 fleet, primarily targeting leisure and independent small business customers. Although the Federal Aviation Administration (FAA) lifted its 20-month ban of the troubled Boeing 737 Max from flying passengers Wednesday, Southwest said the jet wouldn’t re-enter service until later next year. From a technical standpoint, the share price broke out above a nine-month downtrend line that may see it retest its pre-pandemic high at $58.83. The airline has a market cap of $27.35 billion.

Delta Air Lines, Inc. (DAL)

With a market cap of $25.67 billion, Delta flies to over 300 destinations in more than 50 countries. The company announced in September that it plans to borrow $6.5 billion, backed by its frequent-flyer loyalty program to secure liquidity to ride out the tail end of the pandemic.

More recently, the full-service airline canceled one in every five flights it was scheduled to operate on Thanksgiving Day amid crew shortages brought about by the health crisis. Turning to the charts, a recent cross of the 50-day SMA back above the 200-day SMA and breakout above a multi-month downtrend line may lead to further gains toward crucial overhead resistance at $51.

United Airlines Holdings, Inc. (UAL)

United Airlines operates as a full-service carrier through its strategically located hubs in San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. Last month, Raymond James’ airline analyst Savanthi Syth upgraded the airline’s stock to ‘Outperform’ from ‘Market Perform’ and reiterated the firm’s $60 price target.

Syth argues the company sits in a better position than its competitors for a travel revival after securing a pilot agreement through 2022. He also noted that United has no pending fleet retirements, allowing it to rapidly increase capacity when demand picks up. Moving on to the chart, a comprehensive breakout above a crucial downtrend line and the 200-day SMA could see the shares take flight to the January swing low at $74.34. The airline has a market value of $13.18 billion.

For a look at today’s earnings schedule, check out our earnings calendar.

Baidu Completes Double Bottom Reversal

Chinese search engine Baidu Inc. (BIDU) reports Q3 2020 earnings after Monday’s U.S. closing bell, with analysts looking for a profit of $13.08 per-share on $27.5 billion in revenue. If met, earnings-per-share (EPS) would mark a 750% profit increase compared to the same quarter in 2019.  The stock fell more than 6% after posting mostly in-line results in August but recovered quickly and is now trading at a 10-month high.

Baidu Marketing On The Mend

Baidu’s marketing division produces 85% of total revenue, exposing price action to cyclical economic trends. That division took a hit during the first quarter shutdown but is now back on the growth track. Search inquiries and revenue driven by the hugely-popular mobile app rose 28% in Q2 2020 and double digits year-over-year, raising prospects for strong performance in coming quarters. In addition, the company expects to enhance average revenue per user (ARPU) through membership, gaming and live streaming initiatives.

Barclay’s analyst Gregory Zhao just upgraded the stock to ‘Overweight’ and raised the price target to $170, noting, “we think both the online marketing services and the new AI initiatives of Baidu Core are reaching an inflection point. Since 2Q20 its marketing division has followed the online ad industry’s recovery trend to gradually restore growth momentum. We also see substantial upside in the potential monetization through membership, gaming and live streaming to fully utilize existing traffic.

Wall Street And Technical Outlook

The stock has underperformed broad technology benchmarks in recent years, despite bullish Wall Street coverage. It’s currently rated at a ‘Strong Buy’, based upon 7 ‘Buy’ and 2 ‘Hold’ recommendations, and no analysts are recommending that shareholders close positions. Price targets currently range from a low of $130 to a Street-high $182 while the stock closed Friday’s U.S. session $14 below the median $160 target.

Baidu posted new three new highs into 2018 and entered a steep decline that hit a 7-year low in the first quarter. It spent the last 8 months working back to the January 2020 high at 147 and just completed the 100% retracement. This level marks a high volume 2019 breakdown through the 2018 low, as well at 200-week moving average resistance. A better-than-expected report and strong guidance may be needed to mount this formidable barrier.

For a look at all of today’s economic events, check out our economic calendar.

Pfizer’s COVID-19 Vaccine weighs on Gold prices

As it broke key price supports around $1,950/ounce, and finally $1900/ounce amid a pending wave of quantitative easing after Joe Biden was declared the winner of the recently concluded U.S election.

It’s fair to elaborate that gold traders were caught unawares as gold bears wreaked havoc at unprecedented levels, aftermath prices have recovered slightly, at the time of writing this publication the yellow metal was trading at about $1,889/ounce. The sudden rebound has seen lately in the greenback also clampdown on any bullish resolve in keeping price above $1,900/ounce.

The precious metal is fast losing its safe-haven status on the bias that its inverse correlation to stocks is much less appealing as global investors look into other alternatives as seen in recent days.

Digging deeper, into a key macro distorting gold prices is COVID-19 vaccine on bias that it pushed 10-year U.S Treasury yields to their highest point since COVID-19 pandemic started, meaning the surge in U.S Treasury yields and impressive gains recorded relatively in global stocks means it might just be a matter of few weeks for the precious metal to fall below the $1,800 price level.

This has kept gold traders bearish in the near term, on the bias that the precious metal is priced lower and not until a Joe Biden’s presidency comes to effect we might see the bullion metal trading below $1,800 price levels.

It would be unfair ruling out gold bulls as the mother of all stimulus packages seem to be on its way, judging by reports on the blue party’s economic agenda in bailing out a fragile economy battered by COVID-19 virus, means gold prices could recover remarkably after the end of January 2021.

However if the COVID-19 vaccine plus the stimulus deal creates a reflationary impulse not seen before, the U.S central bank might have no option but to lift interest rates earlier than expected, meaning gold investors might have a lot to battle for, as prices could tank below $1500/ounce in the long term.

For a look at all of today’s economic events, check out our economic calendar.

COVID-19 – The Race to a Vaccine

The 2nd Wave

The 2nd wave of the COVID-19 pandemic has hit Europe hard. As a result, a number of countries across the EU have had little choice but to reintroduce lockdown measures.

Britain has also reintroduced lockdown measures across England this week.

For the U.S, things are not much better. New daily COVID-19 cases continue to set new records as the West enters an uncertain winter.

The economic devastation from the 1st wave could pale into insignificance when considering the likely impact of the 2nd wave.

For this very reason, the race towards an effective and widely available COVID-19 vaccine is all the more important.

Until an effective vaccine is readily available, containment measures, border control, and more will remain economically debilitating.

The Race Participants

There are a vast number of pharma companies that are currently in the race to deliver the 1st effective COVID-19 vaccine.

Some of these companies are researching more drugs than others, suggesting that they may be more likely to deliver first. Others may argue, however, that having too many varieties to test will result in a lack of progress.

The companies are shown in the chart below

statistic_id1119090_top-companies-by-covid-19-treatment-vaccines-in-development-2020

While the companies listed above are trialing 60 different drugs and vaccines, as at 28th October, there were reportedly 674 drugs and vaccines in development, targeting COVID-19.

The figures are made available by statista.com and Pharma Intelligence.

Looking at the top 10 companies listed above and a few more in more detail:

U.S Headquartered

EpiVax: Unlisted and headquartered in Providence, USA.

Mateon Therapeutics: Listed on OTCMKTS (“MATN”) and headquartered in California.

Merck & Co.: Listed on the New York Stock Exchange (“MRK”) and headquartered in New Jersey, USA.

Moderna Inc.: Listed on the NASDAQ (“MRNA”) and headquartered in Cambridge, Massachusetts, USA.

Pfizer Inc.: Listed on the New York Stock Exchange (“PFE”) and headquartered in New York City. (Pfizer Inc. has partnered with Germany’s BioNTech SE)

Sorrento Therapeutics: Listed on the NASDAQ (“SRNE”) and headquartered in California. Currently trailing many of the front runners in the race for an effective vaccine.

Talem Therapeutics: This is a wholly-owned subsidiary of ImmunoPrecise Antibodies USA. Its parent company, ImmunoPrecise Antibodies Ltd is listed on the Toronto Stock Exchange.

Tonix Pharmaceuticals: Listed on the NASDAQ (“TNXP”) and headquartered in New Jersey.

Europe Headquartered

AstraZeneca: Listed on the London Stock Exchange (“AZN”) and headquartered in Cambridge, England and Sodertalje, Sweden.

GlaxoSmithKline: Listed on the London Stock Exchange (“GSK”) and headquartered in Brentford, England.

Grifols, S.A: Listed on the Bolsa de Madrid (“GRF”) and headquartered in Barcelona, Spain.

Asia Headquartered:

GC Pharma: Listed on the Korea Stock Exchange (“006280”) and headquartered in Yongin, South Korea.

As indicated above, the U.S pharmas make up the lion’s share of companies in the race to deliver a COVID-19 vaccine.

Coronavirus – The Latest Numbers

When considering the fact that the U.S has recorded an alarming 9,919,522 COVID-19 cases and 240,953 COVID-19 related deaths, it is not surprising that Pharma U.S is leading the charge.

Looking at the latest Coronavirus figures, the total number of cases currently sits at 49.031. While 34.98m have reportedly recovered, there have been 1.24m reported deaths.

For Europe and the U.S, the number of cases reported amidst the 2nd wave has been far more significant than in the 1st wave.

When considering the fact that the winter has just begun, these numbers are likely to balloon further.

For the Global Economy, the key to any recovery rests on finding an effective vaccine and soon. Failure to successfully trial a vaccine by the end of the year will leave the world exposed for another full quarter.

Larger multinational companies may be able to tighten the belt. Small to medium-sized companies, however, will begin to shut down in far greater numbers than seen in the 1st wave.

The damage to the economy would be so severe that some nations will be in the economic wilderness for a decade if not more.

So, having identified the key players in the race to an effective COVID-19 vaccine, the next step is to understand at what stage of clinical trials each currently stands.

The Clinical Trials

Companies that are more advanced may not ultimately reach the end goal first, but they do have a greater chance.

For this reason, share prices have tended to reflect how advanced and successful trials have been to date.

According to Pharmaintellgence.informa.com,

Of the total 674 drugs, 510 are currently in the preclinical trial phase. This means that the vast majority may not make it to clinical trials.

Of the remainder:

  • 49 are currently in phase 1 clinical trial.
  • 75 are in phase 2, and
  • 28 are in phase 3.

Taking a closer look at the current trials testing drugs for the treatment and/or prevention of COVID-19 fund in Trialtrove, the breakdown in phases is as follows:

  • I: 431
  • II: 1,728
  • III: 1,011
  • IV: 327

From the numbers above, it is clear that the sector is making strong progress towards effective treatment and/or vaccine.

The Front Runners

  • AstraZeneca (“AZN”) announced this week that they are on track to deliver a vaccine as early as this year. The company is due to deliver test results by the end of the year. AstraZeneca is working with the University of Oxford to deliver an effective vaccine.
  • Moderna Inc. (“MRNA”) is reportedly getter ready for a global launch. In late October, the company stated that it had already accepted in excess of $1bn in deposits from governments. Late-stage trials are underway.
  • Pfizer Inc. (“PFE”) and BioNTech SE have announced that they may release initial late-stage trial data this month. If results are positive, Pfizer Inc. will apply from the FDA for emergency use authorization.

While the above are in their final stages, there are a number of other pharmas also making progress.

FDA approvals, however, may be hard to come by for pharmas looking to enter the largest COVID-19 market. That will, therefore, give the likes of Moderna Inc. and Pfizer Inc. the upper hand for now. The flood gates could open, however, should both hit snags at this late stage. Such an event could give AstraZeneca a green light to enter the U.S market.

In the days and weeks ahead, we will continue to monitor progress towards a vaccine and review other pharmas in the race.

Trading Currencies: Into the Final Straight

With the first US presidential debate on the 29th, we have officially entered the final phase of the 2020 presidential race, a race that is getting tighter than we realise.

Although most polls suggest a Biden win, how the final results will fall is still a mystery, and FX trading is reflecting this risk.

DXY’s Recent Uptrend – Could It Be A Telling of USD’s Future Path?

Since entering the final 60 days of the campaign, the US dollar basket has begun to pop and is trading in a strong upward channel. It has added as much as 300 points since the 60-day mark as seen in this chart. Check USD price today.

Keep an Eye on the Following Issues If You’re Trading DXY and USD

There are five main issues of the campaign that are beginning to take shape, and these issues, when discussed by the candidates, are moving DXY.

These include:

  1. The Supreme Court – the reactions to which can been seen from the 21st of September after the passing of Ruth Baber Grinberg.
  2. COVID-19 handling – this is a big issue for Trump’s re-election, over 60% of American are worried about the handling of the disease.
  3. Race and violence in the cities – Handling of this issue varies greatly between the two candidates and will spark fierce debate.
  4. The Economy and its recovery – polls suggest Americans see Trump as a better candidate here. If Biden wins, the initial reactions in FX and equities may be a slight negative from an economic reasoning.
  5. Validity of the Vote – this is building as one of the biggest risks in the market. The President continues to seed this idea to his supporter base – a contested election would put volatility front and centre and would ramp up risk-off trading.

How Is the Market Forecasting the USD Trend?

If we try to take a look at the market forecast of EUR/USD, we will notice that experts are mostly predicting a bullish trend for the pair in the long run. Given the high uncertainty surrounding the US politics as well as its economy, it’s obvious that the market is unsure how the USD trend may go. Nonetheless, as the election draws closer, the debates would offer fresh clues and ideas for USD traders.

Source: Data on 25 Sep on Mitrade (updated every Friday)

If USD’s Broad Weakness Continues, How Can Traders Make the Most of It?

With the election happening in just a month and with two more debates to go, it’s very likely that USD trend will go on a roller-coaster ride with unpredictable turns and loops. Yet, the good thing about trading forex or even index derivatives is that traders have the freedom to decide to go long or short based on the market’s trend. With derivative market’s characteristic that allows traders to buy/sell with leverage and relatively low deposit, traders can grasp more opportunities during this volatile period.

Mark Your Calendar! Most Important Events to Trade on for USD Traders:

  • Oct 7 (Wed) 7:00-8:30 pm MDT – Vice presidential debate
  • Oct 15 (Thurs) 9:00-10:30pm EDT – Second presidential debate
  • Oct 22 (Thurs) 8:00-9:30pm CDT – Third presidential debate

In the upcoming debates, the 5 issues mentioned in the above will be discussed and dissected by the candidates and it will surely drive FX direction and momentum. Traders should stay alert on the headlines of the debates as well as the overall US politics.

This article is prepared by Lucia from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.

Darkest Before Dawn

The MSCI Asia Pacific Index fell for the fourth consecutive session today and many markets (India, Shenzhen, Taiwan, and Korea) fell more than 2% and most others were off more than 1%. Europe’s Dow Jones Stoxx 600 is giving back the past two days’ gains. The S&P 500 could gap lower at the open. Benchmark 10-year yields are a little softer but have remained subdued in the face of the dramatic moves in equities.

The US yield is little changed near 0.66%. Practically no currency could escape the clutches of the rebounding dollar, though the yen and sterling are little changed. The JP Morgan Emerging Market Currency Index is lower for the fifth consecutive session. Gold remains heavy and is approaching the (38.2%) retracement of this year’s rally which is found near $1837. Crude oil is consolidating at lower levels. November WTI is in narrow range below $40 a barrel.

Asia Pacific

Hong Kong and New Zealand report trade figures. Economists did a good job forecasting New Zealand imports and exports. As expected, the formers rose a little and the latter slipped. The takeaway is that New Zealand reported its first trade deficit (~NZD353 mln), snapping a six-month period of trade surpluses. Economists had a harder time with HK figures. Exports pared their decline to 2.3% year-over-year from 3%, but the bigger miss was in the weakness of imports. These fell 5.7% year-over-year after a 3.4% decline in July. The net result was that HK’s trade surplus was halved from the HKD29.8 bln to HKD14.6 bln.

China continues to harass Taiwan with incursions into its air defense zone. The bullying practice has escalated in the past week or so. Beijing’s aggressiveness comes as the US some European countries have stepped up their interactions, including high-level visits. It is hard to say that it is having an economic impact but as a potential flashpoint, it is drawing attention.

Japan may have a new prime minister, but the government’s assessment of the economy remained little changed from last month. The economy is said to be in a severe place but some areas, namely, exports, production, business failures, and jobs, are improving (four of 14 categories). The median forecast in the Bloomberg survey expects the economy to expand 15% this quarter, the first expansion since Q3 19.

The dollar is in less than a third of a yen range today above JPY105.20. The $1.4 bln in expiring options between JPY105.10 and JPY105.25 have been neutralized. The next set is for almost the same amount at JPY105.70-JPY105.75. A four-day uptrend on the hourly bar charts comes in a little above JPY105.20 by the North American open. A break could see JPY104.60-JPY104.80. The Australian dollar is lower for the fifth consecutive session. It dipped below $0.7030 for the first in two months. A break of $0.7000 could see $0.6950 quickly.

The $0.7080 area now offer resistance. The PBOC set the dollar’s reference rate a little softer than the bank models in the Bloomberg survey anticipated. Although some observers see it as a sign that officials are seeking to stop the yuan from strengthening, the fact of the matter is that the dollar remained bid. The greenback is at its best level since the start of last week, a little below CNY6.83. Note that after the US market close today, FTSE-Russell will announce whether it will include Chinese bonds in its indices. A year ago, it refused, but China has reduced barriers to enter and exit.

Europe

European banks took 174.5 bln euros from the ECB’s latest Targeted Long-Term Refinancing Operation. These are loans that can have a rate of as much as minus 100 bp providing the funds are lent to households and businesses. It was at the high end of expectations and follows a 1.3 trillion operation a few months ago. This will lead to another jump in the ECB’s balance sheet. Recall that the ECB’s balance sheet has been slowing increasing as it continues to buy bonds under its APP and PEPP operations. The extra liquidity in the Eurosystem is a factor that is pushing three-month Euribor a little below the minus 50 bp deposit rates. When observers say that central banks are out of ammo, few anticipated the deeply negative loans offered and the introduction of the dual rates.

Neither the Swiss National Bank nor Norway’s Norges Bank altered policy at today’s meetings. The pullback in the Swiss franc in recent weeks is too small to register for officials, who remain concerned about its strength. The OECD regards it as the most over-valued currency in its universe. The threat of being identified by the US as a “currency manipulator” is not a strong enough deterrent as intervention remains one of its key tools. Some had expected the Norges Bank to bring forward its first hike from the end of 2022, but it did not. On the other hand, Hungary raised the one-week deposit rate 15 bp to 75 bp, catching the market by surprise and giving the forint a lift.

The German September IFO survey edged higher. The current assessment rose to 89.2 from 87.9, while the expectations component firmed to 97.7 from a revised 97.2 (from 97.5 initially). The overall assessment of the business climate rose to 93.4 from 92.6. The preliminary PMI data showed the manufacturing sector continues to rebound, while the service sector is stalled.

In the UK, Chancellor Sunak canceled the fall budget and is expected to present a new jobs support program to Parliament today. Speculation in the press is for a German-like arrangement, where the government picks up some of the wage bill for employees that are retained but on shorter hours. Meanwhile, the British Chamber of Commerce estimate suggest over half of UK firms have not completed the government’s recommended steps to prepare for the end of the standstill agreement with the EU.

The euro is extending its decline for a fifth consecutive session. It has dipped below $1.1635 in European turnover. For the first time this quarter, the skew in the one- and two-month options (risk-reversals) favor euro puts over calls. The $1.16 area corresponds to a (50%) retracement of the Q3 gains. The $1.1600-$1.1610 area holds about 1.6 bln euro in options that expire today.

There is another option for nearly 525 mln euro at $1.1625 that also will be cut today. A move above $1.17, where an 845 mln option is struck (expiring today) would help stabilize the tone. Sterling is firm within yesterday’s range, when it tested $1.2675. It is near $1.2750 in late London morning turnover. A push above $1.28 is needed to begin repairing some of the recent technical damage.

America

The US reports new home sale (August) and the KC Fed manufacturing survey (September), but it will be the weekly jobless claims that capture the attention. Seasonal factors encourage expectations for a continued gradual decline. However, note that around in November, the seasonal adjustment will add rather than subtract. The markets will be particularly sensitive to an unexpected increase in weekly jobless claims, especially given the lack of fresh measures by either the Fed or Congress. In fact, some observers attribute the Fed’s somber assessment to prompt more stimulus as a factor that helped spur the down move in equities.

Canadian Prime Minister Trudeau unveiled funding for a wide range of initiatives, including daycare, pharma, housing and environment. None of the three major opposition parties endorsed it. Trudeau leads a minority government and the budget needs to be approved or it could potentially trigger new elections.

Mexico’s central bank meets today. Yesterday’s retail sales report showed a solid 5.5% increase in July, but it was still less than expected. Inflation is running just north of the upper end of Banxico’s 2-4% target. The cash rate target is 4.5%. The peso’s six-week rally is ending with a bang this week and it is off over 5%. After five 50 bp rate cuts, Banxico is widely expected to cut 25 bp today. We suspect the odds of standing pat is greater.

The US dollar poked above CAD1.34 today for the first time since early August. The next important chart area is near CAD1.3440. Initial support is likely around CAD1.3360. If the equity market stabilize the Canadian dollar will likely strengthen. After jumping over 3% yesterday, the greenback extended its gains to MXN22.53 in Asian turnover but has gradually firmed through the European morning. The first area of support is seen in the MXN22.00-MXN22.20 area.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Marc Chandler, MarctoMarket.

Copper, a Potential Casualty of Further Dollar Strength

What is our trading focus?

HG Copper – COPPERUSDEC20
COPA:xlon – WisdomTree Copper ETC (UCITS eligible)


Copper’s impressive recovery and momentum from the March low, has started to slow with the price struggling to extend its impressive gains beyond 3.10/lb on High Grade copper (COPPERUSDEC20). The rally seen across industrial metals, not least copper, in recent months has been driven by a post-pandemic recovery in Chinese demand supported by credit and scattered supply mine disruptions.

While the fundamental outlook remains supportive, the lack of fresh upward catalysts may now pose a short-term challenge to this poster-child of momentum. Something that has helped attract a substantial amount of speculative long positions from trend following strategies that many hedge funds and CTA’s adhere to.

Copper is currently challenging the uptrend from the March low, but in our opinion the price would have to break below $2.95/lb before it kicks off a correction/consolidation phase. Just like gold’s current correction has more to do with dollar strength than changed fundamentals, an extended period of dollar strength could be the trigger that for now could pause this classic momentum trade.

 

Source: Saxo Group

A key source of inspiration behind the rally has been the continued slump in stocks at warehouses monitored by the three major futures exchanges in New York, London and Shanghai. Not least the drop to a 14-year low in stocks monitored by the London Metal Exchange has supported the market. The tightness that it signaled drove the spot premium over the three-month benchmark to an 18-month high at $40/t last week before easing lower to $28/t yesterday.

During the past week stock levels have stabilized on LME while levels monitored by the SHFE has seen a steady rise since late June. This development combined with softer prices in Shanghai may potentially have shut the arbitrage window for profitably importing copper into China.

The reason why copper risks a non-fundamental supported correction can be found in the weekly Commitments of Traders report. The mention strong momentum has continued to attract an ever increasing net-long position held by speculators such as hedge funds and CTA. Given that many of these positions are purely based on technical analysis a break below $2.95/lb could trigger a correction.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Gold Bulls Challenged on a Sustained Break Below $1900/oz

What is our trading focus?

XAUUSD – Spot gold
XAGUSD – Spot silver
XPTUSD – Spot platinum
XAUXAG – Gold-Silver ratio
IGLN:xlon – iShares Physical Gold
ISLN:xlon – iShares Physical Silver
IPLT:xlon – iShares Physical Platinum


In our latest update titled “Gold too passive, risks deeper correction”, we observed how gold increasingly had seen its movement mirroring those seen in U.S. stocks. The lack of fresh input from bonds and the dollar – up until yesterday – meant that algorithmic trading systems, often trading correlations between markets, have moved to the driving seat, thereby creating an unusually positive correlation between gold and stocks.

We maintain a positive medium term outlook for gold but also accept that tactical trading strategies may pounce on the break below $1900/oz in order to force long liquidation and lower prices. Based on the latest price action, the short-term outlook has turned more neutral with the additional dollar strength and stock market weakness being the two key risks for the market.

Gold dropped below $1900/oz on technical selling only to climb back above when the break was met with strong buying interest through exchange-traded funds. Having broken below the 50-day moving average, the risk of an even longer and deeper correction can not be ruled out. Fibonacci levels to watch are $1872/oz followed by $1825/oz.

GOLD GRAPH
Source: Saxo Group

The combination of gold’s current correlation with stocks, losing further ground, and the dollar rallying the most in three months was the trigger that sent precious metals into a mini tailspin. The markets are currently reacting to dimming outlook for further U.S. fiscal stimulus, rising Covid-19 cases around the world, U.S.-China tensions and the very clear risk of increased volatility around the presidential election.

As mention, the dollars biggest advance in three months took the EURUSD uncomfortable close to the 1.1700-1.1735 pivot area. Speculators have increasingly in recent months been expressing their negative dollar view through buying of EURUSD. A break below could see the Greenback rally onto the comeback trail, thereby creating additional headwinds for commodities.

However, precious metals stood out yesterday with the sector taking a bigger hit than growth dependent sectors such as industrial metals and energy. It also once again highlighted the battle between short-term technical traders selling futures on the technical break below $1900/oz and long-term investors rushing in to snap up gold at lower prices. Total holding in exchange-traded funds backed by bullion jumped by almost 36 metric tons or 1.2 million ounces yesterday, the biggest one-day increase in more than four years.

Once again it was silver and platinum, a recent climber, which bore the brunt of the selling. The gold-silver ratio jumped to 79 after having traded in a relative tight range around 72 ounces of silver to one ounce of gold. Platinum meanwhile also suffered from its lack of liquidity and despite a recent improvement in the fundamental outlook it slumped with the gold-platinum ratio rising to 2.14 ounces of platinum to one ounce of gold after recently finding support at the important 2 level.

Having broken below $26/oz and its 50-day moving average, silver is once again looking for support. Using Fibonacci retracements from the June low, it has so far managed to find support ahead of $23.40, the August low with further weakness pointing to $21.9 as the next level.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

RESERVE BANKING – THE ELEPHANT IN THE ROOM 

The expression “elephant in the room“…

“…an important or enormous topic, question, or controversial issue that is obvious or that everyone knows about but no one mentions or wants to discuss because it makes at least some of them uncomfortable or is personally, socially, or politically embarrassing, controversial, inflammatory, or dangerous. (source)

Lets’s start with some history. The following is an excerpt from an earlier article of mine…

The warehouse proprietors (‘bankers’) decided they needed to find a way to increase their profits. Earning fees from their depository and safekeeping services wasn’t enough. Since most of the gold remained in storage and most transactions involved exchange or transfer of paper receipts for the gold on deposit, they decided to issue ‘loans’ of the gold/money to others and charge interest. The cumulative amounts of gold loaned out could not exceed the amount of gold held in storage. And, hopefully, not too many depositors would ask to redeem their physical gold at the same time. 

It seemed to be a workable system. But apparently the ‘bankers’ were not content. They soon started issuing more loans/receipts for gold which did not exist. Of course they saw no need to inform anyone of their actions and the receipts still stated that they were redeemable in fixed amounts of gold. And when someone wanted to take possession of their gold on a physical basis they could still do so. Up to a point. (see History Of Gold As Money)

If any of this sounds familiar to you, it should. Fractional-reserve accounting by warehouses/banks was a starting point for the credit expansion that now funds our world economy.

As we become more dependent on credit, we also become more vulnerable to events similar to that which happened twelve years ago. Another credit collapse isn’t just a possibility, nor is it only highly likely. Rather, it is inevitable.

A PRIMER ON FRACTIONAL-RESERVE BANKING

On a personal, retail level, here is an example of how fractional-reserve banking works today:

Your brother-in-law pays you the thirty thousand dollars that he borrowed three years ago. You decide to put the money in a time deposit (one year CD, etc.) at your bank. At the end of the day when your banker balances his books he finds that deposits at the bank exceed the funds which are currently loaned out/invested by an amount in excess of the ten percent US Federal Reserve requirement.

And since that surplus amount is now available for new loans and additional investments, your bank’s loan committee and investment department are busily engaged in efforts to allocate those funds on a – hopefully – profitable basis. After due consideration, it loans twelve thousand dollars to Jane, who wants to buy a car and fifteen thousand dollars to a local entrepreneur.

Jane pays the twelve thousand dollars to Mr. Smith who is selling the car to her (private transaction). Jane drives away in her new car and Mr. Smith deposits the money in his bank which subsequently loans out ten thousand eight hundred dollars to a local dentist who is expanding his practice.

The local entrepreneur deposits the fifteen thousand dollars in his business account which is at the same bank that loaned him the money. Voila! The same bank which made the two loans now has fifteen thousand dollars in ‘new’ deposits of which it can lend out or invest another thirteen thousand five dollars. It promptly does so.

Where are we now? The original deposit of thirty thousand dollars has  grown to $81,300! How? By lending/investing a majority of the same money over and over again.

US Federal Reserve regulations require banks to keep on deposit an amount of money equal to ten percent of the deposits they take in (checking, savings, CDs, etc.). The remaining ninety percent can be loaned out or invested. (There are exceptions, allowances, and variations to the requirements depending on deposit type, amount, etc.  There are also ways to meet the requirement other than just holding cash reserves.)

Once the money is deposited, the process is ongoing and continually adds to the amount of dollars in the system.

TOO MANY BOBS

Here is a story to help illustrate the risk involved in fractional-reserve banking.

Bob has ten thousand dollars that he doesn’t know what to do with so he gives it to his best friend, Sam, for safekeeping. Bob tells Sam that he does not expect to need the money anytime soon, but he may want to get some of it from time to time. And, of course, if the unexpected happens (it always does) he may need to have access to more – or all – of it.

Since Sam is a specialist in financial matters and has considerable investment expertise he decides to invest four thousand dollars of Bob’s money in US Treasury notes. Sam also loans five thousand dollars to a friend of his who is a homebuilder. Sam will earn interest on the construction loan in addition to a modest return on the US Treasury notes he purchased. Not bad. Especially since he does not have to pay Bob more than a pittance for ‘watching’ his money for him. Maybe Bob should pay Sam something for the good job he is doing (think negative interest rates).

Sam has decided to keep one thousand dollars of Bob’s money available in case it is needed. Good thing, too. After one week, Bob asks Sam for one thousand dollars of his money back in order to take care of some ‘unexpected’ expenses. Sam promptly pays Bob his one thousand dollars.

Sam now feels that the likelihood of Bob needing more of his money anytime soon is a remote possibility. Hence, he pledges the US Treasury notes as collateral and borrows four thousand dollars. He keeps one thousand in cash and loans another three thousand dollars to his friend, the home builder.

Bob sees the success the builder and others are having and decides that he wants to invest his remaining nine thousand dollars in real estate. So he goes to see Sam.

Sam only has one thousand dollars of Bob’s money available and gives it to him right away. He tells Bob that he will have the rest of his money shortly.

Sam calls his builder friend right away. The builder tells Sam that a couple his homes have not sold yet and the money to repay Sam isn’t available until the homes are sold.

Sam could sell the four thousand dollars in US Treasury Notes in order to access part of the money needed to pay Bob. But the proceeds would have to be used first to pay off the loan for which they are pledged as collateral. Since the loan amount is nearly identical to the market value of the US Treasury notes, no additional funds would be available.

Bob, meanwhile, decides that he won’t start investing in real estate as he had planned. Therefore, he won’t need the rest of his money right now.

Except that when his wife gets home from work, he learns that one of their kids needs braces on her teeth. Also, the interest rate reset on their home mortgage has taken effect.  The new monthly payment will increase by several hundred dollars. He decides that he might need to draw from his money (that Sam has charge of) after all.

When he calls on Sam the next day, Bob is shocked to find out that his money is not available. And Sam doesn’t know when it will be available.

Do you see the risk in fractional-reserve banking? If too many Bobs want their money at the same time or can’t make their mortgage payments, what do you think will happen?

CREDIT ADDICTION STARTS WITH US TREASURY

All of the credit expansion explained in the illustrations above is after the fact. The original credit expansion starts with the United States Treasury.

You may have heard the term “robbing Peter to pay Paul”. Among other things, the meaning is “to take from one person or thing to give to another, especially when it results in the elimination of one debt by incurring another. ” (source)

This is how US Treasury debt is paid. New Treasury securities are issued to pay off those that have matured.

The total debt continues to grow because it is never paid off; only replaced with more debt. In addition, new debt offerings must be enough to pay interest on existing debt and continue to fund day-to-day operations of the government.

Referring to fractional-reserve banking, fund manager and investor Bill Gross said:

“It still mystifies me…how a banking system can create money out of thin air, but it does. By rough estimates, banks and their shadows have turned $3 trillion of “base” credit into $65 trillion + of “unreserved” credit in the United States alone…”  

Mr. Gross’s quote above is from several years ago. The numbers today are so much larger as to be nearly unimaginable. And the risk of systemic financial crisis looms ever greater.

Fractional-reserve banking is ongoing.  It is at the core of the Federal Reserve’s efforts to expand the supply of money and credit. Hence, the number of US dollars continues to increase and their value continues to erode.  Their value at any given time is always suspect.  How can we possibly know what a dollar is worth when there is an unlimited supply and no constancy?

What is truly amazing is the extent to which our banking system can hold itself together.  And, to whatever extent the Fed’s efforts have kept the system from imploding, it is noteworthy that we continue to look to and depend on the perpetrator of the crime to rescue us. Even worse, the solution(s) offered are the very same actions that led to the current predicament.  Spend more and borrow more.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Gold too Passive, Risks Deeper Correction

What is our trading focus?

XAUUSD – Spot gold
XAGUSD – Spot silver
XPTUSD – Spot platinum
XAUXAG – Gold-Silver ratio
IGLN:xlon – iShares Physical Gold
ISLN:xlon – iShares Physical Silver
IPLT:xlon – iShares Physical Platinum


Gold as well as silver and platinum have seen renewed weakness following yesterday’s FOMC meeting. This after Fed chair Powell, as expected so close to the US elections, refrained from announcing new measures to stimulate and support an economic recovery which he described as still being highly uncertain. While the Fed has promised rock-bottom rates for longer than three years, the across market reaction with lower stocks and a stronger dollar, have raised some concerns that the Fed’s tool box has started to look empty with the element of surprise no longer there.

Gold’s post-FOMC reaction has mirrored the developments seen in weaker stocks and a stronger dollar. It shows that precious metals for now instead of being a safe-haven asset, chase the alternating risk sentiment being reflected through these key markets.

While U.S. ten year real yields, a key driver for gold, continue to stabilized around -1%, the short-term market direction is likely to be dictated by stock and currency market developments. Especially a break in the Nasdaq below 11,000 and a stronger dollar against the euro below €1.17 could increase the risk of a deeper correction in gold than the one seen already down to $1900/oz.

The rising inflation theme that in recent months helped drive demand for gold and inflation protected bonds have started to fade somewhat in recent weeks. This after seeing forward inflation projections move lower after reaching a cycle high at the end of August. Countering this potential short term headwind for gold, it is our worry that the optimistic views on when a vaccine against Covid-19 will be become widely available are too optimistic. With the case count continuing to rise around the world, recently also in the U.S., the global economic recovery look set to slow over the coming months.

With these developments and the potential for a very ‘ugly’ U.S. elections period ahead, we maintain our bullish outlook for gold. In the short-term however the performance of U.S. mega-caps and the dollar hold the key to the direction. As a result we are likely to see the two month consolidation period being extended further.

Gold remains stuck in the $1900’s with local support at $1937/oz ahead of the key $1900/oz level. Three previous lower highs point to fading upside momentum with the market in need of a break above $1200/oz to neutralise it.

Source: Saxo Group
Source: Saxo Group

Turning our attention to silver we have seen little in terms of fresh input to the market with most of the recent price action being dictated by mentioned outside markets. It is currently stuck in a $26/oz to $27.50/oz with no major changes seen in its relative value versus gold where the XAUXAG ratio has traded in a very tight range around 72 ounces of silver to one ounce of gold.

Source: Saxo Group

Platinum has rallied strongly since the World Platinum Investment Council last week changed its 2020 outlook from a supply surplus to a deficit. Having tried for a couple of days to break a key level against gold it also got hit by profit taking following yesterday’s FOMC meeting. Trading at a discount close to 1000 dollars to gold the metal has yet to challenge the recent highs which are $1005/oz and $1040/oz. For that to happen the XAUXPT ratio probably needs to break below 2, a key area of support where platinum’s further advance has been scuppered on several occasions since May (see small insert chart).

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Is the COMEX Fudging Physical Delivery Data?

Written by Jan Nieuwenhuijs from Voima Insight

When it comes to the price of gold, there is always much discussion in the gold space regarding the COMEX futures exchange. Because futures are traded with leverage, they have a significant impact on the gold price. Therefore, it’s always worth scrutinizing COMEX trading to be sure the gold price is a fair representation of supply and demand.

The other day I commented on an article by Robert Kientz titled “COMEX’s Gold And Silver Futures Market Trade Data Not Adding Up” (I have been told Kientz’s work is based on an analysis by Kirian van Hest). Although I haven’t read everything by Kientz and van Hest, the gist of the initial article* I commented on was that the number of contracts that were delivered in early September did not match the change in open interest for this contract.

To make sense of the delivery data I’ve collected trading volume and open interest numbers for the September 2020 contract from Nick Laird at GoldChartsRUs.comCME Group, which is the owner of the COMEX, only publishes granular trading volume and open interest statistics going back four days, so I asked data miner Nick Laird for data going back further.

The only dissimilarity I could find is that CME Group discloses delivery data one of their webpages with a one-day lag. Possibly, this leads to confusion. As an example, on the CME’s delivery notices webpage we can see that on September 9, 2020, deliveries accounted for 243 contracts (red box below).

Exhibit 1. Delivery notices report.

However, on CME’s trading volume webpage, deliveries on September 9, 2020, accounted for 104 contracts (red box below).

Exhibit 2.

The explanation can be found in the delivery notices report (exhibit 1). One can see that one day prior to September 9, 2020, exactly 104 contracts were delivered. This is because on the delivery notices report it reads in the top left “intent date.” So, the delivery notices report discloses intents for deliveries, which then are being executed the next day (and as such reported on the trading volume page). If I compare delivery numbers for each day of the September contract between the notices report and trading volume webpage, they are all the same, there is just a lag of one day in the latter.

If I make a table of daily open interest, change in open interest, deliveries, the difference between the change in open interest and deliveries (“OI change + deliveries”), and trading volume numbers, everything makes perfect sense. Have a look below:

Exhibit 3. GC20U is the September 2020 contract.

What we can see, day by day, is that the difference between change in open interest and deliveries and can be offset by trading volume. For example, on August 31, 2020, the number of contracts physically delivered accounted for 1928, and the change in open interest was -1888. The difference between the change in the open interest and deliveries is 40 contracts, but can be explained by a trading volume of 158 contracts. Trading volume always opens new contracts (short and long) but how this affects the open interest depends on the positions of the traders before they entered the trades. Volume can increase or decrease the open interest.

My conclusion is that there is no fraud, because on every day in the table (exhibit 3) volume exceeds the difference between the change in open interest and deliveries  (“OI change + deliveries”).

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A Depression For The 21st Century

The Depression Of The 21st Century will likely end up being the new singular event of discussion and comparison for all financial and economic catastrophes. Questions of how much worse and how long it will last are difficult to answer. Predictions about the type and strength of potential recovery could be premature.

THE GREAT DEPRESSION

After the stock market crash in October 1929, the situation was bleak. Formerly wealthy investors literally lost everything. Unemployment surged, especially with the layoffs on Wall Street.

The onset of the new year, 1930, brought new-found optimism. Banks and brokerage firms began hiring again, confidence increased and stocks recovered a majority portion of their previous losses.

Unfortunately, things didn’t get better. The new-found optimism was lost, stocks collapsed again, and the layoffs continued. Over the next two years, stock prices declined by more than ninety percent.

What if something like that happened today? A similar percentage drop in the Dow Jones Industrial Average would take it from 29,000 to 2900. There is not much allowance for confidence to reassert itself in the face of stocks dropping to a level last seen in November 1991. A nearly 30-year period of higher and higher stock price gains would be wiped out in two short years.

Taking only two years to find a bottom might be the best news. It took the stock market (DJIA) twenty-three more years (twenty-five years in all) to regain its all-time price peak from August 1929. That is in nominal terms. In inflation-adjusted terms, the stock market did not regain and exceed its previous all-time high until May 1959 – thirty years after the crash.

As bad as the stock market numbers sound, other events and circumstances reflect a clearer picture of the financial and economic turmoil which followed the crash.

The ranks of unemployed grew to more than twenty-five percent, then declined to approximately twenty percent and remained at that level until dropping sharply with the concurrent rise in manufacturing and industrial activity associated with the United States involvement in World War II.

Homeless people on the streets, long lines at soup kitchens, beggars, and tent cities were obvious indications of the depressed state of the economy. Week after week, month after month, year after year, the Great Depression lingered on.

The conditions accompanying the bleak economic environment were exacerbated by bank failures. People who thought they had some money safely deposited at their local building and loan institution or commercial bank saw their hopes and dreams dashed. Bank failures became an almost common threat to financial stability.

How much more difficult would it be for us today to deal with similar events and circumstances? Probably much more difficult. We might not be able to cope with it.

As a society today, we are far removed in experience and memory from hard times. We have become accustomed to being taken care of. Part of that coddled feeling is due to the extreme level of government guarantees and our expectations that ‘Big Brother’ will always be there to do something.

Investors and consumers like guarantees; and they want to see evidence that a guarantee is more than just an empty promise.

During the 1930s, with the alarming numbers of bank failures and the Great Depression at its full-blown worst, confidence was almost nonexistent. Bank runs and depressed stock prices had created an atmosphere of financial panic.

President Roosevelt’s answer was a bank “holiday”. Not too long afterwards, Congressional legislation authorized the formation of the Federal Deposit Insurance Corporation (FDIC) and the Federal Savings And Loan Insurance Corporation (FSLIC).

Use of the terms ‘federal’ and ‘insurance’ in the names of the new institutions was meant to help restore lost confidence and maintain it. Apparently it worked. Confidence in the banks improved.

The money wasn’t really there to back up the guarantees. It was an empty promise, but people felt better; and that seemed to be good enough. Fragile as the banking system was – and still is – people preferred having their money in the bank.

That preference did not in any way, shape, or form, translate to investor participation in the stock market. Still reeling from the collapse in stocks, people would sooner lend or give money to family members. If someone had any money to invest they usually bought bonds. It took almost two generations for stocks to become fashionable again.

NO RESERVATIONS FOR TODAY’S STOCK INVESTORS

The almost casual attitude towards selloffs in the stock market that exists in this century is the result of assuming that the market will right itself and go right back up in short order. Or, if things are serious enough, the Federal Reserve Cavalry will ride to the rescue – every time.

The expectation that the Fed will always bail out the banks and the financial markets has muted the word ‘caution’ when it comes to investing. Some people seem to fancy themselves as smart investors because they bought stocks this past spring and are now feeling the euphoria from the effects of the Fed’s injection of the money drug into their financial veins.

We seem to have forgotten how difficult it was to extricate ourselves from a similar mess little more than a decade ago. The financial markets may have recovered more quickly this time but the economic backdrop is more characteristic of a patient that is “terminally ill but resting (un)comfortably”.

The Fed is very aware of how precarious the situation is. They have pulled out all the stops in their quest to “bring back inflation”. They are fighting an uphill battle. The chart below shows the declining effects of the inflation created by the Fed over the last half-century…

Capacity Utilization Rate – 50 Year Historical Chart

This chart shows capacity utilization back to 1967. Capacity utilization is the percentage of resources used by corporations and factories to produce finished goods.

As you can see in the chart, the capacity utilization rate has been trending down in regular stair-step fashion for more than fifty years. A possible reason could be an increase in the efficient use of the available resources. Rather, though, the declining capacity utilization rate is more reflective of an ongoing decline in the demand for finished goods.

Neither of those reasons are consistent with the expectations from ongoing inflation that the Fed creates. The actual results are indicative of a multi-decade decline in the demand for finished goods; a long-term slowdown in economic activity.

Here is another chart. This one shows the relationship of gold’s price to the monetary base…

Gold’s Price To The Monetary Base – 100 Year Historical Chart

In the chart immediately above, we see that the ratio of gold’s price to the monetary base is in a long-term decline that has lasted for over one hundred years. This seems somewhat contradictory when compared to what some think they know about gold.

Gold’s higher price over time is a reflection of the ongoing decline of the U.S. dollar. The decline (loss of purchasing power) in the value of the U.S. dollar is the result of the inflation created by the government and the Federal Reserve.

The increase in the monetary base is an indicator of the extent to which the government and the Fed have debased the money supply. The continual expansion of the supply of money and credit leads to the loss in purchasing power of the dollar.

Some gold analysts and investors believe that increases in the monetary base lead to similarly proportionate increases in gold’s price. But that is not what is happening.

Gold’s price increase for the past one hundred years does not correlate with the increase in the monetary base. The price of gold reflects the actual loss in purchasing power of the U.S. dollar.

Inflation created by the Fed is losing its intended effect. It’s resulting effects on the economy are similar to those of drug addiction. Over time, each subsequent fix yields less and less of the desired results.

THE FED KEEPS TRYING

Jerome Powell’s announcement of a ‘major policy shift’ is borne out of fear and frustration. The intention of moving towards “average inflation targeting” while allowing inflation to run higher than the standard 2% target is meaningless.

If you continually fall short of your original 2% target, how can you possibly “allow inflation to run higher”? That is like saying that your car will only go forty mph but you want it to go fifty mph. Nothing you have done so far has been successful in getting your car to go fifty mph. As a result, you announce that you are going to allow you car to go sixty mph for awhile. Huh?

Mr. Powell’s statement is an admission that the Fed has lost control. This does not mean that they necessarily had much control over things in the past, either; but the Fed definitely can influence the financial markets. For example…

“…as the Fed slashed interest rates to nearly record lows from 2001 until mid-2004, housing prices climbed far faster than inflation or household income year after year. By 2004, a growing number of economists were warning that a speculative bubble in home prices and home construction was under way, which posed the risk of a housing bust.” (source)

Fed Chairman Alan Greenspan’s response to the potential threat of a housing bust was that housing prices had never endured a nationwide decline and that a bust was highly unlikely.

Even after the fact, during his testimony before the House Committee on Oversight and Government Reform, Greenspan referred to his own reaction to the credit crisis and its economic destruction as one of “shocked disbelief”. The former Fed chairman is blamed by some for the credit crisis of 2007-08.

The Federal Reserve has a history of implication regarding causes of financial and economic disaster; and, on occasion, they have admitted their part:

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”…Remarks by Governor Ben S. Bernanke (At the Conference to Honor Milton Friedman, University of Chicago -Chicago, Illinois November 8, 2002)

Three years later, Mr. Bernanke had succeeded Mr. Greenspan and was at the helm as Chairman of the Federal Reserve when storm-tossed seas amid waves of financial debt threatened to destroy the ship completely – again.

I wonder if Mr. Bernanke regrets his public admission in behalf of the Federal Reserve; he seemed to be in a hurry to leave his post at the end of his initial term as Chairman.

As The Depression Of The 21st Century unfolds, here are some charts of various economic indicators that bear watching…

Continued Jobless Claims Historical Chart

The chart above shows that the current level of continued jobless claims is twice as high as it was at its peak in June 2009; and that is after declining forty percent from its peak earlier this year in April.

Housing Starts Historical Chart

The above chart of Historical Housing Starts puts into perspective the action and attention in today’s market for new homes. It is true that housing starts are nearly back to their peak from just before economic fallout from the Covid-19 response. Nevertheless, they are still thirty percent lower than their peak in 2006 prior to the mortgage crisis associated with the Great Recession. In addition, the activity level of new housing starts for the past decade is lower than any decade as far back as the 1960s.

Durable Goods Orders – Historical Chart

As the above chart shows even at their post-pandemic recovery highs, durable goods orders are still lower than at any other point dating back to the early 1990s (the exception being the brief spike downwards in 2009).

5 Year 5 Year Forward Inflation Expectation

The chart above measures the expected average inflation rate over the five-year period that begins five years from today. Expectations for the future rate of inflation continue to decline and reached their lowest point since December 2008, and lower than any other point in this century.

Expectations for lower rates of inflation are consistent with the trend of actual rates of inflation shown on the chart below…

Historical Inflation Rate by Year

Inflation rates in this century are lower than any comparable period of time going back to the 1950s-60s.

We spoke earlier in this article about declining demand for finished goods. Raw goods have been affected by lack of demand, too. One of these is crude oil.

Below is a chart showing the phenomenal increase in oil reserves that has occurred over the first two decades of the 21st Century…

U.S. Crude Oil Reserves – 110 Year Historical Chart

The huge increase in crude oil reserves depicted above (May 2008 – current) corresponds perfectly with the huge decrease in the price of oil over that same time period.

In May 2008, crude oil peaked at $145 bbl. In March of this year, it posted a low price of $11 bbl. There are reports that the immediate spot price for crude oil on tankers and ready for delivery actually approached zero. However, $11 bbl still represents a decline in its price of ninety-two percent.

Demand in luxury goods markets has suffered, too. The World Gold Council announced that jewelry demand in the U.S. fell 34%, compared to the second quarter of 2019; and for the first six months of the year jewelry demand fell 21% to an eight-year low.

The World Gold Council said that jewelry demand also fell to historic lows in European markets, dropping 42% in the second quarter and for the first half of 2020 was down 29%.

CONCLUSION

The upshot of all this is that the effects of inflation are growing more muted over time. More and more stimulus has less and less impact.

Also, the demand for money is increasing. People need money – not more credit. Inflating the prices of financial assets might make it look like things are getting better, but the reality of it all is that while financial asset prices recover and go to new highs, the economy never regains its full health.

The relative difference between stocks at all-time highs and the current state of the economy is growing larger. Some might think that higher stock prices are an indication of expectations for the eventual full recovery of the economy; but that is not the pattern of the economic cycle this century.

For the past twenty years, and longer according to some of the charts above, economic activity is stagnating and weakening. Each bout with financial catastrophe leaves the economy weaker overall, and it never fully recovers. It just continues to muddle along.

Wall Street, the banks, and some investors seem to do well enough; but the comfort and overall good feelings associated with a rising stock market seem disproportionate to the disappointing level of well-being and optimism emanating from the general public and small businesses.

At this time, the economy is a better indicator than stocks and bonds (house prices, too) of our financial health. We are currently in poor financial health and before we can get better, we will experience a healing crisis of immense proportion. (also see Supply And Demand For Money – The End Of Inflation?)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT

ORACLE: The TikTok Battle

National security

Such is the case of TikTok. To young performers, it is known as an app where you share your creative ads dancing or doing anything else that may keep the attention of a multimillion audience for several minutes.

To the US security and intelligence, it is known as a Chinese data and social networking company that threatens to tap into the sovereign territory of the US social data. Roughly, that is the concern that made the administration of the US President impose the September-15 deadline for selling the US operations of TikTok to an American company.

Two contenders

Previously, Microsoft used to the main company in focus to continue TikTok’s US operations. However, the negotiations with this potential buyer went aside as Oracle took over the stage, and the people around the issue are pointing to the fact that the deal is very possible. But this is not the only thing people are pointing out: Oracle has been financially supporting Donald Trump’s campaigns and has been more than just cooperative with the US President until now.

So we have an international business, the US-China relations, and the US elections all in one knot around Oracle now. With all this in view, stocks of Oracle may soar in case the deal is successfully sealed: not because there are a lot of truly positive business outcomes from it, but because of the heightened degree of discussions around the matter.

Technical view

On the daily chart, the recent spike that still ended up below the previous high corresponds to the announcement that Oracle is likely to take over the race over TikTok from Microsoft. The bearish ending is logical for that bar because there is no deal signed yet, and in the end, what we have is just talks and negotiations. In the meantime, the deadline of September 15 is nearing – that means, even if we don’t see another bullish spike, there will be increased volatility in any case. In the end, it falls well into the equilateral upward channel Oracle’s stock has been in since March. Expect $56 to provide firm support while $62 may be the objective for bulls in the most aggressively bullish scenario. Otherwise, the area of $58-59 seems a fair target range for Oracle stock in the short term.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice. 

Platinum on Top as Gold Consolidates; Crude Remains Under Pressure

The Bloomberg Commodity Index, which tracks a basket of major commodities spread evenly across energy, metals and agriculture, traded lower for a second week. Risk appetite, as seen through the behavior among U.S. megacap stocks, has received a setback following the flurry of activity during July and August. This development, combined with a dollar that has stopped falling, rising coronavirus cases and concerns about the timing of a vaccine, have all played a part.

The hardest hit during the past week was the energy sector, which amid rising signs of wavering fuel demand, began seeing the price of oil and fuel adjusted lower to better reflect current fundamentals which are showing signs of weakening. The grains sector maintained strong momentum ahead of Friday’s U.S. Government report, which was expected to confirm a lower production due to adverse weather and lower ending stocks as a result of very strong demand from China.

Precious metals continued their consolidation within a relatively wide range, with gold and silver trading higher on the week. Signs of deteriorating relations between the U.S. and China, together with continued demand for inflation hedges as seen through the strong demand for gold via exchange-traded funds, helped to offset headwinds created by the general reduction in risk appetite.

At the top of the table this week we find platinum, which normally operates in gold’s shade. In their latest quarterly update the World Platinum Investment Council (WPIC) revised their 2020 outlook from a surplus to deficit. In it, they explain the changes caused by the pandemic which have reduced access to recycled material as well as supplies from South Africa, the world’s biggest producer – adding to heightened global risk which they, as well as Saxo Bank, expect will continue to drive investor demand for hard assets.

Platinum has, since the diesel scandal a few years ago, seen its spread to gold go from a premium to the current discount of more than 1000 dollars per ounce. While gold has reached a record high, platinum as well as silver (another semi industrious metal) remain well below their record highs. Platinum hit a $2300/oz peak in early 2008 before collapsing 68% during the Global Financial Crisis later that year.

From an investment perspective, platinum’s biggest challenge remains its lack of liquidity, being a much smaller market than gold. This is one of the likely reasons why it, despite an improved outlook, has seen a muted demand from asset managers who operate in sizes which platinum would struggle to manage.

The key area of resistance is currently between $1000/oz and $1040/oz where it has been rejected on several occasions during the past three years.

Source: Saxo Group

Agriculture

The grain sector has seen strong gains during the past five weeks with weather concerns, the weaker dollar and strong Chinese demand all having helped create a bullish backdrop. The combined long in Chicago traded corn, wheat and soybeans futures reached 214,000 lots during the week to September 1, some 325,000 lots above the five-year average seen for this period. This is interesting, because it is normally a time of year when funds tend to be net sellers given the lack of unknowns ahead of the arrival of the new harvest.

With these developments in mind, the market was looking ahead to Friday’s monthly update on production, yields and stocks from the U.S. Department of Agriculture. In the World Supply and Demand Estimates (WASDE) – released after writing this – grain traders were looking for data to support the recent strong rally and elevated longs across the sector.

Source: Saxo Group

Crude oil remains under pressure from weaker fundamentals as the recovery in global energy demand continues to show signs of stalling. Many countries around the world, especially in Europe and Asia, are now in the midst of a second wave of coronavirus. As a result, the recovery in fuel demand has stalled with work-from-home and the lack of leisure and business travel – both signs that it will take longer than anticipated to get back to a pre-virus levels of energy demand.

During the period of sideways trading since June, data from the physical market had begun sending signals that the price and current fundamentals were moving out of sync. Among others, we have seen a rising contango with spot prices trading at a deepening discount to the next month(s) as storage tanks fill up in response to weak refinery margins, primarily due to an overhang of unwanted diesel and jet fuel. These developments have led to rising demand for tankers toward floating storage trades, while Saudi Arabia has reduced its official selling price for October as demand from key customers such as China begin to weaken.

What it took for the correction to occur was a deterioration in the overall risk appetite as seen through the correction in U.S. (tech) stocks and the dollar being bought. In Brent crude oil, the break of the uptrend from June was the technical trigger, which finally kicked off a move to bring price and fundamentals more in line.

We do not believe that we will see a new dramatic sell-off in crude oil, but have to accept that the coronavirus and doubts about the timing of a vaccine may continue to delay until next year the recovery back towards $50/b on Brent crude oil. The slowing recovery in demand will challenge the resolve of the OPEC+ group which in hindsight increased production before demand had recovered enough to absorb the additional barrels.

Fundamental oil market guidance will be provided by OPEC and the International Energy Agency when they publish their monthly oil market reports on September 14 and 15 respectively.

Brent has found support at its 100-day moving average at $39.50/b but with speculators only just having started to reduce bullish bets, the correction may take it down to towards $36.50/b before support can be established. The general level of risk appetite through stocks and the movement of the dollar will continue be a key source of inspiration for traders.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Gold Reaches $2,000 Amid Dollar Depreciation

$2,000. Think about this number. Theoretically, it’s just a number, one of many. But… somehow we feel that jumping above this level was a big event in the gold market. After all, gold surpassed this psychologically important point for the first time in history, reaching record high, as the chart below shows.

How did gold manage to achieve it? The obvious reason is the coronavirus crisis and its economic consequences. But let’s be more specific. The first driver was the elevated risk perception spurred by the pandemic and the Great Lockdown, which increased the safe-haven demand for gold.

The second explanation is the Fed’s easy monetary policy. It’s true that inflation remains low, but investors should remember that rising goods prices are not the only sign of easy money. The ultra low real interest rates, ballooned Fed’s balance sheet with the broad money supply as well, and elevated equity prices – all these factors reflected the Fed’s ultra dovish stance, and boosted the gold prices.

The third reason is the dollar’s depreciation. As one can see in the chart below, the greenback lost more than 7 percent in value since its March high, reversing a safe-haven rally amid coronavirus crisis.

Although the weakening of the U.S. dollar partially reflected the Fed’s accommodative stance and the increase in the risk appetite, we should not forget about investors’ growing demand for a safe-haven alternative to the dollar. I mean here that the loss of confidence in the U.S. government, Trump’s weaponization of the greenback, and trade wars inclined many investors to diversify their investment portfolios. As there is no sensible alternative among other major fiat currencies, some people could switch to gold.

To be clear, I’m not writing about the demise of the U.S. dollar’s, as the reports about its fall are, as always, greatly exaggerated. I’m analyzing here the economic reasons behind the greenback’s sharp depreciation – in order to draw investment conclusions for precious metals investors.

First, the dollar tends to weaken during risk-on episodes, so when market sentiment improved after the worst phase of the coronavirus crisis, the greenback simply corrected after previous gains. Second, the U.S. central bank eased its monetary stance in the response to the economic collapse, slashing interest rates. The lower yields accrued to the dollar-denominated bonds narrowed the divergence in interest rates across the Atlantic (see the chart below), which reduced capital inflows into America and triggered a shift in holdings in favor of other markets.

Third, the U.S. did a poor job in containing the coronavirus compared to other developed countries, which worsened its economic outlook and made investors expect ultra low interest rates kept by the Fed for longer. Fourth, the U.S. central bank added massive liquidity into financial markets and activated currency swaps with other central banks, increasing the supply of greenbacks. Fifth, the Fed is effectively monetizing massive fiscal deficits, which also leads to large external deficits.

So, what’s next for the dollar and gold? Well, with improving health and economic situation in the U.S., the downward pressure on the greenback should weaken. On the other hand, the adopted ultra dovish stance makes the Fed similar to the ECB and the Bank of Japan, which should maintain the downward pressure on the dollar. In other words, it seems that the U.S. dollar could rally again only if there is another risk-off moment, such as the second wave of infections in Europe or the financial crisis. But gold should move in tandem with the greenback, then.

Summing up, gold has recently jumped above the psychologically important level of $2,000, while the U.S. dollar depreciated sharply. Some analysts link these two events and claim that the gold’s rally was caused by the dollar’s depreciation. Although it certainly helped, please note that the greenback lost just about 7 percent, while gold gained about 40 percent since spring. So, it seems that in the current environment of very dovish Fed, ultra low real interest rates, and high public debt, gold can shine even without serious weakness in the dollar.

That’s great – but even greater is the fact that it is likely that the greenback started a cyclical decline in spring amid the banana-republic-style money creation and debt monetization by the Fed. There could be a rebound in the short-term (for example, because of negative economic data out of the Eurozone economy), but I wouldn’t be surprised if the U.S. dollar would be next year below the current levels. It goes without saying that gold would benefit from further potential depreciation of the greenback.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Daily Gold News: Precious Metals Fluctuate Following Recent Gains

The gold futures contract gained 0.48% on Thursday, as it extended Wednesday’s advance of 0.6%. The market has retraced most of the recent decline from September 1 local high of $2,001.20. On Friday intraday volatility has been relatively low despite monthly jobs data release. And the stock market’s rout didn’t trigger any significant move in gold. Gold price is trading within a month-long consolidation, as we can see on the daily chart:

Gold is 0.1% lower this morning, as it is trading along yesterday’s closing price. What about the other precious metals? Silver gained 0.77% on Thursday and today it is 0.3% lower. Platinum gained 1.74% and today it is 0.4% higher. Palladium gained 0.55% on Thursday and today it’s 0.1% lower. So precious metals are slightly retracing their yesterday’s advances this morning.

Yesterday’s U.S. Producer Price Index release has been slightly higher than expected, and the Unemployment Claims have been at 884,000 vs. the expected number of 838,000. Today we will get the Consumer Price Index release at 8:30 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, September 4

  • 4:00 a.m. Eurozone – German Buba President Weidmann Speech
  • 8:30 a.m. U.S. – CPI m/m, Core CPI m/m
  • 2:00 p.m. U.S. – Federal Budget Balance
  • All Day, Eurozone – Eurogroup Meetings

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Gold Prepares for Massive Bullish Trend but Break Needed

The XAU/USD (Gold) chart is showing the end of an ABCDE triangle pattern (green). This could complete a wave 4 (blue) retracement and restart the uptrend. What is the key breakout zone for the bulls?

Price Charts and Technical Analysis

Gold 4 hour chart

Gold needs to make a bullish break above the resistance trend lines (red) to confirm the upside (green check). There is not much resistance ahead from a volume point of view once the breakout occurs. Although the tops of wave B and D remain sub levels to be aware of. The current wave 1-2 pattern remains valid as long as price stays above the Fib levels of 2 vs 1. A break below the 100% Fib could indicate a deeper retracement first within the larger uptrend.

Although Gold has probably completed the triangle pattern, the wave C of a triangle is known to be complex and lengthy. A new low could easily expand the wave C and hence the entire triangle (small red x). The entire triangle pattern would become invalid if price breaks below the bottom (big red x). For the moment, a bullish breakout and uptrend resumption do seem close by. The Wizz 9 and previous top are the next immediate targets.

Gold 4 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

 

U.S. Shares Plunged. Is Gold Next?

Last week, the U.S. stock market has seen strong selling activity. The S&P 500 Index has declined about 7 percent from its peak, while the Nasdaq Composite Index plunged more than 10 percent (entering a correction territory), below 11,000, as the chart below shows. It was the tech sector’s worst drop since the end of March, if not the quickest correction ever.

What did happen? Well, the ultra-bulls would say that it was just a normal correction on the long-term bullish trend. The perma-bears would disagree, claiming that the day of reckoning had finally arrived. But what is the truth? Well, corrections happen from time to time, that’s for sure. However, it might be also the case that investors have finally realized that the recovery is much slower than previously anticipated. As we repeated many times, there will be no V-shaped recovery and the economy will not return to the pre-coronavirus levels for a longer time than people thought it would.

Another issue is that the economic uncertainty has increased recently. First, the U.S. presidential election is approaching quickly and the pre-election period is always a period of elevated volatility (and September and October are also historically months of increased volatility). And now there is an increased risk that the election’s results could be contested if there’s no clear outcome, because of the expanded voters’ access to voting by mail. Second, the U.S. Senate aims to vote today on a drastically scaled-back Republican coronavirus aid bill, despite the opposition from Democrats.

The limited aid package or a delayed stimulus could raise doubts about the pace of economic recovery. Third, the Brexit saga stroke back, as new legislation by the British government raised fears of a derailment of trade talks with the EU. So, investors have been reminded that there are several downside risks to economic growth. What a surprise!

But it seems unlikely that with the current ultra-dovish Fed, which eagerly injects massive liquidity into economy and will maintain interest rates at ultra-low levels for years, the recent correction will transform into the full-blown bear market.

Implications for Gold

What does the correction in equities imply for the gold market? Well, the last week was not the best for the yellow metal, as one can see in the chart below. However, gold was relatively stable compared to shares. It makes, of course, sense, as the reckoning of slower recovery and more downside risks than previously thought should be positive for the gold prices, in contrast to equities. So, gold does not have to follow the stock market and plunge now.

The funny thing is that although gold is often considered to be uncorrelated or negatively correlated with the stock market, we could see upward moves in both asset classes. The reason is simple: the dovish monetary policy with negative real interest rates and massive liquidity should support both equities and the yellow metal. Gold could be also bought as a portfolio diversifier or portfolio’s protection amid the rising equity prices and concerns about the sustainability of the Fed-driven bull’s party at the Wall Street.

And I hope that you did not forget about the Fed’s revolutionary shift from targeting 2 percent to maintaining an average of 2 percent. Under the new regime, in which inflation above the 2 percent does not have to be a problem, the U.S. central bank would maintain the federal funds rate at ultra-low level for longer, which would increase risk appetite and support more volatility in asset prices and financial imbalances. In such a macroeconomic environment, the role of gold as a hedge against both inflation and stock market volatility could increase.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

 

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Crude Oil Adjusting to Weakening Fundamentals

What is our trading focus?

OILUKNOV20 – Brent Crude Oil (November)
OILUSOCT20 – WTI Crude Oil (October)


Crude oil remains under pressure from weaker fundamentals as the global energy demand recovery shows sign of stalling. Many countries around the world, especially in Europe and Asia are now in the midst of a second coronavirus wave. As a result the recovery in fuel demand has stalled with work-from-home and lack of leisure travel both signs that it will take longer than anticipated to get back to pre-virus levels of energy demand.

Data from the physical markets such as weaker time spreads as the spot price weakens faster than deferred months, weak refinery margins primarily due to an overhang of unwanted diesel and jet fuel, lower of cost of shipping oil and reduced demand from China, the worlds biggest buyer, have for the past month increasingly been highlighting the risk of correction.

What it took was a deterioration in the overall risk appetite as seen through the correction in US (tech) stocks and the dollar being bought. In Brent crude oil, the break of the uptrend from June was the technical trigger which finally kicked of a move to bring price and fundamentals more in line.

We do not believe that we will see a new dramatic sell-off in crude oil but have to accept that the coronavirus and doubts about the timing of a vaccine may continue to delay until next year, the recovery back towards $50/b on Brent crude oil. The slow(ing) recovery in demand will challenge the resolve of the OPEC+ group which in hindsight increased production before demand had recovered enough to absorb the additional barrels.

Brent has found support at its 100-day moving average at $39.50/b but with speculators only just having started to reduce bullish bets, the correction may take it down to towards $36.50/b before support can be established. The general level of risk appetite seen through stock market developments and the movement of the dollar will continue be key sources of inspiration for traders.

Fundamental oil market guidance will be provided by OPEC and the International Energy Agency when they publish their monthly oil market reports on September 14 and 15 respectively. The EIA released its Short Term Energy Outlook yesterday and while saying that US oil production will shrink by 860k b/d in 2020, they also highlighted the incredible difficulty in providing forward guidance given the continued uncertainty about the demand outlook.

Delayed by a day due to the Labor Day holiday on Monday, the Energy Information Administration will publish its “Weekly Petroleum Status Report” at 15:00 GMT. The report covering the week to September 4 will be less distorted than recent updates as the impact on production, refinery activity and trade from Hurricane Laura continues to fade.

Yesterday’s sharp rebound in crude oil was halted after the American Petroleum Institute said that US crude stocks rose by 3 million barrels last week. If confirmed by the EIA it will be the first rise in seven weeks. Occurring right at the end of the summer driving season may raise concerns about a renewed stock pile build on weaker than normal consumption due to Covid-19 and reduced demand from refineries entering maintenance.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Daily Gold News: Precious Metals Mixed Ahead of ECB Release

The gold futures contract gained 0.60% on Wedsnesday, as it continued to fluctuate within a short-term consolidation following last week’s decline. The market bounced off $2,000 resistance level. On Friday the intraday volatility has been relatively low despite monthly jobs data release. And the stock market’s rout didn’t trigger any significant move in gold recently. Gold price is trading within a month-long consolidation, as we can see on the daily chart:

Gold is 0.1% higher this morning, as it is trading along yesterday’s closing price. What about the other precious metals? Silver gained 0.34% on Wednesday and today it is 0.5% higher. Platinum gained 1.60% and today it is 0.2% lower. Palladium gained 0.54% on Wednesday and today it’s 0.6% lower. So precious metals are mixed this morning.

Yesterday’s JOLTS Job Openings release has been better than expected at 6.62 million. Today we will get the ECB Monetary Policy Statement at 7:45 a.m. and the ECB Press Conference at 8:30 a.m. We will also get the U.S. Producer Price Index along with the Unemployment Claims releases at 8:30 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Thursday, September 3

  • 7:45 a.m. Eurozone – Main Refinancing Rate, Monetary Policy Statement
  • 8:30 a.m. Eurozone – ECB Press Conference
  • 8:30 a.m. U.S. – PPI m/m, Core PPI m/m, Unemployment Claims
  • 10:00 a.m. U.S. – Final Wholesale Inventories m/m
  • 12:30 a.m. Canada – BOC Governor Macklem Speech
  • 1:00 p.m. Eurozone – ECB President Lagarde Speech

Friday, September 4

  • 4:00 a.m. Eurozone – German Buba President Weidmann Speech
  • 8:30 a.m. U.S. – CPI m/m, Core CPI m/m
  • 2:00 p.m. U.S. – Federal Budget Balance
  • All Day, Eurozone – Eurogroup Meetings

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.