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Gold has traded between $1,268 and $1,280 so far today…as of 9:30 am Pacific, bullion is up $6 an ounce at $1,271…Silver has jumped 21 cents to $17.31…Copper is up a penny to $2.14…Crude Oil has surged $1.30 a barrel to $45.96 while the U.S. Dollar has backed off from resistance around 94.50 and is down half a point to 93.81…
A little bit of back-peddling by Goldman Sachs yesterday, though unbelievably they still remain bearish overall on Gold…the bank has raised its forecasts for the yellow metal while scaling back its expectations of Fed rate hikes over the next year…Goldman Sachs has increased its 3, 6 and 12-month forecasts to $1,200, $1,180 and $1,150 per ounce from $1,100, $1,050 and $1,000, respectively, in a report from analysts including the well-known Jeffrey Currie. “While the upside risks to Gold pricing appear relatively limited from here (oh, really?), we see a number of catalysts for Gold prices to moderate, including a more hawkish Fed and ultimately U.S. policy rate divergence, corresponding with gradual dollar appreciation over the next 3–12 months,” the analysts said…
Over at JPMorgan, there’s some different sentiment regarding Gold – JPMorgan Private Bank’s Solita Marcelli on CNBC yesterday: “We’re recommending our clients to position for a new and very long bull market for Gold…$1,400 is very much in the cards this year.” The firm’s global head of fixed income, currencies and commodities reasoned that, with so many negative interest rate policies around the world, Gold will continue to be bought as an alternative currency…and, with expectations that investors will seek to hedge against the resulting volatility, Marcelli believes that Gold will remain attractive in a world where bonds and U.S. rates may cease to be the main risk-off asset. “Central Banks may consider diversifying their reserves (as they anticipate) negative rates on existing holdings,” said Marcelli, when discussing the commodity as a safe-haven trade. “Gold is a great portfolio hedge in an environment where the world government bonds are yielding at historically low levels.”
Gold + India: What’s Really Happening?
India’s Gold imports could hit a record high this year amid widespread smuggling to sidestep government levies on overseas shipments, Australia and New Zealand Bank, Asia’s biggest shipper of physical Gold, said today…the forecast by the bank’s head of precious metals, John Levin, runs counter to tallies that show Gold imports in decline in the world’s second-biggest bullion market after China…Levin said he expects 15% of India’s Gold this year to be “smuggled in” or arrive via “other unofficial channels” to beat a 10% levy imposed by the government…Levin also said more semi-refined Gold, known as Gold dore, was being imported from overseas mining companies because of a lower government levy (the import duty on Gold dore is 8.5%). “You could see a record amount of Gold going into India this year,” Levin said, “A lot through unofficial channels and a lot of it going in as semi-refined Gold.”
Oil Update
Oil futures turned sharply positive this morning after the U.S. government reported a surprise decline in Crude inventories…the Energy Information Administration reported U.S. commercial Crude stockpiles fell by 3.4 million barrels to 540 million in the previous week…
In a sign of an ongoing aggressive fight for market share, Iran has set its June official selling prices for heavier Crude grades it sells to Asia at the biggest discounts to Saudi and Iraqi Oil since 2007–2008…
Meanwhile, worries about supply disruptions resurfaced today after Shell announced the closure of a key Nigerian pipeline…this disruption to output will likely push Nigeria’s production to its lowest in more than 2 decades…production declines and disruptions in Alberta, Latin America, Asia and elsewhere in Africa have also acted as a support to prices this week…
Oilsands companies around Fort McMurray began to restart operations yesterday after the out-of-control wildfire forced a week-long shutdown…provincial and industry officials said production in much of the region should ramp up soon…
Suncor Energy (SU, TSX) CEO Steve Williams: “I lived in Fort McMurray, my children went to school in Fort McMurray and the resilience of that community is something to be very proud of. That’s what you’re going to see in this next phase as we start to pull together to get industry moving, to rebuild the community, and you’ll see all of us standing very much shoulder to shoulder.”
In today’s Morning Musings…
1. Part 8 of our interview series with Colorado Resources‘ (CXO, TSX-V) President & CEO Adam Travis…
2. Another gem in the Golden Triangle’s “Heart of Gold“ Camp…
3. Pure Energy (PE, TSX-V) tries to regain energy after yesterday’s stumble…
4. Canadian dollar and TSX chart updates…
Gold has traded between $1,256 and $1,268 so far today…as of 9:50 am Pacific, bullion is down $4 an ounce at $1,260 after yesterday’s tumble…Silver is 3 cents higher at $17.02…Copper is off a penny at $2.13…Crude Oil has jumped $1 a barrel to $44.43 while the U.S. Dollar Index has rallied another one-tenth of a point to 94.25…
Bullion has fallen in 5 out of the past 6 sessions, having failed to hold above resistance at $1,300, and not benefiting much from data last week showing that the U.S. economy added the fewest jobs in 7 months in April…however, bullion has strong support at its rising 50-day SMA around $1,250…
Indians bought a third less Gold than last year during the annual Hindu and Jain holy festival of Akshaya Tritiya yesterday, industry officials estimate, as droughts have hit the earnings of millions of farmers while the metal’s price has jumped significantly in 2016…
The U.S. would not necessarily lose out if other currencies emerged as alternatives to the dollar’s status as the world’s so-called reserve currency, a top central banker said today…William Dudley, President of the Federal Reserve Bank of New York, did not comment on U.S. interest rates in a speech…rather he said Americans should not be concerned if, for the right reasons, other currencies started to eat into the dollar’s 60% share of foreign exchange reserve holdings. “I don’t see this as a zero-sum game,” Dudley, one of the most influential Fed policymakers, said in prepared remarks to a conference in Zurich that was closed to reporters. “If other countries’ currencies emerge to gain stature as reserve currencies, it is not obvious to me that the United States loses,” he said, as long as it “is being driven by their progress, rather than by the U.S. doing a poorer job.”
Oil Update
Crude continues to benefit from what the Saudis say is an increase in global demand, and from supply disruptions in Alberta’s Oilsands and elsewhere (Nigeria in particular) that have knocked out 2.5 million barrels of daily production and temporarily eclipsed concern over high global inventories and a looming surplus of refined products…today, news services reported that the chief executive of Saudi Arabi’s state-owned Oil giant Saudi Aramco said the company would likely increase its output. “We’re seeing a global increase in demand,” CEO Amin Nasser stated. “We are meeting that call on us.”
Fort McMurray Update
Praise God for Fire Chief Darby Allen and the hundreds of other heroes who have worked tirelessly to save lives (not a single person was killed or injured from the inferno that engulfed Fort McMurray) and 90% of the homes, businesses and critical infrastructure in that community…while there are areas of incredible damage and destruction, and many lives have been turned upside down, the great rebuilding effort that will take place in Fort McMurray – through grit, determination and faith – is going to be an inspiration to the rest of Canada…
Below is an awesome portrait of Fort McMurray Fire Chief Darby Allen by artist Russell Thomas who says the original painting is “a symbol of courage and heart” and will be gifted to the Fort McMurray fire department…he plans to make prints available for sale with all proceeds going toward the United For Fort McMurray campaign focused on rebuilding the community…
Thomas told the CBC he said he’s “really optimistic” about the future of his city. “The people have responded in a way that is unlike anything we’ve ever seen before,” he said. “We’re going to rebuild, and we’re going to do it quickly, and we’re going to do it mindfully, and we’re going to do it with enthusiasm.”
Russell Thomas’ original painting of Fire Chief Darby Allen will be gifted to the Fort McMurray fire department. Prints will be made available for sale, with all proceeds going to the United Way campaign for Fort McMurray (Russell Thomas/Facebook).
Economic Fallout From Fort McMurray
The Bank of Canada had forecast that Canada’s GDP would expand by 1% in the 2nd quarter, but now economists at Toronto-Dominion Bank and Bank of Montreal suggest that growth will be flat or even potentially negative…
In today’s Morning Musings…
1. Is $40 the new floor for Crude?
2. Two new additions to the BMR Top Opportunities List…
3. Sandra Escobar Silver discovery in Durango State continues to show strong potential…
Gold has traded between $1,261 and $1,286 so far today…as of 9:30 am Pacific, bullion is down $25 an ounce at $1,263…Silver is off 49 cents at $16.95…Copper has shed a nickel to $2.14…Crude Oil has slipped $1.14 a barrel to $43.52 while the U.S. Dollar Index is up one-tenth of a point at 94.07…it faces stiff resistance at 94.50…
Billionaire investor Stan Druckenmiller continues to load up on Gold, according to a Bloomberg report…at the Sohn Investment Conference in New York last week, he said the bull market in stocks has “exhausted itself” due to excessive borrowing from the future, adding that Gold is his largest currency allocation. “We refer to Gold as a currency, not a metal,” Druckenmiller said…
Bart Melek, head of commodity strategy at TD Securities, explained that the Gold market doesn’t look over-extended compared to the beginning of previous bull markets…however, the rally remains dependent on the Federal Reserve and interest rates, he added. “While Gold looks overbought on numerous metrics, spec positioning looks similar to what it was back at the end of 2005/early 2006, before a large rally started,” he said. “If the Fed is more restrictive than traders currently expect, Gold is due for a big correction.”
According to Bloomberg, India’s government has collected 2.8 tonnes by 105 depositors of Gold so far under its Gold Monetization Scheme (GMS)…the program, which has been in place for 6 months, is intended to mobilize idle Gold held by households and institutions of India to facilitate its use for productive purposes…
Meanwhile, a softening in Gold prices could spur Indian Gold demand for a festival this week and weddings this month…the world’s 2nd-biggest user of the precious metal has seen a surge in local prices to the highest in 2 years, deterring normal seasonal buying patterns…
China’s Gold reserves stood at 58.14 million fine troy ounces at the end of April, up from 57.79 million fine troy ounces at the end of March, the central bank has reported…
Gold-U.S. Dollar Comparative
This 36-year Gold-U.S. Dollar Index comparative chart shows a topping pattern in the Dollar Index in 2015 that was similar to what occurred in Gold in 2011–2012…
The greenback’s sharp rise in the early 80’s was followed by a vicious slide…same thing happened after the run-up between 1996 and early 2002…the record run over such a short period from mid-2014 to December 2015 could easily be followed by another major plunge – it’ll be interesting to see how this plays out…
Gold is showing every sign of being in a new bull market, and that typically spells trouble for the U.S. dollar…
Fort McMurray Fire & Oil Update
Thanks to cooler temperatures, hundreds of firefighters are thankfully starting to get a grip on the massive wildfire in northern Alberta that led to the evacuation of the more than 80,000 residents of Fort McMurray…by the grace of God, no one has been killed by this inferno…many homes and businesses have been destroyed while Oilsands production has been curtailed by about 40%…
The Fort McMurray wildfire will likely become the costliest catastrophe in the country’s history with insurance losses potentially reaching $10 billion…Bank of Montreal cut its 2nd-quarter GDP estimate for the Canadian economy to zero from 1.5%, citing “severe disruptions to Oil production” due to the fires…BMO said the estimate was a placeholder, dependent on receiving more information on the scope of the disaster…
Some eco-freaks on social media and elsewhere keep blaming this fire on “climate change”- should we be surprised?…of course Green Party leader Elizabeth May drew that link almost instantly last week, and Fort McMurray residents will not soon forget the tweet from former provincial NDP candidate Tom Moffatt who called the fires “karmic” and used the hash tag “Feel the Bern” to mock the town before delivering a half-hearted apology…
The Oil-haters out there are forgetting something, however, as Kevin Libin pointed out in a Financial Post column:
“Oil didn’t just fuel the cars, trucks and buses that spirited nearly 100,000 people safely away from deadly smoke and flames. It powers firefighting aircraft working to control the blaze. It whisks first responders to the most urgent emergencies. Oil also happens to be the reason for the work camps near Fort McMurray where thousands have found shelter. Oil funded and fuelled the transport planes, furnished by the Oil companies that own them, used to shuttle Fort McMurray residents to family support networks in Calgary and Edmonton. The Oil industry’s obsessive safety culture, drilled into Fort Mac’s workers, no doubt made a crucial difference in residents making it out in such a timely and healthy condition. Oil even made possible the plastic bottles of water being donated to the shelters. Keep that in mind the next time environmentalists demand an end to the bottled-water industry.”
Where is our Prime Minister in this disaster?…if a city in Quebec had burned to the ground, would he still be sitting on the sidelines?…
A 5-year-old Ontario did his part to help Fort McMurray over the weekend…CTV News reported how Alexander Tuck spent Saturday afternoon running a lemonade stand with his mother, Danielle, to collect donations for the Canadian Red Cross relief effort for Fort McMurray…the two set up the stand outside a local shopping center in Whitby, about 55 km northeast of Toronto, and Tuck’s efforts raised nearly $2,600..
In today’s Morning Musings…
1. Updated charts for Silver (short-term and long-term)…
2. Equitas Resources (EQT, TSX-V) forgets the KISS principle…
3. Eskay Creek (ESK, TSX-V) gets full title to the SIB Property, immediately adjacent to the past producing Eskay Creek mine…
TSX Venture Exchange and Gold
The Venture gave up some ground to begin the week but support held just above the EMA(20) with the Index bouncing back Thursday and Friday to close the week down just slightly at 669.
Are there cracks starting to appear (“Sell In May & Go Away“), or can the Venture’s amazing run from its late January low of 466 continue? Find out in today’s Week In Review And A Look Ahead.
Gold has traded between $1,275 and $1,295 so far today…as of 10:00 am Pacific, bullion is up $17 an ounce at $1,295…Silver has jumped 20 cents to $17.50…Copper is up a penny at $2.19…Crude Oil is 43 cents higher at $44.75 while the U.S. Dollar Index has declined one-tenth of a point to 93.68 after approaching resistance at 94 overnight…
Gold strengthened this morning on a significantly weaker-than-expected U.S. non-farm payrolls number of 160,000 for April…this was well below consensus estimates of around 200,000 and was also the weakest gain since September…the unemployment rate, obtained from a separate survey of U.S. households, held steady at 5%…on the bright side, wages rose during the month, with average hourly earnings up 8 cents an hour, representing a 2.5% annualized gain…
April is historically the strongest month for non-farm payrolls which makes this morning’s headline miss look even worse by comparison…
More bluster from the Fed backbenches yesterday – St. Louis Fed President James Bullard, an FOMC voting member, said that the Fed could raise rates at its June meeting if the economic data calls for it…not a chance…the reality is the U.S. economy (thanks to excessive regulation and taxes) is sputtering as evidenced by very weak Q1 growth and this morning’s jobs report…meanwhile, inflation continues to underperform, we’re into a volatile political environment with U.S. elections just 6 months away (Crooked Hillary could also get indicted), and Britons will be voting in a referendum in late June (1 week after the next Fed meeting) on whether to remain in the EU…this is simply not the kind of environment that’s conducive to rate hikes…
Goldman Sachs, which continues to insist the Fed will carry out 3 rate hikes this year, made another bad call with today’s jobs report when they forecast a robust number of 240,000…they were off by a whopping 80,000…
Commodity Strength
Citigroup was the bank that was ahead of the game back in 2012 when the commodity sector really started to weaken…now, in contrast to the outlook from Goldman Sachs, Citigroup believes a weaker U.S. dollar and China’s stabilizing economy means commodities have indeed turned the corner…
Investors have poured $18.3 billion into global exchange-traded funds backed by raw materials this year, data compiled by Bloomberg show…assets invested in commodity hedge funds, ETFs and passive indexes have reached $315 billion, the highest since May 2015, Citigroup said in an April report…for now, investors are betting with Citigroup…since mid-March, hedge funds and other money managers have more than tripled their combined net-long holdings across 18 commodities to 1.09 million futures and options contracts, according to U.S. government data…
“The flow of investor money back into commodities has happened much more quickly than we thought it would,” David Wilson, a London-based analyst at Citigroup, told Bloomberg. “Instead of just short-covering, you’ve seen it move on to the long side as well, partly on the fact that China is stimulating somewhat. Can you still be over-bearish commodities? It doesn’t really make sense.”
Oil Update
The shutdown of energy facilities in northern Alberta accelerated yesterday, taking offline about 1 million barrels – close to 40% – of the province’s daily Oilsands production, as a wildfire that started near Fort McMurray spread south to new producing areas…
Meanwhile, Oil companies poured their resources into the firefighting effort – from sheltering evacuees to helping with medical emergencies…
Adding to the temporary supply outage in Canada is an ongoing decline in U.S. Oil output which has fallen by 800,000 bpd since mid-2015 as producers succumb to a route that saw prices tumble more than 70% between mid-2014 and early 2016…the drop in North American output, combined with disruptions in Latin America, is eating into the global supply overhang…
Bo Copley: Hillary Clinton’s Nightmare As She Pursues Her War On Coal & Fossil Fuels
Bo Copley is quickly becoming famous in America…he’s an unemployed West Virginia Coal miner and a man of deep faith, and he challenged Democratic front-runner Hillary Clinton the other day in Williamson, West Virginia, at a community roundtable…Clinton had earlier asserted, while scarcely able to contain her glee, that “we’re going to put a lot of Coal miners and Coal companies out of business” while out on the campaign trail…this was music to the ears of America’s Left, and the movement’s many Canadian followers…
What sort of individual, running for the highest office in the land, would take pleasure in attacking an industry like that and putting Americans like Bo Copley out of work?…Clinton, such a flawed establishment candidate she couldn’t even beat socialist Bernie Sanders in Indiana this week, has fully embraced “climate change” fanaticism but took a well-deserved rebuke from Copley whose plight appears to have resonated among many American blue collar workers…in one of the more intense interactions Clinton has had on the campaign trail, Copley – growing emotional at times – pressed Clinton for her past statement and asked her, “How you can say you are going to put a lot of Coal miners out of jobs and then come in here and tell us how you are going to be our friends?”…Clinton dug herself into an even deeper hole by saying her words were taken out of context, but clearly they were not…Hillary and the truth don’t exactly align very well…
What a fascinating 6 months we’re about to witness in U.S. politics, and the outcome is likely going to have a major impact on the greenback, Gold and the broader markets…
In today’s Morning Musings…
1. Tracking the explosive TSX Gold Index…
2. Superb week for Colorado Resources (CXO, TSX-V) as company beefs up war chest to tackle KSP Property…
3. Part 2 of our interview series with Lithium X Energy (LIX, TSX-V) CEO Brian Paes-Braga – learn more about the Clayton Valley…
Gold has traded between $1,273 and $1,287 so far today…as of 8:15 am Pacific, bullion is down $4 an ounce at $1,275…Silver is off 4 cents at $17.31…Copper has retreated a nickel to $2.17…Crude Oil has surged $1.09 a barrel to $44.87 while the U.S. Dollar Index has rallied another half point to 93.78…resistance at previous 94 support…
Assets in SPDR Gold Trust rose 0.07% to 825.54 tonnes yesterday, their highest in more than 2 years…
A weaker-than-expected U.S. non-farm payrolls number tomorrow would put an abrupt end to the rally this week in the U.S. dollar which has prevented Gold from conquering the $1,300 level…an increase in payrolls of less than 200,000 with the unemployment rate above 5% would likely be considered weak, further curtailing Fed tightening expectations…the ADP report yesterday showed private employers hired the fewest workers in 3 years in April…
Republican presumptive nominee Donald Trump, who should not be underestimated as he goes after Hillary Clinton this fall (unless she’s indicted), told CNBC this morning that he’s for low interest rates unless inflation perks up…calling himself the “King of Debt” in his business dealings, he warned that the $19 trillion national debt would be troublesome if the cost of borrowing increases…
Fort McMurray Wildfire
Our prayers go out to the tens of thousands of people affected by the devastating wildfire in Fort McMurray that has forced the evacuation of all 88,000 residents and burned down 1,600 structures…with many evacuees having fled north for accommodations at Alberta’s Oilsands fields, production at several facilities has been disrupted…the exact decline in output is uncertain but significant…
Suncor, Royal Dutch Shell, Syncrude, Husky, and Connacher Oil and Gas have all announced partial to complete production shutdowns to focus on housing evacuated employees and residents, and to move resources to protecting the community…
Losses from the devastating wildfire are already estimated at $1 billion and will likely set records for the country, according to insurance industry experts…the evacuations themselves may also increase costs…the Insurance Bureau of Canada said most policies will cover living expenses for policyholders who are forced by the government to evacuate….
Albertans are resilient – they will rebuild Fort McMurray…
Oil Update
Events in Fort McMurray are yet another example of what has turned out to be a key feature in the Oil market this year – a pattern of unexpected supply disruptions supporting prices…the difference today compared with a year ago is that the market is starting to price in supply disruptions, and that has bullish implications for the balance of 2016…
Libya’s already crippled Oil production is at risk of further decline from a stand-off between rival eastern and western political factions…other high-risk countries are Venezuela, Iraq, Nigeria and Algeria…
Meanwhile, U.S. production continues to fall, with the latest official figures showing a decline by over 8% since mid-2015 to 8.8 million bpd…
Tesla’s Model 3 And The Lithium Market
Tesla Motors (TSLA, NASDAQ) posted quarterly results yesterday that generally met Wall Street’s expectations and gave a bullish outlook for vehicle production on the strength of demand for its upcoming Model 3…the electric automaker reported a Q1 loss of 57 cents per share on $1.6 billion in revenue…
Tesla’s Model 3
“The overwhelming demand for Model 3 confirms that compelling all-electric vehicles have mass-market appeal,” Tesla said in its shareholder letter…Tesla reported 1st-quarter deliveries of 14,810 vehicles, nearly in line with the figure announced in April…it expects 2nd-quarter deliveries of about 17,000 vehicles, below analysts’ forecasts for nearly 19,500, according to StreetAccount…
Lithium – Heart & Soul Of Energy Revolution
Lithium is very much the heart and soul of the energy revolution…the Model 3, all by itself, will have a huge impact on Lithium demand, which is already threatening to make supply impossible without exploration and production of new resources…at the end of the day, Tesla’s “huge step towards a better future” achieved by fast-tracking “the transition to sustainable transportation” comes down to Lithium…this helps explain the huge interest in Lithium stocks and what’s happening in Nevada, the staging ground for a U.S. Lithium boom that will feed the manufacturing beasts for everything from EV’s, battery gigafactories, powerwalls and energy storage solutions to the long and growing list of consumer electronics that we use every day…
Today we begin an interview series with Brian Paes-Braga, founder and CEO of Lithium X Energy (LIX, TSX-V), an individual whose skill and passion for entrepreneurship was played out at a boutique brokerage firm in Vancouver in recent years where he excelled in all aspects of the venture capital business…
Paes-Braga launched Lithium X late last year along with heavyweights Frank Giustra and Paul Matysek…this is an “A” team by any measure, so it’s no surprise that the stock has climbed as much as 7-fold from where it started at the end of last November…
In today’s Morning Musings…
1. Part 1 of our interview series with Lithium X CEO Brian Paes-Braga, and a fresh “where to now” LIX chart from John…
2. Richmont Mines (RIC, TSX) delivers more high-grade from its exploration drill program at the Island Gold mine…
3. Updated Venture and Canadian dollar charts…
Gold has traded between $1,274 and $1,290 so far today…as of 8:30 am Pacific, bullion is down $6 an ounce at $1,280…Silver is off 7 cents at $17.32…Copper is down a penny at $2.22…Crude Oil is up slightly at $43.74 while the U.S. Dollar Index has rallied another one-quarter of a point to 93.22…
“The difficulty Gold is experiencing in staying above $1,300 does not necessarily mean the bull rally is ending. But the rally may be tired and in need of consolidation. This can trigger profit-taking,” said HSBC analyst James Steel.
The Reserve Bank of Australia yesterday cut its benchmark rate by one-quarter of a percentage point to 1.75%…the move reflects soft inflation and economic sluggishness driven in part by weak demand from China, the largest buyer of Australian exports…adding to concerns were a drop in Chinese manufacturing and signals that euro zone growth is slowing more than previously forecast…although the Reserve Bank of Australia’s decision to lower interest rates overnight didn’t have a major impact on the Gold market, it highlights the continued trend of loosening global monetary policy…
Dennis Gartman, editor of The Gartman Letter, told CNBC’s “Fast Money” that he predicts Gold could finish out the year 10 to 15% above current levels, around $1,500 an ounce…even though he granted the precious metal tends to get to “big, round numbers” like $1,300 and “back off”, Gartman said the fundamental case remains intact due to central bank policies around the world…
In today’s Morning Musings…
1. Colorado Resources (CXO, TSX-V) to add $4 million to its war chest – what does this mean?…fresh interview segment with CEO Adam Travis…
2. Updated charts for 2 Lithium plays…
3. Attractive emerging Gold producer in Arizona…
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