Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Trade Binance Vanilla Options for the First Time on Bitcoin Crypto's - 2nd Aug 21
From vaccine inequality to economic apartheid - 2nd Aug 21
Stock Market Intermediate Top Reached - 2nd Aug 21
Gold at a Crossroads of Hawkish Fed and High Inflation - 2nd Aug 21
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

If the U.S. Eonomy Weakens Again, What Happens to Gold and Base Metals?

Commodities / Metals & Mining Nov 30, 2009 - 01:27 PM GMT

By: HRA_Advisory

Commodities

Best Financial Markets Analysis ArticleThe announcement of a surprisingly large US trade deficit for September had some assuming the US consumer is back in a buying mood.  Alas, the much watched Michigan consumer confidence index for November quickly followed, and it is off a large 4.6 points, from 70.6 in October to 66.0 now.  The import gains were largely for crude oil, and there was some gain from the “declunkering” auto sector.  Even in weak markets there will periods of restocking that have to be figured into single bits of data.  Before Friday was done inventory levels for crude came out that were full enough to knock its price back from recent highs. 


Chinese data indicates better than the astounding growth that had been expected, and Japanese data indicated stronger than expected growth.  Europe is back in the black, though at sub 1% rates for the zone as a whole.  Canadian trade data for September came out the same day as the US figures, and it surprised with only half the $1.8 billion deficit that had been expected.  There were somewhat higher exports to the US, but the real surprise was a very large percentage gain to Europe.

Increased trade between economies with strengthening currencies is likely to be volatile going forward as currency ratios move about.  Those looking for a stronger greenback near term mostly assume that would be in conjunction with a weaker Euro.  That makes sense given both economies can’t see the end of the debt tunnel yet, but the players are realigning in ways that continue to bode uncertainty and the old “rules” of the currency game have not been working so well of late. 

Talk of having the Yuan rise as part of rebalancing the trade picture is finally getting some nods from Chinese officials.  It will happen at some point, and probably soon in a small way if China’s economy continues its strong performance.  When a larger move that would make its regional trading partners (and US senators) happy is still anyone’s guess.  There have been more recent comments about letting foreign companies issue Yuan denominated bonds.  A small thing, but part of building the financial infrastructure necessary to move the Chinese currency from being a peg to a true market participant.

If gold’s price gains are saying anything specific it’s that a strengthening Yuan could be harder on the Dollar than anything else.  The broader message is however that the currencies dance winners won’t be known till the music stops.  This is creating a market for the yellow metal as a neutral asset against all fiat currencies that we expect would largely be sustained even if the currency pairs roll over and the Dollar sees a gain.  A consolidation of gold’s price on a large uptick for the greenback should still be expected, but gold holders would be as interested in the yellow metal’s value in their home currencies as in its trade against the Dollar, and that could steady its market.  The Dollar has seen brief periods of strength in the past few sessions that have not led to anything like the gold selloffs expected by some.  It’s also of note that gold is now quite close to record highs in several other currencies, including the Euro.

The steadiness of copper and the other base metal prices continues to impress.  While we continue to view this as part of the Dollar dance, there are more signs that sellers are not worried about future markets.  CODELCO, Chile’s state owned and the sector’s largest copper producer, has just indicated it plans to raise handling rates to China by 15%, or $10 per tonne.  Though not a large factor, it is evidence that CODELCO is getting more comfortable with the demand picture to Asia.  News out of China on the environmental issues at lead-zinc smelters have quieted, but we doubt gone away.  To this could be added a number of mine supply disruptions, but as noted in the Journal none is large enough individually to be large concerns per se. 

While we are still expecting consolidation in base metal prices, we increasingly wonder if that wouldn’t simply cause offers in the commercial stockpiles to begin disappearing.  The same logic holds here as for the precious metals that local currency considerations will drive decisions about what price is too low to put metal into the market.  If China does start incremental gains for its currency again that may only muddy the waters.  Chinese metal holders would need to start thinking in terms of whether they could pay fewer Yuan at future date for the same amount of metal, which isn’t an issue with the Yuan-$ rate essentially fixed as it is now. 

Cutting to the chase, we remain concerned by the currency equations that have become such a large part of metals pricing.  Though base metal stockpiles remain at manageable levels they do continue to build, and we believe that is what should govern opinion about future pricing for the time being.  We doubt there will be a large uptick for base metal stories before general economic stats indicate that broader global growth will continue, and are willing to wait for that.  If the contrarian few that believe a bounce should be in the offing for the greenback are right, we would expect that to weigh more heavily on base metals than on gold.  That would be a buying opportunity we’d look kindly on since our concerns about pricing are short term, not long term. 


Gain access to potential gains of hundreds or even thousands of percent! From March to June, HRA introduced four new gold explorers to subscribers. Those four companies have generated an average gain of 205%, to date! SPECIAL HRA OFFER: For a limited time only, HRA is offering free reports and a subscription savings. Click here for more information: http://www.hraadvisory.com/sh2009.html

By David Coffin and Eric Coffin
http://www.hraadvisory.com

    David Coffin and Eric Coffin are the editors of the HRA Journal, HRA Dispatch and HRA Special Delivery; a family of publications that are focused on metals exploration, development and production companies. Combined mining industry and market experience of over 50 years has made them among the most trusted independent analysts in the sector since they began publication of The Hard Rock Analyst in 1995. They were among the first to draw attention to the current commodities super cycle and the disastrous effects of massive forward gold hedging backed up by low grade mining in the 1990's. They have generated one of the best track records in the business thanks to decades of experience and contacts throughout the industry that help them get the story to their readers first. Please visit their website at www.hraadvisory.com for more information.

    © 2009 Copyright HRA Advisory - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    HRA Advisory Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in