The balance between gold, USD and oil
Gold is up again today and if it holds this will be gains in 9 out of the last 10 days. Chris Temple and I look at what is supporting this move and the US dollar is top on the list. We assess the potential of this move reversing. We also look at the oil price and it’s weakness in a typically strong season.
Click here to visit Chris’s website. I highly recommend checking out the stocks Chris is following!
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I guess Chris does not believe that the US is in an end of empire decline.
No end to the Petrodollar?
I guess the world is not changing to electrically-driven transportation systems.
Ebolan – I just wrote you back on yesterday’s blog regarding Oil/Gas/Vehicles/Batteries etc…., but since I took so long to write this, I’m just going to post it here since Oil was in the discussion.
It is a bit long…… but if you don’t like the Energy Sector please scroll past it.
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Oil & Gas will NOT be phased out overnight, and there are literally thousands of uses for petroleum products in industry and daily life.
Personally, I’m considering staking out positions again in the ETFs like XLE, XOP, and OIH to get exposure to the larger producers, smaller Jrs, and Oil Service companies, but I just don’t have the bandwidth anymore to chase the individual names.
Certain investors do like holding the individual issues though, because of dividends or capturing out-sized move without having them truncated by the average of a basket of stocks. This is true in any sector, and while I’m critical of the holdings or weightings in many ETFs for Gold, Silver, Uranium, Lithium, etc… they absolutely fill a nice void for investors that just want exposure to a particular sector or sub-sector.
I’ve been eye-balling a number of exploration and development stories in Oil & Gas, but for the last 2 years have just used the ETFs to capture the general moves, as I spend most of time on the individual shares of Metals and Energy Metals.
Even though I don’t think the Oil/Gas industry is any imminent danger, the largest use for Oil & Gas is clearly in Transportation (Autos, Buses, Airlines, Boats/Ships). As more and more of the market share starts to convert over to Electric Vehicles, then it will squeeze out many of the marginal Oil/Gas companies, and cause a greater consolidation in the space for survival. This will take 10-20 years (not 10-20 months). 🙂
I’m a fan of Lithium, Cobalt, Copper, Manganese, and PGMs because they are utilized in different Battery types, and there is growth not just in the cars, but in Electric Buses, Electric Trucks, Electric Tractors, E-Bikes, Forklifts, Drones, Powertools, Tablets/Smart Phones, etc….
Too many people get fixated on just one company like Tesla or Volkswagen, and miss the forest due to the trees. The multiple battery plants being built in Asia are mind-boggling. The overall marketplace for batteries is SOOO much larger than just one car company like Tesla, but that is what steals the headlines in the brain-dead mass media.
The other growth segment is really in Backup Batteries for renewable energy sources like Solar and Wind. Since the political pressure and public sentiment (wrong or right) is pushing the market that direction, then renewable power plants will need hefty BackUp Batteries.
There are also many remote businesses (including miners) that find it easier to have battery powered equipment or run their remote site power off Back-Up batteries, and not deal with liquid fuels or the emissions.
So many people want to argue about Global Warming (fact/fiction) or how long it will take Gasoline cars to get faded out, or how Big Oil won’t let it happen….. but they are having the wrong arguments (at least as it relates to investing), or using outdated thinking, and missing the investing thesis in Battery Tech due to the tunnel-vision of their thinking. They are so busy trying to win the debate on Climate Change or whatever has their feathers ruffled, that they are missing the changes in industry that are happening on a global basis, due to pollution, efficiency, portability, and manufacturing standards.
A larger market of Batteries are coming into MANY areas of daily life with their knowledge and without their permission or philosophical approval. The cheese is moving, industries are adapting, Big Oil is very involved in renewable energy now (they see the writing on the walls), there are more to Lithium-ion batteries than just Tesla or EVs, and it is the cumulative demand for technology, transportation, and being able to store power in mobile fashion without hauling around Gas/Oil that has many companies moving aggressively into bigger and better batteries.
I told people 2 decades ago that you don’t have to like the smell of gasoline to get rich owning a chain of service stations. You don’t have to like Big Macs to get rich owning a franchise of several McDonalds. You don’t have agree with ladies pampering themselves to own a chain of Day Spas. Etc….
You don’t have to own an Electric Car (I don’t) to understand that Batteries are in demand, and the raw components like Lithium, Cobalt, Copper, Manganese are likewise in demand.
For example: I’ve never taken a ride on a Chinese Electric bus. It doesn’t matter. I’m more than happy to own shares in the Lithium companies, selling their material to the refiners, that sell their products to the battery companies, that sell those batteries to manufacturers of Chinese Electric buses.
No intense metaphysical debate is needed to invest in supply & demand fundamentals. The trend is happening either way…..
Batteries are simply becoming increasingly used in mobile energy storage, and the odds are that anyone reading this using a battery right now on whatever device they are using to log on to the KER (if using a tablet, laptop, or smartphone). Pretty simple.
On a related note, I was on a rant about specialty metals and battery tech with Jay (Fi Fighter) earlier today and figured I’d throw this up here as well in case anyone is following some of the Asian interest in Lithium companies.
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@Excelsior – “Jayfire – Solid points on the commodities that the Chinese can source themselves. It’s the rest of the world that should be working towards securing strategic supplies of many of the critical elements and #SpecialtyMetals that support medical, aerospace, defense, electrical, manufacturing, etc… or we are at the whim of the Chinese price makers.
* This is why the US put up a bill for address just this:
https://ceo.ca/specialtymetals?61098c33a36c
As for Lithium and Cobalt being sources outside of China, you’ll note that #Tianqui gobbled up the first Australian Lithium producer outside of the Big 3 – which was #Talison. I was a shareholder in Talison back then and there was some market chatter when everyone realized they Chinese were going to slowly acquire sources of Lithium, and they’ve only continued to play this card over the last few years.
Look at how #Ganfeng came in and acquired much of $NMT.AX and $MIN.AX new producing #Lithum project (that rarely gets mentioned when people go down the list of producers). #Ganfeng has also partnered with $ILC International Lithium and $PIO.AX Pioneer resources in a big way. In addtion, #Ganfeng did a strategic investment $LAC Lithium Americas and $PLS.AX Pilbara and are sniffing around other companies. Toyota and the Japanese are in with $ORL $ORE.AX Orocobre.
At this point $NMX Nemaska Lithium is one near-term Lithium producer that doesn’t have much Asian participation as their big stakeholders are $JMAT.L Johnson Matthey & $FMC FMC Corp.
While on this train of thought with Specialty Metals, the Rare Earth discussion came up yesterday on ceo.ca and here was a quick synopsis and rant that others may appreciate:
@Excelsior – “I was invested in the #RareEarth bubble in 2010-2012 back when companies like $MCPIQ $MCP Molycorp $LYC.AX Lynas, $GWG-H Great Western Minerals $QRM Quest Rare Minerals $REE Rare Element Resources $TASIF Tasman Metals $ARU.AX $ARAFF Arafura $AVL $AVLNF Avalon $WML $WMLLF Wealth Minerals $HRE $HREEF Stans Energy $FREFF Frontier Rare Earths $GGG.AX $GDLNF Greenland Minerals $MDL $MLLOF Medallion $GEM $GOLDF Pele Mountain $MAT $MHREF Matamec and $UCU $UURAF UCore and too many others to name were all the rage.
Obviously in retrospect we know that the #SpecialtyMetals space completely collapsed on the back of a China-hype bubble-pop; but it was a fascinating phenomenon to watch implode (and a painful lesson for not overstaying your welcome in a parabolic move up). Many of the companies were destroyed like Molycorp, GreatWestern, Stans, Tasman, Quest, etc…
Some of the companies transformed into Graphite or Lithium or Uranium stocks to reinvent themselves. Like $AVL and $WML joined the Lithium frenzy a year or two ago, or $GGG.AX is now being promoted as a Uranium play, or $GEM gave up on #REEs and Uranium and is getting into energy generation and Energy storage.
$MAT Matamec and $ARU.AX Arafura stayed the course in Rare Earths and actually have a chance of moving their projects forward. $LYC.AX Lynas is still creeping along and may pull out of it’s rut as the only #producer outside of #China.
$UCU Ucore switched focus to processing and separation of various elements but still has a real rare earths theme and is healthier than most companies from those days. I actually really like the direction they have decided to go.
There is currently the Mark Smith (previous Molycorp CEO) trio of $NB $NIOBF NioCorp for #Niobium & #Scandium $LGO $LGORF Largo resources for #Vanadium and he’s now involved with $IB $IAALF IBC Advanced Alloys who is mostly involved with #Beryllium and Copper alloys but is going to process and do the downstream fabrication for NioCorp’s Scandium, so they may all get conjoined at one point. $ELC $ASXSF Elysee is good way to own all 3.
** My favorite #Specialty Metals play is still $ALK.AX $ALKEF Alkane Resources because they are an Aussie Gold #Producer (many Gold investors don’t even realize this), but they are using the incoming revenues to continue to develop their #zirconium #hafnium, #niobium and #RareEarths Dubbo project.
http://www.alkane.com.au/projects/current-projects/dubbo
It’s a very thinly traded, and strange market to dabble in the #SpecialtyMetals space these days, but you can follow a few of those rabbit holes and see where it leads… but tread with extreme caution.
Ian Chalmers addresses #CTMS2017 audience on hafniumIn a recent presentation at InvestorIntel’s 6th Annual Technology Metals Summit
VIDEO Presentation
Ian Chalmers, Managing Director of Alkane Resources Corp. (ASX: ALK | OTCQX: ANLKY) delivered a presentation titled “Hafnium – Cleaner Power and Transport. Faster, More Energy Efficient Next Gen Devices.”
https://investorintel.com/investorintel-video/ian-chalmers-addresses-ctms2017-audience-hafnium/
Battery production boom is set to turbocharge green energy growth.
Source: Benchmark Mineral Intelligence
(check out all these Y-U-G-E Battery plants and their growth projections)
LG Chem has 4 of the huge Battery factories. They are taking this industry very seriously.
Exclusive: China’s GSR eyes substantial stake in $9 billion Chilean Lithium miner SQM –
Rosalba O’Brien and Kane Wu – July 5, 2017
https://www.reuters.com/article/us-sqm-m-a-china-idUSKBN19Q0K2
I sure do like the big dividend checks I get from XOM, CVX, SU, and Shell, and the XOM is worth more than 40 times my cost in 1980. Shell is up 30 fold since then. I plan to hold’em.
Yes, I noted that up above that holding the larger producers for the Dividends makes a great deal of sense. I believe Paul L. has had similar experiences.
Good on you Bonzo Barzini. Cheers!
Being an “Old Turkey” with the big names like Exxon, Shell, BP, etc… makes a lot of sense; however, doing a buy an hold on most Jr Explorers or Developers can be the recipe for insolvency. That is like juggling dynamite, and those smaller companies have large surges, and then waterfall declines. Most won’t ever make it into production. It’s no different in Oil Exploration than it is in Gold or Silver. Most will go bye-bye, so investors can’t just buy and hold, and would be better suited playing a medium term trend or trimming on the rips and adding back on the dips.
Getting exposure to XOP is a safer way to get a basket of Jrs in the Oil space, or OIH gives one a basket of Oil Service companies….. and someone else does the rebalancing and filtering of which companies to include. This is idea if an investor doesn’t want to spend the time to do all the research on all the companies individually.
I think Devon and Apache are cheap at these prices.
Yes, both Devon and Apache have pulled back nicely from their highs in the summer of 2014 and have very similar looking charts.
I haven’t looked into their fundamental pictures in some time. Do you feel they’ll make good progress if Oil stays in the $40’s?
No, not if oil stays in the 40’s. But either could be taken over by a major.
Ah yes, they’re both nice mid-tiers but would make nice acquisition targets from the Majors. Good point.
Back to Gold………
Gold $1254
Silver $16.44
I love how when Silver got down to $15 that all the bears came out calling for $13 and $9. 🙂
There were also many commentators scoffing that Gold even had a chance at $1250 but were watching for $1180 and then $1100 or the low of $1045.40 to get tested.
😮
How could anyone miss the significance of that flash crash? If silver closes at the current level, it will be a breakout (the chart will show today’s action this evening):
http://stockcharts.com/h-sc/ui?s=%24SILVER&p=D&yr=1&mn=8&dy=0&id=p41282224921&a=533162319
Yes, agreed. Silver went down and tagged longer term support, but many traders and platforms only look at the closing prices. It had bounced a long way up (above $15) by the close.
Looking forward to today’s weekly close for sure.
Goldfinger made me laugh with this, but sometimes things need to spelled out simply:
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@Goldfinger – “This is called an uptrend:”
He ,he …me too…check the notes ,I said bottom in ….&$1307 will be a test. 🙂
Yes, I remember OOTB. Just point out (once again) that when the sentiment gets most bearish, (with calls for ridiculously low levels from the bears) that it breeds the environment where rallies are born.
Some commentators said maybe $1230-$1240 could be touched but that Gold would need to break out above $1250 for them to get bullish…..
Well Gold closed at $1255 (how about those apples….?) 🙂
Silver at $16.50
I like to aggravate the clueless….. 😉
Keep up the great work….. give em’ The BOOT or the Claw…….
Excelsior, I yield to your knowledge on many issues with regard to metals and commodities in general.
I would suggest, however, you have not considered one thing.
That factor is the amount of the rest of the world available for horizontal drilling and fracking. This has been concentrated in North America mostly up to now.
We may have passed peak oil, but I believe the declining tail will be a very long one.
Further every photovoltaic installation diminishes the need for conventional electrical generation for a long time. But solar cannot replace conventional generation without a storage mechanism, because the sun does not always shine. I know you understand this.
Thanks CFS. Yes, I believe that franking and horizontal drilling will expand in use in many other countries outside of the US, and am actually quite bullish on Nat Gas moving forward for just these reasons.
As for the declining tail we are in agreement there as well. I mentioned 10-20 years before the EVs really start to displace gas & diesel cars in a more meaningful way (not 10 to 20 months) poking at this very idea. If you read many articles in the Battery space and EV space, they have assumptions of 3 years or 5 years etc…. and while disruptive change does come fast, this institution and in particular the infrastructure is far more entrenched and it will take decades not year for the transition to happen.
Also eluded to up above were the thousands of uses for petro products that will still provide a floor to demand (plastics, chemicals, pharmaceuticals, lubricants, etc…)
As for the need for Renewable power (ie… Solar & Wind) to have a storage mechanism, yes absolutely. I focused on the BackUp Batteries or Energy Storage up above for a few paragraphs, that is what I was eluding to.
Ever Upward!
Fracking (not Franking)
Franking is when you let Frank from Moscow loose on the energy sector in Russia.
You are Frank ing with me … 🙂
Frank is thinking of uranium….
Un-Franking-believable
Frankly you guys are just being silly now.
😉
For clarity, I’m not really Bullish on one area of Energy over others because I believe the human family here on planet Earth needs all the energy inputs it can come up. The only one I’ve been vocally bearish on the last few years was Coal, but even thermal Coal had a nice rally last year (it may have just been a dead cat bounce though). Most of the larger commodity conglomerates have been divesting coal assets as fast as possible, but a few companies have consolidated those assets into reasonably sound companies (for now).
I like Oil & Gas, Nuclear, Solar, Wind, Geothermal, Tidal, Run-Of-River, Hydro, and Battery power, and have irons in all those fires. I’m still constructive on Solar and Wind, but just think the average public and the politicians they elect are completely unrealistic with their capacity to replace Nuclear, Oil/Gas, or Coal plants. Germany and the new South Korean government are in cuckoo land if they they think they can ditch all their Nuclear for example and make a simple swap with Solar or Wind. (as evidenced by the fact that Germany has spiked their power rates, spiked their pollution emissions, and have had to import Nuclear and Coal and Gas power from their neighbors ever since shooting their mouths off). If South Korea does what they claim they want to do, it will be a disaster. Japan has been in the Energy hurt-locker ever since they shut down their nuclear fleet and while they have brought back on-line 5 nuclear plants, many residents don’t want to turn on the rest. Where do they think their energy will be coming from? They say Solar but have been buying dirty Coal energy and huge amounts of Oil/Nat Gas/Biomass plant energy instead. All of those have tons more emissions and kill more people than Nuclear ever has since it’s inception.
There is a vast rift between Reality/facts and Perceptions in the Energy markets today, where everyone is relying too strongly on Solar and Wind to save the day. If that is where things are moving then they need to be just as bullish on BackUp Batteries and Energy Storage. “Sticking it where the sun don’t shine….” has taken on quite a new meaning 🙂
All approvals in place, Japan nuclear deal comes into force
By Dipanjan Roy Chaudhury, Economic Times Bureau|Updated: Jul 21, 2017,
“The landmark Indo-Japanese civil nuclear deal signed in November 2016 came into force from Thursday that would enable Japan to export nuclear power plant technology as well as provide finance for nuclear power plants in India.”
“Japan would also assist India in nuclear waste management and could undertake joint manufacture of nuclear power plant components under the Make in India initiative, persons familiar with the development told ET. ”
Next week looks like it’s gonna be a good one. GSR breakdown…
http://stockcharts.com/h-sc/ui?s=GLD%3ASLV&p=D&yr=1&mn=5&dy=0&id=p68449779039&a=521820217
SLV:GLD weekly (this is the opposite of the SGR so UP is what we want to see):
http://stockcharts.com/h-sc/ui?s=SLV%3AGLD&p=W&yr=3&mn=0&dy=0&id=p03497257816&a=533707604
GDXJ has now more than filled its July 3 gap:
http://stockcharts.com/h-sc/ui?s=GDXJ&p=D&yr=1&mn=5&dy=0&id=p90779318084&a=520792672
Bullish Setup in Platinum
by @Goldfinger on July 21, 2017
Platinum even looks bullish relative to silver, to me:
Not how it’s playing around the 25% line (gray band) and testing its breakout above the 50 week simple moving average.
Miners acting extremely weak relative to gold. FWIW.
Yes – I agree with you there spanky. With the nice move up in the metals all week, it would have been encouraging to see the miners outperform more than they did.
Gold up .9% and GDX up .4% / GDXJ up .6% / GOEX up 1%
Silver up .8% and SIL up .56% SILJ actually down .2%
Maybe they forgot what they mine?
Those numbers were just today (Friday’s) closing numbers [not the weekly] for clarity.
Yawn… let me know when gold hits and stays above the $1300 mark. Better yet, let me know when it can close above $1360 on a weekly basis. Not a bad performance from gold and silver over the last few days mind you.
I believe Chris is both right and wrong.
Yes, gold has benefited from a declining dollar.
But while the dollar is over-sold, the Euro is seeing a Macron-bounce.
Once Brexit occurs, Euro fiscal unification becomes more possible and the Euro does not need to decline.