Good afternoon
it´s getting crazier by the day…and more volatile!
Equities are getting another hammering today in Europe….base metals are actually holding pretty well, down about 1% on average so far. And gold is obviously profiting from the malaise! The entire metal complex is certainly also supported by a very weak US$ …Bonds are still rallying big time, now trading at 0,66% yield for the US 20-year bond. I think these bonds are not trading at outlook for the economy - they are trading at levels, which still guarantee capital preservation in 10 years time, while people like Victor Dalio are very bearish indeed.
The US came out with some very strong labor market numbers, above the highest estimate, and also revised the previous month up. But as we know - this was before the virus really hit. Gold sold off initially on those numbers, only to find renewed buying and it´s trading at 1684! Well, that was 20 min ago..we are now at 1650 US$/oz at 4.40 pm European time, and as I will leave this uninspiring screen! There is massive macro-trading happening in the moment - looks like equities have bottomed ( for today? ) / bond yields have bottomed / the US$ has bottomed…hence gold is seeing profit-taking.
The Chinese economy is surely ramping up again…many indicators and individual announcements are showing this, while the rest of the world is not quite there yet!
Interesting story today in the PGM´s…Amplats had an explosion at their main refinery, and has cut guidance for PGM production this year by a 1 mill oz! That´s big stuff in a market, which is undersupplied anyway ( in the case of palladium, at least for as long as we are not seeing a real meltdown in car sales this year ) or nearly balanced , with just a 100.00oz approx supply-overhang, in platinum!
Unfortunately for me, smaller gold stocks and developers are still not doing that much…pretty disappointing! But understandable, I guess - in times like these, you want to buy liquid assets only, and that´s whats happening. But at some stage, the liquid boys will be so far ahead, that they get very tempted to use paper to swallow up the smaller ones! I bought some EVN, AOP, HRN and TIE the last few days…
Negative interest rates around the globe are continuing to help the gold price….it feels like it might test 1700 very soon. Holdings of Gold ETF´s are rocketing - up 4 mill oz since 15th of January, to 85 mill oz.
Graphex - announced a small placement ( possibly at the most difficult time ! ) just to keep them running and pay a few consultants, until ( hopefully ) a large financing agreement will be signed in a few month. This is seen as a strategic long term financing for the PE-funds involved - but the current turmoil certainly does not make things any easier! There is a small Shareholder Purchase Plan as well - only 250.000$, and for applications up to 30.000 A$. I could imgaine, that this will be gone quickly - so if you have interest to participate, you should contact the company quickly. We have spoken about GPX many times before - a true high-risk/high-reward situation!
What a week is behind us! A lot of first-ever events! Not really fun, I have to admit…but my feeling is , that we are getting slowly but surely to the bottom of this. Cases of the corona virus have been increasing strongly outside of China - and we will probably see another week or so of the same - but my impression is, that things don´t get out of hand completely. We will have severe disruptions in the economy - no doubt about this - but we will also have a swift recovery, once the worst is behind us in a few weeks time. It´s selffulfilling prophecy - everybody I know, is pretty cautious in what he is doing , and that in itself will restrict the spread. And every additional week pharma companies are getting, will bring them closer to have some sort of cure to this new virus. Complacency is not what we need - but there is no reason to see this as a 100-year event, as Victor Dalio has called it. I find it very promising today, that the market is weak - but not really that volatile - and a reduction of volatility is what will tend to show us the bottom of the market! This plus a bottom of bond yields! So next week will be a weak of bottom-fishing?
Have a nice weekend, still!
WS