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Alexander Stahel 🌻 Profile picture
@BurggrabenH
Nov 28, 2020 • 20 tweets • 14 min read • Read on X
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1/ Let us share some fundamentals on #gold price, given latest price action has been testing nerves of bulls after 50% increase post 2018.

Thread @Mintgecko @TheLastDegree @GMoneyResearch @AdamMancini4 Image
2/ View gold as a currency Image
3/ Like other currencies, #gold prices are volatile despite safe heaven backdrop... Image
4/ #gold is third most liquid asset class behind #UST and #SPX. It is entertaining, at times visionary, to read #bitcoin takes away sun of #gold. In reality, that is technically impossible. The two asset classes do not compete. @michael_saylor Image
5/ No surprise: analysts also here follow price action when “forecasting”. Boringly useless. #WallStreet Image
6/ In contrast to consumable commodities such as #oil #gas or #copper, #gold does not trade off supply/demand fundamentals. Please study @IGWTreport reports if u want to learn more...! @RonStoeferle Image
7/ After adjusting for Bretton Woods effect 1971-1975, first free floating bull market til 1980 shows good correlation bw price and real yields, except for a brief period of gold price euphoria. By the by, historic bull markets usually perform >600%... Image
9/ So basically #gold price trade of TIPS since 1975 (we only have TIPS ETF data since 2003 with R square > 0.7!). Hence, to understand gold price, one needs to have a view on direction of nominal 10y UST and inflation. We will share a view here in a separate thread. Image
10/ We often read a weaker dollar is good for gold and vice versa. This may be true short term. However, since 1970 there is zero correlation between the two! #USD #Dollar Image
11/ Of course, gold performance needs local context. If u are based in Brazil or Russia, each with high natural inflation due to dollar bull for past decades, u only had a bull market in #gold :-) Image
12/ #gold demand is >65% retail (jewellery, coins, bars), 17% central banks, some industrial use and gold backed ETFs. Image
13/ ETFs explain marginal buyer in #gold best, not #Centralbanks. So for all the conspiracies about #DeepStateCorruption, ETF inflows or outflows matter. ETFs react to TIPS! @EdVanDerWalt does great work following them. Image
14/ Speculative Futures position do NOT explain #gold price action. Simply does not move the needle. Too big an asset class.

End of thread. Cheers. Pls share! Image
Thx
So, let us now share our view on how the gold price may unfold in 2021. Brief and based on our fundamental findings of what is ahead...#GOLD Image
As the GLOBAL economy recovers into Q1 & Q2, both GDP & Inflation accelerate y-o-y and according to the one of the best macro advisory processes out there. Note that the rate of change matters here. @HedgeyeDDale @KeithMcCullough Image
This most likely means nominal 10y UST sell-off FASTER than inflation accelerates, causing real rates to increase. At the very least, real rates won’t go more negative for months. That won’t push gold price higher. Of course other factors may matter too. #UST #Inflation Image
So we think gold will be range bound or even revisit $1550 (see quarterly forecast in chart) as bullish sentiment gets shaken out before the bull continues into 2022 and as visualised by our favorite chartist @Northst18363337 ... Image
Other great followers on gold are @EdVanDerWalt @RonStoeferle @AdamMancini4 @TheLastDegree @LukeGromen @ttmygh @GOLDCOUNCIL

🍻
Food for thought on why nominal rates sell off faster than inflation kicking in

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More from @BurggrabenH

Alexander Stahel 🌻 Profile picture
Nov 3
Let's talk China: Episode 5 of 7

In this episode, we discuss China's 2nd of 5 economic paths it can follow.

This episode will also focus on Xi the leader. To understand Xi means to better understand China's economic path forward.

1/n #China Image
Can China replace malinvestment with more consumption?

Answer: Maybe a little bit & over a long time frame, but President Xi does not want to focus on this path. Instead, he wants to implement his socialist utopia.

2/n Image
Yes, China’s rising entrepreneurs were welcomed by the Communist Party for at least two decades. But all of that is in reverse.

Under Xi Jinping, China has moved full circle: from low growth & low freedom in the pre-reform era back towards something similar today.

3/n Image
Read 7 tweets
Alexander Stahel 🌻 Profile picture
Oct 29
Let's talk China, shall we? Episode 4 of 7

In this episode, we discuss China's investment-led growth model & the first of 5 economic paths China can follow.

As you would expect, also this episode is full of Chinese characteristics!

1/n #China Image
Starting in 1990s, China’s economic engine has been fueled by capital investments.

Its central planning bureau defined GDP targets, picked winners and drove growth from debt-driven capital formations (green line).

2/n Image
Has any other nation tried this before, ever? Not to our knowledge.

We checked at ALL G20 economies and their respective growth models for past 70 years. 45% capital formation share is a unique experiment in economic history.

3/n Image
Read 6 tweets
Alexander Stahel 🌻 Profile picture
Oct 20
Let's talk China, shall we?

Over the past 3 years, we made some controversial calls in commodities. We decided to exit our oil holding in Aug 2022, we went short natgas in early 2023 or called for copper to go lower in May.

Why? Because we have an egde on China.

1/n #China Image
Yes, mainstream media picked up pace on important issues facing China today.

Most came to understand that the property bubble burst, that the economy is slowing, that geopolitical frictions are emerging, that there is too much debt.

But do they understand the underlying forces that drive these issues?

2/n
While the majority of these facts are known, most Western observers, investors & industrialists do not fully appreciate their interdependence & the structural changes that are unfolding in China today.

For too long, the CCP had their back.

3/n
Read 10 tweets
Alexander Stahel 🌻 Profile picture
Sep 21
Pre-2020, Gold had one marginal buyer, that being gold-backed ETFs.

Today, gold has at least 3 marginal buyers that can overlap or alternate each other. They are:

- Gold backed Western ETFs (which buy, sell or hold based on US real rates);

- Central Banks seeking higher gold reserves (China; India; Thailand; Vietnam; Qatar, KSA or even Poland) for geopolitical & other reasons;

- Chinese & other Asian wholesale or retail market participants and professional speculators;

Who bought most last? India!

Why? The government cut import duties on gold by 9% at end of July, triggering a renewed surge in demand. “The impact of the duty cut was unprecedented, it was incredible,” said Philip Newman, managing director of Metals Focus in London. “It really brought consumers in.”

At least for now, there seems to be always somebody.

1/nImage
Note however that Chinese retail buying has slowed down recently, as best illustrated by the Shanghai gold premium over international prices.

I will elaborate on the Chinese retail clients more soon.

2/n Image
However, professional Chinese speculators have increased their futures positions somewhat again. Who is the better indicator of what comes next, retail or the pros? IDK

3/3 Thx Image
Read 5 tweets
Alexander Stahel 🌻 Profile picture
Sep 4
In 2023, I said I will tweet less about oil and I will stick to this promise but today I make an exception and will break the promise as we enter a period of more volatility for oil...

So let's talk about OPEC and Saudi market share. It's decision making time.

1/n
Step by step:

The Saudis decided to keep oil from falling <$75 for 2y by cutting overproportionally in their OPEC+ quota context.

They have cap for 12mbpd but produce 9mbpd. It was 10.5mbpd in 2022. Pick a number but they are 15-20% below their fair share.

2/n Image
Why did they do so?

Likely because of bad advisers. There is a whole crew of supply gloomers out there charging clients money to claim the Permian or US shale is about to roll over.

Well, it isn't.

3/n US weekly DOE crude oil Image
Read 14 tweets
Alexander Stahel 🌻 Profile picture
Jun 18
Let me share some real time data on the EU natgas market that are hard to get.

European gas consumption for 28 countries matches last's years to the cubic meter (Oct 2022 - Oct 2023 = Year 2022).

However, consumption remains 17% below 2019/20 season.

Is there a supply issue? Rubbish. The global LNG market is oversupplied from every corner; EU storages will be filled by end of Aug where we sit. We have too much gas.

#TTF 1/4 (in mcm/day and YTD)Image
Three factors matter why there is less consumption vs 2019/20 season:

1) Milder weather: 70% of total consumption is temperature related. Temperatures are milder, thus Europe consumes 14% less vs 2019/20.

Is that permenant? It sure looks like a trend where I sit. But climate scientists can answer that best.

Households Consumption; 2/4Image
2) Less power generation: Europe replaces more and more natgas in the grid with solar & wind and in the case of France with better capacity utilisation of its nuclear fleet. That adds up...!

Selected Power Consumption: 7 countries; 3/4 Image
Read 4 tweets

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