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

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More from @BurggrabenH

May 10
A big deal for #TTF?

Today, Ukrainian Transit Operator OGTSU annouced force majeure on gas deliveries from Russia to Slovakia (Velké entry point) due to damages of facilities in occupied territory which cannot be accessed for repairs.

1/3
tsoua.com/news/diyi-okup…
Pro memoria: Russia delivers through 3 major pipeline systems & in the form of LNG by sea.

The pipeline via Ukraine has a capacity of up to 40bcm of which 1/3 of current gas transits via Ukraine is reported to be down now (32.6mcm/d).

2/3
Our view:
- Yamal -88% YTD due to "unfriendly state" decision (GER Mallnow at zero too);
- Velké: 6.2bcm YTD, 130days x 32.6mcm/d = 4.2bcm -> 4.2/6.2 = 68% - not 33% - affected.

Ceteris paribus, EU must replace 68cm annualised to match 133bcm deliveries in 2021 by R (ex LNG)
Read 5 tweets
May 5
Can the European Union ban Russian gas imports?

Answer: Faster than you might expect, but it comes down to great leadership & setting the right priorities!

Let's go - Part 3 (total of 13 tweets) with a focus on the UK.

1/n 🧵
#UkraineRussiaWar #EuropeanUnion
In part 1 we explained EU LNG and the importance of its optimial use.

2/n
In part 2 we explained the potential of more local production & illustrated the need for policy corrections such as building German LNG regasification terminals.

3/n
Read 13 tweets
May 1
Diesel - the work horse fuel of the modern economy - is mooning as we are short everything.

More precisely, wholesale Diesel prices in the US are up >100% since January 1st while crude oil prices are "only" up 38%.

1/n 🧵
Step by step. What does it mean to pay $5.35 per gallon in barrels last Thursday?

A barrel contains 42 gallons, so that $224/barrel. Canada was even worse while Cuba tries to keep its regime going (by subsidising prices at the pump).

2/n
Don't feel bad if you are based in North America because Diesel prices in Europe are even worse due to higher taxes.

Take Germany - the land of diesel cars & no speed limit. Here people pay US$2.2/liter or the equivalent of $344 per barrel. How about that for cheap energy?

3/n
Read 16 tweets
Apr 27
Can the European Union ban Russian gas imports?

Answer: Faster than you might expect, but it comes down to great leadership & setting the right priorities!

We continue - Part II with a total of 25 Tweets

1/n 🧵
#UkraineRussiaWar #EuropeanUnion
In part I we explained that Europe must replace 150bcm of Russian gas imports to help support the end of the Russian genocide in Ukraine.

It will also be the recipe to reduce the current risk-premium in gas prices & avoid long-lasting food shortages or a refugee crisis.

2/n
We explained that...
- (1) higher LNG imports from optimised infra & capacity utilisation can deliver up to 90bcm or 62% of 150bcm if free market prices can continue to "pull" LNG into Europe;
- (2) one-off storage potential of up to 25bcm (one winter) to buy some time...

3/n
Read 22 tweets
Apr 27
Can the European Union ban Russian gas imports?

Answer: Faster than you might expect, but it comes down to great leadership & setting the right priorities!

Let's go - Part 1 of a total of 25

1/n 🧵
#UkraineRussiaWar #EuropeanUnion
Basics first: How much gas does Europe need to replace (not just the EU, UK et al too)?

Answer: Europe purchased 150 billion cubic meters (bcm) of gas from Russia, imported from 3 pipelines & 15bcm in the form of Liquified Natural Gas (LNG) by sea.

2/n Source: Burggraben
Why is it important to cut Russian gas?
Because it finances Putin's genocide in Ukraine which in turn pushes gas prices up. That destroys businesses and - for heaven's sake - creates food shortages with a subsequent refugees crisis.

3/n #foodshortage
Read 26 tweets
Apr 25
Food prices likely have to go higher in the coming month & despite the macro system stress.

Result: Looking at the data for the past 30 years, the FAO Food Price Index (@FAO) would have to rise by 30% to match Ammonia's cost for farmers.

1/9 Thread
First, what food matters and why?
Answer: to feed 7.9 billion people grains & rice matter most.

2/n
What do farmers need to to maximise crop yields of wheat, corn or soybeans?
Answer: they need 3 fertilisers, namely Nitrogen (ammonia), Phosphorus & Potassium. The mix varies by region but the world cannot be fed without the three.

3/n courtesy @WillisThomas & CRU
Read 9 tweets

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