3/ Like other currencies, #gold prices are volatile despite safe heaven backdrop...
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
5/ No surprise: analysts also here follow price action when “forecasting”. Boringly useless. #WallStreet
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
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%...
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.
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
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 :-)
12/ #gold demand is >65% retail (jewellery, coins, bars), 17% central banks, some industrial use and gold backed ETFs.
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.
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!
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
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
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
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 ...
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.
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
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.
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)
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; 2/4
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...!
India likes a "GOOD" deal - also in crude oil - and is about to teach Russia a lesson what that means.
Spoiler 1: it's not a pretty one!
Spoiler 2: China & Turkey will learn quickly..!
Let's look at the Indian-Russo crude oil bromance.
1/x Thread
Before the invasion in Feb 2022, Russia exported some 2.8mbpd (55%) of its 5.5mbpd crude to Europe by way of pipeline (Druzhba) & sea transportation (seaborne).
But not just crude oil...
2/x
Russia also sold products such as diesel or jet to Europe for a total of 1.4mbpd in petroleum product exports.
In other worlds, G7 sanctioned as introduced in Dec 2022 required 4.2+mbpd of crude & products to be re-shuffeled in globally. Big numbers!
For now, Red Sea disruptions due to Houthi attacking commercial vessels randomly remains a ton-mile story, not a crude oil story.
Within different shipping segments the picture of diverting cargo around the Suez Canal remains a Container Vessel story, to a less extent also a Product Tanker & Crude Oil tanker story.
Container Vessels owners have been the most consequent in diverting cargo.
Since Nov, the number of container vessels crossing the Suez Canal has collapsed by 80% in both directions.
2/n
Crude Oil tankers from the Middle East (Saudi Arabia; UAE; Iraq; Kuwait; Qatar or Oman) to Europe are also lower but our high frequency data does not yet show a similar collapse.
It also nicely illustrates how changing Russian crude flows (Urals diverted to India & China and away from Europe) have increased traffic through the Suez Canal - good for Egypt as Russian dark fleet vessels will or cannot seek an alternative route to ship oil from the Baltics to India.
Brazil is is an interesting microcosm to study in the oil industry.
It's a large, growing consumer of petroleum products. It's the 8th largest producer of crude oil in Dec 2023 as well as a large producer & consumer of biofuels.
Most importantly, it's energy agency reports the data in detail & timely (unlike most countries globally).
1/n
Brazil's resource wealth (mainly offshore) is well documented but it struggled for years to follow through.
Finally, it does with an exit rate of 3.9mbpd of oil production in 2023. Only the US, SA, RUS, CAD, IRQ, CN & IRN (incl condi; in this order) produced more that month. That's 50% growth since Jan 2018!
2/n
Better still, most such production growth reaches the international market. In Dec 2023, Brazil exported 1.7mbpd of crude oil - an ATH.
Remember, in oil net exports is the key number to measure.