Category Archives: silver-rounds

An employee handles one kilogram gold bullions at the YLG Bullion International Co. headquarters in Bangkok, Thailand, on Friday, Dec. 22, 2023. 
Chalinee Thirasupa | Bloomberg | Getty Images

Gold prices advanced Tuesday, on track for a record close as rising expectations of a September interest rate cut bolstered demand for bullion.
Spot gold gained 0.7% to $2,438.83 per ounce. Gold futures advanced 0.6% to $2,443.80. Earlier in the day, futures hit a high of $2,448.2, the best level since May 20 when it traded for as much as $2,454.20.

Gold prices hit all-time highs earlier this year before pulling back as the prospect of higher-for-longer interest rates dampened investor enthusiasm for the precious metal.
But interest in the asset has grown after June’s softer inflation data and some recently dovish comments from Federal Reserve Chair Jerome Powell combined to raise the odds of rate cuts coming this year. Markets are pricing in three quarter-percentage point cut coming this year, with the first slated for September, according to the CME FedWatch Tool, which uses 30-day fed funds futures to find probabilities.
A weakening dollar has also supported demand for bullion. On Tuesday, the U.S. greenback rebounded after falling to a five-week low.
“Interest to ‘buy-the-dip’ remained prevalent among investors amid strong sentiment towards gold, which is likely why the market was quick to rally on soft U.S. data prints and dovish Fed expectations,” UBS’ strategist Joni Teves said in a note on Friday.
“With the market sitting just above the psychological $2400 level, we think risks are skewed to the upside,” Teves continued. “We think positioning remains lean and there’s space for investors to build gold exposure.”

Gold rallied to record highs in the first half of 2024 on the back of a multi-year spike in demand from central banks around the world, as mounting global geopolitical risks boosted interest in the safe haven asset. According to UBS, central bank buying of bullion is the highest it’s been since the late 1960s.
“With some central banks now questioning the safety of holding USD- and EUR-denominated assets (following the financial and debt crises and more recently the war in Ukraine), many are choosing to instead fill their reserves with gold,” read a note last month from UBS.
On the flip side, gold has also come under pressure from lackluster Chinese demand. In a recent note, Citi said China central bank and retail consumption of gold is expected to remain weak over the summer, but noted “underlying strength” in demand amid a slow recovery in the China real estate market.
Gold mining stocks also advanced on Tuesday. The VanEck Gold Miners ETF gained 1.2% in the premarket, on pace for a fifth winning day in six. The U.S.-listed shares of Harmony Gold and Gold Fields rose 6% and 4%, respectively. The U.S. listed shares of DRDGold popped more than 5%. Continue reading →

Former President Trump officially won the GOP nomination with his vice presidential pick, Sen. JD Vance, in tow.The Republican senator from Ohio, a former Marine, private equity alum and author of a bestseller-turned-Netflix special, received the nod on Monday, two days after the former president narrowly escaped an assassination attempt during a rally in Pennsylvania.”Prior to this horrific event, the markets were already sniffing out, subsequent to the debate, a Trump victory. Now, investors are sniffing out a what? A ‘red sweep,'” said Jason Katz, UBS managing director and senior portfolio manager, on “Varney & Co.,” predicting what could unfold should the GOP ticket win the White House. “The tax laws of 2017 become permanent, maybe you get additional tax cuts. You will have much less erroneous regulations; we could see a very big pickup in M&A activity,” he detailed.ELON MUSK HAILS JD VANCE, TRUMP’S VP PICKSen. JD Vance and wife Usha Chilukuri Vance celebrate as he is nominated to be Donald Trump’s vice president on the first day of the Republican National Convention at Fiserv Forum in Milwaukee on July 15, 2024.FED’S POWELL CONDEMNS TRUMP ASSASSINATION ATTEMPT: A ‘SAD DAY FOR OUR COUNTRY’The Dow Jones Industrial Average closed firmly above 40,000 on Monday, a new record high, up 6.7% this year, with the S&P 500 just shy of its all-time high, up 18% this year. The tech-heavy Nasdaq Composite has gained 23%, closing just below its record high reached this month.READ ON THE FOX BUSINESS APPWith the Republican National Convention underway, investors will be listening for details on whether the GOP’s policy platform can keep the momentum for equities going.LIVE UPDATES FROM THE RNCAt a recent “How will the Election Impact the Markets?” Ameriprise virtual roundtable in late June, attended by FOX Business, Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors may be subject to more volatility through November.”As the markets start to discount not only who sits in the White House but where control of Congress lies, that could create a period of volatility. But what we generally see historically is that no matter how the results shake out, volatility ebbs back to more normalized levels post-election day,” he noted, and then investors turn back to fundamentals. “The level of interest rates, growth and corporate profits, and obviously the trajectory for monetary policy, these are the four things that generally drive the markets,” he said.Republican presidential candidate Donald Trump is rushed offstage during a rally on July 13, 2024, in Butler, Pennsylvania.The team was not available to comment on whether there will be any market or election impact after the assassination attempt on Trump over the weekend.FED DOESN’T NEED TO WAIT ON RATE CUTSOutside the upcoming election, tailwinds for the economy are emerging. On Monday, Federal Reserve Chair Jerome Powell said policymakers are seeing positive inflation data and don’t necessarily need to sit idle for inflation to hit their preferred target rate.Federal Reserve Bank Chair Jerome Powell”The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long because the tightening that you’re doing, or the level of tightness that you have, is still having effects, which will probably drive inflation below 2%,” Powell told attendees at the Economic Club of Washington, D.C.The consumer price index fell 0.1% in June vs. May, the first monthly drop since May 2020. Still, year-over-year prices remain elevated at 3%.Currently, 89% of market participants are pricing in a September rate cut, according to the CME’s FedWatch Tool, which gauges rate moves. No action is predicted at the July meeting.Russell Price, chief economist at Ameriprise, expects one rate cut in September and another in December but says the health of the U.S. consumer is a bigger driver of the economy.”What’s really most important is consumers. Consumer spending has eased a little bit. In my mind, consumers are still doing just fine. But they have gone a little bit long in the tooth when it comes to the amount of spending they did on goods a few years ago and more recently on services, particularly on travel and vacations and the like. But generally, consumers, though, are [in] good financial shape,” he noted.Original article source: Trump, JD Vance and stock market momentum: Here’s why Continue reading →

LilliDayIntro Analysts have been expecting a recession for years now, but the S&P 500 (NYSEARCA:SPY) does not care and continues to rise. During 2024 it recorded new all-time highs several times, and those who waited for a crash to invest in it probably regretted not doing so earlier. Those who sold in panic I hope have realized that it always pays to stay invested, even if everyone expects a new 1929 soon. At the end of 2023 I wrote an article on the 2024 of S&P 500 where I showed my optimism for the first half of the year, thanks to the AI hype, but I underestimated the magnitude of this trend. I expected a new all-time high but not that it would touch $5,600; never did I think Meta would grow an additional 50% in a few months and Nvidia by 160%. It was a pleasant surprise for my portfolio, but I think it is time to question the sustainability of this growth. Obviously, I will continue with my buy & hold strategy no matter what, but the concerns I had at the end of 2023 are gradually materializing and may halt the growth of the S&P 500. In the second half of 2024, I expect there will be many more challenges to overcome than in the first 6 months, as interest rates are only now really hitting the economy. Empirically, the consequences of a rate hike have been shown to have a lagging effect of about 12 to 18 months on the economy, and we are only now experiencing them in full. My S&P 500 price target for late 2024 was only $3,600, a highly improbable figure after such a strong rise in big tech companies. In any case, I would not rule out a good portion of the gains made so far being wiped out. In my opinion, it is necessary for the Fed to start cutting rates as early as the next meeting, otherwise an economic slowdown/recession at the end of the year is inevitable, which is something I already anticipated in my previous article. I would like to emphasize again that this article is not intended to spread panic and entice you to take profits on the best performing companies; just take it as food for thought. As I have previously mentioned, my view about the investment world is totally different from doing market timing. I think it is always worth staying invested and taking advantage of slumps to invest more, as long as you have chosen the right companies, of course. The economy is beginning to creak High interest rates are beginning to hurt the economy, particularly the labor market. No one doubts its current resilience. In fact, the unemployment rate is only 4.10%, but there are signs that do not bode well for the coming months. Investing.com First of all, from April onward there has been a slow but steady deterioration. Among other things, for three months in a row, analysts’ estimates have been too optimistic. In general, we cannot criticize the current level of unemployment, but at the same time we cannot base our analysis of the labor market solely on it. First of all, because it is a lagging indicator, so it does not give us any information about the future, and secondly, its volatility can change drastically depending on the macroeconomic environment we are in. Let me give you a real-life example to make my point. In June 2008, the unemployment rate was 5.60%, and no one expected it to rise much higher, not even the FOMC. Federal Reserve The expected range for the 2008 unemployment rate was between 5.50% and 5.80%, in 2009 between 5.20% and 6.10%. At the end of 2008, the unemployment rate rose to 7.30%, yet the estimates had been made a few months earlier. In just 6 months, the situation changed dramatically, but the biggest error concerns the estimate for 2009: the unemployment rate at the end of the year reached 9.90%. In light of these considerations, it seems clear that the unemployment rate is not suitable for understanding the future of the labor market, and therefore not useful in our investment theses. It gives us information about the past, but we are interested in the future. What can help us instead is the Sahm Rule Recession Indicator, created by the macroeconomist of the same name, Claudia Sahm. Often, to predict a recession, we look at the inversion of the yield curve, but this other indicator has also proven flawless at predicting all recessions since the 1970s. But how does it work? The rule is very simple and involves relating the value of the current three-month moving average unemployment rate to the value of the lowest three-month moving average unemployment rate over the past 12 months. In other words, it seeks to show an abnormal increase in the unemployment rate compared with what has been recorded over the past year. Its purpose is thus to predict whether the unemployment rate is about to shoot up, much more than the market might expect. Federal Reserve Bank of St. Louis Every time the indicator has exceeded the 0.50 threshold there has been a recession; today we are at 0.43 and the figure is rather worrying since it is steadily worsening. Of course, the Sahm Rule is not law, so it could be wrong, but I, personally, rely on it a lot. After all, I have no reason to think that this time is different. It is not certain that we will touch 0.50 in a few months, but at the same time I wonder why there has to be an improvement. Interest rates are still very high, and the Fed, unlike other central banks, remains quite reluctant to reduce them. It wants to make sure 100% that inflation has been defeated, which is agreeable, but economics is not a certain science and historically, the timing of central banks has never been perfect. I would like to point out that I don’t think it is their fault, recessions are part of the business cycle and will always be there. An economy cannot grow all the time, and surely a mild recession is better than out-of-control inflation. The point is that the magnitude of the recession cannot be known in advance, and keeping rates high even though inflation is falling may prove to be the wrong choice. Right now, no one knows for sure what the right choice is; my view is that rates should be cut by 25 basis points as early as the next meeting, so one cut in 2024 is not enough. Only in a few years will we know whether the Fed has made the right choice, and at that point it will be very easy to judge. Returning to the analysis of the labor market, there are other signs that puzzle me. Federal Reserve Bank of St. Louis Federal Reserve Bank of St. Louis Since the pandemic, both full-time and part-time jobs have achieved significant increases, however, since January 2023, full-time jobs have halted their run. They are even declining from the end of 2023. In other words, employers are beginning to prefer part-time rather than full-time hires. This could be due to less demand for their products/services, and therefore it is no longer necessary to have as many full-time employees. In addition, another interesting data point is that of continued claims. Federal Reserve Bank of St. Louis More and more people are struggling to find new employment, and while the current figure is not alarming, there has been a rather rapid deterioration since late April 2024. This is something that needs to be monitored, not least because as long as rates remain high, I see no reason why continued claims should improve. Overall, the labor market data are not positive, and for the first time in several years (with the exception of the pandemic) we can see the first cracks. In any case, I would like to emphasize that I do not think we are facing a new 2008, it would not make sense to make this kind of analogy. Every recession is different, although there are common features. The motivations behind the 2008 crisis are different from those that might trigger a recession in late 2024-early 2025. To some extent, one aspect that perhaps can connect them might be people’s inability to meet their loans on credit cards. Federal Reserve Bank of St. Louis Until 2021, delinquency rates were at historic lows, but since rates were raised, there has been a rather steep increase. While current levels are not too different from the historical average, what is worrying is that this upward trend has never stopped. In other aspects, such as the inability of households to pay their mortgages, we are on two totally different tracks. Federal Reserve Bank of St. Louis U.S. households have never shown a sign of weakness in recent years and delinquency rates have declined quarter by quarter. Finally, to conclude the topic on the impact of high interest rates on the economy, I must mention the GDP growth estimates for Q2 2024. Federal Reserve Bank of Atlanta Real GDP is expected to grow by 2% in Q2 2024, a positive figure but halved from just a few months ago. In a very short time frame, expectations have deteriorated radically, but we still cannot call it an economic contraction. Basically, the economy remains solid, but high interest rates are hurting the expectations for future growth, yet the S&P 500 is not discounting any of this. TradingView The index continues to record new all-time highs, driven mainly by the most influential tech companies active in artificial intelligence. As much as this pleases me (Meta is the top position in my portfolio), I believe that sooner or later, investors will have to do a reality check, since this upward trend cannot be sustainable. The market is just waiting for the first-rate cut to feed the bull market, which is quite controversial since a recession has always followed the pivot in the past decades. If we based on what has happened in the past, we should hope that it will never happen. @kurtsaltrichter X profile In any case, it should be made clear that it is not the first-rate cut that triggers a recession, but the wrong timing with which it occurs. Theoretically, rates should be cut gradually, but it almost always ends up with panic cutting, as happened both during the early 2000s and during the Great Financial Crisis. TradingView To date, the market is discounting only one cut of about 25 basis points by the end of 2024, too little in my view to curb the continued deterioration of the labor market. Moreover, with the S&P 500 making all-time highs every week, it is clear that much of the investor base is discounting a future scenario in which the Fed will succeed in fighting inflation without triggering a recession. As much as I might hope that this is the case, the track record of the past few decades tells an entirely different story. In other words, I think the market is not considering at all the option that something could go wrong, and that is what worries me. What has sustained the U.S. economy to date Since the Fed raised rates, the word recession was in many more articles/journals. High rates coupled with the end of QE looked as if it might deal the death blow to the S&P 500’s climb, but actually, it did not. Excluding a brief pessimistic interlude that ended in late 2022, and the flash crash of March 2020, investors have not experienced a real bear market since 2008. Yet, the conditions for it to happen were there. The reason the most anticipated recession of all time never happened is because expansionary fiscal policy was able to offset the Fed’s restrictive moves. Federal Reserve Bank of St. Louis Thus, even though the Fed Funds Rate has exceeded 5%, when the fiscal deficit/ GDP greatly exceeds the historical average, the economy is being held up artificially. In 2023, this figure was -6.19%, in 2022 -5.34%, in 2021 -11.76% and in 2020 -14.69%. I mean, I can understand that in 2020-2021, we were facing an unprecedented global pandemic, but the deficit in the next two years is still much higher than it was historically. The large fiscal stimulus has fueled a sharp rise in the stock market, regardless of the Fed’s actions. This is probably why rates have not yet been lowered, because the fiscal deficit is still too high. Something might change after the presidential election. What is worrying is that this kind of deficit is becoming the norm, which will lead to negative consequences in the long run. CBO’s Budget Projections Total deficit estimates do not seem to be improving in the next few years, quite the contrary. Even if the United States is the world’s leading power, it does not mean that it can borrow as much as it wants, because this process involves a gradual distrust of the quality of its debt. In particular, if there is no reversal of the trend, the cost of net interest will become a burden that will limit economic growth. Today, we are close to reaching the trillion mark in net interest, and according to estimates, it will be worse in the future. Its weight compared to GDP could reach 3.90% in 2034. In other words, the large deficit may have postponed the recession, but long-term economic growth will suffer. Of course, the rating agencies are aware of all this, which is why both Fitch and S&P no longer consider U.S. debt AAA. This does not mean that the United States is at risk of default, it simply needs to avoid running deficits as if we were in the middle of a world war. Once the deficit is contained, there will no longer be the driver that is offsetting the negative effects of restrictive monetary policy. Moreover, the deficit issue may also be of interest to investors concerned about the re-inversion of the yield curve. Let me explain further. Federal Reserve Bank of St. Louis We all know that yield curve inversion has predicted all past recessions, and the main trigger is its re-inversion. In any case, re-inversion does not always happen in the same way. In the first case, it can occur because T-bills are bought more than T-bonds, so it is called bull steepening. In the second case, the exact opposite can happen, that is, T-Bonds are sold more than T-Bills, so it is called bear steepening. The second case is the one we are most interested in at the moment, because short rates will probably remain high for a long time to come, while long-term rates may see an increase due to the problems addressed earlier regarding the huge fiscal deficit. To put it another way, many expect re-inversions at the time when rates will be cut several times (this is many quarters from now) but actually, it could happen before that time. Certainly, worse-than-expected inflation data could speed up this process, as T-bond yields would surge upward. The Budget and Economic Outlook: 2024 to 2034. EUR/USD exchange rate and AI bubble My bearish thesis on the second half of 2024 is mainly based on what has been discussed so far, but there are other factors to consider that I will dwell on a bit. The first is the EUR/USD exchange rate, as it is affected by the monetary policy of the Fed and ECB. The latter has already started to cut rates, while the Fed may not even cut rates in 2024, although this is an unlikely scenario. Regardless, it is evident that the ECB is more inclined than the Fed regarding a more expansionary monetary policy, and this could depreciate the euro against the dollar. While part of this assumption is already discounted in the current exchange rate, in my view there may be a case for a weaker euro than expected. ECB inflation dashboard Taking a look at the HICP in detail, we can see that there are some countries where there is a risk of deflation rather than high inflation. Italy’s HICP is only 0.80%, for Finland and Latvia 0.40% and 0% respectively. At the same time, others such as Belgium and Croatia are well above 4%, Portugal and Spain slightly below. There is a great diversity in Europe in terms of inflation rate, and keeping the main refinancing operations rate at 4.25% can be detrimental to countries with inflation below 1%. In short, I think there are conditions for the ECB to cut rates faster than expected in 2024, resulting in an appreciation of the dollar against the euro. If it does not, some countries may experience a severe recession. This is important for any U.S. company that sells in Europe, as imports will be hurt. Finally, one last aspect I would like to address is the issue of artificial intelligence. You have been hearing about the famous AI bubble for months now, so I will not dwell on it too much. In my opinion, it is pointless to make comparisons with the tech bubble of early 2000; we are in a totally different situation. The tech companies that are fueling the bubble today are giants that generate tens of billions of dollars in free cash flow every year, as well as having negative net debt: the companies in vogue in 2000 were not even generating profits. Bubble or no bubble, justified valuation or not, what is certain is that these giants cannot grow that much every single year and have a huge weight on the S&P 500. TradingView Historically, consumer staples (XLP) have never experienced such a divergence in returns compared to the tech sector (XLK). I do not doubt that today’s tech companies are even sounder than many consumer staples, but such a divergence is too marked not to expect a return to the mean. Simply put, I think it makes more sense at the moment to add to the portfolio those businesses that we consider boring rather than those that are recently in the spotlight. Conclusion Everyone was pleased with this huge bull run, but like every good thing, sooner or later, there is an end. No one can know when, but based on the data analyzed in this article, I would say that a crucial time will be the end of the year. The outcome of the presidential election will have a major impact on the issue of the fiscal deficit, and by that time the Sahm Indicator may have already crossed the 0.50 threshold. At the same time, the yield curve may also have re-inverted due to bear steepening. In my view, the deterioration of the labor market can only be stopped (if it is not already too late) if the Fed starts cutting rates as early as the next meeting; otherwise it risks getting the timing wrong, as it almost always did. My strong sell rating refers to a second half of the year far more disappointing than the first, whose difficulties could perpetuate into 2025. We will see what happens, I certainly will not sell everything in a panic even in the event of a 15-20% collapse from current levels. Having a long-term approach allows you to see recessions as an opportunity to be exploited and not as something negative. Continue reading →

BrianAJacksonChinese central bank gold bullion purchases lagged in June, contributing to flat prices for the month. Agnico Eagle’s Ontario, Canada mine may emerge as a promising prospect for the gold industry. Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits. Mixed News Drives Flat Prices in May After reaching a new all-time high in May, offsetting forces kept gold unchanged during the month of June. Gold traded as high as $2,376 per ounce on June 6. On June 7, gold closed at its monthly low of $2,294 following news that the Central Bank of China did not buy any gold bullion in May. Global central bank gold buying has been one of the main drivers of this year’s gold rally, with the Chinese central bank behind a large percentage of those purchases. The People’s Bank of China has been reporting bullion purchases since November 2022, 18 consecutive months of buying. The pause in buying likely raised concern among gold market participants that this important driver of gold demand could weaken. In contrast, gold investment demand has been in decline since April 2022, but in June, global holdings of gold bullion-backed exchange traded products finally registered inflows, albeit small, after 12 consecutive months of net outflows. Is Western investment demand, the main driver of gold rallies historically, staging a comeback? Gold also gathered some support from inflation readings (May CPI and PCE) that were interpreted by the market as increasing the likelihood of interest rate cuts by the U.S. Federal Reserve (Fed). At the end of June, the market was pricing in two 25 basis point cuts in 2024, compared to only one 25 basis point cut being priced in at the end of May. Lower real interest rates have historically been supportive of higher gold prices. Gold closed at $2,326.75 per ounce on June 28, essentially unchanged from its May 31 close of $2,327.33. Rally in Miners Stalls (Despite Positive Outlook) Gold stocks did not fare quite as well as the metal in June; NYSE Arca Gold Miners Index (GDMNTR)1 and the MVIS Global Juniors Gold Miners Index (MVGDXJTR)2 were down 3.71% and -6.33%, respectively. We are disappointed with this outcome. The lack of investor interest in gold as an asset class in recent years has frequently led to gold stocks underperforming the metal, not only in a declining gold price environment, which is justified but also in periods of flat or sideways gold price action. There were no sector-wide results, updates, or any major events that could explain the generally widespread underperformance across the sector. Quite the opposite, in fact. Many companies provided project updates during the month of June that, in aggregate, we viewed as largely positive. We took the time to catalogue the announcements, news, and updates released by the companies in our gold mining universe during the month of June. We logged approximately 45 company releases including drilling results; completion of debt and equity financing; completion of mergers and acquisitions; new economic studies, as well as maiden resource estimates, and permits and regulatory approvals for several projects; construction updates, including declaration of first gold pour, from several new mines approaching production; mine specific news and production guidance revisions; comprehensive reviews of companies and assets via investor days; and a new life of mine plan for one of the largest gold mines in the world. Our original assessment, deeming the news flow broadly positive, was supported by our classification of each release as having the potential of being positive/neutral or negative to the outlook of the company. We classified over 40 of the updates as potentially positive/neutral and only 4 as potentially negative. For reference, the negative news included short-term production guidance downgrades due to weather/geotechnical-related disruptions, and a serious incident at a single asset, junior company (not held by the Strategy) that halted its operations. Fundamentally, in our opinion, any signs of trouble or weakness were significantly outweighed by signs of strength and health of the sector. A Closer Look at Agnico Eagle’s Detour Lake We had the opportunity to visit Agnico Eagle’s (5.01% of Strategy net assets) Detour Lake mine in Ontario. The mine and its potential can certainly be highlighted as a bright spot for the gold industry. We toured the open pit, the processing plant, the tailings dam, the site where the underground exploration ramp portal will be constructed, the maintenance shop and the training center (fleet operating simulator). Overall, our impressions were positive. The mine, the plant and the team showed well. The site visit followed the release of a new life of mine plan and underground project for the asset. The company also hosted a two-hour technical session to review the details of the new plan and project ahead of the site visit. The 2024 plan updates the existing open pit mine production profile and incorporates updated costing. The company has also completed a preliminary economic assessment for a proposed underground mining and mill throughput optimization project, demonstrating the potential to increase the Detour Lake mine’s overall production to an average of approximately one million ounces of gold per year over a 14-year period, starting in 2030. Portfolio Manager Imaru Casanova visiting Agnico Eagle’s (AEM, AEM:CA) Detour Lake mine in Ontario. Interested in digital assets? Receive the latest updates Annual production is expected to increase to approximately one million ounces per year from 2030 to 2043. This is an increase of approximately 43% or 300,000 ounces of gold annually, when compared to average annual production from 2024 to 2029. From 2044 until 2054, the mine is planned to process stockpile material, producing an average of about 300 thousand ounces of gold per year. Additional exploration has the potential to add ounces to the mine plan in future years and extend the life of the mine beyond 2054. With costs declining as production increases over the next twenty years, the cash flow generation of Detour Lake expands significantly (see chart below). With a pathway to one million ounces, Detour Lake has the potential to move from being one of the 10 largest gold mines in the world to being one of the top 5 gold mines in the world, in one of the most attractive mining jurisdictions. There is a lot for Agnico Eagle investors to be excited about, providing a great opportunity for Agnico to demonstrate why they are the highest quality gold mining company in the world, and solidify the case behind its historical valuation premium relative to its peers. Agnico Eagle’s “Pathway to One Million Ounce Producer” 1 Higher Cash Cost in stockpile reclaim period reflects drawdown of long-term low-grade stockpiles, lower head grade, and re-handling costs. Open Pit feed offset by Underground to Stockpile Reclaim period is 52Mt at 0.5g/t. 2 Free cash flow ((FCF)) represents the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets, and is non-GAAP measure. Source: Agnico Eagle. Data as of June 2024. Free cash flow ((FCF)) represents the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets. Important Disclosures All company, sector, and sub-industry weightings as of June 30, 2024, unless otherwise noted. Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this communication. This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Please note that the information herein represents the opinion of the author, but not necessarily those of VanEck, and this opinion may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. 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Investors should seek such professional advice for their particular situation and jurisdiction. 1 NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold.2 MVIS Global Junior Gold Miners Index (MVGDXJTR) is a rules-based, modified market capitalization-weighted, float-adjusted index comprised of a global universe of publicly traded small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver. Personal consumption expenditures (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. 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Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Gold investments are subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. Gold investments are subject to risks associated with investments in U.S. and non-U.S. issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks. All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance. ©&bsp;Van Eck Associates Corporation. Original Post Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →

WASHINGTON (Reuters) – U.S. producer prices increased moderately in June, further confirmation that inflation had resumed its downward trend and strengthening the case for a September interest rate cut.The producer price index for final demand rose 0.2% last month after being unchanged in May, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI nudging up 0.1%.In the 12 months through June, the PPI increased 2.6% after advancing 2.4% in May.The government reported on Thursday that consumer prices fell for the first time in four years in June amid cheaper gasoline and a broad deceleration in the costs of goods and services, including rents.The tame inflation data followed news last week of a rise in the unemployment rate to a 2-1/2 year high of 4.1%.With the Federal Reserve now wary of labor market weakness, economists and financial markets are increasingly betting on a rate cut in September, with another reduction in borrowing costs expected in December.Fed Chair Jerome Powell acknowledged the improving inflation environment during his testimony before lawmakers this week, but also highlighted the risks to the labor market saying “we have seen considerable softening.”The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. It has hiked its policy rate by 525 basis points since 2022.(Reporting By Lucia Mutikani; Editing by Andrea Ricci) Continue reading →

(Reuters) – Futures tied to the S&P 500 and the Nasdaq 100 indexes paused near record levels on Friday ahead of results from JPMorgan, Citigroup and Wells Fargo that will throw second-quarter earnings season into high gear.JPMorgan Chase, the largest U.S. lender, is expected to report a decline in quarterly profit, with analysts expecting large lenders to set aside more money to cover deteriorating loans.Shares of both JPMorgan and Citigroup were marginally down ahead of results.As the S&P 500 and Nasdaq scale new peaks, investors are hoping for strong profit growth from companies beyond the heavyweight tech names such as Nvidia so that the U.S. stocks rally can broaden out.A rotation out of high-flying large cap stocks in favor of small-cap shares knocked back the tech-laden Nasdaq by nearly 2% on Thursday after a surprise fall in U.S. consumer prices solidified bets of a September interest rate cut.Traders now see an 86% chance of a rate cut in September, up from 72% a week ago, according to CME Group’s FedWatch Tool.For further evidence of cooling inflation, investors will look to producer prices data for June and the University of Michigan’s consumer survey data later in the day.At 04:46 a.m., Nasdaq 100 E-minis fell 9.25 points, or 0.05%, and S&P 500 E-minis rose 4.75 points, or 0.08%. The Dow E-minis gained 39 points, or 0.1%.Tesla dipped 1.4% as UBS downgraded the electric vehicle maker to “sell”.U.S. regional lender Bank of New York Mellon and industrial supplies maker Fastenal are also scheduled to report.(Reporting by Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty) Continue reading →

A closely-watched report on US inflation showed consumer price increases cooled further during the month of June, according to the latest data from the Bureau of Labor Statistics released Thursday morning.The Consumer Price Index (CPI) declined 0.1% over the previous month and increased just 3.0% over the prior year in June — a deceleration from May’s flat month-over-month increase and 3.3% annual gain in prices. Both measures beat economist expectations of a 0.1% monthly increase and a 3.1% annual gain.Notably, this is the first time since May 2020 that monthly headline CPI came in below 0%. It’s also the slowest annual gain in prices since March 2021.On a “core” basis, which strips out the more volatile costs of food and gas, prices in June climbed 0.1% over the prior month and 3.3% over last year — cooler than May’s data. Economists had expected a 0.2% monthly uptick in core prices and a 3.4% year-over-year increase.It was the smallest month over month increase in core prices since August 2021.Markets jumped on the heels of the report, with the 10-year Treasury yield (^TNX) falling about 9 basis points to trade around 4.2%.Inflation has remained stubbornly above the Federal Reserve’s 2% target on an annual basis. But recent economic data has helped fuel a narrative that the central bank should cut rates sooner than later.Immediately following Thursday’s encouraging inflation data, markets were pricing in a roughly 87% chance the Federal Reserve begins to cut rates at its September meeting, up from 75% a day prior, according to data from the CME Group.The data adds onto other rate cut signals across the labor market and economy.On Friday, the Bureau of Labor Statistics showed the labor market added 206,000 nonfarm payroll jobs last month, ahead of the 190,000-plus expected by economists. However, the unemployment rate unexpectedly rose to 4.1%, up from 4% in the month prior. It was the highest reading in almost three years.Notably, the Fed’s preferred inflation gauge, the so-called core PCE price index, showed inflation eased in May. The year-over-year change in core PCE came in at 2.6% over the prior year in May, in line with estimates and the slowest annual gain in more than three years.FILE – Federal Reserve Board Chair Jerome Powell speaks at a news conference at the Federal Reserve in Washington, June 12, 2024. Powell testifies to the Senate Banking Committee on Tuesday, July 9, 2024. (AP Photo/Susan Walsh, File) (ASSOCIATED PRESS)Shelter prices cool, energy index fallsNotable call-outs from the inflation print include the shelter index, which rose 5.2% on an unadjusted, annual basis, a slowdown from May. The index rose 0.2% month over month.Sticky shelter inflation has largely been blamed for higher core inflation readings, according to economists, but June’s print showed more signs of cooling.The index for rent and owners’ equivalent rent (OER) each rose 0.3% on a monthly basis, slightly cooler than May’s rise and the smallest increases in these indexes since August 2021. Owners’ equivalent rent is the hypothetical rent a homeowner would pay for the same property.Meanwhile, lodging away from home decreased 2% percent in June, after falling 0.1% in May.Energy prices also fell again in June, driven by a significant drop in gas prices. The index declined another 2% over the prior month. On a yearly basis, the index was up 1%.Gas prices fell 3.8% from May to June after falling 3.6% the previous month.The food index increased 2.2% in June over the last year, with food prices rising 0.2% from May to June — proving to be a sticky category for inflation. The index for food at home rose 0.1% month over month while food away from home increased another 0.4%.Other indexes that increased in June included motor vehicle insurance, household furnishings and operations, medical care, and personal care.The indexes for airline fares, used cars and trucks, and communication were among those that decreased over the month, according to the BLS.Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.Click here for the latest stock market news and in-depth analysis, including events that move stocksRead the latest financial and business news from Yahoo Finance Continue reading →

Inflation has remained stubbornly above the Federal Reserve’s 2% target on an annual basis. But recent economic data has helped fuel a narrative that the central bank should cut rates sooner than later.Immediately following Thursday’s encouraging inflation data, which showed headline inflation falling month over month for the first time since May 2020, markets were pricing in a roughly 89% chance the Federal Reserve begins to cut rates at its September meeting, up from 75% a day prior, according to data from the CME Group.The data is the latest to build the case for Fed rate cuts.On Friday, the Bureau of Labor Statistics showed the labor market added 206,000 nonfarm payroll jobs last month, ahead of the 190,000-plus expected by economists. However, the unemployment rate unexpectedly rose to 4.1%, up from 4% in the month prior. It was the highest reading in almost three years.Notably, the Fed’s preferred inflation gauge, the so-called core PCE price index, showed inflation eased in May. The year-over-year change in core PCE came in at 2.6% over the prior year in May, in line with estimates and the slowest annual gain in more than three years.”The decline in the consumer price index between May and June won’t stick but it strengthens the case for the Federal Reserve to begin cutting interest rates in September, particularly as the labor market has softened,” wrote Oxford Economics chief US Economist Ryan Sweet.Still, the economist warned, “We caution about reading too much into the decline in the CPI in June and don’t believe that this is the new trend.”Seema Shah, chief global stratgiest at Principal Asset Management, agreed the latest numbers “put us firmly on the path for a September Fed rate cut” but that “a July policy cut is still off the table.””Not only would it spark questions of ‘what do they know about the economy that we don’t know?’ but the Fed still needs to gather additional evidence of waning price pressures to be absolutely certain of the inflation path.”Read more on the latest CPI print here. Continue reading →

Just_Super/iStock via Getty ImagesPreamble These days, gold bugs are grinning merrily and will tell anyone with ears to hear that the metal is up around 20% over the last 12 months (c$1,950 in July 2023 v Current price $2,370); not bad. What would surprise many of those grinning bugs (which I am one) is that copper has also had a similar increase. Back in July 2023, the spot price of copper per pound was $3.77 and now it is $4.58, which also represents an increase of approximately 20%. Of course, this increase in copper prices has had a positive impact on the financials of Taseko Mines Limited (NYSE:TGB). And the rise in copper prices is not the only reason that makes Taseko such an attractive investment. In my humble opinion, there are three data points to consider when contemplating an investment into a listed mining company; The jurisdiction of the operations, the financials and the quality of the company’s reserves. However, in the case of Taseko, there is also an underappreciated asset to consider; “Taseko’s 100%-owned Aley Project in northeast British Columbia is one of largest undeveloped niobium deposit in the world.” I suspect that few investors have heard of niobium compared to those who are familiar with the term “rare earths.” And this cannot be because the element is about as useful as a chocolate teapot, and sparsely used, far from it in fact. According to some reports; “The Niobium Market size is estimated at 106.85 kilotons in 2024, and is expected to reach 171.49 kilotons by 2029, growing at a CAGR of 9.92% during the forecast period (2024-2029).” This is not the first time I’ve covered niobium as I highlighted the importance of the metal in an article on NioCorp titled; “Time To Short This Overvalued Stock.” The reasons for my sell recommendation was due to the over valuation of the stock rather than the assets it controls. As regards jurisdiction, I’ve written quite a few articles highlighting the increasing risks of investing in miners which have operations outside of the collective West. Most recently, I’ve covered the perils of locating operations in Bolivia, Columbia and Africa. In my article covering Barrick Gold, I explored the Pandora’s box of potential hazards associated with developing new deposits in Mexico. Needless to say, Taseko’s operations are all in North America, which is considered a “safe” jurisdiction. Overview Of Operations Taseko Mines holds significant copper deposits across North America, both in active production and in development stages. Gibraltar Mine: Described as the second-largest open-pit copper mine in Canada, Gibraltar is Taseko’s flagship operation and a major contributor to the company’s revenue. Located in British Columbia, it has been in operation since 1972 and is expected to continue producing until at least 2038. Recent figures show a 26% increase in copper production in 2023, reaching 123 million pounds. Taseko holds a 100% interest in the mine after acquiring the remaining 12.5% from partners in March 2024. This mine also produces a significant amount of molybdenum, which was 247 thousand pounds in the last quarter. Given that the current price per pound is circa $20.00, the company gets around $5 million of extra revenue. Florence Copper Project: This fully permitted in-situ copper recovery project in Arizona represents Taseko’s strategic growth initiative. It is expected to begin commercial production in Q4 2025, promising to be one of the most efficient copper producers globally due to its low energy, water, and greenhouse gas intensity. According to the company; “When fully operational, the facility will have a production capacity of 85 million pounds of LME Grade A copper metal each year and a mine life of 22 years.” Yellowhead Copper Project: This early-stage exploration project located in British Columbia demonstrates Taseko’s commitment to resource expansion. While not yet in production, it holds potential for future copper extraction and contributes to the company’s overall resource portfolio. The mine has 458 million metric tonnes of reserves together with the added bonus of extractable gold and silver. This deposit is understood to have a mine life of 25 years. Despite the various hurdles that need to addressed, the company is making progress in developing the site; “The Company is preparing to advance into the environmental assessment process and is undertaking some additional engineering work in conjunction with ongoing engagement with local communities including First Nations. The Company is also collecting baseline data and modeling, which will be used to support the environmental assessment and permitting of the project.” New Prosperity: Whilst the company has defined a large porphyry gold-copper deposit at the New Prosperity site, hurdles remain due to the fact that it is located in an area of cultural significance for the local Indian population. However, despite the sensitive nature of the location, discussions with interested parties appears to be progressing well. The company has suggested that an agreement is in the offing; “In March 2024, Tŝilhqot’in and Taseko formally reinstated the standstill agreement for a final term, with the goal of finalizing a resolution before the end of this year.” Aley Project: The Aley Project entered the Environmental Assessment Process back in 2014 and there are indications that the company expects very few hurdles to their plans going forward. During their last report, the company stated that the Aley Project is making progress on environmental monitoring and product marketing. The company further confirmed that there is an ongoing pilot test, which is gathering data to help design commercial facilities and generate samples of niobium and its oxides for marketing. Clearly, this ongoing investment in pilots suggests that the project is moving slowly but surely towards development. Financials Given the more than nice rise in the price of copper, one can well believe that Taseko’s financials looked pretty good for the last quarter. Positives Revenues: From the graphic below, it can be seen that there was a huge up move in both revenues and cash flow, 27.21% and 112.77% respectively. Graphic showing revenues and cash flow (Obtained from Taseko quarterly report) Cost Savings: The acquisition of additional concentrate offtake rights, combined with record low smelter treatment costs, is expected to result in cost savings of $10 million in the second half of 2024. Progress at Florence Copper Project: Construction and wellfield development activities at the Florence Copper project are progressing well, with ten new production wells drilled. This indicates the project is on track for commercial operation. Successful Refinancing: The refinancing of senior secured notes, pushing the maturity to 2030 and upsizing the offering, strengthens Taseko’s financial position and provides additional cash proceeds and flexibility. Negatives There were a few concerns in the report, some of which could be described as one-offs, while others have the potential to impact profitability in the future. Lower Net Income: Taseko Mines Limited’s net income decrease from $33.8 million to $18.9 million, which was primarily attributed to an unrealized foreign exchange loss of $13.7 million, a $5.1 million increase in accretion and unrealized fair value adjustments for Cariboo and Florence royalty obligations, and higher finance expenses due to increased net borrowings, including Florence project financings. Impact of Concentrator #2 Downtime: Copper production and mill throughput were negatively affected by planned maintenance downtime in January 2024. Lower Copper Recoveries: Copper recoveries in the first quarter were lower than recent quarters due to lower head grades and increased milling of partially oxidized material. Environmental Liabilities: The company has significant provisions for environmental rehabilitation, primarily for the Gibraltar and Florence Copper projects, which could represent a long-term financial liability. The Future For Taseko Mines If we consider the negatives of the quarterly report given above, in my opinion, net income is more than likely to recover. One hopes that foreign exchange losses will be less going forward, and funding is now in place for the Florence project. The company’s presentation paints a rosy picture of both the demand for copper and its continued upward trajectory in the price of this essential metal. Graphic showing copper demand v supply (Obtained from Taseko presentation) As early as 2025, the company will have Florence adding to revenues and profits. Not forgetting the additional substantial assets of Yellowhead, New Prosperity and Aley, all of which appear to be on track for development. Valuation Considering the growth in revenues and cash flow, a Price to Earnings ratio of 16.36 puts the company in bargain basement territory. And compared to peers, the stock could well be thought of as good value using this metric. For comparison, Freeport-McMoRan (FCX) has a P/E of 29.92 and Southern Copper’s (SCCO) P/E is 27.72. If we check Seeking Alpha’s Factor Grades and match it with the company’s P/E, again investors can appreciate that the stock looks attractive. Certainly, the profitability of the company is likely to improve for the reasons outlined in this piece. Value of stock (Seeking Alpha) There are other ratios that suggest that Taseko is pretty good value relative to its peers, as the table below illustrates. Ratio Freeport-McMoRan Southern Copper Taseko Mines Return on Equity 10.00% 29.97% 16.55% Net Income Margin 6.97% 24.20% 12.19% Click to enlarge As you might expect for a relative newcomer, the differences lie in the level of indebtedness of the three companies. Ratio Freeport-McMoRan Southern Copper Taseko Mines Debt-to-Equity Ratio 33.54% 92.20% 140.46% Current Ratio 2.35 3.31 1.97 Click to enlarge Summary Taseko Mines has a diverse portfolio of copper and niobium projects. The company’s main producing asset, the Gibraltar Mine, is the second-largest open-pit copper mine in Canada. Taseko is also developing other copper projects that are expected to be online soon. The company’s financials have been positively impacted by rising copper prices, but it has had lower net income due to foreign exchange losses and increased finance expenses, which are not expected to be repeated for the next quarter. Finally, the company’s stock appears undervalued compared to peers based on various financial metrics. I do believe that I have talked myself into buying more of the stock. Continue reading →

The stocks of big banks are outperforming the rest of the S&P 500 this year, and that investor confidence is about to be put to the test.JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all report their second-quarter results this Friday, kicking off another earnings season for the US banking industry. Bank of America (BAC) reports the following Tuesday.The stocks of these banks — the four largest in the US — have each climbed more than 20% since January, outperforming the S&P 500 (GSPC). That performance is also roughly double the gains of an index that tracks the wider industry, the KBW Nasdaq Bank Index (^BKX).Big bank investors are optimistic about the ability of the biggest financial institutions to thrive as the Federal Reserve slowly lowers interest rates, as regulators water down a set of new bank capital rules and as Wall Street dealmaking stages a comeback.The Fed’s policy path — which currently is expected to be 1 or 2 cuts in 2024 followed by more in 2025 — “really bodes well” for the group of big banks over the next year, said RBC Capital Markets bank analyst Gerard Cassidy.But the actual results from the big banks during the second quarter are not expected to stun, despite a headline number from JPMorgan that will likely blow away all rivals.JPMorgan is expected to report a sizable net profit due partly to a pre-tax multi-billion-dollar accounting boost from an exchange of shares in credit card giant Visa (V), but analysts say that won’t grab a lot of attention from market watchers.”I think the market will pretty quickly pull that out as sort of an unusual or one time event,” said Scott Siefers, a large bank analyst with Piper Sandler.Where there will likely be more focus is what JPMorgan has to say about a key measure of lending profit known as net interest income.Jamie Dimon, CEO of JPMorgan Chase. (AP Photo/Alex Brandon) (ASSOCIATED PRESS)That profit — which measures the difference between what banks pay out in deposits and take in from their loans — is expected to be down from the sequential quarter. Same goes for the other three big banks.Even the biggest banks have been struggling with this measure as deposit costs stay elevated, loan demand remains weak and the Fed takes longer than expected to bring interest rates back down.”Investors are hoping to see that net interest income for the second quarter will, ideally, be the trough for big banks this year,” Siefers added.The results from the big banks are also likely to reveal the cautionary stance these lenders are taking on credit as higher rates pose more challenges for their borrowers.New provisions set aside to cover future loan losses at the big four banks are expected to rise 26% from last quarter. By comparison, the pace of loan loss provisions across all commercial banks began to stabilize earlier this year, rising 0.30% over the quarter, according to Federal Reserve data.Where results should be considerably brighter are within the Wall Street operations of these big banks as dealmaking stages a comeback from poor performances in 2023 and 2022.The big four banks along with Wall Street specialists Goldman Sachs (GS) and Morgan Stanley (MS) are all expected to show sizable jumps — an average of more than 30% — in investment banking fees compared with a year ago. Goldman and Morgan Stanley report their earnings on Monday and Tuesday.Goldman Sachs CEO David Solomon. REUTERS/Mark Stockwell (REUTERS / Reuters)The big event that all banks are waiting for is when the Fed finally decides to start lowering rates from a 23-year high. The current market bet is that it could happen as early as September.For smaller regional banks, the sooner rate cuts come the better. They are more reliant on lending income and thus have been hit harder by a drop in net interest income across the industry. They are also more exposed to the weaknesses in the commercial real estate market.Investors have pushed down the stocks of various regional and small banks this year as new problems or concerns surface.It happened last week after Dallas bank First Foundation (FFWM) announced a $228 million infusion from new investors to help it reduce its concentration of multifamily apartment loans.It also happened in June following an analyst report calling out debt held by Bank OZK (OZK), and in May when a short seller targeted Axos Financial (AX) over the quality of its property loans.Commercial real estate worries first ignited at the start of this year when New York Community Bancorp (NYCB) set aside a surprising amount of money in case of loan losses in part to rent-regulated apartment complexes in the New York City area.NYCB’s stock plummeted but it was able to calm the market with an emergency equity infusion from a group that included former Treasury Secretary Steven Mnuchin.Former Treasury Secretary Steven Mnuchin. Alex Wong/Pool via REUTERS (REUTERS / Reuters)All of this turmoil has “subdued investor expectations” for regional banks, Bank of America analyst Ebrahim Poonawala said.Investors will be on the watch for more vulnerabilities as many mid-sized institutions report in the coming weeks.For these lenders “the bull case is that their actual credit losses will be significantly lower than what is being priced into their stocks,” Chris McGratty, a regional bank analyst with KBW told Yahoo Finance.But the institutions that rely heavily on commercial real estate lending aren’t likely to be given the benefit of doubt until the credit cycle has come full circle, McGratty added.An index tracking regional bank stock prices (KRE) has fallen more than 7% since the beginning of the year.David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.Click here for in-depth analysis of the latest stock market news and events moving stock prices.Read the latest financial and business news from Yahoo Finance Continue reading →

ayala_studioEditor’s note: Originally published at tsi-blog.com on May 31, 2024 [This blog post is an excerpt from a recent commentary at www.speculative-investor.com] With regard to the topics that we write about regularly, over the past year, we have been most wrong about the stock market and the US economy. It’s true that the average stock has not fared particularly well, but we have been consistently surprised by the strength of the S&P500 Index and other large-cap-focussed indices for about 18 months now. Also, we thought that the US economy would be in recession by the end of last year and would be very weak during the first three quarters of this year, but while the US economy certainly slowed during the first half of this year, it clearly has not yet entered recession territory. These mistakes are linked, in that major bearish trends in the stock market tend to encompass recessions. Today we’ll discuss, in broad-brush terms, a likely consequence of both the stock market and the US economy performing much better than we expected up until now. In our opinion, it’s not the case that the US economy has avoided a recession, but rather that the current cycle has been elongated. We use the commodity/gold ratio (the Spot Commodity Index (GNX) divided by the US$ gold price) to define booms and busts, with booms being multi-year periods during which the ratio trends upward and busts being multi-year periods during which the ratio trends downward. The vertical lines drawn on the following GNX/gold chart mark the trend changes (shifts from boom to bust or vice versa) that have occurred since 2000. It’s not essential that the bust phase of the cycle contains a recession, but it’s rare for a bust to end until a recession has occurred. Usually, the sequence is: 1) The commodity/gold ratio begins trending downward, marking the start of the economic bust period. 2) The economic weakness eventually becomes sufficiently pervasive and severe to qualify as a recession. 3) Near the end of the recession, the commodity/gold ratio reverses upward, thus signalling the start of a boom. Note that it is not unusual for the stock market to continue trending upward after the bust begins, but the stock market always peaks prior to a recession getting underway. For example, an economic bust began in October 2018, but the SPX continued to make new highs until early 2020. In the current cycle, the commodity/gold ratio has been trending downward since the first half of 2022, meaning that the US economy has been in the bust phase of the cycle for a little more than two years without entering recession. While this is much longer than average, it is comparable to what happened during 2005-2009. During 2005-2009, a bust began (the commodity/gold ratio commenced a multi-year downward trend) in Q4-2005, but a recession did not begin, and the stock market did not peak until Q4-2007. Evidence that the US economy is slowing is becoming clearer almost by the week, but a recession probably won’t start any sooner than September of this year and could be postponed, with help from the government and the Fed, until late this year or even early next year. This means that the coming recession probably won’t end any sooner than the second half of 2025 and could even extend into 2026, which has implications for all the financial markets. It’s the implication for the gold market that we are concerned with today. The US$ gold price tends to peak on a multi-year basis after it has fully discounted the economic, fiscal and monetary consequences of a recession. This usually happens in the latter stages of a recession, but before the recession has ended. Therefore, whereas a year ago, we were thinking along the lines of the cyclical gold bull market climaxing in the second half of 2024, the current economic cycle’s elongation and the postponing of a recession probably mean that gold’s cyclical bull market will continue until at least the second half of next year. Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →