(Kitco, Thurs. Sep. 28th, 2023 )
MARKET FOCUS
– Gold holding at $1900 while the U.S. Fed raises interest rates faster than at any time in history is a bullish sign for the metal. Gold has no interest rate return yet actually hit an all time high of $2,100 in March 2022 when the Fed announced the tightening of their policy will begin. This means the public isn’t buying the Fed and its actions as gas, grocery & housing prices continue to become untenable price increases to the U. S. consumer.
Result? Gold will go higher upon any Fed pause or pivot to lower interest rates and that is coming .
— Equities today: Asian and European stocks were mixed overnight. U.S. Dow opened around 20 points lower but then turned higher. In Asia, Japan -1.5%. Hong Kong -1.4%. China +0.1%. India -0.9%. In Europe, at midday, London -0.4%. Paris +0.2%. Frankfurt flat.
U.S. equities yesterday: U.S. equities finished mixed, with the Dow weaker and modest gains for the Nasdaq and the S&P 500 was nearly unchanged. The Dow fell 68.61 points, 0.20%, at 33,550.27. The Nasdaq was up 29.24 points, 0.22%, at 13,092.85. The S&P 500 edged up 0.98 point, 0.02%, at 4,274.51.
— Oil rose to a one-year high on Wednesday.WTI crude futures climbed $3.29, or 3.6%, to settle at $93.68/bbl. The session high was over $94. Brent crude futures closed up $2.59, 2.8%, to close at $96.55/bbl. Brent traded above $97/bbl during the trading session to the highest settlement in 2023, after a steep drop in U.S. crude stocks compounded worries of tight global supplies — stockpiles tumbled below 22 million barrels last week to the lowest since July 2022, according to government data on Wednesday. Inventory levels in Cushing have been cut in half since June, and are at a level that’s close to the operational minimum. If tank storage falls below 20 million barrels, the oil can become sludgy and difficult to remove, potentially adding to upward pressure on prices and renewing fears of inflation. Meanwhile, the premium for near-term barrels of WTI traded at about $2, the highest level since July 2022, a sign that the futures market is reflecting physical tightness.
Meanwhile, Russian oil is trading closer to $100 a barrel than the Group-of-Seven price cap of $60. Crude from the country’s western ports has rallied along with headline futures in recent days, Argus Media Ltd. data show. Price increases are more than making up for the reduction in sales volume for Russia and Saudi Arabia, according to calculations by consulting firm Energy Aspects.
Of note: Saudi Aramco agreed to buy a stake in MidOcean Energy for $500 million, its first investment in liquefied natural gas as the company seeks to diversify beyond its core oil business. It said separately on Wednesday that it will start talks to take a 10% stake in China’s Shenghong Petrochemical.
The U.S.’ national Strategic Petroleum Reserve has reached its lowest levels in decades, even as tensions escalate with China. The Biden administration has significantly reduced oil stocks in the reserve, cutting them by nearly half as part of an effort to curb soaring domestic gasoline prices. Officials from the U.S. gov’t have clarified that last year’s high fuel prices were primarily due to supply shocks caused by Russia’s invasion of Ukraine, rather than President Biden’s push for clean energy and reduced reliance on fossil fuels. In contrast, China has been aggressively expanding its oil reserves, stockpiling substantial quantities of low-cost crude oil from Russia.
— Quotes of note:
-
- Crude oil nears $100 a barrel. “It really all boils down to concerns over supply tightness continuing and even exacerbating going into the northern hemisphere winter months,” said Vandana Hari, founder of consultancy Vanda Insights.
- Oil is not just for transportation. Global oil demand growth may start to slow down in the future, but consumption rates will still stay strong, says UBS in a research note. “Most of us associate oil with transportation. But oil is more than that. Many everyday products are derived from crude oil, and we remain highly dependent on it, covering nearly one-third of our energy thirst,” UBS says. “OECD countries and the Middle East have the highest daily consumption of oil per person. We expect oil demand to continue increasing over the coming years, but at a slower pace than before. Emerging Asia and the petrochemical sector should remain the demand drivers, in our view.
- Market perspectives:
— Outside markets: The U.S. dollar index was weaker, with the euro and British pound both firmer against the greenback. The yield on the 10-year U.S. Treasury note was higher, trading around 4.63%, with a higher tone in global government bond yields. Crude oil futures shifted lower. U.S. crude was around $96.05 per barrel and Brent around $93.95 per barrel. Gold and silver were firmer ahead of U.S. trading, with gold around $1,893 per troy ounce and silver around $22.80 per troy ounce.
— U.S. 10-Year Treasury yield hits 4.65% as concerns rise over prolonged elevated interest rates, reaching levels not seen since July 2007. This increase comes amid growing concerns that interest rates are poised to remain elevated for an extended period. Despite expectations of a sharper increase, initial jobless claims have held steady, staying close to their over-seven-month highs. This trend reinforces recent evidence suggesting that the U.S. labor market remains tight.
Posted by :
Jack Dempsey , President
401 Gold Consultants LLC
jdemp2003@gmail.com