Comment of the Day
Video commentary for January 10th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics covered include: stocks wobble on slightly higher yields, gold and oil steady,
This section continues in the Subscriber's Area.
Russia to Try to Limit Oil Discounts With Market Principles
This article from Bloomberg may be of interest to subscribers. Here is a section:
The Urals grade, by far the country’s top export stream, was $37.80 a barrel at the Baltic Sea port of Primorsk on Friday, according to data provided by Argus Media. That was less than half where Brent futures settled on the same day.
The ballooning discount follows the European ban on almost all seaborne crude imports from Russia that imposed from Dec. 5. Simultaneously, the European Union joined with the G-7 industrialized nations in imposing a cap on the price of Russian supply. Anyone wishing access to Western services — in particular industry standard insurance, but also an array of other things — could only do so if they paid $60 of less.
The western price cap is “illegal” and will affect stability of the global energy supply, requiring “significant cooperative effort by responsible countries to remedy,” the ministry said, reiterating earlier statements by President Vladimir Putin and top Russian energy officials.
Russia is prepared to cut its crude production by 500,000-700,000 barrels a day in response to the threshold, Deputy Prime Minister Alexander Novak said last month.
Eoin Treacy's view - The energy markets remain in a state of flux. Europe wants cheaper energy but the USA is now an exporter with a government willing to buy at around $70. Meanwhile the perennial issue of sustaining sufficiently high prices to balance bloated budgets among OPEC members has not gone away. Russia has a challenge in reducing supply because many of its wells are in permafrost. Once shut down, these wells cannot easily be turned back on.
War & Peace
Thanks to a subscriber for this report by Zoltan Pozsar for Credit Suisse. Here is a section:
Eoin Treacy's view - There are big themes at play as great power politics makes a come back. The one thing which is certain is none of what is in front of us is cheap. Re-arming, Reshoring, re-stocking and re-wiring all imply higher costs, holding more inventory and less efficient supply chains. That’s a recipe for inflation to remain persistent.
Who is the Mystery Gold Buyer?
Thanks to a subscriber for this report from TD Ameritrade (NASDAQ:AMTD). Here is a section:
The rally in gold prices over the past two months has defied analyst expectations for continued weakness, including TD Securities'. Yet, we see little evidence that the rise in gold prices is associated with a changing macro narrative. Given the bearish macro backdrop, speculative interest in gold has remained exceptionally lackluster as the world barrels towards a recession, especially after accounting for recent shifts in CTA positioning. Still, gold prices have continued to firm, retracing more than 50% of their significant drawdown from 2022 highs. • This begs the question: who in the world is this mystery buyer driving prices higher? Armed with a flows-based approach, we present strong evidence that behemoth Chinese and official sector purchases may have single-handedly catalyzed a $150/oz mispricing in gold markets. What is less clear is what has driven these massive purchases. • We investigate whether a sanctions-evasion war chest associated a potential invasion of Taiwan, China's reserve currency ambitions, massive pent-up demand associated with the Chinese reopening, or Chinese New Year demand could be consistent with this extreme buying activity. Chinese demand appears unrelenting for the time being, but barring a grandiose geopolitical regime change, we find that it would likely subside towards normal levels in coming months. This would leave gold prices vulnerable to a steep consolidation lower, given gold's lack of alternative buyers and its current mispricing relative to its recent historical relationship with real rates. We turn to our tracking of positioning for the top ten gold traders in China to scour for nascent signs of peaking Chinese demand, which could present a tactical signal for a noteworthy repricing lower.
Eoin Treacy's view - Since China is the world’s largest gold producer it begs the question why they would be buying on the international market in size. There is the potential that they wish to lend credence to the Renminbi as a reserve asset in order to sway Middle Eastern governments to accept it in payment for oil.
Eoin's personal portfolio: cash rolled, investment positions opened, trading positions opened and short profits taken January 6th 2023
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
Travel Schedule - Future Minerals Forum 2023
I have accepted the Saudi Arabian government's invitiation to attend the Future Minerals Forum again this year. I am due to fly out Monday evening and will arrive in Riyadh on Tuesday evening with a stop in Frankfurt along the way. I expect to be back in Dallas Friday afternoon. I expect to keep up with the publishing schedule but the time I post articles will be affected by travel.
At present, I have meetings arranged with the CEOs of Polymetal, Alien Metals, Perseus Mining, Pyx Resources, Aurora Minerals Group, Silver X Mining, Goviex Uranium, Kuya Silver, Esper Satellite Imagery, Saudi Gold Refinery with more to come. If subscribers have any questions they would like me to ask just let me know.