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BMO Issues Gold Market Primer Ahead Of Gold Forum Americas

This weekend started off the Gold Forum Americas, where BMO has many of their analysts and is keeping a close
The post BMO Issues Gold Market Primer Ahead…

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This article was originally published by The Deep Dive

This weekend started off the Gold Forum Americas, where BMO has many of their analysts and is keeping a close eye on. For this, they released a gold overview note and provide some insight into the supply-demand situation and areas they believe will be the talking points at the forum.

Further, they provided an excellent matrix identifying the current gold supply-demand balance that exists today, and where they expect it to go in the future.

They start the note off by saying, “There is no doubt we are in an interesting period for gold, as the Federal Reserve edges toward tapering and eventual rate rises, while producers face the relatively rare challenge of deciding what to do with the strong cash flow currently being generated.”

The first point being made in this note is that gold is still at a very good price, even after falling 6.5% year-to-date to ~$1,800. Especially since the latest Jackson Hole speech and August’s nonfarm payroll miss, which brought back the idea that the Federal Reserve still has much to improve the economy before they can start tapering.

BMO believes there will be some slowing of asset purchases by the Federal Reserve heading into year-end. They write, “with negative real yields, high geopolitical tensions and potential for wider market volatility, we see the potential for a sharp correction in gold (a la 2013) as relatively low.”

The second larger point BMO believes will be of discussion at the Gold Forums this weekend, is what are/will the miners do with the immense amount of cash they are now raking in due to Gold extending over $1,400 for 790 days, the longest on record.

Miners who aren’t concentrated on giving investors capital returns via buybacks or increased dividends are revisiting shuttered mines. BMO writes, “we have already seen restarts, including the likes of Kainantu and more recently Kiena, enjoying a new lease of life. There are several advanced restart projects including Bardoc and Mt Todd, amongst others that are expected to capitalize on gold’s heightened allure.”

The last overarching point BMO believes will be much of the discussion at the Gold Forums is that ETF demand continues to drag in Gold. They write, “Unlike other commodities, 2021 looks set to be a relatively bad year for gold demand.

World Gold Council data highlights substantial ETF outflows in Q1, particularly in North America, and steady inflows in Q2.” As explained above, BMO is under the belief that the Federal Reserve tapering “is all but certain,” coupled that with the negative real yields, they believe that there is “no overwhelming reason for aggressive rotation away from gold.”

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post BMO Issues Gold Market Primer Ahead Of Gold Forum Americas appeared first on the deep dive.


US stocks close in a sea of red as tax hike fears grow

US stocks closed the week in a sea of red on Friday September 17 after technology shares led the broad losses across segments and tax hike fears dragged…

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US stocks closed the week in a sea of red on Friday, September 17, after technology shares led the broad losses across segments and tax hike fears dragged the benchmark indices down.

The S&P 500 fell 0.91% to 4,432.99. The Dow Jones fell 0.48% to 34,584.88. The NASDAQ Composite Index declined 0.91% to 15,043.97, and the small-cap Russell 2000 was up 0.18% to 2,236.87.

Markets have been volatile this week amid mixed global cues. Loses in the Asian markets over worries of slow economic recovery and recent geopolitical developments weighed on investors’ minds. The tech-savvy Nasdaq declined the most.

In addition, the recent retail sales and unemployment data offered mixed signals about the US economy. While retails sales were up in August, jobless benefits claims rose noticeably last week.

Meanwhile, lawmakers were considering a proposal to hike corporate tax. The news could be worrisome for some investors as a tax hike may eat into the companies’ profits. Democrats are seeking to increase the corporate tax from the current 21% to 26.5%.

Investors will now eagerly wait for the Fed’s monthly meeting next week. The central bank officials are expected to discuss the latest economic data as they continue with the stimulus tapering talks.

All the S&P 500 stock segments stayed in the negative territory. Technology and communications services stocks were the biggest losers, pushing the index down. Stocks of vaccine manufacturers Moderna, Inc. (MRNA) and Pfizer Inc. (PFE) plunged 3.57% and 1.34%, respectively.

Invesco Ltd. (IVZ) stock rose 5.71% after reports that it is in talks to merge with the asset management unit of State Street Corporation (STT). STT stock declined 2.47% in intraday trading.

SmileDirectClub, Inc. (SDC) shares surged 12.92% after the stock was discussed on social media.

AbCellera Biologics Inc. (ABCL) stock rose 2.53%, a day after the US Food and Drug Administration extended the emergency use authorization for its covid drug Bamlanivimab.

In technology stocks, Apple Inc. (AAPL) fell 1.94%, Microsoft Corporation (MSFT) fell 1.65%, and ASML Holdings N.V. (ASML) declined 3.18%. Adobe Inc. (ADBE) and Cisco Systems, Inc. (CSCO) fell 1.75% and 1.19%, respectively.

In communication stocks, Alphabet Inc. (GOOG) fell 2.08%, Facebook, Inc. (FB) declined 2.96%, and T-Mobile US, Inc. (TMUS) declined 1.19%. In addition, Sea Limited (SE) dropped 1.23%, and Snap Inc. (SNAP) advanced 3.08%.

In the material sector, BHP Group (BHP) fell 4.46%, Rio Tinto Group (RIO) fell 3.02%, and Vale S.A. (VALE) fell 2.21%. Ecolab Inc. (ECL) and Freeport-McMoRan Inc. declined 2.01% and 4.10%.

Also Read: Check these 5 oil and gas stocks with high price-to-earnings ratio


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Also Read: ASAN, FORG, & DATS stocks shine on higher demand hopes

Top Gainers

Top performers on S&P 500 included Thermo Fisher Scientific Inc (6.49%), Invesco Ltd (5.46%), Centene Corp (4.95%), Diamondback Energy Inc (3.18%). On NASDAQ, top performers were Corvus Pharmaceuticals Inc (135.40%), Helbiz Inc (96.56%), Priority Technology Holdings Inc (47.23%), Innate Pharma SA (40.87%). On Dow Jones, Amgen Inc (0.93%), UnitedHealth Group Inc (0.80%), American Express Co (0.79%), Procter & Gamble Co (0.16%) were the leaders.

Top Losers

Top laggards on S&P 500 included Unum Group (-6.04%), International Flavors & Fragrances Inc (-5.53%), Copart Inc (-5.46%), Nucor Corp (-4.49%). On NASDAQ, Protagonist Therapeutics Inc (-62.00%), TCR2 Therapeutics Inc (-36.45%), Eliem Therapeutics Inc (-21.92%), Janux Therapeutics Inc (-20.26%). On Dow Jones, Dow Inc (-2.89%), Caterpillar Inc (-1.89%), Apple Inc (-1.83%), Microsoft Corp (-1.75%) were the laggards.

Volume Movers

Top volume movers were Bank of America Corp (43.29M), Nov Inc (41.49M), Apple Inc (40.72M), AT&T Inc (38.62M), Oracle Corp (37.24M), Lucid Group Inc (39.05M), Match Group Inc (36.06M), SoFi Technologies Inc (33.81M), Tellurian Inc (28.37M), Corvus Pharmaceuticals Inc (26.47M).

Also Read: Top five mid-cap retail stocks with more than 100% YTD gain

Futures & Commodities

Gold futures were down 0.22% to US$1,752.85 per ounce. Silver decreased by 1.87% to US$22.367 per ounce, while copper fell 1.15% to US$4.2322.

Brent oil futures decreased by 0.45% to US$75.33 per barrel and WTI crude was down 0.81% to US$71.97.

Bond Market

The 30-year Treasury bond yields was up 1.13% to 1.902, while the 10-year bond yields rose 2.43% to 1.363.

US Dollar Futures Index increased by 0.33% to US$93.227.

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Stocks Stumble For 2nd Straight Week Amid Debt Ceiling Doubts, FOMC Fears, & Gamma Unclench

Stocks Stumble For 2nd Straight Week Amid Debt Ceiling Doubts, FOMC Fears, & Gamma Unclench

The usual avalanche of debt-ceiling fearmongering…

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Stocks Stumble For 2nd Straight Week Amid Debt Ceiling Doubts, FOMC Fears, & Gamma Unclench

The usual avalanche of debt-ceiling fearmongering has begun (which of course will continue until 1 second before the deadline when an agreement will suddenly be found) and that along with anxiety ahead of next week's FOMC and today's gamma unclenching from quad witch expirations did not help dip-buyers save stocks for the week.

Nasdaq was the week's biggest loser and a late-day buying spree into the OpEx pushed Small Caps into the green barely for the week...

Energy stocks massively outperformed on the week while Materials were the big laggards...

Source: Bloomberg

But anxiety remains as Debt Ceiling doubts have created quite the kink in the bills curve...

Source: Bloomberg

And pushed the anxiety proxy to cycle highs...

Source: Bloomberg

Analysts at Eurasia Group, a political risk consultancy, suggested the dangers for investors are significant.

"Republican intransigence over increasing the debt limit and Democratic overconfidence that they will be able to pressure Republicans into doing so is creating unusually high risks of the U.S. crossing into a technical default on its debt sometime in late October," they wrote in a note on Thursday.

"Congress will at some point increase the debt ceiling, but it may require the pressure of a technical default and market sell-off to get there," the Eurasia Group team also said.

"Based on our analysis of the incentive structure of both sides at this time, we see that risk at 20%."

In fact, the market is finally starting to reflect the chance of a technical default - albeit still small - as short-term USA default risk spiked dramatically this week (NOTE in Oct 2015, USA 1Y CDS spiked to 40bps)...

Source: Bloomberg

For now, it seems everyone is just full of Fed liquidity-based optimism...

The S&P 500 fell back below its 50DMA after an initial bounce (something we haven't seen recently on these bounces as we note that ~30% of SPX gamma expired at today's open and 60% of SPY, 35% of QQQ, and a very large set of stock options expired on the close)...

The Dow is back at/below its 100DMA and Small Caps are hovering around their 50DMA.

VIX spiked back above 20 as hedgers piled in ahead of next week's FOMC...

Both Defensives and Cyclicals were lower this week - modest rotation midweek, but by the close, pretty systemic selling...

Source: Bloomberg

The Dollar surged further today, extending the week's gains to erase all losses from Jay Powell's Jackson Hole speech...

Source: Bloomberg

Treasury yields were all higher on the week, led by the belly (5Y +6bps, 30Y +0.5bps)...

Source: Bloomberg

10Y Yields spiked further to a key resistance level this week...

Source: Bloomberg

And 10Y Yields broke back above their 200DMA...

Source: Bloomberg

30Y Yields spiked up to their 50DMA today and found resistance...

Source: Bloomberg

Cryptos were broadly higher on the week with Bitcoin and Ethereum up around 5%. Litecoin ended the week up 4.5% after the Walmart partnership fake news spiked it 35% on Monday...

Source: Bloomberg

Big gains in the dollar this week weighed on 'some' commodities with copper and PMs down but the energy complex rallied with crude up significantly...

Source: Bloomberg

Gold fell back below $1800...

Silver was clubbed like a baby seal back below $23...

WTI rallied back above $72 this week...

And Nattie exploded higher recently, only to tumble today...

Finally, amid all that vol in commodity-land, CPI this week, and today's UMich inflation expectations, Stagflation remains the big worry...

Source: Bloomberg

Get back to work Mr.Powell!

Tyler Durden Fri, 09/17/2021 - 16:00
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“Monster Reallocation” Sees Biggest Stock Inflow Since March, Largest Ever Inflow To Large Cap Funds

"Monster Reallocation" Sees Biggest Stock Inflow Since March, Largest Ever Inflow To Large Cap Funds

Flows into mutual funds and related…

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"Monster Reallocation" Sees Biggest Stock Inflow Since March, Largest Ever Inflow To Large Cap Funds

Flows into mutual funds and related investment products showed sharply higher net purchases of equity products, steady inflows into fixed income, and another week of FX flow into CNY and JPY; of these the most notable was the $51.2BN going into stocks (with the usual distribution of $52.7bn into ETFs, offset by $1.6bn out of mutual funds) - the largest inflow since March 21 - following +$13bn the prior week; Separately $16.1BN went to bonds, a tiny $37MM to gold (still the largest in 6 weeks), all coming out of money markets, as cash saw a decline of $61.8BN, the largest outflow since July 20.

The acceleration reflected higher net inflows into the US market, which saw $45.7 billion in inflows, the most since March 21, while flows into global benchmark products and EM equities decelerated slightly, and demand for non-US DM equity products was roughly steady:

  • Japan: largest inflow in 3 weeks ($0.1bn)
  • Europe: largest inflow in 4 weeks ($0.1bn)
  • EM: inflows past 6 weeks ($1.8bn)

By sector, the largest net inflows (scaled by AUM) were into industrials.

Commenting on this week's fund flows, in his latest Flow Show note (more in a subsequent post), BofA's Michael Hartnett noted a "monster reallocation" in cash to stocks as the "tax redistribution threat" recedes and "as Fed was expected to remain Wall St-friendly", leading to what the latest Fund Manager Survey dubbed the easiest liquidity since the peak of the last credit bubble in July 2007 (a finding confirmed by Goldman's own liquidity indicator which has never been easier).

And with the floodgates now open, besides the massive equity reallocation, last week also saw the largest inflow to US large cap funds ever ($28.3bn), the 12th week of tech inflows with $3.2BN entering this week, the largest since Mar’21...

... and the largest inflows to energy since Jun’21, at $1.0BN.

Summarizing the inflow distribution by style:

  • US large cap ($28.3bn),
  • US growth ($6.9bn),
  • US small cap ($4.2bn), US value ($1.6bn).

And by sector:

  • tech ($3.2bn),
  • consumer ($1.1bn),
  • healthcare ($1.0bn),
  • energy ($1.0bn),
  • financials ($0.6bn),
  • materials ($0.3bn),
  • utils ($0.2bn),
  • com svs ($0.1bn),
  • real estate ($95mn).

Away from equities, flows into global fixed income funds also picked up slightly on the week (+$16bn vs +$13bn the prior week), the largest inflows in 10 weeks, as most product categories experienced higher net inflows, with the exception of IG credit funds and EM bond funds, both of which saw moderately lower (but still positive) net inflows. Here is the full breakdown:

  • Largest IG bond inflow in 3 weeks ($8.7bn)
  • HY bond inflows past 3 weeks ($1.1bn)
  • EM debt inflows past 3 weeks ($1.4bn)
  • Largest Munis fund inflow in 3 weeks ($1.2bn)
  • Largest MBS inflow since Apr’21 ($1.0bn)
  • Govt/Tsy fund inflows past 2 weeks ($1.0bn)
  • TIPS inflows past 43 weeks ($1.0bn)
  • Bank loan inflows past 8 weeks ($0.6bn)

Within EM bonds funds, the mix of demand shifted toward hard currency and away from local currency this week. Money market fund assets declined by $62bn.

Tyler Durden Fri, 09/17/2021 - 15:05
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