Tag: Commodities

Barrick Gold Corporation explores for and develops mineral properties. The company primarily explores for gold, copper, and silver deposits.

According to Oilprice.com Barrick Gold Corp is one of most promising gold miners in 2020. Barrick Gold made headlines earlier this year when they attempted to acquire Newmont Mining which would of created the world’s largest gold producer. Barrick wanted Newmont Mining because of their adjoining assets in Nevada.

Needless to say, Barrick eventually pulled its $18 billion offer for Newmont Mining Corp and agreed to form a joint venture in Nevada with Newmont Mining.

The world’s second largest gold producer reported earnings yesterday and said it would be at the top end of its production targets for the year and the lower end of cost estimates.

Thanks to the rise in gold prices over the last year and gold production increasing to 1.31 million ounces from 1.15 million ounces over the last 12 months, profits rose to $264 million, or 15 cents per share, in the quarter ended Sept. 30, from $89 million, or 8 cents per share, a year earlier. 

And if that news wasn’t good enough, Barrick also announced that its Board of Directors declared a dividend for the third quarter of 2019 of $0.05 per share, a 25% increase on the previous quarter’s dividend.

Although the Newmont Mining deal didn’t materialize, Barrick’s late founder Peter Munk vision of building the world’s largest gold producer remains on the table.  The latest talk on the Street is now combining with Freeport-McMoran.

Freeport-McMoRan (NYSE: FCX) engages in the mining of mineral properties in the United States, Indonesia, Peru, and Chile. The company primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas.

Barrick Gold Corp.’s chief said there’s a logic to combining with Freeport-McMoran Inc. as a way to expand into copper, but isn’t committing to any deals yet.

A tie-up with Freeport could bolster Barrick’s U.S. presence, where it already operates gold mines in Nevada, said Chief Executive Officer Mark Bristow, who cautioned that it’s not something currently being considered.

“Everyone has been fingered as a potential suitor of Freeport,” said Bristow, when asked if he was interested in a combination. “There’s a bit of work for us to do before we can get our head around broadening our scope.”

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In general, the mining stocks do better than gold when the price of the metal rallies.  Although gold prices have pulled back, I think it’s just part of any normal uptrend, in the cause of gold, a longer term uptrend that started in late 2018.

So where is the price of Barrick headed next, lets go to the charts go to long on the pull back to the weekly demand at $15.30 with a target right before the weekly supply zone.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

The last time I talked about natural gas was two months ago,

Natural Gas Analysis Report 9/5/19 – A Bottom Has Been Put In

There was this huge base at $2.00 on the monthly chart going back 18 years.  In September, I noticed a monthly hammer candle had formed in August.  If you are aware of the common candle stick patterns, a hammer candle usually occurs at the bottom of a down trend.  However, what confirmed the end of the downtrend was on the daily chart, price has formed a demand zone, on top of a demand zone.  I call a zone on top of a zone, a level on level and is one of the most powerful formation when trading supply and demand zones.   Thus, the chart suggest to go long a pull back to the daily demand levels and go long with a target at $2.700.

Please note, there are typically two seasons for the U.S. gas market: Summer (April-Oct) and Winter (November-March). Gas is injected into the ground in Summer and gas is withdrawn in Winter to meet demand that rises well above production.  Please note, today is November 6^th.

Natural gas prices surged higher on Monday climbing nearly 4% after rising 5.25% for the week. Short-covering by funds should continue. The weather is expected to remain cooler than normal through most of the eastern portion of the United States over the next 6-10 and 8-14 days.

Hedge fund traders reduced some of their short position in futures and options and added to longs, but remain exposed to a short-squeeze. According to the most recent commitment of trader’s report released for the date ending October 29, 2019 managed money reduced short position in futures and options by 21.5K contracts while increasing long positions in futures and options by 11K contracts. The current net short position at 299K contracts is nearly 3X the open interest that is short futures and options, providing the backdrop for a short-squeeze.

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Overall, the Smart Money is still net short natural gas, but are being forced to recover the positions due to being short squeezed.  In this case, the short squeeze is occurring because of the excess in demand for the contract and lack of sellers.  Since price has moved up rapidly, the short sellers are covering to preserve some of their gains and/or cap their losses, resulting in additional buying, which is causing price to move higher.

So where are prices headed next, the chart suggests price is heading to the weekly supply at $3.100.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Cotton has been used in textile production for 1000s of years and used in providing thousands of products like apparel, but even gunpowder. The US, India and China produce over 65% of cotton used by citizens of the world. A bale of cotton weighs about 500 lbs and can produce over 1000 T-shirts. Harvesting cotton begins in July until late November and is grown in about 15 states such as, but not limited to North Carolina, South Carolina, Tennessee and Virginia. 

Georgia produces about
20% of cotton in the US, which is also its leading crop. The climate and
environment in Georgia facilitate the high-quality cotton growth which textile
mills worldwide desire.

In 2018, President Trump
put tariffs on Chinese goods coming into the United States earlier this year,
and the Chinese retaliated. The US is the top producer and exporter of soybeans
with China purchasing about 25% of what the US produces U.S. annual soybean
crop.  China is the largest importer of
soybeans in the world.  However, China
has canceled all shipment of beans from the U.S. causing the prices in the
soybean futures market to drop to the lowest price in a decade.

So what did farmers do, at least those located in the Southeast region of the US, they planted more and more cotton?

Recently on AgDay TV, Tyne Morgan spoke with David Hudson, an economist at Texas Tech University, about the trade war’s impact on cotton.

He says increased acres are part of that equation.

“As soybean prices fell more acres shifted over to cotton in year two and so now we’re seeing the effects in year two of this pretty substantial drop in cotton price,” says Hudson. “That is a trade effect, but it’s a delayed effect.”

Hudson even the strong MFP payments for cotton won’t be enough to offset falling prices in 2019.

“We’re talking about nearly a 40% decline in prices, year over year,” says Hudson.

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So where is the price of cotton going next, the chart suggests to short at the monthly supply at $67.50.

There is a monthly demand down at $43.

But the chart suggests your first target should be at major/resistance band at $57.50.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

When I think of Northeast Winter, I think of heating oil.  Growing up in the projects of New York City, each building had these big boilers ground and every so often I would see a tanker truck refilling the boiler.  As I got older finally realized the black plume of smoke I use to see, it was the combustion of the heating oil in the boiler as it was producing steam for heat and hot water.

NOTE: I grew up right there on the Lower East Side of Manhattan.

Now the Northeast heating oil industry is start to put pressure on the state in the New England regional to mandate biodiesel content in home heating oil in an effort to carbon emissions.   This should be an easy victory for the Industry as because a lot of the heating oil used in New England already contains some biodiesel, but its use is not required in every state.

And across the country, they are encouraging Seattle residents to switch to cleaner heating system by implementing a new tax on the sale of home heating oil to the tune of $0.24 / gallon starting 9/1/20.

Heating oil is a petroleum product refined from crude oil. Heating oil and diesel fuel are closely related products called distillates.  Distillation is the process of separating the components or substances from a liquid mixture by using selective boiling and condensation.  I studied chemical engineering in college and can appreciate the massive refiners out there.

Refiners who produce heating oil often make decisions about how much to produce based on the price they are paying for crude oil. However, buying your heating oil during the summer months is usually a better bet because prices tend to drop based on the lack of demand.

As the winter approaching, what can homeowners expect to pay for the price of heating oil, lets go to the charts to find out?

Monthly Chart (Curve Time Frame) – monthly supply is at $2.4560 and monthly demand is at $1.6000.

Weekly Chart (Trend Time Frame) – the trend is sideways.

Daily Chart (Entry Time Frame) – the chart suggests to play the extremes, wait for price to get to the daily supply or daily demand before considering a trade set-up

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Federal Reserve Chairman Jerome Powell spoke Tuesday in Denver on “Data Dependence in an Evolving Economy.”  He reiterated and tried to assure the crowd that the economy remains strong and the Fed supports keeping the economic expansion going.

Fed Powell also addressed the repo scare from a couple of weeks ago were overnight repo lending dried up.  Taskmaster4450le spoke about this today in his post title, 

Where Are People Going To Hide?

Turning to short-term funding markets, Powell said “a range of factors” might have caused the turmoil seen last month when the cost of short-term borrowing spiked as firms scrambled to get funding.

Regardless the cause, Powell said it was now time for the Fed to increase the size of its balance sheet. He said the central bank may purchase short-term Treasury bills.

Some analysts call this a “soft” form of quantitative easing, because the Fed buys these securities from the market, but Powell bristled at this description.

“I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase program that we deployed after the financial crisis,” he said.

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During the Great Recession QE is injected tons of money into the economy by buying bonds and mortgage-backed securities in hopes of jump starting the economy.  And we are still feeling the effects of QE from ten years ago because money poured into the stock market which has been artificially inflated throughout the years through all the buyback programs (Apple is one of the biggest culprit).  At some point, the bubble will pop, prices will fall and money will migrate in to precious metals (and potential cryptocurrencies).

According to the World Gold Council, gold-backed ETFs bought 75 metric tons of the gold worth almost $4 billion in September.  The SPDR Gold Shares ETF (GLD), the world’s largest and most liquid gold-backed fund, bought 43 tons more bullion during the 30 days.

This is the Smart Money directly at work and they are adding leverage to their investments/trades.  Today I noticed unusual options activity in GLD.   The Smart Money bought over 6000 call options with a strike price at $149 that expire in March 2020. 

This is on top of the 7000 call options they bought yesterday. 

I can’t say I have seen call options going out this far, but this trade set-up has plenty of time of being profitable as the chart suggests the next target for GLD is the $152.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Earlier this month I noticed natural gas hitting reaching a longer term base and reversing direction. 

Natural Gas Analysis Report 9/5/19 – A Bottom Has Been Put In

Natural gas put in a hammer, reversal candle, which usually occurs at the bottom of a down trend. On the daily chart, price formed a demand zone, on top of a demand zone.  Thus, the chart suggested to go long during a pull back to the daily demand zones with a target at the daily supply at $2.700.

Price never pull back, but did hit the daily supply and is falling now.  Because the demand zones were never hit, they are still in play.

The United States Natural Gas Fund (UNG) is an exchange-traded security designed to track percentage changes in the price of natural gas delivered to Henry Hub, Louisiana, the main U.S. benchmark for natural gas.

Yesterday I noticed that the Smart Money bought over 29,000 of the Nov 15 call options with a strike price at $21. 

Because UNG follows the natural gas futures, the charts look very similar.

And based on the seasonality of natural gas price acting bullish from the Fall to the Winter from a technical standpoint, but also from a fundamental standpoint, I love the trade.  Thus, the Smart Money should have no problems being profitable on this trade. 

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This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Fracking and horizontal drilling technology (which has created access to the once inaccessible shales of oil and gas) in the last 10 years has made the US a major player in the world of oil production.

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The technology has bee so beneficial to the US, that in 2018, the US become the number one producer of oil in the world.   However, I can’t leave Saudi Arabia out of this conversation.  They are the number two producer of oil in the world at 12.4 millions barrels/day.  As you know, the price of oil is probably one of the clearest examples of supply and demand. So say the oil rig count goes up in the US or Saudia Arabia increases oil production, the price of oil is surely to go down.  However, if the oil rig count goes down or if the oil pipelines are sabotaged, supply will take a hit and oil prices will rise. This past Sat, drones attacked Saudia Arabia oil pipelines.

Drone strikes on key Saudi Arabian oil facilities, among the world’s largest and most important energy production centers, have disrupted about half of the kingdom’s oil capacity, or 5% of the daily global oil supply.

Yemen’s Houthi rebels on Saturday took responsibility for the attacks, saying 10 drones targeted state-owned Saudi Aramco oil facilities in Abqaiq and Khurais, according to the Houthi-run Al-Masirah news agency.

In a statement on Sunday, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said that 5.7 million barrels a day of crude oil and gas production have been affected. The latest OPEC figures from August 2019 put the total Saudi production at 9.8 million barrels per day.

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So at the open on the crude oil futures Sunday at 6 pm eastern, I expect price to gap up,

but I have no idea if price will fill the gap that day because price is still within a $5 range going back to the beginning of August.

Thus the chart suggests to play the extremes, until they are broken, but always keep in mind of the bigger picture.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

This past weekend I talked about how the latest AccuWeather 2019 crop production analysis predicts a significant decline from last year’s corn and soybean yield.  And how this past Monday, the fate of many farmers would be decided by the World Agricultural Supply and Demand Estimates (WASDE) is a monthly report that forecast supply and demand for major crops (global and United States) and livestock (U.S. only).  But this was another example of why I don’t really care about reports, news or Trump twits because price action trumps everything and the chart suggested corn prices were going to decline. 

Ag Analysis Report – 8/9/19…Is Corn Prices Going Lower???

The Agriculture Department on Monday said farmers planted a bigger corn area than analysts estimated and pegged crop yields that also exceeded expectations, sparking the biggest rout in futures since 2013. That was a blow to growers who were holding back supplies, hoping a rally that started in May due to delayed sowing would extend through the fall.

“This is a huge disappointment for farmers that have already been struggling with a lot of uncertainty with this corn crop, trade wars and what have you,” said Tanner Ehmke, manager of the research team at CoBank, a $138 billion lender to the agriculture industry. “A lot of people were banking on the opportunity to sell at much higher prices. This report now really brings that into question.”

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DDRUUUMM RROOLLLLLLL

I do feel story for all the farmers in the Midwest as they have just been reduced to pawns, as Trump continues to play chess with China.  And like the big Ag companies, I would love to teach those farmers how to hedge their crops with futures so they can protect themselves win, lose or draw.

If there was one message I could send the farmers, it would be the chart suggests price will retest the weekly demand at $356.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.