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Can Gold Replace The USD As Reserve Currency?

gold bars coins photo
One of the stories gold bulls like to tell is the decline of the US Dollar as the world reserve currency. This story usually runs along the following lines: The US is overspending massively, thus the US is a debtor nation. Debtor nations don't last forever, thus the US is heading for collapse. When countries collapse, their currency becomes worthless. Since gold has never been worthless in the history of modern civilization, trade Dollars for gold now so you'll preserve value heading into that uncertain future. That's it in a nutshell, isn't it? When the cow excrement hits the rotating blades you want to hold on to the value you've created in the past.  And you want whatever the best form of money is.  And because gold has always preserved its value well during such crises, you should choose gold.  Simple.  Gold will protect you against the collapse of your country. The modern reality is more complex than that.  In today's world, there is more than one country, and countries don't all collapse at once. When one country collapses there are other countries still standing, and that provides a framework of support that can be used to set your country up again. New deals can be signed, loans can be made with international money, banks can be restarted and linked into the world banking network - it's pretty amazing.  We'll see with Venezuela how quickly this can happen, once the question of who's in charge there is settled. Plus there's the inconvenient fact that gold is difficult to fractionalize.  That means a hunk of gold is often worth more than you need for a purchase.  Imagine wanting to buy a single shopping bag of food in a time when the local currency is worthless, and you are holding your bar of gold. How do you shave off "the right amount" for your purchase?  Even a dime-sized gold coin is worth hundreds of dollars today, much more than your typical food purchase. So the reality is that gold is indeed a great store of value, but there are still issues with using it directly as currency.  What we really need is currency we can both fractionalize and trust - thus the idea of gold-backed currency.  Or, as it's better known, a gold standard.
Your Gold Enthusiast is not saying this is the best answer, however. It is possible to be a gold bug AND realize there is a better solution than going to 100% gold-backed currency. What we are looking for is currency whose value we can trust, and it doesn't have to be 100% gold backed.  All that's needed is a good percentage of gold backing. Whether that's 25% or 50% or even 10% we don't know, we'll leave that to others to debate while we spin some numbers and do some pondering. What we do know is that the US is heading deeper down the rabbit hole of debt.  That's not good. And especially it's not good that two of the other superpowers in the world - China and Russia - are digging themselves slowly out of their own debt rabbit holes, AND accumulating gold.  They are putting their currencies in positions of superior economic strength compared to the US Dollar. And the rest of the world is watching. Both countries are also forming trading alliances with other countries that are not based in US Dollars. China has both their own gold- and petro-dollar based trading contracts.  Russia has been trading natural gas with other countries for years as well.  And let's not forget the EU, which has the purpose of making trade between member countries possible without relying on external currencies or markets. This is all leading to a new multi-polar world, where there are several large superpowers (if you will). Just 10 years ago the US could say it was the world's biggest superpower.  Now China is a viable contender for the crown, and while Russia is much smaller than the US or China it has positioned itself as a rising economic superpower. While the EU is currently caught up in the Brexit battle with England it is also not out of the discussion - just distracted at the moment. Your Gold Enthusiast is watching all this happen and is fascinated by the idea of a multi-polar world. It is a step closer in evolution to everyone getting along, so that is good.  There are still borders and differences, but wars are increasing being fought with sanctions and tariffs rather than shooting, and that's a step in the right direction. Right now the US Dollar is still the #1 currency in world transactions.  It's dominance is shrinking however, and we may yet see the day when gold prices shoot up in US Dollar terms as it already has in many other world currencies. Another writer wrote this very good article about this possible multi-polar world, looking at whether it could be backed by gold. You'll have to read it to discover his answers, and his discussion is well worth understanding. Because of all the variables I don't think anyone can make exact predictions; what we're after is the direction things are likely to go, and where the decision points are that tell us if we're right or not. Why does all this matter?  Because as time passes the future has a way of becoming the present - and then we're living in it. Signed,
The Gold Enthusiast DISCLAIMER: No specific securities were mentioned in this article.  The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He has no plans to trade the shares in the next 24 hours.
About the Author 
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.
NYSE:GDX July 17, 2019 11:05am

Will Canntrust (CTST) pull off a miraculous recovery this week?

From Aaron Missere:

Right now Canntrust is down, but are they out?

There is no denying that Canntrust's value has been decimated in a matter of days after the news that health Canada would be putting the company under investigation for growing cannabis in rooms prior to obtaining their license to grow. In a short week the stock declined consecutively every single day since the announcement to close the week down almost 50%. Its astonishing how fast a company who carried a strong reputation in the high growth cannabis sector can be demolished and have their reputation tarnished overnight. Now as serious as the news really is, there are always two sides to a story, and most of the time someone's loss is another one's fortune. The question remains on many of our minds, will this be the case for canntrust once the dust settles. This week is going to be a very crucial week for canntrust and their shareholders for a few reasons.

The Fate Lies in Health Canada's Hands

This is going to be a big week for Canntrust and I can see the stock having more volatility than last week. More than likely a large amount of short interest has accumulated on Canntrust after last week's news, and I wouldn't be surprised if we see a short squeeze in the trading sessions to come. There is a perfect catalyst coming up this week that could cause a massive bounce in shares of Canntrust. The company has until July 18th to respond to health Canada'sregulator'ss report. At that point Health Canada will determine if the company receives a fine of up to a million dollars Canadian or a suspension/cancellation of their federal license. In my opinion if health Canada eases back at all hinting at a possible fine and allows Canntrust to pick up the pieces of their broken reputation, shares will rally immensely. Often times when things look like they could not get any worse and there is no hope are the times that you need to think logically, weigh the pros and cons and see through the darkness. Its human nature to join the crowd and rain down negativity on Canntrust as many investors within the community have done so. I truly believe "this too shall pass" but let's talk about the worst-case scenario. If Canntrust was to lose their federal license than the company would indeed be in big trouble, at that point I think they would have to be bought out, rebranded and dismantled. Brands and reputation definitely carry value especially in the cannabis sector so Canntrust has taken a big hit.

How Far Will Health Canada take it?

In my opinion Health Canada is making an example of Canntrust and they came in guns blazing. On Friday we felt the waves of fear ripple through the cannabis sector with a broad selloff from large caps to small caps. Selling quality cannabis grown in licensed facilities should be on the top of their list, but completely destroying a company for breaking the rules once is another story. It would make more sense to even increase the size of fines for non-compliance in the future to deter companies from breaking the rules, but a suspension or complete withdrawal of one's license seems a little overboard. This would also look bad for the Canadian government allowing the destruction of so many jobs. We will be waiting on the edges of our seat this week to see the final verdict from health Canada but I wouldn't be surprised if we see more volatility than last week. At this point buying the dip in shares of Canntrust is very risky business but for a high-risk investor, there is lots of potential for returns. Buckle your seatbelts if you are on the Canntrust coaster, we could be in for a wild ride!


About the Author  Aaron Missere is the CEO and founder of financial media company Departures Capital Inc.  He is an avid and experienced investor, with a primary focus on the cannabis industry.  In addition to being a featured contributor to and, he is an author for  Aaron also currently hosts a weekly show on YouTube that recaps and explains the movement in the stock market, with a heavy emphasis on marijuana stocks. 
CannTrust Holdings Inc. (CTST) was trading at $2.81 per share on Wednesday morning, up $0.06 (+2.18%). Year-to-date, CTST has declined %, versus a 12.77% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of StockNews.
NYSE:MJ July 17, 2019 10:00am

Why is There Weakness In The Brent-WTI Spread, Despite Tension With Iran

  • Brent-WTI moved lower even though the price of oil climbed
  • The risk is on the upside in the spread
  • BNO and USO are the ETFs that reflect the short-term price action in the two benchmarks
    In the world of crude oil, the two leading benchmark pricing mechanisms that trade on the Intercontinental Exchange and the NYMEX division of the CME respectively are Brent and West Texas Intermediate or WTI. Approximately two-thirds of the world’s producers and consumers price their petroleum using the Brent price, including oil from Europe, Africa, and the Middle East. The United States is now the world’s top producer, and its crude oil uses the WTI benchmark.  WTI is a lighter and sweeter grade of crude oil, meaning it is easier to refining into gasoline. Brent has a higher sulfur content making it less sweet and more economical to refine into distillate products.  The price differential between Brent and WTI is both a quality and a location spread, but it is much more. Since the Middle East is the world’s most turbulent political region, the spread is also a barometer of risk in the area.    Brent-WTI moved lower even though the price of oil climbed Since the Arab Spring in 2010, the price of Brent crude oil has typically traded at a premium to WTI because the political risk in the Middle East rose. At the same time, increasing US production caused the price of WTI to trade at a lower price than Brent, causing the premium to rise. Source: CQG The chart of the price of nearby WTI futures minus Brent futures highlights that before 2009, the range in the spread was from a $6.33 premium for WTI to a $3.24 premium for Brent. Since gasoline is the world’s leading oil product, the WTI tended to trade at a premium to Brent. However, the world changed with the political changes in the Middle East, and since 2009, the range has been from a $2.68 premium for WTI to a $27.64 premium for Brent. The Brent premium has typically moved higher when the price of oil rallies. In February 2016, when crude oil fell below $30 per barrel on both benchmarks, WTI briefly returned to a premium.  In early June, the price of nearby WTI futures fell to a low at $50.60. As the price was falling in late May, the Brent premium moved to $11.59 per barrel, the highest level since 2015. Since then, the price of oil recovered, but the Brent premium moved to around the $6.45 per barrel as of last Friday.  Four consecutive weeks of inventory declines in the US as reported by the API and EIA led to gains in the price of WTI futures which gained on Brent.    The risk is on the upside in the spread Meanwhile, the other reason for higher oil prices over recent weeks has been the rising tension in the Middle East. The Trump administration slapped sanctions on Iran and put an end to exemptions that allowed the theocracy to sell petroleum to customers around the world. Iran retaliated with attacks on oil tankers near the Straits of Hormuz, the downing of a US drone, and missile attacks on Saudi sovereign territory. Just last week, an attempt to hijack a British oil tanker only failed because of the increased military presence in the region. Iran has also begun to enrich uranium, which could lead to even more hostilities over the coming days, weeks, and months. As the political temperature rises in the Middle East, supply concerns will increase, leading to gains in the price of oil. Since Brent is the benchmark for oil from the area, we could see price spikes in the Brent-WTI spread.   BNO and USO are the ETFs that reflect the short-term price action in the two benchmarks In the ETF market, the United States Oil Fund, LP (USO) is the ETF that replicates the price action in WTI crude oil on a short-term basis. The United States Brent Oil Fund, LP (BNO) is the ETF that follows the price of the Brent benchmark. A long position in BNO and short position in USO is one way to synthesize the Brent-WTI spread without venturing into the futures markets.  The Brent-WTI spread declined from $11.59 in late May to the $6.45 per barrel level as of Friday, July 12. The spread is a barometer of political risk, and the potential for a spike back to the recent high or even higher is likely to increase with hostilities in the Middle East.  _________________________________________________________________________________ About the Author  Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is a top ranked author on Seeking Alpha in various categories.  Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.  Over the past decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities. Aside from contributing to a variety of sites, Andy is the Editor-in-Chief at Option Hotline.
NYSE:USO July 16, 2019 6:23pm

Gold: What Is Sentiment Telling Us

gold bars coins photo
Gold (GLD) has enjoyed a huge run off of its June lows, thanks to a complete U-turn in Fed Policy. Initially, 2019 was expected to be the year of three rate cuts and a continued effort to cool off inflation, but Powell has walked back all of his comments, and 50 basis points of cuts before year-end are now on the table. While this is a boon for the stock market (SPY) that was dealing with recession worries up until just recently, it's an even bigger help to the yellow metal. The good news for the bulls is that this spike higher in gold has two significant differences between past $100/oz moves higher since 2016. The first is that this move is showing follow-through as gold is not melting off of its highs like it has been accustomed to doing in the past. The second and more meaningful change of character is that sentiment has heated up to extreme levels, and while this may seem like a bad thing, it's actually the complete opposite. I have worked with Daily Sentiment Index [DSI] data for several years and found some interesting nuances that are counter to what common sense might be. I constantly see some analysts harping on the fact that high readings of sentiment are bearish, and low readings for sentiment are bullish. While this is generally true, it is essential to know where these readings are coming within a general trend. The 2011 top in gold occurred with several readings above the 95% level for bullish sentiment, telling us that more than 19 out of 20 market participants were bullish on gold for a full week near the $1,900/oz top. However, this type of bullish sentiment was occurring after an accelerating three-year uptrend, and therefore, this final spike sentiment was buyers capitulation. However, when we get these same type of readings after a multi-year consolidation, this sentiment is telling us something completely different. In this case, it is telling us that market participants are finally warming up to the metal again after a frustrating and lengthy period of disinterest the past few years. The point being is that the 5-year high in bullish sentiment for gold we registered on June 24th was the best thing that gold bulls could have asked for. As can be seen in the below chart, both the December 2017 spike to 91% bulls and the Q1 2019 spike to 90% bulls were unable to eclipse the prior sentiment high of 95% bulls. So what else can this chart of Daily Sentiment Index tell us? As we can see from the red line on the chart, which is a sentiment moving average, gold is trending higher and above its vital sentiment moving average. This is a positive sign as it shows that more bulls are entering the market on an intermediate-term basis.  When more bulls enter a market after a period of disinterest, this typically leads to any sharp dips being bought up quickly. This moving average is also nowhere near overbought at current levels near 60% bulls. As long as this moving average can stay away from the 80% bulls level, the gold bulls don't have anything to worry about here from an exuberance standpoint. Based on this new multi-year high in bullish sentiment that accompanied the recent $1,365/oz breakout, I would expect the most likely scenario is for gold to build a new base between $1,350/oz and $1,450/oz. Breakouts from multi-year bases typically either correct through time or price, and thus far it's looking like gold might end up correcting through time.  This would be the best-case scenario as it would allow the metal to build a new launchpad above its prior multi-year resistance.I would consider any pullbacks down to the $1,370/oz area to be buying opportunities, especially if these dips are coupled with bullish sentiment falling below the 50% bulls level. As long as gold defends the $1,325/oz on a weekly close, I would consider any pullbacks to be buying opportunities. The next real resistance for gold doesn't come in until $1,560/oz. ______________________________________________________________________________________
About the Author  Taylor Dart has over 10 years of experience in active & passive investing specializing in mid-cap growth stocks, as well as the precious metals sector. He has been writing on Seeking Alpha for four years, and managing his own portfolios since 2008. His main focus is on growth stocks outperforming the market and their peers. In addition to looking at the fundamentals, he uses different timing models for industry groups, and scans upwards of 2000 stocks daily to identify the best fundamental opportunities with the timeliest technical setups.  Taylor is a huge proponent of Trend Following and the "Turtles" who enjoyed compound annual growth rates of over 50 percent per year.
NYSE:GDX July 16, 2019 6:04pm

Is Aphria (APHA) the ‘hidden gem’ that everyone forgot about?


What is going on?


For many that follow us and know our investment strategy in the cannabis sector post legalization has been heavily focused on holding our largest positions within the large cap cannabis stocks. We feel that these companies carry the least amount of risk as opposed to so many of the small cap stocks that have sold off immensely. The large cap stocks have seen their fair share of shakeups and volatility but we still feel that investing in large caps, especially when the market pulls back like it has, is going to be the key to maximizing returns within the cannabis sector. With many cannabis stocks feeling the growing pains of any new industry, experiencing wild price swings, there are so many stocks right now sitting close to their yearly lows. Knowing when to start buying these stocks is crucial to success with it comes to investing and even more so, knowing how to determine if you are buying a great company at a good price or a value trap.


Aphria should not be forgotten


One company that comes to mind is Aphria. This stock has seen its fair share of volatility due to a short seller attack over their latin american assets this year that shaved off over 50% of their market cap within days only to bounce right back up after the dust settled. We saw the stock go on to more than triple off of its lows after the attack and has now been steadily declining after hitting $14 per share in April. At current levels the company still has a market cap of over 2 billion dollars (cad) and a 52 week high of $22 (cad).


Aphria is not to be forgotten for many reasons and it starts with the canadian cannabis market. The company has supply agreements with all of the canadian provinces and the yukon territories. After digesting Aphria’s latest earnings report we were very pleased to see that the company grew revenues over 600% year over year and over 200% from the previous quarter. We highly value increasing revenue numbers as a key driver to success in the short term, and as the company matures, then we will focus on the bottom line more closely including profitability. Compared to its counterparts and other large cap cannabis stocks, aphria lost just over $100,000 last quarter which is very minimal compared to a company like canopy which lost over $300,000,000, yes 300 Million. We feel that aphria is very close to profitability, and despite the lackluster numbers coming out of the canadian cannabis market, aphria has a secret weapon that will propel them back up to new highs in the coming months.

Aphria’s Secret Weapon

Aphria is already thinking like an industry leader, setting up operations globally in latin america, south africa and more importantly europe. Aphria has put a lot of emphasis on germany which is most likely going to be the largest cannabis market outside of north america. The company is one of three companies to hold a german cannabis license, the other two being aurora and ICC International Cannabis/Wayland. This is a huge advantage next to over cannabis companies in our opinion as the market in europe grows, aphria will have first mover advantage compared to other companies. On top of this Aphria acquired CC Pharma which serves over 13,000 pharmacies across germany.


Despite the shake up in the stock earlier this year, the company still holds licenses in Jamaica, Colombia and Argentina, which we feel will be a high growth sector as well. These markets have a long way to go, but should prove to be more and more profitable as the global push for legalization continues and the world opens up to cannabis.


The opportunity lies ahead 

At current levels we feel that aphria is not only undervalued compared to some of its competitors, but we feel that you are getting a lot of bang for your buck if you are betting on international expansion. We really like that the company is growing revenues at such a fast pace, while minimizing losses, as we feel that is going to be crucial over the next few years. What we would like to see from the company is a solid mix of diversified revenue coming from the canadian market and international market to reinforce aphria as a play on international growth. Aphria is on the top of our watchlist and should probably be on yours as well.

(Disclosure : We do not own Aphria) ________________________________________________________________________________________________
About the Author  Aaron Missere is the CEO and founder of financial media company Departures Capital Inc.  He is an avid and experienced investor, with a primary focus on the cannabis industry.  In addition to being a featured contributor to and, he is an author for  Aaron also currently hosts a weekly show on YouTube that recaps and explains the movement in the stock market, with a heavy emphasis on marijuana stocks.
NYSE:MJ July 15, 2019 5:35pm

How did hurricane Barry affect natural gas?

NYSE:UNG July 15, 2019 4:11pm

Is Gold Retail Demand Faltering?

gold bars 2019
Gold retail demand seems to be faltering in Hong Kong, where gold recently hit a 6-year high. Gold gift sales are down 4.4% year-to-date and look stagnant in the current month. Shoppers seem concerned by three factors right now. First, those prices are very high; that seems obvious enough.  Second, that the Year of the Pig is viewed as a less-great year to get married in.  And 3rd, that US-China trade war uncertainties meant future economic conditions are less favorable than before. The result is that retail gold demand in Hong Kong has fallen back to primarily investment purchases.  Typically gold investors form a steady floor for Hong Kong demand, and jewelry sales are the variable above that. The year is just passing through the summer wedding season, so we are keeping an eye on sales for the next few months. Some trade outlets are whispering that people are trading in gold bars bought before. This would mean either that people are strapped for cash, or they expect lower gold prices in the near future. It could be that Chinese people are concerned about weak current data from their economy and are simply hoarding cash. Gold prices are expected to rise as several countries (including the US) weaken their currencies by lowering interest rates. Technical chart readers tell us we are at a critical inflection point for gold.  As old-time traders used to say, "it'll either go up or down from here".  So we face the same old two questions traders have had to answer forever: Which way, and When?  Your friendly Gold Enthusiast took a crack at the When question last week. Which direction - in the US at least - depends most on what the Fed does next.  If they lower interest rates, gold will head up in US Dollar terms.  If they decide to leave rates alone we may well see a drop in gold prices, again in US Dollars. At this point we pause and think wistfully back to when the market wasn't so driven by the US Federal Reserve... Signed,   The Gold Enthusiast DISCLAIMER: The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He has no plans to trade the shares in the next 24 hours but is watching option prices for another possible covered call trade.
ETF BASIC NEWS July 15, 2019 10:57am

Is Silver Really a Better Buy Than Gold?

silver gold bars
NYSE:GDX July 11, 2019 5:42pm

Natural Gas – The important support level that’s now resistance

NYSE:UNG July 11, 2019 11:19am

Is Gold Destined for Summer Doldrums in 2019?

gold bars 2019
Every summer gold traders tremble in fear of "the summer doldrums."Newcomers to the gold scene might be asking whether the summer doldrums are a real thing?  While old-timers might ask: "Does it look like we'll get those this year?" Here's a 1-year chart of GLD - guess for yourself on each question, then your friendly Gold Enthusiast will weigh in. spdr trust gld 2019                     As you can see the recent gold rally is no joke.  It almost looks more like a Bitcoin rally in miniature -- haha. (Longtime readers will know The Gold Enthusiast is not a true Bitcoin fan.) But first let's examine this whole mythological summer doldrums idea.  The summer doldrums are called that because all the big retail news about gold happens in other times of the year.  In the Fall it's India buying gold preparing for marriage season.  In the Winter and Spring it's marriage season itself, along with Christmas and New Year holidays in the West.  Then in Spring there's gold gifting season in India and parts of the Middle East. And for some reason Russia always seems to be buying gold for their central bank reserves in December.  Then in January there's a burst of New Year optimism, with manufacturers projecting their gold use for the year. But in summer there's - just not much.  Not much news, other than July earnings season in US markets, which is a snore-fest by US earnings season standards. That's where the idea of summer doldrums comes from.  It is a thing - it's when the gold market kinda goes news-cold.  Not that nothing's going on, just that relatively there's not much to put gold on the front page.  On a known, repeating basis. Which brings us to this year.  This year we have some geopolitics!  And as we all know, geopolitical uncertainty is a big driver of gold prices.  The 1-year chart of gold above shows a dip from July through August, then a slow gradual sideways move until December.  That was owning to a lack of good news from the retail markets as well as a lack of uncertainty in geopolitical terms. Then came December when the picture for gold brighted up. A lot. Now as we head into this summer we have quite a bit of uncertainty.  Yes, it looks like we have a truce in the US-China trade war.  But in the meantime, Iran rattled a few modern sabers, with some actual missile firing and ship-attacking.  And the US responding more with words and economics than with shooting.  So while this-all gets sorted out we have - geopolitical instability. And we're into summer this year from a much higher price level.  Which either adds to the upside potential, or to the size of the downside slump, depending on which way you want to call it from here. So the answers to our original questions were Yes and No.  Yes, the summer doldrums in gold are a real thing.  And No, it doesn't look like we'll have those this year. Signed, The Gold Enthusiast DISCLAIMER: The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He has no plans to trade these in the next 24 hours.
ETF BASIC NEWS July 10, 2019 11:01am

Gold flashes a warning signal for currency markets

gold %dollars
NYSE:GDX July 10, 2019 10:37am

Why OPEC is a relic of the past

  • A nine-month extension to production cuts
  • Russia’s profile rises
  • Output policy now depends on a triad of the leading producers
  The international oil cartel met on July 1 and 2 at its biannual meeting in Vienna, Austria. Before the meeting, the oil minister from the most influential member of OPEC, Saudi Arabia, said that his country would like to see Brent crude oil in a range from $60 to $70 per barrel.  Trades issues that threaten the global economy and the rising tensions in the Middle East are pulling the price of the energy commodity in opposite directions.  OPEC is not the influential body that determines the international price of crude oil anymore. The United States now produces over 12 million barrels per day, and Russia is one of the three leading producers. Two of the three world leaders are not members of the cartel, making it a toothless tiger. Meanwhile, OPEC attempted to shift the power balance back in its favor at the most recent meeting.    A nine-month extension to production cuts The price of crude oil went into and came out of the meeting within the price range that is the sweet spot for the Saudis.                  Source: Barchart   The chart illustrates that last week, the active month September Brent crude oil futures contract that trades in the Intercontinental Exchange traded in a range from $62.07 to $66.74 per barrel and closed last Friday at just over the $64 level. Brent is the benchmark pricing mechanism for most OPEC members and two-thirds of the world’s petroleum.  Since the price of Brent futures slipped from a high at $75.59 per barrel in April, it was no surprise that the members of the cartel agreed to extend the 1.2 million barrels per day production cut at their meeting. The only surprise was that the members decided to formalize its relationship with Russia with a partnership charter.  The Russians have been involved in OPEC production policy since early 2016 when the price of petroleum slipped below the $30 per barrel level. Russia bridged the divide between the Saudis and Iranian who have been arch-enemies in the region for years, to engineer a production cut that lifted the price of oil from the lows.  The news of the extension for the next nine months came as no surprise as Vladimir Putin and Saudi Crown Prince Mohammed bin Salman leaked the information at the G20 meeting the weekend before OPEC ministers gathered in Vienna.    Russia’s profile rises Russia’s involvement in OPEC production has been growing over the past three years. At the late 2018 meeting, the oil ministers could not agree on a final level for an output but until Russian oil minister Alexander Novak and President Putin mediated to come up with a 1.2 million barrels per day cut to the previous production quota when the price of oil was on its way to the lows late last year. Russia agreed to participate in the cut and over the years has bought lots of goodwill with the other members of the cartel.  Without Russia, OPEC would have absolutely no power these days since the US is now the world’s leading oil-producing country. The partnership agreement with the Russians serves to preserve at least some of the cartel’s influence when it comes to the path of the price of the energy commodity.    Output policy now depends on a triad of the leading producers In reality, OPEC is a relic of the past. The price of oil is now under the control of the three leading producers. Oil is one of the most political commodities in the world as more than half the reserves are in the Middle East. The US sanctions on Iran and recent retaliation when it comes to attacks on tankers, missiles flying from Yemen into Saudi sovereign territory, and an attack on a US drone near the Strait of Hormuz have increased supply risks for crude oil exports from the region.  Oil is a market with lots of vested political interest. The US administration has not been shy about its desire for more output from the Saudis and allies in the Middle East to keep the price of oil under control. The situation with Iran has only increased US pressure to increase production. Russia and the Saudis would prefer a higher price but realize that would only encourage even more oil to flow from the US. The political nature of the commodity means that there are likely lots of behind the scene influence peddling between Washington, Moscow, and Riyadh these days.  President Putin and the Crown Prince of Saudi Arabia already knew the verdict of the OPEC meeting before the ministers sat down at the table on July 1, and it is likely that President Trump also was aware of the outcome of the meeting before it occurred.  OPEC is now nothing more than a trade organization with Russia pulling the strings, and the US exerting influence through its relationship with Saudi Arabia.  _____________________________________________________________________________________ About the Author  Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is a top ranked author on Seeking Alpha in various categories.  Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.  Over the past decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities. Aside from contributing to a variety of sites, Andy is the Editor-in-Chief at Option Hotline.
NYSE:USO July 9, 2019 11:17am

Technically, gold charts look very bullish

gold bars 2019
NYSE:GDX July 9, 2019 10:55am

Silver Prices Struggle to Hold On [Details]

Silver prices dropped hard Friday as investors went back to equities. While the stock market closed down from the pre-holiday high, it was still a fairly strong showing for stocks compared to other investment groups.  Precious metals and other safe-haven trades took it on the chin Friday, with SLV down on a big-volume day.  That's not usually a good sign for bulls short-term. 3 month slv ishares silver trust(credit So we're back to looking at the chart to see how bad it is, and where our trading decision points are. Your friendly Gold Enthusiast would argue that for silver, we're sitting on it right now.  International silver is at 15.04 in pre-market New York trading, having gained enough cents to climb back above 15.00. There is a case to be made on the overnight 5-minute chart that 14.85 might be a more precise support level than 15, but as we're not looking to go short quite yet we'll just keep that knowledge in our back pocket for now. For most regular investors, SLV is the easiest way to trade silver in the US markets.  The current equivalent to 15.00 international silver in SLV is 14.05, so we'll be keeping an eye on that in the coming days. The other thing the SLV chart shows oh-so-clearly is how investors have adopted a real "safe-haven" view of silver.  Silver popped on June 20 when the Fed indicated they saw warning signs in the economy and might cut rates.  Normally falling interest rates are bad for precious metal prices, but the fear of recession triggered a relative stampede into silver.  News then about the gold-to-silver ratio hitting a fresh all-time high probably helped direct some traffic to silver that might have gone to gold. But as the chart shows, interest in silver waned almost immediately, with the metal not going any higher than it did that day. In fact, it's been the opposite - silver has lost ground on more days than it's made ground. Now that we're back down on support we'll have to see whether there is enough interest to keep silver in the current trading range, or if it's back to the basement... Signed, The Gold Enthusiast DISCLAIMER: The author is long the silver sector via small positions in PAAS, SVBL, and AGQ. He may sell the AGQ position if SLV closes below 14.05 for reasons discussed in this article, but has no intentions of trading the other positions in the next 72 hours.
ETF BASIC NEWS July 9, 2019 10:53am

Does Gold’s 5-Year High Mean It’s Time to Re-Think?

fine gold closeup photo
With gold hitting a 5-year high, it’s time for me rethink the yellow and the role it plays it both the broad investment landscape and possibly my own portfolio.  I’ve been a longtime skeptic of gold and remain stubbornly bearish regarding its long-term outlook.  To my mind, the oft-cited purposes that give it value are either diminishing or gone — using an alternate currency is quickly replacing bitcoin, which itself has seen a resurgence. The ability to hedge against inflation has been spurious, and using it as a store of wealth or a sage asset — in case of thermonuclear war — seems silly. If my fear is the end of the world, I’d rather own farmland with some cows.  But thanks to recent macro and political events have seen sovereign and individuals accumulating into the shiny stuff in recent months.  gld gold holdings graph 2019 And if we are to believe that the recent bullish boasts and bets made by some of the highest-profile money managers such as Stanley Druckenmiller, George Soros, Jeffery Gundlach and Bill Gross, it should be going ever higher in the months to come.  The basis for the bull calls varies a bit. But, they all underpinned that as Druckenmiller stated at Sohn conference last May, “gold has traded for 5000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates.”    Bottom line, one of the great knocks against gold was its inert nature and the cost to hold or store it in some fashion. Now with zero to negative rates on bonds, which can at best, return your original capital, gold with its theoretically unlimited upside looks increasingly attractive.  As you can see gold recently broke out of a near 4-year doldrum and appears poised for a what could be a multi-year bull move higher.  gld spdr shares 2019 chart But, what bucket does gold as an “asset” actually fall into and what role can it play in your portfolio? Some of the key determinants were based on how you view gold, to begin with; is it a currency, an inflation hedge, a safe haven, a commodity or some combination of all?  A recent article from Pension Partners provided a good overview for each of these labels. 

Gold as a Currency

Since the end of the Gold standard in 1972, we see an overall correlation of -0.37 between Gold and the Dollar Index, meaning that on average Gold and the Dollar move in opposite directions. rolling 1-year correlation gold vs us dollar But on average, it doesn’t mean always. In looking at the calendar year returns, Gold and the Dollar have moved in opposite directions 75% of the time. That means in 1 out of every 4 years they are actually moving either up and down together. And while Gold and the U.S. Dollar tend to move in opposite directions, the moves are not anything close to proportional. Since 1972, the Dollar Index has fallen 16% (-0.4% annualized) while Gold has risen 2875% (8% annualized). There is clearly more to Gold than just a falling Dollar.

Gold as a Commodity

Is Gold more of a Commodity? Let’s take a look. Since 1972, the monthly correlation between Gold and the Thomson Reuters Equal Weight Commodity Index (CCI Index) is .39. rolling 1-year correlation gold vs cci commodity index While Gold and Commodities tend to move together, that isn't the cade and the cumulative appreciation since 1972 has not been close to proportionate. In 31% of years, Gold has moved in the opposite direction to the equal weight commodity index, with an annualized return of 8.0% for Gold versus 3.1% for the CCI Index.

Gold as an Inflation Hedge

Since 1972, Gold’s 2,875% advance has far surpassed the cumulative rate of inflation in the US of 480% for the overall CPI and 473% for Core CPI. Digging in a little deeper, reveals that Gold is anything but a constant or proportionate inflation hedge. From 1972 through 1980, Gold surged 1256% versus a 110% increase in the CPI. During the next 20 years (from 1981 through 2000), the CPI rose 101% while Gold fell 54%.

Gold as a Safe Haven

We know that Gold is uncorrelated to the U.S. stock market, with a monthly correlation of 0.00 since 1972.  Meaning, it does provide a nice diversification from stocks but whether it’s any safer is up to debate.  gold vs s&p 500 rolling 1 year correlation

The Enigma that is Gold

The truth is that Gold cannot be simply defined as a currency, commodity, inflation hedge or safe haven. At various times it has been some/all of these things and at other times none of these things. Gold is not a pure play on any one factor but the sum product of multiple factors. If you believe the U.S. Dollar is going lower, short the U.S. dollar. Gold will likely rise but the inverse Dollar ETF (UDN) is certain to rise. If you believe commodities are going higher, go long a basket of commodities. Gold will likely rise with them but a broad-based commodity exposure (DBC) will have better odds. If you are concerned about inflation, Gold may end up protecting you in the long run. But, as we have seen, Gold can be a terrible inflation hedge in the shorter run (see 1981-2000).  Long-term bonds and stocks have been a much more consistent hedge against inflation than Gold over the past 40+ years. Finally, if you are seeking a safe haven – Gold may provide such exposure at times. But, the odds of that are not nearly as high as the consistency of treasury bills/bonds. Perhaps, the most important thing we can say about Gold is that it is truly an enigma. Its behavior is unique in terms of its lack of sensitivity to economic activity and non-correlation to stocks and bonds. That uniqueness, while frustrating to those who need to explain its every move, is what makes it an interesting component in a diversified portfolio.  It also makes Gold an effective baseline to which you can compare more economically sensitive commodities such as Lumber.  To extract long-term value from Gold, embrace the enigma. Leave the storytelling to those whose job it is to come up with a reason for its every move.  
ETF BASIC NEWS July 3, 2019 1:42pm

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