Silver Presents a Shiny OpportunityJul23

Precious Metals

Tumbling bond yields kindle investor demand for gold

These days, the conversation about gold is changing as fears rise about the fate of the global economy and bond yields continue to fall — pushing the total amount of bonds that provide a negative yield to almost $13tn by the latest count, up from $6tn in October, according to data from Barclays. The correlation between the growing volume of negative-yielding bonds and the rising value of gold is striking.

In normal times buying gold means investors miss out on earning interest on other assets such as bonds and stocks, the so-called “opportunity cost” of buying the precious metal. “Holding gold in a meaningful way within portfolios can be a costly exercise over the long term,” said Matthew Yeates, a fund manager at Seven Investment Management. But tumbling yields have erased that problem, at least for the time being.

Gold is increasingly seen by investors as one of the few solid hedges against the possibility of a US slowdown, analysts say, particularly amid growing expectations that further rate cuts by central banks will fail to lift global growth. “Gold as a zero-yielding asset will look even more attractive versus an asset that is guaranteed to lose money,” said Paul Wong, a former senior portfolio manager at Sprott Asset Management.

Investors have turned to gold instead of bonds to protect against any downturn in the US stock market as it continues to hit record highs, according to George Milling-Stanley, head of gold strategy at State Street Global Advisors.

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Precious Metals

Silver rallies to its highest in over a year, plays ‘catch up’ to gold’s gains

Silver futures marked a fifth straight day of gains session gain on Thursday, for their highest finish in more than a year. Tight supply concerns, along with strength in gold, may help lift prices for silver back to levels not seen since 2016.

“We were overdue for a rally in silver as the gold/silver ratio was sitting near historic highs,” said Chris Gaffney, president of world markets at TIAA Bank. “In short, silver had some ‘catching up to do’ as it was left out of the overall rally in precious metals during the first half of 2019.”

Silver’s most-active September contract settled at $16.198 an ounce on Thursday, up 22.7 cents, or 1.4%, for the session, the highest finish June 29, 2018, according to Dow Jones Market Data. The precious metal posted gains in each of the previous four sessions and trades nearly 6% higher so far this month. Year to date however, silver based on the most-active contracts have climbed by 4%, underperforming gold which has seen an 11% rise so far this year. Palladium futures have also seen an impressive 26% year-to-date rise.

“Gold has a pretty good head start on silver during the first half of 2019,” said Gaffney, who does not expect silver to surpass gold’s overall performance in 2019. Silver, however, “will outperform gold over the remainder of the year,” he said.

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Precious Metals

Buy SLV Now Before Everyone Else

The backdrop is set for silver to begin its outperformance going forward. It has been hated, shorted, possibly even manipulated for years. It has lagged gold and gold miners substantially in recent years, as it typically does in the early stages of a PMs’ bull market.

However, the Fed is ready to embark on another easing cycle, which I expect will be very extensive and should flood the financial system with massive amounts of liquidity. First to attempt to delay the recession, and then to pull the economy out of the recession. Gold, silver, and gold miners should do extremely well.

Furthermore, silver is already beginning to outperform gold, as it did in the later stages of the prior bull market, and as it has typically done throughout recent history. Moreover, silver mining shares that have been beaten down relentlessly in recent years could be the real “winners” percentage wise going forward.

Therefore, Seeking Alpha recently increased its silver/SLV positions, has added some silver miners to its portfolio, and will add more silver miners to AIG’s portfolio going forward. Returns could turn out to be phenomenal over the next few years in the silver segment in their view.

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Precious Metals

NASA to Explore Asteroid Containing Precious Metals Worth $10,000 Quadrillion

NASA IS GEARING UP for a 2022 mission to “Psyche 16,” an asteroid containing enough precious metal to make everyone on Earth a billionaire. Located between the orbits of Mars and Jupiter, Psyche 16’s natural resources, which include gold, platinum, iron and nickel, are estimated to be worth $10,000 quadrillion. Written out, that number is $10,000 followed by 15 zeros.

Before you start wondering what you might do with your billion-dollar bounty, consider the fact that NASA’s mission to Psyche 16 is strictly scientific. The space agency has no immediate plans to do any mining and the asteroid is way too large to tow back to Earth.

The space agency and its university partners are excited to explore Psyche 16 because it appears to be stripped to its core — a core made of solid metal. Scientists wonder whether Psyche could be the exposed core of an early planet, perhaps the size of Mars, that lost its rocky outer layers due to violent collisions that occurred while the solar system was forming.

The space agency is set to launch the Psyche spacecraft in 2022 from Florida’s Kennedy Space Center. It will arrive at the asteroid in 2026. And while NASA is not looking to capitalize on the precious metal bounty that Psyche 16 could yield, two space mining companies — Deep Space Industries and Planetary Resources — are both looking at smaller, nearby asteroids that could be rich in precious metals.

Read the full article from InStore Magazine +

Week Ahead

This week the advance estimate of US Q2 GDP growth will be in the spotlight, alongside flash Markit PMIs, durable goods orders, and existing and new home sales; UK CBI factory orders and distributive trade surveys; and Eurozone, Japan and Australia flash PMIs. The ECB policy meeting is likely to signal monetary easing as soon as in September while Turkey’s central bank is seen cutting interest rates by 250bps. Investors will also react to the outcome of the Conservative leadership election.

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US Consumer Sentiment Slightly Below Forecasts

The University of Michigan’s consumer sentiment for the US came in at 98.4 in July 2019, little-changed from the previous month’s 98.2 and slightly below market consensus of 98.5, a preliminary estimate showed. An improvement in consumer expectations was partially offset by a decline in current economic conditions.

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Euro Weakens on Imminent ECB Rate Cut

The Euro fell as much as 0.5% to 1.122 against the USD around 8:40 am New York time on Friday amid rising expectations of a lower ECB interest rate as early as next week. Money markets rose their odds for a 10bps cut in deposit rate next Thursday to nearly 60% from 40% earlier in the week and 10% at the start of June. The ECB deposit interest rate stands now at a record low of -0.4%.

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Asian Shares End Lower on Fed Rate Cut Views

Stock markets across the Asia-Pacific region closed in the red on Monday, amid uncertainties over China-US trade tensions and expectations that the Fed interest rate cut later this month will be smaller than anticipated after the Wall Street Journal reported on Friday that the central bank plans to cut rates by only a quarter-percentage point.

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Gold Eases from 6-Year High

Gold prices were down more than 1.2% to $1429.3 an ounce around 11:00 AM New York time on Friday, on the back of a stronger dollar while investors are taking advantage of Thursday’s gains to book profits. In the previous session, gold prices rose to the highest level since May 2013, amid investors’ expectations of an interest rate cut by the Fed and persistent tensions in the Middle East. Meantime, Silver prices dropped 0.9% to $16.20 an ounce, after hitting the highest level in over a year. 

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Silver Hits 13-month High

Silver increased to a 13-month high of 16.492 USD/t.oz.

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Oil Rallies on Supply Concerns

Oil prices climbed on Monday morning amid rising concerns of a supply disruption in the Strait of Hormuz due to tensions in the Middle East. On Friday, Iran seized a British oil tanker in the Gulf, after Britain’s capture of an Iranian tanker earlier this month while Libya said a shut down in the country’s largest oilfield caused a production loss of about 290,000bpd. The US crude rose 1% to $56.2 a barrel and the Brent crude jumped 1.5% to $63.4 a barrel around 08:25 AM London time.

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FX

Dollar index falls below 200-day moving average as Fed officials argue for quick action on signs of distress

The U.S. dollar weakened Thursday, with a closely watched index turning negative for the week, after New York Fed President John Williams sent ripples through financial markets by arguing that the central bank’s limited room for stimulus calls for quick action when signs of distress emerge.

The ICE U.S. Dollar Index, a measure of the U.S. currency against a basket of six major rivals, fell 0.5% to 96.69, leaving it down 0.1% for the week and below its 200-day moving average at 96.75. A decisive move below the average would be viewed by technicians as a loss of longer-term upside momentum for the index.

“When you have only so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress,” said Williams, in a speech at a research conference in New York. The remarks, which were echoed by Fed Vice Chairman Richard Clarida later in the afternoon, were cited for a rally in U.S. Treasurys that sent yields lower, while stocks also gained ground, pushing the S&P 500 to a session high amid moderate gains. The Dow Jones Industrial Average trimmed losses but traded nearly unchanged.

Trading in the fed-funds futures market reflected rising expectations that the Fed could move to cut its key lending rate by half a percentage point, rather than the typical quarter-point, when policy makers meet July 30-31. Traders now see a roughly 50% chance of a half-point move.

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Stocks

FANG stocks have lost their characteristic mojo, but investors are sticking with them

The mega-cap tech stocks that have led much of the record-long bull run have started to lose steam, but investors are still giving them the benefit of the doubt.

The so-called FANG block of tech giants — Facebook, Amazon, Netflix and Google’s parent Alphabet — are still mostly in the red for the trailing 12 months despite their strong year-to-date comeback. Amazon’s single-digit gains in the past 12 months can also be compromised if the e-commerce giant disappoints when reporting earnings next week.

It has become apparent that the backdrop for Big Tech is turning unfavorable from the government crackdown to the U.S.-China trade war to a global economic slowdown. Adding to the list of worries is their earnings trend — Netflix tanked more than 10% on Thursday on a surprising drop in the subscriptions number. But so far, many investors believe these are just “hiccups” on their mega upward trend.

Perhaps the biggest backlash brewing against those tech superstars is the government’s antitrust investigations. The Federal Trade Commission and Department of Justice have launched a probe into FANG’s privacy practices and monopoly claims. Meanwhile, a potential breakup of Big Tech has turned into a campaign issue in the 2020 presidential election.

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PBOC

China will ease policy further, but saving big ammunition for potential shocks

China is keeping all its economic policy tools within reach as the trade war with the United States gets longer and costlier, but still sees more aggressive action like interest rate cuts as a last resort should the dispute get uglier, policy sources say.

Heading off a sharper economic slowdown remains Beijing’s top priority, though officials fear easing too much could fuel debt and financial risks, according to government advisers involved in internal policy discussions. The Politburo, a top decision-making body of the ruling Communist Party, is expected to meet later this month to discuss economic and policy issues for the rest of 2019.

Barring a trade meltdown or other shock, the most likely options to boost growth in coming months include more fiscal spending and liquidity infusions by the central bank in various forms, sources said, building on similar steps over the past year. But financial markets may be more focused on what China signals in early August, if the U.S. Federal Reserve cuts interest rates as widely expected on July 31.

While a Fed cut would give China more room to move, possibly with a symbolic trimming of its short-term market rates, Reuters sources said there was no urgency do so, noting there is already ample liquidity in the financial system and asserting earlier stimulus measures are showing signs of kicking in.

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FinTech

The fight over Facebook’s digital currency could change the face of banking

As Facebook has described it, a Libra coin will be a digital asset that runs on a distributed ledger and will be “backed” by a “reserve” of fiat currency that will include US dollars, British pounds, euros, and Japanese yen. Facebook has created a nonprofit organization, called the Libra Association, to lead the development of the platform, has signed up 27 organizations as participants and plans to increase the number of organizations to 100 by next year. If we are to believe Facebook, the Libra Association will be a new kind of organization, one with no central authority. Blockchain technology is what makes it possible, the company says.

This week, David Marcus, head of Facebook’s digital-currency project, faced an onslaught of critical questions from members of the US Congress, several of whom said that what Facebook is proposing is actually a bank and should be regulated as such.

What seemed to matter more to Congress, however, was not whether the project meets the technical definition of a bank, but the significance of Facebook’s massive scale and potential to drive adoption of its currency. If billions of people start using it, Libra could have a profound effect on the global financial system. “Ultimately, if Facebook’s plans come to fruition, the company and its partners will wield immense economic power that could destabilize currencies and governments,” said Representative Maxine Waters of California, who chairs the Financial Services Committee.

But this isn’t just about Facebook. Big Tech is coming for financial services. We already see it in China, where WeChat and Alibaba’s digital payment services are ubiquitous. The Bank of International Settlements, which is known as the central bank for central banks, has warned that these firms and others, including Google and Amazon, could become “dominant” in the area thanks to network effects. In the face of this seemingly inevitable wave of change, policymakers will have to strike the right balance between fostering innovation and protecting consumers. Facebook has just given them a place to start: “What is a Libra?”

Read the full article from MIT Technology Review +

Plant-Based

UBS predicts plant-based meat sales could grow by more than 25% a year to $85 billion by 2030

The plant-based food market has seen explosive growth in the past year with the public listing of Beyond Meat and Burger King’s nationwide rollout of the Impossible Whopper. There could be plenty more growth to come: UBS expects the plant-based-protein or alternative-meat market to grow by 28% a year, from $4.6 billion in 2018 to $85 billion in 2030.

Brands such as Beyond Meat and Impossible Foods have been making waves in the food world. Beyond Meat’s share price has soared nearly 150% since its public debut in May, while Impossible’s Burger King partnership signals plant-based meat alternatives are ready for the mainstream.

Plant-based alternatives to dairy and eggs are also benefiting from the move away from animal products. Plant-based milk has grown nearly 6% in the last year in terms of US sales with brands such as Alpro and Oatly becoming household names. Plant-based eggs, such as those sold by JUST, have grown 38% according to SPINS and The Good Food Institute.

UBS expects the plant-based dairy market alone to swell to $37.5 billion by 2025. However, its growth estimates for the broader plant-based food sector could prove conservative “if plant-based meat adoption accelerates thanks to innovation and increasing consumer awareness.”

Read the full article from Business Insider +

3DP

The Army can now 3D-print body armor on the fly

Army researchers have devised a method to produce ceramic body armor, lightweight but strong, from a 3D printer. Except that 3D printers are meant to print out knickknacks, not flak jackets — which meant that engineers had to hack into the printer to get the job done.

Ceramic armor, light but hard, provides great protection but can also be difficult to manufacture, notably in combining materials to create a strong com composite. “For ceramics, that’s a bit of a challenge because with you can’t really do a one-step additive manufacturing process like you could if a metal or a polymer,” said Lionel Vargas-Gonzalez, a researcher at the Army Research Laboratory.

Ceramic armor stops bullets by shattering them or reducing their penetrative ability, but this depends on how porous the ceramic is. Ceramic armor can achieve “something that’s about 99 to 100 percent fully dense,” Vargas-Gonzalez said, and that density is important because “porosity is one of the main deficiencies of ceramic armor when it comes to being able to withstand threats.”

Vargas-Gonzales sees 3D printer ceramics as the “next avenue for armor because we’re going to be able to, in theory, design armor in a way that we can attach multiple materials together into a single armor plate, and be able to provide ways for the armor to perform better than it can be just based on one material alone.”

Read the full article from Task & Purpose +

Robotics & Automation

Robotic Surgery Giant Crushes Earnings Views; Is A Breakout Possible?

Intuitive Surgical (ISRG) crushed second-quarter earnings forecasts Thursday and delivered another period of $1 billion-plus in sales — but the robotic surgery stock dipped in after-hours action.

Shares of Intuitive Surgical slipped 0.7%, near 533, after the company announced earnings. The robotic surgery stock ended the regular session on the stock market today with a 2.5% gain, at 536.63. Intuitive Surgical stock is working on a buy point at 540.56 out of a cup-with-handle.

Intuitive Surgical sells a robotic surgery system called da Vinci. The number of procedures using a da Vinci system increased 17% in the second quarter. That was slightly below estimates, Evercore ISI analyst Vijay Kumar said. It was also below 18% growth in the first quarter.

Still, “Intuitive Surgical reported a big headline revenue and (earnings per share) beat, with the highlights being a big systems revenue number and solid operational expenses management,” he said in a report to clients.

Read the full article from Investor’s Business Daily +