DMR–Gold the outlier as the commodities complex led by oil moves higher


Gold dithered around the $1290 mark today – down $2 on the day and in a continuation of the same trends that have kept it in a downward pattern for the past several days, i.e., a firmer dollar and rising bond yields. Silver is up 5¢ at $16.45.

While gold dithered, Brent crude oil prices breached $80 per barrel in overnight trading. Oil’s upside got another boost when Total, the French oil company, threatened to pull out of Iran unless the EU took measures to protect it against U.S. sanctions.  Financial Times interpreted the move as putting a “dent in EU hopes” of saving the nuclear accord with Iran.  Total is the largest foreign investor in Iranian oil production.

Brent crude is up 52.15% on the year and 8.7% over the past month, largely on MidEast concerns.  When one analyzes what is going on in the commodity markets – the CRB is up 13% over the past year – gold, comes up as the outlier.  It is up only 3.3% over the past year.  “The geopolitical noise and escalation fears are here to stay,” Julius Baer’s Norbert Rücker told Reuters yesterday. “Supply concerns are top of mind after the United States left the Iran nuclear deal.”

In its Morning Briefing today, Seeking Alpha says, “Government borrowing costs are continuing to grind upwards. The 10-year Treasury yield has broken through 3.1% – its highest level since July 2011 – as higher oil prices point to increased inflation following yesterday’s upbeat U.S. retail sales numbers.”

Perhaps the outlier is due for a turnaround. . . . .

Quote of the Day
“Thanks to almost a decade of unprecedented market interventions by global central banks (which have collectively acquired assets totaling over $20 trillion), everywhere you look there is repression of yields, repression of market volatility, and their side effects of exploding asset valuations (to heights not seen since shortly before past historic crashes), financial-engineered debt, leverage, stock-buybacks, cryptocurrency-insanity, ‘short volatility’ and all manner of reckless yield-chasing investment schemes. This is an age of massive artificial economic imbalances and systemic risks.” – Mark Spitznagel, Mises Institute

Chart of the Day

Chart courtesy of

Chart note:  We thought this chart would be an appropriate follow-up to comments made yesterday by Goldcorp chairman, Ian Telfer. “We’re right at peak gold here,” he said, “Are we not looking for it? Are we bad at finding it? Or have we found it all? My answer is we found it all.”  As you can see current global gold mine production in 2017 was 3150 tonnes.  Meanwhile, in a report issued this morning by the World Gold Council, it predicts physical demand will increase in the years to come the result of economic growth and a rising middle class particularly in China and India.  To that we would add growing demand for gold internationally as a safe haven.  Global gold demand was 4108 tonnes in 2017 and  got as high as 4738 tonnes in 2011, according to the World Gold Council. Scrap and above-ground inventories – both inconsistent sources – made up the gap.

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