Housekeeping: Good Morning.
Gold Revaluation is a process punctuated by events on Oct 22nd to Nov. 5th
Today:
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Commentary: BOA Commodity Report Gold/Silver
Equity Recap:
The S&P 500 and Nasdaq Comp closed at record highs during the shortened trading day on Wednesday.
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Bottom Lines
Three Ds could drive commodity prices higher into 2025
Decarb, Deglob, Data Centers.. and Debase
Energy & grains could trade in a range, with upside risks
Supply overhang is real
Copper remains the darling of commodity investors
Dont leave home without it
Power demand and price volatility are poised to surge
Freeport Keynote Copper presentation
Gold could hit $3,000/oz on Fed rate cuts; silver could outperform gold
There is a close correlation between investment demand and gold prices (Exhibit 33).
From this standpoint, a gold price average of $2,500/oz this year could be justified, if investment demand increased by around 20%. Yet, non-commercial purchases were up by only around 3% YoY in 1Q24, enough to justify an average gold price of just $2,200/oz YTD. Flows would not justify a gold price at $3,000/oz, our target for the next 12-18 months. Yet, if non-commercial demand picks up from current levels on the back of the Fed cutting rates, the yellow metal could push higher again.
Silver has similar demand drivers to gold, but it also has exposure to the energy transition, i.e. from solar panels and EVs (Exhibit 34).
Hence, we see the potential for silver to outperform gold going into 2025. Finally, PGMs fundamentals remain challenged on slowing production of cars with a combustion engine and lack of supply discipline.
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Market News:
"With elevated inflation preventing Federal Reserve officials from feeling confident enough to cut interest rates, some policymakers at their meeting last month called for careful attention to signs the labor market might weaken faster than anticipated." Source: WSJ
"A year and a half ago, Threads was but a twinkle in Mark Zuckerberg’s eye. Now, the rival to Elon Musk’s X has reached more than 175 million monthly active users, the Meta CEO announced on Wednesday. His announcement comes as Threads is about to hit its one-year anniversary." Source: The Verge
"Private companies added 150,000 jobs in June, below the upwardly revised 157,000 in May and the Dow Jones consensus estimate for 160,000. Leisure and hospitality added 63,000 jobs, easily the biggest gain among the categories that payrolls processing firm ADP measures.Source: CNBC
"Oil prices have climbed to a two-month high, as refineries gear up for the summer driving season and traders fret over renewed tensions in the Middle East. Source: FT
"Netflix is following through on its plan to phase out its cheapest ad-free tier for existing subscribers. As spotted in numerous posts on Reddit, Netflix is now asking some basic plan subscribers to choose a new plan to stay subscribed to Netflix." Source: The Verge
Geopolitics:
Israel will only end the war after achieving all of its objectives.
Hamas said it did not drop the condition of a ceasefire in Gaza, while it added that Israeli PM Netanyahu did not want a permanent ceasefire in Gaza and requires the movement to lay down arms, according to Al Arabiya.
Hamas leader said they are waiting for a positive response from the Israeli side to start negotiations on the details of the deal, according to CNN.
Russia's Defence Ministry said it is carrying out drills involving mobile nuclear missile launchers, according to Interfax.
Some headlines via NewSquawk or DataTrek
Data on Deck:
MONDAY, JULY 1 9:45 am S&P final U.S. manufacturing PMI June -- 51.7% 10:00 am Construction spendingTUESDAY, JULY 2 9:30 am Federal Reserve Chair Jerome Powell speech in PortugalWEDNESDAY, JULY 3 8:15 am ADP employment June 170,000 152,000', 2:00 pm Minutes of Fed's June FOMC meetingTHURSDAY, JULY 4 None scheduled, July 4 holidayFRIDAY, JULY 5 8:30 am U.S. employment report June 1
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