Morning Rundown | Goldman on Commodity Hoarding
"Hoarding by industry players tees up the next leg higher" they say
Market Rundown:
Good morning. The dollar is weaker by 35 points. Bonds are unchanged. Stocks are all up about 50bps. Gold is up $10. Silver is up 25 cents. Copper is very strong today up 14 cents. Grains are up as well. Crypto hangs on after yesterday’s bludgeoning up 1%
Stocks are now definitely moving inverted to inflation fears. As we stated several times, it is about oil now. Look for weakness in oil from increased supply by our Saudi friends (not from decreased demand) to bolster equities now. Which will then warn of Fed tough talk again. Also keep in mind China stimulus will boost US stocks
MS on Chip Shortage
While the situation remains fluid, discussions with OEMs, suppliers and data from our Asia Semis team (led by Charlie Chan) suggest the long-lasting global auto chip shortage may be edging closer to resolution. We see improved supply chain availability as an underappreciated trigger for the transfer of value from those who have enjoyed pricing power on the down-stream to those who have had to face rising input costs and lower production upstream.Like a rusty seesaw on a deserted playground… the balance will shift from dealers to suppliers.
Goldman on Commodity Hoarding
In the past two months, hoarding by consumers has concealed just how weak commodity demand has been. From early April to mid May, commodity fundamentals were effectively pushed into recession as China imposed the broadest COVID lockdowns since 2020. By our estimates, global oil demand fell 2.5% while onshore copper demand fell 10% as Chinese PMIs saw their worst print since February 2020.
To square this pricing paradox, investors must understand how commodity market behavior shifts when they enter into periods of prolonged scarcity. As we saw in gasoline markets in 2006, when inventories appear after a period of scarcity and volatile prices, market participants – from refiners to manufacturers – begin to hoard the spare stocks as a hedge against future scarcity.
**more at bottom**
Podcast
Long one, covers active trading for Gold and Bitcoin yesterday
https://twitter.com/i/broadcasts/1YqKDqnYvqLGV
Zen Moment
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