Slowdown Jitters. Manic Metals Report 09/04/2024

Could the demand for precious and industrial metals grind to a halt? Markets got very worried as they got caught up in a lot of economic slowdown concerns and pre-election jitters.  Could Bidennomics stary to unravel as inflationary policies and the government trying to manage the economy by picking winners and losers in the chop sector, electric cars and energy start to backfire. Are we facing a major economic slowdown with oppressive corporate taxes could throw the US economy into reverse and squelch innovation and compete creativity? Maybe the Harris Campaign should look to the economic slowdown in China and take heed, so they do not repeat the same mistakes .  The uncertainty of all of this has led to consternation in the markets as concerns about the upcoming US presidential election and the weakness in global manufacturing put a whole new perspective on gold as a risk protection asset.
On one hand people have been buying gold because of political uncertainty the war in Ukraine but also inflation.
Because we have seen a big drop in the price of oil and while grain prices are recovering are at much lower levels than they had been and because of a drop in copper aluminum uranium the gold as an inflation hedge has lost some of its luster.

Yet with the Federal Reserve on track to cut interest rates in September and with the possibility of a weakening economy causing more rate cuts in the future ,gold should start to find a bid quickly based upon the fact that the US dollar will start to fade.
Obviously, there were some stagflation fears in the ISM data as it showed slower than expected production but higher than expected inflation.
KITCO News reports that ” Commodities are often seen as a safer go-to investment than stocks during times of economic strife as they make up the base materials that fuel the engines of society, but according to Goldman Sachs, the current environment is risky for most popular commodities, and gold offers the best protection against the loss of value.
“We strongly believe in the diversifying role of commodities in investment portfolios based on several structural drivers, including commodities’ hedging role against supply disruptions, not an uncommon occurrence in energy, and the potential for sharp rallies in select industrial metals driven by a combination of long supply cycles and structural green metals demand growth associated with energy security and decarbonization investment,” analysts at Goldman Sachs wrote in their recent commodities update.
“However, given the current softening cyclical environment, we opt to tactically close our 2024 Deficits Basket trading recommendation with a potential gain of 8% and focus on our highest conviction views in the current environment, namely higher implied oil volatility, long gold and short long-dated European gas,” they added.  While they have closed the book on multiple commodity-focused investments, Goldman’s analysts said, “Gold stands out as the commodity where we have the highest confidence in near-term upside.”

We think a good play going into the end of the year would be a gold butterfly spread for the options it’s a way to take advantage of the bullishness and gold and give yourself a wide range for potential profits.

Copper prices also look like they’re getting ready to turn in perhaps useless weakness as a possibility to lock in some prices our expectations are that like previous sell offs and copper based on Chinese economic data will reverse soon as China will be forced to put in more economic stimulus there’s already a report from Bloomberg the China is going to lower interest rates for certain banks to help out their realities situation and with lower interest rates around the world the demand for Chinese start to increase some are concerned that the trump presidency could lead to new sanctions on Chinese products but it’s very possible that China is going to be in a much more friendly mood when it comes to negotiating with the trump administration than they were with the Biden administration we suspect that a trump presidency will be very bullish for metals as we expect to see the industrial sectors in the United states start to really take off.
Myra P. Saefong at Marketwatch points out that Copper futures have dropped over 20% from their all-time high this year. She said that “Commodities have declined in the third quarter, marked by hefty losses in oil and copper, as downbeat economic data from China and the U.S. fuel worries about a slowdown in demand. That has repercussions for financial markets, with signs of economic stress contributing to overall declines the U.S. and global stock markets on Tuesday.
WE are also seeing stress in construction . Mish Talk is reporting that construction that commercial real estate spending is down for the 10th consecutive month. Most other sectors joined the slump in July.
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This might be an attractive level to put on a gold platinum spread and a gold silver spread
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