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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

5 World Currencies That Are Closely Tied to Commodities
September 5, 2018

This year, commodity prices have been under pressure from a strong U.S. dollar and trade war fears. This has made a huge dent in the balance sheet of many net exporters of resources, in turn weakening their currencies. However, commodities could be on the rebound and are flashing a massive buy signal.

This should come as a shock to no one, but what most people don’t realize is just how closely some currencies track certain commodities. I have shared several charts that show this correlation over the years at numerous industry conferences. Attendees were always astounded when I got to these slides – and we’re talking professional economists, money managers and CEOs here.

With that said, I think it’s important that you see this correlation as well. Below are five world currencies that have been impacted by lower commodity prices.

1. Australian Dollar

Australia is the world’s top iron ore producer and exporter, with usable iron ore output of 880 metric tons in 2017. This means that its income is very sensitive to price changes. As demand from China, the world’s largest consumer of iron ore and top steel producer, has softened, so too has the Australian dollar.

Australian Dollar Tracks Iron Ore Prices
click to enlarge

2. Canadian Dollar

The fifth-largest oil producer in the world is Canada, with an average production of 4.59 million barrels per day in 2016. Oil accounts for almost 11 percent of the nation’s exports – almost all of which is sent straight to the U.S. The strong correlation between the Canadian dollar and oil prices is largely due to crude oil being the largest single contributor of foreign exchange to the nation. Should oil prices continue to rise, so too should the Canadian dollar.

Canadian Dollar Tracks Oil Prices
click to enlarge

3. Russian Ruble

Compared to Canada and Australia, Russia’s export mix isn’t nearly as diversified: about half of its exports in terms of value are a combination of oil and natural gas. (Russia sits atop the third-largest oil reserves in the world and the number one natural gas reserves.) It should come as no surprise, then, that its currency is highly influenced by the price of crude. When oil fell in July 2014, so did the ruble. However, the ruble and crude decoupled in early 2018 when the U.S. imposed sanctions against the Eastern European country for its alleged meddling in the 2016 presidential election.

Russian Ruble Tracks Oil Prices
click to enlarge

4. Colombian Peso

The same story can be found in Colombia, where oil exports are responsible for about 20 percent of government revenue and 25 percent of total exports. Although oil exports fell from $12.7 billion in 2015 to $8.26 billion in 2016, production exceeded targets in 2017 with an average 854,121 barrels per day. As Venezuela’s economy falls further into disarray, Colombia has taken its place as the number five exporter of oil to the U.S. – one of the world’s biggest markets.

Colombian peso tracks oil prices
click to enlarge

5. Peruvian Sol

Copper is Peru’s most important mineral export by value, amounting to 24 percent of exports in 2016 worth $8.77 billion. With around 81 million metric tons of copper reserves, it’s the second-largest producer after Chile. As such, the Peruvian sol has declined in tandem with the red metal.

Peruvian Sol Tracks Copper Prices
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How familiar are you with the world’s currencies? Test your knowledge in this interactive quiz!

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Oil Takes Center Stage: Commodities Halftime Report 2018
July 16, 2018

meet the top ranking commodities for the first half of 2018

Near the beginning of the year, Goldman Sachs analyst Jeffrey Currie made the case that the macro backdrop right now favored commodities in 2018. With inflation pushing prices up and world economies borrowing record amounts of capital, it was the best time “in decades,” he said, for investors to have exposure to base metals, energy and other materials.

“Commodities had a miserable year” in 2017, Currie told CNBC. “History says commodities will outperform equities this year.”

Currie’s forecast has been mostly accurate so far. Except for a rocky June, commodities have been one of the best performing asset classes in the first half of the year. From January to the end of May, the group, as measured by the Bloomberg Commodities Index, rallied close to 3 percent—170 basis points ahead of the S&P 500 Index. Advances were largely driven by crude oil, which currently seeks to close above $80 a barrel for the first time since November 2014.

Of the 14 major commodities we track at U.S. Global Investors, oil was the standout performer, gaining roughly 23 percent, followed by nickel (up 16.76 percent) and wheat (16.51 percent). You can view our always-popular, interactive Periodic Table of Commodity Returns by clicking here.

commodity returns in the first half of 2018
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There are a number of factors supporting oil right now, not least of which is President Donald Trump’s decision to withdraw the U.S. from the Iran nuclear deal. The move has the potential to significantly curb exports out of the Middle Eastern country, responsible for about 4 percent of the world’s supply. Markets were further disrupted two weeks ago when the U.S. government warned importers to stop buying Iranian oil or face sanctions.

In addition, supply is being squeezed by worsening economic conditions in Venezuela, which sits atop the world’s largest known oilfield, and conflict in Libya, home to Africa’s largest oil reserves. On Wednesday of last week, though, Libya indicated it would resume exports from its eastern ports, which sent Brent crude down more than 2 percent.

Global Oil Consumption Blasted to New Heights

Many investors might be inclined to believe the oil rally is over, but I think we could continue to see movement to the upside on further supply restrictions and rising demand. In its June Statistical Review of World Energy, British oil and gas giant BP reports that consumption grew for the eighth straight year in 2017, climbing to 98.2 million barrels per day (bpd) for the first time ever. We would need to see growth of only 2 percent by the end of this year for demand to reach and surpass 100 million bpd—a phenomenally large sum.

This could be achieved if Chinese demand growth remains as robust as it’s been for the past decade. Consumption stood at 12.8 million bpd in 2017, a new record for the country. This figure is up 64 percent from only 7.8 million bpd in 2007.

Although China is now the world’s number one auto market in terms of sheer size, vehicle and vehicle finance penetration are still relatively low compared to the U.S., Japan, Germany and other major economies. There were about 115 vehicles per 1,000 people in 2015, according to J.D. Power, compared to the U.S. with 800 vehicles per 1,000 people. That means there’s plenty of upside potential for energy as more Chinese households are able to afford automobiles.

Speaking of autos, the excitement over electric vehicles (EVs) is helping to drive up the cost of nickel, vital in the production of lithium-ion batteries. In the first six months of the year, the price of nickel rose close to 17 percent, to $14,823 per metric ton. As impressive as that is, it’s still three and a half times below its all-time high of $54,050, set in May 2007.

Commodities Now a Buy: Goldman Sachs

As I said earlier, commodities had a rough June, falling some 3.64 percent as trade tensions between the U.S. and China escalated. This was the group’s biggest monthly slump in nearly two years, led by copper and soybeans.

goldman sachs says commodities now a buy after biggest monthly decline since 2016
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Goldman analysts say this has created a well-timed buying opportunity, as the selloff was overdone. According to the bank, the U.S.-China trade war impact on commodities “will be very small, with the exception of soybeans where complete rerouting of supplies is not possible.”

Goldman now forecasts a 10 percent return on commodities over the next 12 months as the U.S. dollar corrects and trade fears subside.

If you recall, I made a similar bullish call on commodities back in April after showing that, relative to equities, commodities are as cheap now as they’ve possibly ever been. They’re even cheaper than they were in 2000, before the start of the last commodities super cycle. Had you invested in a fund tracking a commodities index in 2000, you would have seen your money grow at a compound annual growth rate (CAGR) of around 10 percent for the next 10 years, according to Bloomberg data.

history says now might be the time to rotate into commodities
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Copper Demand Should Accelerate With Electric Vehicle Sales

Among the most attractive opportunities I see is copper, which rose to an 11-month high of $3.29 per pound in early June before sinking 15 percent. Like nickel, copper has benefited from the forecast that EV adoption will accelerate. According to Bloomberg New Energy Finance, EV sales are expected to grow from a record 1.1 million units worldwide in 2017, to 11 million in 2025, then to 30 million in 2030.

This is good news for copper. As I’ve pointed out before, EVs require three to four times as much copper as traditional gas-powered vehicles.

copper price tumbled 15 percent on trade war fears
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“You’re going to need a telescope to see copper prices in 2021,” Robert Friedland, billionaire founder and executive chairman of Ivanhoe Mines, told us back in January when he visited our office.

Robert’s comment might be hyperbolic, but the thing to keep in mind is that demand for the red metal is about to turn red hot.

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the links above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 03/31/2018: BP, Ivanhoe Mines Ltd.

The Bloomberg Commodity Index is made up of 22 exchange-traded futures on physical commodities. The index represents 20 commodities, which are weighted to account for economic significance and market liquidity.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).

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A Massive Windfall for China's Fast-Growing Tech Giants
July 2, 2018

massive windfall china's fast growing tech giants

Stop buying Iranian oil or face the music.

That’s the message the U.S. government shared with the world last week, giving importers until November 4 to cut their consumption of Iran’s crude to zero—or expect sanctions. The threat comes a month after President Donald Trump withdrew the U.S. from the Obama-era nuclear deal.

West Texas Intermediate (WTI) responded by adding more than $6 to the price of a barrel last week alone, to end above $74.

U.S. toughness on iran pushes crude above $70 a barrel
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Other drivers included supply disruptions in Canada and Libya, as well as a sharp, more-than-expected decline in U.S. crude inventories. Nearly 10 million barrels were drawn in the week ended June 27, the most since September 2016. Crude is now up an eye-popping 70 percent from the same time last year, contributing to the inflationary pressure that’s pushed consumer price growth to a six-year high.

And there could be more upside, should supply crunches continue along with Trump’s ongoing geopolitical efforts to isolate Tehran. Ready to see $90-a-barrel oil? That’s the forecast from Bank of America Merrill Lynch analyst Hootan Yazhari.

“We are in a very attractive oil price environment,” Yazhari told CNBC this week, “and our house view is that oil will hit $90 by the end of the second quarter of next year,” or 12 months from now.

Even if this prediction ends up overshooting the mark, I believe there could still be money to be made in the energy space on tightening supply and strong global demand. For more, I urge you to watch this brief video outlining the six factors that matter when picking energy stocks.

Bull Market May Have Just Hit a Trade War Wall

The U.S. market is mere days from hitting a milestone that some investors might not have anticipated in the business-friendly era of Trump. Both the S&P 500 Index and Dow Jones Industrial Average have been stuck in correction mode since early February of this year, when inflation fears and concerns of a global trade war triggered a monster selloff.

Today marks the 100th day both indices have been in correction, and according to MarketWatch, if they stay sideways another nine trading days, it will become the longest such stretch since 1984.

Stocks managed to recover then, but as I see it, unless Trump softens his stance on trade, they will have a difficult time doing the same today. Stiff retaliatory barriers are scheduled to be raised by China, Canada and other key markets, and Canadian consumers have already started boycotting American-made goods. U.S. exports of steel, soybeans and other products are down from a year ago because of friction over the tariffs, which are essentially regulations that could jeopardize the positive work Trump has done in cutting red tape in other areas.

Below is the Dow’s performance so far this year, not including today, annotated with some key moments in the Trump trade war. I chose the Dow specifically because it includes the very largest U.S. exporters, some of which do tens of billions of dollars in sales in China alone. As the biggest U.S. exporter, Boeing delivered more than 200 aircraft to the Asian country last year, accounting for a quarter of the plane maker’s global sales. Apple generated around 20 percent of its revenue in China, or the equivalent of $44.7 billion.

key moments in trump trade war
click to enlarge

The question now is whether we’re headed for a recession, and how investors can prepare—though I believe the market is oversold, as I explain in the most recent edition of Frank Talk Live. The last nine years have been extraordinarily profitable, but every bull market must come to an end—not from age, remember, but from changes in monetary or fiscal policy.

Last week I offered one of my favorite strategies to face the next bear market with confidence. Discover what it is by clicking here.

Trade war friction has strained international relations in other ways than just trade, of course. Among those is foreign direct investment (FDI), essential for global economic growth.

Chinese FDI in the U.S. Just Fell 92 Percent

China’s tech industry is exploding. Last year, gross output value of Chinese tech firms hit 20 trillion yuan, or about $3 trillion, for the first time ever. Nine of the world’s 20 biggest tech firms now call China home, beginning with Alibaba, valued at half a trillion dollars. And for the past several years, China has filed far more patent applications than the U.S. on an annual basis. (I should point out, though, that the U.S. still has more patents overall, having just issued patent number 10 million.)

The Asian country, in fact, has more unicorns—or startups worth $1 billion or more—than any other nation on earth. Chinese unicorns account for more than half of the global total, and 66 percent in terms of valuation, according to the World Economic Forum (WEF).

Just look at the top 10 Chinese unicorns. Ant Financial, formerly known as Alipay, ranks first with a valuation of $145 billion. That’s about twice the value of the number one U.S. unicorn, Uber.

top 10 china unicorns
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It’s very likely even more capital will flow into these firms this year and next. That’s because Chinese FDI in the U.S. fell an incredible 92 percent in the first half of 2018, as the government cracks down on capital flight. The decline is also likely in response to the U.S. government’s increased scrutiny of Chinese acquisitions.

chinese foreign direct investment (FDI) in the U.S. fell 90 percent in the first half of 2018
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According to economic research firm Rhodium, Chinese investors have sold $9.6 billion worth of U.S. assets, including office buildings in New York, San Francisco, Chicago and Los Angeles. That’s after making only $1.8 billion in investments. What this means is that the country’s net U.S. FDI is negative $7.8 billion so far this year.
And regarding a possible rebound in Chinese investment activity, “looming U.S. policies present substantial headwinds,” writes Rhodium’s director of research, Thilo Hanemann.

So where will all this capital go?

I don’t think anyone can say for sure, but my guess is that this will be a huge windfall for the already fast expanding Chinese tech industry.

Only Half of China Is Online

There are even more reasons to be optimistic about the Chinese tech industry, including the fact that only a little over half of the country’s population is online. At 772 million people, the user base is massive—more than twice the size of the entire U.S. population—but penetration is only 54.6 percent, according to UBS. That’s well behind the U.K. (94.8 percent), Japan (93.3 percent) and the U.S. (87.9 percent).

china's online universe still has room for growth
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This means, of course, that the country’s tech and internet industries still have much room to grow.

China is already number one in mobile payments, having surged to a whopping $9 trillion in 2016, compared to only $112 billion for the U.S. The Asian giant is rapidly becoming cashless—so much so that a friend of mine recently had a hard time using paper money to make a purchase in a Chinese convenience store. In fact, a number of unmanned, fully-automated stores—most notably BingoBox and Alibaba’s Tao Cafe—have sprung up all over the country. Transactions are made simply by scanning your smartphone on a designated counter or plate before leaving the store.

Learn more about one of the world’s fastest-growing regions by clicking here!

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 3/31/2018: The Boeing Co.

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GO GOLD! Inflationary Tariffs Could Supercharge the Yellow Metal
June 4, 2018

Global sales of semiconductors crossed above 400 billion for fisrt time in 2017

Ready for inflation?

Just days after Treasury Secretary Steven Mnuchin reassured markets that a trade war between the U.S. and China was “on hold,” the Trump administration announced that it would be moving forward with plans to impose 25 percent tariffs on as much as $50 billion worth of Chinese exports to the U.S. Beijing has already suggested that it will retaliate in kind.

The White House also reinstated tariffs on imports of steel and aluminum from Canada, Mexico and the European Union (EU) after allowing earlier exemptions to expire. Again, there’s a big chance the U.S. will see some sort of tit-for-tat response.

Steel prices are already up 45 percent from a year ago. The annual change in the price of a new vehicle in the U.S. has been dropping steadily since last summer, according to Bureau of Labor Statistics data, but with the cost of materials set to rise dramatically, we could see a price reversal sooner rather than later.

US midwest hot rolled steel price up 45 percent from last year
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Next up, the U.S. government could slap steep tariffs on imported automobiles—and possibly even ban German luxury vehicles outright, according to a report by German business news magazine WirtschaftsWoche.

These decisions, if fully implemented, will have a multitude of implications on the U.S. and world economies. What I can say with full confidence, though, is that prices will rise—for producers and consumers alike—which is good for gold but a headwind for continued economic growth.

You Can’t Suck and Blow at the Same Time

US midwest hot rolled steel price up 45 percent from last year

Let me explain. I’ve often said that middle class taxpayers elected Trump president by and large to take on entrenched bureaucrats, cut the red tape and streamline regulations. People are fed up. A study last year by the Congressional Budget Office (CBO) found that government workers not only earn more on average than private-sector workers with similar educational backgrounds, they’re also guaranteed health, retirement and other benefits. Trump responded to these concerns by signing an executive order that eased the firing of federal workers.

He’s kept his word in other ways. Since being in office, he’s already eliminated five federal rules on average for every new rule created, according to the Competitive Enterprise Institute (CEI). He’s weakened Obamacare and Dodd-Frank, not to mention slashed corporate taxes.

In 2017, the number of pages in the Federal Register, the official list of administrative regulations, dropped to 61,950 from 97,069 the previous year. This is especially good news for productivity. Research firm Cornerstone Macro found that Americans were more productive when there were fewer rules, less productive when there were more rules. 

productivity decreased as the number of federal rules and regulations grew
click to enlarge

These are all positive developments that should help boost the economy. The problem is that they could be undermined by tariffs, which are essentially regulations. We believe government policy is a precursor to change, and history suggests that rising tariffs and regulations hurt the economy.

Consider automobiles. U.S. automakers are the second largest consumer of steel following construction. In March, the Wall Street Journal estimated that the tariffs could add at least $300 to each new vehicle sold in the U.S. And speaking to Bloomberg last week, a spokeswoman for the Alliance of Automobile Manufacturers said the tariffs on steel and aluminum imports will make cars more expensive. “These tariffs will result in an increase in the price of domestically produced steel—threatening the industry’s global competitiveness and raising vehicle costs for our customers,” Gloria Bergquist said.

Do tariffs on imported vehicles threaten united states auto sales
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Higher Inflation Has Historically Meant Higher Gold Prices

The good news in all this is that higher inflation has historically been supportive of the price of gold. In the years when inflation was 3 percent or higher, annual gold returns were 15 percent on average, according to the World Gold Council (WGC).

gold has historically rallied in periods of high inflation
click to enlarge

When gold hit its all-time high of $1,900 an ounce in August 2011, consumer prices were up nearly 4 percent from the same time the previous year. The two-year Treasury yield, meanwhile, averaged only 0.21 percent, meaning the T-note was delivering a negative real yield and investors were paying the U.S. government to hang on to their money. This created a favorable climate for gold, as investors sought a safe haven asset that would at least beat inflation.

CIBC: Major Gold Firms to Generate Strong Free Cash Flow and ROIC

gold has historically rallied in periods of high inflation

Finally, I want to draw attention to an exciting research report released last week by the Canadian Imperial Bank of Commerce (CIBC). I’m a huge admirer of the work CIBC does, especially that of Cosmos Chiu, director of precious metals equity research. Chiu and his team write that the “future looks brighter” for gold equities on improved free cash flow and return on invested capital (ROIC). Both factors are among our favorites. I recently shared with you a chart that shows that, over the past 30 years, ROIC outperformed other factors by as much as one and half times.

With gold trading near $1,300 an ounce, producers are currently posting positive margins, according to CIBC. As a result, every stock in the bank’s large-cap universe, with the exception of Kinross, is expected to generate positive free cash flow through 2019.

Go Gold! Royalty/Streaming Companies Deliver the Profits

The bank has even better news for royalty and streaming companies, particularly Franco-Nevada, Royal Gold and Wheaton Precious Metals. For one, the three big royalty names delivered combined shareholder returns of 6.2 percent between 2013 and 2017, outperforming both senior producers and physical gold.

Three largest royalty and streaming companies forecast to deliver strong return on invested capital
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Now, CIBC forecasts the royalty group will generate strong ROICs, “steadily inching higher over the next decade… to average between the 5 percent and 8 percent mark from 2018 – 2023.” ROIC measures how well a company can turn its invested capital into profits.  

Loyal readers already know we’ve long been fans of Franco-Nevada, Wheaton Precious Metals and other royalty/streaming names. To find out why we believe they’re the “smart money” of the gold mining space, I invite you to watch this brief five-minute video.

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (03/31/2018): Franco-Nevada Corp., Royal Gold Inc., Wheaton Precious Metals Corp.

Free cash flow is the cash a company produces through its operations, less the cost of expenditures on assets. In other words, free cash flow or FCF is the cash left over after a company pays for its operating expenses and capital expenditures or CAPEX.

Return on invested capital (ROIC) is a profitability ratio. It measures the return that an investment generates for those who have provided capital, i.e. bondholders and stockholders. ROIC tells us how good a company is at turning capital into profits.

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This Oil Rally Could Have Much Further to Go
May 16, 2018

a picture inside hive blockchain technologies cryptocurrency mining facility in inceland

For more than a week now, West Texas Intermediate (WTI) crude oil has been trading north of $70 per barrel, a level we haven’t seen since November 2014. Gas prices are likewise trending up, as I’m sure you’ve noticed. According to the American Automobile Association (AAA), the average cost for a gallon of regular gas was $2.88 on May 15, up nearly 25 percent from a year ago.

This will inevitably push inflation up even higher. In April, consumer prices advanced 2.4 percent year-over-year, their fastest pace since February 2017.

Energy the Best Performing Sector for the Three-Month Period

The good news is that energy stocks are also recovering. The S&P 500 Energy Index, which tracks heavy hitters such as Chevron, Exxon Mobil, Marathon Petroleum and more, is up almost 7 percent year-to-date, and 46 percent since its low in January 2016. As of May 15, energy was the top-performing sector for the three-month period, returning 14.5 percent.

energy stocks are recovering alongside oil prices
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Those returns could grow even more, if Bank of America Merrill Lynch’s latest forecast proves accurate. Analysts there believe the price of oil could climb back up to the $100 range as early as next year, which would add another $1 to the cost of a gallon of gas.

Speaking to CNBC this week, famed energy analyst Dan Yergin, winner of the Pulitzer Prize, said that Brent crude, the international oil benchmark, could reach $85 a barrel by July. This would serve as a “big stimulus” for U.S. drilling activity, he noted. I would add energy share prices to that assessment.

2018 gas prices higher than previous three years
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U.S. gas prices peaked at $4.11 a gallon in July 2008, according to AAA, and if you’re like me, you’re probably in denial that we might have to start paying that again at the pump. We’re not quite there yet, but it might be time to get your portfolio ready by adding to your energy exposure.

Venezuela Oil Output Deteriorates Further Ahead of Sunday’s Presidential Election

So what’s driving the current rally?

Besides greater global demand—supported by a healthy, expanding economy—two things in particular are keeping prices buoyant right now. Number one, President Donald Trump’s decision to pull the U.S. out of the Iran nuclear deal has the potential to curb exports out of the Middle Eastern country, by as little as 200,000 barrels per day (bpd) or as much as 1 million bpd, depending on your source. Iran is responsible for about 4 percent of the world’s supply, so the impact is not insignificant.

Global oil supply is also being squeezed right now by worsening economic conditions in Venezuela. A member of the Organization of the Petroleum Exporting Countries (OPEC), Venezuela sits atop the world’s largest proven oil reserves—and yet its monthly output has been declining rapidly for more than two years. In January, the most recent month of data available, the South American country pumped only 1.67 million bpd. The International Energy Agency (IEA) estimates output fell an additional 60,000 bpd in February. That’s a 31-year low with the exception of a brief period between December 2002 and February 2003 when oil workers went on strike, sending global prices soaring.

Venezuela oil production in freefall
click to enlarge

Venezuela’s crumbling economy will be top of mind this Sunday as its citizens go to the polls for the first time since socialist President Nicolas Maduro took power in 2013. Although hyperinflation has made the bolivar more worthless than tissue paper, and food and medicine shortages are an everyday thing now, it’s hard to imagine Maduro not walking away with a second term.

Venezuela is one of the most corrupt nations in the world, and the U.S. plans to hit back with steep oil sanctions following Sunday’s election. The beleaguered country is the third-largest supplier of crude to the U.S., following Canada and Saudi Arabia. Such sanctions would be a crippling blow not only to its oil industry but also the government’s already-fragile budget.

As unfortunate as this is, it nonetheless presents an opportunity to energy and oil investors, with additional upside potential as the country’s oil supply tightens even further.

Watch this brief video on opportunities in energy and natural resources by clicking here!

 

The S&P 500 Energy Index comprises those companies included in the S&P 500 that are classified as members of the GICS energy sector.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 3/31/2018: Exxon Mobil Corp., Chevron Corp., Marathon Petroleum Corp.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

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Net Asset Value
as of 09/21/2018

Global Resources Fund PSPFX $5.43 0.01 Gold and Precious Metals Fund USERX $6.77 -0.03 World Precious Minerals Fund UNWPX $3.51 -0.01 China Region Fund USCOX $9.53 0.27 Emerging Europe Fund EUROX $6.48 No Change All American Equity Fund GBTFX $26.83 0.12 Holmes Macro Trends Fund MEGAX $20.22 -0.11 Near-Term Tax Free Fund NEARX $2.19 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change