Gold: The Unimpeachable Commodity Investment

Author: Frank Holmes
Date Posted: September 27, 2019 Read time: 57 min


By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

Pierre Lassonde Says Gold Could Hit $25,000 in 30 Years

It’s official: Donald Trump has become only the fourth president in U.S. history to be the subject of a House impeachment inquiry.

I won’t say much on this, as the details of the inquiry are still unfolding. Plus, it’s an extremely divisive topic. Less than half of Americans support Trump’s impeachment, even after the news broke of his call with Ukrainian president Volodymyr Zelensky.

I will say one thing. If history is any guide, it’s highly unlikely that Trump will be convicted of any impeachment charges, especially with Republicans in control of the Senate. The only two presidents who have ever faced such charges, Andrew Johnson and Bill Clinton, were both acquitted. Richard Nixon, as you know, resigned before articles of impeachment could be drawn up.

I don’t believe investors have too much to worry about in the short term, despite Trump’s warning that “markets would crash” if he were impeached. “Do you think it was luck that got us to the Best Market and Economy in our history,” he tweeted this week. “It wasn’t!”

The sample size is small, but history shows that impeachments have had minimal impact on markets, and outcomes have been inconsistent. Stocks slid in the months following the start of Nixon’s impeachment inquiry, but far more important factors were at play, including the collapse of the Bretton Woods monetary system, the 1973 oil crisis and the start of the 1970s recession. In Clinton’s case, stocks ended up nearly 40 percent 12 months after the House announced its plans to impeach. But again, context matters. The U.S. economy was strong in the late 90s, and we were at the tail end of one of the longest equity bull markets in history.  

Not All Impeachments Are the Same S and P 500 Returns After Initial Presidential Impeachment Inquiries
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The scenario today looks very much the same. The U.S. economy—though it may be showing some cracks—is still going strong. Stocks have so far shrugged off threats of impeachment. Going forward, I would place the blame of any potential market weakness on other factors, from the global economic slowdown to ongoing trade tensions between the U.S. and China.

Germany on the Cusp of Recession

Indeed, if we look overseas, there’s much more that could rattle markets than U.S. political theater. Germany, for instance, may be on the cusp of recession, if it has not already entered one. The preliminary purchasing manager’s index (PMI) for September shows that the manufacturing sector in the world’s fourth largest economy is contracting at its fastest pace since the depths of the global financial crisis a decade ago. The flash PMI registered 41.4, an alarming 123-month low.

Germany manufacturing sector weakens to a 10 year low
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“The manufacturing numbers are simply awful,” commented Phil Smith, principal economist at IHS Markit, which produces the monthly report. “All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books.”

Car sales have been slowing across Europe for months now, as I’ve written about before. In August they were down a whopping 8.4 percent year-over-year, according to the European Automobile Manufacturers Association (ACEA). This has been a drag on Germany’s important automotive manufacturing industry, Europe’s largest and the world’s fourth largest by production.

Suppliers are feeling the pain as well. Continental AG, the Hanover, Germany-based manufacturer of auto parts, said this week that as many as 20,000 jobs were at risk over the next decade as plants will be closed not only in Germany but also Italy and the U.S.

Nervous investors have run for cover in the German bond market, where yields across the entire yield curve are currently trading in negative territory.

Helicopter Money Ahead?

A record $17 trillion in global debt now carries a negative yield, which is equivalent to about 20 percent of world GDP, according to a recent report by the Bank for International Settlements (BIS). The bank notes that the growing acceptance of negative yields has become “vaguely troubling.”

Just as troubling is the expanding level of global debt, which is now the highest it’s ever been in peacetime, according to Deutsche Bank’s recent analysis of 12 major economies. These dozen economies collectively have an average debt-to-GDP of 70 percent, the highest level in 150 years outside of a world war.

Global Debt at Its Highest level in Peacetime
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Jim Reid, the report’s lead author, warns that we may see central banks continue the sort of unconventional market interventions that have propelled record levels of borrowing in the first place.

“The multi-trillion dollar question is whether governments can successfully and consistently issue the holy grail of funding—zero-coupon perpetual bonds. If they can do that, spend the money, and central banks buy the bonds, then that is pure helicopter money,” Reid writes.

In its simplest terms, “helicopter money” refers to a rapid surge in money-printing, the hope being that it will spur economic output.

An inevitable consequence to this, of course, is runaway inflation. See: Weimar Germany, Zimbabwe and, more recently, Venezuela. 

WGC: Gold Is Still Under-Represented

I see gold as a solution to many of the issues I’ve laid out, whether it’s recessionary spillover from Germany, high debt levels or helicopter money.

I’m not alone in thinking this. In a September report, the World Gold Council (WGC) calls the yellow metal “the most effective commodity investment,” adding that “allocations of 2 percent to 10 percent in a typical pension portfolio have provided better risk-adjusted returns than those with broad-based commodity allocations.”

However, the WGC says, gold is under-represented in most commodity indices, meaning investors are underexposed.

“Investors who access commodities via a broad-based index often assume they have an appropriate allocation to gold. In fact, most broad-based commodity indices have a very small allocation,” the WGC analysts write.

Consider the S&P GSCI, which tracks 24 commodities. West Texas Intermediate (WTI) oil and Brent oil make up nearly half of the index with a combined weighting of 45 percent. Gold, meanwhile, represents only 3.73 percent of the index.

This underexposure can be seen in a recent review of global family offices’ asset allocations. UBS’ Global Family Office Report 2019, released this week, shows that gold represents as little as 0.8 percent of portfolios on average. Equities in developed markets are the top position, representing a full quarter of portfolios, but some managers say they are trimming their exposure in preparation for a potential recession. A full 55 percent of family offices believe a recession will make landfall by 2020, according to the study.

Global Family Offices Current Approximate Strategic Asset Allocation
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The good news is that, of the 360 family offices surveyed—which collectively manage approximately $5.9 trillion—17 percent said they were planning to increase their gold position in 2020. More than three quarters said they were keeping it the same. Only 5.3 percent said they would be decreasing their exposure.

Increasing their gold exposure, I believe, would be rational and prudent at this time. As I told Kitco News’ Daniela Cambone at last week’s Denver Gold Forum (DGF), the longer yields stay negative around the world, the better the chances are of gold rocketing up to $10,000 an ounce. You can watch the entire interview by clicking here.

Congratulations to the U.S. Global Marketing Team!

On a final note, I wish to congratulate our marketing team for the recognition they received this week from the Investment Management Education Alliance (IMEA), which promotes knowledge-sharing and investor education among marketers who work in the financial industry.

At this year’s event in Chicago, our team picked up two STAR awards, for Best Newsletter and Best Product Education Campaign, as well as special recognition for its community volunteering. U.S. Global now has 88 STAR awards to its name.

These accolades would not be possible without you, our readers and subscribers, so thank you!

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Until next week, happy investing!

U.S. Global Marketing Team Wins Distinguished Awards from IMEA Investment Management Education Alliance

Gold Market

This week spot gold closed at $1,497.05, down $19.85 per ounce, or 1.31 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 3.45 percent. The S&P/TSX Venture Index came in off 3.53 percent. The U.S. Trade-Weighted Dollar rose 0.61 percent.

Date Event Survey Actual Prior
Sep-24 Conf. Board Consumer Confidence 133.0 125.1 134.2
Sep-25 New Home Sales 659k 713k 666k
Sep-26 Hong Kong Exports YoY -7.4% -6.3% -5.7%
Sep-26 GDP Annualized QoQ 2.0% 2.0% 2.0%
Sep-26 Initial Jobless Claims 212k 213k 210k
Sep-27 Durable Goods Orders -1.1% 0.2% -2.0%
Sep-29 Caixin China PMI Mfg 50.2 50.4
Sep-30 Germany CPI YoY 1.3% 1.4%
Oct-1 Eurozone CPI Core YoY 1.0% 0.9%
Oct-1 ISM Manufacturing 50.3 49.1
Oct-2 ADP Employment Change 140k 195k
Oct-3 Initial Jobless Claims 215k 213k
Oct-3 Durable Goods Orders 0.2%
Oct-4 Change in Nonfarm Payrolls 140k 130k


  • The best performing metal this week was palladium, up 2.57 percent as hedge funds increased their bullish positioning to an eight-week high. Gold traders and analysts were split between bullish and bearish on the yellow metal this week in the Bloomberg survey despite the metal’s price swings. On Monday, ETFs added 498,162 troy ounces of gold to their holdings, the most in three months, according to Bloomberg data. Then on Thursday, ETFs added another 130,610 troy ounces of gold, marking the ninth straight day of inflows. Hedge funds boosted their bullish positions in gold to the most bullish on record with data going back to 2006.
  • Turkey’s central bank gold holdings rose $903 million from the previous week to bring total holdings to $25.9 billion. The nation’s reserves are up a whopping 45 percent year over year.
  • Even as gold prices had a very bad day on Wednesday, falling 1.8 percent, demand for gold-backed ETFs spiked. Holdings jumped the most since June. Bloomberg writes that this suggests some investors have been waiting for a pullback in order to buy the dip. Where is all this money coming from? Perhaps from divestment in the S&P 500. Bloomberg reports that the SPDR S&P 500 ETF Trust lost $8.7 billion to withdrawals last week and that the SPDR Gold Shares ETF saw $950 million in inflows, the most in three months.

Holdings in Gold Backed ETFs Surged the Most Since June
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  • The worst performing metal this week was silver, down 2.61 percent as hedge funds cut their net-long position to a five-week low. In negative economic news, U.S. home price gains in 20 cities decelerated in July for a 16th straight month. The S&P CoreLogic Case-Shiller index of property values increased 2 percent from a year earlier, which is the slowest since August 2012. U.S. consumer confidence saw the biggest drop since the start of 2019, falling to 125.1. This demonstrates that expectations for the economy are worsening, which poses a risk to household spending.
  • Sibanye Gold Ltd. announced that it plans to cut 5,270 jobs at its Marikana platinum mines in South Africa as deadlocked wage negotiations with workers brought a strike closer, reports Bloomberg. The company is restructuring operations that it acquired when purchasing Lonmin Plc earlier this year that made it the world’s biggest platinum miner.
  • Discounts on gold in India have widened significantly due to muted retail demand and higher unofficial imports, according to the World Gold Council Market Intelligence Group. The gold discount was $28 in July and then widened to $55 an ounce in August. Gold demand out of India, the world’s second largest consumer, has weakened due to higher prices but could rise in the coming month as Diwali approaches.


  • In a stock deal implying equity value of around C$338 million, Osisko Gold Royalties has entered into a definitive agreement to buy the remainder of Barkerville Gold Mines, reports Bloomberg. According to the article, the purchase is a premium of 26 percent over the Barkerville September 20 closing price. On the topic of gold names, Citigroup says that the latest signs are “strongly suggesting” that uptrends in precious metals are resuming after consolidating for the past few weeks. If you recall, earlier in the month the group said gold could rally to a record above $2,000 an ounce in the next two years. Similarly, Overseas China Banking Corp. agrees that gold should be supported in the short term, and could advance toward $1,600 an ounce.
  • A deficit in palladium could widen amid a lack of mine investment, reports Bloomberg. That is according to MMC Norilsk Nickel, which controls around 40 percent of global palladium output. The Russian company explains that the supply shortfall for palladium will be 600,000 ounces this year due to tougher environmental regulations underpinning demand. Palladium set another record on Wednesday after gaining over 30 percent this year, Bloomberg continues.
  • Conviction in gold’s uptrend is strengthening, according to UBS’s Global Precious Metals Comment for the week. As Joni Teves writes, as gold gains further upward momentum, UBS believes other areas in the market can become more active and support the next leg higher. “Participation out of China, the private wealth community, and retail investors has scope to pick up ahead, granted the supportive macro narrative remains intact,” she continues. Bloomberg ads in another article this week, which due to insufficient exploration spending, gold reserves have depleted significantly. This alone looks to be enough supply-side impetus to perk up the yellow metal.


  • According to AGF Investments, investors should be more concerned about the increasing prospects of Elizabeth Warren as president of the U.S. than the Donald Trump-Ukraine phone call scandal. The firm says that the Ukraine controversy is unlikely to affect stock markets and that President Trump should instead be attacking Warren as the main competition. According to Jefferies LLC, a 2020 election that pits Trump against Warren could finally crack the U.S. dollar’s multiyear rise by creating a massive spend fest, reports Bloomberg. Brad Bechtel, global head of foreign-exchange, says, “Warren and Trump’s tone would be different but the end result would be the same, massive blowouts of the U.S. government budget.”
  • Bloomberg reports that the repo market could be heading for trouble on Monday even as the market calmed this week. Last week the overnight repo rate soared to a record high of 10 percent amid a funding crunch that drew scrutiny to the size of the Fed’s balance sheet, writes Alexandra Harris. Thomas Cook collapsed this week, but not everyone was a loser. Hedge funds have been betting that some companies will fail by buying credit-default swaps. Bloomberg reports that more companies are set to follow Thomas Cook’s path as Europe’s economy slows and a growing number of companies are under stress.
  • The Minerals Council of Australia (MCA) has warned that gold companies could face mine closures if the Victorian government moves ahead with a 2.75 percent royalty on gold production. Australia is one of the largest miners of the metal. The MCA says that the projected $16 million in revenue the government would see from the royalty pales in comparison to the $300 million spent by Victorian gold mines in 2018 on wages, goods and services, taxes and community grants, the Financial Times reports.

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Index Summary

  • The major market indices finished down this week. The Dow Jones Industrial Average lost 0.43 percent. The S&P 500 Stock Index fell 1.01 percent, while the Nasdaq Composite fell 2.19 percent. The Russell 2000 small capitalization index lost 2.52 percent this week.
  • The Hang Seng Composite lost 2.15 percent this week; while Taiwan was down 0.92 and the KOSPI fell 1.99 percent.
  • The 10-year Treasury bond yield fell 3 basis points to 1.68 percent.

Domestic Equity Market

SP 500 Economic Sectors weekly performance
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  • Utilities was the best performing sector of the week, increasing by 1.31 percent versus an overall decrease of 1.15 percent for the S&P 500.
  • Marathon Petroleum Corp. was the best performing stock for the week, increasing 13.50 percent.
  • AB InBev’s Asia unit raised $5 billion in the world’s second largest IPO so far this year, trailing only the $8.1 billion listing of Uber.


  • Health care was the worst performing sector for the week, decreasing by 3.01 percent versus an overall decrease of 1.15 percent for the S&P 500
  • Micron Technology was the worst performing stock for the week, falling 12.33 percent.
  • Shares of Carnival Corp. and its rivals tumbled after the world’s largest cruise operator cut its earnings expectations for the full year, citing higher fuel costs due to Middle East tensions, along with the impact of Hurricane Dorian.


  • Peloton, the indoor fitness brand, began trading on the Nasdaq on Thursday and was valued at around $8 billion. The company makes stationary bikes and treadmills equipped with interactive displays. It also offers a subscription video service that streams exercise classes to its exercise equipment. However, Peloton ended its first day down 11 percent from its IPO price of $29 a share.
  • Google launched a $5 per month Play Pass subscription service that gives subscribers access to over 350 apps and games. Google Play Pass is available from on Monday in the U.S., and will become available to all Android users throughout the week.
  • Amazon launched Amazon Care, a virtual primary care clinic with an option for nurses to visit employees in the home, according to a CNBC report. The company also unveiled a vast array of new gadgets on Wednesday including the $130 ‘Echo Buds’ that come with Bose noise-canceling technology and a high end Echo smart speaker to take on Apple’s HomePod and the Google Home Max. The big focus for Amazon’s product blitz was Alexa-powered electronics, as the tech giant moves from smart speakers to smart home.


  • Beyond Meat fell as much as 4.4 percent after Exane BNP Paribas’ Mikheil Omanadze initiated shares with an underperform rating and a Street-low price target of $70. The analyst cited the stock’s high valuation and low barriers to entry in the alternative meat industry. The analyst also noted giants like Nestle, Tyson, Kellogg and Hormel are all working on competing products and have “far more firepower.”
  • Tinder’s parent company Match Group saw shares tumble after the Federal Trade Commission announced a lawsuit alleging the company used fake love-interest ads to lure consumers into buying subscriptions. The agency accused Match Group of unfairly exposing customers to risk of fraud, and issuing "false promises of ‘guarantees’" for subscribers.
  • Facebook has been hit with a new investigation by the U.S. government, this time from the Justice Department. This is the fourth recent investigation of the social media company.

The Economy and Bond Market



  • Contract signings to purchase previously owned U.S. homes rebounded in August by more than forecast, writes, helped by low mortgage rates and continued household income gains. The National Association of Realtors’ index of pending home sales increased 1.6 percent from the previous month.
  • Data from the Labor Department shows that jobless claims rose 3,000 to a three-week high of 213,000 in the week ended September 21. The four-week average, which is a less volatile measure, fell to 212,000, reports Bloomberg, the lowest since July.
  • Chicago Fed President Charles Evans doesn’t see the need to cut interest rates again because two recent reductions should be enough to lift inflation above the central bank’s 2 percent target, reports Bloomberg. “We’re pretty well positioned now to see how things play out from here,” Evans said Wednesday.


  • U.S. consumer confidence posted the biggest decline since the start of 2019. The Conference Board’s index decreased in September to a three-month low of 125.1 from a downwardly revised 134.2 a month earlier, according to data from the group. Both the present situation and expectations gauges declined, with the latter dropping to the lowest level since January.

US Consumer Confidence Deteriorates as Outlook for Economy and Job Market Worsens
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  • The preliminary IHS Markit services purchasing managers’ index for employment fell to 49.1 in September, Bloomberg reports, the lowest since December 2009, from 50.4 the prior month, according to data released Monday. The overall services PMI rose by less than estimated to 50.9 from 50.7. The figures suggest U.S. job gains will slow further, the article goes on to explain, after the four-month average of hiring at companies fell to the lowest since 2012.
  • Home-price gains in 20 U.S. cities decelerated in July for a 16th straight month, as values proved still too elevated for buyers despite low mortgage rates, writes Bloomberg. The S&P CoreLogic Case-Shiller index of property values increased 2 percent from a year earlier, the slowest since August 2012, according to data released Tuesday. 


  • Next Friday’s jobs report will be at the center of investor attention. The labor market has been one of the bright spots amid global and domestic economic and political turmoil.
  • The September ISM Manufacturing reading will be released Tuesday. Given its recent dip into contraction at 49.1, the forecast to 50.5 would be welcome as it would cross back up the 50 technical contraction threshold.
  • Incoming European Central Bank President Christine Lagarde said the global economy is likely to dodge an outright contraction, though trade tensions remain the top threat to the growth outlook.


  • The impeachment inquiry into Trump has rattled global markets and poses a serious setback to resolving the trade war, writes Business Insider. Additionally, the U.S. share of world exports is slipping, and Trump’s China spat has led to a slump in global trade. Trade volumes fell by 1.4 percent in the year to June, the article continues, pointing to the worst performance in nearly a decade.
  • Germany is ‘firmly in contraction territory,’ writes Business Insider, after the country’s PMI showed its lowest reading since October 2012.
  • The world is about to enter a low-growth “window of weakness” with near equal possibilities it will slip into recession or bounce back to recovery in the next year, according to a new economic forecast from Pacific Investment Management Co. “While recession is not our base case, it doesn’t take much to tip over an economy that is moving along at stall speed,” Pimco’s analysts wrote in a report released Thursday. “During this window, we think it is prudent to focus on capital preservation, to be relatively light in taking top-down macro risk in portfolios, to be cautious on corporate credit and equities.”

Energy and Natural Resources Market



  • The best performing major commodity for the week was sugar, which gained 3.97 percent on rains in Brazil delaying the sugar cane harvest. Imports of nickel ore are increasing ahead of an expected ban on ore shipments from Indonesia that many expect to lead to shortages. China boosted its inbound shipments of iron in August to 5.72 million tons, which is the highest level in 11 months. Additionally, Bloomberg reports that increasing withdrawals of nickel from warehouses in Europe and Asia are draining the supply of the metal used in creating stainless steel. Tighter supply could lead to higher prices of the metal.
  • Honda Motor Co. has agreed to buy 320 megawatts of wind and solar electricity from farms in Texas and Oklahoma, which is the biggest clean power purchase ever by an automaker, reports Bloomberg. This will allow the company to cut its greenhouse gas emissions from manufacturing by 60 percent in North America.
  • In good news for oil this week, a report released by the Energy Information Administration shows that although renewables will be the fastest growing energy source through 2050, oil consumption will still be key to meeting energy demand for several decades to come. The report shows that petroleum and other liquids will see their use increase through 2050, even as their share of global energy demand declines. Natural gas demand is seen as increasing by 1.1 percent a year.


  • The worst performing major commodity for the week was natural gas, which fell 5.33 percent.  Natural gas futures plunged this week and are headed for the longest streak of declines in more than seven years after government data showed a triple-digit gain in inventories for last week, reports Bloomberg. This news comes just as a Permian Basin pipeline starts up and production is outrunning demand for the fuel.

Natural Gas Plunges After Biggest Seasonal Storage Gain in Four Years
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  • Oil is also having a rough week as traders are confused by conflicting reports of when Saudi Arabia’s crude production will be back to running at full capacity after an attack that shut down some production earlier this month.  Saudi Arabia has said that it will restore lost output by the end of the month. Bloomberg reports that WTI oil futures fell 1 percent in New York on Tuesday after rising 1 percent on Monday. Oil is also suffering from weaker manufacturing data out of Germany.
  • Aluminum is falling toward its lowest in two years on concerns that demand will slow and that China has an overcapacity of the metal. Bloomberg reports that many players see the aluminum market moving into a surplus after years of a deficit. According to Christine Keener of Alcoa, financial subsidies available to Chinese aluminum producers have created an uneven playing field and are discouraging investments elsewhere in the world.


  • Ecopetrol SA, a Colombian state-owned oil company, is looking at more deals in the Permian Basin as the company seeks to add more reserves outside its home country, reports Bloomberg. In August the company made a $1.5 billion deal with Occidental Petroleum Corp to form a joint venture in the Permian. Colombia’s Energy and Mining Minister told Bloomberg in an interview this week that the nation is planning a 30-fold increase in the amount of solar and wind energy it generates over the next three years.
  • According to Morgan Stanley, cobalt and copper are the best positioned among industrial commodities to benefit from a recovery in global demand when it does happen, and ranked iron ore in last place. Most metals are lower this year due to growth headwinds out of China.
  • At the Bloomberg Global Business Form in New York on Wednesday, Planet Labs Inc. announced an initiative called “Satellites for Climate Action” that aims to provide precise data on greenhouse gas emissions. Will Marshall, co-founder of the company, says “there is a huge data emergency” and “we need to have the data to be able to do something.” The Satellites for Climate Action is a collaboration between Bloomberg, California Governor Gavin Newsom and San Francisco-based Planet Labs to collect data from space.


  • The U.S. hit Chinese companies with sanctions that are accused of shipping Iranian oil. This sent oil-tanker costs surging as freight markets were scrambling to find alternative ships. According to data from the Baltic Exchange in London, rates for ships hauling 2 million barrel cargoes of Middle East oil to Asia surged 19 percent.
  • Bloomberg’s Will Wade reports that natural gas is killing America’s nuclear energy and that wind and solar may finish the job soon. Nuclear plants struggle to compete with cheap gas coming from the nation’s shale fields. However, they generate 24 hour electricity without producing carbon emissions. Renewable proponents say that although green energy hasn’t nailed down the needed storage capacity to beat out nuclear, it’s only a matter of time before it does. BloombergNEF expects renewables to account for 48 percent of the U.S. power system by 2050.
  • Nestle SA is boosting inspections on coffee it purchases after recent tests confirmed that beans from some countries had high levels of weed killer that are close to a regulatory limits, reports Bloomberg. Nestle, the world’s largest coffee roaster, has informed suppliers of Indonesian and some Brazilian beans of the new procedures.

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Emerging Europe



  • Turkey was the best performing country this week, gaining 4.9 percent. Bank shares appreciated sharply with Turkiye Garanti Bank gaining 12.8 percent and Akbank 13.8 percent in the past five days. No specific positive news on the banks was announced this week. Some investors could be expecting the government to announce a more comprehensive solution to banks’ non-performing loans (creation of a Bad Bank with government support).
  • The Turkish lira was the best performing currency this week, gaining 1.3 percent against the U.S. dollar. The lira appreciated on hopes of an improving relationship between Turkey and the U.S. The U.S. verbally offered a new military contract for the sale of F-35 and Patriot missiles. However, President Trump did not meet Erdogan this week in New York as expected and both leaders did not find a solution to the creation of a buffer zone in Syria.
  • The industrial sector was the best performing sector among eastern European markets this week. Aselsan Elektronik Sanayi, a Turkish military equipment producer, was the best performing equity, gaining almost 5 percent.


  • The Czech Republic was the worst performing country this week, losing 2.1 percent. Czech’s economic confidence fell to the lowest level in nearly five years. The central bank has been raising rates since mid-2017, but left its main rate unchanged at 2 percent at this week’s meeting.
  • The Hungarian forint was the worst performing currency in the region this week, losing 1.1 percent. The currency weakened after the central bank projected lower inflation and economic slowdown and shifted to a more dovish stance.
  • Utilities was the worst performing sector among eastern European markets this week. PGE, a Polish power generator, was the worst performing equity losing more than 1 percent.


  • Russia is already the main grain exporter to China. It has now started to sell chicken and is preparing to export pork after China imposed tariffs on U.S. meats in the summer. Russia’s agriculture sector is growing and exports to China are rising, benefiting from the trade war between the U.S. and China.
  • Greece can be included in the European Central Bank’s (ECB’s) asset purchase program, known as quantitative easing, if it continues to make progress in implementing reforms, ECB President Mario Draghi said on Monday. For Greece to participate in the bond purchase it must have at least one investment grade credit rating from a major rating agency and its debt must be deemed by the ECB as sustainable.
  • Renaissance Capital’s research team recommends adding Turkish banks for the next three to six months. The economy has rebalanced, its growth forecast is being revised upward, inflation is coming down, but politics remain messy. For those willing to take risk, they recommend to increase exposure to the financial sector.


  • Germany’s composite PMI, a reflection of business sentiment, dropped to 49.1 in September from 51.7 in August. Most of the decline has been attributed to external uncertainties like the trade war between the U.S. and China as well as Britain’s plan to exit the European Union. The service PMI stayed above the 50 level that separates growth from contraction, but the composite PMI, which combines service and manufacturing activity, fell below the 50 level.

Germany PMI Data Weakened in September
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  • House Speaker Nancy Pelosi initiated impeachment proceedings against President Trump, accusing him of violating the Constitution in seeking help from a foreign leader to damage a political opponent. Impeachment procedures against U.S. presidents do not happen very often, but according to Cornerstone Macro’s team, previous impeachment cases led to large upward moves in interest rates and sharp appreciation of the dollar. Equity prices also moved sharply, albeit in different directions, Roberto Perli wrote in his note from September 25, titled “Impeachment and the markets: what history tells us?”
  • Brexit talk intensified in Great Britain after UK’s Supreme Court ruled that Boris Johnson’s decision to shut down parliament weeks before Brexit’s deadline was unlawful. He keeps pushing to take Great Britain out of the eurozone on October 31 with or without a deal. His opposition is asking for another extension to the Brexit deadline and a snap election. Political noise will definitely intensify next month.

China Region



  • The best performing indices in the region for the week were India’s NIFTY and SENSEX Indices once again, rising 2.11 and 2.13 percent for the week following up on last Friday’s tax cut surge. Thailand’s SET Index and Vietnam’s Ho Chi Minh Index also finished green for the week.
  • The best-performing sector in Hong Kong’s Hang Seng Composite Index was telecommunications, which fell only 1.49 percent for the last five trading days.
  • Taiwan’s industrial production came in at 2.28 percent year-over-year growth, surpassing analysts’ consensus for a 1.50 percent August growth rate.


  • The worst-performing index in the region was the Shanghai Composite, which fell 2.42 percent this week. Hong Kong’s Hang Seng Composite also dropped, falling 2.15 percent for the week.
  • The laggard sector in Hong Kong’s Hang Seng Composite Index this week was materials, which declined 4.53 percent, narrowly nudging out energy, which declined 4.41 percent in that time.
  • South Korea’s exports for September fell 22 percent year-over-year, down from a prior decline rate of 13.3 percent. Chip shipments were down 40 percent.


  • In what has of late developed into a regularly weekly comment, there remains opportunity for a degree of resolution to the U.S.-China trade war, which could potentially have immediate positive effects upon investor sentiment and add more corporate certainty. The word last weekend was that the cancellation of the U.S. farm tour had nothing to do with a breakdown or positioning in trade talks and may even have come at the request of the United States. Vice Premier Liu He reportedly remains on track for visits to the U.S. at least by the second week of October, with most recent reports suggesting the high level talks will even start next week. Early this week China granted new tariff waivers for purchases of U.S. soybeans, and mid-week media reported that Chinese buyers are also preparing to boost purchases of U.S. pork. (There is also an acute domestic Chinese shortage of hogs at the moment.) 
  • Third quarter GDP for U.S.-China trade war beneficiary Vietnam should come out this weekend, offering global investors more insight on the rising economic power of that Southeast Asian nation.
  • While we mentioned it last Friday following the immediate surge in Indian equities markets, it seems appropriate to offer the chart below demonstrating where India’s new taxation level clocks in versus some of its regional peers. The move under the Narendra Modi administration shifts taxation levels more to the middle of the pack, making the country much more competitive. The country also enjoyed one of its best back-to-back two day trading gains in equities markets since the financial crisis last decade.

India Tax Cut on Domestic Companies In Line with Rest of Asia
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  • In keeping with this section’s views, we once again reiterate that trade war escalation must remain a threat until it isn’t. President Trump announced that he has no interest in some partial deal; he wants a full deal. Does this still include an “interim” deal? (Hint: We don’t know.) While there were indeed some positive developments this week in the media turnaround on the farm tour and the granting of Chinese waivers for the purchase of U.S. soybeans, and the reiteration that Vice Premier Liu He remains on the schedule—now reportedly for next week—so too there remains the prospect of a breakdown or slowdown in talks, and with that, perhaps sentiment. While initially it seemed the announcement of Chinese agricultural purchases from the U.S. may well have allowed for some possible positivity on reading the relative state of the trade talks, the White House announced late in the week that it was considering restrictions on portfolio flows into Chinese securities—perhaps those listed there, perhaps even those listed here—which obviously at face value seems like a major potential negative for markets, sentiment, and the trade talks. Then again, given the regular shifts in sentiment around tweets, on-again/off-again talks and meetings, tariff hike implementation and delays, etc. the late-breaking announcement from the White House on Friday may also just be designed to ratchet up pressure and up the ante heading into the upcoming high-level talks and around the week-long Chinese holidays.  Time will tell, but of course, one would be remiss not to consider that trade uncertainty—specifically cited by the Federal Reserve as a concern in its recent “proactive” rate cuts—thus may also incentivize President Trump to attempt to keep all parties off balance while negotiations remain ongoing (and while he still publicly advocates for deeper rate cuts).
  • Unrest continues in Hong Kong, now reaching the roughly four-month mark and even as the city (and the Chinese mainland) prepare for upcoming of holidays. While China is set to be closed for a week starting on Tuesday, Hong Kong will be closed this coming Tuesday for National Day and subsequent Monday for Chung Yeung. As China prepares to celebrate its 70th anniversary, Hong Kong protesters are currently scheduled to hold protests into the weekend and upcoming holiday. National Day fireworks were called off in Hong Kong weeks ago, and this week’s town hall-style session put on by embattled HK CEO Carrie Lam led to no resolution—in fact, Ms. Lam reportedly had to wait hours for crowds to dissipate before she could leave the building. And in late news on Friday, the HK police reportedly banned the National Day protests.
  • The U.S. dollar hit new 52-week closing highs this week, which, as noted in the past, could continue to exert a degree of pressure on emerging markets.

Blockchain and Digital Currencies



  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended September 27 was Ether Zero, up 209.66 percent.
  • Bitcoin Futures contracts began trading for the first time this week on the highly anticipated Bakkt platform. According to Bakkt, the very first contract was executed at 8:02pm ET on Sunday at a price of $10,115.

Bakkt Futures trade was executed this week tweet

  • A fully-owned subsidiary of, Medici Ventures, has invested $2 million in blockchain-based identity firm Evernym, reports CoinDesk. Medici Ventures participated in Evernym’s Simple Agreement for Future Equity (SAFE), which will be transferred into preferred stock at an undisclosed date. “Evernym is bridging the gap between the siloed approach to identity and true self-sovereign identity,” Overstock CEO and President of Medici Ventures Jonathan Johnson said. “Everynm’s platform allows every person, organization, and connected thing to have an independent identity.”


  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended September 27 was ETERNAL TOKEN, down 74.29 percent.
  • Although numerous industry and media outlets had been reporting that Beijing was close to unveiling a digital payments system, China’s central bank is now denying those widespread rumors, reports MarketWatch. Over the weekend, the People’s Bank of China (PBOC) announced over its official rumor-busting website, Piyao, that it will not release a digital currency by November and internet giants Alibaba and Tencent will not be the first companies to utilize its online payment system when it is rolled out.
  • Cryptocurrency finance startup Circle announced on its website Tuesday that it has stopped its line of research reports, saying it needs to reconsider the offering, reports CoinDesk. “While we’ve made significant progress with our content offerings, it’s time to evaluate our contribution and overall strategy,” the announcement reads. “With that in mind, we’ve decided to pause Circle Research activity for the time being as we decide on a future direction for the program.”


  • As trading volumes decline on major cryptocurrency exchanges, some have decided to tune up their referral programs, reports Bloomberg. For example, Binance has allowed for bonus allocations to people who sign up via multi-level marketing programs (just like programs you’ve seen involving supplements, cosmetics or kitchen items). “How can you earn over 1,000 $BTC on #Binance without making a single trade?” Binance Tweeted this month. “Invite friends. Earn crypto together.”
  • Cryptocurrency is headed to the Mall of America in Minneapolis, Minn, writes CoinDesk. Flexa, a startup that makes it easier for cryptocurrency to be used in the real world, will be an advisory participant in a new demonstration store at the mall. The store is being organized in coordination with management consulting firm McKinsey. “The big thing for us is showing that cryptocurrency is an extremely legitimate, if not the best, form of digital payment,” Flexa CEO Tyler Spalding said.
  • Although a corrective bounce in price, if any, will likely be short-lived for bitcoin, writes CoinDesk, the digital currency is defending the key 200-day moving average support for the third consecutive day. The cryptocurrency fell more than 10 percent on Tuesday and investors are hoping to see a minor bounce up to $8,700.


  • In a company blog post on Monday, Kik Interactive CEO Ted Livingston announced that the app will be shutting down its core messaging service. As reported by CoinDesk, Livingston explained that the company’s ongoing dispute with the U.S. Securities and Exchange Commission (SEC) has forced it to close its doors.
  • An ex -ed official, Simon Potter, responded to the argument from the British central bank saying that a Libra-like “Synthetic Hegemonic Currency” would help end the dominance of the dollar as the global reserve currency during an event in New York this week. “I see no argument that makes sense to have something that complicated out there when you have large, liquid capital markets in the U.S.,” Potter said, as reported by CoinDesk. “Not having one currency that you can basically price things and have a deep market in, which makes life much harder for the global currency.”
  • According to one Bloomberg headline this week, bitcoin’s monster drop has indicators warning that more pain lies ahead. The article goes on to explain that although bitcoin is holding above the $8,000 level, a breach below would test its 200-day moving average support, which sits around $7,000. Another indicator for the coin shows it has yet to dip into oversold territory, which could portend further declines, Bloomberg writes.

top 10 gold countries with the largest gold reserves.

Leaders and Laggards

Weekly Performance
Index Close Weekly
S&P/TSX Global Gold Index 241.86 -9.21 -3.67%
Gold Futures 1,504.20 -10.90 -0.72%
Natural Gas Futures 2.40 -0.13 -5.29%
S&P/TSX VENTURE COMP IDX 569.58 -20.87 -3.53%
10-Yr Treasury Bond 1.68 -0.04 -2.32%
Nasdaq 7,939.63 -178.05 -2.19%
Oil Futures 55.94 -2.15 -3.70%
Hang Seng Composite Index 3,494.46 -76.61 -2.15%
S&P 500 2,961.79 -30.28 -1.01%
DJIA 26,820.25 -114.82 -0.43%
Korean KOSPI Index 2,049.93 -41.59 -1.99%
Russell 2000 1,520.48 -39.29 -2.52%
S&P Energy 440.45 -11.80 -2.61%
S&P Basic Materials 362.03 -4.09 -1.12%
XAU 91.07 -3.53 -3.73%


Monthly Performance
Index Close Monthly
Natural Gas Futures 2.40 +0.15 +6.62%
S&P/TSX Global Gold Index 241.86 -27.84 -10.32%
10-Yr Treasury Bond 1.68 +0.20 +13.64%
Oil Futures 55.94 +0.16 +0.29%
Gold Futures 1,504.20 -44.90 -2.90%
S&P 500 2,961.79 +73.85 +2.56%
S&P Energy 440.45 +24.74 +5.95%
Hang Seng Composite Index 3,494.46 +47.18 +1.37%
DJIA 26,820.25 +784.15 +3.01%
Korean KOSPI Index 2,049.93 +108.84 +5.61%
Nasdaq 7,939.63 +82.75 +1.05%
S&P Basic Materials 362.03 +14.17 +4.07%
Russell 2000 1,520.48 +47.76 +3.24%
S&P/TSX VENTURE COMP IDX 569.58 -14.24 -2.44%
XAU 91.07 -10.12 -10.00%


Quarterly Performance
Index Close Quarterly
Natural Gas Futures 2.40 +0.08 +3.27%
10-Yr Treasury Bond 1.68 -0.33 -16.48%
DJIA 26,820.25 +293.67 +1.11%
Oil Futures 55.94 -3.49 -5.87%
S&P 500 2,961.79 +36.87 +1.26%
Gold Futures 1,504.20 +80.80 +5.68%
S&P Energy 440.45 -25.28 -5.43%
Nasdaq 7,939.63 -28.13 -0.35%
Korean KOSPI Index 2,049.93 -84.39 -3.95%
S&P Basic Materials 362.03 -1.99 -0.55%
Russell 2000 1,520.48 -26.07 -1.69%
Hang Seng Composite Index 3,494.46 -303.36 -7.99%
S&P/TSX Global Gold Index 241.86 +22.82 +10.42%
S&P/TSX VENTURE COMP IDX 569.58 -10.47 -1.81%
XAU 91.07 +7.66 +9.18%


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This commentary should not be considered a solicitation or offering of any investment product.

Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.

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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 (06/30/2019):

Ecopetrol SA
Occidental Petroleum Corp
Turkiye Garanti Bank AS
Akbank T.A.S.
SPDR S&P 500 ETF Trust
SPDR Gold Shares ETF
Osisko Gold Royalties Ltd
Barkerville Gold Mines Ltd
MMC Norilsk Nickel PJSC

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index. The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The S&P/Case-Shiller Index tracks changes in home prices throughout the United States by following price movements in the value of homes in 20 major metropolitan areas. The Conference Board index of leading economic indicators is an index published monthly by the Conference Board used to predict the direction of the economy’s movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. The IHS Markit / BME Germany Manufacturing PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The widely tracked S&P GSCI is recognized as a leading measure of general price movements and inflation in the world economy. The index representing market beta is world-production weighted. It is designed to be investable by including the most liquid commodity futures, and provides diversification with low correlations to other asset classes. The NIFTY 50 index National Stock Exchange of India’s benchmark broad based stock market index for the Indian equity market. Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the Bombay Stock Exchange (BSE) in India. Sensex comprises 30 of the largest and most actively-traded stocks on the BSE, providing an accurate gauge of India’s economy. The SET Index is a Thai composite stock market index which is calculated from the prices of all common stocks (including unit trusts of property funds) on the main board of the Stock Exchange of Thailand (SET), except for stocks that have been suspended for more than one year. The Vietnam Stock Index or VN-Index is a capitalization-weighted index of all the companies listed on the Ho Chi Minh City Stock Exchange.