Oil Takes Center Stage: Commodities Halftime Report 2018

Author: Frank Holmes
Date Posted: July 13, 2018 Read time: 48 min

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.

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 this 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.

Explore investment opportunities in commodities!


Index Summary

  • The major market indices finished mixed this week. The Dow Jones Industrial Average gained 2.30 percent. The S&P 500 Stock Index rose 1.50 percent, while the Nasdaq Composite climbed 1.79 percent. The Russell 2000 small capitalization index lost 0.41 percent this week.
  • The Hang Seng Composite gained 1.56 percent this week; while Taiwan was up 2.41 percent and the KOSPI rose 1.67 percent.
  • The 10-year Treasury bond yield remained flat at 2.82 percent.

Domestic Equity Market

SP 500 Economic Sectors weekly performance
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  • Information technology was the best performing sector of the week, increasing by 2.32 percent versus an overall increase of 1.50 percent for the S&P 500.
  • CA Inc. was the best performing stock for the week, increasing 19.96 percent.
  • The NASDAQ closed at 7,823.92 on Thursday, making for its first record close since June 20.


  • Telecommunications was the worst performing sector for the week, decreasing by 1.58 percent versus an overall increase of 1.50 percent for the S&P 500.
  • Broadcom Inc. was the worst performing stock for the week, falling 18.26 percent.
  • Johnson & Johnson has been ordered to pay the sixth largest product-defect award in U.S. history. A St. Louis jury awarded $4.69 billion to the 22 women who said its talcum powder gave them ovarian cancer.


  • Apple launched a new set of Macbook Pros on Thursday. The updated laptops have faster processors and most notably, a "quieter" keyboard.
  • The U.S. is on track to become the world’s biggest oil producer. The Energy Information Administration released data on Wednesday showing the U.S. will produce 11.8 million barrels a day next year, putting it ahead of both Saudi Arabia and Russia, the Associated Press reports. This could be a boon for U.S. oil companies if the price of crude holds up.
  • While defensive sectors have recently outperformed cyclical growth sectors, it is not a definitive sign that a stock market meltdown is coming.


  • Trump’s trade wars are starting to worry businesses. Federal Reserve Chairman Jerome Powell told Kai Ryssdal of "Marketplace" that business contacts across the U.S. sounded the alarm about Trump’s trade policy to the 12 Federal Reserve branches.
  • The Justice Department is appealing the $85 billion AT&T-Time Warner merger. The Department has argued that the merger would limit competition and drive up prices for consumers.
  • Former Tesla employee Martin Tripp has filed a "whistleblower" tip with the U.S. Securities and Exchange Commission, alleging the company lied about Model 3 production figures and installed unsafe batteries in its cars, the Washington Post reported.


July 11, 2018
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July 9, 2018
Get to Know Frank Holmes: Part 2
July 5, 2018
Get to Know Frank Holmes: Part 1

The Economy and Bond Market



  • The Labor Department said on Thursday its consumer price index (CPI) edged up 0.1 percent as gasoline price increases moderated and apparel prices fell. In the 12 months through June, the CPI increased 2.9 percent, the biggest gain since February 2012. The underlying trend continues to point to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.
  • U.S. producer prices increased slightly more than expected in June amid gains in the cost of services and motor vehicles, leading to the biggest annual increase in six-and-a-half years. The Labor Department said on Wednesday its producer price index (PPI) for final demand climbed 0.3 percent last month, also lifted by increases in gasoline prices. The PPI rose 0.5 percent in May. In the 12 months through June, the PPI advanced 3.4 percent, the largest gain since November 2011. Producer price gains echo the stronger economic environment.
  • The number of U.S. workers filing for unemployment benefits fell more than expected last week, hitting a two-month low, in a sign that labor market conditions remained robust in early July. Initial claims for unemployment benefits dropped 18,000 to a seasonally-adjusted 214,000 for the week ended July 7, the lowest level since early May, the Labor Department said on Thursday.


  • Consumer sentiment dropped below expectations at the beginning of July to a six-month low on rising fears regarding the Trump administration’s trade tariffs. Consumer sentiment fell to 97.1, according to the University of Michigan’s monthly survey of consumers. Economists expected a reading of 98.2, according to Reuters.
  • While business optimism remains near record highs, the latest NFIB Small Business Optimism Survey showed that 55 percent reported few or no qualified applicants for the positions they were trying to fill. Twenty-one percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem.
  • If the end of easy monetary policy, a trade war and myriad geopolitical dangers weren’t enough, a U.S. yield curve poised to invert is adding to the risks for investors.


  • Aside from a dip in April, retail sales have remained robust during the first five months of 2018. Next week’s retail sales advance is likely to uphold the growth trend.
  • New housing starts have trended upward in the last two months. A strong report next week could cement the momentum.
  • After a choppy first quarter, U.S. manufacturing has picked up pace since April. Next week’s U.S. Empire Manufacturing Survey will be scrutinized for gauging activity for the second quarter.


  • The prices of goods subject to foreign competition, such as toys and television sets, have tumbled over the past two decades as trade barriers have come down around the world. Prices of so-called non-tradeables, such as hospital stays and college tuition, have surged. Just as globalization has been a headwind holding back inflation, its unraveling could end up being a tailwind in the years ahead, pushing costs higher as countries and companies retreat from the international marketplace. That would be on top of the one-time effect that Trump’s tariffs will have on prices of selected imports, putting pressure on the Fed to raise interest rates at a faster pace than the gradual path it has currently mapped out.

Price Changes from 1997 to 2017
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  • The Leading Index has been decelerating since the start of the year. Unless we see a reversal in next week’s release, we could soon fall into negative growth. As a precursor to future economic growth, this would flash a warning sign about future prospects. 
  • Industrial production has been falling since April. With escalating tariff tensions, next week’s release is likely to continue the soft patch in production.

Gold Market

This week spot gold closed at $1,241.45 down $13.75 per ounce, or 1.10 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 3.18 percent. Junior-tiered stocks outperformed seniors for the week, as the S&P/TSX Venture Index came in off just 2.01 percent. The U.S. Trade-Weighted Dollar reversed course this week with additional tariff treats and rose 0.79 percent.

Date Event Survey Actual Prior
Jul-10 Germany ZEW Survey Current Situation 78.1 72.4 80.6
Jul-10 Germany ZEW Survey Expectations -18.9 -24.7 -16.1
Jul-11 PPI Final Demand YoY 3.1% 3.4% 3.1%
Jul-12 Germany CPI YoY 2.1% 2.1% 2.1%
Jul-12 Initial Jobless Claims 226k 214k 232k
Jul-12 CPI YoY 2.9% 2.9% 2.8%
Jul-15 China Retail Sales YoY 8.8% 8.5%
Jul-18 Eurozone CPI Core YoY 1.0% 1.0%
Jul-18 Housing Starts 1322k 1350k
Jul-19 Initial Jobless Claims 220k 214k


  • The best performing metal this week was gold, down 1.10 percent. Holdings in the SPDR Gold Shares ETF, which accounts for more than one-third of total bullion-backed ETFs, have fallen to the smallest since August. However, gold assets in the London-listed iShares Physical Gold ETC are at a new record. Investors in the U.K. are seeking a haven for their investments as Prime Minister Theresa May struggles to keep the government together, writes Bloomberg. Investors added $17.5 million in assets to the State Street SPDR Gold MiniShares ETF, an increase of 33 percent, for the fourth straight day of inflows. This is a new ETF with lower fees than the SPDR Gold Shares ETF mentioned earlier.
  • U.S. wholesale prices rose by the most since November 2011 in the 12 months ended in June, as the costs of services accelerated, as shown in a Labor Department report this week. Bloomberg’s Shobhana Chandra writes that this is an indicator that inflation pressures in the production pipeline are firming due to increased demand and tariffs on steel and other goods. Inflation has historically been positive for the price of gold.
  • Japan’s largest gold retailer said that gold bar sales in the first half of this year climbed 32 percent compared to the prior year due to falling prices, yen appreciation and growing demand from local investors. Oil saw its biggest weekly loss in more than five months due to escalating trade tensions, which is positive for precious metal miners in easing energy costs at mines.


  • The worst performing metal this week was platinum, down 1.80 percent as hedge funds boosted their bearish platinum outlook. Investors withdrew money for the ninth straight week from commodity-focused ETFs, reports Bloomberg. Outflows from ETFs that invest in precious metals narrowed while funds that can buy all types of commodities had losses, the article continues.
  • Sentiment for gold remained bearish this week, with traders saying this comes on the back of a subdued global trend, reports Bloomberg. The dollar extended gains from the previous session with U.S. inflation data along with trade war concerns boosting demand for the greenback. Other U.S. data came out this week, showing that some 3.56 million workers left positions in the month of May. According to Labor Department data, that is the most Americans quitting since 2000 and up from the prior month’s 3.35 million workers. 
  • Greg Barnes, an analyst with TD Securities, downgraded the recommendation on Kinross Gold Corp. to buy from action list buy, reports Bloomberg. Kinross recently had analyst tour their Fort Knox operations in Alaska where the mine’s life could be extended another nine years with the addition of the Gilmore property.


  • According to Bloomberg Intelligence Commodity Strategist Mike McGlone, the history of compressed gold prices could be a guide to show that the dollar should be peaking, with a potential for higher gold prices. McGlone writes that it has been almost two decades since gold sustained a narrower 24-month range and that the most recent similarly compressed period in 2001 and 2002 coincided with a peak in the trade-weighted broad dollar index and a bottom in gold. The yellow metal could also rise due to slumps in production. South Africa was once the world’s biggest producer of gold; however, production has been in a steady decline the last few years and fell 16.2 percent from a year earlier in May, for eight straight months of decreases. Another headwind for gold production in South Africa is that mining unions began wage talks this week where laborers have demanded a 37 percent increase in pay, as producers are constantly struggling to reduce costs in the world’s deepest mines.

south african gold production contracted the most in 15 months
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  • Barrick Gold Corp., the world’s largest producer of gold, reported a decline in second-quarter production as planned maintenance weighed on output, as expected. The gold miner produced only 1.05 million ounces in the first quarter of this year, which is the lowest amount for Barrick in 16 years. This emphasizes the notion that the world has hit “peak gold” supply where most of gold has already been discovered and it’s become much more difficult to find new deposits. Tighter gold supply can lead to higher prices.

barrick shrinkage gold output up from last quarter but still down from 2017
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  • The Federal Reserve began shrinking its balance sheet in October of last year and has already shrunk it by about $179 billion, with an expectation of eventually shrinking by $1.9 trillion. However, as Cornerstone Macro writes, the balance sheet shrinking is contributing to push the effective federal funds rate closer to the top of the range the Fed specifies, which was not supposed to happen so early. This could lead to rates not being increased by as much or as fast as previously expected with the Fed maintaining $800 billion to $1 trillion than expected on its balance sheet.


  • JPMorgan writes that if a global recession is looming, it might be time to own the Swiss franc, Singapore dollar, the U.S. dollar and the Japanese yen and to let go of emerging market currencies. Recessions are when creditors start to ask for their money back and the U.S. dollar would benefit since it is the world’s default funding currency. JPMorgan says that talk of a recession is “premature” and drew its research of currency performance over the last five recessions.
  • A Bloomberg opinion piece from Noah Smith shows that tightened immigration policies might have been a contributing factor to the stock market crash of 1929. In 1924 immigration was severely curtailed and the result of this dramatic drop in population influx was that it reduced long-term economic growth. Reducing the flow of people also limited the economy. The housing crash in the mid-1920’s might have been a direct result of the tightening of immigration, which then exacerbated the stock market crash in 1929.  History can repeat itself if the lessons are forgotten.
  • The U.S. released a list of an additional $200 billion in tariffs on Chinese products this week. There have been growing signs of frustration among GOP lawmakers as House Speaker Paul Ryan has said that tariffs “are not the solution.” Bloomberg writes that many Republicans have said they want to give President Trump a chance to see if his tariff approach works or persuade him to back down, rather than restricting his power to impose such tariffs. The tariffs might not have taken much of a toll on the economy yet as a lull in U.S. consumer inflation in June could prove temporary as the tariffs take effect.  Oddly on the new tariff list are rare earth elements that are used in everything from phones to wind turbines, but the U.S. has no domestic production and China accounts for 85 percent of the world’s production and 78 percent of our imports. 


Blockchain and Digital Currencies



  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended July 13 was Stox, which gained 99.89 percent.
  • A technical indicator from Divergence Analysis Inc. might be showing that the world’s largest cryptocurrency is bucking a selling trend and gearing up for a price increase, reports Bloomberg. The Buying and Selling Pressure Indicator (DVAN) is a “proprietary analysis charting the coin’s current price, trend line and ideal exit points” the article explains, and current suggests the selling trend that started May 14 could end shortly, giving way to a potential bull run.

this DVAN indicator shows a price surge may be on the horizon
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  • Litecoin, often called the silver to bitcoin’s gold, spiked on Wednesday to $81 per coin after news emerged that the Litecoin Foundation as acquired a 9.9 percent stake in Germany’s WEG Bank through a partnership with crypto-to-fiat payments provide TokenPay, writes CoinDesk. This new partnership has opened a door for new consumer-focused crypto payment solutions with Charlie Lee, litecoin founder, called the deal a “huge win-win” for all parties.


  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended July 13 was DWS, which lost 45.89 percent.
  • A new study by a small team at Boston College found that a majority of initial coin offerings (ICOs) failed within four months of their token sales. The study measures a coin’s social footprint via Twitter and found that only 44.2 percent of token projects are active into the fifth month or beyond. The study did however find that crypto-tokens continue to generate abnormal positive average returns after the ICO, in contrast to initial public offerings (IPOs).
  • China’s clampdown on cryptocurrencies appears to have succeeded, writes Bloomberg. Prior to the government shutting down the nation’s crypto exchanges last year, the Asian nation accounted for the majority of trading in bitcoin. Now, according to a state-run news agency in China, yuan-denominated trading in bitcoin has dropped below 1 percent of the global volume.


  • One of Google’s founders, Sergey Brin, told a gathering at a blockchain conference over the weekend in Morocco, that he’s been making a few bucks here and there mining Ethereum, the second-biggest digital currency. He explained that a year or so ago his son wanted to get a gaming PC, and Brin told him that “if we get a gaming PC we have to mine cryptocurrency.” So they got an Ethereum miner on it and have been mining ever since. He also acknowledged that Google missed an opportunity to be on the cutting edge of blockchain technology, but thinks the company’s research division Google X, could get involved.
  • DIRT, a startup company that is developing a protocol based on the ethereum blockchain to allow users to validate information across different datasets, has raised $3 million in seeding funding, according to CoinDesk. The San Francisco-based startup announced on Wednesday that several notable investment firms participated in the funding round, including Coinbase co-founded Fred Ersham. DIRT founder Yin Wu told CoinDesk in an interview that his goal is to have a platform where third-party decentralized application developers can create a token curated registry – similar to how Wikipedia uses the community to update and verify its data.
  • Last week FINRA released a note saying that member firms should declare any activity related to digital assets, such as cryptocurrencies or virtual coins and tokens. According to FINRA, they “encourage” firms to declare trading in digital assets, derivatives tied to such assets and pooled funds that invest in such assets. This new measure could help protect investors and discourages any “silent” or “hidden” practices going on within a regulated business.


  • The Trump administration made it clear that one of the greatest threats to the public right now is just emerging, reports Bloomberg. That threat is “red-hot markets for crypto coins.” Although the administration does view the digital token world as a threat, the formation of a task force to help protect consumers from this type of fraud is a positive opportunity for the entire space.
  • Bank of Queensland, one of Australia’s oldest retail banks, has revised its contract terms to prohibit borrowers from using loans such as mortgages to purchase cryptocurrency, reports Coindesk. “The move is the result of concerns over recent price volatility of the cryptocurrency market, as well as Australian regulators’ increasing scrutiny over the nascent space,” a report from Australia Finance Review said on Thursday.
  • Three of the world’s most respected economists are predicting that global regulators will come down hard on bitcoin, reports Barron’s. Nouriel Roubini, for example, says that “For bitcoin to be a currency it has to be a unit of account, a means of payment, and a stable store of value. It is none of these.”

Energy and Natural Resources Market



  • Iron ore was the best performing major commodity this week rising 40 basis points. The commodity posted its first weekly advance in three weeks after news of further environmental controls in China’s steel industry, which may trigger demand for higher quality iron ore inputs.
  • The best performing sector this week was the S&P 1500 Steel Index. The index rose 1.67 percent after Goldman Sachs suggested that steel could be the bright spot amid volatility within metals, as the trade risks should support near term domestic steel prices.
  • The best performing stock for the week was TGS Nopec Geophysical Co. The Norwegian oil & gas services company rose 9.13 percent after the company reported significantly higher customer activity, leading to a 47 percent rise in second quarter revenues.


  • Zinc was the worst performing commodity this week. The commodity dropped 6.28 percent, posting its worst week in a decade after a sharp slowdown in China’s import growth points and weaker domestic demand. 
  • The worst performing sector this week was the FTSE 350 Mining Index. The index dropped 2.18 percent after most metals were lower in London, with the London Metals Index posting a fifth consecutive weekly decline.
  • The worst performing stock for the week was Ingredion Inc. The Illinois-based corn producer and refiner dropped 11.07 percent to a 52-week low after the company warned it was experiencing “lower volumes sold and higher than expected manufacturing costs.”


  • Crude oil inventories in the U.S. dropped a shocking 12.6 million barrels, posting the second largest weekly draw in at least a decade. The Energy Information Administration reported a huge draw in crude oil inventories of 12.6 million barrels for the week ended July 6, after a build of 1.2 million barrels per day (bpd) reported for the previous week.

U.S. crude oil inventories post second largest draw in a decade
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  • The International Energy Agency warned on Thursday that spare oil production capacity risks are being “stretched to the limit” as supply disruptions and U.S. sanctions against Iran tighten the market, Financial Times reports. The Paris-based agency said that while there were signs of stronger oil, prices may start to weigh on demand growth. For now though, the key risk is supply capacity.
  • Steel in China rose on steel capacity curbs, showing little ill-effects from the ratcheting up of trade tensions between Washington and Beijing. More than half of China’s steelmaking capacity will be subject to anti-pollution controls and production curbs, compared with about a third last year, Prakash Sharma, head of China research at consultancy Wood Mackenzie, Bloomberg reports.


  • Commodity ETFs posted outflows for the ninth consecutive week. Outflows from U.S.-listed commodity ETFs totaled $345 million in the week ended July 12, according to data compiled by Bloomberg.
  • Ireland is set to become the first country in the world to divest from fossil fuels, after a bill was passed that requires its sovereign wealth fund to sell off its holdings in fossil fuel companies “as soon as is practicable”. The bill is part of a growing movement as investors steer away from fossil fuels. It follows recent moves by the Norwegian sovereign wealth fund to reduce its exposure to coal.
  • China’s crude oil imports fell for a second consecutive month in June to the lowest since December, as shrinking margins and volatile oil prices led some independent refiners, known as “teapots”, to scale back purchases. June shipments came in at 8.36 million bpd, according to data from the General Administration of Customs. That was down 9 percent from 9.2 million bpd in May.

China Region



  • Foreign exchange reserves in China rose slightly this month and beat expectations, climbing to $3.112 trillion.
  • Despite a drop in its initial day of trading in Hong Kong on Monday, Chinese communications equipment giant Xiaomi rebounded solidly and gained 26.18 percent in its first week of trading following its initial public offering. At present, the company’s market cap sits at about $61 billion, and the phone-making behemoth’s planned inclusion in the Hang Seng Composite Index was announced this week as well.
  • The world rejoiced with Thailand at the successful rescue of the 12 players and coach of the Wild Boar soccer team from the Mae Sai cave complex near the Myanmar border, even as the world was saddened by the death of a retired Thai SEAL that ran out of oxygen while placing extra compressed air tanks along the flooded exit route of the complex. Welcome home, Wild Boars, and enjoy watching the FIFA World Cup final this weekend!  


  • Vietnam’s Ho Chi Minh Stock Index declined by 81 basis points for the week, a lone red index amid a sea of green around the region.
  • The weakest sector in the Hang Seng Composite this week was telecommunications, which finished down 48 basis points. 
  • The Bank of Korea lowered its 2018 GDP forecast slightly, dropping down to 2.9 percent from a previous expectation of 3.0 percent.


  • Media reports on Friday suggested that China’s sovereign wealth fund may be preparing to invest in domestic Chinese stocks and bonds. Whether or not this is a certainty remains to be seen, but the possibility is intriguing, coming in the same week that Xinhua released a statement referring to “historic lows” in the A-share market and some tempering of the official Chinese rhetoric following the Trump administration’s latest round of proposed tariffs.
  • India’s car and SUV sales jumped the most in more than eight years for the June measurement period, Bloomberg News reported this week, pointing out that deliveries “surged 37.5 percent from the previous year.”
  • Sunny Optical (2382 HK) released handset lens shipments numbers for the June period that came in better than numerous analysts’ expectations. June shipments were up 83 percent year-over-year.


  • Foreign exchange reserves declined amid all emerging ASEAN economies over the last couple of months, and Indonesian authorities announced Friday that they had intervened on behalf of the rupiah.
  • While there may yet be smoother resolution to the U.S.-China trade spat—ZTE, for example, appears to have escaped from an all-out ban on purchasing U.S. components, leading the beleaguered stock to rally as much as 25 percent in one day amid Hong Kong trading—there remains a possibility that contentious trade issues drag on unresolved for quite a while, perpetuating a degree of uncertainty. This week China’s trade surplus with the U.S. for the month of June jumped to a new record of $28.97 billion.

china trade balance with u.s. at new record high
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  • North Korea remains topical. While U.S. Secretary of State Mike Pompeo returned from Pyongyang this week stating that Kim Jong Un has not backed off of commitments to denuclearization, the North Korean regime referred to U.S. demands as “cancerous” and “gangster-like,” and North Korean officials reportedly did not show up Thursday for planned meetings with American counterparts to discuss the return of U.S. soldiers’ remains. All this, of course, while North Korea’s Kim Jong Un reportedly sent U.S. President Donald Trump a nice note. Hopefully this is progress, but there remains a certain risk nonetheless.

Emerging Europe



  • The Czech Republic was the best performing country this week, gaining 67 basis points. The Czech inflation rate rose in June to a seven-month high, boosting the case for more interest rate increases. The Consumer Price Index (CPI) is at 2.6 percent, above the central bank’s target of 2 percent. Andrej Babis won parliamentary approval for a minority government, ending more than eight month of political uncertainty.
  • The Russian ruble was the best performing currency this week, gaining 73 basis points against the dollar. Despite Brent crude declining more than 6 percent this week, the Russian ruble, which usually is highly correlated with the price of oil, appreciated. International inflows in government bonds probably supported the ruble, according to an analyst at VTB Capital.
  • The utilities sector was the best performing sector among eastern European markets this week.


  • Turkey was the worst performing country this week, losing 8.95 percent. Equites trading on the Istanbul exchange sold off sharply after President Erdogan was sworn into office on Monday, eliminating the prime minister position and ruling with executive powers. Banks declined the most, with Turkiye Garanti Bankasi losing 18.8 percent.
  • The Turkish lira was the worst performing currency this week, losing 5.85 percent against the dollar. On Monday, the lira gained more than 1 percent against the dollar in the morning session of trading. However, the lira then sold off sharply, weakening by more than 3 percent in a single day. President Erdogan, under his new executive powers, announced that he would be appointing central bank members going forward, not the Cabinet. Moreover, he removed Mehmet Simsek, an investor-friendly Treasury and Finance Minister, from his Cabinet and names his son-in-law, Mr. Berat Albayrak, the former Energy Minister, to oversee economic policy.

turkish lira remains volatile as erdogan takes control of country
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  • The real estate sector was the worst performing sector among eastern European markets this week.


  • China signed more than 20 agreements with Central and Eastern European (CEE) countries last Saturday to boost cooperation under the Belt and Road Initiative. These agreements involved in fields such as transport, infrastructure, industrial parks, finance, healthcare, education and agriculture. China-CEE cooperation, also known as the "16+1" mechanism, promotes the development of China and the sixteen CEE nations by shrinking the disparity inside members of the European Union (EU) for more balanced development. This will push forward European integration, said Premier Li Keqiang during his visit to Bulgaria.
  • Turkey could end a state of emergency rule that was imposed after the failed July 2016 coup attempt. Most likely, it will not be extended after July 18, which could create some positive sentiment.
  • Next week, the final June inflation data for the Eurozone will be released. Most Bloomberg Economists predict upward revision from 1.9 percent to 2 percent. Core inflation most likely will stay unchanged at 1 percent.


  • NATO summits usually demonstrate unity among its members, but not this time. During this week’s meeting, Trump once again has criticized NATO members for not paying enough. Only five countries – US, UK, Greece, Poland and Estonia – meet their NATO obligation and pay at least 2 percent of their gross domestic product (GDP). He also criticized Germany for being too dependent on Russian gas, saying, “it certainly doesn’t seem to make sense that [Germany] paid billions of dollars to Russia and we have to defend them against Russia.” Germany aims to spend 1.5 percent of its GDP on defense by 2025.

pay their fair share for NATO estimated 2017 defense spending as a percentage of GDP
click to enlarge

  • In Germany, the far-right Alternative for Germany (AfD) party overtook the Social Democrats for the first time in polls. INSA poll, which was published by the Bild daily, gave the centre-left Social Democratic party 17 percent of the vote, with the AfD taking 17.5 percent. AfD is an anti-immigration, far-right party that is benefiting from the recent turbulence inside Chancellor Merkel’s coalition government over migration policies.
  • German investor confidence declined to its lowest level since 2012, as trade war picks up between major economies. The ZEW Center for European Economic Research said on Tuesday that its Index of Investor Expectations fell to minus 24.7 in July from minus 16.1 in June. The negative reading means that more investors saw a worsening of the outlook than forecast an improvement.


Leaders and Laggards

Weekly Performance
Index Close Weekly
DJIA 25,019.41 +562.93 +2.30%
Nasdaq 7,825.98 +137.59 +1.79%
Korean KOSPI Index 2,310.90 +38.03 +1.67%
Hang Seng Composite Index 3,922.21 +60.21 +1.56%
S&P 500 2,801.31 +41.49 +1.50%
S&P Energy 564.08 +4.41 +0.79%
S&P Basic Materials 367.05 +1.04 +0.28%
10-Yr Treasury Bond 2.83 +0.00 +0.18%
Russell 2000 1,687.08 -6.98 -0.41%
Gold Futures 1,241.30 -14.50 -1.15%
SS&P/TSX Venture Index 725.24 -14.86 -2.01%
S&P/TSX Global Gold Index 188.88 -5.42 -2.79%
Natural Gas Futures 2.76 -0.10 -3.50%
XAU 80.43 -3.32 -3.96%
Oil Futures 70.59 -3.21 -4.35%


Monthly Performance
Index Close Monthly
Oil Futures 70.59 +3.95 +5.93%
Nasdaq 7,825.98 +130.28 +1.69%
S&P 500 2,801.31 +25.68 +0.93%
S&P Energy 564.08 +3.58 +0.64%
Russell 2000 1,687.08 +10.54 +0.63%
DJIA 25,019.41 -181.79 -0.72%
S&P/TSX Global Gold Index 188.88 -2.02 -1.06%
S&P Basic Materials 367.05 -9.40 -2.50%
XAU 80.43 -3.36 -4.01%
SS&P/TSX Venture Index 725.24 -34.93 -4.60%
Gold Futures 1,241.30 -60.00 -4.61%
10-Yr Treasury Bond 2.83 -0.14 -4.68%
Korean KOSPI Index 2,310.90 -157.93 -6.40%
Natural Gas Futures 2.76 -0.21 -6.92%
Hang Seng Composite Index 3,922.21 -347.26 -8.13%


Quarterly Performance
Index Close Quarterly
Nasdaq 7,825.98 +685.73 +9.60%
Russell 2000 1,687.08 +129.75 +8.33%
S&P Energy 564.08 +42.00 +8.04%
Oil Futures 70.59 +3.52 +5.25%
S&P 500 2,801.31 +137.32 +5.15%
Natural Gas Futures 2.76 +0.07 +2.68%
DJIA 25,019.41 +536.36 +2.19%
S&P/TSX Global Gold Index 188.88 +2.28 +1.22%
S&P Basic Materials 367.05 +3.02 +0.83%
10-Yr Treasury Bond 2.83 -0.01 -0.32%
XAU 80.43 -2.33 -2.82%
Korean KOSPI Index 2,310.90 -131.81 -5.40%
SS&P/TSX Venture Index 725.24 -57.13 -7.30%
Hang Seng Composite Index 3,922.21 -337.11 -7.91%
Gold Futures 1,241.30 -106.70 -7.92%


U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission ("SEC"). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC.

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.

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):
TGS Nopec Geophysical Co
Ivanhoe Mines Ltd.
Barrick Gold Corp.
Kinross Gold Corp.
Sunny Optical


*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.

The Producer Price Index (PPI) measures prices received by producers at the first commercial sale. The index measures goods at three stages of production: finished, intermediate and crude.
The National Federation of Independent Business’s (NFIB) Index of business optimism is based on responses from 1221 member firms.
The Empire State Manufacturing Index is an index based on the monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. The index summarizes general business conditions in New York State.
The S&P 1500 Steel Index is an unmanaged market capitalization weighted index of companies whose primary business involves the manufacture and processing of steel.
The FTSE 350 Mining Index is a capitalization-weighted index of all stocks designed to measure the performance of the mining sector of the FTSE 350 Index. The index was developed with a base value of 1000 as of December 31, 1985.
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.
ZEW Germany Expectation of Economic Growth is a survey on the question of economic growth in six months.
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.