Which Investments Worked 40 Years Ago When Inflation Was This High?
The U.S. was experiencing some of the highest inflation in its history.
I just returned home from London, where I was attending and speaking at the AIM Summit, which stands for Alternative Investment Management. Over $10 trillion in assets under management (AUM) were represented among the hundreds of institutional investors, family offices, fund managers and more who were in attendance.
One of the most valuable benefits of taking part in this international summit is the unique insight you receive from global leaders.
I had the pleasure of speaking with Ali Jehangir Siddiqui, Pakistan’s former ambassador to the U.S. during the Trump administration. He shared with me his first experience meeting the president, who eschewed formalities and traditional protocol in favor of getting right down to business. The U.S. would withdraw millions in aid, Trump told Siddiqui, if Islamabad didn’t do more to combat terrorists and militants.
I also had the opportunity to catch up with my friend Robert Friedland, founder and co-chairman of Ivanhoe Mines, one of our favorite copper producers. Robert told me a power vacuum could soon open up in both Russia and China, as both leaders may be seriously ill. There’s speculation that Vladimir Putin could have cancer, while Xi Jinping may be suffering from a brain aneurysm that the Chinese leader is choosing to treat not with surgery but traditional Chinese medicine.
If true, it may not be long until we see a dramatic shift in the world order.
Of Bulls and Bears
After today’s close, the S&P 500 is off about 20% from its all-time high set in early January, putting stocks in bear market territory. This being the case, I wanted to revisit the historical bull and bear markets from the past 50 years to see how much they rose or fell by, respectively.
Between 1973 and today, there have been six bear markets, the average decline being 41%. The worst of the five bear markets took place from October 2007 to March 2009 when stocks decreased about 57%.
If this sounds bad, I hope the bull market chart helps brighten your mood. Over the same period, there were five bull markets. Stocks rose 227% on average. The strongest bull market occurred roughly from 1987 to 2000, gaining a phenomenal 582% before crashing due to the dotcom bubble.
What Worked in the 1970s
Inflation continues to hover above an annual rate of 8%, with prices for gasoline, natural gas, food and used vehicles rising the most. The last time inflation was this high, Ronald Reagan was only a year into his first term, and the headline interest rate was around 13%, compared to 1% today.
Forty years ago, the U.S. was experiencing some of the highest inflation in the country’s history after a decade of global oil supply shocks, easy monetary policy and expanding government borrowing. The convertibility of the dollar into gold had recently been suspended, and this had the immediate effect of devaluing the greenback.
There are key differences between then and now—unemployment was alarmingly high in the 1970s and early 80s, for instance—but there are also a few obvious parallels. Today we’re facing our own global supply chain disruptions, for everything from food to energy, largely as a result of the war in Eastern Europe and ongoing Covid lockdowns. A shortage of semiconductor chips has slowed the manufacture of new automobiles, appliances, data centers and more.
Even though the Federal Reserve has begun raising rates in a new tightening cycle, monetary policy remains extremely accommodative on a historical basis. Combined with trillions of dollars in pandemic-related stimulus, this has served as rocket fuel for corporate borrowing and household debt, both of which stand at all-time highs. For the first time ever, the federal government now owes over $30 trillion, or nearly 130% of the U.S. economy.
The truth is, officials are much more comfortable with large deficits today than they were in the 1970s, and that’s all thanks to modern monetary theory, or MMT. Advocates of MMT believe that deficit spending is perfectly fine since the government can just issue more of its own currency to pay for it all. And thus the cycle continues.
Gold Was the Number One Asset of the 1970s
So what can investors do?
Again, history is a valuable guide. The best asset to own in the 1970s was gold, which went from $35 an ounce at the beginning of the decade to as high as $850 by 1980. Investors sought a hard asset that could go toe-to-toe with inflation and hold its value over time, and the yellow metal fit the bill. Unlike fiat currency, which policymakers can create more of out of thin air, gold requires incredible amounts of time, energy, and money to produce. This helps keep its supply in check.
But does the thesis still hold up?
Well, consider this: So far this century, through the end of April 2022, gold has outperformed the S&P 500 by a factor of three. Not bad for a “barbarous relic” that generates no income.
Granted, if we compare gold to the market over the past 10 years, the metal has significantly underperformed as stocks rallied in the longest bull market in history, fueled by low interest rates and low inflation.
That said, the S&P 500 has traded down in 2022 on inflation risk and concerns the Fed will raise borrowing costs much faster than initially anticipated. Gold has been the better asset, then, delivering a positive return in the first four months of the year.
Is Bitcoin Stealing Gold’s Thunder?
Some market watchers may wonder why gold hasn’t climbed even higher. Indeed, when inflation surpassed 8% in March 2022, the metal’s price was not quite able to surpass its record high of $2,073 an ounce, set in August 2020.
There’s speculation that the recent popularity of Bitcoin and other digital assets has siphoned off investors’ money that would otherwise have gone to gold. As a Bitcoin fan myself, I’m not so sure. With a total market cap of $11.5 trillion, gold remains one of the most liquid assets on earth, and unlike Bitcoin, it’s universally respected and traded. Dozens of central banks around the globe continue to hold billions of dollars’ worth of gold in their reserves.
I should also point out that Bitcoin has tumbled dramatically from its all-time high set in November 2021, putting it on a similar path as tech stocks and other risk-on assets. This has made some investors question its perceived role as a store of value, or “digital gold.”
Commodities Were Also a Profitable Bet
Even if physical gold is not hitting new highs, its resilience in the face of runaway inflation tells us that what the market seems to favor right now are hard assets that have intrinsic value. It’s little wonder, then, that prices for nearly every commodity—from metals to energy to agriculture—are going parabolic in many cases.
We saw the same thing happen in the 1970s. The S&P GSCI, which tracks a basket of commodities, surged sevenfold during the decade, while the S&P 500 remained mostly flat.
With commodity prices doing so well right now, we believe energy producers and metal miners look attractive by extension. Many oil and gas companies posted head-turning results in the first quarter of 2022, which was reflected in higher share prices. London-based Shell, for instance, reported $9.1 billion in profits in Q1, almost three times what it made during the same quarter in 2021. In New York trading, Shell stock rose 23% year-to-date through the end of April.
Inflation may not be as “transitory” as the Fed maintained early on, but at some point, prices will stabilize. Until then, it’s important for investors not to make rash decisions and panic-sell at a loss. If nothing else, it may be prudent simply to hold your positions for a longer duration than you were planning. This isn’t the first spate of inflation we’ve seen, and it likely won’t be the last.
Missed the HIVE Blockchain Technologies webcast update on the stock consolidation, set to happen next week? Watch the replay on YouTube by clicking here!
- The major market indices finished down this week. The Dow Jones Industrial Average lost 2.90%. The S&P 500 Stock Index fell 3.05%, while the Nasdaq Composite fell 3.82%. The Russell 2000 small capitalization index lost 1.08% this week.
- The Hang Seng Composite rose 3.99% this week; while Taiwan was down 11.38% and the KOSPI fell 11.36%.
- The 10-year Treasury bond yield fell 13 basis points to 2.788%.
- The best performing airline stock for the week was Spirit Airlines, up 11.80%. The European Union dropped its mask mandate for passengers on flights and in airports from Monday, reports CNBC, following updated guidelines from the bloc’s Aviation Safety Agency. The updated guidance takes into account the latest developments in the pandemic, “in particular the levels of vaccination and naturally acquired immunity, and the accompanying lifting of restrictions in a growing number of European countries,” the European Centre for Disease Prevention and Control said.
- Ryanair’s fiscal year 2022 results were slightly ahead of consensus expectations, albeit with few surprises following the early-April guidance update. Net loss in the fourth quarter narrowed as higher revenue beat consensus estimates, reports Morningstar, with the airline saying it expects to return to profitability in fiscal 2023.
- After stepping back last week, system net sales improved this week to -6.9% compared to -11.5% last week. While domestic leisure volumes decelerated modestly, both international and corporate volumes improved this week. In addition, pricing remains strong with system pricing now up 6.6% versus 2019 (compared to up 4.0% last week) as domestic pricing is now higher by 13.5% versus 2019.
- The worst performing airline stock for the week was Aeromexico, down 12.30%. On the negative side, jet fuel is up 70% year-to-date, impacted still by the Russia/Ukraine conflict, thus hurting operating margins. Moving forward, however, there may be a gradual improvement in fuel cost on the back of a softening oil price curve.
- May scheduled capacity was lowered 1% (now 76% recovered to 2019) driven primarily by a 2% cut in APAC (mostly Chinese domestic). APAC also reduced June/August/September by 1% and July by 2%, which was not Chinese domestic driven. Overall, June capacity remained at 81% recovered while July, August and September were pulled in 1% and are now at 85%, 85% and 88%, respectively.
- Intra-Europe net sales declined by 17 points to up 5% versus 2019, driven by a higher base, with 11% week-on-week growth. International net sales were down by eight points versus 2019 and declined by 3% this week. This led to a nine-point decrease in system-wide net sales to -14% versus 2019, up by 2% this week.
- Airlines’ (domestic) capacity in Latin America has been surprising to the upside since mid-2021, demonstrating the faster rebound in demand for air travel, mostly leisure. For 2022 total seat supply – measured by ASK/ASM – it could be at 100% of 2019 levels, on average, for the three carriers, with Azul relatively better off at 112%, followed by Copa at 98% and GOL at 91%.
- To get Spirit Airlines management to return to the table and negotiate a “consensual transaction,” JetBlue commenced an all-cash, fully financed tender offer to acquire all outstanding shares of Spirit for $30 per share. It is contingent on reaching a merger agreement with Spirit with a path to reaching the original $33 per share offer subject to receiving necessary due diligence. Over the next few weeks, JetBlue’s management will be meeting with Spirit’s shareholders to convince them to tender shares and/or vote against the Frontier offer during the June 10 shareholder vote.
- In the latest data, international volumes stepped up to its best level during the pandemic and are down 13.2% versus 2019 (and versus down 16.9% last week) while domestic system volumes are down 12.3% versus 2019. International pricing was steady this week at flat versus 2019.
- Bloomberg published an article citing the removal of all 737MAX deliveries through 2024 from the China Southern fleet plan. The article sources comments made by the China Southern Chairman during investor meetings last week with a follow-up quote from China Southern IR stating that the removal was due to “uncertainty surrounding the delivery.” The implied takeaway from the article is that the 100+ MAX aircraft intended to be delivered to China through 2024 are now deferred beyond 2024.
- Domestic leisure tickets sold decelerated for the third straight week to -18.1% versus 2019 (compared to -17.1% last week). However, leisure pricing continues to climb and is now up 21.9% versus 2019, compared to up 16.9% last week as the higher pricing more than offsets the volume deceleration.
- Canada is lagging the U.S. in core business travel due to fewer back-to-work policies. Air Canada reported business travel remained down 50% versus 2019 levels in the first quarter and expects that to improve – 40% in the second quarter. Post Labor Day, the company expects corporate demand down 30%- 20% through the end of the year. Air Canada remains confident that business travel eventually comes back by 2024.
- The best performing country in emerging Europe for the week was the Czech Republic, gaining 3.6%. The best performing country in Asia this week was the Philippines, gaining 5.8%.
- The Russian ruble was the best performing currency in emerging Europe this week, gaining 5.5%. Due to sanctions imposed on Russia, the ruble is being supported by the country’s central bank, reaching its highest level since 2018 this week and holding the spot for best performing global currency year-to-date. This is undermining attempts from the United States and the West to hurt Russia’s economy after its invasion of Ukraine. The Chinese yuan was the best performing currency in Asia this week, gaining 1.5%.
- Wood & Company, a research firm specializing in central emerging Europe, hosted its first in-person event last week since the pandemic began. The conference was well-attended, with investors coming from around the world to the Athens Riviera – pointing to a strong interest in Greek equites.
- The worst performing country in emerging Europe for the week was Turkey, losing 1.6%. The worst performing country in Asia this week was Malaysia, losing 0.4%.
- The Turkish lira was the worst performing currency in emerging Europe this week, losing 2.6%. The Pakistani rupee, for the second week in a row, was the worst performing currency in Asia this week, losing 3.4%.
- Tencent, a Chinese multinational technology and entertainment company, reported its slowest ever growth in revenue this week. Net profits fell 51% (or $3.4 billion) year-over-year. Fintech earnings began to feel the impact of COVID curbs in mid-March, as many companies are headquartered in Shanghai where lockdowns have been strict.
- Shanghai started to reopen its economy with companies slowly restarting operations. The city will reopen four of its 20 subway lines on Sunday as it slowly eases pandemic restrictions that have kept most residents in their housing complexes for more than six weeks. The city will also restart 273 bus lines connecting major urban centers. There are growing expectations that life in Shanghai will return back to normal between June 1 and mid-to-late next month.
- Ukrainians who escaped war and found safety in neighboring Poland are slowing returning home. Bloomberg reported that since February 24, when the war started, 3.46 million people crossed into Poland from Ukraine, and those moving the opposite way have reached 1.39 million. In all, 1.85 million Ukrainians have returned to the country. This is a sign of growing confidence among Ukrainians that the situation is improving (at least in the West side of Ukraine).
- Ukrainian forces are making some advancements on the battle fields. This week, Wood & Company reported that Ukraine’s forces have captured so much territory that they’ve reached the border with Russia in one counter-attack area near Kharkiv. Ukraine’s defense minister Oleksii Reznikov admitted last Friday that there is no swift end to the war with Russia in sight. However, he also said that Ukraine is “witnessing a strategic turning point in favor of Ukraine” and that this process will last some time.
- Various news sources have implied that two important world leaders are having health issues. Rumors say that Vladimir Putin recently underwent surgery to remove fluid from his abdomen. Others point to speculation that Chinese President Xi Jinping may be suffering from a brain aneurysm. The Chinese president, age 68, reportedly wants to be treated with traditional medicine rather than undergo major surgery after he was rushed to the hospital, The Sun reported last week.
- China may not be able to recover its economy as quickly as it did in 2020, due to recent lockdowns, reports Reuters. Back then, China experienced a sharp rebound, or a “V” shaped recovery. This year may be more like a “U” shaped recovery, which represents longer weak economic growth. In 2022, China may experience 5% growth instead of 5.5% that was previously projected by Beijing.
- The Biden administration is set to fully block Russian bond payments to U.S. investors, reports Bloomberg, in a move that could force Moscow into its first foreign default in a century. Currently, Russia is able to make payments to U.S. investors thanks to a waiver which is due to expire May 25. Insurance on Russian sovereign debt (used to protect investors against non-payments) jumped on Wednesday, signaling a 90% chance of default within one year.
Energy & Natural Resources
- The best performing commodity for the week was aluminum, up 6.31%. Control by OPEC+ over the oil market appears to be declining. Outside of the Middle East, supply growth continues to fall short of expectations: following April’s OPEC undershoot versus quotas reached of 1.8mb/d in April, with the group’s spare capacity “buffer” declining concurrently to just 7%. This means that, while OPEC+ production is growing in absolute terms, the group’s ability to influence price is diminishing. This creates upside risk to current prices, particularly in the context of expected higher summer demand.
- America’s shale oil companies are enjoying a cash bonanza, as soaring oil prices and months of capital restraint transform the fortunes and balance sheets of a sector once notorious for debt-fueled drilling sprees. Operators will rake in about $180 billion of free cash flow this year at current crude prices, according to research company Rystad Energy. That compares to huge losses amassed during a decade of fast supply growth that crashed to a halt just before the pandemic.
- U.S. energy firms last week added oil and natural gas rigs for an eighth week in a row as high prices and prodding by the federal government prompted drillers to return to the wellpad. The oil and gas rig count rose in the week ended May 13 to its highest since March 2020, Baker Hughes said in a report. Baker Hughes said that puts the total rig count up 261, or 58%, over this time last year.
- The worst performing commodity for the week was lumber, down 27.10%. Bakken natural gas production does not appear to have yet fully recovered from severe weather disruptions in late April, according to S&P Global | Platts. Bakken throughput on TRP/OKE’s Northern Border Pipeline have averaged just below 1.5 Bcf/d in recent days, 200-300 MMcf/d less than pre-storm averages.
- For the past two months, the International Energy Agency (IEA) has become more bearish on demand, lowering its 2022 demand forecast to 99.4MMb/d versus 100.6MMb/d, citing slowdown in global economic growth.
- China’s electricity output plummeted last month as COVID restrictions in Shanghai and other parts of the country pummeled economic activity, reports Bloomberg, from factory floors to steel mills and shopping malls. Electricity generation fell in April from the prior month to 608.6 billion kilowatt-hours, a decline of 4.3% on the same period last year. Thermal power output plunged to an even greater degree, the article continues, down 12% for the biggest drop since 2008, as the share of renewables increased at the expense of coal and gas and China installed more solar capacity than expected in the first quarter.
- Chinese crude steel production picked up in April, reports Reuters, increasing 5.1% month-over-month with easing COVID and environmental restrictions. Despite the pickup, production was still down 5.2% year-over-year and China plans to keep crude steel production output below 2021 levels. The targeted steel production levels are being used to help control GHG emissions as the country aims to have peak emissions in 2030.
- The global lithium industry needs as much as $42 billion of investment by the end of the decade in order to meet demand for the crucial battery-making material, writes Bloomberg, with attempts to build supply chains outside of China subject to much higher costs, according to a data and market-intelligence provider. The sector will require $7 billion of investment each year from now until 2028, Benchmark Mineral Intelligence said in a report. That would help it meet forecast demand of 2.4 million tons a year by 2030, which is four times higher than the 600,000 tons that’s estimated to be produced in 2022.
- China’s coal production climbed by almost 12% in the first four months of the year compared with the same period in 2021, as the government ordered miners to maximize output to reduce the risk of electricity shortages and cut dependence on imports from Australia.
- Oil retreated for the first time in four sessions as COVID lockdowns strained the economy in China, the world’s biggest crude importer. WTI slid to trade near $109 per barrel, Bloomberg explains, reversing earlier gains. China’s industrial output and consumer spending slumped in April to the worst levels since the pandemic began, while apparent oil demand and crude processing plunged. Strict lockdowns to halt the virus have curbed fuel use.
- The European Union is meeting today to discuss details of a sixth round of sanctions on Russia. The proposed package continues to include a ban on Russian oil imports, which continues to be stalled by Hungary as it seeks guarantees over its own energy supplies. Reuters reports that EU officials must publicly pressure Hungary on its position, while targeting a May 30-31 summit as the moment for agreement on a phase ban on Russian oil.
- Supply is reportedly improving across all PE grades, except for LLDPE C6 due to a shortage of hexene and other additives. There are some suggestions that domestic demand may be weakening, and inventories have reportedly increased, though this is not deterring domestic producers from nominating price increases. Rather, producers have deferred their 6-7cpp April/May price increases to May/June.
- According to Bloomberg, the retail sales indicator in the U.S. for April increased 0.9%, up 0.40% from last period, although 0.10% under consensus. Industrial production increased 1.1% in April on a month-over-month basis, which is 0.20% over the previous period and 0.60% above consensus. Industrial production recorded its fourth consecutive month of gains. Stronger sales and industrial production in the United States reflects increased consumer demand and investment growth, despite high inflation.
- Mercedes Benz announced more than 75% of its investments would be allocated to higher-end vehicles. The company wants to focus on the luxury end of the market and has forecast a sales increase of 60% by 2026. The move could help the company shift its operating margin to around 14% by mid-decade. Mercedes Benz CEO Ola Kallenius said, “Our goal is to build the world’s most desirable cars.”
- Nio Inc., a Chinese electric carmaker, was the best performing S&P Global Luxury stock for the week, gaining 14.57% due to its debut on the Singapore Exchange without raising funds, giving investors a new channel to trade in addition to the NYSE and Hong Kong. The stock ended at $17.30 on Friday, up 2.4% over the price it started the week at.
- As reported by the Wall St. Journal, “Luxury Brands Are Counting on Americans to Keep Spending,” wealthier shoppers are still able to spend on luxury items so far this year, however the story is a bit different for lower-level income earners. Card transactions for luxury goods items among consumers earning more than $125,000 a year increased 21% in April compared with a year earlier. The overall trend suggests that although appetite for luxury goods remains enormous in the United States, only brands’ core customers can still afford to splurge.
- Burberry, one of the main luxury fashion houses in the United Kingdom, despite reporting good numbers for April, said that its future performance depends on the China consumer spending recovery. China is a key market in the luxury goods industry, and after COVID lockdowns, the company will be keeping a close eye on its return to consumption of these goods.
- Williams-Sonoma, an American home retailer, was the worst performing S&P Global Luxury stock this week, losing 14.30%. Analysts from Telsey Advisory Group, maintain the company with an “outperform” but a target price 17% lower, from $198 to $165.
- Cadillac, a General Motors’ premium brand, announced the rollout of “LYRIQ,” the company’s first electric vehicle. “Cadillac will define the future of luxury transportation through its range of forthcoming electric vehicles, and it all begins with LYRIQ,” Vice President Rory Harvey said. The company aims for an all-electric portfolio by 2030.
- Hotels throughout London have been adding to their number of available rooms as travel picks up again globally. COVID travel restrictions were dropped in the U.K. in March, prompting tourists to return to London, and for the first time, these travelers have more choices where to stay. An additional 46 properties are expected to open in the city this year, and of around 5,500 rooms, some 2,500 are considered “luxury suites.”
- Watches of Switzerland, the biggest retailer of Rolex watches in the U.K., reported that in March, April and May, its sales were up 48%, with new store openings in the United Kingdom and the United States. This points to high demand for luxury watches and successful reopening of the economy. Customers have returned to pre-COVID in-store shopping habits while also returning to air travel, even with record high inflation numbers.
- Private clinics and car dealers are taking the retail spaces in Hong Kong that have been vacated by luxury brands due to the lack of tourists and stiff competition from online shopping. One example is seen with Human Health Holdings, which runs 50 clinics, which took the room at Start House in Tsim Sha Tsui, which Sasa Plus (one of the main beauty and health care retailers in Hong Kong) previously occupied. Porsche is another luxury brand that has vacated and moved to a less expensive area. Following the recent spike of COVID in China, people have become increasingly more health-conscious, said the senior director at CBRE Hong Kong.
- Luxury companies such as LVMH Moët Hennessy Louis and Gucci are facing lower sales in China, one of the main luxury markets overseas, because of a drop in domestic tourism due to lockdowns. Shanghai is home to around 15% of China´s luxury stores. Most listed European brands reported their first-quarter sales in China down 30% to 40%, according to UBS estimates.
- According to The Telegraph, Harrods, one of the leading stores in London, announced that Russians (or individuals who are either currently or ordinarily in Russia) may not shop at the store for luxury goods worth more than £300. The announcement is to comply with the sanctions introduced on Russia after the country invaded Ukraine. Essentially, this means that jewelry, designer clothing, furniture, etc., are now off-limits for these individuals.
Blockchain and Digital Currencies
- Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Nekocoin, rising 1,913.68%.
- Gary Gensler, the head of the Securities and Exchange Commission (SEC), made a pitch for a higher budget on Wednesday, telling lawmakers in the U.S House of Representative that he wants to do more as a cop on the cryptocurrency beat, according to Bloomberg. He cited the recent firestorm that consumed TerraUSD as an example of the industry’s investor-protection need, telling lawmakers “There was one crypto complex that went from $50 billion in value to zero just in the last three weeks.”
- A Bitcoin whale just sent $73,803,577 worth of Bitcoin off Coinbase, according to Bloomberg. Bitcoin whales, investors who own $10 million or more in BTC, typically send cryptocurrency from exchanges when planning to hold their investments for an extended period of time.
- Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was Flexible Leverage Index, down 100%.
- A selloff in cryptocurrencies accelerated Monday, with Bitcoin dropping back below $30,000 after weak Chinese economic data dented appetite for riskier assets. Monday’s price action saw Bitcoin give back some of a Sunday rally. The total market value of cryptocurrencies has dropped by about $326 billion in the past seven days to roughly $1.33 trillion, according to data from CoinGecko. Bitcoin is some 57% off its November all-time high.
- Cryptocurrency hedge funds lost 12% in April, the most among all investment styles, according to Bloomberg Hedge Fund Indices. The Bloomberg All Hedge Index fell 1.6% in the month and lost 3.2% year-to-date.
- Amid the ups and down of cryptocurrencies, a new venture by Rodrigo Batista – who helped found the Bitcoin Market – shows that risk appetite is more than alive. Digitra.com, the cryptocurrency trading platform created by the entrepreneur, is capitalized and ready to debut in retail in June.
- Texas has ambitions to become the most important crypto hub in the U.S. A number of following facts support the claim of Texas and its largest metropolis, Dallas-Fort Worth, as the main cryptohub of the United States. The world’s largest cryptocurrency operator Coinsource is based in Dallas, Texas. The crypto start-up Zabo acquired in 2021 by Coinbase originated in Dallas, and in April 2022, Fort Worth became the first city government to mine Bitcoin and Texas itself was already referred to as the “mining capital,” writes Bloomberg.
- Popular nun-fungible token (NFT) marketplace OpenSea just launched a new marketplace protocol to buy and sell NFTs. The new venture, which was first made apparent by an address linked to OpenSean on Etherscan earlier Friday, was confirmed in a blog post by the company, according to an article written by the Block.
- Cryptocurrency litigation is soaring, prompted by a surge of investors in the space, and U.S. proposals promise more rules to fight over in the coming months and years, writes Bloomberg. Crypto has generated more than 200 class action lawsuits and other private litigation as of this month, up more than 50% since the start of 2020, according to Morrison Cohen, which tracks the activity.
- The recent collapse of a popular stablecoin shows that the tokens aren’t ready to be used by consumers to make payments, according to a key U.S. watchdog. “People wonder: Is it going to be one day used for consumer payments?” Rohit Chopra, director of the Consumer Financial Protection Bureau, said in a Bloomberg TV interview on Monday. “Many are thinking it’s not ready yet,” writes Bloomberg.
- Mike Novogratz, the founder of Galaxy Digital Holdings who this week issued a mea culpa over Terraform Labs’ imploded stablecoin, noted that some smaller tokens are down 80% from their highs. Should their losses accelerate to the same degree they did in 2018, those coins could lose an additional 70%, according to Bloomberg.
This week gold futures closed the week at $1,846.17, up $22.56 per ounce, or 1.88%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 4.17%. The S&P/TSX Venture Index came in up 0.49%. The U.S. Trade-Weighted Dollar fell 1.29%.
|May-15||China Retail Sales YoY||-6.6%||-11.1%||-3.5%|
|May-18||Eurozone CPI Core YoY||3.5%||3.5%||3.5%|
|May-19||Initial Jobless Claims||200k||218k||203k|
|May-24||New Homes Sales||750k||—||763k|
|May-25||Durable Goods Orders||0.6%||—||1.1%|
|May-26||Hong Kong Exports YoY||-3.5%||-8.9%|
|May-26||GDP Annualized QoQ||-1.3%||—||-1.4%|
|May-26||Initial Jobless Claims||210k||—||218k|
- The best performing precious metal for the week was silver, up 3.25%. Steppe Gold Limited reported a significant boost to its year-over-year first quarter revenue this week, reports Proactive Investors, as the company ramps up production at its ATO mine in Mongolia. Revenue for quarter ended March 31, 2022, came in at $5.5 million. The company said it mined 69, 613 tonnes of ore and 192,680 tonnes of ore were stacked on the leach pad, with an average gold grade of o1.83 grams per tonne.
- K92 mining reported first quarter results this week, with strong quarterly gold equivalent production of 28,188 ounces (or 24,152 ounces of gold, 1.52 million pounds of copper and 28,142 ounces of silver). This is a 49% increase from the first quarter of 2021. The company also highlighted cash costs of $536 per ounce of gold and all-in sustaining costs of $788 per ounce of gold.
- Investors once again looked to gold as a haven asset to help protect their hard-earned cash in the first quarter of 2022 as record inflation pummeled other investment vehicles. Physical demand for gold jumped 34% year-over-year to 1,234 tons in the first three months of 2022, according to the World Gold Council, marking the highest quarterly demand increase the gold market has seen since 2018.
- The worst performing precious metal for the week was steel, down 4.42%. The coming days could be pivotal for prices since significant technical levels have been broken. This could act as a brake on price declines in the near-term by offsetting some of the investor outflows which have weighed on the market recently, particularly if activity in China begins to rebound in the coming weeks after prolonged lockdowns have hampered demand.
- Equinox Gold Corp. has suspended operations at the RDM Mine in Brazil, according to a statement. It is withdrawing its 2022 production guidance for the RDM Mine until operations resume. The operation halt is due to delayed permits for the scheduled tailings storage facility raise. The company expects operations could restart as soon as two months from receiving regulatory approval, which is anticipated in the second quarter of this year.
- Exchange-traded funds cut 229,133 troy ounces of gold from their holdings in the last trading session, bringing this year’s net purchases to 7.32 million ounces, according to data compiled by Bloomberg. This was the seventh straight day of declines. The sales were equivalent to $415.1 million at the previous spot price.
- The fact that the last two mean reversion periods in crude oil coincide with enduring bottoms in the price of gold may play out in 2022, writes Bloomberg. The crude peak in 2000 launched gold above $300 an ounce, the article explains, and when oil reverted from its all-time high at around $145 per barrel in 2008, the yellow metal formed a base around $800. Could a reversal be in store?
- Orezone Gold Corporation continues the development of the Bombore Gold Project, the largest undeveloped gold project in Burkina Faso, with a total resource of 6.2 million ounces at 0.68 grams per ton silver. As of March 31, 2022, overall construction progress was at 68.4% with the project remaining on schedule for its first gold pour in the third quarter 2022.
- Late last week, Orla Mining released its first quarter financials, and more importantly, its first quarterly release as a gold producer. Numbers came in as a solid beat (clean earnings per share of $0.08 per share ahead of consensus of $0.03 per share). This comes on better production (23,000 ounces of gold in the quarter, better than consensus of 21,600 ounces of gold).
- Small-scale miners near Endeavour Mining’s operation in Burkina Faso launched a protest on Tuesday after mine officials moved in to clear them from the surrounding area, according to Agence d’Information du Burkina. Artisanal miners stormed Endeavour’s Houndé project and set fire to its facilities, the state-run news agency said on its website. Neither Endeavour nor officials at the mining site could be immediately reached for a comment.
- Continued weakness in the junior gold space could begin to weigh on the GDXJ ETF, as companies at the lower end of the market cap scale begin to reach threshold for deletion. Over the past month, valuations have declined by 25% in parallel with the broader market sell-off, and analyst estimates show some junior gold miners now trade at $41 per ounce on an EV per ounce basis, in-line with levels last seen in mid-2019 at a gold price below $1,300 per ounce.
- The World Platinum Investment Council (WPIC) lowered its supply forecast for 2022 to 7.78 million ounces, as it expects lower output from South Africa and Russia. Additionally, the organization estimated supply at 8.18 million ounces earlier this year and major South African producers are all lowering guidance. The WPIC sees sanctions impacting Russian output and has reduced its platinum surplus outlook to 627,000 ounces from 652,000 ounces.
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. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
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 (03/31/2022):
Ryanair Holdings PLC
Copa Holdings SA
GOL Linhas Aereas Inteligentes
JetBlue Airways Corp.
K9 Mining Inc.
Endeavour Mining PLC
Burberry Group PLC
LVMH Moet Hennessy Louis
Ivanhoe Mines Ltd.
*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 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 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 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 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. 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 private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
The S&P GSCI serves as a benchmark for investment in the commodity markets and as a measure of commodity performance over time. It is a tradable index that is readily available to market participants of the Chicago Mercantile Exchange.
The Bloomberg All Hedge Index represents the average performance of hedge funds, as defined by the Bloomberg Hedge Fund Classifications.
Latest ResourcesView All
November 25, 2022Learn More
November 18, 2022Learn More
November 14, 2022Learn More
November 11, 2022Learn More