InvestMacro

Gold Miners Trading At Their Largest Discount

– Amidst a backdrop of elevated inflation, near-record high gold prices, and negative real rates, many gold bulls are puzzled by the lack of upside follow-through in the Gold Miners Index (GDX). This is because, despite this favorable environment, the index is down 6% year-to-date and 40% from its Q3 2020 highs.

However, it’s important to note that the gold producers are up against significant headwinds which have dented margins, including higher labor, fuel, and materials costs. So, while they have historically performed well in this environment, some of the gold price’s upside has been offset by these rising costs.

Given that the GDX is littered with several high-cost producers with sub-par track records, this has weighed on the index’s performance, dragging down nearly all the stocks in the sector and the GDX.

The good news is that this 22-month decline (August 2020 – June 2022) has left some of the highest-quality miners sitting at their cheapest valuations since Q1 2020.

In this update, we’ll look at three miners that are not only less affected by the inflationary pressures but are trading at a significant discount to their historical multiples: Kinross Gold (KGC), Alamos Gold (AGI), and Wesdome Mines (WDOFF).

Kinross Gold (KGC)

Beginning with Kinross, the company is a 2.0-million-ounce producer with operations in Mauritania,
Brazil, Nevada, Alaska, and Chile.

The company has been performed the worst among its larger peers over the past year, punished by the acquisition of a development-stage project in Canada and after divesting its Russian assets this spring after the invasion of Ukraine.

While the latter development wiped out more than $1.0 billion in net asset value and 300,000 ounces of annual gold production, the company may be better positioned following the divestment, even if the assets were sold for less than fair value. This is because Kinross was not getting much value for its Russian assets (Kupol, Udinsk) anyways and can now command a higher multiple with an Americas-focused portfolio.

Understandably, investors are disgusted with the stock’s performance, with it down over 60% since Q3 2020. However, at current prices, the correction looks to be overdone.

This is because Kinross has historically traded at 7x cash flow and is currently trading at 3.5x FY2023 cash flow estimates ($1.20 per share). While I think 7x cash flow is a high estimate and 5.5x cash flow is more appropriate, this still translates to a fair value of $6.60 per share, or more than 65% upside from current levels.

It’s also important to note that FY2023 cash flow does not factor in any upside from its Dixie Project that it recently acquired in Canada, which looks to be home to 9+ million ounces of gold and could produce 425,000+ ounces per annum at sub $800/oz costs.

Source: Kinross Historical Cash Flow Multiple, FASTGraphs.com

With production not expected to begin until 2028 at Dixie, this asset has been discounted and Kinross doesn’t get much value for the asset. However, I see a fair value for this asset of $1.7 billion, translating to more than $1.50 per share in additional upside long-term.

While the stock’s 18-month fair value lies 65% higher, the stock has the potential to more than double long-term if it can execute successfully at Dixie. Given this deep discount to fair value combined with a 3.0%+ dividend yield, I see the stock as a steal at $4.00

Alamos Gold (AGI)

The second name worth watching closely is Alamos Gold, a mid-tier gold producer currently churning
out 450,000+ ounces per annum from its three operations in Canada and Mexico.

However, the stock has fallen out of favor recently, given that its costs have risen above $1,200/oz and are expected to come in at levels above the industry average in 2022.

While this certainly dampens the short-term margin outlook ($1,130/oz costs in 2021), Alamos will look like a completely different company by the second half of 2025. This is because it’s currently constructing its Phase 3 Expansion at its high-grade Island Gold Mine, which will push production from ~125,000 ounces per annum to 230,000+ ounces per annum.

Meanwhile, the company aims to construct a 4th mine in Manitoba (Lynn Lake), adding another
150,000 ounces per annum by 2026.

Source: Alamos Gold Growth Plan, Company Presentation

If Alamos was only a growth story, it would be unique, and we would already expect it to command a
premium multiple in a sector where growth is hard to find.

However, it’s important to note that this growth will be accompanied by significant margin expansion and a jurisdictional upgrade. This is because its Phase 3 Expansion which will nearly double throughput, is expected to contribute to sub $600/oz costs at Island.

At the same time, Lynn Lake’s costs should come in below $975/oz. The result will be a transformation from a 450,000-ounce producer at $600/oz margins ($1,800/oz gold price) to a ~750,000-ounce producer with $1,000/oz margins ($1,800/oz gold price.

Finally, it will see its exposure to Mexico (Tier-2 rated jurisdiction) dip from 30% to 20%. The result is a company that will enjoy expansion in its P/NAV multiple at the same time as its cash flow increases substantially.

Based on this outlook, I see a fair value for the stock above US$10.00 and view this pullback in AGI as a gift.

Wesdome Mines (WDOFF)

The final name becoming attractive is Wesdome Mines, a junior producer operating out of Canada with
one mine in Ontario and another in Quebec.

While junior producers are a dime a dozen, Wesdome is special given that it has two of the highest-grade gold mines globally, and it’s busy ramping up to full production at one of them (Kiena) over the next year.

Given its 10+ gram per tonne gold grades, it uses considerably less fuel and labor than its peers per ounce of gold produced, given that it’s moving less than one-sixth the rock volume given its grades.

Source: Highest Grade Gold Mines Globally, Company Filings, Author’s Chart

Wesdome’s steady ramp-up at Kiena means that while its costs may be above $1,100/oz currently,
they’re expected to slide to less than $825/oz by 2024.

Given this enviable position as a company with meaningful margin expansion on the horizon in a period of slight margin contraction sector-wide, I would view any pullbacks below US$8.00 (key technical support level) as buying opportunities.

Final Thoughts

With the gold miners trading at their largest discount to net asset value in two years, I see now as a favorable time to begin adding some exposure. Given KGC, AGI, and WDOFF’s improving margin profiles looking out to 2025, I believe they are three of the best ways to get exposure to the sector.

Disclosure: I am long AGI, KGC

Taylor Dart
INO.com Contributor

Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying small-cap precious metals stocks, position sizes should be limited to 5% or less of one’s portfolio.

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Source: Gold Miners Trading At Their Largest Discount

Metals Opinions

28 Jun

Technical Analysis: Why You Should Expect a Popularity Surge

– Here’s when a “rebirth of interest” in cycles and waves occurs

By Elliott Wave International

You probably know that the term “technical analysis” refers to analyzing the behavior of financial markets themselves — such as the stock market — as opposed to “fundamental” analysis, which is based on news and events outside of financial markets.

Well, in recent years, technical analysis has been out of favor.

A classic Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and cultural trends, explains why:

When bear markets mature, technical analysis is all the rage. When bull markets mature, it is not even on investors’ radar.

The stock market had been in a bull market for more than a dozen years so newsletters based on technical analysis have struggled. You might catch a market technician getting interviewed on financial television or for a print article here and there, but most interviewees offered “fundamental” analysis or external reasons for their market forecasts. You see, “fundamental” analysis tends to be popular when the stock market is rising because people feel that the “machine of society” and the market are linked and they’re both humming along as they should. In bear markets, people start to feel that “fundamentals” failed them, so they turn to other forecasting tools.

This chart and commentary from Robert Prechter’s landmark book, The Socionomic Theory of Finance, reveals how the popularity of financial theories have waxed and waned with the trend of the stock market:

The chart shows that in times of increasingly positive social mood — such as the 1920s, the 1950s-1960s and the 1980s-1990s — people in the field of finance tend to believe in human rationality and humans’ ability to control social trends. In times of increasingly negative social mood — such as the 1930s-1940s, the 1970s, and the first decade of the 2000s — there is a rebirth of interest in non-rational human behavior and the existence of cycles, waves and even extraterrestrial influences such as sunspots.

You probably know that Elliott wave analysis is a form of technical analysis. It tracks the market’s pattern, which repeats in predictable ways.

If stock market prices continue to trend lower, expect a jump in the Wave Principle’s popularity.

Of course, you don’t have to wait to start using Elliott waves. In fact, individuals who were already following the message of the Elliott wave model were prepared before the downtrend started in the Dow Industrials and S&P 500 index in January.

Indeed, part 1 of the January Elliott Wave Theorist (published December 31, 2021) referred to an Elliott wave pattern when the publication said:

Diagonals occur at the end of larger sequences. If this diagonal proves true, the market is poised to roll over directly into a bear market.

Just two trading days later (Jan. 5), the Dow hit an all-time intraday high and then “rolled over.” The senior index has been trading lower since.

By contrast, a Jan. 5 article in the mainstream financial press was titled (Marketwatch):

Why the bull market will stay alive in 2022 …

The article referenced the comments of three market newsletter writers, and those comments largely centered on “fundamental” analysis, such as expectations for economic growth, earnings, pharmaceutical sales, General Motors’ development of electric vehicles and so on.

No analytical method is perfect, including the Wave Principle. However, over decades of meticulous market observations, Elliott Wave International has concluded that the Elliott wave model is the most useful analytical method available — in bull or bear markets.

If you’d like to delve into the details of the Wave Principle, you are encouraged to read Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market’s position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market’s general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable. Many areas of mass human activity display the Wave Principle, but it is most popularly used in the stock market.

Good news: You can access the entire online version of the book for free once you become a member of Club EWI, the world’s largest Elliott wave educational community (approximately 500,000 worldwide members and growing).

A Club EWI membership is also free and unlocks access to a wealth of Elliott wave resources on investing and trading. All the while, you are under zero obligation as a Club EWI member.

Just follow this link to get started right away: Elliott Wave Principle: Key to Market Behavior — free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Technical Analysis: Why You Should Expect a Popularity Surge. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Opinions Stock Market News

28 Jun

Murrey Math Lines 28.06.2022 (AUDUSD, NZDUSD)

Article By RoboForex.com

AUDUSD, “Australian Dollar vs US Dollar”

As we can see in the H4 chart, AUDUSD is trading below the 200-day Moving Average to indicate a descending tendency. In this case, the price is expected to test 1/8, break it, and then continue falling to reach the support at 0/8. However, this scenario may no longer be valid if the price breaks the resistance at 2/8 to the upside. After that, the instrument may reverse and resume growing towards 3/8.

In the M15 chart, the pair may break the downside line of the VoltyChannel indicator and, as a result, continue moving downwards.

NZDUSD, “New Zealand Dollar vs US Dollar”

As we can see in the H4 chart, NZDUSD is also trading below the 200-day Moving Average, thus indicating a possible descending tendency. In this case, the price is expected to break 3/8 and then continue moving downwards to reach the support at 1/8. However, this scenario may no longer be valid if the price breaks the resistance at 4/8 to the upside. After that, the instrument may reverse and grow towards 5/8.

In the M15 chart, the pair may break the downside line of the VoltyChannel indicator and, as a result, continue its decline.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News

28 Jun

Forex Technical Analysis & Forecast 28.06.2022

Article By RoboForex.com

EURUSD, “Euro vs US Dollar”

After completing the ascending wave at 1.0614, EURUSD is correcting down to 1.0555. Later, the market may trade upwards to reach 1.0629 and then resume falling with the target at 1.0440.

GBPUSD, “Great Britain Pound vs US Dollar”

GBPUSD has finished the ascending wave at 1.2330 along with the correction down to 1.2240; right now, it is forming a new consolidation range above the latter level. Today, the pair may grow towards 1.2400 and then trade downwards to return to 1.2250. After that, the instrument may start another growth with the target at 1.2420.

USDJPY, “US Dollar vs Japanese Yen”

USDJPY has completed the correctional wave at 135.55 and may later start another decline towards 134.90, thus forming a new consolidation range between these two levels. If the price breaks this range to the upside, the market may form one more ascending structure to reach 136.70; if to the downside – resume falling with the target at 134.18.

USDCHF, “US Dollar vs Swiss Franc”

Having finished the ascending wave at 0.9619, USDCHF is expected to correct down to 0.9545 and may later resume growing to reach 0.9633. After that, the instrument may form a new descending structure towards 0.9577 and then start another growth with the target at 0.9700.

AUDUSD, “Australian Dollar vs US Dollar”

AUDUSD is still consolidating around 0.6915. Possibly, the pair may grow to reach 0.6962 and then resume trading downwards with the target at 0.6863.

BRENT

Having broken 113.00 to the upside, Brent continues growing towards 115.60 and may later correct to return to 113.00. After that, the instrument may form one more ascending wave with the target at 117.20 or even extend this structure up to 122.50.

XAUUSD, “Gold vs US Dollar”

Gold is still consolidating around 1831.00; right now, it is forming a new descending structure towards 1815.00. Later, the market may start a new growth with the target at 1831.00 and then resume trading downwards to reach 1791.00.

S&P 500

After breaking 3830.0 to the upside, the S&P index continues growing towards 3950.0. Later, the market may reach 4014.0 and then resume trading downwards with the short-term target 3617.0.

Article By RoboForex.com

Financial News Forex and Currency News

28 Jun

The Analytical Overview of the Main Currency Pairs on 2022.06.28

By JustForex

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.0546
Prev Close: 1.0581
% chg. over the last day: +0.33%

Durable Goods Orders in the US unexpectedly rose by 0.7% in May, while analysts had expected no change. At the same time, the US pending home sales overcame a six-month slump and showed a slight gain. As softening inflation expectations prompted a reassessment of the prospects for aggressive interest rate hikes, the dollar index declined, allowing the euro to rise slightly. Futures pricing indicates that traders now expect the US Federal Reserve’s benchmark interest rate to stabilize at around 3.5% (the previous forecast was 4% in 2023).

Trading recommendations

Support levels: 1.0573, 1.0408, 1.0379
Resistance levels: 1.0611, 1.0680, 1.0723

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The price still forms a wide corridor, and the MACD indicator has become inactive, but there is divergence towards sales. Under such market conditions, sell deals can be considered from the resistance level of 1.0611, but only after the additional confirmation. A price move above 1.0611 will change the priority. Buy trades are best to look for on intraday time frames from the support level of 1.0573 or the lower border of the flat, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.0611 resistance level and fixes above, the uptrend will likely resume.

News feed for 2022.06.28:

– US FOMC Member Williams Speaks (m/m) at 01:30 (GMT+3);
– ECB President Lagarde Speaks at 11:00 (GMT+3);
– US CB Consumer Confidence (m/m) at 17:00 (GMT+3).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2263
Prev Close: 1.2266
% chg. over the last day: +0.02%

UK household inflation expectations decreased to their lowest level since January, which is good news for Bank of England officials who fear increased price pressures. Despite that, inflation expectations are still elevated. Financial markets show a roughly 73% chance that the Bank of England will raise the bank rate to 1.75% from 1.25% at the next policy meeting on August 4.

Trading recommendations

Support levels: 1.2238, 1.2093, 1.1974
Resistance levels: 1.2324, 1.2422, 1.2470, 1.2523, 1.2629

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The situation is very similar to the euro. The price forms a wide corridor, while the MACD indicator shows no activity, but there is a slight divergence. Under such market conditions, sell deals can be considered from the resistance level of 1.2422 or the upper border of the flat, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.2238 or the lower border of the flat, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.2422 resistance level and fixes above, the uptrend will likely resume.

There is no news feed for today.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 135.11
Prev Close: 135.47
% chg. over the last day: +0.27%

The yield differential between Japanese Government Bonds and US Treasuries still keeps the JPY low. However, the Bank of Japan holds its monetary policy soft as policymakers attribute rising inflation to rising energy and commodity prices. More and more analysts are starting to believe that at some point, the Bank of Japan will make currency intervention, as the yen’s weakness is taking a heavy toll on the Japanese economy. Both BOJ Governor Kuroda and Prime Ministerof Japan Kishida acknowledge this point.

Trading recommendations

Support levels: 134.84, 133.35, 131.67, 131.00, 130.12, 129.48, 128.76
Resistance levels: 135.88, 136.66

The medium-term trend on the USD/JPY currency pair is bullish. The price trades near the moving average lines and forms a wide price balance. The MACD indicator has become inactive. Under such market conditions, buy trades can be considered from the support level of 134.84 or 133.35, but with confirmation. A resistance level of 135.88 is good for sell deals, but only with additional confirmation and short targets.

Alternative scenario: If the price fixes below 133.35, the downtrend will likely resume.

There is no news feed for today.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2889
Prev Close: 1.2873
% chg. over the last day: -0.12%

The Canadian dollar is a commodity currency, so it depends not only on the US Dollar Index but also on oil prices. The dollar index declined yesterday, while oil prices grew during the last three trading sessions. As a result, the Canadian dollar has strengthened. It should be noted that the Bank of Canada is on its way to raising interest rates and the latest inflation data showed that inflation in Canada has not stopped rising. Therefore, on expectations of an aggressive rate hike at the next meeting, the Canadian dollar may continue its upward momentum in the coming days.

Trading recommendations

Support levels: 1.2815, 1.2709, 1.2618, 1.2578, 1.2510
Resistance levels: 1.2887, 1.2956, 1.3068

In terms of technical analysis, the trend on the USD/CAD currency pair is bullish. But the MACD indicator became negative, and the price is trading below the moving averages. Buyers are losing the initiative. A price move below 1.2815 will change the priority. Under such market conditions, it is better to look for buy deals in the lower time frames from the support level of 1.2815. For sell deals, it is better to consider the resistance level of 1.2956, but it is also better with confirmation and short targets.

Alternative scenario: if the price breaks through and consolidates below the 1.2815 support level, the downtrend will likely resume.

There is no news feed for today.

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Financial News Forex and Currency News

28 Jun

Fears of a recession are decreasing. Russia has defaulted

By JustForex

On Monday, the US dollar fell slightly from a 20-year high hit earlier this month. It followed positive US economic data that eased expectations of an aggressive rate hike by the Federal Reserve. At the same time, stock indices also showed weakness, but usually, when the dollar index declines, indices rise.

At the close of trading on Monday, the Dow Jones index (US30) decreased by 0.20% and the S&P 500 index (US500) lost 0.30%. The technology index NASDAQ (US100) fell by 0.72% yesterday. At the end of the day, all three indices were down.

Goldman Sachs says the US rate market is underestimating the risk of recession. While market expectations for the Fed Funds rate have declined in recent weeks to levels with “limited downside potential for early 2023, federal funds pricing for 2024 likely underestimates recession risk,” strategists said. According to expectations implied by interest rate swaps, the Fed policy rate will peak at 3.60% by March 2023, up 2% from current levels.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained by 0.52%, French CAC 40 (FR 40) fell by 0.43%, Spanish IBEX 35 (ES35) lost 0.02%, British FTSE 100 (UK100) closed on Monday in plus 0.69%.

On Monday, Prime Minister Boris Johnson said that Britain may introduce unilateral changes to Northern Ireland’s trade rules after Brexit this year. The EU calls the move illegal.

Russia’s first major international default in more than a century became a fact on Monday. It was followed by months of coordinated Western sanctions that left Moscow with cash but denied access to an international financial network.

Oil jumped by 2% yesterday on rumors that a G7 decision against Russia would lead to further supply cuts. The Saudi-led OPEC+ alliance also cut its projected 2022 oil market surplus to 1 million barrels per day from a previous estimate of 1.4 million. Some oil investors are hesitant to open large positions after the US Energy Information Administration said the weekly inventory report would be delayed for the second week in a row because of server problems. The EIA weekly oil report was not released on June 24 and will likely not be released on June 29.

G7 leaders warned that Russian President Vladimir Putin would be held accountable for committing the heinous and deadly attack on a crowded shopping mall in Ukraine. According to President Vladimir Zelenski, at least 1,000 shoppers were in the mall when a Russian missile hit it, making it “one of the most devastating terrorist attacks in European history.” At least 18 people were killed and more than 40 injured. The number of casualties is difficult to determine as rescuers continue to search among the rubble. With a high probability, Russia will be declared a sponsor of terrorism in the near future.

Asian markets were trading higher on Monday. Japan’s Nikkei 225 (JP225) gained 1.43%, Hong Kong’s Hang Seng (HK50) added 2.35% for the day, and Australia’s S&P/ASX 200 (AU200) jumped by 1.94%.

Earlier this month, the Bank of Japan may have suffered a 600 billion yen ($4.4 billion) unrealized loss on Japanese government bonds as the widening gap between domestic and foreign monetary policy led to rising yields and prices. Despite this, the Bank of Japan continues to keep its monetary policy soft as policymakers attribute rising inflation to rising energy and commodity prices. More and more analysts are starting to think that at some point, the Bank of Japan will make currency intervention, as the yen’s weakness is taking a heavy toll on the Japanese economy. Both BOJ Governor Kuroda and Prime Minister of Japan Kishida acknowledge this point.

S&P 500 (F) (US500) 3,900.11 −11.63 (−0.30%)

Dow Jones (US30) 31,438.26 −62.42 (−0.20%)

DAX (DE40) 13,186.07 +67.94 (+0.52%)

FTSE 100 (UK100) 7,258.32 +49.51 (+0.69%)

USD Index 103.98 -0.21 (-0.20%)

Important events for today:

– US FOMC Member Williams Speaks (m/m) at 01:30 (GMT+3);
– ECB President Lagarde Speaks at 11:00 (GMT+3);
– US CB Consumer Confidence (m/m) at 17:00 (GMT+3).

By JustForex

Economics & Fundamentals Financial News

28 Jun

SEC confirms Bitcoin is a commodity – THREE key takeaways for crypto investors

By George Prior

– The inevitable regulation of the cryptocurrency market is “a significant step closer” due to comments made on Monday by the U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, says Nigel Green, CEO of one of the world’s largest independent financial advisory organisations

Speaking to CNBC’s Jim Cramer, Gensler said that Bitcoin is now to be labelled as a commodity.

Nigel Green says: “The comments from Gary Gensler clears up years of debate. One of the world’s most influential regulators has now confirmed that it views Bitcoin as a commodity, in much the same way gold is, and not a security.

“The financial watchdog said that many tokens on the market have the key attributes of securities, which puts them under the jurisdiction of the SEC, but not Bitcoin.

“As a commodity in the U.S., Bitcoin would fall under the oversight of The Commodities Futures Trading Commission.”

The deVere CEO says that there are three key takeaways from the comments made by the SEC chief.

“First, the SEC’s approach is to galvanise Bitcoin’s long-held status as ‘digital gold.’

“Bitcoin is often referred to as ‘digital gold’ because like the precious metal it is a medium of exchange, a unit of account, non-sovereign, decentralised, scarce, and a store of value.”

He adds: “I believe that the world’s largest crypto will dethrone gold as the ultimate safe haven asset within a generation as millennials and younger investors, who are so-called ‘digital natives’, believe it competes better.

“Millennials are to become an increasingly important market participant in the coming years, with the largest-ever generational transfer of wealth – predicted to be more than $60 trillion – from baby boomers to millennials taking place.

“In addition, our world is becoming increasingly tech-driven and cryptocurrencies are, of course, digital by their very nature.

“Another key factor is the historic levels of money-printing as central banks around the world attempt to prop-up their economies following the fallout from the pandemic.

“If you are flooding the market with extra money, then in fact you are devaluing traditional currencies – and this, and the threat of inflation, are legitimate concerns to a growing number of investors, who are seeking alternatives.”

Nigel Green continues: “Second, Gensler said that regulators in the U.S., which include the SEC and the CFTC, have a lot of work to do in order to introduce comprehensive laws that would protect the investing public.

“This is a clear sign that the financial watchdogs are homing in on regulation of the sector. As I have long said, I believe this is inevitable – and it is something I support as cryptocurrencies become increasingly part of the mainstream, global financial system.”

He has previously been quoted by media outlets as saying “Proportionate regulation” should be championed as it would help protect investors, shore-up the market, tackle criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term economic boost to those countries that introduce it.”

“Third, the wider crypto sector will take the comments made by the chair of the SEC as bullish. We can expect prices to gradually rise.”

Despite the current volatility, like many long-term crypto investors Nigel Green says he is still accumulating Bitcoin. “I’m using the volatility as a buying opportunity; I’m topping up my investment portfolio at a lower price point.

“The reason why I’m still buying Bitcoin? Because I’m confident that digital, global, borderless, decentralised, tamper-proof, unconfiscatable money is, clearly, the future.”

The deVere CEO is also doubling down on an earlier price prediction: “I remain confident that Bitcoin may get a tough summer, but that it could stage a bull run in the fourth quarter.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Cryptocurrencies Opinions

28 Jun

Stocks steady while crude prices jump

By ForexTime

US stock futures have perked up this morning on news that China will cut its quarantine time on foreign travellers. This comes as Wall Street pared gains after initially rising from stronger-than-expected US durable goods data.

Meanwhile, there’s more action in the oil markets as crude extends its recent gains on supply disruptions.

The blue-chip benchmark S&P500 ended Monday 0.3% lower, after a turbulent day of trading in which the index slowly gave up earlier gains. The broad-based index remains around 18% lower for the year.

Technically, the S&P500 had been trading at the bottom of a bear channel after the highs at the end of March.

Prices were also oversold on the daily and weekly charts with the RSIs dipping towards 30. The rebound has taken us above the May low at 3811.1 and the bulls are now challenging trendline resistance from the October 2021 low.

Above here is the key psychological level at 4,000 with the 50-day simple moving average at 4028.4.

Crude bounces off trendline support

Oil prices had their worst week since early April, with Brent falling more than 7% over the last week.

Concern over the macro outlook has weighed heavily despite fundamentals remaining constructive. G-7 nations are meeting at the moment, and discussions around a potential price limit on Russian oil appear to be on the agenda. It is suggested that any limits would be done through insurance and shipping.

However, it would likely take some time to come to an agreement and would require the EU to renegotiate its last round of sanctions which some member countries may be reluctant to do, given how long it originally took EU countries to finalise its Russian oil ban.

OPEC members are set to meet tomorrow with an OPEC+ ministerial meeting on Thursday.

The cartel already agreed at its previous meeting on larger supply increases for July and August so confirmation of that supply increase for August is expected.

After falling sharply from the high at the start of the month at $123.27, Brent found support last week at the upward trendline touching the March, April and May lows. The 100-day simple moving average has also helped hold up prices and currently sits at $107.76.

We are now trading just above the 50-day simple moving average at $111.64 with bulls eyeing up the $114 resistance level which had capped Brent prices for much of April-May.

Article by ForexTime

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Economics & Fundamentals Financial News

27 Jun

Wealth of nations: Why some are rich, others are poor – and what it means for future prosperity

By Amitrajeet A. Batabyal, Rochester Institute of Technology

– Why are some nations rich and others poor? Can the governments of poor nations do something to ensure that their nations become rich? These sorts of questions have long fascinated public officials and economists, at least since Adam Smith, the prominent Scottish economist whose famous 1776 book was titled “An Inquiry into the Nature and Causes of the Wealth of Nations.”

Economic growth matters to a country because it can raise living standards and provide fiscal stability to its people. But getting the recipe consistently right has eluded both nations and economists for hundreds of years.

As an economist who studies regional, national and international economics, I believe that understanding an economic term called total factor productivity can provide insight into how nations become wealthy.

Growth theory

It is important to understand what helps a country grow its wealth. In 1956, Massachusetts Institute of Technology economist Robert Solow wrote a paper analyzing how labor – otherwise known as workers – and capital – otherwise known as physical items such as tools, machinery and equipment – can be combined to produce goods and services that ultimately determine people’s standard of living. Solow later went on to win a Nobel Prize for his work.

One way to increase a nation’s overall quantity of goods or services is to increase labor, capital or both. But that doesn’t continue growth indefinitely. At some point, adding more labor only means that the goods and services these workers produce is divided between more workers. Hence, the output per worker – which is one way of looking at a nation’s wealth – will tend to go down.

Similarly, adding more capital such as machinery or other equipment endlessly is also unhelpful, because those physical items tend to wear out or depreciate. A company would need frequent financial investment to counteract the negative effect of this wear and tear.

In a later paper in 1957, Solow used U.S. data to show that ingredients in addition to labor and capital were needed to make a nation wealthier.

He found that only 12.5% of the observed increase in American output per worker – the quantity of what each worker produced – from 1909 to 1949 could be attributed to workers becoming more productive during this time period. This implies that 87.5% of the observed increase in output per worker was explained by something else.

Total factor productivity

Solow called this something else “technical change,” and today it is best known as total factor productivity.

Total factor productivity is the portion of goods and services produced that is not explained by the capital and labor used in production. For example, it could be technological advancements that make it easier to produce goods.

Another way to understand total factor productivity.

It’s best to think of total factor productivity as a recipe that shows how to combine capital and labor to obtain output. Specifically, growing it is akin to creating a cookie recipe to ensure that the largest number of cookies – that also taste great – are produced. Sometimes this recipe gets better over time because, for example, the cookies can bake faster in a new type of oven or workers become more knowledgeable about how to mix ingredients more efficiently.

Will total factor productivity continue to grow in the future?

Given how important total factor productivity is to economic growth, asking about the future of economic growth is basically the same as asking whether total factor productivity will continue to grow – whether the recipes will always get better – over time.

Solow assumed that TFP would grow exponentially over time, a dynamic explained by the economist Paul Romer, who also won a Nobel Prize for his research in this field.

Romer argued in a prominent 1986 paper that investments in research and development that result in the creation of new knowledge can be a key driver of economic growth.

This means that each earlier bit of knowledge makes the next bit of knowledge more useful. Put differently, knowledge has a spillover effect that creates more knowledge as it spills out.

Despite Romer’s efforts to provide a basis for the assumed exponential growth of TFP, research shows that productivity growth in the world’s advanced economies has been declining since the late 1990s and is now at historically low levels. There are concerns that the COVID-19 crisis may exacerbate this negative trend and further reduce total factor productivity growth.

Recent research shows that if TFP growth falls, then this can negatively affect living standards in the U.S. and in other rich countries.

A very recent paper by the economist Thomas Philippon analyzes a large amount of data for 23 countries over 129 years, finding that TFP does not actually grow exponentially, as Solow and Romer had thought.

Instead, it grows in a linear, and slower, progression. Philippon’s analysis suggests that new ideas and new recipes do add to the existing stock of knowledge, but they don’t have the multiplier effect previous scholars had thought.

Ultimately, this finding means that economic growth used to be quite fast and is now slowing down – but it’s still occurring. The U.S. and other nations can expect to get wealthier over time but just not as quickly as economists once expected.

About the Author:

Amitrajeet A. Batabyal, Distinguished Professor and Arthur J. Gosnell Professor of Economics, Rochester Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions

27 Jun

Crude Oil Is Consolidating

By RoboForex Analytical Department

On Monday morning, the Brent price is balancing at $113 per barrel The commodity marker remains uncertain – the supply isn’t expanding as quick as it is expected to, and the demand might drop as well.

China is cancelling lockdowns but it does not necessarily mean that the country will start increasing its oil import right away. There are doubts about the Chinese economy’s ability to quickly and steadily expand at a time when the entire world is fighting inflation and afraid of recession.

OPEC+ members are working according to their earlier approved plan to increase oil production. This factor might have calmed down financial markets but Libya remains a mess and the Iranian oil won’t come to the commodity market in a while. Taken together, all these factors create a rather controversial basis.

In the H4 chart, having completed the correctional wave at 107.30, Brent continues growing towards 113.30 and may later consolidate there. After that, the instrument may break the range to the upside and form one more ascending wave with the target at 117.60. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving near the lows outside the histogram area, which means that it may grow to reach 0 and the uptrend in the price chart may continue.

As we can see in the H1 chart, after finishing the ascending wave at 113.30 along with the correction down to 110.15, Brent has rebounded from the latter level. Possibly, the asset may break 113.30 and then continue growing towards 117.70. Later, the market may correct to return to 113.30 and then form one more ascending structure with the first target at 119.50. From the technical point of view, this idea is confirmed by the Stochastic Oscillator: after rebounding from 50, its signal line is expected to continue moving towards 80.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

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