Gold Gold and commodity prices move in Super Cycles which la...

Gold and commodity prices move in Super Cycles which last from 20-25 years. The lastest Gold Super Cycle started in 2000 when gold price was about USD250 per ounce. I bought it in 2005 at USD480 per ounce. The historical gold price chart is shown in Fig. 1 below. The Super Cycle may last a few more years.

The market expects the Fed to cut rates this year on the back of the banking crisis to to prevent a hard landing. On the other hand, geopolitical tensions remain high and probably escalate anytime as US- China confrontations are more frequent. Precious metals such as gold and silver are the safe havens.

Central banks bought 1,136 tonnes of gold last year - the most on record, according to the World Gold Council (WGC). Geopolitical uncertainty and high inflation are the key reasons for holding gold. Turkey was the biggest buyer in 2022. China was also an active buyer, lifting its total gold reserves to over 2,000 tonnes.

On Apr 14, gold dropped 2% following the release of data showing a 0.3% slip in U.S. core retail sales last month. Nevertheless, gains in Jan and Feb suggest that consumer spending is on track to accelerate in the first quarter. Moreover, households expect inflation to increase over the next 12 months, while U.S. factory producton fell in Mar but managed to make a modest gain in the first quarter.

Gold is trading above the MA100 at USD1803.64, supported by a positive RSI. The technicals appear to be in favour of an upside and a potential test of USD2.045.30. If the price does not reach its peak and instead has a downward trend, we may witness a decline toward the USD1927.36 region.

Fig. 3 shows gold's hourly chart. The fall on Apr 14 extended below the 100 hour MA and then the 200 hour MA next at USD2015.58 and USD2010.74 respectively. The low stalled just ahead of the 50% retracement of the move up from the Mar 22 low. That came in at USD1991.35. The 200 hour MA is now the resistance (at USD2010.74). A move below is bearish. A move above it and then the 100 hour MA at USD2015.57 and given the recent volatility it will could "fast break the other way" once again.

Last month, I said that the stock market has not factored in a recession while crude oil has. Well, diesel is also flashing recession signs.

In China, the number of trucks running on highways is noticeably down in recent weeks. In Europe, diesel's premium to crude futures recently plunged to the lowest level in more than a year. In the US, demand is on track to contract 2% in 2023, S&P Global Inc says. Excluding 2020, when much of the economy briefly came to a standstill, that 2% slump would be the biggest drop in America's diesel use since 2016.

We are "assuming one of the worst economic climates in recent memory outside of the 2008-2009 financial crisis and the pandemic," said Debnil Chowdhury, S&P's head of Americas fuels and refining.

Demand for the heavy-machinery fuel that powers everything from commercial trucking fleets to construction equipment is weakening in many of the world's largest economies. Viewed as an early signal of weaker industrial activity and reduced consumer spending, the pullback has recession-watchers on high alert.

Diesel demand can act as a leading indicator for broader growth as an early sign that spending by households is waning. An expected drop in diesel demand fits with building recession risks across the economy.

Diesel prices surged after Russias invasion of Ukraine disrupted trade flows, but have been coming down amid concerns many of the world's biggest economies have bumpy roads ahead. Economists say there's a 65% chance of a U.S. recession and a 49% chance of an EU one within the next year. In China, the risk is lower but its recovery from its harsh Covid-19 restrictions will still require a marked and fast improvement in consumer confidence.

Much of the pullback in diesel demand can be tied to trucking, which consumes about 60% of diesel in China and more than 70% in the U.S.. The number of trucks running on Chinese highways fell 8% in the week ended Apr 9. Commercial diesel stockpiles nationwide excluding state refineries ballooned to an 8-month high in early Apr.

The demand drop came after China's manufacturing activity eased unexpectedly in Mar, leading a slide in factory gauges across Asia. Emerging markets in the region including Indonesia - where the government has started cutting subsidies for fuel - are also seeing demand weaken as growth slows.

Similar trends are playing out in other parts of the world.

European demand has been soft through winter on muted heating demand, and macro headwinds are clouding the demand outlook.

In the U.S., trucking - and therefore, diesel - consumption has been hit by a decline in factory output, home construction and retailers working off high inventories, said Bob Costello, chief economist at industry group American Trucking Associations. By one measure from supply chain intelligence firm FreightWaves, Mar trucking volume hit the lowest seasonal levels in 5 years.

The US trucking slowdown is due to a shift in consumer spending patterns: The steady stream of internet orders to fend off pandemic boredom has given way to vacations and experiences. As inflation squeezes household budgets, the first things people stop buying are what's known in the trucking industry as "high-volume shippers," or cheap consumer packaged goods like sodas.

"Anytime we see consumers stretched because of inflation, that impacts the cheaper goods that tend to move in large volumes," said Craig Fuller, CEO of FreightWaves. Individual decisions like skipping soda add up to a macro impact that reduces the overall volume of goods that move through the economy.

The drop in U.S. diesel demand will be especially pronounced on the West Coast, where massive tech-sector layoffs and a banking crisis have put the region under financial stress. There, diesel demand will slump 5%this year, more than twice the national average.

U.S. container imports, a bellwether of diesel use from the trucks and trains that move them around the country, are also under pressure. In Los Angeles, inbound shipments are at their lowest level since Mar 2020. In China, which is shipping out many of those cargoes in the first place, throughput of containers at key ports fell 5% in the week ended Apr 9.

There is more downside than upside to Chinese diesel demand in the second half of the year. With global economic headwinds especially in the West, China will need to rely on domestic consumption to support its manufacturing activities.”

It's not all doom and gloom. though. Europe's demand for ultra low-sulfur diesel is set to rise almost 9% between Mar and Jul, supported - in part - by summer travel. French authorities will most likely refill strategic reserves eventually, having released millions of barrels of petroleum products in response to widespread labour strikes.

But in the U.S., short of a government stimulus to stoke the economy, demand for diesel isn't returning anytime soon. Diesel demand is different from gasoline, where higher prices prompt drivers to pull back at the pump and cheap fuel can bring them back.

People don't move product simply because it's cheap to move. They do it because there's somebody on the other end who has made the order and is there to receive it.