InvestMacro

By Admiral Markets

Source: Economic Events September 18, 2019 – Admiral Markets’ Forex Calendar

Today, all eyes will be on the Fed rate decision. This is particularly true, as the BoJ rate decision also occurs from Wednesday to Thursday.

In regards to the Fed, the Fed Watch Tool shows that market participants expect a rate cut by 25 basis points with around 80% probability, what means that the main focus of market participants will be concerned with what will be delivered in the Fed statement.

Will the Fed dot plot suggest FOMC members to see further rate cuts in the upcoming 12 – 18 months? Where will the economic projections be, especially with the ongoing tensions in the trade dispute between the US and China.

And after the latest developments in Saudi Arabia, where an attack on Saudi oil facilities responsible for 5% of global supply and resulted in the biggest intra-day percentage gain in oil since the Gulf War in 1991, a near-term pick-up in inflation seems very likely.

The Fed could be assumed to not just reflect the state of the US, but also global economic growth (due to an ongoing trade war between the US and China), rising inflation, on the other hand, leaves the US central bank in a dilemma.

So, it is difficult to say which direction the USD/JPY will be headed after the Fed, but we would assume that a more dovish stance in the Fed’s overall rate outlook could trigger USD/JPY weakness.

We will probably have to wait until the BoJ delivers their statement, but our assumption is that one of the main drivers for the USD/JPY to gain further momentum after recapturing 106.80/107.00 over the last week was not only the (at least felt) de-escalation of the US-Chinese trade dispute.

But also rumours made rounds that the BoJ could consider cutting rates into deeper negative territory. Such a step is among the key options of the BoJ, although the central bank may need to accompany that with measures to mitigate the pain any such move could inflict on financial institutions.

That said, if such a step is not brought up in any way, JPY could regain the recent losses, and also result in a drop in the USD/JPY down to and back below 107.00.

Below 108.50/109.00 we consider the picture on a daily time-frame to be bearish with a drop below 105.80 triggering a wave of further selling and quickly activate the region around 105.00 again:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between June 18, 2018, to September 17, 2019). Accessed: September 17, 2019 at 10:00 PM GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

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By Admiral Markets

by JustForex

Currency majors demonstrate a variety of trends. The dollar index (#DX) has become stable near monthly lows before the Fed meeting. The Central Bank is expected to reduce its key interest rate range by 25 basis points to 1.75%-2.00%. We recommend paying attention to updated economic forecasts and comments by the Fed representatives. The regulator may indicate a further rate of monetary policy adjustment. It should be recalled that earlier Donald Trump repeatedly criticized the Fed for a “strong” dollar and called for the beginning of a long and aggressive cycle of lowering interest rates.

During the Asian trading session, optimistic data on the trade balance of Japan have been published. Financial market participants continue to monitor the trade negotiations between Washington and Beijing, the Brexit process, as well as the situation in the “black gold” market. Today, investors will assess important economic reports from the UK, the Eurozone and the US.

Oil quotes have been declining after a sharp rally since the beginning of this week. At the moment, futures for the WTI crude oil are testing the $58.80 mark per barrel.

Market Indicators

Yesterday, the main US stock indices closed in the positive zone: #SPY (+0.25%), #DIA (+0.14%), #QQQ (+0.48%).

The 10-year US government bonds yield has been declining. At the moment, the indicator is at the level of 1.77-1.78%.

• – Data on inflation in the UK at 11:30 (GMT+3:00);
• – Consumer price index in the Eurozone at 12:00 (GMT+3:00);
• – Statistics on the real estate market in the US at 15:30 (GMT+3:00);
• – Data on inflation in Canada at 15:30 (GMT+3:00);
• – Fed interest rate decision at 21:00 (GMT+3:00).

by JustForex

By Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM, ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By Orbex

The US dollar posted strong gains on Tuesday as the two-day FOMC meeting got underway. The Fed will be announcing its rate plan decision and releasing the economic projections. Oil prices were also seen recovering from the recent surge. This came as Saudi officials announced plans that oil production would be back on track earlier than anticipated.

Euro Gains After ZEW Data

EURUSD was seen rising strongly on the day. These gains came after the ZEW economic sentiment improved to -22.5. The data came better than expected. The Eurozone ZEW economic sentiment was also seen coming up better than the median expectations. The common currency gained despite the US dollar rising higher on the day.

EURUSD Clears Resistance Level, More Gains Ahead?

EURUSD was seen rising above 1.1030 resistance level. The gains came following the currency pair finding dynamic support off the trend line. However, price action will have to clear the near-term top formed at 1.1091. A close above this level will see further gains to the main resistance level of 1.1140.

Sterling Gains Despite No Brexit Breakthrough

The pound sterling was seen posting gains, regaining the lost bullish momentum. The gains in the currency came despite the EU officials noting that there was no major breakthrough with the UK on Brexit. This comes as UK officials laid out new plans to avoid the Irish backstop arrangement.

GBPUSD on Track to Test Resistance

The GBPUSD currency pair managed to post strong gains on the day. The reversal comes as price formed a higher low. The upside gains will see price action testing the resistance level of 1.2511–1.2533. However, we expect to see a possible reversal on the initial test of this level.

Gold Prices Remain Flat

The precious metal continued to trade flat ahead of the Fed meeting today. The market risk sentiment was also rather mixed. But this sideways range could be breached following the outcome of today’s Fed meeting. The bias remains to the upside at the moment.

Will XAUUSD Breakout Higher

Gold prices are currently holding the sideways range of 1508–1485 for the moment. However, we expect a potential breakout to the upside. This could form a possible lower high to the longer-term trend. Alternately, a downside breakout will result in XAUUSD continuing the longer-term correction. The lower support is at 1431–1428 level.

By Orbex

By Lukman Otunuga, Research Analyst, ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By IFCMarkets

US stock indexes edged up on Tuesday led by real estate and utility shares. The S&P 500 rose 0.3% to 3005.70. Dow Jones industrial added 0.1% to 27110.803. The Nasdaq advanced 0.4% to 8186.02. The dollar weakening resumed despite data showing US industrial production rose above expected 0.6% in August, largest gain in a year. The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.4% to 98.21 but is higher currently ahead of expected decision of the Fed to cut rates today at conclusion of its policy meeting. Stock index futures point to lower openings today.

European stocks continued retreating on Tuesday. Both the EUR/USD and GBP/USD turned higher yesterday with both pairs lower currently. The Stoxx Europe 600 ended less than 0.1% lower. The German DAX 30 lost 0.1% to 12372.61 despite ZEW report German investor sentiment improved in September. France’s CAC 40 however rose 0.2%. UK’s FTSE 100 slipped 0.01% to 7320.4.

Asian stock indices are mixed today. Nikkei lost 0.2% to 21960.71 after report Japan’s August exports contracted at a faster pace than expected with yen slide against the dollar intact. Chinese stocks are rising: the Shanghai Composite Index is up 0.3% and Hong Kong’s Hang Seng index is 0.1% higher. Australia’s All Ordinaries Index turned 0.2% lower despite Australian dollar’s move lower against the greenback.

Brent futures prices are edging higher today. Prices fell yesterday after news Saudi Arabia were close to restoring 70% of the estimated 5.7 million barrels per day output lost after drone attack on refinery. The American Petroleum Institute late Tuesday report indicated US crude inventories rose by 0.6 million barrels last week. Prices tumbled yesterday: November Brent lost 6.5% to $64.55 a barrel on Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.

Market Analysis provided by IFCMarkets

Note:
This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.

By The Life Science Report

Source: Streetwise Reports   09/16/2019

Shares of migraine treatment research firm Alder BioPharmaceuticals opened 84% higher today after the company announced that it has agreed to be acquired by H. Lundbeck for $1.95 billion.

Early this morning, clinical-stage biopharmaceutical company Alder BioPharmaceuticals Inc. (ALDR:NASDAQ), which is developing migraine treatments, and Danish global pharmaceutical company H. Lundbeck A/S (HLUKF:OTC Pink sheets), which specializes in brain diseases, announced a definitive agreement for Alder to be acquired by Lundbeck.

Under the terms of the agreement, Lundbeck will commence a tender offer for all outstanding shares of Alder, whereby Alder stockholders will be offered an upfront payment for $18.00 per share in cash, along with one non-tradeable Contingent Value Right (CVR) of $2.00 per share. The upfront cash consideration represents a 79% premium to Alder’s shareholders based on the closing price on September 13, 2019, and an approximately 3% discount based on the 52-week high share price.

The non-tradeable CVR will be paid upon the approval by the European Commission of a Marketing Authorization Application in the European Union, through the centralized procedure. The terms of the CVR payment reflect the parties’ agreement over the sharing of potential economic upside benefits from such approval. There is no assurance such approval will occur or that any contingent payment will be made.

Alder’s Board of Directors unanimously approved the transaction, and the company will file a recommendation to shareholders recommending they tender their shares to Lundbeck. The transaction is expected to close in Q4/19 subject to customary closing conditions including the tender of more than 50% of all shares of Alder outstanding at the expiration of the offer and receipt of required regulatory clearances including a Hart-Scott-Rodino review in the U.S.

Alder is currently developing eptinezumab for the preventive treatment of migraine in adults. Migraine is a disabling neurological disease characterized by recurrent episodes of moderate to severe headache accompanied by nausea, vomiting and sensitivities to light and sound. More than 134 million people are estimated to experience migraine annually and it is estimated to be the second leading cause of years lived with disability among all diseases causing disability.

Eptinezumab is an investigational monoclonal antibody (mAb) that is administered as a quarterly 30-minute IV infusion. Eptinezumab was designed for immediate and complete bioavailability with high specificity and strong binding for suppression of calcitonin gene-related peptide (CGRP), a neuropeptide believed to play a key role in mediating and initiating migraines. If approved by the U.S. Food and Drug Administration (FDA), it will be the first IV CGRP therapy for migraine prevention. Alder submitted a Biologics License Application (BLA) to the FDA for eptinezumab in February 2019 and the FDA has set a Prescription Drug User Fee Act (PDUFA) action date of February 21, 2020. Alder is also presently developing ALD1910, a mAb designed to inhibit pituitary adenylate cyclase-activating polypeptide (PACAP) for migraine prevention.

Lundbeck asserts that through this acquisition it will continue to expand the range of brain diseases for which the company brings its leading and best-in-class therapies to patients, and that by acquiring Alder, it will further enhance its capabilities to deliver future biological innovations in brain diseases. Eptinezumab, together with ALD1910, could help establish Lundbeck as an emerging leader in migraine and other pain syndromes.

Adler’s President and CEO Bob Azelby commented, “As a global leader in neuroscience research with products registered in more than 100 countries and a strong network of neurology specialists, Lundbeck is the ideal partner to advance Alder’s mission of changing the treatment paradigm for migraine prevention. We believe this positions eptinezumab for a successful launch both in and outside of the U.S…Importantly, today’s news provides Alder shareholders with significant and immediate cash value, as well as the ability to benefit further once eptinezumab is approved by the EMA. Looking ahead, we expect Lundbeck will leverage Alder’s expertise in antibody development to explore additional indications for eptinezumab and continue the development of ALD1910.”

Alder BioPharmaceuticals is headquartered in Bothell, Wash., and describes its business as a clinical-stage biopharmaceutical company focused on transforming migraine treatment through the discovery, development and commercialization of novel therapeutic antibodies.

H. Lundbeck is a global pharmaceutical company specialized in brain diseases based in Valby, Denmark. The company has operated for more than 70 years, and states that it has been at the forefront of neuroscience research. The firm employs approximately 5,500 employees in more than 50 countries. The firm generated revenue of $2.8 billion in 2018 and has research centers in Denmark and California and production facilities in Denmark, France and Italy.

Alder BioPharmaceuticals started the day with a market capitalization of about $841.4 million. The company has 83.64 million shares outstanding, and as of Friday, had a short interest of around 19.2%. The stock has a 52-week price range of $8.39–18.88/share. This morning, ALDR shares opened much higher at $18.48 (+$8.42, +83.70%) over Friday’s $10.06 closing price. The stock has traded on more than 40-times average volume today between $18.34-18.88/share and at present is trading at $18.56 (+$8.50, +84.49%).

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1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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( Companies Mentioned: ALDR:NASDAQ,
)

By The Gold Report

Source: Bill Powers for Streetwise Reports   09/16/2019

Bill Powers of the Mining Stock Education podcast discusses the news flow from this junior explorer.

At the 2019 Beaver Creek Precious Metals Summit last week in Beaver Creek, Colorado, I had the opportunity to meet one-on-one with numerous junior mining management teams. Due to a rising gold price environment, the expectation and general mood among the management teams was much more positive than the previous year.

While there, I interviewed Craig Lindsay, president and CEO of Otis Gold Corp. (OOO:TSX; OGLDF:OTCMKTS), along with Alan Roberts, who serves as the company’s vice president of exploration. Craig summed up the sentiment at Beaver Creek as such: “This is my third year in a row of coming here and it’s great to see a bunch of new names in terms of investors—institutional investors and high net worth investors. There’s pretty much every major mining company here looking for projects. That tells me that we’re on the cusp of a pretty interesting move in the gold market. That alone is going to create some amazing opportunities for investors who want to get into this space, which has been downtrodden for a number of years.”

Both Craig and Alan were not just generally encouraged with the current sector sentiment, but were also specifically enthused about Otis Gold’s prospect of continued success at their flagship Kilgore development project, located in Clark County, Idaho.

Kilgore’s Impressive Preliminary Economic Assessment

Otis Gold Corp. recently released a positive preliminary economic assessment (PEA) on the Kilgore project based on a resource estimate developed from 381 drill holes and 93,000 meters of drilling, and using an assumed gold price of $1,300/ounce. The 12,000-acre project is located on U.S. Forest Service land, is 100% owned by Otis Gold Corp., and has no royalties on it. While PEAs can be based upon Inferred resource estimates, Kilgore’s PEA is 85% based upon the more certain Indicated resources. The project has an after-tax net present value (NPV5) of US$110.4 million and internal rate of return (IRR) of 34.0 %, with a three-year payback period and five-year mine life. The average annual gold production is estimated at 112,500 ounces and initial capex at US$81 million.

Kilgore’s PEA at $1,500/ounce Gold

When the Kilgore PEA uses the current gold price in its calculation, the project economics move from being impressive to being stellar. At $1,500/oz gold, Kilgore’s NPV5 increases to $185.5 million and its IRR improves to 53.3%.

Kilgore’s Expansion Potential

Not only does $1,500/oz gold improve Kilgore’s attractiveness, but both Alan and Craig are confident that Kilgore’s 961,000-ounce gold resource and current five-year mine life will be significantly expanded. Alan stated that he joined the Otis Gold Corp. team last year specifically because of the project’s exploration potential: “I was attracted to the potential size of the Kilgore deposit because of its overall geologic setting.”

Craig, likewise, articulated his confidence that the Kilgore project will continue to expand: “When you look at the fact that we’ve got this new PEA in place that has some very strong economics and you stand on the edge of our deposit and you look out on that 12,000 acres and you see the fact that there is alteration throughout this project. There’s gold in the soils. There’s gold on pretty much every rock you pick up. You really get the feeling and you could see that this story is going to grow.”

Kilgore Could Be A Mini Round Mountain

Both Craig and Alan compared Kilgore’s potential to that of Kinross Gold Corp.’s (K:TSX; KGC:NYSE) massive Round Mountain open-pit mine in Nevada. Alan stated that Kilgore’s most geologically similar deposit is “probably Round Mountain in Nevada.”

Craig concurred and pointed out that Echo Bay Mines, the former owner of the Kilgore project, saw a direct comparison between the Kilgore project and Round Mountain: “What’s interesting from a comparative point of view is that Round Mountain was originally developed by a company called Echo Bay Mines. In the 1990s, Echo Bay was the one that originally started developing the open-pit heap bleach potential at Kilgore. So they saw some direct comparisons to Round Mountain, and Round Mountain has really been one of the most successful volcanic-hosted epithermal gold systems in not just the United States but the world in terms of its historic production and its current production profile. There’s some really fascinating comparisons to that story. I really think in many respects we’ve got a mini Round Mountain and a Round Mountain in the making going forward.”

Kilgore’s Path Forward

There is a fall drill program scheduled at Kilgore, which includes step-out drilling with a potential to increase the project’s resource. Craig also said that the company is planning a significantly larger exploration program for 2020 to further test Kilgore’s exploration targets.

Otis Gold Corp.’s Current Valuation and Investment Opportunity

In the past few years, Otis Gold’s shares have traded mostly between the CA$0.25 and CA$0.40 range. Currently, Otis shares trade at only about CA$0.10. The primary reason, Craig explained, is that “an environmental group has filed a complaint against the U.S. Forest Service with respect to how they have approved the last exploration permit that Kilgore was issued in August of 2018.”

While acknowledging that the environmental group’s filing created some uncertainty around the permit, he noted that “our legal counsel, the U.S. Forest Service and the Department of Justice, who are dealing with this case, are very confident that they’ll reach a resolution of this. It will be in our rear-view mirror, and we’ll be able to advance happily with this project.”

Craig views the current valuation of Otis Gold Corp. as a significant buying opportunity for investors: “Otis is a pretty compelling story. There is a real opportunity here. When we get through this court case, there’s going to be potentially a significant reevaluation in the company. We’re trading at about CA$0.10 a share, so a CA$16 million valuation or US$13 million. Per ounce in the ground, we’re trading at about US$13 an ounce in the ground. The median in the Western U.S. is about $50 to $55 an ounce in the ground. So, there’s some significant upside. . .there is a real unique investment opportunity, I believe, in Otis today at these levels.”

Bill Powers is the host of the Mining Stock Education podcast that interviews many of the top names in the natural resource sector and profiles quality mining investment opportunities. Powers is an avid resource investor with an entrepreneurial background in sales, management and small business development. His latest interviews can be found at MiningStockEducation.com.

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Disclosure:
1) Bill Powers: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Otis Gold Corp. is an advertiser on my website, Mining Stock Education.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

The content produced by Bill Powers and Mining Stock Education LLC is for informational purposes only and is not to be considered personal, legal or investment advice or a recommendation to buy or sell securities or any other product. It is based on opinions, public filings, current events, press releases and interviews but is not infallible. It may contain errors and we offer no inferred or explicit warranty as to the accuracy of the information presented. If personal advice is needed, consult a qualified legal, tax or investment professional. Do not base any investment decision on the information contained on MiningStockEducation.com, our podcast or our videos. We usually hold equity positions in and are compensated by the companies we feature and are therefore biased and hold an obvious conflict of interest. MiningStockEducation.com may provide website addresses or links to websites and we disclaim any responsibility for the content of any such other websites. The information you find on MiningStockEducation.com is to be used at your own risk. By reading MiningStockEducation.com, you agree to hold MiningStockEducation.com, its owner, associates, sponsors, affiliates, and partners harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries (financial or otherwise) that may be incurred.

( Companies Mentioned: OOO:TSX; OGLDF:OTCMKTS,
)

By Money Metals News Service

Monday’s spike in crude oil prices could be a game changer – for geopolitics, for the economy, and for investors.

Normally it would be foolhardy to draw big, sweeping conclusions from a single day’s trading activity.

But in this case, it’s not just the fact that oil prices surged 13% to over $62/barrel. Or even the fact that more than 5% of the world’s oil producing capacity suddenly got taken offline.

The world can cope with volatility in the energy market. An increasingly volatile environment for all assets presents much greater challenges.

But few investors are positioned to cope with the rising risk of war in the Middle East. Few are prepared for the prospect of persistently higher energy prices and higher inflation. Even fewer are taking steps to insulate their portfolios from future black swan events.

Black swans by their nature are impossible to predict. No one saw a devastating drone strike on Saudi Arabian oil production facilities coming.

Delivering the biggest single blow in history to the global oil supply turned out to be surprisingly easy.

Unfortunately, it may be just as easy for terrorists or rogue states to target electrical grid infrastructure, nuclear power facilities, computer systems, or gatherings of world leaders. A single, crudely executed strike could not only inflict disproportionate damage to the global economy but also potentially trigger a full-scale war.

President Donald Trump says the United States is “locked and loaded,” ready to attack Iran for its alleged role in shuttering the Saudis’ oil facilities.

Republican Senator Lindsay Graham is suggesting we bomb Iranian oil refineries in retaliation – a move that could trigger another oil price spike and possibly provoke a Russian response.

Things have escalated rapidly since President Trump controversially planned – then cancelled – a meeting with the Taliban last week. He then proceeded to fire his national security advisor, John Bolton, who had been pushing for war with Iran.

That upset some of the war hawks on Capitol Hill. But the sudden attack on our putative ally Saudi oil machinery gives them one of their best opportunities to push Trump toward war.

How can investors best position for rising risk factors in heretofore sanguine markets?

Monday’s dramatic market moves offer some guidance. Energy stocks surged. Gold and silver gained 0.8% and 2.5%, respectively, on safe-haven buying.

The major stock market averages fell, but only modestly. There was no indication of panic selling taking hold.

Of course, the government’s Plunge Protection Team had the weekend to get circuit breakers on the exchanges in place. President Trump also vowed the U.S. would stand ready to tap the Strategic Petroleum Reserves if necessary to boost oil supplies.

Investors appear to still be largely complacent when it comes to the threat of future oil spikes.

For the past few years the conventional wisdom has been that oil supplies are plentiful and therefore prices should remain low. But those low prices reflected, to some extent, complacency about geopolitical risks.

Low oil prices have wrecked many marginal producers. Frackers and deep-sea drillers have been practically obliterated during a brutal bear market for the oil and gas sector that extended into this summer. It could leave a legacy of severe under-investment in oil production capacity.

The last five recessions were each preceded by a run-up in crude prices of at least a 90%, according to DataTrek Research. A one-day spike won’t trigger a recession, but we are very late into the economic cycle where the energy sector typically assumes leadership, before the economy and stock market roll over.

A surge in oil prices would put the Federal Reserve in a tough position. Rising energy costs hurt consumers and raise the odds of a recession. But if the Fed tries to help the economy by stimulating, it risks pushing energy prices, and price inflation more broadly, even higher.

If the Fed cuts rates again this week as expected, it will be betting that the oil spike is transitory and that inflationary pressures remain well contained.

The markets will have their say after the central bank releases its policy statement on Wednesday. If investors sense monetary policy is heightening inflation risk, they will likely bid up precious metals.

Physical precious metals are, in a very real sense, a form of stored energy. It takes an immense amount of energy to mine ore from the earth and refine it into lustrous gold and silver coins you can hold in your hand.

Higher energy and labor costs will ultimately translate into higher production costs for metals and higher spot prices. A surge in safe-haven demand from investors could have an even bigger, more immediate impact.

Perhaps one day headlines will appear throughout the mainstream media describing gold and silver price shocks that nobody saw coming.

The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

By Orbex

Tomorrow is a pretty busy day on the economic calendar! Key data is coming out both in Europe and the Americas.

Here we’ll be focusing on inflation data from the UK and Canada.

As most central banks around the world are heading towards an easing bias, if not outright rate cuts, these two countries have managed to buck the trend. Inflation in the UK and Canada remains well within policy targets. And their economies seem to be performing better than their peers.

Canada is especially in a better position given the news over the weekend of the attack on a Saudi refinery that cut 5% of the world’s oil production.

Prices in crude have subsequently spiked, as other producers have signaled they weren’t interested in stepping into the supply gap. We still don’t know how long the Saudi supply will be offline for repairs. This means Canada could expect to benefit from higher crude prices in the short term.

What to Expect From the UK

There are several bits of UK data coming out at once. Therefore, we should expect some seesawing of the market.

Generally, the focus is on the monthly CPI figure. Expectations are for this to jump to 0.7% from 0.0% prior. From there we would expect an annualized rate of 2.0%. This would be a slight decline from 2.1% prior, and exactly at the BOE’s target. If the expectations prove true, it would imply that there will be no major changes from the BOE at their meeting on Thursday.

It’s understood that the BOE would like to have a more accommodative policy given the uncertainties of Brexit and the UK registering negative growth last quarter. But the central bank can’t take action with inflation being as high as it is. And given the increase in crude prices, we could expect further inflationary pressures in the near term.

The Markets

The generalized weakness in the pound due to Brexit uncertainty would usually be expected to help exporters. It would also increase prices for consumers, pushing up the CPI. This would imply that the projections are underestimating the annualized inflation rate, and we could have a beat.

Generally, higher inflation is seen as negative for the pound, despite conventional wisdom. Typically, the idea is that if inflation is increasing, the currency should get stronger due to a tightening bias of the central bank. But the consensus is that the BOE is not in a position to raise rates while Brexit is still being resolved.

What to Expect Out of Canada

Canada has a rather relaxed day on the economic calendar. And the markets are expected to be more interested in other events that could drive the CAD, such as geopolitics.

In any case, the relevant data for the BOC is the monthly core CPI number. Expectations are for this to slow to just 0.1% from 0.3% prior. But that would still put the annualized rate at 2.2%, up from 2.0% prior.

While Canada might benefit from higher crude prices in general, internally, the disruption of supply might pose a problem. Most of the country’s oil-producing facilities are in Alberta and are exported to the US.

There isn’t much infrastructure to bring that crude to the east, where the majority of the population lives (there is only one pipeline that goes as far as Montreal). There, Canada relies on imports, 40% of which come from Saudi Arabia. While the refinery in St. John can switch to other suppliers, we generally expect those to be more expensive. This would imply higher prices at the pump in the coming weeks, and increased inflation going forward.

By Orbex