Pre-Positioning for Full-Tilt Commodities Rebound

With the year nearing its end, kids home from school, and the holiday season in full gear, I thought it a good time to provide a brief overview of what I’m seeing in the markets and how I’m playing it.

Tax loss selling season is nearing an end and the timing couldn’t be better as it appears the commodity bull market (across the board) that we’ve been waiting for is starting to leave the station.

Uranium just breached a 16-year high and is up 62% over the past year. The utilities are getting forced to come off the sidelines and the fundamentals are as good as I’ve seen since the Fukushima tragedy.

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Uranium just breached a 16-year high and is up 62% over the past year.

Lithium looks to be bottoming with the better, most liquid names in the space starting to catch a bid. You wouldn’t know it from the sentiment in the space but the data on EVs is actually pretty good.

As Jesse D. Jenkins recently noted in an excellent piece, EV and hybrid vehicle sales just posted the best year-over-year growth in Q3 of 2023 since the fourth quarter of 2021. 

He goes on to note that year-to-date sales of electric and plug-in hybrid vehicles in the US topped 1 million in September for the first time and are on pace to exceed 1.4 million by year’s end. 

Throw in the hilariously named Inflation Reduction Act, which is spurring growth in the critical metals space, and China’s nimbleness and apparent new willingness to stimulate its economy, and it seems like a good time to add to your lithium exposure if you missed the first run up before the recent consolidation. 

Pre-Positioning for Full-Tilt Commodities Rebound

Copper is seeing premium spikes on better than expected demand from electric vehicles, solar panels, and the power industry drawing down inventories. Bloomberg recently reported that the fees traders pay for imported cargoes over benchmark prices on the London Metals Exchange just reached the highest level in a year. 

Add to that increasing geopolitical risk across the board (see First Quantum’s Cobre Panama mine as a recent example) and, once again, throw in China looking to stimulate its economy, and you have the makings for a perfect storm in the copper space. 

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Then, we have gold, which is near all-time highs, just breached the $2,000 level again, is making new all-time highs in many foreign currencies, is up 15% for the year… yet continues to attract yawns from even the most ardent of goldbugs.

The gold premise is a simple one and, again, like copper and lithium and uranium, I’ve been adding to my exposure during the boring period. 

The simple premise is, if the most hawkish Fed since Volcker and a dollar index that breached the 107 level before its recent retreat isn’t enough to cause a breakdown in the gold chart, then it’s not going to happen. In fact a breakout looks clear as day to me. 

And given the bargains that abound in the space, you’d be wise to polish up that gold equities list because I suspect we’re in for a heck of a 2024.

Let’s get it!

Gerardo Del Real

Gerardo Del Real
Editor, Daily Profit Cycle