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September 13, 2024

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The SCTR Report: Insmed’s Stock Hangs in the Balance—Here’s What You Need to Know

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Numerous companies are making strides within their respective sectors, but, unless you follow the sector closely, you might not be aware of them. That’s what makes StockCharts Technical Rank (SCTR) reports so helpful.

If you’ve checked your SCTR reports regularly, you might have noticed Insmed (INSM) appear at or near the top over the last three months.

FIGURE 1. DAILY SCTR REPORTS SHOW INSM IN THE OF THE TOP-UP, LARGE-CAP STOCKS.Image source: StockCharts.com. For educational purposes.

Insmed (INSM) is a biotech company that has had a near-perfect SCTR score of 99.9 since the end of May.

A SCTR (pronounced scooter) score above 90 is exceedingly bullish, as it signals technical strength across multiple technical indicators and timeframes. Sustaining a score well above 90 for months tells you that something tremendous is happening with the company and its stock.

But if you don’t follow biotech, you’re probably wondering, “What is Insmed? Why haven’t I heard of it? Why is it soaring now? Where was it before it showed up on the SCTR report’s top spot?”

In a Nutshell, Here’s What’s Driving INSM

Insmed’s stock is popping thanks to positive results from a late-stage study of its antibiotic drug Arikayce, developed for treating a rare, severe lung infection. The study’s success boosts hopes for broader FDA approval, driving INSM’s sharp breakaway gap to all-time highs.

Before this, however, what did INSM’s performance look like?

Three-Year Lookback at INSM’s Performance

FIGURE 2. WEEKLY CHART OF INSM. The recent tests catapulted INSM to all-time highs.Chart source: StockCharts.com. For educational purposes.

Take note of the following points:

  • The breakaway gap (see orange short-term downsloping trend line) from $22 to $49.53 marked a 125% spike.
  • While INSM’s SCTR score has exceeded the 90 line four times in the last three years (see green circles), notice how it barely outperformed, and largely underperformed, its broader industry, represented by the Dow Jones U.S. Biotechnology Index ($DJUSBT).
  • The latest break above the 90 line looks flat-out bullish (see green rectangle), aligning with a 171% outperformance of its industry.

Does this make INSM a strong candidate for a long position? To explore that further, let’s shift to a daily chart.

Should You Go Long INSM?

FIGURE 3. DAILY CHART OF INSM. Note the declining momentum and topping formation.Chart source: StockCharts.com. For educational purposes.

Here are the main things to keep an eye on:

  • INSM looks to be forming a double top; still, market sentiment reacting to INSM’s latest testing news and developments moving forth may defy (bearish) technical indications.
  • The Chaikin Money Flow (CMF) shows that buying pressure is fading, matching up with the Relative Strength Index’s (RSI’s) bearish divergence signal from overbought levels.
  • Despite looking toppy, for INSM’s near-term uptrend to continue, you’d want to see it break above resistance at its all-time level of $80.53 while remaining above its most recent swing low at the $70 range.
  • If it falls below the $70 range, the next lines of support can be at the previous swing lows of $67.20 and $61.50.

Warning: A deeper correction may indicate that something is off between the technical reading and the market’s reaction to the company’s news or product development.

If INSM falls below $61.50, the long-term uptrend could still hold despite invalidating the short-term trend. Be extra careful, though! INSM might slide to $45–$52, hitting key Fibonacci retracement levels, but a dip that low could mean something big has changed with INSM’s product development, and the price action may be reflecting the market’s response to these (bearish) developments.

Closing Bell

StockCharts’ SCTR Reports spotlight hidden stock opportunities that might not have crossed your radar. Insmed is a great example. It’s been riding high on positive testing news, but its technicals are flashing warning signs. If you want to follow INSM’s price action, add it to one of your StockCharts ChartLists. If not, be sure to use SCTR daily to find other (potentially hidden) opportunities for your next trade.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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A Déjà Vu in The Consumer Staples Sector Sends a Strong Warning Signal

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Tech Rallies, But Remains Inside the Lagging Quadrant

A quick look at the Relative Rotation Graph for US sectors reveals that the Technology sector is still the main driving force for the market. Technology now makes up more than 30% of the market capitalization of the S&P 500, so it significantly influences the price (movement) of the S&P 500 index.

On this weekly RRG above, the XLK tail can be seen heading further into the lagging quadrant, together with XLC and XLE.

After dipping to the 540 area at the end of last week, the market has recovered some of that ground so far this week. This move has now established the area around 540 as support, while overhead resistance still remains intact around 565. A break of either level will very likely ignite an acceleration in the direction of the break.

On the weekly RRG, this move has had no material impact so far.

The Daily RRG Shows Some Improvement

Only when zooming in on the daily Relative Rotation Graph can we see this week’s improvement.

What is interesting to see on this daily RRG is that the same three sectors that are inside the lagging quadrant on the weekly RRG are also inside the lagging quadrant on this daily RRG. XLC and XLE clearly confirm their relative downtrends by rotating at a negative RRG-Heading.

The uptick in tech stocks so far this week has caused an improvement in relative momentum, but not (yet) in relative strength.

But It’s Based On a Narrow Foundation

Zooming in on the technology sector members and using the table below to examine their performance over the last five trading days, we find the RRG provides some insight into where this jump in performance is coming from.

With XLK up 5% so far this week, only 9 out of the 50 stocks in this group outperform SPY. The other 41 are below XLK. With NVDA being one of the top-ranking stocks, this group is already pulling performance up by its market capitalization, especially because MSFT, the other big name inside XLK, is only 0.5% below XLK.

Therefore, the foundation of this tech rally so far is very narrow. Again.

Based on these observations, I will judge the current tech rally as a recovery within an established relative downtrend.

Defensives Pushing Into Leading RRG Quadrant

On the opposite side of the spectrum, three sectors seem very well positioned for further outperformance. XLV (Health Care), XLF (Financials), and XLP (Consumer Staples) have all just entered the leading quadrant, which means a turnover from a relative downtrend into a relative uptrend against SPY. All three are rotating at a positive RRG-Heading, and all three are showing an increasing RRG-Velocity.

Looking at their individual charts combined with relative strength and their RRG-Lines, one sector stands out with a setup we have seen before.

Consumer Staples

At the end of 2021, the consumer staples sector ended a prolonged period of underperformance (20 months), marked by the first vertical dashed line in November 2021, when the RS-Line broke above a falling resistance line. By then, the JdK RS-Momentum line had already crossed above the 100 level, pushing the XLP tail into the improving quadrant.

A few weeks later, the JdK RS-Ratio line also crossed above 100, and the tail moved into leading. Shortly after that move, the market started to drop, and XLP started to serve its role as a defensive sector, outperforming SPY for more than a year while the market (SPY) dropped 20%.

Fast Forward to the Present

The RS-line of XLP has broken above its falling resistance after a downtrend that started at the end of 2022, so almost two years ago — 21 months, to be exact. RS-Momentum rose above 100 a few weeks after that event, and this week, RS-Ratio also crossed above 100, pushing the XLP tail into the leading quadrant.

The price moves on the SPY chart are almost identical on both occasions. There is a peak when the RS line crosses upward, and a second peak shortly after the RS-ratio line crosses above 100.

Given the defensive nature of the Staples sector and the analogy that seems to be playing out at the moment, I am keeping my cautious/careful approach to the markets.

RISK > POTENTIAL REWARD

#StayAlert, –Julius

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What Was the Highest Price for Gold? (Updated 2024)

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Gold has long been considered a store of wealth, and the gold price often makes its biggest gains during turbulent times as investors look for cover in this safe-haven asset.

The 21st century has so far been heavily marked by episodes of economic and sociopolitical upheaval. Uncertainty has pushed the precious metal to record highs as market participants seek its perceived security. And each time the gold price rises, there are calls for even higher record-breaking levels.

Gold market gurus from Lynette Zang to Chris Blasi to Jordan Roy-Byrne have shared eye-popping predictions on the gold price that would intrigue any investor — gold bug or not.

While some have posited that the gold price may break US$3,000 per ounce and carry on as high as US$4,000 or US$5,000, there are those with hopes that US$10,000 gold or even US$40,000 gold could become a reality.

These impressive price predictions have investors wondering, what was the highest gold price ever? Gold has set multiple fresh all-time highs (ATH) in 2024 alone, and we share the latest one and what has driven it to this level below. We also take a look at how the gold price has moved historically and what has driven its performance in recent years.

How is gold traded?

Before discovering what the highest gold price ever was, it’s worth looking at how the precious metal is traded. Knowing the mechanics behind gold’s historical moves can help illuminate why and how its price changes.

Gold bullion is traded in dollars and cents per ounce, with activity taking place worldwide at all hours, resulting in a live price for the metal. Investors trade gold in major commodities markets such as New York, London, Tokyo and Hong Kong. London is seen as the center of physical precious metals trading, including for silver. The COMEX division of the New York Mercantile Exchange is home to most paper trading.

There are many popular ways to invest in gold. The first is through purchasing gold bullion products such as bullion bars, bullion coins and rounds. Physical gold is sold on the spot market, meaning that buyers pay a specific price per ounce for the metal and then have it delivered. In some parts of the world, such as India, buying gold in the form of jewelry is the largest and most traditional route to investing in gold.

Another path to gold investment is paper trading, which is done through the gold futures market. Participants enter into gold futures contracts for the delivery of gold in the future at an agreed-upon price. In such contracts, two positions can be taken: a long position under which delivery of the metal is accepted or a short position to provide delivery of the metal. Paper trading as a means to invest in gold can provide investors with the flexibility to liquidate assets that aren’t available to those who possess physical gold bullion.

One significant long-term advantage of trading in the paper market is that investors can benefit from gold’s safe-haven status without needing to store it. Furthermore, gold futures trading can offer more financial leverage in that it requires less capital than trading in the physical market.

Interestingly, investors can also purchase physical gold via the futures market, but the process is complicated and lengthy and comes with a large investment and additional costs.

Aside from those options, market participants can invest in gold through exchange-traded funds (ETFs). Investing in a gold ETF is similar to trading a gold stock on an exchange, and there are numerous gold ETF options to choose from. For instance, some ETFs focus solely on physical gold bullion, while others focus on gold futures contracts. Other gold ETFs center on gold-mining stocks or follow the gold spot price.

It is important to understand that you will not own any physical gold when investing in an ETF — in general, even a gold ETF that tracks physical gold cannot be redeemed for tangible metal.

With regards to the performance of gold versus trading stocks, gold has an interesting relationship with the stock market. The two often move in sync during “risk-on periods” when investors are bullish. On the flip side, they tend to become inversely correlated in times of volatility.

According to the World Gold Council, gold’s ability to decouple from the stock market during periods of stress makes it “unique amongst most hedges in the marketplace.” It is often during these times that gold outperforms the stock market. For that reason, it is often used as a portfolio diversifier to hedge against uncertainty.

What was the highest gold price ever?

The gold price hit US$2,531.70, its all time highest price at the time of this writing, on August 20, 2024. What drove it to set this new ATH?

Gold broke through the important psychological level of US$2,000 per ounce in late 2023 on rising expectations that the US Federal Reserve would begin to reverse course on interest rates, and set multiple new all time highs in 2024. Gold climbed throughout Q2 to over US$2,450 in May, and then moved to US$2,483.35 on July 17.

While interest rate cuts have yet to materialize as of mid-September, gold climbed to over US$2,500 in mid-August on a weakening dollar, positive economic data and the news on August 16 that the Chinese government issued new gold import quotas to banks in the country following a two month pause.

Central bank gold buying has been one of the tailwinds for the gold price this year and China’s central bank has been one of the strongest buyers. It climbed further the following week to its new all-time high.

Fears of a looming recession — or the strong belief that a recession is already here — are also highly supportive for gold heading as we head deeper into 2024. Read our in-depth breakdown of gold’s recent price performance below.

What factors have driven the gold price in the last 5 years?

5 year gold price chart, September 9, 2019, to September 10, 2024.

Chart via InvestingNews.

Despite these recent runs, gold has seen its share of both peaks and troughs over the last decade. After remaining rangebound between US$1,100 and US$1,300 from 2014 to early 2019, gold pushed above US$1,500 in the second half of 2019 on a softer US dollar, rising geopolitical issues and a slowdown in economic growth.

Gold’s first breach of the significant US$2,000 price level in mid-2020 was due in large part to economic uncertainty caused by the COVID-19 pandemic. To break through that barrier and reach what was then a record high, the yellow metal added more than US$500, or 32 percent, to its value in the first eight months of 2020.

The gold price breached that level again in early 2022 as Russia’s invasion of Ukraine collided with rising inflation around the world, increasing the allure of safe-haven assets and pulling the yellow metal up to a price of US$2,074.60 on March 8, 2022. However, it fell throughout the rest of 2022, dropping below US$1,650 in October.

Although it didn’t quite reach the level of volatility as the previous year, the gold price experienced drastic price changes in 2023 on the back of banking instability, high interest rates and the breakout of war in the Middle East.

After central bank buying pushed the gold price up to the US$1,950.17 mark by the end of January, the US Federal Reserve’s 0.25 percent rate hike on February 1 sparked a retreat as the dollar and Treasury yields saw gains. The precious metal went on to fall to its lowest price level of the year at US$1,809.87 on February 23.

The banking crisis that hit the US in early March caused a domino effect through the global financial system and led to the mid-March collapse of Credit Suisse, Switzerland’s second-largest bank. The gold price jumped to US$1,989.13 by March 15. The continued fallout in the global banking system throughout the second quarter of the year allowed gold to break above US$2,000 on April 3, and go on to flirt with a near-record high of US$2,049.92 on May 3.

Those gains were tempered by the Fed’s ongoing rate hikes and improvements in the banking sector, resulting in a downward trend in the gold price throughout the remainder of the second quarter and throughout the third quarter. By October 4, gold had fallen to a low of US$1,820.01 and analysts expected the precious metal to be on the path to drop below the US$1,800 level.

That was before the October 7 attacks by Hamas on Israel ignited legitimate fears of a much larger conflict erupting in the Middle East. Reacting to those fears, the gold price climbed through the month and closed at US$2,007.08 on October 27. As the Israel-Hamas fighting intensified, gold reached a then new high of US$2,152.30 during intraday trading on December 3.

That robust momentum in the spot gold price has continued into 2024, chasing new highs on fears of a looming US recession, the promise of Fed rate cuts on the horizon, the worsening conflict in the Middle East and the tumultuous US presidential election year. By mid-March, gold was pushing up against the US$2,200 level.

That record-setting momentum continued into the second quarter of 2024 when gold broke through US$2,400 per ounce in mid-April on strong central bank buying, sovereign debt concerns in China and investors expecting the Fed to start cutting interest rates. The precious metal went on to hit US$2,450.05 per ounce on May 20.

Throughout the summer, the hits have just kept on coming. The global macro environment is highly bullish for gold in the lead up to the US election. Following the failed assassination attempt on former US President Donald Trump and a statement about coming interest rate cuts by Fed Chair Jerome Powell, the gold spot price hit a new all-time high on July 16 at US$2,469.30 per ounce.

One week later, news that President Joe Biden would not seek re-election and would instead pass the baton to his VP Kamala Harris eased some of the tension in the stock markets and strengthened the US dollar. This also pushed the price of gold down to US$2,387.99 per ounce on July 22.

However, the bullish factors supporting gold over the past year remain in play and the spot price for gold has gone on to breach the US$2,500 level first on August 2 on a less than stellar US jobs report before closing just above the US$2,440 level. A few weeks later, gold pushed past US$2,500 once again on August 16, to close above that level for the first time ever after the US Department of Commerce released data showing a fifth consecutive monthly decrease in a row for homebuilding.

Ongoing economic and geopolitical uncertainty had the gold spot price supported above the US$2,500 level to a new high of US$2,525 per ounce on August 20.

What’s next for the gold price?

What’s next for the gold price is never an easy call to make. There are many factors that affect the gold price, but some of the most prevalent long-term drivers include economic expansion, market risk, opportunity cost and momentum.

Economic expansion is one of the primary gold price contributors as it facilitates demand growth in several categories, including jewelry, technology and investment. As the World Gold Council explains, “This is particularly true in developing economies where gold is often used as a luxury item and a means to preserve wealth.” Market risk is also a prime catalyst for gold values as investors view the precious metal as the “ultimate safe haven,” and a hedge against currency depreciation, inflation and other systemic risks.

Going forward, in addition to the Fed, inflation and geopolitical events, experts will be looking for cues from factors like supply and demand. In terms of supply, the world’s five top gold producers are China, Australia, Russia, Canada and the US. The consensus in the gold market is that major miners have not spent enough on gold exploration in recent years. Gold mine production has fallen from around 3,200 to 3,300 metric tons each year between 2018 and 2020 to around 3,000 to 3,100 metric tons each year between 2021 and 2023.

On the demand side, China and India are the biggest buyers of physical gold, and are in a perpetual fight for the title of world’s largest gold consumer. That said, it’s worth noting that the last few years have brought a big rebound in central bank gold buying, which dropped to a record low in 2020, but reached a 55 year high of 1,136 metric tons in 2022.

The World Gold Council has reported that central bank gold purchases in 2023 came to 1,037 metric tons, marking the second year in a row above 1,000 MT.

‘I think clearing US$2,400 for good — trading a few weeks above that level would be key,’ Lundin said. ‘Eventually I think we’re going to go much higher. The timing of that is always the hard part. Getting back to where I think we’re going to be at the end of this cycle, I think the gold price is going to be somewhere between US$6,000 and US$8,000.’

‘You’ve seen such an incredible breakout (in gold), such an incredible setup — and the public’s just not in the trade yet,’ he said. ‘When they do come back in, I think on the back of some of these capital flows, then that’ll be a big driver of not only gold, but the equities, which today we still really have not seen any material inflows.’

Should you beware of gold price manipulation?

As a final note on the price of gold and buying gold bullion, it’s important for investors to be aware that gold price manipulation is a hot topic in the industry.

In 2011, when gold hit what was then a record high, it dropped swiftly in just a few short years. This decline after three years of impressive gains led many in the gold sector to cry foul and point to manipulation. Early in 2015, 10 banks were hit in a US probe on precious metals manipulation. Evidence provided by Deutsche Bank (NYSE:DB) showed “smoking gun” proof that UBS Group (NYSE:UBS), HSBC Holdings (NYSE:HSBC), the Bank of Nova Scotia (NYSE:BNS) and other firms were involved in rigging gold and silver rates in the market from 2007 to 2013.

Not long after, the long-running London gold fix was replaced by the LBMA gold price in a bid to increase gold price transparency. The twice-a-day process, operated by the ICE Benchmark Administration, still involves a variety of banks collaborating to set the gold price, but the system is now electronic.

Still, manipulation has by no means been eradicated, as a 2020 fine on JPMorgan (NYSE:JPM) shows. The next year, chat logs were released in a spoofing trial for two former precious metals traders from the Bank of America’s (NYSE:BAC) Merrill Lynch unit. They show a trader bragging about how easy it is to manipulate the gold price.

Gold market participants have consistently spoken out about manipulation. In mid-2020, Chris Marcus, founder of Arcadia Economics and author of the book “The Big Silver Short,” said that when gold fell back below the US$2,000 mark after hitting close to US$2,070, he saw similarities to what happened with the gold price in 2011.

Marcus has been following the gold and silver markets with a focus specifically on price manipulation for nearly a decade. His advice? “Trust your gut. I believe we’re witnessing the ultimate ’emperor’s really naked’ moment. This isn’t complex financial analysis. Sometimes I think of it as the greatest hypnotic thought experiment in history.”

Investor takeaway

While we have the answer to what the highest gold price ever is as of now, it remains to be seen how high gold can climb, and if the precious metal can reach as high as US$5,000, US$10,000 or even US$40,000.

Even so, many market participants believe gold is a must have in any investment profile, and there is little doubt investors will continue to see gold price action making headlines this year and beyond.

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

This post appeared first on investingnews.com

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How Would a New BRICS Currency Affect the US Dollar? (Updated 2024)

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The BRICS nations, originally composed of Brazil, Russia, India, China and South Africa, are looking to establish a new reserve currency backed by a basket of their respective currencies.

The potential BRICS currency would allow these nations to assert their economic independence while competing with the existing international financial system. The current system is dominated by the US dollar, which accounts for about 90 percent of all currency trading. Until recently, nearly 100 percent of oil trading was conducted in US dollars; however, in 2023 one-fifth of oil trades were reportedly made using non-US dollar currencies.

Central to this ongoing situation is the US trade war with China, as well as US sanctions on China and Russia. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what’s known as de-dollarization. In turn, this would have implications for the United States and global economies.

During the first US Presidential Debate between former President Donald Trump and current Vice President Kamala Harris on September 10, Trump doubled down on his recent pledge to impose strict tariffs on nations seeking to move away from the US dollar as the global currency. He is taking a particularly strong stance against China, threatening to slap 60 percent to 100 percent tariffs on Chinese imports if elected.

It’s still too early to predict when a BRICS currency will be released, but it’s a good time to look at the potential for a BRICS currency and its possible implications for investors.

Table of Contents

Why do the BRICS nations want to create a new currency?Will BRICS have a digital currency?What would the advantages of a BRICS currency be?How would a new BRICS currency affect the US dollar?How would a BRICS currency impact the economy?How can investors prepare for a new BRICS currency?Investor takeaway

Why do the BRICS nations want to create a new currency?

The BRICS nations have a slew of reasons for wanting to set up a new currency. Recent global financial challenges and aggressive US foreign policies have prompted the BRICS countries to explore the possibility. They want to better serve their own economic interests while reducing global dependence on the US dollar and the euro.

When will a BRICS currency be released? There’s no definitive launch date as of yet, but the countries’ leaders have discussed the possibility at length. During the 14th BRICS Summit, held in mid-2022, Russian President Vladimir Putin said the BRICS countries plan to issue a ‘new global reserve currency,’ and are ready to work openly with all fair trade partners.

In April 2023, Brazilian President Luiz Inacio Lula da Silva showed support for a BRICS currency, commenting, “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries? Who decided that the dollar was the (trade) currency after the end of gold parity?”

In the lead up to the 2023 BRICS Summit last August, there was speculation that an announcement of such a currency could be on the table. This proved to be wishful thinking, however.

‘The development of anything alternative is more a medium to long term ambition. There is no suggestion right now to creates a BRICS currency,’ Leslie Maasdorp, CFO of the New Development Bank, told Bloomberg at the time. The bank represents the BRICS bloc.

South Africa’s BRICS ambassador, Anil Sooklal, has said as many as 40 countries have expressed interest in joining BRICS. At the 2023 BRICS Summit , six countries were invited to become BRICS members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. All but Argentina officially joined the alliance in January 2024.

In recent years, the US has placed numerous sanctions on Russia and Iran. The two countries are working together to bring about a BRICS currency that would negate the economic impacts of such restrictions, according to Iranian Ambassador to Russia Kazem Jalal, speaking at a press conference during the Russia–Islamic World: KazanForum in May 2024.

Some experts believe that a BRICS currency is a flawed idea, as it would unite countries with very different economies. There are also concerns that non-Chinese members might increase their dependence on China’s yuan instead. That said, when Russia demanded in October 2023 that India pay for oil in yuan, India refused to use anything other than the US dollar or rupees. Russia is struggling to use its excess supply of rupees.

Will BRICS have a digital currency?

BRICS nations do not as of yet have their own specific digital currency, but a BRICS blockchain-based payment system is in the works, according to Kremlin aide Yury Ushakov in March 2024. Known as the BRICS Bridge multisided payment platform, it would connect member states’ financial systems using payment gateways for settlements in central bank digital currencies.

The planned system would serve as an alternative to the current international cross-border payment platform, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, which is dominated by US dollars.

“We believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain. The main thing is to make sure it is convenient for governments, common people and businesses, as well as cost-effective and free of politics,” Ushakov said in an interview with Russian news agency TASS.

What would the advantages of a BRICS currency be?

A new currency could have several benefits for the BRICS countries, including more efficient cross-border transactions and increased financial inclusion. By leveraging blockchain technology, digital currencies and smart contracts, the currency could revolutionize the global financial system. Thanks to seamless cross-border payments, it could also promote trade and economic integration among the BRICS nations and beyond.

A new BRICS currency would also:

Strengthen economic integration within the BRICS countriesReduce the influence of the US on the global stageWeaken the standing of the US dollar as a global reserve currencyEncourage other countries to form alliances to develop regional currenciesMitigate risks associated with global volatility due to unilateral measures and the diminution of dollar dependence

How would a new BRICS currency affect the US dollar?

RomanR / Shutterstock

For decades, the US dollar has enjoyed unparalleled dominance as the world’s leading reserve currency. According to the US Federal Reserve, between 1999 and 2019, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79 percent in the rest of the world.

According to the Atlantic Council, the US dollar is used in approximately 88 percent of currency exchanges, and 59 percent of all foreign currency reserves held by central banks. Due to its status as the most widely used currency for conversion and its use as a benchmark in the forex market, almost all central banks worldwide hold dollars. Additionally, the dollar is used for the vast majority of oil trades.

Although the dollar’s reserve currency share has decreased as the euro and yen have gained popularity, the dollar is still the most widely used reserve currency, followed by the euro, the yen, the pound and the yuan.

The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar’s dominance. However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar’s value. It could also cause an economic crisis affecting American households. Aside from that, this new currency could accelerate the trend toward de-dollarization.

Nations worldwide are seeking alternatives to the US dollar, with examples being China and Russia trading in their own currencies, and countries like India, Kenya and Malaysia advocating for de-dollarization or signing agreements with other nations to trade in local currencies or alternative benchmarks.

While it is unclear whether a new BRICS currency would inspire the creation of other US dollar alternatives, the possibility of challenging the dollar’s dominance as a reserve currency remains. And as countries continue to diversify their reserve holdings, the US dollar could face increasing competition from emerging currencies, potentially altering the balance of power in global markets.

However, a recent study by the Atlantic Council’s GeoEconomics Center released in June 2024 shows that the US dollar is far from being dethroned as the world’s primary reserve currency. ‘The group’s ‘Dollar Dominance Monitor’ said the dollar continued to dominate foreign reserve holdings, trade invoicing, and currency transactions globally and its role as the primary global reserve currency was secure in the near and medium term,’ reported Reuters.

Ultimately, the impact of a new BRICS currency on the US dollar will depend on its adoption, its perceived stability and the extent to which it can offer a viable alternative to the dollar’s longstanding hegemony.

How would a BRICS currency impact the economy?

A potential shift toward a new BRICS currency could have significant implications for the North American economy and investors operating within it. Some of the most affected sectors and industries include:

Oil and gasBanking and financeCommoditiesInternational tradeTechnologyTourism and travelThe foreign exchange market

A new BRICS currency would also introduce new trading pairs, alter currency correlations and affect market volatility, requiring investors to adapt their strategies accordingly.

How can investors prepare for a new BRICS currency?

Adjusting a portfolio in response to emerging BRICS currency trends may be a challenge for investors. However, several strategies can be adopted to capitalize on these trends.

Invest in commodities like gold and silver as a hedge against currency risk.Gain exposure to BRICS equity markets through stocks and ETFs that track BRICS market indexes.Consider alternative investments such as real estate or private equity in the BRICS countries.

Prudent investors will also weigh these strategies against their exposure to market, political and currency fluctuations.

In terms of investment vehicles, investors could consider ETFs such as the iShares MSCI BIC ETF (ARCA:BKF) or the Pacer Emerging Markets Cash COW 100 ETF (NASDAQ:ECOW). They could also invest in mutual funds such as the T. Rowe Price Emerging Markets Equity Fund, or in individual companies within the BRICS countries.

Simply put, preparing for a new BRICS currency or potential de-dollarization requires careful research and due diligence by investors. Diversifying currency exposure, and investing in commodities, equity markets or alternative investments are possible options to consider while being mindful of the associated risks.

Investor takeaway

While it is not certain whether the creation of a BRICS reserve currency will come to pass, its emergence would pose significant implications for the global economy and potentially challenge the US dollar’s dominance as the primary reserve currency. This development would present unique investment opportunities, while introducing risks to existing investments as the shifting landscape alters monetary policy and exacerbates geopolitical tensions.

For those reasons, investors should closely monitor the progress of a possible BRICS currency. And, if the bloc does eventually create one, it will be important watch the currency’s impact on BRICS member economies and the broader global market. Staying vigilant will help investors to capitalize on growth prospects and hedge against potential risks.

FAQs for a new BRICS currency

Is a BRICS currency possible?

Some financial analysts point to the creation of the euro in 1999 as proof that a BRICS currency may be possible. However, this would require years of preparation, the establishment of a new central bank and an agreement between the five nations to phase out their own sovereign currencies; it would most likely also need the support of the International Monetary Fund to be successful internationally.

The impact of its war on Ukraine will continue to weaken Russia’s economy and the value of the ruble, and China is intent on raising the power of the yuan internationally. There is also a wide chasm of economic disparity between China and other BRICS nations. These are no small obstacles to overcome.

Would a new BRICS currency be backed by gold?

While Russian President Vladimir Putin has suggested hard assets such as gold or oil, a new BRICS currency would likely be backed by a basket of the bloc’s currencies.

That said, speaking at this year’s New Orleans Investment Conference, well-known author Jim Rickards gave a detailed talk on how a gold-backed BRICS currency could work. He suggested that if a BRICS currency unit is worth 1 ounce of gold and the gold price goes to US$3,000 per ounce, the BRICS currency unit would be worth US$3,000, while the dollar would lose value compared to the BRICS currency as measured by the weight of gold.

Importantly though, he doesn’t see this as a new gold standard, or the end of the US dollar or the euro.

“(With) a real gold standard, you can take the currency and go to any one of the central banks and get some gold,” Rickards said at the event. “With BRICS they don’t have to own any gold, they don’t have to buy any gold, they don’t have to prop up the price. They can just rise on the dollar gold market.

How much gold do the BRICS nations have?

As of Q2 2024, the combined central bank gold holdings of the original BRICS nations plus Egypt (the only nation of the five new additions to have central bank gold reserves) accounted for more than 20 percent of all the gold held in the world’s central banks. Russia, India and China rank in the top 10 for central bank gold holdings.

Russia controls 2,335.85 metric tons (MT) of the yellow metal, making it the fifth largest for central bank gold reserves. China follows in the sixth spot with 2,264.32 MT of gold and India places eighth with 840.76 MT. Brazil and South Africa’s central bank gold holdings are much smaller, coming in at 129.65 MT and 125.44 MT, respectively. New BRICS member Egypt’s gold holdings are equally pauce, at 126.57 MT.

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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What is an Offtake Agreement? (Updated 2024)

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Offtake agreements play a critical role in obtaining project financing for high capital expenditures, such as manufacturing plants or processing facilities.

From early-stage enterprises to more mature businesses, cash flow challenges can make it difficult to secure loans to finance infrastructure projects. This type of contract can go a long way to mitigate risk in the eyes of lending institutions.

Offtake agreements are often employed in a wide range of sectors, including mining, energy, agriculture, pharmaceuticals and foodservice manufacturing.

But what are offtake agreements, and how do they work? Here’s a brief overview of these deals and how they are typically structured.

What are offtake agreements in project financing?

An offtake agreement is a binding contract between a company that provides goods or services and a company that needs to procure those goods or services. It formalizes the buyer’s intention to purchase a certain amount of the producer’s future output.

Still confused? Here’s a simple breakdown of how offtake agreements work:

Let’s say a company has been working on a new coffee mug, but is looking for financing to develop this new project before it is actually produced.In order to secure financing from the bank, the company signs an offtake agreement with a coffee shop that is interested in selling the mugs once they are produced. Under the terms and conditions of this contract, the coffee shop agrees to buy all the mugs that the company intends to produce during the next year.The mug producer can assure investors and lenders that there is a market for its product before it begins production. It can also be confident that it has ensured a minimum return on its goods.The coffee shop can continue functioning as normal because it knows that it has secured a supply of mugs for a particular price and for delivery at a particular date.

What are the benefits of offtake agreements in mining?

The risks associated with extracting resources are high. One way exploration companies can reduce these risks is by securing offtake agreements.

Mining offtake agreements are important for many companies, but are particularly crucial for those focused on critical and industrial metals. Many of these metals are not sold on the open market, and that makes it harder for producers to offload them.

Generally, offtake agreements are negotiated after a feasibility study is completed and prior to mine construction; they help assure producers that there is a market for the material they plan to produce. That is beneficial for a number of reasons — most obviously, it means the mining company won’t have to worry about being able to sell its metal.

Additionally, having an offtake agreement tends to make it easier for producers to secure financing to move a project through mine construction. A lender or investor is more likely to finance a project if they are confident that companies are already lining up to buy the metal it will produce.

Buyers will also sometimes provide producers with money to advance their mining projects when an offtake agreement is created. However, that is not always the case.

Of course, this type of contract can also be beneficial for buyers. Offtake agreements allow buyers to purchase metal at a particular market price. This can function as a hedge against future price changes if demand outweighs supply. The terms and conditions of an offtake agreement also guarantee that buyers will receive the product they are purchasing at a specific date.

What risks are associated with offtake agreements?

While offtake agreements have many benefits for both producers and buyers, there are risks associated with them as well.

It’s possible for both parties to back out of an offtake agreement, though doing so usually requires negotiations and often the payment of a fee. Companies also face the risk of not having their offtake agreements renewed once they are in production, and they usually must make sure that their product continues to meet the buyer’s standards.

Offtake agreements can also be complicated and can take a long time to set up. For mining companies that want to move forward quickly with project development, spending that time can be a hindrance. These companies may choose to progress on their own and discover other routes to project financing.

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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Testing Confirms Potential for Significant Antimony Production from the La Demajagua Gold-Silver-Antimony Mine, Cuba

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Antilles Gold Limited (“Antilles Gold” or the “Company”) (ASX: AAU, OTCQB: ANTMF) is pleased to advise that the metallurgical test work undertaken by BGRIMM Technology on the gold-arsenopyrite concentrate to be produced by the La Demajagua open pit mine in Cuba, has been completed.

BGRIMM, which is a leading Chinese engineering group specialising in the design and construction of roasters to oxidise refractory gold concentrate, carried out the test work over a 9 month period to demonstrate the technical viability and design parameters for a processing facility that will include a two-stage fluidised-bed roaster, an acid plant and CIL circuit to produce a gold doré, and a separate leach circuit to recover antimony from the gold-arsenopyrite concentrate before roasting.

BGRIMM’s report will be translated from Mandarin to English for inclusion in a new Scoping Study for the expanded La Demajagua project. A summary of recoveries and processing consumables has been provided in English. The attached Memorandum from JJ Metallurgical Services Inc dated 12 September 2024 describes the test work undertaken on the La Demajagua gold-arsenopyrite concentrate by BGRIMM Technology, the anticipated antimony and gold recoveries, and the estimated annual antimony production.

POTENTIAL ANNUAL ANTIMONY PRODUCTION (9 YEAR LoM) (refer Note 1 below)

BGRIMM determined a 77.9% antimony recovery from alkaline leaching of the ~53,000tpa of gold-arsenopyrite concentrate with 4.9% antimony content expected to be produced after reverse flotation of the La Demajagua ore, which would yield ~2,028tpa of contained antimony in a precipitate~2,758tpa of antimony is also expected to be contained in the ~5,900tpa of silver- gold-antimony concentrate produced by reverse flotation

Payables of 57% of the prevailing antimony price (currently ~US$26,000/t) have been offered for the combined antimony contained in a blended silver-gold-antimony concentrate delivered to a northern Chinese port.

Antimony is a critical mineral with widespread industrial and technological uses with supply constraints and growing demand. The price of antimony recently doubled after China announced future restrictions on exports of the strategic metal.

Click here for the full ASX Release

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John Kaiser: Gold Price Trigger, Junior Miner Challenges, 4 Stocks I’m Watching

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John Kaiser of Kaiser Research shared his thoughts on gold, honing in on why interest in gold and gold stocks remains relatively low even though the metal has been trading at or near all-time highs.

In his view, part of the issue is the disappearance of the traditional gold bug — Kaiser explained that this has come about due to former US President Donald Trump’s takeover of the Republican Party.

‘The traditional things that Republicans were concerned about — they’re no longer concerned about that. They are now into crypto and stuff like that. So gold has been in a sense orphaned from the traditional audience,’ he said.

Meanwhile, Democrats tend to have little interest in the yellow metal or the related equities.

Another contributing factor is the ongoing shift away from the US dollar. Kaiser said this has created a sense that America has peaked, and is now heading into a decline relative to other countries.

‘That’s also not a really good talking point for a traditional gold bug,’ he noted.

When asked what could catalyze interest in gold and gold stocks, he pointed to the US election. ‘Regardless of the outcome, we’re going to see gold trend higher, and that’s I think going to be the trigger,’ Kaiser said.

He also discussed issues facing junior miners right now and how they can be addressed, touching on intraday naked shorting, accredited investor requirements and slow permitting times.

In closing, he shared four stocks he’s watching: Vista Gold (TSX:VGZ,NYSEAMERICAN:VGZ), Solitario Resources (TSX:SLR,NYSEAMERICAN:XPL), PJX Resources (TSXV:PJX,OTCQB:PJXRF) and Nevada Organic Phosphate (CSE:NOP).

Watch the interview for Kaiser’s full thoughts on those topics and more.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

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South Korea was the world’s biggest ‘baby exporter.’ New evidence shows some mothers were forced to give up children

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South Korea has for decades been known as the world’s largest “baby exporter” – sending hundreds of thousands of children overseas after the country was ravaged by war and many mothers left destitute.

Many of those adopted children, now adults scattered across the globe and trying to trace their origins, have accused agencies of corruption and malpractice, including in some cases forcibly removing them from their mothers.

A report released earlier this week by a Korean government commission supports those claims and uncovers new evidence on the coercive methods used to force mothers to give up their children.

The Truth and Reconciliation Commission, tasked in 2022 with investigating the claims, found that more than a dozen babies in several government-funded care facilities in the 1980s had been forcibly taken to adoption agencies, sometimes “on the day of birth or the next day.”

It examined three care facilities in the cities of Daegu and Sejong where, in 1985 and 1986, 20 children in total were transferred to adoption agencies. Most of those children were adopted overseas in the United States, Australia, Norway and Denmark.

The commission is still investigating cases allegedly involving falsified paperwork. An interim report is expected to publish later this year.

Searching for their roots

More than 200,000 South Korean children have been adopted overseas since the 1950s following World War II and the Korean War, according to authorities. Many of those children were adopted by families in the US and Europe.

While adoptions continue today, the trend has been declining since the 2010s after South Korea amended its adoption laws in an effort to address systematic issues and reduce the number of children adopted overseas.

For a generation of adoptees who have grown up in often homogenous, majority-White populations, some say they feel both disconnected from their Korean roots and unable to fit in. It’s what prompted a search for their biological families.

Some of those adoptees say they have mixed emotions over the commission’s findings, feeling both horror and hope that the investigation will shed light on what many long suspected.

“It’s truly terrifying to hear how systemic these issues were, but I wouldn’t say it’s necessarily surprising,” said Susanné Seong-eun Bergsten, who was adopted from South Korea and grew up in Sweden.

Bergsten’s biological family found her when she was a young adult, and while there was no sign that her paperwork was falsified, she says she can understand the struggles having been involved in advocacy for Korean adoptees.

“Us adoptees, we’re all kind of told, these adoptions are for our own good and we should all feel grateful for escaping poverty,” she said, calling the reality “far more complex.”

“Our adoption papers often lack important information which could give us more context for adoption, like our cultural background, stigma, and the individual struggles that our parents faced in the post-war era,” she said.

“[It] validates what Korean adoptees have known for decades within our community: The narrative that Korean mothers chose of their own volition to relinquish their children is, in all too many cases, a fiction,” he said.

While both Zastrow and Bergsten said it marked a promising step in the right direction, Bergsten urged the government to continue taking accountability and offer reparations to adoptees and their families.

“Adoption touches every level of Korean society, every economic class,” said Zastrow. “There is still much about Korean adoption that has not been formally acknowledged.”

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North Korea releases images of Kim Jong Un visiting a uranium enrichment site, giving rare glimpse inside its nuclear program

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New pictures of North Korean leader Kim Jong Un touring what state media said is a uranium enrichment facility have given an extremely rare glimpse inside the isolated nation’s closely guarded nuclear weapons program.

According to a report from Korean Central News Agency (KCNA) on Friday, Kim visited the facility – a bright, sterile warehouse filled with long rows of cylindrical machinery – which is used to produce weapons-grade nuclear material for the North’s growing arsenal.

The report comes as North Korea continues to ramp up its illegal nuclear weapons program and strengthens relations with Russia, deepening widespread concern in the West over the isolated nation’s direction under Kim.

The location and exact date of Kim’s visit to the site were not disclosed in the report, but the purpose of his inspection was clear, according to KCNA: to lay out a “long-term plan for increasing the production of weapon-grade nuclear materials.”

Experts say the images – which show Kim flanked by men in military uniforms and crisp white lab shirts – underscore North Korea’s growing confidence in its position as a nuclear power.

“Kim is exceptionally confident these days and he’s particularly interested in making sure that his calls for a massive increase in nuclear capabilities are not misinterpreted,” said Ankit Panda,  Stanton Senior Fellow at the Carnegie Endowment for International Peace, adding “these disclosures lend credibility to North Korea’s plans and demonstrate that they’ve come a long way in their enrichment capabilities.”

It’s a theme the North Korean leader has touched on frequently in recent years, including this week.

In a speech celebrating the 76th anniversary of North Korea’s founding on Monday, Kim pledged to “exponentially” expand the regime’s nuclear arsenal, reiterating bellicose rhetoric he has used in the past.

During his visit to the purported enrichment facility, Kim expressed repeated satisfaction with the technical capabilities of North Korea’s nuclear sector and emphasized the need to increase the number of centrifuges for greater production, according to state media.

Park Won-gon, professor of North Korean Studies at Ewha Womans University in Seoul, said the timing of the disclosure is also important.

The disclosure comes at a time of heightened tensions between North Korea and the West, with the US and its allies accusing North Korea of providing substantial military aid to Russia’s war effort in Ukraine. Both Moscow and Pyongyang have denied North Korean arms exports, despite significant evidence of such transfers.

In June, the two autocratic nations pledged to use all available means to provide immediate military assistance in the event the other is attacked, according to a landmark defense pact agreed to during a visit by Russian President Vladimir Putin to Pyongyang.

Since the location of this facility was not revealed in the KCNA report, it’s unclear whether the images are from a site already known to international observers, such as the Yongbyon nuclear research facility, or something entirely new. North Korea is believed to have several sites for enriching uranium.

“I’m not sure we can establish the site from the images,” said Martyn Williams, a Senior Fellow at the Stimson Center, “but it’s certainly the first time we’ve seen this set up and in this level of detail.”

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Russia expels six British diplomats it accuses of spying and sabotage activity

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Russia’s FSB security service said on Friday it had revoked the accreditation of six British diplomats in Moscow whose actions it said showed signs of spying and sabotage work.

Britain’s embassy in Moscow did not immediately respond to a Reuters request for comment.

The FSB, the main successor agency to the Soviet KGB, said it had documents showing that a British foreign office department in London responsible for Eastern Europe and Central Asia was coordinating what it called “the escalation of the political and military situation” and was tasked with ensuring Russia’s strategic defeat in its war against Ukraine.

“Thus, the facts revealed give grounds to consider the activities of British diplomats sent to Moscow by the directorate as threatening the security of the Russian Federation,” the FSB said in a statement.

“In this connection, on the basis of documents provided by the Federal Security Service of Russia and as a response to the numerous unfriendly steps taken by London, the Ministry of Foreign Affairs of Russia, in co-operation with the agencies concerned, has terminated the accreditation of six members of the political department of the British Embassy in Moscow in whose actions signs of spying and sabotage were found,” it said.

The six diplomats were named on Russian state TV, which also showed photographs of them.

“The English did not take our hints about the need to stop this practice (of carrying out intelligence activities inside Russia), so we decided to expel these six to begin with,” an FSB employee told the Rossiya-24 state TV channel.

The FSB said Russia would ask other British diplomats to go home early if they were found to be engaged in similar activity.

Russian Foreign Ministry spokeswoman Maria Zakharova was cited by the state TASS news agency as saying the activities of the British embassy in Moscow had gone well beyond diplomatic convention and accusing it of carrying out deliberate activity designed to harm the Russian people.

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