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Bloomberg's McGlone on Gold Correction and Oil Glut (Audio) · Bloomberg Intelligence

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  Speaker 1: of news desk, gom Bill Maloney charge, all right, thank
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  Speaker 1: you very much, billing here live breaking news over your
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  Speaker 1: I'm Charlie Pellett. That's sub Bloombred Business Flash June listening
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  Speaker 1: to taking stock with pim Box and Kathleen Hayes on
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  Speaker 1: Bloomberg Radio. Gold the price of gold declining. Today. You
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  Speaker 1: can buy an ounce of gold for twelve hundred and
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  Speaker 1: fifty one dollars an ounce. That is fifteen dollars less
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  Speaker 1: than it costs yesterday. Here to tell us more about
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  Speaker 1: gold and other commodities is Mike mccloan. He is commodity
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  Speaker 1: strategist for Bloomberg Intelligence and he joins us here in
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  Speaker 1: the studio. Mike, thank you very much for being here.
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  Speaker 1: Great to see you. Give us the story on goal.
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  Speaker 1: What's going on? Why the sell off? What are all
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  Speaker 1: the connections. I think gold is just doing a little
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  Speaker 1: bit of a catch up to the record high stock
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  Speaker 1: market prices. The dollar really hasn't been much of a
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  Speaker 1: factor this year, and gold really got its lift after Brexit.
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  Speaker 1: That's when it moved above thirteen hundred dollars announced. Both
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  Speaker 1: remember our gold started the year, It started the year
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  Speaker 1: below eleven hundred dollars announced. Right now it's around twelve fifty,
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  Speaker 1: so it's still up eighteen percent on the year. And
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  Speaker 1: part of the reasons it's up, it's because there's this
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  Speaker 1: proliferation of negative interest rates in the world that's still
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  Speaker 1: a pretty good solid support for the world's really quintessential
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  Speaker 1: you know, alternative asset um. So it's worth a little
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  Speaker 1: bit about FED tightening. But you know we did that
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  Speaker 1: last year too, and actually within the tightening, gold within
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  Speaker 1: a day or two put in its low. So so
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  Speaker 1: is this then okay? So is this then maybe just
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  Speaker 1: a bit of a correction. Are you just people like,
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  Speaker 1: you know, kind of lightning up to run it back up?
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  Speaker 1: Because I think partly what also is happening, there was
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  Speaker 1: this speculation that the ECB might be ready to start
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  Speaker 1: tapering off on its bond purchases, put thoroughly to bed
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  Speaker 1: today by the ECB minutes also by a couple of
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  Speaker 1: e CP Council members, at least one of them speaking
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  Speaker 1: of New York. Um. So if the if the FED
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  Speaker 1: raises once, I think that's I'm a gold bull, That's
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  Speaker 1: what I'm saying. So what, especially if the west of
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  Speaker 1: the central banks in the world aren't gonna stop buying bonds.
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  Speaker 1: I think that's a good assessment. I mean, gold head,
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  Speaker 1: it got way overdone. Open interest reach a record high
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  Speaker 1: in futures in July and it's come off since. And
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  Speaker 1: this is very similar to what it did in two
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  Speaker 1: thousand ten before it ran up to that high, or
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  Speaker 1: that took a major collapse in the dollar. Hopefully that
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  Speaker 1: won't happen. We don't think that won't happen. But gold
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  Speaker 1: still as its value. It's just pulling back. There's definitely
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  Speaker 1: been some profit taking. Open interests come off and the
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  Speaker 1: question is whereas it continue. I think for gold to
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  Speaker 1: really move and sustain above will probably needs something negative
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  Speaker 1: in terms of the stock market or the dollar like
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  Speaker 1: it did in two thousand ten. I guess we don't
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  Speaker 1: really want that to happen. Well, that's where gold comes
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  Speaker 1: in play. It's a diversifier and it's really done a
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  Speaker 1: good job doing that this year. Tell us about what's
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  Speaker 1: going on in oil. I've got a print right now.
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  Speaker 1: Oil a front month at fifty and forty nine cents
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  Speaker 1: a barrel. It's up sixty six cents today. Well, I
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  Speaker 1: think there's two things to remember in oil. It's not
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  Speaker 1: so much that OPEC is gonna reduce production. Is they're
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  Speaker 1: going to stop the drill at will trend at least
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  Speaker 1: they say they will. The market thinks it's gonna happen,
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  Speaker 1: It doesn't always know that will happen. And we have
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  Speaker 1: this hurricane brewing. That's really pretty good positive things for oil,
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  Speaker 1: but we all know they overwhelming. The most significant way
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  Speaker 1: to describe oil now is glut. One word glutt. We
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  Speaker 1: all know that. And if oil sustains much higher, we're
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  Speaker 1: gonna be more supply come on board. Yes, it doesn't
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  Speaker 1: happen really quick. But oil and the fifty handle has
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  Speaker 1: been pretty good resistance since the beginning of the year.
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  Speaker 1: Last year. The key level is sixty, and I think
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  Speaker 1: most traders, most investors know that this is a level
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  Speaker 1: if they've been long and they should be lightning up
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  Speaker 1: and being a little carefully. It's just been good resistance
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  Speaker 1: for quite a while. It's been a good trade all year, right,
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  Speaker 1: I mean you take a look at crude oil, I
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  Speaker 1: mean it's up what more than thirty six percent in price?
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  Speaker 1: This key thing to remember, it's been a good range trade.
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  Speaker 1: But gold different than than gold. You can't really invest
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  Speaker 1: in crude really has futures. So if you look at
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  Speaker 1: the number one traded um oil ETF this year us SO,
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  Speaker 1: it's up like five um. So. Actually, when it comes
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  Speaker 1: to investing standpoints, sometimes it's better. It has been better
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  Speaker 1: to sell oil on rallies rather than buy it on support.
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  Speaker 1: But it's been stuck between forty and fifty for a while.
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  Speaker 1: But yeah, that's where I like to really differentiate and
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  Speaker 1: make the difference. If you look like you can buy
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  Speaker 1: gold in et F and get that gold return, but
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  Speaker 1: in oil it's a much different story. It has to
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  Speaker 1: use futures. It rolls, and there's a little it's a
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  Speaker 1: little more complicated, but for traders it's it can be fun.
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  Speaker 1: So what's the uh what would you say the odds
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  Speaker 1: are of oil going downhill? Again? I know we have
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  Speaker 1: the latest to his inventories and they showed more demand.
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  Speaker 1: But as you said, as people called call this glut,
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  Speaker 1: this global glut a wall, right. And there's also I
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  Speaker 1: think a lot of people are going to really believe
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  Speaker 1: that Saudi Arabic can engineer this this kind of production
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  Speaker 1: until you actually see it on paper, right, So uh,
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  Speaker 1: and and and being carried out as well. Would you say,
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  Speaker 1: one intent chance, how much the risk the oil actually
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  Speaker 1: takes another turn towards the lows. We have to be
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  Speaker 1: careful of the actual probabilities. But I think the thing
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  Speaker 1: that remembers trends, your friend. And guess what, there's no trend.
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  Speaker 1: It's been stuck in a range we all know supplies overwhelming.
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  Speaker 1: It's getting up near the upper end of the range,
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  Speaker 1: at least in the shorter term. It might extend a
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  Speaker 1: little higher. And I think that we should remember trends,
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  Speaker 1: your friend. It's near the upper end of the range,
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  Speaker 1: and what's just expected to stick in the stick within
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  Speaker 1: a trend and in the short term might be a
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  Speaker 1: new one, but who knows how long it's gonna last.
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  Speaker 1: Just quickly you want to do anything on corn or
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  Speaker 1: or grains con there. Corn corn has reached recently reached
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  Speaker 1: a ten year low. Supply is just is you know,
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  Speaker 1: it's going to be the record year harvest in for
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  Speaker 1: corn and soybeans, but the prices are reached so much
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  Speaker 1: such a low level that the man is picking up exponentially.
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  Speaker 1: We're just one weather event away from a pretty substantial railly.
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  Speaker 1: I'm not predicting weather, but these things happen in cycles,
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  Speaker 1: and expect that happened at some point. All right, he
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  Speaker 1: knows how to watch that. Stop watch very very well.
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  Speaker 1: Mike mclenn, Thank you so very much. Commodity strategist for
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  Speaker 1: Bloomberg Intelligence on Kathleen Hayes along with pim Fox and
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