China’s Big Move in Gold — and More!

The market wobbled into the weekend after days of selling. It’s time to kick back, open a cold one, and let me show you some of the stories you probably missed in the panic attack that passes for market activity lately.

We’ve got everything from China and gold to America’s rising oil dominance and more. It’s really quite exciting! I’ve got some must-see charts, too.

Let’s get started.

China’s Up to Something in Gold

China has bought gold for three straight months. The People’s Bank of China increased holdings to 60.26 million troy ounces in February from 59.94 million a month earlier, according to data on its website. Last month’s inflow of 9.95 metric tons (319,899.9 troy ounces) follows the addition of 11.8 tons in January and 9.95 tons in December.

The only central bank adding more gold than China is Russia, as you can see in this chart I grabbed from my Bloomberg terminal …

China is stocking up on gold. But Russia is buying with both hands, taking in 274.3 metric tons (8,818,949.8 troy ounces) last year.

Why are China and Russia doing this? Because they want to diversify away from the U.S. dollar. Uncle Sam uses the mighty greenback like a club, whacking misbehaving countries with sanctions that affect dollar-based trade.

Related post: Is King Dollar facing a death cross?

Watch this development. It could reshape the financial world as we know it.

America on Course to Dominate Global Oil Markets

OilPrice.com reports that thanks to rising oil production from U.S. shale plays and increased oil export capacity from the Gulf Coast, America will soon export more oil and liquids than Saudi Arabia.

We’re already making big progress toward that. Last week, the Energy Information Administration (EIA) reported that the U.S. exported more crude and petroleum products than it imported. For the rest of the year, the EIA forecasts, U.S. exports will grow while our demand for imported heavy oil falls.

“Increasingly profitable shale production and a robust global appetite for light oil and gasoline is poised to bring the U.S. to a position of oil dominance in the next few years,” said Rystad Energy senior partner Per Magnus Nysveen.

And Rystad has a chart to show its forecast  …

According to Rystad, U.S. oil production increased by about 2 million bpd last year. And it will grow by close to another 1 million bpd in 2019, despite the fact that independent operators are cutting capital spending.

The Curious Case of the Disappearing Earnings

Here’s a taste of what I shared with my Wealth Supercycle subscribers on Friday.

According to FactSet, the S&P 500 is projected to report a year-over-year decline in earnings of 3.2% in the first quarter. It’s the largest cut to S&P 500 earnings estimates since the first quarter of 2016.

But if earnings estimates keep going down, why did stocks run up like the devil was chasing them?

Because the Fed stepped in to prop up it up. When the Fed telegraphed that it would do what it takes to push stocks higher, traders bought with newfound confidence.

Now, the rally is ahead of reality. Having run so far, so quickly, even big-name stocks are underperforming.

The good news is there is a way to win even in a market that’s running out of gas. I told my Wealth Supercycle subscribers about it on Friday. You can find out yourself when you click here and fill out the short form at the bottom of the page.

Europe’s Dour Outlook Sends Shivers Through the Market

On Thursday, the European Central Bank (that’s ECB to you and me) slashed its growth forecasts. It lowered its outlook for 2019 gross domestic product growth to 1.1% from a previous 1.7%. This sent shivers through the market.

ECB President Mario Draghi promised to keep interest rates lower for longer. He also promised to throw more money at banks, who will hopefully, in turn, throw it at businesses.

Draghi cited external factors such as protectionism, the still-uncertain nature of Britain’s exit from the European Union and vulnerabilities in emerging markets. The fact that Italy is in recession and Germany is teetering on recession were the unspoken 800-pound elephants in the room.

And Draghi talked with the language of a Beat poet as he described what the ECB is doing.

“In a dark room you move with tiny steps — you don’t run but you do move.”

We’ll just step away from that one. Good luck, Europe!

Where Are the Jobs?

U.S. employers added 20,000 jobs in February, and the nation’s unemployment rate fell to 3.8%, according to data released Friday by the Labor Department. Not too shabby. But where were those jobs created? And where did jobs disappear. The friendly folks at Bloomberg created a handy-dandy chart just for that  …

I guess I should give up on my dream of being a lumberjack, eh? But I look so good in plaid!

That’s it for now. Have a great rest of your weekend, and get ready for a wild ride next week.

All the best,

Sean

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