Gold Anomaly

The Commodity Report #192

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Gold Anomaly

As Warren Pies wrote in a post last week, the current performance of Gold is really an anomaly, both plotted against TIPS and the USD-Index. This anomaly once again highlights the importance of thinking of gold as a liquidity hedge - it is not primarily an inflation hedge or always highly correlated with the USD or inflation expectations.

Warren wrote that 2024 (and also currently) is the fifth calendar year with positive 10y TIPS yields and positive gold returns (2005, 2006, 2008, 2023).

Compared to the DXY the anomaly becomes even stronger. Here 2024 is the first year ever where gold up more than >25% and the USD-Index is up my more than >5%.

Corn Setup

Another nugget for agri-investors: Corn remains in a larger downtrend and during the recent weeks speculators have built the largest long position since 2006. I think this is an opportunity to fade this trend going forward and once technicals confirm a short trade according to our system.

Created with TradingView

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In Other News…

It seems like DeepSeek actually busted the recent US Gas demand bubble.

The news that DeepSeek had created a large language model, roughly equivalent to ChatGPT, at just one-tenth of the cost and a fraction of the computing power sent shale gas and independent power producers’ stock prices tumbling and helped to propel a selloff in the NYMEX gas futures market. S&P Global wrote last week that since the release of ChatGPT in late November 2022, electric utilities, market analysts and even natural gas producers have been projecting ever-larger US power grid load growth tied to the buildout of datacenters to support artificial intelligence. By late 2024, US utilities were projecting datacenter electricity demand to reach 900 TWh by 2035 – up from an estimated 185 TWh in 2023.

Historically, power demand forecasts have overestimated growth, largely because they didn’t account for improvements in energy efficiency -- like the ones achieved by DeepSeek AI.

Under the CI planning scenario, datacenter demand would grow by just 280 TWh by 2035, adding about 5.7 Bcf/d in incremental gas burn if 100% of the additional electric load were supplied by gas. Assuming wind and solar power supply at least some of the additional load, the bottom-line impact for gas would be even smaller. If the aggregate utility forecast is accurate and the projected 455 TWh of datacenter demand growth by 2035 is supplied 100% by natural gas, demand for gas would increase by just over 12 Bcf/d – just a fraction of the growth expected from LNG export demand over the next decade.

Created with TradingView

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This week, look out for the following:

• WASDE Report on Tuesday

• CPI data on Wednesday

• PPI data on Thursday

• Retail Sales data on Friday

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Research Service

If you’re an institutional investor, check out our research products for commodity-related futures or equities here.

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Till next Monday, Lukas

If you have any questions in the meantime, please feel free to contact me via X or Mail.

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