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‘That’s a Wrap’

By Rod Blake

As the brokers, investors, portfolio managers and traders closed down their terminals last Friday afternoon many were stunned how quickly and violently that almost all of the North American markets (equity, commodity and currency) turned negative on word that Iran was about to launch a military advance on Israel. And by the end of the day the only market that was positive was the U.S. dollarthe world’s go to asset in times of potential crisis – as no one wanted to be long over a potentially call to arms weekend.

The way I see it – When I was a broker, we called it ‘The Herd’. That was when a stock or market suddenly surged up or down, usually on news but more often on a rumour. The herd is actually a mass or overload of orders driving the market in one direction. And, just like a stampeding herd of buffalo that don’t know why they’re running, an overload of market orders has much the same effect. Buy or sell now at the market and get the facts latter. As a broker, I always tried to be ahead of the herd for my clients and myself. That is – I tried to sell into a rising market or be a buyer during a sell off. That was usually a winning strategy because, just like the buffalo, after the event that caused the herd to move was over, the markets usually calmed down and returned to the norm, or close to where they were before the event. The last big herd event I recall was the panic selling that overtook the markets when COVID-19 hit in early 2020 and the markets fell continually for about 4-months. You may recall that the price of crude oil actually went negative by about $20 for a short period of time. I was a buyer of petroleum stocks at that time. The market soon figured it out that COVID-19 was not the end of mankind and quickly returned to the norm and eventually higher. I still hold a good portion of those petroleum positions to this day. Try to be ahead of the herd. It can be a winning trade.

The new trading week began with the investors digesting the massive airstrike by Iran on Israel and watching for any sign of reprisals.

Causing the CBOE Volatility Index or ‘VIX’ to rise to a new 5-month closing high of 19.23.

Reuters reported that Tesla Inc. ‘TSLA-N’ informed its workforce of an impending worldwide 10% or about 15,000 of workers layoff as per CEO Elon Musk – “…to reorganize and streamline the company for the next phase of growth.”

Similarly – the share price of Lion Electric Co. ‘LEV-T & N’ dropped by $0.11 or 7.64% to $1.33 after the Montréal, PQ based heavy duty all-electric heavy-duty urban vehicles announced cost cutting measures that included the layoff of about 120 or 10% of the company’s workforce.

Critical Elements Lithium Corp. ‘CRE-V’ shares’ rose by $0.04 or 6.06% to $0.70 after the Montréal, QC based explorer released encouraging diamond drill hole lithium & tantalum assays from the company’s flagship Rose West Discovery east of James Bay, Québec.

Going the other way – Standard Lithium Ltd. ‘SLI-V’ stock dropped to a new 31/2-year closing low of $1.47.

And Lithium Americas Corp. ‘LAC-T & N’ shares’ plunged lower by $2.75 or 30.02% to $6.41 after the Vancouver, BC based mineral developer announced a very dilutive 55-million common share or $275-million equity financing to help advance the company’s Thacker Pass Lithium Project in Humbolt County, Nevada.

Gold bullion rose to close at a new all-time high of US$2,393 a troy ounce (t oz).

Which no doubt helped Agnico Eagle Mines Ltd. ‘AEM-T & N’ and Kinross Gold Corp. ‘K-T’ & ‘KGC-N’ to rise to respective new 3-year closing highs of $87.82 and $9.31.

Going the other way – Barrick Gold Corp. ‘ABX-T’ & ‘GOLD-N’ stock fell by $1.19 or 4.96% to close at $22.78 after the world’s second largest gold miner’s 1st-quarter production figures failed to meet analysts’ expectations.

Silver rose to a new 11-year closing high of US$28.86 a troy ounce (t oz), but as with gold, most silver stocks failed to move higher.

Copper rose to a new 2-year high of US$4.49 a pound and unlike gold and silver – copper equities followed the red metal higher with Taseko Mines Ltd. ‘TKO-T’ & ‘TGB-N’ shares’ rising to a new 3-year closing high of $3.45, while Ivanhoe Mines Ltd. ‘IVN-T’ and Entrée Resources Ltd. ‘ETG-T’ closing at respective new all-time highs of $19.36 and $1.62.

First Quantum Minerals ‘FM-T’ stock rose by $1.31 or 8.86% to $16.09 on rumours that multiple mining companies were in talks with the Toronto, ON miner to take over its prized and currently government ordered shuttered Cobre Panama Copper Mine in Panama.

Zinc continued its recent uptrend to close at a new 1-year high of US$1.30 a pound.

TC Energy Corp. ‘TRP-T & N’ was forced to shut down its NGTL natural gas pipeline near Edson, AB due to a rupture and resulting fire.

This as natural gas fell to a new 2-month low of US$1.68 per million British thermal units (MMBtu).

The key Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs rose by 2-rigs in the past week to 619, down by 134rigs from this time last year. Up north – the number of Canadian active rigs fell by 14-rigs to 127, up by 22-rigs from one year ago.  

The Canadian forestry industry gave a collective “Hurrah” to the Federal Government’s new 2024 Budget that aspires to create 3.8-million new homes by 2031.

This as the price of lumber fell to a 5-month low of US$508 per 1,000 board feet (mbf).

Meanwhile, environmentalists who claim that the forest industry does nothing but clearcut our forests might want to take note that British Columbia has just planted the province’s 10-billionth forest seedling as part of a reseeding program that began back in 1930. The province’s forest industry is committed to planting another 50-million seedlings this year.

Copper and gold showed the most improvement in the commodity sector over the week, while lumber and crude oil lost the most.

The CRB Commodity Index rose to a new 2-year closing high of 346.

The Canadian dollar fell to a new 51/2-month low of US$0.7230 while the US dollar ‘DXY’ rose to a new 51/2-month high of 106.23.

Four of the five North American markets, save for the Dow 30 that was virtually unchanged, were down going into a very Israel/Iran induced nervous weekend.

For the Week – the DJI lost 0.008% to 37,986, as the S&P 500 fell 3.05% to 4,967, and the NASDAQ dropped 5.52% to 15,282. In Canada the TSX lost 0.42% to 21,807 and the TSX Venture fell 3.56% to 567. The CBOE Volatility Index or VIX gained 8.09% to 18.71.

With currencies – the Canadian dollar gained 0.14% to US$0.7268, while the U.S. dollar ‘DXY’ rose 0.10% to 106.12. 

With commodities – gold bullion gained 2.09% to US$2,393, as silver rose 2.47% to US$28.68, and copper improved by 3.22% US$4.49 while lithium lost 0.74% to US$15,242. Crude oil lost 2.67% to US$83.18, and natural gas fell 0.11% to US$1.76, while uranium gained 0.62% to US$89.30. With soft commodities – lumber fell 5.93% to US$508. Overall – the CRB Commodities Index gained 0.87% to 346.

And Finally – Exactly one year (April 17th) after Canada’s largest gold heistPeel Regional Police announced the arrest of nine individuals who participated in relieving Air Canada’s ‘AC-T’ Toronto Person International Airport operations of 6,600 gold bars weighing 400 kg and worth at the time about $22-million. Officials do not expect that much of the bullion will be recovered as it is thought that most of the gold was used to purchase illegal firearms.

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