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‘That’s a Wrap’

By Rod Blake

Resource investors began the trading week with a sharp eye on the seemingly ever-rising American dollar (DXY) that due to rapidly rising U.S. interest rates is at or near 20-year highs and which in turn has been detrimental to U.S dollar priced commodity portfolios.

Kinross Gold Corp. ‘K-T’ & ‘ KGC-N’ rose by $0.47 or 10.83% to $4.81 after the company announced an enhanced share buyback program that will see the giant gold miner repurchase US$300-million of its outstanding shares by the end of this year and commit 75% of its excess cash for further share buybacks over the next 2-years.

The stock price of Cypress Development Corp. ‘CYP-V’ surged up by $0.28 or 25.00% to $1.40 after the Vancouver based company announced that the pilot plant for its flagship Clayton Valley Lithium Project in Nevada had achieved the production of battery grade 99.94% lithium carbonate (Li2CO3).

Just three weeks after announcing production cutbacks in Sweden – Canfor Corp. ‘CFP-T’ announced the giant forest company would cut about 200-million board feet of production from its British Columbia mills over the next two weeks.

Late in the week the U.S dollar (DXY) climbed to a new 20-year high of 112.99.

Which helped to push the Canadian loonie down to a fresh 2-year low of US$0.7356.

Meanwhile, crude oil crumbled to a new 2-year low of US$79.21-per-barrel.

And Gold bullion fell to a new 2-year low of US$1,644-an-ounce.

All of which helped to push the gold heavy TSX Venture Exchange down to a new 2-year low of 578.

The way I see it – As brokers, we occasionally came across markets that defied logic or as per John Maynard Keynes – “The market can remain irrational longer than you can remain solvent”. This doctrine could be the current state of the U.S. dollar. The greenback continues to rise with each Fed interest rate hike and will probably continue to do so until the market senses that the rate increases are coming to an end. The current situation is not a good scenario for most U.S. dollar priced commodities or resource investors. In times like this one has to pull in one’s horns and just wait for normality to return. The upside, however, is that once such a dominant trend is halted, the markets tend to rebalance very quickly.

Westshore Terminals Investment Trust ‘WTE-T’ announced that the largest coal exporter on the west coast has temporally shut down operations due to a strike by union workers,

While on a related note – Teck Resources Ltd. ‘TECK.B-T’ & ‘TECK-N’ warned of a one – two-month production shortfall from its Elkview Operations steelmaking coal operations near Sparwood, BC due to a structural failure of its plant feed conveyor belt.

Sierra Metals Inc. ‘SMT-T’ become the second miner in a few weeks to suffer production losses due to illegal blockades – and its stock price fell by $0.05 or 7.25% to $0.64 after company announced a suspension of operations of its Yauricocha Copper/Zinc Mine in Peru due to an illegal blockade by local residents.

For the Week – The important Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs rose by 1-rig to 764, an increase of 243 from this time last year. Up north – the number of active Canadian rigs rose by 4-rigs to 215, an increase of 53 in the past year.

The DJI fell by 3.99% to 29,593 with the S&P 500 off by 4.65% to 3,693 and the NASDAQ down 5.07% to 10,868. Up north – the TSX lost 4.67% to 18,481 and the TSX Venture dropped 8.40% to 578. The CBOE Volatility Index or VIX rose by 13.76% to 29.92.

Gold bullion lost 1.79% to US$1,644 with silver off by 3.53% to US$18.86 and copper down by  6.15% to US$3.36. In the oil patch – crude oil lost 7.15% to US$79.21 and natural gas fell 12.28% to US$6.86. The Canadian dollar fell by 2.38% to 0.7356 and the U.S. dollar ‘DXY’ rose by 3.03% to 112.99. Overall – the CRB Commodities Index fell by 4.32% to 288.

And Finally – Economic reality overcame ideological thinking in Great Britain this week as the island nation lifted a 3-year ban on shale fracking in a Russian induced effort to strengthen the country’s domestic energy supply.

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