Month: July 2020

Gold and Silver shined yesterday, climbing to multi-year highs, boosted by the weaker US dollar, the zero interest rates, the surging COVID-19 cases around the world, and the expectations for more stimulus packages from Europe and US.

Both precious metals gained support after the European leaders agreed on a historic 750 billion-euro Recovery Fund on Tuesday, to support their coronavirus-hit economies. Also, Trump’s administration is considering another round of fiscal relief package that would include extended unemployment insurance and more money for schools.

The yellow metal jumped more than 1%, hitting its highest since September 2011 at $1.865/oz, while Silver prices rallied 5% breaking above $22/oz to a six-year high. Silver has gained more than 15% since last week and more than 90% since it bottomed near $11.60/oz just 4 months ago.

The white metal benefited from safe-haven flows as a means of wealth protection but also gained support from the recovering industrial demand due to its use in industrial applications.

Coronavirus Update:

Global cases: More than 14.7 million

Global deaths: At least 611,322

U.S. cases: More than 3.85 million

U.S. deaths: At least 141,118

Market Reaction:

Global stock markets and energy sector benefited from the improved risk sentiment, reaching fresh multi-month highs, after the progress on three potential COVID-19 vaccines, the robust corporate earnings in the US and the optimism that the upcoming European and US coronavirus stimulus would help the recovery of the global economies after the pandemic.

Dow Jones index rose 0.6% while S&P 500 edged higher by 0.2% supported from the rally in the energy stocks such as Chevron and Exxon coupled with the better-than-expected Q2 earnings from Coca Cola and IBM. However, Nasdaq Composite dropped 0.7% after tech names such as Tesla, Facebook, Amazon, Netflix, Microsoft, and Apple were all down more than 1%.

Economic Calendar for July 22, 2020 (GMT+ 3:00):

Market Brief, Wednesday, 22nd of July, 2020

US stock markets rose 0.5% on Tuesday gaining support from the rally in the energy stocks and on the better-than-expected earnings from Coca-Cola and IBM. However, the Nasdaq Composite under performed dipping 0.8% as traders booked profits from the major tech names.

Asian markets edged higher on Wednesday morning following the overnight gains in Wall Street. The Chinese stock markets led the gains with 1%, extending their recent rally on massive stimulus packages.  

Crude oil prices surged 3% yesterday reaching their highest level since early March on optimism that the upcoming European and US coronavirus stimulus would help boost demand for crude oil. 

Gold prices surged above one thousand eight hundred and fifty dollars per ounce hitting fresh nine-year highs while Silver prices rallied 5% breaking above twenty two dollars per ounce on the back of the European stimulus package and US dollar weakness. 

Looking at the forex markets we can see that Euro climbed above the 1,15 level against the dollar reaching its highest level in more than a year after European leaders agreed on a historic recovery fund to prop up coronavirus-hit economies.

The US energy giant Chevron has announced an all-stock deal for about $5 billion to buy the oil and gas producer Noble Energy Inc, which is the largest US energy deal in 2020. The deal was the first major energy takeover since the outbreak of coronavirus which caused the drop in global fuel demand by 30%, sending crude oil prices to their 20-year lows.

The plunge in the oil prices has decimated shares of many small and medium sized Exploration and Production companies with high quality assets, such as Noble Energy.  They have become highly attractive targets for those that have a strong balance sheet and resources to buy them.

The total value of the deal is $13 billion, including Noble’s $8 billion debt, and the $5 billion stock transaction. Under the terms of the deal, Noble Energy shareholders will receive 1 share of Chevron stock for every 10 Noble Energy shares in their holdings. The offer values Noble at $10.38 a share, a 7.5% premium to its closing price on Friday July 17^th, almost 60% down since the start of the year and nearly 90% down since its all-time peak in mid-2014.

By acquiring Noble’s assets, Chevron is adding some quality low-cost onshore assets in the Permian Basin, Texas, which is the heartland of the US shale oil industry, benefiting from economies of scale, including technology and modern drilling methods. Furthermore, the company is increasing its proved reserves by about 18% and adding some attractive undeveloped resources which will enhance its already advanced upstream portfolio.

Furthermore, Chevron will expand and diversify its global portfolio, by adding Noble’s major cash-generating offshore natural gas fields in Israel and Cyprus, in the Eastern Mediterranean Sea and some fields in Equatorial Guinea in West Africa. Those assets will come on top of the recent acquired blocks, offshore of Egypt, in the Red Sea, making Chevron a major player in the Middle East’s energy market.

Noble Energy made the first discovery offshore in Israel in 1999 and delivered to the country’s first domestic natural gas in 2004. Today, the Tamar Platform supplies approximately 70% of Israel’s power generation where the Leviathan field delivered its first gas in December 2019.

Noble was also the first operator to discover natural gas resources offshore in Cyprus in the Levant Basin. In November 2019, the company received the first exploitation license granted by Cyprus, providing a fiscal and regulatory pathway for the economic development of the Aphrodite field.