Gold seems to be high on the tariff hysteria, says Zuoz Industrial's Urs Dur

Commodities Market Analysis: Gold, Oil, and China's Deflation

Key Concepts:

• Gold as a store of value
• China's deflationary pressures
• Impact of tariffs on China
• Russian oil supply and "Dark Fleet"
• Geopolitical tensions

Gold Market

• Current Status: Gold prices are near all-time highs (above $3330).
• Drivers: The rise in gold prices is attributed to "tariff hysteria" and general nervousness in the market.
• Analyst Perspective: The analyst suggests that there might be better investment opportunities than buying gold at such high prices.
• Alternative Focus: The analyst recommends focusing on China's deflation as a more significant factor influencing the market.

China's Deflation

• Key Issue: China's deflation is a major concern, exacerbated by geopolitical tensions and tariffs.
• Impact of Tariffs: Tariffs worsen China's deflationary pressures.
• Consumer Behavior: Chinese consumers are nervous due to COVID-19 crackdowns and are holding onto their money, waiting for prices to decrease further.
• Stimulus Ineffectiveness: Chinese stimulus measures have not been effective in stemming deflation.
• Commodity Consumption: China is the largest consumer of dry bulk goods like iron ore, coal, and grain. While grain consumption is increasing due to population growth, coal and iron ore consumption are relatively stagnant.

Oil Market

• Russian Oil Supply: Russian oil continues to flow despite sanctions, facilitated by a "Dark Fleet" of tankers.
• Dark Fleet Operations: These tankers, representing 20-25% of certain tanker classes, transport Russian and Iranian oil to China, often with transponders turned off and using older, potentially unsafe ships.
• Enforcement: The United States has not actively seized these sanctioned ships.
• Analyst Perspective: The analyst views the idea that Russian oil is not on the market as a "ridiculous farce."

Geopolitical Tensions

• Impact: Geopolitical tensions contribute to market nervousness and exacerbate China's deflationary pressures.
• Focus: The analyst emphasizes the importance of monitoring China's economic situation over focusing solely on tariffs.

Conclusion

The commodities market is influenced by various factors, with China's deflationary pressures being a key concern. While gold prices are high due to market nervousness and tariff concerns, the analyst suggests focusing on China's economic situation. Russian oil continues to flow despite sanctions, highlighting the complexities of the global oil market.