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[theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we discuss whether this record run we have seen in gold is set to continue. TD Securities Bart Melek joins us. MoneyTalk's Anthony Okolie is going to have a look at it TD economic forecast for the Canadian economy, and in today's education segment, Jason Hnatyk is going to have a look at how you can find analyst research on Advanced Dashboard.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to the guest of the day, let's get you an update on the markets.
Last full trading week of September.
Squeeze in one more day of September next Monday but here we are. The S&P TSX composite index down about six ticks.
Nothing too dramatic happening out there right now but I am noticing the uranium play is continuing to get a bid, including Cameco.
The stock is up about 3 1/4%. Things got set off last week with the news headlines about three-mile I'll and restarting to feed Microsoft with energy for its hungry AI applications. Interesting developments.
Also noticing a little bit of movement in the oil and gas names. Right now West Texas intermediate benchmark American crew just above $70 per barrel. It's now in negative territory, seems to be reversing the trend I noticed earlier. $4.24 per share for Baytex, it down .7%.
South of the border, it's been a month packed with news, a few corporate earnings, a lot of fit speakers on deck.
Up about 1/4 of a percent on the S&P 500.
September has that reputation but after a bumpy start the first few days, it's been off to the races. We will see how the rest of the week plays out. Tech heavy NASDAQ, up a little shy of 1/3 of a percent.
Micron is on deck, one of a handful of companies this week we are keeping an eye on, reporting the earnings, I believe they are coming up on Wednesday. Ahead of that the stock is of little shy of 3%. And that's your market update.
The price of gold has run up to record levels in recent trading, but as the Fed begins its rate cutting cycle, will the rally continue? 20 essay discusses Bart Melek, managing Dir. and global head of commodity strategy at TD Securities.
Great to have you back.
>> It's great to be back. Thank you.
>> We will talk about where you think gold could be headed but let's talk about what got us here in the first place. A lot of moving parts.
>> Yes, absolutely. I think we should probably start back some 12 months ago where we had the Federal Reserve at that time, no one was really imagining a 50 basis points cut like we saw last Wednesday but what we did witness is a very robust central bank buying and that's on the back of record level of central bank purchases in 2022, 2023. This year started off fairly robustly as well. It has slowed down. But that was one of the elements, along with strong physical markets in Asia and other parts of the world. That prevented gold from troughing in a material way, even as rates were on the way up real rates anyway, as inflation fell. We saw Fed rates at 550 basis points. There was already a robust market, and the economy started slowing a little bit, China underperformed and the narrative shift in towards cuts. On Wednesday, the Federal Reserve delivered a 50 basis points cut and a dovish narrative but ahead of that, the markets were expecting it for the most part and we have seen very, very robust proprietary trade or discretionary trade positions. We at some point that it was may be a little bit too much, too soon, and that helped to move gold to the record levels we have seen. Robust speculative purchases. And the start of ETF buying. We have not really seen the market go firing on all cylinders and in our view, we still think there is some upside to go as we move into early 2025.
>> We have seen that strong demand from central banks. You are saying ETF holdings are starting to rise and a 50 basis point cut from the Fed, I imagine the gold bulls like all of these components. Is it more complicated than that?
>> Yes.
Central banks since then have slowed down a bit. I think people think after almost 2 years a very aggressive buying, slow down to the last five months or so, but we expect central banks might be interested again. I think the hope on their part was that we could see a bit of moderation because, as I said, it looked like there was may be too much positioning on the long end. Now I think central banks may be in it again the and the generalists and institutional investors in the Western world may develop an appetite for gold again and with a 50 basis points cut, even though we have very hefty positions, we really did not see last week and the CFTC data that would indicate a lack of appetite, in fact, long positions grew much more than short positions, so length increases were still pretty hefty in terms of positioning which represents a risk but I suspect this particular Fed is very much tilted towards the second element of its mandate which is maximum employment. The Federal Reserve, unlike, let's say the Bank of Canada, targets to policies or two things they want to accomplish simultaneously. They want to have price stability, which is controlling inflation, and they want Max employment, maximum employment. And I think Mr. Powell, starting back in August at Jackson Hole, I think with very little ambiguity told the market that he doesn't want the labour market to weaken much more. The rest of the economy in many ways has slowed down.
There are disinflationary pressures, not deflation but inflation has decelerated a great deal and the Fed now is quite comfortable I think with the idea that we are going to move to their 2% target and that, of course, takes time but at the same time, the Fed wants to reduce the restrictive aspect of monetary policy to facilitate a little bit more economic activity so we don't see a very sharp downturn in labour. So they are trying to hit two things at the same time.
Historically, that did not end well because through much of the history, it ended up in a significant slowdown, even recession. This time we are hoping that we are going to have more of a soft landing as this Federal Reserve starts cutting rates and we are hoping that things stimulate and we get the best of both worlds: low inflation and decent growth.
>> There is a lot of consensus around this idea that they can stick the soft landing.
What if they don't, what if it ends up being a hard landing, you get a recession, a rather painful one, what would happen to gold?
>> Well, gold seems to be a winner under most scenarios here.
If there is a very sharp downturn, one we don't expect, then the Federal Reserve's response would be more monetary easing, even lower real interest rates. There are some rigidities on the price side, it's unlikely that we are going to get deflation de facto so you can very much envision a world where the economy slows down much more than the Fed anticipated. I think the reaction function would be to aggressively cut rates and for gold, that's pretty good. One, you're protecting against deterioration in real rates as the Fed cuts and also the Fed tends to-- gold tends to have an inverse relationship to it risk assets like equities for example or copper or other things so when the economy is slow, demand for industrial metals or energy doesn't tend to do well.
Earnings tend to disappoint, and then gold tends to be an outperform her as rates go down and gold is seen as being relatively stable.
>> The last thing I want to ask, let's talk about that. We talk about gold in the here and now, things that have happened, interesting moves over the course of the last year, but historically… >> Gold is no one's liability. There is no counterparty risk. If I own an ounce of gold, I own an ounce of gold. I don't have to rely on the government to pay me a yield or pay me back. There is intrinsic value in it. So far, so good for the last 5000 years or so. Gold has been considered valuable by humanity, has historic value.
We are assuming for the next 10 years or so it will be the same thing, so it has its own value. It doesn't have to depend on the solvency of any government. Second, it's a real asset that requires real resources to produce it, to take it out of the ground. That includes labour, that includes capital in the form of those big mighty machines that dig stuff out, everything from water pumps to trucks to smelters and if we argue there is inflation in the world, well then we have to argue that the cost of labour is going to catch up and so will the cost of everything associated with getting an ounce out of the ground in terms of capital and steel girders and you name it.
The third fact that I think is important here is that the average ore grade is declining over time. We have been mining it for thousands of years and all the good stuff that's easy to get at has been pretty much mined out. If it was easy to get out of the ground, people knew about it and try to take it out. Now we are left with more troublesome assets, new assets in particular. Some are high up in the Andes mountains or in geopolitically unstable parts of Africa, for example.
And to the extent that the price of gold has tracked the marginal costs or we call it the 98 percentile of the cost curve, then, as we move forward and if we expect inflation down the road, it's a good protector. It gives you a real implied yield of sorts. If labour goes up by two or 3% and you are going to need more labour to get that ounce because there's less of gold available and you need more machinery, given technology doesn't change much, then gold should deliver inflation plus that extra premium that is reflected in the difficulty of getting an ounce out of the ground so I think over the long run, it should be a decent reflector of aggregate prices in the world and should keep up so in 50 years time, you should probably still have in real terms the same amount of purchasing power from $100,000 worth of gold today, in 50 years, you will probably get $50,000 in terms of real terms of purchasing power as well so it's not a bad asset and on like equities, for example, you can imagine that in 50 years, technology stocks that are all the rage today may not be because they will be outmoded and outdated. There is no guarantee that today's technology will be the same in the next 50 years were be the same companies. So there's that element as well which is stable store of value has been around for many millennia.
>> Fascinating stuff and a great start to the program. We will get to your questions about commodities, if you've got a question about gold, scented and, we will talk about gas, copper, silver. Bart Melek joins us for the program. And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Shares of Intel are in the spotlight today. There are unconfirmed reports that Apollo Asset Management is offering to inject up to $5 billion into the beleaguered chipmaker. That follows on reports that Qualcomm had approached Intel about potential takeover. Intel, of course, has struggled to gain significant market share despite the industrywide boom in artificial intelligence. That's reflected in its stock price. Today you're up a little shy of 3%. The health of the consumer is going to be in the spotlight later this week it, Costco earnings are on deck. The big-box retailers expected to grow earnings year-over-year as cash-strapped households continue to hunt for bargains. The stock has been a leader in the consumer discretionary space, gaining some 60% over the past year.
Costco is scheduled to report on Thursday.
Southwest Airlines is apparently warning its employees there will be some quote difficult decisions announced in the coming days. Several media outlets are reporting that the airline told workers in a video it wants to boost revenue through changes to its flight network, among other things. The airline has been pressured to make changes by activist investor Elliot Investment Management. Quick check in on the market, we will start you on Bay Street with the TSX Composite Index. We are down a modest 31 points, a little more than 1/10 of a percent. South of the border, the S&P 500, right now up 14 points, 1/4 of a percent, 5717.
We are back with Bart Melek, taking your questions about commodities. First one for you here. We talked about gold off the top. We knew this one was coming. What's your current outlook for oil?
>> For the last six months, I was a little bit more, our team was a little bit more negative on oil than I think consensus and I think we still think that oil doesn't have an awful lot of upside into 2025, at least in the first half anyway. What we are seeing as we are seeing a lot of disappointing data from China. China, of course, is one of the key countries that are responsible for demand growth. We are looking at China may be performing a little bit weaker than previously, although we are not looking at a recession in the United States are a hard landing, we are thinking that things are going to slow down a little bit, that implies that demand growth for oil may be a little slower down the road and at the same time, we have a lot of new crude from Canada as the pipeline to the Pacific has ramped up, as other countries around the world increase production, and that includes of course shale output in the United States, it has been fairly decent.
They have done a lot of work and becoming more efficient.
So even today's lower prices WTI at 71 or $72.
>> Roughly around $70 per barrel, in the ballpark. It is profitable.
And we have an OPEC+ that has a lot of spare capacity. In fact, just a few months ago, they said they would like to reintroduce 2.2 million barrels of production that they have cut because of COVID. They have since relented and they are not going to do that but there's that threat and when we look at supply and demand fundamentals and we look at the balances, we wouldn't be at all surprised to see a surplus in the first half of next year and therefore it's going to be challenging for oil to have a big rally.
Of course, that will be offset by potential cuts from OPEC, though they have not said anything yet but if history is repeated, they may entertain it. Also, there is an element that the supply side in other parts of the world might respond a little bit and then there's did the geopolitical risk.
>> I think a lot of people would say with the amount of geopolitical risk in the world right now, they might look at oil at $70 per barrel and ask why it's not higher.
>> It is those supply demand fundamentals and there is a bit of a premium because of the events most recently associated with the conflict with… >> Hezbollah?
>> Hezbollah in Lebanon. There is always at risk that it goes region wide, a disruption and flows from Morin and around the area. Something that happened in the 80s with the tanker war. At this point, that clearly is not the scenario people are projecting because if they were, we would see much higher oil, but there is a bit of that element that still keeping up with if that goes away we could see oil a little lower because of it. If conversely we see you conflict spread out, that premium will be added but we might do a lot of forecasting and projecting. We are not very good but we attempt to try to project these conflicts. We more respond to what is happening as opposed to trying to call them because that's something we don't know more than anyone else.
>> An uncertain world.
What do you make of the recent declining gasoline prices?
>> Well, that is quite often associated with worries over demand. If consumers, retailers slowing, if we are seeing the job market may be not totally decline, we could very well see a situation where people have less money in their pocket, they travel less, you basically demand trucks use less fuel. Essentially, it's a demand worry and that is something I think that's going to be with us for a while. We see it in the spreads of the refinery premiums and we are seeing it on the ground as well. We will see what happens.
Organizations like the International Energy Agency continues to downgrade the man because of all this and the market is responding with its own lower estimates for demand as well and I think that in large part explains much of what's been happening.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Bart Melek on commodities in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
In today's education segment, we are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
Jason Natyk, Senior client education instructor with TD Direct Investing joins us now. You're gonna walk us through how we can do in-depth research on a company using the platform.
>> Absolutely. Great to be here.
Many times on this program, we have walk you through some of the trading components on the platform, how to make your trades, set up profit loss targets, how to customize the experience in the charts.
Today we will dive in how we can do a little bit of additional research about the company's and find out some analyst information here on the platform. Let's jump in and take a peek.
One of the hallmarks of advanced dashboard is that you can customize pretty much everything within the platform but there is a tab created for us to do some more in-depth analysis, that would be the aptly named analysis tab. That's at the top of the page.
We will jump in there and I will walk you through the main strokes. First, on our company profile, we can learn more about the overarching business that the company is in. We can see who the board of directors are and at the bottom we have some key dates on the company, specific earnings dates and things like that.
That's the company profile. Financial statements.
What we want to hear about those big companies, we have all the high-level financial information they will be releasing on their quarterly call so we can begin to form opinions on things like whether it's overvalued or undervalued, things like this. If you want to have all of these higher-level data points drill down into consumable points, we have estimates and ratios.
Moving down the tabs, we have lots of great information here.
Here you can compare year-over-year. That gets you into more opinions and help to identify trends in the market.
Interestingly, you can see those colourful bar charts on this page, they are customizable based on what's important to you.
Each different section of information, if we choose a different ratio, it's going to update that chart so you can keep what's important to you at the top of the screen.
Continuing to move, we've got our analyst evaluations. It's pretty straightforward.
You've got price targets, consensus, buy, sell, hold ratings, we talked trends a couple of times, we are getting the trend of analyst information month over month, we can see how things are moving and changing and how opinions are being formed. You can dive in and take a look.
Next on the list, it's more abstract but high level good information to find out, it's the relative performance. On this page, once it loads, this page will show us how our individual company is performing against some of the major indices as well as sectors in the market, outperforming, underperforming over different time periods.
We also have our Earnings Analyzer. On this particular page, we have a chart. We can see our candles on the centre of the screen. Below that, it's charting earnings-per-share. We are actually getting a range of what earnings-per-share are estimated by analysts in the industry.
A little bit more information to add colour to our trading opinions and lastly on the left, on the right-hand side, we are getting more information on when those earnings are coming out, we are getting information about earnings per sale estimates as well as the buy, sell, hold ratings and then the volatility ratings.
We can see where the companies apply volatility is sitting, where it has been over the course of the 52 week range just like you might get from a pricing history, and then down below, we are also getting something like a Bollinger band, we are getting probability ranges on that price point. Lots of great information to add some colour into your theories.
>> Lots of great functions on the advanced dashboard platform. If someone wants to learn more about it, where can they go?
>> Lots to unpack here. We are all about teaching people to fish. Let's jump into the platform and I'll show you where there are some great educational resources. In the platform, you have the learn tab at the top of the page. We have some quick, targeted videos about specific components in Advanced Dashboard. Check those out.
Next thing, jumping over to our web broker platform, I'm on the learn tab at the top of the page. If I go to the video lesson section, I have filtered for advanced dashboard, we have 18 specific lessons on advanced dashboard and how to use, conceptual ideas that might fit nicely with advanced dashboard. Last but not least, I will flip over to our TD Direct Investing YouTube page.
We are producing lots of great, informative and also dare I say it engaging content. It's fun to engage here.
Lots of great stuff. If we scroll down on this particular page, we have a whole playlist set up to educate you on our platforms from web broker to advanced dashboard as well as the new TD mobile app for you to take a look and learn more.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Jason Natyk, Senior client education instructor with TD Direct Investing. For more educational resources, check out the learning centre on web broker.
We are back with Bart Melek, taking your questions about commodities. Someone wants to know, easy questions for you today, how could the US presidential election impact the commodity space?
>> I've been thinking about this for a while now and there is definitely a possible impact, depending on which party wins, whether they hold both the Senate and the House, there are many machinations.
>> We would have to get a little thing here, if this, then this, etc.
>> I'm not going to pontificate on who is going to win but I will say that under a Republican regime, based on what they've said, it's probably less likely that we are going to have a robust increase, acceleration in spending for environmental initiatives, such as the inflation reduction act. That could include less subsidies, that could include looser fuel standards which all would mean that the transition to net zero is a little slower.
If it's lower, metals like copper would benefit less. We still would think there would be an upside for probably less so.
Why? If we are not subsidizing battery EVs, if we are not subsidizing the expansion of the grade and green generation, probably it means that the demand growth for copper is a little less robust, and that means a less tightened market. Why? Because electrification requires a lot of copper. For example, an ice vehicle uses I think 25 kg of copper and pure battery vehicle uses three times more something like that.
Depending on what the political agenda is, depending on what the policy is, that has an impact on how quickly you go towards net zero.
Silver is another one that gets impacted.
Silver is very much used in solar panels, it's used in all sorts of electronics and vehicle electronics, typically, the more electronics in a vehicle, the more silver used, upwards of 2 ounces per vehicle.
And we produce some hundred and 10 million vehicles a year so if you have a large penetration or large share of new vehicles being built pure EVs, then more silver.
Probably more green solar panels and other electronics associated with it. And silver is one metal that long term doesn't seem to have a lot of new capital going into it relative to demand. We can see a very tight market down the road.
So it depends on what policy you have.
The more green you have, the better it is for these metals. The lush green investment, it's still most likely positive. We are not going back, it's just the rate of increase realistically, what happens. That very much I think will be a political question and whoever gets elected will make those decisions.
>> A lot to watch heading into November.
We are getting closer by the day. We talked briefly about China earlier.
Someone wants to get your take on Chinese demand for commodities. How is holding up?
>> It's weaker than we thought nine months ago. We were hoping that after China opened up after COVID, there would be a great resurgence.
>> It was supposed to be game on time.
>> That didn't happen. It seems that China didn't provide as many subsidies and income support programs to households as many Western countries have done and what we are seeing is we are seeing a real estate market that's in difficulty.
And that means that commodities used for construction, and that's everything from Copper to aluminum to nickel have performed a little worse than expected. We are looking at inventories that are hotter than we thought and now, indirectly, through tariffs in the United States, in Europe on EVs for example, 25% tariffs from Europe and 100% from Canada and the US, it probably means that we import less and that probably means prices of these vehicles are higher here than otherwise so from a global perspective, that's less demand for metals. Yes, you don't import a vehicle from China, you probably try to make it in North America, but we certainly don't have the capacity to make as many and if we do, it will be at a higher price. Demand almost by definition is less robust. Not almost, it usually is, becomes less affordable.
And China and copper, for example, that's the one that everybody knows, it's some 50% of global demand.
Now that doesn't mean we don't think it's positive because we do you think that between lower rates in the United States and stimulus probably coming in from China eventually as well and lower central bank rates from other central banks, ultimately, we will recover and that market is fairly tight. I think it will be in a balance and after the recent correction, it has gone up but it's going to be I think more stable than it would've been if the economy in China was much more robust. Still positive, but not hyper positive, if we can use that term.
>> Hyper positivity, gotta work that into the workplace here. We will get back to your questions for Bart Melek on commodities in just a moment's time.
And a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Inflation recently hit the Bank of Canada's 2% target. We have already got three rate cuts under our belt here in Canada and were expected to come and expectations that our economy will rebound next year and into 2026. However, there are always risks out there. A lot to go through.
>> TD Economics says that economic growth is actually tracking slightly better than forecasted 1/4 ago but economic growth is still subdued, in their words. Real GDP growth is coming in at about 1.1% this year, well below the trend pace of 1.8%, but longer term, they do see that the economy will rebound in 2025 and 2026 amid cooling inflation and lower interest rates. The reason for the lower expectation for real GDP growth this year is that spending is expected to remain lacklustre. There was increased consumer spending last quarter due to a fast drop in interest rates and strong population growth. But the government has not been very successful in controlling the unsustainable immigration flows just yet.
In 2025, we could potentially see a reversal of this trend as our chart shows looking forward.
Now, the other area that they have forecasted is job market. Canada's job market has cooled significantly over the past year with the expansion of the labour force more than double the pace of hiring.
TD economics is based case is the unpleasant rate peaking at 6.8%.
TD Economics does warn that continued resilience in population growth could push the unemployment higher-than-expected.
Finally, on inflation, given the slack in the economy TD Economics believes that headline inflation will be re-anchored very close to the 2% mark by the end of the year. However, they warn that the Bank of Canada must be careful not to overcorrect on monetary policy that pushes inflation through its target on the downside to a great degree.
>> Without warning in mind, what's the thinking on interest rates and where they are headed?
>> The Bank of Canada, they believe that the BOC has a long way to go in cutting interest rates, there is a potential 50 basis point cut at any meeting. They see the neutral overnight rate at 2 1/4%, that's two full percentage points lower than the current rate which stands at 4 1/4%.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are back in Advanced Dashboard, taking a look at the heat map, a nice view of the market movers. We will start with the TSX 60. The composite index is down about 1/5 of a percent. South of the border, the S&P 500 is up about 1/5 of a percent. As we dig into the map to see what's going on on the TSX 60, there is a weakness in financial names, nothing too dramatic but they are heavy hitters on the top line.
Telus, Rogers, BCE slightly lower, making some ground up lately on this interest rate cuts but not so much today. Cameco, uranium play, 2 1/2% up. South of the border, the S&P 500 up about 1/5 of a percent. What's happening beneath the surface?
I'm playing the same game along with you here today because I'm pulling it up on my screen to see what's going on. Intel, reports over the weekend of cash injections from a saviour or may be a potential takeover overtures, unconfirmed reports but enough to get the stock up by about 3% and Tesla up about 4%.
We are back now with Bart Melek from TD Securities. One more question.
AI demand, will this boost demand for energy and thus commodities?
>> I think so. Certainly that is, a few years ago, an unexpected element in demand. We are even talking about reenergizing 6 mile island facilities to facilitate that.
As a I gets more integrated into the broader economy, these data centres will require a lot of power. It helps copper, it helps silicone, it helps uranium is one. So I think it does, probably not as much as people think because you have to think of integrated chips and other processors.
>> Early innings, right? There's been a lot of excitement.
>> It's the generating and then the wires and then the transformers that use a lot more copper and metal and silver two, silver's experience quite a lot used in everything from capacitors to solders. So there is a point to be made that AI will help commodities, but I think more on the energy generation side as opposed to the ones that are specifically used for chips as only trace elements, very little is used in a chip, a lot more in a wire.
>> Fascinating stuff as always. Always a pleasure to have you here. Look forward to the next time.
>> It was wonderful to be here. Thank you.
>> Our thanks to Bart Melek, managing Dir.
and head of commodity strategy at TD Securities.
As always, make sure you do your own research before making any investment decisions.
if we did not have time to get your question today, we are going to aim to get it into future shows. Stay tuned for tomorrow show. Michael O'Brien, managing Dir. and head of the core Canadian equity team at TD Asset Management will be our guests. He wants to take your questions on Canadian stocks. You can get those questions in ahead of time.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. Thanks for watching.
We will see you tomorrow.
[theme music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we discuss whether this record run we have seen in gold is set to continue. TD Securities Bart Melek joins us. MoneyTalk's Anthony Okolie is going to have a look at it TD economic forecast for the Canadian economy, and in today's education segment, Jason Hnatyk is going to have a look at how you can find analyst research on Advanced Dashboard.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to the guest of the day, let's get you an update on the markets.
Last full trading week of September.
Squeeze in one more day of September next Monday but here we are. The S&P TSX composite index down about six ticks.
Nothing too dramatic happening out there right now but I am noticing the uranium play is continuing to get a bid, including Cameco.
The stock is up about 3 1/4%. Things got set off last week with the news headlines about three-mile I'll and restarting to feed Microsoft with energy for its hungry AI applications. Interesting developments.
Also noticing a little bit of movement in the oil and gas names. Right now West Texas intermediate benchmark American crew just above $70 per barrel. It's now in negative territory, seems to be reversing the trend I noticed earlier. $4.24 per share for Baytex, it down .7%.
South of the border, it's been a month packed with news, a few corporate earnings, a lot of fit speakers on deck.
Up about 1/4 of a percent on the S&P 500.
September has that reputation but after a bumpy start the first few days, it's been off to the races. We will see how the rest of the week plays out. Tech heavy NASDAQ, up a little shy of 1/3 of a percent.
Micron is on deck, one of a handful of companies this week we are keeping an eye on, reporting the earnings, I believe they are coming up on Wednesday. Ahead of that the stock is of little shy of 3%. And that's your market update.
The price of gold has run up to record levels in recent trading, but as the Fed begins its rate cutting cycle, will the rally continue? 20 essay discusses Bart Melek, managing Dir. and global head of commodity strategy at TD Securities.
Great to have you back.
>> It's great to be back. Thank you.
>> We will talk about where you think gold could be headed but let's talk about what got us here in the first place. A lot of moving parts.
>> Yes, absolutely. I think we should probably start back some 12 months ago where we had the Federal Reserve at that time, no one was really imagining a 50 basis points cut like we saw last Wednesday but what we did witness is a very robust central bank buying and that's on the back of record level of central bank purchases in 2022, 2023. This year started off fairly robustly as well. It has slowed down. But that was one of the elements, along with strong physical markets in Asia and other parts of the world. That prevented gold from troughing in a material way, even as rates were on the way up real rates anyway, as inflation fell. We saw Fed rates at 550 basis points. There was already a robust market, and the economy started slowing a little bit, China underperformed and the narrative shift in towards cuts. On Wednesday, the Federal Reserve delivered a 50 basis points cut and a dovish narrative but ahead of that, the markets were expecting it for the most part and we have seen very, very robust proprietary trade or discretionary trade positions. We at some point that it was may be a little bit too much, too soon, and that helped to move gold to the record levels we have seen. Robust speculative purchases. And the start of ETF buying. We have not really seen the market go firing on all cylinders and in our view, we still think there is some upside to go as we move into early 2025.
>> We have seen that strong demand from central banks. You are saying ETF holdings are starting to rise and a 50 basis point cut from the Fed, I imagine the gold bulls like all of these components. Is it more complicated than that?
>> Yes.
Central banks since then have slowed down a bit. I think people think after almost 2 years a very aggressive buying, slow down to the last five months or so, but we expect central banks might be interested again. I think the hope on their part was that we could see a bit of moderation because, as I said, it looked like there was may be too much positioning on the long end. Now I think central banks may be in it again the and the generalists and institutional investors in the Western world may develop an appetite for gold again and with a 50 basis points cut, even though we have very hefty positions, we really did not see last week and the CFTC data that would indicate a lack of appetite, in fact, long positions grew much more than short positions, so length increases were still pretty hefty in terms of positioning which represents a risk but I suspect this particular Fed is very much tilted towards the second element of its mandate which is maximum employment. The Federal Reserve, unlike, let's say the Bank of Canada, targets to policies or two things they want to accomplish simultaneously. They want to have price stability, which is controlling inflation, and they want Max employment, maximum employment. And I think Mr. Powell, starting back in August at Jackson Hole, I think with very little ambiguity told the market that he doesn't want the labour market to weaken much more. The rest of the economy in many ways has slowed down.
There are disinflationary pressures, not deflation but inflation has decelerated a great deal and the Fed now is quite comfortable I think with the idea that we are going to move to their 2% target and that, of course, takes time but at the same time, the Fed wants to reduce the restrictive aspect of monetary policy to facilitate a little bit more economic activity so we don't see a very sharp downturn in labour. So they are trying to hit two things at the same time.
Historically, that did not end well because through much of the history, it ended up in a significant slowdown, even recession. This time we are hoping that we are going to have more of a soft landing as this Federal Reserve starts cutting rates and we are hoping that things stimulate and we get the best of both worlds: low inflation and decent growth.
>> There is a lot of consensus around this idea that they can stick the soft landing.
What if they don't, what if it ends up being a hard landing, you get a recession, a rather painful one, what would happen to gold?
>> Well, gold seems to be a winner under most scenarios here.
If there is a very sharp downturn, one we don't expect, then the Federal Reserve's response would be more monetary easing, even lower real interest rates. There are some rigidities on the price side, it's unlikely that we are going to get deflation de facto so you can very much envision a world where the economy slows down much more than the Fed anticipated. I think the reaction function would be to aggressively cut rates and for gold, that's pretty good. One, you're protecting against deterioration in real rates as the Fed cuts and also the Fed tends to-- gold tends to have an inverse relationship to it risk assets like equities for example or copper or other things so when the economy is slow, demand for industrial metals or energy doesn't tend to do well.
Earnings tend to disappoint, and then gold tends to be an outperform her as rates go down and gold is seen as being relatively stable.
>> The last thing I want to ask, let's talk about that. We talk about gold in the here and now, things that have happened, interesting moves over the course of the last year, but historically… >> Gold is no one's liability. There is no counterparty risk. If I own an ounce of gold, I own an ounce of gold. I don't have to rely on the government to pay me a yield or pay me back. There is intrinsic value in it. So far, so good for the last 5000 years or so. Gold has been considered valuable by humanity, has historic value.
We are assuming for the next 10 years or so it will be the same thing, so it has its own value. It doesn't have to depend on the solvency of any government. Second, it's a real asset that requires real resources to produce it, to take it out of the ground. That includes labour, that includes capital in the form of those big mighty machines that dig stuff out, everything from water pumps to trucks to smelters and if we argue there is inflation in the world, well then we have to argue that the cost of labour is going to catch up and so will the cost of everything associated with getting an ounce out of the ground in terms of capital and steel girders and you name it.
The third fact that I think is important here is that the average ore grade is declining over time. We have been mining it for thousands of years and all the good stuff that's easy to get at has been pretty much mined out. If it was easy to get out of the ground, people knew about it and try to take it out. Now we are left with more troublesome assets, new assets in particular. Some are high up in the Andes mountains or in geopolitically unstable parts of Africa, for example.
And to the extent that the price of gold has tracked the marginal costs or we call it the 98 percentile of the cost curve, then, as we move forward and if we expect inflation down the road, it's a good protector. It gives you a real implied yield of sorts. If labour goes up by two or 3% and you are going to need more labour to get that ounce because there's less of gold available and you need more machinery, given technology doesn't change much, then gold should deliver inflation plus that extra premium that is reflected in the difficulty of getting an ounce out of the ground so I think over the long run, it should be a decent reflector of aggregate prices in the world and should keep up so in 50 years time, you should probably still have in real terms the same amount of purchasing power from $100,000 worth of gold today, in 50 years, you will probably get $50,000 in terms of real terms of purchasing power as well so it's not a bad asset and on like equities, for example, you can imagine that in 50 years, technology stocks that are all the rage today may not be because they will be outmoded and outdated. There is no guarantee that today's technology will be the same in the next 50 years were be the same companies. So there's that element as well which is stable store of value has been around for many millennia.
>> Fascinating stuff and a great start to the program. We will get to your questions about commodities, if you've got a question about gold, scented and, we will talk about gas, copper, silver. Bart Melek joins us for the program. And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Shares of Intel are in the spotlight today. There are unconfirmed reports that Apollo Asset Management is offering to inject up to $5 billion into the beleaguered chipmaker. That follows on reports that Qualcomm had approached Intel about potential takeover. Intel, of course, has struggled to gain significant market share despite the industrywide boom in artificial intelligence. That's reflected in its stock price. Today you're up a little shy of 3%. The health of the consumer is going to be in the spotlight later this week it, Costco earnings are on deck. The big-box retailers expected to grow earnings year-over-year as cash-strapped households continue to hunt for bargains. The stock has been a leader in the consumer discretionary space, gaining some 60% over the past year.
Costco is scheduled to report on Thursday.
Southwest Airlines is apparently warning its employees there will be some quote difficult decisions announced in the coming days. Several media outlets are reporting that the airline told workers in a video it wants to boost revenue through changes to its flight network, among other things. The airline has been pressured to make changes by activist investor Elliot Investment Management. Quick check in on the market, we will start you on Bay Street with the TSX Composite Index. We are down a modest 31 points, a little more than 1/10 of a percent. South of the border, the S&P 500, right now up 14 points, 1/4 of a percent, 5717.
We are back with Bart Melek, taking your questions about commodities. First one for you here. We talked about gold off the top. We knew this one was coming. What's your current outlook for oil?
>> For the last six months, I was a little bit more, our team was a little bit more negative on oil than I think consensus and I think we still think that oil doesn't have an awful lot of upside into 2025, at least in the first half anyway. What we are seeing as we are seeing a lot of disappointing data from China. China, of course, is one of the key countries that are responsible for demand growth. We are looking at China may be performing a little bit weaker than previously, although we are not looking at a recession in the United States are a hard landing, we are thinking that things are going to slow down a little bit, that implies that demand growth for oil may be a little slower down the road and at the same time, we have a lot of new crude from Canada as the pipeline to the Pacific has ramped up, as other countries around the world increase production, and that includes of course shale output in the United States, it has been fairly decent.
They have done a lot of work and becoming more efficient.
So even today's lower prices WTI at 71 or $72.
>> Roughly around $70 per barrel, in the ballpark. It is profitable.
And we have an OPEC+ that has a lot of spare capacity. In fact, just a few months ago, they said they would like to reintroduce 2.2 million barrels of production that they have cut because of COVID. They have since relented and they are not going to do that but there's that threat and when we look at supply and demand fundamentals and we look at the balances, we wouldn't be at all surprised to see a surplus in the first half of next year and therefore it's going to be challenging for oil to have a big rally.
Of course, that will be offset by potential cuts from OPEC, though they have not said anything yet but if history is repeated, they may entertain it. Also, there is an element that the supply side in other parts of the world might respond a little bit and then there's did the geopolitical risk.
>> I think a lot of people would say with the amount of geopolitical risk in the world right now, they might look at oil at $70 per barrel and ask why it's not higher.
>> It is those supply demand fundamentals and there is a bit of a premium because of the events most recently associated with the conflict with… >> Hezbollah?
>> Hezbollah in Lebanon. There is always at risk that it goes region wide, a disruption and flows from Morin and around the area. Something that happened in the 80s with the tanker war. At this point, that clearly is not the scenario people are projecting because if they were, we would see much higher oil, but there is a bit of that element that still keeping up with if that goes away we could see oil a little lower because of it. If conversely we see you conflict spread out, that premium will be added but we might do a lot of forecasting and projecting. We are not very good but we attempt to try to project these conflicts. We more respond to what is happening as opposed to trying to call them because that's something we don't know more than anyone else.
>> An uncertain world.
What do you make of the recent declining gasoline prices?
>> Well, that is quite often associated with worries over demand. If consumers, retailers slowing, if we are seeing the job market may be not totally decline, we could very well see a situation where people have less money in their pocket, they travel less, you basically demand trucks use less fuel. Essentially, it's a demand worry and that is something I think that's going to be with us for a while. We see it in the spreads of the refinery premiums and we are seeing it on the ground as well. We will see what happens.
Organizations like the International Energy Agency continues to downgrade the man because of all this and the market is responding with its own lower estimates for demand as well and I think that in large part explains much of what's been happening.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Bart Melek on commodities in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
In today's education segment, we are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
Jason Natyk, Senior client education instructor with TD Direct Investing joins us now. You're gonna walk us through how we can do in-depth research on a company using the platform.
>> Absolutely. Great to be here.
Many times on this program, we have walk you through some of the trading components on the platform, how to make your trades, set up profit loss targets, how to customize the experience in the charts.
Today we will dive in how we can do a little bit of additional research about the company's and find out some analyst information here on the platform. Let's jump in and take a peek.
One of the hallmarks of advanced dashboard is that you can customize pretty much everything within the platform but there is a tab created for us to do some more in-depth analysis, that would be the aptly named analysis tab. That's at the top of the page.
We will jump in there and I will walk you through the main strokes. First, on our company profile, we can learn more about the overarching business that the company is in. We can see who the board of directors are and at the bottom we have some key dates on the company, specific earnings dates and things like that.
That's the company profile. Financial statements.
What we want to hear about those big companies, we have all the high-level financial information they will be releasing on their quarterly call so we can begin to form opinions on things like whether it's overvalued or undervalued, things like this. If you want to have all of these higher-level data points drill down into consumable points, we have estimates and ratios.
Moving down the tabs, we have lots of great information here.
Here you can compare year-over-year. That gets you into more opinions and help to identify trends in the market.
Interestingly, you can see those colourful bar charts on this page, they are customizable based on what's important to you.
Each different section of information, if we choose a different ratio, it's going to update that chart so you can keep what's important to you at the top of the screen.
Continuing to move, we've got our analyst evaluations. It's pretty straightforward.
You've got price targets, consensus, buy, sell, hold ratings, we talked trends a couple of times, we are getting the trend of analyst information month over month, we can see how things are moving and changing and how opinions are being formed. You can dive in and take a look.
Next on the list, it's more abstract but high level good information to find out, it's the relative performance. On this page, once it loads, this page will show us how our individual company is performing against some of the major indices as well as sectors in the market, outperforming, underperforming over different time periods.
We also have our Earnings Analyzer. On this particular page, we have a chart. We can see our candles on the centre of the screen. Below that, it's charting earnings-per-share. We are actually getting a range of what earnings-per-share are estimated by analysts in the industry.
A little bit more information to add colour to our trading opinions and lastly on the left, on the right-hand side, we are getting more information on when those earnings are coming out, we are getting information about earnings per sale estimates as well as the buy, sell, hold ratings and then the volatility ratings.
We can see where the companies apply volatility is sitting, where it has been over the course of the 52 week range just like you might get from a pricing history, and then down below, we are also getting something like a Bollinger band, we are getting probability ranges on that price point. Lots of great information to add some colour into your theories.
>> Lots of great functions on the advanced dashboard platform. If someone wants to learn more about it, where can they go?
>> Lots to unpack here. We are all about teaching people to fish. Let's jump into the platform and I'll show you where there are some great educational resources. In the platform, you have the learn tab at the top of the page. We have some quick, targeted videos about specific components in Advanced Dashboard. Check those out.
Next thing, jumping over to our web broker platform, I'm on the learn tab at the top of the page. If I go to the video lesson section, I have filtered for advanced dashboard, we have 18 specific lessons on advanced dashboard and how to use, conceptual ideas that might fit nicely with advanced dashboard. Last but not least, I will flip over to our TD Direct Investing YouTube page.
We are producing lots of great, informative and also dare I say it engaging content. It's fun to engage here.
Lots of great stuff. If we scroll down on this particular page, we have a whole playlist set up to educate you on our platforms from web broker to advanced dashboard as well as the new TD mobile app for you to take a look and learn more.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Jason Natyk, Senior client education instructor with TD Direct Investing. For more educational resources, check out the learning centre on web broker.
We are back with Bart Melek, taking your questions about commodities. Someone wants to know, easy questions for you today, how could the US presidential election impact the commodity space?
>> I've been thinking about this for a while now and there is definitely a possible impact, depending on which party wins, whether they hold both the Senate and the House, there are many machinations.
>> We would have to get a little thing here, if this, then this, etc.
>> I'm not going to pontificate on who is going to win but I will say that under a Republican regime, based on what they've said, it's probably less likely that we are going to have a robust increase, acceleration in spending for environmental initiatives, such as the inflation reduction act. That could include less subsidies, that could include looser fuel standards which all would mean that the transition to net zero is a little slower.
If it's lower, metals like copper would benefit less. We still would think there would be an upside for probably less so.
Why? If we are not subsidizing battery EVs, if we are not subsidizing the expansion of the grade and green generation, probably it means that the demand growth for copper is a little less robust, and that means a less tightened market. Why? Because electrification requires a lot of copper. For example, an ice vehicle uses I think 25 kg of copper and pure battery vehicle uses three times more something like that.
Depending on what the political agenda is, depending on what the policy is, that has an impact on how quickly you go towards net zero.
Silver is another one that gets impacted.
Silver is very much used in solar panels, it's used in all sorts of electronics and vehicle electronics, typically, the more electronics in a vehicle, the more silver used, upwards of 2 ounces per vehicle.
And we produce some hundred and 10 million vehicles a year so if you have a large penetration or large share of new vehicles being built pure EVs, then more silver.
Probably more green solar panels and other electronics associated with it. And silver is one metal that long term doesn't seem to have a lot of new capital going into it relative to demand. We can see a very tight market down the road.
So it depends on what policy you have.
The more green you have, the better it is for these metals. The lush green investment, it's still most likely positive. We are not going back, it's just the rate of increase realistically, what happens. That very much I think will be a political question and whoever gets elected will make those decisions.
>> A lot to watch heading into November.
We are getting closer by the day. We talked briefly about China earlier.
Someone wants to get your take on Chinese demand for commodities. How is holding up?
>> It's weaker than we thought nine months ago. We were hoping that after China opened up after COVID, there would be a great resurgence.
>> It was supposed to be game on time.
>> That didn't happen. It seems that China didn't provide as many subsidies and income support programs to households as many Western countries have done and what we are seeing is we are seeing a real estate market that's in difficulty.
And that means that commodities used for construction, and that's everything from Copper to aluminum to nickel have performed a little worse than expected. We are looking at inventories that are hotter than we thought and now, indirectly, through tariffs in the United States, in Europe on EVs for example, 25% tariffs from Europe and 100% from Canada and the US, it probably means that we import less and that probably means prices of these vehicles are higher here than otherwise so from a global perspective, that's less demand for metals. Yes, you don't import a vehicle from China, you probably try to make it in North America, but we certainly don't have the capacity to make as many and if we do, it will be at a higher price. Demand almost by definition is less robust. Not almost, it usually is, becomes less affordable.
And China and copper, for example, that's the one that everybody knows, it's some 50% of global demand.
Now that doesn't mean we don't think it's positive because we do you think that between lower rates in the United States and stimulus probably coming in from China eventually as well and lower central bank rates from other central banks, ultimately, we will recover and that market is fairly tight. I think it will be in a balance and after the recent correction, it has gone up but it's going to be I think more stable than it would've been if the economy in China was much more robust. Still positive, but not hyper positive, if we can use that term.
>> Hyper positivity, gotta work that into the workplace here. We will get back to your questions for Bart Melek on commodities in just a moment's time.
And a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Inflation recently hit the Bank of Canada's 2% target. We have already got three rate cuts under our belt here in Canada and were expected to come and expectations that our economy will rebound next year and into 2026. However, there are always risks out there. A lot to go through.
>> TD Economics says that economic growth is actually tracking slightly better than forecasted 1/4 ago but economic growth is still subdued, in their words. Real GDP growth is coming in at about 1.1% this year, well below the trend pace of 1.8%, but longer term, they do see that the economy will rebound in 2025 and 2026 amid cooling inflation and lower interest rates. The reason for the lower expectation for real GDP growth this year is that spending is expected to remain lacklustre. There was increased consumer spending last quarter due to a fast drop in interest rates and strong population growth. But the government has not been very successful in controlling the unsustainable immigration flows just yet.
In 2025, we could potentially see a reversal of this trend as our chart shows looking forward.
Now, the other area that they have forecasted is job market. Canada's job market has cooled significantly over the past year with the expansion of the labour force more than double the pace of hiring.
TD economics is based case is the unpleasant rate peaking at 6.8%.
TD Economics does warn that continued resilience in population growth could push the unemployment higher-than-expected.
Finally, on inflation, given the slack in the economy TD Economics believes that headline inflation will be re-anchored very close to the 2% mark by the end of the year. However, they warn that the Bank of Canada must be careful not to overcorrect on monetary policy that pushes inflation through its target on the downside to a great degree.
>> Without warning in mind, what's the thinking on interest rates and where they are headed?
>> The Bank of Canada, they believe that the BOC has a long way to go in cutting interest rates, there is a potential 50 basis point cut at any meeting. They see the neutral overnight rate at 2 1/4%, that's two full percentage points lower than the current rate which stands at 4 1/4%.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are back in Advanced Dashboard, taking a look at the heat map, a nice view of the market movers. We will start with the TSX 60. The composite index is down about 1/5 of a percent. South of the border, the S&P 500 is up about 1/5 of a percent. As we dig into the map to see what's going on on the TSX 60, there is a weakness in financial names, nothing too dramatic but they are heavy hitters on the top line.
Telus, Rogers, BCE slightly lower, making some ground up lately on this interest rate cuts but not so much today. Cameco, uranium play, 2 1/2% up. South of the border, the S&P 500 up about 1/5 of a percent. What's happening beneath the surface?
I'm playing the same game along with you here today because I'm pulling it up on my screen to see what's going on. Intel, reports over the weekend of cash injections from a saviour or may be a potential takeover overtures, unconfirmed reports but enough to get the stock up by about 3% and Tesla up about 4%.
We are back now with Bart Melek from TD Securities. One more question.
AI demand, will this boost demand for energy and thus commodities?
>> I think so. Certainly that is, a few years ago, an unexpected element in demand. We are even talking about reenergizing 6 mile island facilities to facilitate that.
As a I gets more integrated into the broader economy, these data centres will require a lot of power. It helps copper, it helps silicone, it helps uranium is one. So I think it does, probably not as much as people think because you have to think of integrated chips and other processors.
>> Early innings, right? There's been a lot of excitement.
>> It's the generating and then the wires and then the transformers that use a lot more copper and metal and silver two, silver's experience quite a lot used in everything from capacitors to solders. So there is a point to be made that AI will help commodities, but I think more on the energy generation side as opposed to the ones that are specifically used for chips as only trace elements, very little is used in a chip, a lot more in a wire.
>> Fascinating stuff as always. Always a pleasure to have you here. Look forward to the next time.
>> It was wonderful to be here. Thank you.
>> Our thanks to Bart Melek, managing Dir.
and head of commodity strategy at TD Securities.
As always, make sure you do your own research before making any investment decisions.
if we did not have time to get your question today, we are going to aim to get it into future shows. Stay tuned for tomorrow show. Michael O'Brien, managing Dir. and head of the core Canadian equity team at TD Asset Management will be our guests. He wants to take your questions on Canadian stocks. You can get those questions in ahead of time.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. Thanks for watching.
We will see you tomorrow.
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