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[music] >>Hello I'm Greg Bonnell and 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 will only see here. We'll take you through it's moving the markets and answer your questions about investing.
Coming up today will discuss whether the rally and silver has room to run with TD Securities Daniel Ghali. MoneyTalk's Anthony Okolie will a look at the latest GDP numbers and what it can mean for policies south of the border. And in today's WebBroker education segment, Hiren Amin will show us how you can research stocks by market Here of the platform. You can email us@moneytalklive@td.com or Phil at that viewer response box under the video player on WebBroker.
Before our guest today let's get you an update on the markets. Some green of the screen here in Toronto. The TSX Composite Index at this hour, a solid 183 points a little shy of a full percent. One of the most actively traded names at this hour includes… Up copper gold project they have with new gold, pleasing with those numbers up 7%. I want to check on the energy and energy names though. The price of crude oil putting back today, West Texas intermediate around 70 bucks a barrel.
We do have Baytex hanging in there, just above the breakeven line.
Gaining almost 4% of actually at four bucks and $0.97 a share.
South of the border were not seeing a reversal of the selling pressure we've seen in recent days. A lot of concern about inflation.
South of the border and what it means for interest rates, bond yields pushing higher is what were seeing in tomorrow morning the PCE, the feds preferred use of personal consumption expenditures, caution of the market. It bakes a mixed bag of earning south of the border down 25 points the S&P 500 about half percent.
The tech heavy NASDAQ, faring at this hour pretty much pacing the broader market data but have a percent. Salesforce is one of the sore points of the market today. We will tell you a bit more about their quarterly earnings but clearly the street is not pleased by what there's there seeing.
The stock is down about 20%.
And that's your market update.
While many investors when watching the run higher in gold this year, Silver has had an even better run.
Joining us now to discuss what's driving this move that we are seeing and whether it can continue his Daniel Ghali, Senior Commodity Strategist at TD Securities.
Quite a telling chart we showed the audience there.
Gold gaining headlines but silver two.
What is driving this rounded silver?
>> Silver is at an incredible run this year so far. I think silver is fundamentals are among the most exciting and the commodities complex today. This is a market that has been in the deficit for at least three years. That most analysts around the world for C will continue to be in a structural deficit for the foreseeable future.
And really over the last decade or so, nobody's really cared about supply and demand from from… Because there's this huge stockpile of metal that was always sufficiently large enough to accommodate any gap in the physical supply and demand balances. That's the assumption, I think, they will be challenged over the next year or two and that's result really of the acquisition of the solar's demanding more silver and the EV boom is also demanding more silver as a result of the increasing use of electronics and vehicles. So this is a great demand story. A constraint supply story and really an exciting market.
>> Is that would change the story?
Or decade nobody cared and suddenly the market woke up to it. Is it really about this energy transition? Saying "wait, Silver will be key to all this!" .
>> Gold prices have performed quite well in this precious metals environment. You can expect that they perform quite well in that environment as well. But what is particularly interesting about Silvers fundamentals currently is that this inventory picture that we've been discussing is starting to change.
Over the last decade you had about 1.6 billion ounces of silver sitting involves across the world. And when we analyse that picture today, what we find is that there is probably a substantial amount of the silver that is remaining on those volts that has been eroded or otherwise captured by ETF holders, for example. So in turn, the amount of silver that's actually freely available for purchase in the world's largest bullion market, vaulting system in London, is substantially smaller than that.
Were talking about, by our estimates, somewhere around 300 million ounces that are actually available for purchase in the context of an average deficit of around 200 million over the last three years.
So there's really not much time remaining before those inventories are to be fully depleted.
>> That's is a really that's that's an interesting tension because we think of gold being held for a reason often called the silver is often the poor man's gold the people actually want that silver to put it into things. That's a really interesting tension that I have not thought about.
>> Definitely. Over the last 10 years people look at silver as a financial asset similar to gold.
But silver's demand profile is overwhelmingly driven by the industrial site. Right?
It typically is characterized by a substantial amount of fabrication demand.
These are things that could go into jewelry, silverware, industrial applications as well… But, the boom that we've seen on the demand side is really being driven by the energy transition.
So silver is increasingly being disconnected from gold or at least we think that it will. As a result of that.
>> Now, you talk of the supply side briefly because obviously if we have this demand for silver as we transition, and we want to actually get our hands on more of it what about the mining situation?
Is the industry responding to that?
>> Absolutely. We've spent a lot of time talking about the structural underinvestment in mining and metals and other carbon intensive industries that is incurred occurred rather of the last decade. Silver is primarily mind is a byproduct of other mining activities. So lead and zinc mines will produce the silver, gold mines will produce the silver but there is not much silver mind from an actual silver mine. The implication here is that the structural underinvestment of the mining side that we spoke about for copper, for example, is also impacting silver supply.
>> Does this set us up for squeezes situation?
> We do think we are an environment where a squeeze on silver is plausible.
And that relates to the fact that the LBMA vault is the world's largest containing 75% of the world's visible silver inventories and their being drawn down.
They're being drawn down in part by the strong demand side coming from the energy transition team as we discussed.
But also by a significant shift or movement of metal from the west to the east. Namely India, towards India and China.
>> Let's pull up that chart together we pulled up in the beginning showing gold and silver. Gold, you know, it has run fair enough and got a lot of attention.
What we are what are we seeing here? The fact that silver outperformed gold?
That might take people by surprise.
>> It's quite common for silver to perform gold on the basis of its volatility.
If you were to volatility adjust, you will find that in only very recent weeks and months has silver actually started to outperform gold.
But typically, Silver has volatile in the at least twice the skillet gold has in gold prices move 1%, you expand larger movements in silver prices.
>> Gold had the big run. It did pull back a little bit from that big run, people I have talked to so they would be surprised to see a pullback and that we saw pull back. Is the run points to continue here?
In the short or medium term?
>> Interesting with the price action recently is that silver is currently trading their multiyear highs were his gold has not expensed a pullback as a mention of that actually underscores a pretty significant amount of strength and how it's trading. The fact that the drawdown in gold has not pulled silver lower, tells you that there is something brewing on the physical side in silver or on the demand side more broadly.
So we think that potentially, this is associated with strong demand out of China. We have seen some signs of a rotation in real chilled tree in retail trade or activity away from the very significant amount that we saw in gold during the month of April at and rotating potentially towards silver today. But also, because China's solar installations are really beating expectations. Last year was a hallmark year for Chinese capacity growth in solar and the expectation for this year is that in the best case scenario they can only match what they did last year. But the tracking so far this year has been incredibly impressive.
So it does look like physical demand for silver in China is very strong.
>> That sounds like we have a pretty good handle on the fundamental reasons for this silver rally. I think in my last discussion with you and Bart Melek to, there was a word: mystery. The mystery of buying gold. We figure that out?
With the central banks?
>> Partly we think it is associated with the central banks but also mining activity. I think the piece worth mentioning on presses metals today's they're morphing into currency depreciation, precious metals are.
Markets are global in nature and currently there is a pretty acute pressure on Asian currencies, that is incentivizing institutions, retail investors and indeed their governments, to diversify away from currencies that are depreciating and gold is benefiting from that.
>> Before relieve this conversation, we did see the pullback in gold. Is there a miss is there risk for silver?
> We think the risk is probably pretty limited.
It's limited because the margin of safety against substantial investor liquidations, we think it is pretty elevated.
So it'll take a large drawdown in prices before investors really feel the pain in our forest forced to liquidate.
Really on the demand side it's coming for the physical mark.
So it does seem to us like the set up right now is pretty solid.
>> Will watch for some of those things.
A great start to the program always great insight with Daniel Ghali.
We'll get to your questions about commodities for Danial in just a moment's time. A reminder that you can get in touch with us at any time by emailing moneytalklive@td.com or Phil at the viewer response box on a video player on WebBroker.
Now let's take a look at some of the top stories in the world of business and take a look at how the markets are trading.
Shares of cloud software giant salesforce are under pressure today.
The company missed sales estimates for the first time and I was 20 years.
Salesforce says revenue from its professional service business was down about 9% from the same period last year as customers grow cautious in spending.
A different story today for Foot Locker shares holding onto their gains.
The running shoe and fitness apparel retailer beat profit expectations.
Here's what's going on with the retailer.
He did beat profit expectations because the companies turnaround strategy appears to be gaining some action. Subtraction rather. Foot Locker says the average selling price rose during the quarter.
If you sell the right shoe they will pay the full price for it and they need the discount.
Best Buy managed to exceed profit expectations for its most recent quarter despite a continued slide in sales.
While cash-strapped consumers continue to put off buying high-priced electronics, Best Buy is cutting costs across the business including plans to lay off workers even though sales up and sliding, stock is up but 1/2%.
A quick check in of the market here on base tribute you have some green on the screen, hundred 97 points almost a full percent.
South of the border investors up and cautious this week. They are worried about the picture we are getting. We are getting the preferred gauge of the morning so ahead of that, maybe people are just thinking they want to see the report first. Tomorrow, last day of the month will be a significant one depending on where you get that number in the morning.
Down about 1/3 of a percent.
>> We are back with Daniel Ghali taking your questions about commodities.
Here's one we found over the weekend, what should we expect from the weekend's OPEC+ meeting?
>> I think panelists across the world are overwhelmingly inspecting OPEC to honour their current production agreement, that expectation is partially on the back of the weakness in all places that we've seen so far.
And the weakness on physical markets that we've seen. In other words the market needs them to continue to cut. I think the interesting piece here is that OPEC increasingly looks like it's backed itself into a corner. They are undergoing very significant cutting programs restricting supply to the world with Saudi Arabia taking the brunt of the weight on that.
But non-OPEC nation Snavely foreign Nations, the US Canada, Brazil and Guyana are all benefiting from this and increasing supply almost exactly offsetting the amount of barrels that are… By OPEC. This is a situation where they're trying to keep prices afloat in other countries are eating their share of the cake.
>> Can we get to a point, I think in 2014 everyone expected Saudia Arabia and OPEC to shut down and we won't save the day at our expense unless you guys keep pumping your shared reserves. Can we have that situation to were OPEC decides "we will carry all the weight here"?
>> Anything is possible but we see that is unlikely because, the US production which is of course, the largest oil producer in the world, has been underscored by improvements in their technological abilities, they are able to extract more oil and gas from the patch than they used to. The implication there is that even at lower prices, they may still be able to keep their production.
So in attempt to do that may not be a successful as we seen in 2014 when they did attempt to do that as well.
>> I only saw the headline. I think my producer tapped me on the shoulder and said "look at this". This is a common story with OPEC, you get these meetings or production curves and agreements to try to stabilize the price of oil and maybe some Nations don't live up to that and they cheat.
>> Cheating has been a big problem across OPEC Nations.
A big group of producers who have their own incentives in their own agendas that they are putting ahead of the group but over the last few years, actually under production from the group as a whole as, you know, structural underinvestment in oil supplies actually resulted in the substantial amount of operational risks.
Countries were not able to produce as much as they were. Largely alleviated.
So this is part of the story today that countries like Nigeria, for example, are producing more closely to their quotas and intern that is new oil supply that previously was not hitting into the global market.
>> Interesting stuff in a good breakdown in oil there.
Something to keep you around this weekend.
Another question: (Greg reads of the question) > I think for the longest time Canadian energy producers were constrained.
The risk is they the reason is they can't get more oil out to avenues where they can either ship it or to send it to a refiner where it can be transformed into a product that we use like gasoline or a distiller product.
The completion of that pipeline will allow for additional production growth and that is a very positive thing for Canada soil sector.
>> We talk about Western Canadian trading at a discount, American crude, because of those constraints, can Canadian producers expect a healthier price for a barrel?
>> I think, absolutely but I think those constraints, the market pricing is going to very quickly adjust for that additional capacity and we can see a returning to a similar situation on the horizon.
>> When I think about what it took to get this pipeline into operation, are we looking at the last of the big pipeline constructs in this industry? It's a tough go when you're talking about Keystone and getting that finally operational. The last of the big pipeline?
>> You're absolutely right. It has been a very tough go and I think financing for these kinds of projects is very constrained.
>> Let's take another question now.
Back to the metal space. Looking for copper over the next 1 to 3 years.
>> Copper is a very interesting market at the moment. We spoke about this at length in the past. This is a market where we do see structural supply and it was most likely going to enter into a period of structural deficit.
Driven by a boom in demand as the world electrifies and by the long lags that it takes to get a new mine into production.
That being said, prices have since staged a very substantial rally over the months and physical markets are quite weak.
Chinese inventories are building and that tells you that trying to stimulate industrial production and infrastructure investment real estate market just aren't consuming enough of these metals.
So while the rally was actually catalyzed by ^...¸lowering their supplier, what actually happened is that narrative enacted enacted a lot of money into it, Chinese production today is still at an all-time high and physical markets are weak.
But really disconnected from that kind of physical market Outlook today.
>> Price will incentivize you would think, the world wants copper?
Price of copper is rising and we need to find more copper.
Again those aren't overnight stories. How does it play?
Over five, 10, 15 years from now? The world is hungry for this much copper.
How does it play out?
>> It takes 5 to 7 years to get a new mine into production. So even if we were to invest a substantial amount of mining activity today, it would take that long to take out. It does look like at least on a three-year outlook, we will be entering into a period of structural deficits.
>> Interesting stuff is always at home, make sure you do your own research before making investment decisions. We'll get back to your questions for Daniel Ghali in just a moment's time.
A reminder that you can get in touch with us at any time by emailing MoneyTalk Live it td.com.
Let's get to our educational segment of the day.
We will help you take a look at how you can research socks on WebBroker using their market Joining us as Hiren Amin, Senior Client Education Instructor TD Direct Investing.
For viewers who may not be aware why don't we start about what market capitalization actually means?
>> Always to back always great to be back Greg. Essentially market capitalization is a gauge of how much a company is worth is determined by its stock price and its outstanding shares. We will talk about that in just a moment.
I think of market Is the value of the company. If I were to bring it in more in that analogy, think some think of something you have in your home versus an assessed value. This is potentially a market value of the company.
It's straightforward and you can take the stock price which we all know and you can see any company you want then you have to multiply by the outstanding shares.
The outstanding shares essentially is the total number of shares issued by the company that are held by stockholders both outside as well as insiders.
I will take you through WebBroker just a moment and we can take you and show you where you can find this information. Let's pull up Apple as an example today.
Once you bring up the stock profile of Apple, you can scroll down towards this section, this fundamentals area then you can see that the numbers given to you right here in the market capitalization are already calculated for you. But here's where you can see with the total number of outstanding shares are as well there. The other thing I wanted to do Greg is just in the name of education, we want to tell viewers how to use market In different ways.
It can be used to compare one stock versus another but it also helps traders or investors gauge how companies are growing over time by simply looking at the growth of that market capitalization.
Now, quick fun factor to get back a little bit, and the entire world there is approximately 80 major stock exchanges that account for 110 trillion dawdled dollars. That's our total world market capitalization.
And out of those, the number one and two spots are held of course domestically in North American markets by the New York Stock Exchange and the NASDAQ exchange.
They account for a staggering 42% of the total world market capitalization when it comes to equity markets. Now if we bring it domestically here at home, that accounts for a small drop in the bucket but we still jostle between the 10th and ninth spot in the world record sitting at about 3.2 trillion.
Talking about precious metals a moment ago all mention this as well, gold, about $15.7 trillion.
And it's based on capitalizing on the price of gold in the total above gold reserves currently outstanding and that number varies by about 209,000 tons of gold.
> Big numbers indeed.
You know, it helps to have Apple, Nvidia enlisted on your exchange as well.
So now we understand market And how we might want to start thinking about it and doing the research.
Have you actually researched stocks using market On WebBroker?
>> Absolutely let's show viewers how to do that.
Let me put you on the spot and asked what you think is the number one market Company right now in North America?
>> In North America? Not in Canada? In North America?
>> Not in Canada. We will eat include the US.
>> Apple and Microsoft fight with each other in Nvidia. I think that's the top three.
>> Let's put it to the test and see if that holds true. What I'm doing is I'm in the screener tool now. I will just clear and add the criteria you want.
The one criteria we will started up is on the company basics. We will do market capitalization and keep it very broad-based just so I can show viewers they can search for this.
Once that pulls up you will see the results here Greg and you would be correct.
>> I am rubbing my knuckles right now.
>> Microsoft and Apple take the top spot followed closely by Nvidia. It's staggering because some of these companies click even the major exchanges of top countries around the world on an individual basis. That's a quick look and I can do the research there Greg.
>> Great stuff as always and I'm glad I'm so much up on this Thursday getting it together including with you celebrating yesterday.
Good to see you my friend.
> You too.
>> Hiren Amin, Senior Client Education Instructor with TD Direct Investing. For more education, you can use this QR code to navigate td's Instagram page where you can find more informative videos.
Before we get back to your questions with commodities with Daniel Ghali, a reminder of how you can get in touch with us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Just coming in the past couple moments, [Greg reads the question] >> That's a really good question. I think if we Zoom out, the energy transition in our opinion is this decades zeitgeist.
Every decade you have one theme that dominates the investment community's thinking in the energy transition in our communities one of those. The way that we broke down the implications is basically in one of four ways. You have game changer sectors which are essentially the sectors that are going to see a tremendous amount of demand, growth as a result of the energy transition. These are things like electric vehicles, renewable power, more recently, distribution and transmission networks, energy storage, for example.
The next sector would be great if a case and commodities. Those of the raw materials that are inextricable from the game changer's extra sectors.
You can have these blood more copper for example. You can't build more cars overall without more aluminum.
Distribution networks are transition networks without more zinc.
Commodities really are a big part of that story and the sentence that copper is the new oil kind of comes to mind there.
The other two sectors are a little bit different actually. The trouble makers sectors would be those commodities that are going to see governments proactively curtail their production in order to meet their carbon goals.
Aluminum and steel come to mind here.
These are very energy intensive and carbon intensive industries.
We've already seen some Nations around the world place capacity caps that are going to constrain the outlook that we see for supply and demand. Finally the last one is perhaps rest less relevant for copper and base metals as a whole but foregone essentials. Those in other words controlling products which are at a much slower pace will there is supply flow over the next several years >> File those four scenarios and… You need aluminum for electric vehicles but at the same time countries try to hand in their aluminum productions to breakdown omissions. It seems like there is a real push and pull on this.
People want to green future but they don't want to mind the metals that are required to build the green future.
>> Yes absolutely a really interesting analysis we have from a few years ago is that if we map out the sectors in our economy by their carbon intensity and their reinvestment ratios, you find that the sectors that are more carbon intensive have seen less investment over the last decade as a whole.
This is part of the energy transition and this is some of the constraints that we might face in the future.
>> Next question sticks with the energy transition.
If you are saying we've seen declining EV demand.
It hit the commodities space hard.
People talking about hybrids.
>> Absolutely. I think people talk about EV's in many different ways.
Hybrids can be considered an electric vehicle as well. But we have certainly seen this narrative particularly out of the US where consumers are opting more for hybrids than battery electric vehicles over the last year.
I would highlight, however, the from a global standpoint, the battery electric vehicle rate is essentially stable from last year. So this is still a very strong penetration growth which remains very stable and at a very high rates of from a global perspective it's probably less of an issue than it is specifically in the US and that's really because China has been the driving force behind EV penetration and we are seeing local governments continue to subsidize that and to incentivize their population to move towards battery electric vehicles.
>> Are there certain parts of the market that are not getting the full picture in the narrative? I think lithium… Mining related to lithium in the past six months.
It doesn't appear to have done all that well. Based on the narrative the people are not as interested in EV's as they used to be.
>> Yes this is I would say, an emerging narrative that has impacted some of the prices we know. In platinum group metals, essentially largely used as emissions control functions for auto catalysts and internal combustion engines, their prices a really been down. Typically they are somewhat correlated the lease to gold and although we've seen precious metals rally, PGM's a really had a more lacklustre performance so far this year, particularly last year as well.
>> This is part of the story that internal combustion engines may be making a comeback that has been driving a little bit of support towards PGM's as well but this is still an emerging narrative.
>> Interesting stuff and I want to keep your eye on next question about these rate cuts if they do, and when they come, rate cuts are supposed to be good for some commodities. But won't hire commodity prices cause more inflation and in turn keep rates high?
>> Yes that has been a concern of many people that we have spoken to.
Particularly over the last several months.
I think that the right the direct transmission between commodities and inflation rates is overwhelmingly driven by the energy sector. Higher energy prices do tend to almost directly impact inflation.
This is even true for core inflations which strips out the energy component of the reason is that energy is used in many parts of our economy including air travel and the services that come along with that. So the rising commodity prices that we are seeing so far this year is actually more contained into the metal space than into the energy space as a result of that, the implications for inflation are probably less relevant.
>> I've heard the argument to the you take it back to OPEC. While they want a certain price for their accrued so they can profit off it, they don't want to see crude go so high that you would undercut global recovery, get inflation soaring again and keep rates high for a long time. They put that in their calculation?
>> Absolutely. I also think they want to diss incentivize consumers from opting out of gasoline and diesel vehicle. You have to consider that over the last year, there has been more demand destruction from energy efficiency gains, internal combustion engines and there has been from consumers choosing electric vehicles. So car companies seeing that higher energy prices are impacting their sales might opt to invest in their energy efficiency and that's actually more impactful for total oil demand of the move towards EV's.
>> I never thought about that. Interesting stuff and will get back to questions with Daniel Ghali on commodities and just a moment's time.
Always do your own research before you make investment decisions and a reminder that you can get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Well as investors await further signs of inflation, we have some revised numbers about the strength of the US economy.
How is it doing?
Anthony Okolie joins us to take on these latest figures and what it can all mean for ultimately the Fed and interest rates.
Thanks Anthony.
>> Thanks Greg. Appears the economy grew more slowly than we initially thought based on this latest revision of the Q1 US GDP data. We did see a revision of GDP growth down from 1.6% in the first reading to 1.3% and brought along a chart. It does show US GDP down quite a bit from Q4 growth where we did see growth up just over 3%. This is this marks the weakest reading Lussina nearly 2 years.
When we dig into the details, without Q1 revision, it's primarily reflecting a downward revision to consumer spending which feels roughly 70% of economic growth.
Americans are spending less on things like things like global appliances furniture.
That's the biggest drop since the mid-2021. Now on the flipside we did see higher spending on the services up nearly 4% and that's the highest we've seen since mid-2021. The biggest drives of course, we did see a surgeon imports as well as a reduction in business inventories. Keep in mind these two sectors tend to fluctuate quite a bit quarter from quarter to quarter.
Investments were higher on an upgrade to intellectual property key implications in this, certainly the second reading does show softer economic growth but it still hasn't change the narrative according to TD Economics of the US economy remains strong despite higher interest rates.
Again, even though we did see a downward revision to consumer spending in the second reading, buy and sell is moving along at a probably a pretty healthy pace.
In fact TD Economics is with headwinds from Q1 growth easing, they see Q2 GDP growth to a trendline pace of 2.3%.
Now, tomorrow we do get income spending from April data which should give us an idea of spending trends for the second quarter. We also get a revised monthly profile of Q1 PCE as well. And again, with the latest minutes from the Federal Reserve, still leading towards hawkish tone, right now markets are pushing out the timing for the first rate cuts until the end of the year. Greg?
Ask an important number tomorrow morning.
We'll be talking about it tomorrow on the show at noon and also our own country.
We will get our first quarterly report for GDP tomorrow morning right?
>> Yes we will be getting from stats Canada Q1 GDP. Again this is a Q report because this will tip the scale on whether we see a Bank of Canada rate cut in June or July so really it's one to watch. TD Securities says that the economy is actually showing some life after a week second half in 2023 and they're looking for growth of 2.4%. Versus consensus of just over 2%. They believe that household spending will be a key driver for the rebound of thanks to a rebound in core good spending as well as residential investments. So we will wait to see what those numbers show us. Greg.
>> Thanks Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie. Now for an update on the markets.
> Were taking a look at td's advanced dashboard for active traders directed through TD Direct Investing. This is the heat map function.
Giving us a view of the market moving.
On a headline basis we are up almost a full percent of the compass it index.
You can see two of the biggest performance today of the financials which carries a lot of weight with that number.
Royal Bank, CIBC, the latest banks out with her quarterly earnings clearly pleased about 5%, CIBC up we have OPENTEXT and Shopify under a little bit of pressure.
Now south of the border as we said, some big economic data for investors to chew on that hasn't arrived yet.
And those down 1/4 of a percent right now and not a huge deal as we look across the board it's pretty mixed. Salesforce down about 20%, we told you earlier in the show.
A disappointing quarter and forecast as well, the street is not pleased but if you look at other areas we actually have some green on the screen whether the technology bucket or even in some of the financial names.
So well, up 30%. About 40%.
>> We are back now a Daniel Ghali from TD Securities. Talking commodities.
Another question about how the US impact election could impact commodities?
>> Yes we have done a lot of work on this.
I think that, of course there is so many uncertainties but will we try to break down the different ways that the election could play out, there are a few that are worth mentioning.
The first I would say is the fiscal deficit picture. It doesn't look like either party and their candidates have a platform that will increase spending. If we do get a Democrat sweeper Republican sweep, the deficit we see will be substantial.
That should be positive for gold as the fiscal narrative continues to gather steam it is really one of the reasons why we are seeing diversification away from US dollar reserves into gold.
Some of the other ways that it might impacted is the energy transition policy.
Of course even today, there is some uncertainty around how the different administrations might handle the inflation reduction acts. Café standards which set out the policies with the energy transition in the US. Of course Republican presidency might keep a few of those features in my get rid of a few of the other one and legality around that is unclear as well. But there is tons of uncertainty around it and it does appear to be one of the ways that the election might have an impact on markets. I think >> Of the energy transition, the political influence and obviously through something like the inflation reduction acts those big incentives for industry to move in that direction. One actual industry what are they doing on their own apart from government?
States here at home or in other countries, there always seems to bit of a push and pull there.
It is the industry simply on this track regardless of what politicians say? A big influence there?
> There is absolutely an influence because that spending is providing subsidies to consumers than they are encouraging people to adopt electric vehicles, to adopt standards of tighter emissions controls all of which have significant implications for commodities.
>> We start at the top of the show with silver and gold.
Give us a recap of what's happening.
Gold was the move earlier in silver has more than gone up.
>> Absolutely. We started the year off with a pretty historic dislocation between how money managers were invested in golden rates market expectations. At the start of this year, rates markets were expecting the Fed to cut at least six times during the course of 2024. Yet gold investors or macro funds trading and gold were net short. That dislocation or the resolution of that dislocation is really what kicked off the rally in precious metals.
In our view that's almost fully resolved by the time gold prices were announced.
The remaining price action you seen since then of the strength of gold prices is really been associated with this currency depreciation theme that we spoke about earlier and that today, we are starting to see rotates into his silver.
So silver has very attractive fundamentals, most of that story is not yet priced into silver according to our analysis. But we are starting to see money and capital flow into silver on the back.
>> Great stuff as always Danial.
Thank you for joining us and I look forward to our next chat.
>> Thank you very much.
>> Our thanks to Daniel Ghali, Senior Commodity Strategist at TD Securities.
As always be sure to do your own research before making any investment decisions.
And we didn't have time to get your questions today will aim to get it in future shows. Stay tuned, we'll be back tomorrow with an update on the markets and analysis I will have a big show so you won't want to miss it.
Thanks for watching and we will see you tomorrow.
[Music]
[music] >>Hello I'm Greg Bonnell and 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 will only see here. We'll take you through it's moving the markets and answer your questions about investing.
Coming up today will discuss whether the rally and silver has room to run with TD Securities Daniel Ghali. MoneyTalk's Anthony Okolie will a look at the latest GDP numbers and what it can mean for policies south of the border. And in today's WebBroker education segment, Hiren Amin will show us how you can research stocks by market Here of the platform. You can email us@moneytalklive@td.com or Phil at that viewer response box under the video player on WebBroker.
Before our guest today let's get you an update on the markets. Some green of the screen here in Toronto. The TSX Composite Index at this hour, a solid 183 points a little shy of a full percent. One of the most actively traded names at this hour includes… Up copper gold project they have with new gold, pleasing with those numbers up 7%. I want to check on the energy and energy names though. The price of crude oil putting back today, West Texas intermediate around 70 bucks a barrel.
We do have Baytex hanging in there, just above the breakeven line.
Gaining almost 4% of actually at four bucks and $0.97 a share.
South of the border were not seeing a reversal of the selling pressure we've seen in recent days. A lot of concern about inflation.
South of the border and what it means for interest rates, bond yields pushing higher is what were seeing in tomorrow morning the PCE, the feds preferred use of personal consumption expenditures, caution of the market. It bakes a mixed bag of earning south of the border down 25 points the S&P 500 about half percent.
The tech heavy NASDAQ, faring at this hour pretty much pacing the broader market data but have a percent. Salesforce is one of the sore points of the market today. We will tell you a bit more about their quarterly earnings but clearly the street is not pleased by what there's there seeing.
The stock is down about 20%.
And that's your market update.
While many investors when watching the run higher in gold this year, Silver has had an even better run.
Joining us now to discuss what's driving this move that we are seeing and whether it can continue his Daniel Ghali, Senior Commodity Strategist at TD Securities.
Quite a telling chart we showed the audience there.
Gold gaining headlines but silver two.
What is driving this rounded silver?
>> Silver is at an incredible run this year so far. I think silver is fundamentals are among the most exciting and the commodities complex today. This is a market that has been in the deficit for at least three years. That most analysts around the world for C will continue to be in a structural deficit for the foreseeable future.
And really over the last decade or so, nobody's really cared about supply and demand from from… Because there's this huge stockpile of metal that was always sufficiently large enough to accommodate any gap in the physical supply and demand balances. That's the assumption, I think, they will be challenged over the next year or two and that's result really of the acquisition of the solar's demanding more silver and the EV boom is also demanding more silver as a result of the increasing use of electronics and vehicles. So this is a great demand story. A constraint supply story and really an exciting market.
>> Is that would change the story?
Or decade nobody cared and suddenly the market woke up to it. Is it really about this energy transition? Saying "wait, Silver will be key to all this!" .
>> Gold prices have performed quite well in this precious metals environment. You can expect that they perform quite well in that environment as well. But what is particularly interesting about Silvers fundamentals currently is that this inventory picture that we've been discussing is starting to change.
Over the last decade you had about 1.6 billion ounces of silver sitting involves across the world. And when we analyse that picture today, what we find is that there is probably a substantial amount of the silver that is remaining on those volts that has been eroded or otherwise captured by ETF holders, for example. So in turn, the amount of silver that's actually freely available for purchase in the world's largest bullion market, vaulting system in London, is substantially smaller than that.
Were talking about, by our estimates, somewhere around 300 million ounces that are actually available for purchase in the context of an average deficit of around 200 million over the last three years.
So there's really not much time remaining before those inventories are to be fully depleted.
>> That's is a really that's that's an interesting tension because we think of gold being held for a reason often called the silver is often the poor man's gold the people actually want that silver to put it into things. That's a really interesting tension that I have not thought about.
>> Definitely. Over the last 10 years people look at silver as a financial asset similar to gold.
But silver's demand profile is overwhelmingly driven by the industrial site. Right?
It typically is characterized by a substantial amount of fabrication demand.
These are things that could go into jewelry, silverware, industrial applications as well… But, the boom that we've seen on the demand side is really being driven by the energy transition.
So silver is increasingly being disconnected from gold or at least we think that it will. As a result of that.
>> Now, you talk of the supply side briefly because obviously if we have this demand for silver as we transition, and we want to actually get our hands on more of it what about the mining situation?
Is the industry responding to that?
>> Absolutely. We've spent a lot of time talking about the structural underinvestment in mining and metals and other carbon intensive industries that is incurred occurred rather of the last decade. Silver is primarily mind is a byproduct of other mining activities. So lead and zinc mines will produce the silver, gold mines will produce the silver but there is not much silver mind from an actual silver mine. The implication here is that the structural underinvestment of the mining side that we spoke about for copper, for example, is also impacting silver supply.
>> Does this set us up for squeezes situation?
> We do think we are an environment where a squeeze on silver is plausible.
And that relates to the fact that the LBMA vault is the world's largest containing 75% of the world's visible silver inventories and their being drawn down.
They're being drawn down in part by the strong demand side coming from the energy transition team as we discussed.
But also by a significant shift or movement of metal from the west to the east. Namely India, towards India and China.
>> Let's pull up that chart together we pulled up in the beginning showing gold and silver. Gold, you know, it has run fair enough and got a lot of attention.
What we are what are we seeing here? The fact that silver outperformed gold?
That might take people by surprise.
>> It's quite common for silver to perform gold on the basis of its volatility.
If you were to volatility adjust, you will find that in only very recent weeks and months has silver actually started to outperform gold.
But typically, Silver has volatile in the at least twice the skillet gold has in gold prices move 1%, you expand larger movements in silver prices.
>> Gold had the big run. It did pull back a little bit from that big run, people I have talked to so they would be surprised to see a pullback and that we saw pull back. Is the run points to continue here?
In the short or medium term?
>> Interesting with the price action recently is that silver is currently trading their multiyear highs were his gold has not expensed a pullback as a mention of that actually underscores a pretty significant amount of strength and how it's trading. The fact that the drawdown in gold has not pulled silver lower, tells you that there is something brewing on the physical side in silver or on the demand side more broadly.
So we think that potentially, this is associated with strong demand out of China. We have seen some signs of a rotation in real chilled tree in retail trade or activity away from the very significant amount that we saw in gold during the month of April at and rotating potentially towards silver today. But also, because China's solar installations are really beating expectations. Last year was a hallmark year for Chinese capacity growth in solar and the expectation for this year is that in the best case scenario they can only match what they did last year. But the tracking so far this year has been incredibly impressive.
So it does look like physical demand for silver in China is very strong.
>> That sounds like we have a pretty good handle on the fundamental reasons for this silver rally. I think in my last discussion with you and Bart Melek to, there was a word: mystery. The mystery of buying gold. We figure that out?
With the central banks?
>> Partly we think it is associated with the central banks but also mining activity. I think the piece worth mentioning on presses metals today's they're morphing into currency depreciation, precious metals are.
Markets are global in nature and currently there is a pretty acute pressure on Asian currencies, that is incentivizing institutions, retail investors and indeed their governments, to diversify away from currencies that are depreciating and gold is benefiting from that.
>> Before relieve this conversation, we did see the pullback in gold. Is there a miss is there risk for silver?
> We think the risk is probably pretty limited.
It's limited because the margin of safety against substantial investor liquidations, we think it is pretty elevated.
So it'll take a large drawdown in prices before investors really feel the pain in our forest forced to liquidate.
Really on the demand side it's coming for the physical mark.
So it does seem to us like the set up right now is pretty solid.
>> Will watch for some of those things.
A great start to the program always great insight with Daniel Ghali.
We'll get to your questions about commodities for Danial in just a moment's time. A reminder that you can get in touch with us at any time by emailing moneytalklive@td.com or Phil at the viewer response box on a video player on WebBroker.
Now let's take a look at some of the top stories in the world of business and take a look at how the markets are trading.
Shares of cloud software giant salesforce are under pressure today.
The company missed sales estimates for the first time and I was 20 years.
Salesforce says revenue from its professional service business was down about 9% from the same period last year as customers grow cautious in spending.
A different story today for Foot Locker shares holding onto their gains.
The running shoe and fitness apparel retailer beat profit expectations.
Here's what's going on with the retailer.
He did beat profit expectations because the companies turnaround strategy appears to be gaining some action. Subtraction rather. Foot Locker says the average selling price rose during the quarter.
If you sell the right shoe they will pay the full price for it and they need the discount.
Best Buy managed to exceed profit expectations for its most recent quarter despite a continued slide in sales.
While cash-strapped consumers continue to put off buying high-priced electronics, Best Buy is cutting costs across the business including plans to lay off workers even though sales up and sliding, stock is up but 1/2%.
A quick check in of the market here on base tribute you have some green on the screen, hundred 97 points almost a full percent.
South of the border investors up and cautious this week. They are worried about the picture we are getting. We are getting the preferred gauge of the morning so ahead of that, maybe people are just thinking they want to see the report first. Tomorrow, last day of the month will be a significant one depending on where you get that number in the morning.
Down about 1/3 of a percent.
>> We are back with Daniel Ghali taking your questions about commodities.
Here's one we found over the weekend, what should we expect from the weekend's OPEC+ meeting?
>> I think panelists across the world are overwhelmingly inspecting OPEC to honour their current production agreement, that expectation is partially on the back of the weakness in all places that we've seen so far.
And the weakness on physical markets that we've seen. In other words the market needs them to continue to cut. I think the interesting piece here is that OPEC increasingly looks like it's backed itself into a corner. They are undergoing very significant cutting programs restricting supply to the world with Saudi Arabia taking the brunt of the weight on that.
But non-OPEC nation Snavely foreign Nations, the US Canada, Brazil and Guyana are all benefiting from this and increasing supply almost exactly offsetting the amount of barrels that are… By OPEC. This is a situation where they're trying to keep prices afloat in other countries are eating their share of the cake.
>> Can we get to a point, I think in 2014 everyone expected Saudia Arabia and OPEC to shut down and we won't save the day at our expense unless you guys keep pumping your shared reserves. Can we have that situation to were OPEC decides "we will carry all the weight here"?
>> Anything is possible but we see that is unlikely because, the US production which is of course, the largest oil producer in the world, has been underscored by improvements in their technological abilities, they are able to extract more oil and gas from the patch than they used to. The implication there is that even at lower prices, they may still be able to keep their production.
So in attempt to do that may not be a successful as we seen in 2014 when they did attempt to do that as well.
>> I only saw the headline. I think my producer tapped me on the shoulder and said "look at this". This is a common story with OPEC, you get these meetings or production curves and agreements to try to stabilize the price of oil and maybe some Nations don't live up to that and they cheat.
>> Cheating has been a big problem across OPEC Nations.
A big group of producers who have their own incentives in their own agendas that they are putting ahead of the group but over the last few years, actually under production from the group as a whole as, you know, structural underinvestment in oil supplies actually resulted in the substantial amount of operational risks.
Countries were not able to produce as much as they were. Largely alleviated.
So this is part of the story today that countries like Nigeria, for example, are producing more closely to their quotas and intern that is new oil supply that previously was not hitting into the global market.
>> Interesting stuff in a good breakdown in oil there.
Something to keep you around this weekend.
Another question: (Greg reads of the question) > I think for the longest time Canadian energy producers were constrained.
The risk is they the reason is they can't get more oil out to avenues where they can either ship it or to send it to a refiner where it can be transformed into a product that we use like gasoline or a distiller product.
The completion of that pipeline will allow for additional production growth and that is a very positive thing for Canada soil sector.
>> We talk about Western Canadian trading at a discount, American crude, because of those constraints, can Canadian producers expect a healthier price for a barrel?
>> I think, absolutely but I think those constraints, the market pricing is going to very quickly adjust for that additional capacity and we can see a returning to a similar situation on the horizon.
>> When I think about what it took to get this pipeline into operation, are we looking at the last of the big pipeline constructs in this industry? It's a tough go when you're talking about Keystone and getting that finally operational. The last of the big pipeline?
>> You're absolutely right. It has been a very tough go and I think financing for these kinds of projects is very constrained.
>> Let's take another question now.
Back to the metal space. Looking for copper over the next 1 to 3 years.
>> Copper is a very interesting market at the moment. We spoke about this at length in the past. This is a market where we do see structural supply and it was most likely going to enter into a period of structural deficit.
Driven by a boom in demand as the world electrifies and by the long lags that it takes to get a new mine into production.
That being said, prices have since staged a very substantial rally over the months and physical markets are quite weak.
Chinese inventories are building and that tells you that trying to stimulate industrial production and infrastructure investment real estate market just aren't consuming enough of these metals.
So while the rally was actually catalyzed by ^...¸lowering their supplier, what actually happened is that narrative enacted enacted a lot of money into it, Chinese production today is still at an all-time high and physical markets are weak.
But really disconnected from that kind of physical market Outlook today.
>> Price will incentivize you would think, the world wants copper?
Price of copper is rising and we need to find more copper.
Again those aren't overnight stories. How does it play?
Over five, 10, 15 years from now? The world is hungry for this much copper.
How does it play out?
>> It takes 5 to 7 years to get a new mine into production. So even if we were to invest a substantial amount of mining activity today, it would take that long to take out. It does look like at least on a three-year outlook, we will be entering into a period of structural deficits.
>> Interesting stuff is always at home, make sure you do your own research before making investment decisions. We'll get back to your questions for Daniel Ghali in just a moment's time.
A reminder that you can get in touch with us at any time by emailing MoneyTalk Live it td.com.
Let's get to our educational segment of the day.
We will help you take a look at how you can research socks on WebBroker using their market Joining us as Hiren Amin, Senior Client Education Instructor TD Direct Investing.
For viewers who may not be aware why don't we start about what market capitalization actually means?
>> Always to back always great to be back Greg. Essentially market capitalization is a gauge of how much a company is worth is determined by its stock price and its outstanding shares. We will talk about that in just a moment.
I think of market Is the value of the company. If I were to bring it in more in that analogy, think some think of something you have in your home versus an assessed value. This is potentially a market value of the company.
It's straightforward and you can take the stock price which we all know and you can see any company you want then you have to multiply by the outstanding shares.
The outstanding shares essentially is the total number of shares issued by the company that are held by stockholders both outside as well as insiders.
I will take you through WebBroker just a moment and we can take you and show you where you can find this information. Let's pull up Apple as an example today.
Once you bring up the stock profile of Apple, you can scroll down towards this section, this fundamentals area then you can see that the numbers given to you right here in the market capitalization are already calculated for you. But here's where you can see with the total number of outstanding shares are as well there. The other thing I wanted to do Greg is just in the name of education, we want to tell viewers how to use market In different ways.
It can be used to compare one stock versus another but it also helps traders or investors gauge how companies are growing over time by simply looking at the growth of that market capitalization.
Now, quick fun factor to get back a little bit, and the entire world there is approximately 80 major stock exchanges that account for 110 trillion dawdled dollars. That's our total world market capitalization.
And out of those, the number one and two spots are held of course domestically in North American markets by the New York Stock Exchange and the NASDAQ exchange.
They account for a staggering 42% of the total world market capitalization when it comes to equity markets. Now if we bring it domestically here at home, that accounts for a small drop in the bucket but we still jostle between the 10th and ninth spot in the world record sitting at about 3.2 trillion.
Talking about precious metals a moment ago all mention this as well, gold, about $15.7 trillion.
And it's based on capitalizing on the price of gold in the total above gold reserves currently outstanding and that number varies by about 209,000 tons of gold.
> Big numbers indeed.
You know, it helps to have Apple, Nvidia enlisted on your exchange as well.
So now we understand market And how we might want to start thinking about it and doing the research.
Have you actually researched stocks using market On WebBroker?
>> Absolutely let's show viewers how to do that.
Let me put you on the spot and asked what you think is the number one market Company right now in North America?
>> In North America? Not in Canada? In North America?
>> Not in Canada. We will eat include the US.
>> Apple and Microsoft fight with each other in Nvidia. I think that's the top three.
>> Let's put it to the test and see if that holds true. What I'm doing is I'm in the screener tool now. I will just clear and add the criteria you want.
The one criteria we will started up is on the company basics. We will do market capitalization and keep it very broad-based just so I can show viewers they can search for this.
Once that pulls up you will see the results here Greg and you would be correct.
>> I am rubbing my knuckles right now.
>> Microsoft and Apple take the top spot followed closely by Nvidia. It's staggering because some of these companies click even the major exchanges of top countries around the world on an individual basis. That's a quick look and I can do the research there Greg.
>> Great stuff as always and I'm glad I'm so much up on this Thursday getting it together including with you celebrating yesterday.
Good to see you my friend.
> You too.
>> Hiren Amin, Senior Client Education Instructor with TD Direct Investing. For more education, you can use this QR code to navigate td's Instagram page where you can find more informative videos.
Before we get back to your questions with commodities with Daniel Ghali, a reminder of how you can get in touch with us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Just coming in the past couple moments, [Greg reads the question] >> That's a really good question. I think if we Zoom out, the energy transition in our opinion is this decades zeitgeist.
Every decade you have one theme that dominates the investment community's thinking in the energy transition in our communities one of those. The way that we broke down the implications is basically in one of four ways. You have game changer sectors which are essentially the sectors that are going to see a tremendous amount of demand, growth as a result of the energy transition. These are things like electric vehicles, renewable power, more recently, distribution and transmission networks, energy storage, for example.
The next sector would be great if a case and commodities. Those of the raw materials that are inextricable from the game changer's extra sectors.
You can have these blood more copper for example. You can't build more cars overall without more aluminum.
Distribution networks are transition networks without more zinc.
Commodities really are a big part of that story and the sentence that copper is the new oil kind of comes to mind there.
The other two sectors are a little bit different actually. The trouble makers sectors would be those commodities that are going to see governments proactively curtail their production in order to meet their carbon goals.
Aluminum and steel come to mind here.
These are very energy intensive and carbon intensive industries.
We've already seen some Nations around the world place capacity caps that are going to constrain the outlook that we see for supply and demand. Finally the last one is perhaps rest less relevant for copper and base metals as a whole but foregone essentials. Those in other words controlling products which are at a much slower pace will there is supply flow over the next several years >> File those four scenarios and… You need aluminum for electric vehicles but at the same time countries try to hand in their aluminum productions to breakdown omissions. It seems like there is a real push and pull on this.
People want to green future but they don't want to mind the metals that are required to build the green future.
>> Yes absolutely a really interesting analysis we have from a few years ago is that if we map out the sectors in our economy by their carbon intensity and their reinvestment ratios, you find that the sectors that are more carbon intensive have seen less investment over the last decade as a whole.
This is part of the energy transition and this is some of the constraints that we might face in the future.
>> Next question sticks with the energy transition.
If you are saying we've seen declining EV demand.
It hit the commodities space hard.
People talking about hybrids.
>> Absolutely. I think people talk about EV's in many different ways.
Hybrids can be considered an electric vehicle as well. But we have certainly seen this narrative particularly out of the US where consumers are opting more for hybrids than battery electric vehicles over the last year.
I would highlight, however, the from a global standpoint, the battery electric vehicle rate is essentially stable from last year. So this is still a very strong penetration growth which remains very stable and at a very high rates of from a global perspective it's probably less of an issue than it is specifically in the US and that's really because China has been the driving force behind EV penetration and we are seeing local governments continue to subsidize that and to incentivize their population to move towards battery electric vehicles.
>> Are there certain parts of the market that are not getting the full picture in the narrative? I think lithium… Mining related to lithium in the past six months.
It doesn't appear to have done all that well. Based on the narrative the people are not as interested in EV's as they used to be.
>> Yes this is I would say, an emerging narrative that has impacted some of the prices we know. In platinum group metals, essentially largely used as emissions control functions for auto catalysts and internal combustion engines, their prices a really been down. Typically they are somewhat correlated the lease to gold and although we've seen precious metals rally, PGM's a really had a more lacklustre performance so far this year, particularly last year as well.
>> This is part of the story that internal combustion engines may be making a comeback that has been driving a little bit of support towards PGM's as well but this is still an emerging narrative.
>> Interesting stuff and I want to keep your eye on next question about these rate cuts if they do, and when they come, rate cuts are supposed to be good for some commodities. But won't hire commodity prices cause more inflation and in turn keep rates high?
>> Yes that has been a concern of many people that we have spoken to.
Particularly over the last several months.
I think that the right the direct transmission between commodities and inflation rates is overwhelmingly driven by the energy sector. Higher energy prices do tend to almost directly impact inflation.
This is even true for core inflations which strips out the energy component of the reason is that energy is used in many parts of our economy including air travel and the services that come along with that. So the rising commodity prices that we are seeing so far this year is actually more contained into the metal space than into the energy space as a result of that, the implications for inflation are probably less relevant.
>> I've heard the argument to the you take it back to OPEC. While they want a certain price for their accrued so they can profit off it, they don't want to see crude go so high that you would undercut global recovery, get inflation soaring again and keep rates high for a long time. They put that in their calculation?
>> Absolutely. I also think they want to diss incentivize consumers from opting out of gasoline and diesel vehicle. You have to consider that over the last year, there has been more demand destruction from energy efficiency gains, internal combustion engines and there has been from consumers choosing electric vehicles. So car companies seeing that higher energy prices are impacting their sales might opt to invest in their energy efficiency and that's actually more impactful for total oil demand of the move towards EV's.
>> I never thought about that. Interesting stuff and will get back to questions with Daniel Ghali on commodities and just a moment's time.
Always do your own research before you make investment decisions and a reminder that you can get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Well as investors await further signs of inflation, we have some revised numbers about the strength of the US economy.
How is it doing?
Anthony Okolie joins us to take on these latest figures and what it can all mean for ultimately the Fed and interest rates.
Thanks Anthony.
>> Thanks Greg. Appears the economy grew more slowly than we initially thought based on this latest revision of the Q1 US GDP data. We did see a revision of GDP growth down from 1.6% in the first reading to 1.3% and brought along a chart. It does show US GDP down quite a bit from Q4 growth where we did see growth up just over 3%. This is this marks the weakest reading Lussina nearly 2 years.
When we dig into the details, without Q1 revision, it's primarily reflecting a downward revision to consumer spending which feels roughly 70% of economic growth.
Americans are spending less on things like things like global appliances furniture.
That's the biggest drop since the mid-2021. Now on the flipside we did see higher spending on the services up nearly 4% and that's the highest we've seen since mid-2021. The biggest drives of course, we did see a surgeon imports as well as a reduction in business inventories. Keep in mind these two sectors tend to fluctuate quite a bit quarter from quarter to quarter.
Investments were higher on an upgrade to intellectual property key implications in this, certainly the second reading does show softer economic growth but it still hasn't change the narrative according to TD Economics of the US economy remains strong despite higher interest rates.
Again, even though we did see a downward revision to consumer spending in the second reading, buy and sell is moving along at a probably a pretty healthy pace.
In fact TD Economics is with headwinds from Q1 growth easing, they see Q2 GDP growth to a trendline pace of 2.3%.
Now, tomorrow we do get income spending from April data which should give us an idea of spending trends for the second quarter. We also get a revised monthly profile of Q1 PCE as well. And again, with the latest minutes from the Federal Reserve, still leading towards hawkish tone, right now markets are pushing out the timing for the first rate cuts until the end of the year. Greg?
Ask an important number tomorrow morning.
We'll be talking about it tomorrow on the show at noon and also our own country.
We will get our first quarterly report for GDP tomorrow morning right?
>> Yes we will be getting from stats Canada Q1 GDP. Again this is a Q report because this will tip the scale on whether we see a Bank of Canada rate cut in June or July so really it's one to watch. TD Securities says that the economy is actually showing some life after a week second half in 2023 and they're looking for growth of 2.4%. Versus consensus of just over 2%. They believe that household spending will be a key driver for the rebound of thanks to a rebound in core good spending as well as residential investments. So we will wait to see what those numbers show us. Greg.
>> Thanks Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie. Now for an update on the markets.
> Were taking a look at td's advanced dashboard for active traders directed through TD Direct Investing. This is the heat map function.
Giving us a view of the market moving.
On a headline basis we are up almost a full percent of the compass it index.
You can see two of the biggest performance today of the financials which carries a lot of weight with that number.
Royal Bank, CIBC, the latest banks out with her quarterly earnings clearly pleased about 5%, CIBC up we have OPENTEXT and Shopify under a little bit of pressure.
Now south of the border as we said, some big economic data for investors to chew on that hasn't arrived yet.
And those down 1/4 of a percent right now and not a huge deal as we look across the board it's pretty mixed. Salesforce down about 20%, we told you earlier in the show.
A disappointing quarter and forecast as well, the street is not pleased but if you look at other areas we actually have some green on the screen whether the technology bucket or even in some of the financial names.
So well, up 30%. About 40%.
>> We are back now a Daniel Ghali from TD Securities. Talking commodities.
Another question about how the US impact election could impact commodities?
>> Yes we have done a lot of work on this.
I think that, of course there is so many uncertainties but will we try to break down the different ways that the election could play out, there are a few that are worth mentioning.
The first I would say is the fiscal deficit picture. It doesn't look like either party and their candidates have a platform that will increase spending. If we do get a Democrat sweeper Republican sweep, the deficit we see will be substantial.
That should be positive for gold as the fiscal narrative continues to gather steam it is really one of the reasons why we are seeing diversification away from US dollar reserves into gold.
Some of the other ways that it might impacted is the energy transition policy.
Of course even today, there is some uncertainty around how the different administrations might handle the inflation reduction acts. Café standards which set out the policies with the energy transition in the US. Of course Republican presidency might keep a few of those features in my get rid of a few of the other one and legality around that is unclear as well. But there is tons of uncertainty around it and it does appear to be one of the ways that the election might have an impact on markets. I think >> Of the energy transition, the political influence and obviously through something like the inflation reduction acts those big incentives for industry to move in that direction. One actual industry what are they doing on their own apart from government?
States here at home or in other countries, there always seems to bit of a push and pull there.
It is the industry simply on this track regardless of what politicians say? A big influence there?
> There is absolutely an influence because that spending is providing subsidies to consumers than they are encouraging people to adopt electric vehicles, to adopt standards of tighter emissions controls all of which have significant implications for commodities.
>> We start at the top of the show with silver and gold.
Give us a recap of what's happening.
Gold was the move earlier in silver has more than gone up.
>> Absolutely. We started the year off with a pretty historic dislocation between how money managers were invested in golden rates market expectations. At the start of this year, rates markets were expecting the Fed to cut at least six times during the course of 2024. Yet gold investors or macro funds trading and gold were net short. That dislocation or the resolution of that dislocation is really what kicked off the rally in precious metals.
In our view that's almost fully resolved by the time gold prices were announced.
The remaining price action you seen since then of the strength of gold prices is really been associated with this currency depreciation theme that we spoke about earlier and that today, we are starting to see rotates into his silver.
So silver has very attractive fundamentals, most of that story is not yet priced into silver according to our analysis. But we are starting to see money and capital flow into silver on the back.
>> Great stuff as always Danial.
Thank you for joining us and I look forward to our next chat.
>> Thank you very much.
>> Our thanks to Daniel Ghali, Senior Commodity Strategist at TD Securities.
As always be sure to do your own research before making any investment decisions.
And we didn't have time to get your questions today will aim to get it in future shows. Stay tuned, we'll be back tomorrow with an update on the markets and analysis I will have a big show so you won't want to miss it.
Thanks for watching and we will see you tomorrow.
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