The Ghost in the Machine Q1 2020: Central banks, Sugar, Gold, Commodity Hedging, Airlines, Gann, Pandemic.

Welcome to the March 2020 edition of the Ghost in the Machine. Currently the world faces a period of almost unprecedented uncertainty due to the COVID-19 pandemic, which in turn colours many articles in this edition. 

The hope that an easing of US/China trade tensions would boost the global economy have been put to the sword by the enormous disruption from COVID-19, which is proving to be a ‘Black Swan’ type event, exposing numerous weaknesses in global supply chains and ‘just in time’ business practices, as well as exposing the limitations of monetary policy in fending off economic and market shocks.  The work of W.D. Gann is heavily utilised by Technical Analysis enthusiasts, but less familiar to others. We take a look at an updated version of his 1909 ‘Financial Time Table’, which identifies 2020 as the year of the ‘Metonic Panic’. 

Gold has long been identified as one of the most traditional ‘safe haven’ assets, but has not been immune to the volatility in all asset classes – so is this status still justified, and should consideration be given to the current opportunity cost of holding gold?

Turmoil has been a watchword for Sugar markets for a few years, but a sharp drop in 2019/20 output projections had prompted a sharp recovery, but stopped dead by COVID-19; but have the overall fundamentals changed, and how do these look from Brazil’s perspective given the slide in the Real?

Commodities are inherently volatile, and per se see a high volume of ‘hedging activity’. We take a deep dive into hedging strategies and how they are deployed by the various stakeholders. We also take a specific look at the airline industry, where hedging activity is far from universal, despite fuel costs being a key variable in profitability, indeed survival terms.

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