US Yields Slide Following Dovish FOMC Minutes

Dollar Lower Following FOMC Minutes The US Dollar remains under selling pressure this week as the minutes from the latest FOMC meeting in March saw tightening expectations dialled back further. The Fed has been adamant recently in its view that any spike in inflation from the re-opening of the US economy is likely to be temporary and has also addressed the issue of rising yields, again saying it is not concerned.Asset Purchases To Remain For Some Time The March meeting minutes saw the Fed doubling down on this view noting that: “Participants noted that it would likely be some time until substantial further progress toward the Committee’s maximum-employment and price-stability goals would be realized.” The minutes went on to say that: “consistent with the Committee’s outcome-based guidance, asset purchases would continue at least at the current pace until then.”Outcome-Based Guidance Notably, the minutes also elaborated on the Fed’s recent shift in policy strategy away from hiking rates in anticipation of inflation hitting target. The minutes outlined the bank’s aim of using “outcome-based guidance” meaning that the Fed will hold off from hiking rates until “substantial progress” is made in achieving its dual mandate of maximum employment and inflation at or above 2%.Inflation to Run Hot If Necessary The Fed’s shift away from a hard inflation target of 2% has been a key source of focus over recent months given the rise in inflation expectations and yields. Typically, as inflation expectations lifted, the Fed would tighten accordingly. However, given the depth of unemployment caused by the crisis, the Fed has reaffirmed its message that it will allow inflation to run a little hot if necessary, in order to achieve maximum inflation. To a large extent, this has taken a lot of steam out of the bullish USD view.Fed Downplaying Inflation Risks While the Fed has upgraded its economic forecasts for the year ahead and noted some risks in the outlook with regard to the impact of stimulus and the re-opening of the economy on US inflation, for now at least, members have been fairly uniform in their comments on the likelihood of tightening this year. On the back of last week’s negative wage growth number for March, it suggests that the next quarter and beyond will have to show some serious upside surprises for the Fed to shift its view.Technical View US10YThe rally in US 10-year yields has lost some momentum recently. The move into 1.77 has been met with firm selling interest, taking price back down below the 1.685 level. With strong bearish divergence into the last high, while price holds below 1.685 there are risks of a deeper correction. However, given the velocity of the rally so far, the near-term view remains bullish and it would take a break back below the 1.424-1.328 region to affect a shiftDisclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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The Crude Chronicles - Episode 77

Oil Traders Add to Longs The latest CFTC COT institutional positioning report shows that WTI traders increased their net long positions in crude last week by a further 8.255 contracts. With this latest increase, the total upside position has now risen back up eight-month highs of 531,310 contracts. The jump in upside exposure likely reflects the optimism around the ending of the Suez Canal disruption, which was holding up key oil shipments, as well as a generally favourable risk backdrop at the start of Q2.OPEC To Begin Removing Supply Cuts Despite the upside move in oil positioning, price action is reflecting a different story with crude prices remaining bound within a block of consolidation between the 57.50 – 62.02 levels. The correction from prior highs above the 68 mark comes amidst OPEC+’s decision to begin increasing supply once again, putting an end to the supply restrictions which have been in place for over a year now.The group announced at the end of last week that it would begin gradually adding over 2 million barrels per day over coming months with Saudi Arabia also easing out of its voluntary 1 million barrel per day supply cuts.IMF Upgrades Global Growth Forecast While the decision from OPEC+ is generally seen as bearish for the oil market, any further downside has been offset by the generally positive risk tone seen currently with equities markets surging back to highs as optimism continues to grow around a potential end to the pandemic now being in sight. This optimism was boosted by the IMG this week which upgraded its global growth forecasts, particularly in the US and in gulf countries, citing vaccination successes.EIA Reports Deep Inventories Drawdown The latest update from the EIA this week also added further support for crude traders. Headline crude inventories in the US were seen falling by 3.5 million barrels last week, well beyond the 2 million-barrel decline the market was looking for. However, there was an unexpected rise in gasoline and distillate stocks which diluted the news somewhat.Technical View WTICrude oil has sold off from the failure at 65.52 and is now heading back towards the 54.68 level where we have strong confluence between that structural support level, the rising channel low and the retest of the broken bearish trend line. While price holds a test of that area, the near term view is for a continuation higher and a break above the 65.52 level.Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Market Update – April 8 – USD Remains at lows

Market News Today – US Equities closed flat, USD (new 2-week lows) and 10-yr yields cool further. FED mins. supported lower for longer mantra, benign inflation concerns and no scaling back of support until recovery is clear. US Trade deficit at record, increasing by 4.8%, Biden offered to negotiate on 28% corporate tax rate proposals (25%?). Overnight – Nikkei closed down 0.07%, UK houses prices climbed, JPY Consumer confidence up significantly and German factory orders inline. Gold holds 1740 and Oil inventories fell more than expected, USOil trades at $59.20. Beijing now has more billionaires than any where else and bitcoin mining in the country could consume more energy than Italy by 2024.

Still to come this Week – RBA (6th) UK, EU & US PMIs & FOMC Minutes (7th), ECB Minutes, Weekly Claims & Powell speech (8th), CAD Jobs & US PPI (9th).

European stock markets are broadly higher in early trades, with GER30, UK100 and the Euro Stoxx all up 0.4%. US futures are also sought after the S&P already reached another record high yesterday, and the USA500 breached 4,100 for the first time earlier today. Central banks remain eager to keep reflation fears under control and calm concern that they may be forced to rein in stimulus earlier than currently expected. However, while central bank buying will keep markets underpinned, there is increasingly also the risk of bubbles (housing is of particular concern in many jurisdictions) that could have costly consequences if and when they burst.

Today – ECB minutes, US Weekly Claims, BoE’s Haldane, Fed’s Bullard, Powell, Kashkari.

Biggest (FX) Mover @ (07:30 GMT) AUDUSD (+0.30%) rallied from a test of 0.7600 yesterday over S1 and has moved higher today. Over 200hr MA to test PP at 0.7640. MAs remain aligned higher, RSI 53 but still rising, MACD histogram & signal line aligned higher but remain under 0 line from early yesterday. Stochs. in OB zone and cooling. H1 ATR 0.0009, Daily ATR 0.0064.

 

Click here to access the HotForex Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Daily Market Outlook, April 08, 2021

Daily Market Outlook, April 08, 2021 Asian equity markets are mostly a little higher overnight. Yesterday’s release of the minutes of the last US Federal Reserve policy meeting confirmed previous messages that it will be some time before conditions are appropriate to scale back monetary policy support including reducing asset purchases. The UK RICS house price balance came in at 59 for March versus 54 for February. German factory orders as expected rose by 1.2% in February.There continues to be a global focus on the safety of Astra Zeneca’s Covid-19 vaccine. Some EU countries are reported to be considering mixing up vaccines for citizens who received a first dose of the AstraZeneca drug. However, no such action is currently planned in the UK. Moreover, PM Johnson has said that he does not expect the news to delay the plan for easing restrictions.As the UK manufacturing and services PMIs for March both pointed to larger-than-expected improvements in economic activity, today’s construction data will be watched for similar favourable news. The February reading showed an overall rise with housing still the strongest sector. However, as the index was still below the recent high seen late last year a further rise in the latest update seems likely.Recent data have suggested that, after stalling through the autumn and winter months, the US labour market is now improving once again. March saw a rise in employment of 916k the biggest rise for seven months and unemployment claims data appear to be trending down. Today’s weekly initial claims number for early April is expected to provide signs that the rebound has continued into this month.Today’s release of the minutes of the last policy meeting of the European Central Bank will be expected to give insights into ECB’s policymakers’ decision to increase the pace of their asset purchase programme. ECB President Lagarde said at the time that there was a consensus for the action. Nevertheless, it will be interesting to see how much agreement there was that downside economic risks and the need to contain the rise in government bond yields justified the move.US Federal Reserve Chair Powell will appear as part of a virtual panel today at the International Monetary Fund’s semi-annual conference. Other members include the heads of the IMF and the World Trade Organisation. As their topic is supposed to be global economic trends, the discussion is likely to focus not just on the outlook for US monetary policy but also on the wider impact of that on other countries. Of particular interest to markets will be whether anything is said about recent moves in bonds and currencies.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby)Technical & Trade ViewsEURUSD Bias: Bearish below 1.19 bullish aboveEURUSD From a technical and trading perspective, as 1.1880 contains upside corrective moves, bears target a test of 1.16. A close through 1.19 would relieve downside pressure opening a retest of 1.20 offersFlow reports suggest downside bids into the 1.1700-1.1680 area with weak stops on a move through and then congestive bids into the 1.1650 area and continuing through to the 1.1600 where better bids are likely to be seen with weak stops through the level opening a deeper move as a possibility. Topside offers into the 1.1880 level and then stronger offers likely through into the 1.1900 area with short term sellers likely to fade the move with weak stops likely to have stepped a little away from the usual 1.1920 area and then stronger offers again appearing on any push at the 1.1940-60 area and the congestion then increasing on any move through to the 1.2000 area.GBPUSD Bias: Bullish above 1.3910 bearish belowGBPUSD From a technical and trading perspective, as 1.3910 contains upside attempts there is a window to test the downside equality objective at 1.3550. A close through 1.30 would suggest the current correction is complete opening a retest of 1.40 offersFlow reports suggest topside offers congested light through the 1.3800 area before increasing through to the 1.3900 area, some weak stops likely to be absorbed by congestion that is likely to continue through to the 1.4000 area before stops increase. Downside bids through the 1.3720 level and any technical move from the H&S pattern likely to be done so likely to see congestion on any move through the 1.3700 level with weak stops likely through the 1.3680 area and then congestive just beyond the break and through to the 1.3650 where stiffer bids start to appearUSDJPY Bias: Bullish above 109 targeting 112USDJPY From a technical and trading perspective, as 109.50 continues to attract support bulls will look for a test of 112. A loss of 109.30 opens a retest of bids at 108.50Flow reports suggest topside light congestion through to the 110.80 level before weak stops then weakness through to the stronger offers around the 111.80 area matching the highs from the beginning of the previous two years at the same period of time, a break of the 112.30 area is likely to see strong stops appearing and the market opening for further push beyond the last couple of years highs. Before running through to the 112.50 area and another set of stronger offers appearing continuing through to the 112.80 level and likely continue seeing strong offers, downside bids light back through the 110 level and likely to continue to 109.80 with weak stops likely through the level and weak through to the 109.00 area.AUDUSD Bias: Bearish below .7700 targeting .7453AUDUSD From a technical and trading perspective, as 7700 contains upside advances bears will target a test of the downside equality objective at .7453 before trend resumption may developFlow reports suggest light offers through the 0.7700 area with weak stops through the level and the market opening to the 78 cents area before stronger offers through to the 0.7840-60 area and then increasing offers onwards through 0.7900, with the offers likely to continue through to the 0.7950 area and likely increasing resistance through to the 0.8000 levels, downside bids into the 76 cents level with strong bids likely through to the 0.7580 area, weak stops are likely to be few and far between with stronger bids likely into the 0.7550 level and likely stronger congestion through to the 0.7500 area.Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Dollar Weakens; Fed Minutes Confirm Dovish Stance Continues

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S&P500 Closes Above 4000: What’s Next?

Good day,The Euro is targeting the broken psychological level of 1.2000 away from which it might pull and drop.Gold broke the downtrend. The asset might probably pull back to the broken downtrend and approach the level of 1767.00. Although gold might have to face the resistance at this level, as well. So, let’s wait and see what is about to happen next.The US stock index S&P500 broke the level of 3978.00. It might pull back to the broken level and then only jump. Although it is not clear yet how high it might jump. So, let’s check the candlestick formations to figure out what is going to happen next. On the other side, index rates might form the bullish trap.Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Dollar Down, Near Two-Week Lows as Fed Meeting Minutes reiterate Dovish Stance

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Dollar stuck near two-week lows amid lower U.S. yields

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Yuan Erases Year’s Gains Against Dollar as PBOC Steps Aside

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Dollar Set to Snap Two-Day Losing Streak as Rates Find Footing

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Midweek Market Podcast – April 7

The Market Week – April – Week 1

HotForex · Midweek Market Update – April 7

 

The focus of attention once again this week is on the Bond market, as the US 10-year treasury yield reversed from 1.76% to 1.63%, which also pulled the USD lower, as April got into full swing following the Easter holidays. President Biden outlined his $2.25 tn Infrastructure plans, with more details promised during the month. The IMF lifted global growth forecasts to 6% for 2021 on expectations of a strong US economy.

The details of Bill Hwang’s Archegos Capital collapse came into focus as Credit Suisse announced a loss of $4.7 bn. and parted ways with their Head of Risk (Lara Warner) and their investment banking chief (Brian Chin). Archegos had reported assets of $10 bn but highly leveraged positions of around $50 bn when the margin calls began.

Unemployment remains stubbornly high globally but this week signs of a turnaround continued in the USA. The Non-Farm Payroll was a blockbuster, beating the consensus of 650,000 new jobs for March and posting a 916,000 gain, with unemployment falling to 6.0% and revisions for 2021 adding an additional 156,000 new jobs. However, last week’s unemployment claims moved up over 700,000 again to 719,000, missing expectations, and the private payrolls from ADP also missed expectations at 517,000.

The vaccine rollouts continue to gain traction globally, however, the situation in the EU, with rising infections, extended lockdowns and a low vaccination rate, coupled with the persistent concerns over the AstraZeneca vaccine, weigh on the EUR. India and Brazil remain key infection hotspots. There have been 678.6 million vaccines given across 179 countries.

This week FX volatility continued as the USD reversed its March gains. The USDIndex fell from five-month highs at 93.45 to test lows at 92.25. EURUSD moved over 1.1800 from five-month lows at 1.1704 to test the 200-day moving average at 1.1880. USDJPY was the biggest reverse, moving from one-year highs at 110.96 to 109.57 lows. Cable moved up from the mid-1.3700s to test 1.3900 once again.

Global stock markets turned more volatile as the rotation from high growth technology stocks to financials, energies and industrials continued. The USA30 & USA500 posted new all-time highs, over 33,400 and 4080, respectively.

The Gold price moved significantly higher this week, from the key $1685 support level, breaking and holding over $1725 and peaking at $1745 as the USD and yields cooled. Bitcoin also had another volatile week and consolidates around immediate resistance at $58,000 but eyes a new all-time high over $60,000.

USOil prices moved lower and remain under $60.00 a barrel as the consequences of the OPEC+ production increases weigh, balanced by the improving economic outlook as forecast by the IMF.

The yield on the US 10-Year Treasury Note holds above the psychological 1.50% level but has retraced significantly from the 14-month highs last week at 1.76% down to test 1.63%.

Click here to access the HotForex Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /227110/
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Upbeat Soft Data in the EU Fuels Tactical Retreat of USD

Indices of activity in manufacturing and services sector in the EU indicated a welcomed expansion in March. However, it came with a decent delay due to lockdown extensions. Compared to the pace of recovery in the US, it’s still just a minor uptick. Nevertheless, it was enough for Euro to break a series of falls as there was a bunch of risks associated with extended lockdown which were priced in the European currency. The March data eased concerns about worst-case scenario for the EU and helped to downplay impact of slow vaccinations and lockdown pressure on business sentiment. EURUSD is developing a rather rapid upward movement, while USD index broke the main uptrend channel which casts doubts on immediate continuation of the advance:Improving demand for Treasuries also played against the US currency. The yield on 10-year notes continues to decline after reaching a local peak of 1.774% on March 30. In my view it’s just another break in the broad downtrend. Labor market data, ISM indices, in particular the components of new orders and expectations, consumer mobility indices call to prepare for new surprises in April, so the positive impact of the flight from long-date Treasuries on the dollar should still remind of itself in the near future.The recovery in the Eurozone was quite synchronous: Markit pointed to the growth of business activity in Germany, Italy, Spain and Ireland, both in services and in manufacturing. Together, these four countries account for three quarters of the Eurozone's economy. Firms see a surge in orders in the United States against the backdrop of the lifting of restrictions, so they are too very optimistic about the near future.Today, clues about the further behavior of the dollar should be looked for in the minutes of the Fed meeting for March. Expectations are modest – reiteration of the mantra of ultra-easy monetary policy despite all the optimism taking place in the data. Still, there are fears that the dynamics of inflation will cause discomfort among officials. Therefore, if there is even a slight bias towards hawkish policy, even a hint of an earlier curtailment of QE, it will certainly resume the growth of Treasury yields and support the dollar. In general, it is too early to write off strong dollar.On the other hand, the risks of weak vaccination rate in the European currency may be eliminated by news refuting the connection of the Astra Zeneca vaccine with blood clots. This will signal a recovery in vaccination rates - a key component of expectations that immunization targets will be met earlier and mobility will recover faster.From a technical point of view, the upward correction in EURUSD may hit the 1.1930 - 1.1960 zone before we could start discuss resumption of USD rally:Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Market Spotlight: Crude Oil Approaching Buy Zone

Crude Oil Approaching Support ConfluenceFollowing a brief move above the 65.52 level resistance (January 2020 highs), price has corrected lower as selling pressure kicked in. However, while oil holds within the bullish channel running from 2020 lows, the focus is still on a further push higher in the near – medium term. Price is now approaching an area of strong technical confluence around the 54.68 level where we have good structural support, the rising channel low and the retest of the broken bearish trend line. This is an area where are likely to see buying interest kick in to cause a continuation of the uptrend.Key Data to Watch In terms of data to watch this week, the main element to watch is the US crude oil inventories release by the EIA later today. The group is forecasting a drawdown of 2 million barrels which should be further supportive for oil prices in the near term. More broadly, the tone of the IMF meeting so far this week has been supportive for risk assets with the IMF upgrading its global growth forecasts, citing particular strength in the US economy.In terms of downside risks for oil, any resurgent strength in the US Dollar is likely to created headwinds for further upside. Similarly, any disappointment in today’s EIA release would also likely see oil prices lower in the near term.Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Tech has dominated the economy – but the real world is about to strike back

One of the themes that has dominated my articles over the past few years has been the idea of the scalability of tech, especially anything digital; the digital economy has seen growth that has obliterated anything the physical economy – mining, farming, traditional industry – has achieved.

While the physical economy may have grown, perhaps by around 3% or 4%, since the early 1990s, the digital economy has gone from almost nothing to become, probably, the biggest economy on the planet.

Will the physical world ever make a comeback? Or even catch up?

Tech has dominated because it is so easy to scale

My go-to statistic to illustrate the rapid growth and current dominance of technology is that in 1990, the three biggest companies in Silicon Valley had a combined market cap of $36bn. Today the three biggest – Facebook, Google, and Apple – have a combined market cap of around $4.5trn. That’s over a hundred times bigger.

Trademarks, software companies, intellectual property, data – this where the value is. Data is described as the new real estate. Yet when I was a kid, I don’t think it even existed, certainly not in the way it does now.

Even money itself has gone digital. Only about 3% of money globally is now in physical form. Bitcoin is now (measured by market cap, at least), the 13th largest currency in the world. It didn’t exist 15 years ago.

The key to this rapid growth is scalability. A digital product can be endlessly and instantly copied. I can design a fantastic app once, upload it to the app store once, and it can be downloaded a million or a billion times. If Google can get some new groovy feature in its search engine, then once implemented it’s almost infinitely scalable.

But let’s say I design a fantastic washing machine. It takes much longer to get this washing machine to the world – the fabrication and distribution are all tricky, but perhaps most difficult is the burden of regulation in the physical economy, particularly as it attempts to cross the national borders.

By contrast, the economy of the internet is (almost) borderless. The digital space, or certainly the areas where the innovation is, is largely unregulated – how do you regulate something that hasn’t been invented? So digital escapes the ties of regulation that curb the growth of the tangible.

Then, because of the extraordinary speed of growth in digital, there is the potential for investors to make far quicker returns on their investment. And so the digital economy attracts the most capital, the most talent and so on.

With this in mind, let us turn our attention to metals.

The physical world is treacherous and time-consuming

You don’t get much more tangible than metal. Mining is in many ways the most analogue industry there is; it is the very opposite of the dynamic digital world. A geologist is studying rock formations that took thousands of years to take shape, and will take decades to mine.

Even compared to the production of other commodities, mining is slow. To take an oil well or a gas field from discovery to production might be possible in a couple of years. A farmer can get a new crop to market in a year; mining takes ten. Metals are a very different beast, yet they underpin everything we do.

Who’d want to go into mining? It’s a horrible business. Geologists have to go to some of the most unwelcoming and dangerous places on earth – from the freezing frontiers of the Arctic to darkest depths of war torn Africa. That’s before they even know if they’ve discovered anything.

At a grade of roughly 4.5%, Alphamin Resources has, in Mpama North, probably the richest tin mine in the world. If it was a software company, developers from all over would want to work for it, yet one of Alphamin’s biggest problems is attracting talent. Why? The Kivu province of the Democratic Republic of Congo, where it is located, has a long reputation for outbreaks of both conflict and Ebola.

Once you make a discovery (and many geologists make only one or two discoveries in their entire career), you’ve then got to prove the mine is economic. Variable metals prices make this a nightmare – a mine could work at a copper price of $4 per pound – but not at $3 a pound. How do you even know what the copper price will be in five years’ time, by the time you’ve got this thing producing?

Then you’ve got to raise the capital to build the mine. Who wants to invest in a mining company when you’ve got to wait ten years before it starts profitably producing? It could go to zero. Do you know what? I’ll just buy a Nasdaq tracker.

Then there’s the regulation. If you think the cross-border logistics of the washing machine industry are tricky, wait until you see the regulatory burdens placed on mining. Perhaps not without good reason, they are enormous, especially environmentally. That means further delay.

Let’s say you get your mine producing profitably. Who’s to say a government won’t then seize it – either taking control of the mine (as happened in Venezuela, for example) or via windfall taxes? Or actual crooks might try and steal the product (this is a major risk, for example, to the gold miners of Mexico).

Even ignoring all of those risks, to take a mine from discovery to production takes an average of ten years. It often takes longer. Who has ten years? I struggle to find a spare hour.

The result is an industry starved of talent, starved of investment and starved of innovation. Yet the metal it produces underpins everything we do. I could not be writing and you could not be reading this article without boring old copper, aluminium, tin, lead, iron and zinc.

Mining got a wake-up call in the 2000s and billions of dollars of investment went into metals, buoyed by the prospect of a huge Chinese infrastructure spending.

Some of that investment resulted in new discoveries and mines; much resulted in nothing. We spent the money, we explored, we developed, but the mine won’t work at today’s prices (especially so since the fall in metals prices post-2012). Some resulted in the multiple scams which perennially soil this business. Some simply got blown on expensive stays at the Savoy.

However, since 2012, with metals prices flat or falling, the industry has been starved of investment. It’s been surviving on diesel fumes. But something changed last year.

Tech’s one big weakness: it is still dependent on “real” world materials

Never mind the impact Covid-19 has had on supply chains: coronavirus is the great accelerator. Stuff that was going to happen anyway has been brought forward – and metals prices have been rising.

I’ve spent a lot of time on the phone this past week to metals traders and dealers. You might not think so to look at the gold price, but at the precious end of the market, physical bullion dealers are reporting unprecedented demand. One of the biggest US dealers has seen its turnover go from from $651m to $1.5bn to a record $3bn in just the past three years. There’s a similar story in Germany.

Talking to one trader from the floor of the metals exchange, he says this bull market is way bigger than the one we saw in the noughties. “I’ve been here since the 90s. I’ve never seen anything like this. Tin. Copper. There is just no excess stock in the concentrate markets.”

Just to explain that term, mines produce “concentrates” and sell to smelters who produce metal. The concentrates markets are rather opaque to outsiders; the surplus or deficit between mine supply and metal consumption gets hidden there as concentrate stocks go up and down.

“The concentrate stocks are at zero”, he says, “which means the maximum metal supply equals mine supply. It also means that metal production is dropping because there is no more draw down on concentrate stocks possible.”

We saw what happened with China in the 2000s, and a plethora of other countries want similar economic growth. America’s infrastructure needs rebuilding and increasingly interventionist governments the world over are getting involved in infrastructure spending of one kind or another to make themselves popular and secure their re-election.

We talk about the rise of the Asian middle class, but it hasn’t finished yet. And there’s the African middle class to come, not to mention South America.

The large mining companies have relied on acquisition rather than discovery. The smaller companies are finding it increasingly difficult to make discoveries. True elephants (huge deposits) are more and more rare, especially in accessible places. The quality of the grade is falling.

The bottom line is this: there is not enough metal. There hasn’t been enough metal for a long time because there has not been enough investment. Why? The money has all gone into tech – scalable tech.

There is one thing that will solve all of this: higher metal prices. I rather suspect the bull markets we have seen this past year are just the start. We might well now be seeing the physical economy starting to make a comeback.

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