Has Inflation Peaked? Have we already reached “peak” inflation? That’s a question that investors are asking after recent economic headlines suggest some of the factors which led to higher metal prices (and other commodities) may be abating. The big headline last week was he U.S. Consumer Price Index (CPI), which rose 0.6% month-over-month in May and nearly 4% from a year ago, marking its biggest increase since 1992! It certainly did nothing to diffuse the prevailing view that consumer prices are broadly increasing and could remain “sticky” for the next several months. Counterbalancing the rising consumer price trend, however, is the observation that U.S. employment numbers are steadily improving. Nonfarm payrolls rose 559,000 last month which, while below expectations, still contributed to the total unemployment rate falling to 5.8%, which is well below the year-ago peak of 14.8% and equal to where it was in November 2014. 
With a substantial part of the total workforce sidelined temporarily or permanently by last year’s shutdowns and Covid-related restrictions, inflation was able to make substantial headway due to the dramatic drop in productivity. (Remember the basic formula for inflation, in layman’s terms, is “too much money chasing too few goods.”) But with more and more workers coming back and new jobs being created (particularly in the hospitality industry), it’s helping to blunt inflation’s edge to some extent. Then there’s the 5-year breakeven inflation rate, which is a measure of expected inflation derived from 5-Year Treasury Constant Maturity Securities. As the name suggests, it’s basically what participants expect inflation to be in the next five years. But after hitting its highest rate in 10 years a couple of months ago—and more than doubling from a year ago—this indicator is showing signs that inflation expectations have topped out, at least in the near term. 
None of this is to say that the longer-term threat of inflation is over—far from it. With trillions of dollars in new money created in the past year still sloshing around, and with a proposed $1.2 trillion U.S. infrastructure spending bill nearing passage, the “too much money” part of the inflation equation is still very much a factor going forward. Moreover, with Covid-related shutdowns still underway around the globe, the “too few goods” being produced part of the equation will undoubtedly come into play. And while there could be some short-term volatility in gold and silver as risk aversion abates during this summer’s economic reopening, there are more than enough fears to keep safe-haven demand alive for gold well beyond the summer. All told, I expect that both the primary inflation factors mentioned above will continue to support higher industrial and precious metal prices in the months ahead. New Recommendations/ Updates Barrick Gold (GOLD), the world’s second-largest gold mining company, is poised to benefit from the gold turnaround currently underway, and its copper exposure is also a long-term positive (along with declining per-unit copper mining costs). For 2021, Barrick anticipates attributable gold production of around 4.6 million ounces. All-in sustaining costs for gold (a key metric) are expected to range between $970 and $1,020 per ounce—well under the current gold price of $1,874. Cost of sales, meanwhile, is expected to average around $1,045 per ounce. Barrick further expects copper production in the range of 410-to-460 million pounds at an all-in sustaining cost of between $2.00 and $2.20 per pound and cost of sales between $1.90 and $2.10 per pound. Also encouraging for Barrick is a balance sheet featuring zero net debt, $500 million in cash and a $3 billion undrawn credit facility. What’s more, the company trades at a reasonable price/earnings ratio of 16.7, which makes the stock attractively valued compared to many of its peers. After shares rallied 8% from our initial recommendation, I previously suggested taking partial profits (based on the rules of our technical trading discipline). For now, I also suggest maintaining the previously-recommended protective stop-loss on the remainder of the trading position at slightly under the 23 level on a closing basis. As of this writing, the psychologically significant 50-day line has contained GOLD’s latest pullback and is supporting the stock price. HOLD Last week saw some fireworks for Cleveland-Cliffs (CLF), one of North America’s largest integrated steel makers and a member of our metals portfolio. The stock rocketed from 20 to 24.5 per share in just a couple of days for a weekly gain of 23%. Iron ore prices were on the rise last week, which likely contributed to the rally (at least in part). But by far the biggest contributor to the stock’s explosive upside move was none other than Reddit, the social media platform that has been used to push a number of big-name stocks to extraordinary heights this year. Reports on several financial news sites suggest that comments on Reddit pertaining to CLF have been on the upswing lately, suggesting a classic short squeeze could be underway for the stock. While I’m unable to verify this based on short interest data, it rings true and is the most likely culprit behind the stock’s latest rise, in my opinion. 
The most important reason for our continued holding of CLF is based on encouraging financial results in recent quarters, including adjusted EBITDA of $513 million in the first quarter, compared to $23 million in the year-ago quarter. Management also expects Q2 EBITDA of $1.2 billion, as higher prices and production volumes will allow the company to generate “record levels” of free cash flow and pay down a “substantial amount of debt.” After taking partial profits following last week’s rally, I recommended that investors raise the stop-loss on the remainder of the trading position to slightly under the 19.25 level on a closing basis (where the 50-day moving average comes into play). HOLD Freeport-McMoRan (FCX) is one of the world’s top four copper producers and is also benefiting from higher gold prices, with recent sales 9% above the company’s guidance in the fourth quarter. Along with the manufacturing rebound in China and other top copper consumers, driving demand for copper in the foreseeable future will be electric vehicle (EV) demand. EVs use a significant amount of copper in most major aspects of their assembly (including batteries). The International Copper Association, meanwhile, recently estimated that demand for the red metal from EVs will increase to 1.74 million tons per annum (mtpa) in 2027 from less than 0.2 mtpa 10 years ago. Meanwhile in industry news, China, the world’s largest copper consumer, has made a rare decision to release strategic reserves of copper, aluminum and zinc until the end of this year. While the move is designed to relieve rising prices for the industrial metals, many analysts believe that the sell-down won’t abate the strong demand from global buyers. The copper market, meanwhile, has so far shrugged off the news. Company management projects a copper sales increase for the company of 20% in 2021 compared to a year ago, with gold volumes expected to rise by more than 50%—even as production remain low (projections which will likely prove conservative). Freeport is further benefiting from the “clean” energy transition tailwind now accelerating under the current White House administration (with some copper consumption estimates for solar and wind pointing to an additional 4.35 mtpa of copper demanded by 2027), as well as recent computer tech trends (where copper is heavily utilized). The company’s quarterly dividend has also recently been reinstated, tying a nice bow on an already attractive package. I previously suggested using a stop-loss slightly under the 39.35 level (closing basis) on open long positions in the stock. I’m maintaining this recommended stop-loss for now. HOLD Last week I recommended that we move the money previously allocated to our trading position PLTM (see below) into the Global X Lithium & Battery Tech ETF (LIT). This ETF is what I view as a nice fit with our somewhat related positions in the cobalt (via Wheaton Precious Metals) and neodymium-Praseodymium (via MP Materials) spaces. As the world moves toward “cleaner and greener” sources of energy, as well as the electrification of vehicles and alternative forms of energy storage, lithium will play an increasingly pivotal role. That’s the conclusion of a recent forecast report by data analytics firm Fitch Solutions. The lithium market is controlled by a relatively small number of producers, but Fitch foresees that more opportunities will open up and expand growth opportunities for new entrants around the world. Fitch predicts that global lithium production will more than triple, from 442,000 tons of lithium carbonate-equivalent (LCE) last year to 1.5 million tons by 2030. Driving the acceleration of alternative energy storage, according to Fitch, will be the growing demand for rechargeable lithium-ion batteries for the electric vehicle (EV) market, accounting for around 80% of total lithium demand by 2030, from 40% today. Lithium consumption could grow as much as seven times over the next 10 years, based on a projected EV annual sales growth from 3 million today to 21 million units by 2030. Benchmark lithium carbonate prices are currently near a 3-year high of 90,000 yuan per ton, driven by rising global demand for EVs. Global supplies, meanwhile, remain tight. Lithium prices, moreover, are projected to rise significantly in the coming year based on industry analyst estimates. In view of the lithium market’s strong fundamental backdrop, investors who haven’t already done so can buy a conservative position in LIT on weakness down to around 62.50 (where the 50-day moving average comes into play). BUY A HALF ON WEAKNESS 
Last week we sold our conservative position in the GraniteShares Platinum Shares ETF (PLTM) after the 120-day line, along with our stop-loss at 11.50, was violated on a closing basis. This translates to a loss of around 1.5%. You may ask why I would recommend exiting a trading position with a mere 1% to 2% loss? Normally I’d give much more latitude on a stock or ETF position before electing to stop out. But I view 11.50 as particularly significant from a technical perspective, as well as from the standpoint of trader psychology since this level is clearly delineated on the daily chart as being a pivotal “support” level. As such, activity tends to build up around such levels and selling pressure can frequently occur once these levels are decisively violated. More importantly, our trading position in PLTM has been intact for almost a month, which violated another rule of my trading discipline: the appropriately named “4-Week Rule.” Simply stated, it dictates that whenever a long position in a commodity or commodity-related stock fails to make a monthly high or show a meaningful profit after a month, it’s usually best to cut the position and move on to something else. It’s possible that platinum and the platinum ETF could bounce back in the next few weeks, especially if PLTM can establish support above the nearby 11 level in the coming days. But until the speculative element returns to the platinum market, and prices begin showing relative strength, I recommend avoiding the platinum ETF for now as our cash can better be deployed elsewhere. SELL We recently purchased a conservative position in the iShares Gold Trust (IAU), my preferred gold-tracking vehicle of choice (and the most actively traded of the U.S. exchange-listed gold ETFs). According to The Wall Street Journal, the U.S. budget deficit rose to a record $2.1 trillion during the first eight months of the fiscal year “as spending continued to outpace tax receipts that are rising as the economy recovers from the damage inflicted by the Covid-19 pandemic.” This is significant since accelerations in the budget deficit have historically preceded, or coincided with, major rallies in the gold price. The last two times the U.S. ran a budget deficit in excess of $1 trillion (in 2011 and 2018), gold prices rose by an average of 40% in the year following the deficit. This is just one of the reasons why I’m anticipating a fairly vibrant gold market in the intermediate-term (6-9 month) outlook. I suggest maintaining the stop-loss on our trading position in IAU to slightly under the 35 level on a closing basis. HOLD Aggressive investors purchased a position in the iShares Silver Trust (SLV) on May 11. This is my preferred silver-tracking vehicle of choice and is one of the most actively traded of the U.S.-listed silver ETFs. Aside from the obvious inflation factor, silver is benefiting from several major areas of industrial demand (which should increase as the global economic reopening continues apace). Furthermore, silver expert Frank Holmes of U.S. Global Investors recently observed that the metal should become a key beneficiary of several emerging industrial applications, including the global rollout of 5G technology, solar power generation (e.g. solar panels) and the electric vehicle and automotive sector. On a technical note, after hitting a yearly intraday high at 28 on February 1, SLV left a rather prominent “air pocket” that I expect will be eventually filled (as is normal in such cases). For now, I’m maintaining my “hold” rating on SLV and suggest maintaining the stop-loss on our existing trading position at slightly under the 24.50 level on a closing basis. HOLD MP Materials (MP) is regarded as one of the biggest (if not the biggest) rare earths producers in the Western Hemisphere, currently accounting for around 15% of total global supply and with most of its production taking place at its Mountain Pass, California mining site. MP stock rallied 12% at one point earlier last week on news concerning possible U.S. tariffs placed on imported rare earth magnets from China. According to the Financial Times: “The Biden administration is considering an investigation into whether imports of rare earth magnets made largely in China pose a national security threat that could warrant the imposition of tariffs.” A tariff imposition would increase the cost of importing rare earth minerals from overseas and would allow U.S. rare earth producers to effectively raise prices and significantly increase profits, thus benefiting the overall domestic rare earths industry. While MP shares quickly pulled back after the big rally and gave back all their gains, the stock is still well above its intermediate-term closing low from May at 25. Looking ahead, analysts expect the company to grow the full-year 2021 top and bottom lines by 77% and 93%, respectively, with continued double-digit earnings and revenue growth in the next two years. I previously instated a buy recommendation on MP and reiterate that investors can purchase a half position in the stock on weakness, using a level slightly under the pivotal 25 level as the initial stop-loss on a closing basis. BUY A HALF ON WEAKNESS An excellent balance sheet and solid production outlook combine to make Newmont Mining (NEM) one of my top picks among blue-chip senior gold mining companies. From a relative strength perspective, Newmont has been a leader in the present gold mining stock bull market, having been the first of the senior miners to achieve new highs for the year in April. And not only does the stock remain in a strong technical position, but it also has one of the strongest fundamental backdrops among actively traded gold miners as well. In a recent conference call, Newmont’s CEO stated, “During the first quarter, our world class portfolio produced 1.5 million ounces of gold and 317,000 gold equivalent ounces from copper, silver, lead and zinc. In line with our full year outlook and positioning Newmont to deliver a stronger performance as expected in the second half of the year.” Analysts concur and expect Newmont’s top line to increase 37% from a year ago in the second quarter of 2021, while the bottom line is expected to increase 145%. Newmont’s all-in sustaining costs, meanwhile, are currently $1,039 per gold ounce, which is under current bullion prices by around 85%. It’s a solid mining story and I believe Newmont stock should be a part of every long-term precious metal portfolio. After the 10% rally from our initial recommendation, I previously suggested traders take partial profits and raise the stop on the remainder of the trading position. Suggested stop-loss for now is slightly under the 67.50 level (our original entry point). HOLD We recently initiated coverage of Taseko Mines (TGB), which I view as an ideal vehicle for gaining some exposure to the strong molybdenum market. Canada-based Taseko is known mainly for being a mid-tier copper miner that operates the Gibraltar Mine, Canada’s second largest open-pit copper mine. Taseko’s Gibraltar mine boasts proven reserves of 53 million pounds of molybdenum. (On the news front, the company was recently granted a permit that will allow it to continue its 2021 mining plan at Gibraltar without disruption.) Total molybdenum production for the company in the first quarter of 2021, meanwhile, was 530 thousand pounds, up 29% from a year ago. Taseko reported that molybdenum prices strengthened in Q1 and averaged $11.32 per pound (26% higher sequentially). Analysts expect sales and earnings to improve moving further into this year, in part due to improving copper conditions (management also said it expects higher EBITDA this year). In view of the supply shortages and increased industrial demand for steel (of which molybdenum is a key component to increase hardness, electrical conductivity and corrosion resistance), Taseko is a solid story. Long-term-oriented investors can accordingly do some nibbling on pullbacks down to around the 50-day line at 1.75 (stop). I regard TGB to be more of a longer-term “buy and hold” type play in contrast to most of our short-to-intermediate-term trading positions, hence the reason for the much bigger downside latitude I’m allowing the stock. BUY A HALF ON WEAKNESS Wheaton Precious Metals (WPM) is a world-class precious metal streaming company, featuring a high-quality portfolio of long-life, low-cost assets. (Streaming companies make an upfront payment, plus a fixed payment per ounce of metal—often 20% of spot price—giving them the right to a percentage of a mine’s future production and allowing them to leverage rising metal prices.) As the world’s largest silver streaming company, with 14 silver purchase agreements, as well as gold and palladium agreements, Wheaton focuses mainly on high-quality, high-margin operations with a goal of returning a minimum of 30% of cash flow to its shareholders, with the remainder used to grow the company. Aside from precious metals, one of the main drivers behind Wheaton’s stock price right now is the company’s growing exposure to the valuable cobalt market (cobalt prices are up 45% from a year ago). Last year, Wheaton closed a cobalt streaming agreement for the Vale owned Voisey’s Bay Mine for $390 million and will make ongoing payments of 18% of the cobalt spot price per cobalt pound delivered until the delivery of 31 million pounds of cobalt and 21.2% of cobalt production thereafter for the life of mine. (Wheaton recently reported the first production of cobalt from the Voisey’s Bay mine.) With gold, silver and cobalt prices on the upswing, Wheaton should benefit from the accelerating growth in demand. Investors can nibble on weakness down to around 42.50 (near the 50-day line). BUY A HALF ON WEAKNESS Portfolio
| Stock | Price Bought | Date Bought | Price on 6/14/21 | Profit | Rating |
| Barrick Gold (GOLD) | 23 | 5/11/21 | 23 | 1% | Hold |
| Cleveland-Cliffs (CLF) | 20 | 5/11/21 | 22 | 11% | Hold |
| Freeport-McMoRan (FCX) | 41 | 5/11/21 | 39 | -4% | Hold |
| Global X Lithium & Battery ETF (LIT) | 69 | 6/10/21 | 70 | 2% | Buy a Half |
| GraniteShares Platinum Shares (PLTM) | 12 | 5/11/21 | 12 | -4% | Sell |
| iShares Gold Trust (IAU) | 35 | 5/11/21 | 36 | 2% | Hold |
| iShares Silver Trust (SLV) | 25 | 5/11/21 | 26 | 3% | Hold |
| MP Materials (MP) | 32 | 6/8/21 | 33 | 6% | Buy a Half |
| Newmont Minint (NEM) | 67 | 5/11/21 | 70 | 4% | Hold |
| Taseko Mines (TGB) | 2 | 5/24/21 | 2 | 5% | Buy a Half |
| Wheaton Precious Metals (WPM) | 48 | 6/2/21 | 48 | 0% | Buy a Half |
Buy means purchase a position at or around current prices. Buy a Quarter/Half means allocate less of your portfolio to a position than you normally would (due to risk factors). Hold means maintain existing position; don’t add to it by buying more, but don’t sell. Sell means to liquidate the entire (or remaining) position. Sell a Quarter/Half means take partial profits, either 25% or 50%.