The Overnight Report: Gold & Silver Record Highs

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This story features NICK SCALI LIMITED, and other companies.
For more info SHARE ANALYSIS: NCK
The company is included in ASX200, ASX300 and ALL-ORDS

US markets traded positively for a third consecutive day with a general broadening across most sectors with precious metals and oil taking the lead.

Yesterday, the Australian market rallied almost 1% led by materials. ASX200 futures are pointing to another positive day on Tuesday, ahead of a shortened week. 

Good Morning,

The Australian share market advanced 0.9% or 78.5pts to 8,699.90 led by materials which rose 2.34%, on lower-than-normal volume and with all of the eleven sectors finishing higher.

Nick Scali ((NCK)) shares rallied almost 10% on an earnings upgrade with uranium stocks Paladin Energy ((PDN)) and NexGen Energy ((NXG)) rallying sharply higher on a lift in the U308 spot price to US$81/lb last week.

December RBA minutes will be released at 11.30am AEST.

The ASX will close at 2.10pm on Christmas Eve and it will be closed on December 25 and December 26.

What happened overnight

Gold and silver prices kicked off a shortened week with gold futures hitting a record high of US$4,477.70/oz and spot gold rallying over 2%.

Silver futures also reached a record US$68.96/oz. Platinum futures rose 3.5% to a new 17-year high, with palladium up 2.5% to a new three year high.

Rising geo-political tensions with the US seizing a second oil tanker near Venezuela on Saturday and chasing a third on Sunday boosted demand for precious metals.

Global oil prices moved higher on US efforts to block crude exports from Venezuela.

Wind farm related stocks were hit by the Trump Administration’s decision to halt construction of all US offshore wind projects. Shares in Danish energy company Orsted, which is leading two of the projects, sank more than -12% on the news.

US markets continued to rebound for a third day with the S&P500 back near its highest close on record. 

Most sectors have joined the rally, excluding consumer staples. 

The Case for Contrarianism, Steve Sosnick, InteractiveBrokers extract

Last week, a reporter asked me to comment about the apparent clustering of bullish outlooks among Wall Street strategists. 

Interestingly, at the time, she didn’t know that I am perhaps the lone strategist with a bit of an outlying view –- she simply knew that I am willing to offer iconoclastic opinions. 

The story ran today, utilizing one of the comments I made to her, but it was only one part of an extensive discussion.  I’ll offer the rest of my commentary here.

The background is that, according to data compiled by Bloomberg, strategist forecasts for the S&P500 (SPX) for year-end 2026 range from 7,000 to 8,100. (Yes, faithful readers know of my 6,500 forecast, and I learned today of another at 5.280.)

That is of course uniformly bullish – though if the “Santa Claus rally” goes as planned, a test of 7,000 seems all but inevitable before year-end.  The article goes on to state the range in forecasts is the tightest since 2017, meaning that not only is there a consensus about the direction of next year’s move, but there is a general one about its magnitude.

When presented with this data beforehand, my initial reaction was this:

The unanimity and the clustering of outlooks is concerning to me… If everyone is expecting the same thing, then by definition, it’s already priced into the market — especially when the rationales for the consensus outlooks are so often predicated upon similar foundations like rate cuts, tax cuts, and continuing dominance of AI.

I then went on to explain some of the reasoning behind that assertion.  For starters, I do have a bias towards contrarianism.  The bulk of my career was spent managing risks for a multi-billion dollar, algorithmically and systematically driven, options market-making portfolio.

The model made money under most circumstances as long as we avoided catastrophes, and it was my job to figure out what might upset the normally smooth functioning of the model.  

Stocks in general do go higher over time, and thus it is understandable why it makes sense to expect the prevalent prior outcome to occur in the near future – especially when one can easily denote reasons to justify it. 

But I’ve also seen the market has an occasional nasty tendency to make the maximum number of people miserable at the worst possible time.  When it occurs –-rarely, I should add-– it’s because the market has finished scaling the proverbial wall of worry.

Put simply, be fearful when others are greedy.  Or, as the “Oracle of Omaha” originally put it, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”.

The not insignificant amount of good news already priced in includes: an accommodative Federal Reserve that will cut rates at least once, if not twice; SPX earnings to grow by about 14%; and a fiscal bump from the recently passed tax law.  

It seems like folly to think these would not benefit stocks. Those expectations have been a boon to markets and it’s logical that they will continue to be. 

But as noted above, if they’re already well-expected, then they’re also already priced in. One must consider whether simply meeting those expectations will be sufficient. If not, then we could see disappointment even amidst a good investment climate. 

And if they are not met, then the disappointment could morph into something much worse.

When I told the reporter about my non-consensus SPX price target, she said, “I am conflicted between rooting for you to emerge victorious next year and rooting against you for the market and investors’ sakes.” 

My response was, “As I said at the end of the my strategy piece, ‘I kind of hope I’m wrong’.”

Corporate news in Australia 

-Potentia Capital is acquiring HotDoc which was put up for sale in May for $250m-$300m.

-Nelson Peltz’s Trian Fund Management and General Catalyst have agreed to buy Janus Henderson Group Plc for US$7.4bn.

-Droneshield ((DRO)) is establishing a mandatory minimum shareholding policy for all directors and senior management.

-Victoria’s revived State Electricity Commission has made its first investment in wind power generation, committing about -$650 million to build the Delburn wind project.

-Larry Ellison, the father of Paramount CEO David Ellison, is personally guaranteeing around US$40.4bn in equity as part of Paramount’s bid for Warner Bros Discovery.

On the calendar today:

-AU RBA Dec Meeting Minutes

-US 3Q GDP (Initial)

-US Oct Durable Goods (Advance)

-CHAMPION IRON LIMITED ((CIA)) Rana Gruber Acquisition Briefing

-RICEGROWERS LIMITED ((SGLLV)) ex-div 20c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

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