Midweek Market Update

Market updateDear PGM Capital Blog readers,

In this midweek’s blog edition, we want to highlight some of the most important events for the week of August 25 and August 29, 2014.

  • 100 years of Panama Canal
  • Must see internet links
  • Technical market outlook

100 years of Panama Canal

The Panama Canal opened to traffic 100 years ago on Aug. 15, 1914 and immediately became one of the important backbones of international trade, logistics and globalization.

The Panama Canal has a well known and rich history and its benefits are well documented.

We will take a look at the future of the Panama Canal and the challenges that come with it and the possible benefits that it will bring to our region.

The Panama Canal is undergoing a major expansion project to allow for more and larger ships to transit then the current Panamax sized ships and with that a third set of locks is being constructed and its planned opening is set for 2015.

While we believe that expansion of the Panama Canal will be a great a success and secure the future for the canal for another 100 years, the Panama Canal will face increasing competition in the decades to come.

The Panama Canal’s biggest rival the Suez Canal just announced the first major expansion in its 145-year history. Egypt’s ambitious multi-billion-dollar plan, which could nearly double the waterway’s capacity to 97 passing ships a day by 2023, has been largely welcomed by shipping industry executives and economists.

The Suez Canal, which connects the Mediterranean with the Red Sea, can mostly only facilitate one-way traffic–either ships heading north or south–as it is too narrow at some points for vessels to cross both ways. The new canal is expected to solve this problem, cutting the waiting time for ships to three hours from 11 hours.The waterway, however, won’t be deepened to allow fully-laden supertankers, which usually lighten their load–mostly crude oil–before passing through the canal, or do a much longer journey around Cape Agulhas in South Africa.

While we believe, that the expansion for the Suez Canal will be a success and shows the continues growth for maritime logistics and increasing global economy it will not necessary pose a threat for the Panama Canal or our region.

On the other hand another proposed project that has been recently made public will be a direct competition for the Panama Canal. This is the very ambitious Nicaragua Canal, led by the Hong Kong based company called HKND Group, which is ready to finance a Nicaragua Canal with USD 50 billion in exchange for the exclusive rights to develop and manage the Nicaragua Grand Canal for 50-100 years.

While there is a lot of skepticism surrounding this project, when build, this would be the largest engineering project in human history and clearly shows the Chinese ambitions to put a firm foot in the very important global trade market and increase its influence.

This very ambitious project is still in its early stages and if everything goes according to plans, the Chinese want to start construction at the end of 2014/beginning of 2015. This project might be in its early stages, but this project could create huge opportunities for the region and especially countries like Curacao and therefor it will be important to thoroughly follow this project.

Next to above mentioned mega projects, the Panama Canal will face competition in the long term by the opening of the Russian Northern Sea Route and the Canadian Northwest Passage to commercial traffic.

These developments show that the next 100 years in global maritime logistics will be very interesting and the developments will mostly create enormous opportunities for our region.

Must see internet links

Please take your time to read/watch the following links that we have posted below.

Technical market outlook

This is a short follow up from our recent recent technical outlook about the Precious Metals market.

While the gold bull market is slightly delayed, we still continue to support the notion that an upcoming gold bull-market is in the works and we urge patience.

At the moment there is a lot of conflicting short-term technical action happening which puts out mixed signs, but as long as the Gold price stays above the extremely important support level of 1240 we believe that this bull-market is still in the works.

The Gold price needs to take out the resistance zone of 1290-1310 fairly quickly and the miners and Silver need to follow up with positive price action to support the bull-market.

If we see prices go lower and possibly see the support level of 1180 being broken, then all bullish bets are off the table and we will see a continuation of the bear market, but we see the chances of this happening quite low and believe that there is a great opportunity to still acquire precious metals fairly cheap before the bull takes off in the fall of 2014.

For the short-term we remain bullish as long as the gold price stays above 1275-1280 then we can see prices head to 1300. If prices break these levels we are looking at the next support of 1260.

We will keep following this development and post a more detailed analysis at our next midweek market update.

Last but not least, before following any investing advice, be aware that above outlook is of pure technical nature and does not respect any global macro events that will disturb this outlook. Please always consider your investment horizon and risk tolerance and financial situation.

Yours sincerely,

Michael Panneflek

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