FT : France’s Saint-Gobain hunts for fresh acquisitions as part of sustainabilit

France’s Saint-Gobain hunts for fresh acquisitions as part of sustainability push
Construction group looks for deals outside Europe as it invests in chemicals to reduce concrete emissions

France’s Saint-Gobain is on the lookout for more acquisitions outside Europe as the construction supplier pursues a shift into more environmentally-friendly materials, its chief executive said. 

Benoit Bazin, who is also due to become Saint-Gobain’s chair next year, said the group still had “positions to take” in North America, Asia and in emerging markets after a roughly €7bn acquisition spree in the past five years. 

The company, which manufactures materials like glass for skyscrapers and soundproofing materials, has been making dozens of disposals in less profitable divisions or countries. At the same time, it has been investing heavily in chemicals like those used by cement makers to reduce their emissions, as part of a sustainability push.

“The bulk of the work is done. This being said, we still have ideas for acquisitions,” Bazin told the Financial Times, citing countries like India or Vietnam where the group does not offer the full range of materials it specialises in, like insulation products. 

The changes at Saint-Gobain, one of the world’s biggest construction suppliers by sales, with revenues of just over €51bn last year, come as the industry reels from higher borrowing costs. Rising interest rates globally have triggered a real estate slowdown, including in the US where the housing market has cooled.

The construction sector is also facing a reckoning as a result of its environmental impact. Buildings themselves and the energy they consume account for close to 40 per cent of all CO₂ emissions, according to many climate studies, including by the United Nations.

Saint-Gobain, which is known for making the mirrors in the palace of Versailles, had until recent years struggled to boost its profit margin. The company, which was founded in the 1600s and is one of France’s oldest, was also bogged down in a long and ultimately unsuccessful takeover tussle for Swiss chemical group Sika, which came to an end in 2018.

Since then, however, it has successfully pursued dozens of other deals, including the $2.3bn purchase of US-based chemicals group and concrete additives maker GCP in 2021.

Saint-Gobain is now a “light construction” specialist, focused on materials like plasterboard used for partitions, or timber or metallic skeletons for buildings, which are designed to have a lower environmental footprint. Close to two-thirds of its roughly €5bn in annual operating income that once came from Europe now comes from North America and emerging markets, as the European market has grown more focused on renovations instead of new builds. 

That shift, along with push into chemicals, has helped to improve margins, which reached a record 11.3 per cent in the first half of 2021. 

Bazin, a company veteran who became chief executive in 2021, said further acquisitions would not be “€1bn-plus” deals every time. He also shrugged off concerns that a market downturn could weigh down on future transactions, saying that blips in the real estate market were not universal or could turn a corner. 

“I’m confident the US will be resilient next year,” said Bazin, citing a promising labour market and big investments in factories and other areas. 

Bazin will take the chairmanship from Pierre-André de Chalendar in June next year, completing a succession some investors had pushed for to boost its share price. Chalendar has been at the helm of the company since 2007, including a stint as just chief executive.

Saint-Gobain shares are up 35 per cent since the start of the year, although on a two-year basis they are flatter, up closer to 2 per cent. 

The group’s sales are expected to fall in 2023, by roughly 6 per cent according to average analyst forecasts by Refinitiv, before picking up again in 2024, but price rises have helped the group’s margins prove more resilient.  

Some analysts have taken a dimmer view of the industry backdrop, with those at Berenberg highlighting that “trading remains tough for the group”, although Bazin noted that cost inflation in areas like energy or raw materials had now largely dissipated too. 

FT : Inflation has eroded NHS England budget by £3.5bn, think-tank finds

Inflation has eroded NHS England budget by £3.5bn, think-tank finds
Health Foundation warns of further reduction in real-terms spending because of high price growth

The budget of the NHS in England is worth £3.5bn less this financial year than last as a result of inflation, according to research that comes as the health service steels itself for one of the toughest winters on record.

Analysis by the Health Foundation, which was shared with the Financial Times, found that higher than expected price growth meant there had been a big real-terms reduction in funding this year, with another cut expected next year.

Under current plans, the think-tank said NHS England departmental resource spending is £161bn in 2023-24, £3.5bn less than 2022-23 in real terms, which amounts to a decrease of 2.1 per cent.

Planned funding would see this figure fall by a further £1bn in real terms in 2024-25 compared with 2023-24, it said.

The analysis comes after the UK government decided not to allocate extra funding for NHS England in last month’s Autumn Statement.

Prime Minister Rishi Sunak has said one of his five “people’s priorities” is for waiting lists for non-urgent care to be falling by the election expected next year. But the backlog has risen in recent months, with official figures showing a record 7.75mn patients queueing for treatment.

Health leaders have warned of a crisis in the service and called for an urgent cash injection to help reduce waiting lists after a wave of industrial action by health workers since December 2022 compounded funding pressures.


Strikes by doctors, nurses and other staff have so far led to the cancellation of about 1.2mn operations and appointments.

Last week, junior doctors in England announced they would walk out for nine more days in December and January after failing to reach a deal with ministers over a better pay offer.

However, even before the strikes started in 2022, the NHS was struggling to mitigate the effect of high inflation on its budget.

Total health spending in England in 2022-23 was £182bn. This figure is set to increase to £190bn in 2024-25, according to the Health Foundation, “but higher than expected inflation means that, on current plans, this would be a real-terms reduction in funding”.

While total health spending has increased in the current parliament as a result of the Covid-19 pandemic, present plans for the future are “far less generous”, the think-tank said.

As a result, average funding growth for this parliament as a whole could “fall significantly below the long-term average”, it added.

Anita Charlesworth, director of research and the REAL centre at the Health Foundation, said keeping spending plans as designed for this and next year “would be challenging in the best of times but with post-Covid backlogs, ongoing industrial action and productivity struggling to recover after the pandemic, it’s hard to see how this can be sustained”.

“Whichever the next government is will have incredibly tough decisions to make — to either limit what the NHS can do or increase funding over the long term against a backdrop of fiscal pressure,” she added.

The Department of Health and Social Care said: “NHS funding — including depreciation — is still increasing to a record level and the Autumn Statement increased the NHS budget for 23-24 by over £1 billion. We are investing a record £165.9 billion in 2024/25, which includes £3.3 billion to improve urgent and emergency, elective, and primary care performance to pre-pandemic levels.”

>>> Weekend Papers Summary

Weekend Papers Summary

FINANCIAL TIMES
-China's consumer prices fell 0.5% YoY in November, the sharpest decline in three years, due to worsening deflation. The decline was more than the 0.2% forecast by Bloomberg and exceeded October's 0.2% fall. Producer prices dropped by 3% and have remained negative for the past year. Policymakers face economic pressures, including a property sector liquidity crunch, weak trade data, and slow recovery from zero-Covid lockdowns.
-Khan Younis, Gaza's second-largest city, is a significant military and symbolic location for Hamas. Its refugee camp, founded to shelter Palestinians displaced in the 1948 war, is believed to be the birthplace of Hamas's top leaders, Yahya Sinwar and Mohammed Deif. Israeli officials believe these leaders are hiding in tunnels beneath the city. Khan Younis is also a key location for Hamas militants to launch rockets.
-The US has vetoed a UN Security Council resolution calling for an immediate humanitarian ceasefire in the Israel-Hamas war. The vote highlights the growing diplomatic isolation between the US and Israel, as the Israel Defense Forces continue to press the military against Hamas in southern Gaza. The resolution was supported by 13 Security Council members, with the UK abstaining. US deputy ambassador to the UN Robert Wood criticized the draft for not including language condemning Hamas's October 7 attack, which killed 1,200 Israelis and took over 200 hostages.
-UBS has incurred $400M in real estate costs due to its takeover of Credit Suisse, including breaking leases on offices occupied by the bank. The Swiss lender has transferred thousands of Credit Suisse staff to its own buildings and removed its logos from its UK and New York headquarters. The $200M expense was attributed to early contract termination and office refurbishment.
-Saudi Arabia is obstructing the UN's climate negotiations and pressuring the UAE's presidency to shift focus away from oil and gas producing nations. COP28 president and Abu Dhabi National Oil Company head, Sultan al-Jaber, is under pressure from Saudi Arabia. The Saudis are unhappy with UAE's handling of discussions in Dubai. Saudi Arabia's minister of energy, Prince Abdulaziz bin Salman, missed his UN plenary session due to negotiations.
-The Panama and Suez canals, crucial for global trade, are facing disruptions that could disrupt supply chains in the run-up to Christmas. Ship-owners and importers are concerned that a drought in the Panama Canal and attacks on cargo vessels near the Suez Canal could limit traffic. This could lead to a shortage of consumer electronics and Christmas decorations. If the Suez Canal attacks worsen, the combination of these restrictions and the Panama Canal restrictions could be catastrophic. More than half of container shipping scheduled to link Asia and North America is expected to cross either canal during Q3.
-German and French security officials are warning of a higher risk of Islamist terror attacks during the Christmas and Hanukkah holidays by young "lone wolves" radicalized by Israel's war against Hamas. The increased threat level is attributed to Hamas' support from terror organizations like al-Qaeda and Islamic State. France's DGSI head, Nicolas Lerner, noted that IS traditionally aversion to nationalist causes like Hamas is now actively calling for solidarity with its Palestinian brothers. Europe has been bracing for violence since Hamas' rampage in October.
-Javier Milei, the president-elect of Argentina, is aiming to implement rapid reforms to address the country's economic crisis. After winning the presidency with an anti-establishment campaign, markets have rallied since the election. Milei has forged an alliance with the mainstream centre-right and has largely sidelined a controversial campaign pledge to replace the peso with the US dollar. He plans to devalue the currency, merge government ministries, and tackle the chronic fiscal deficit. However, he faces significant obstacles and will be the weakest president in decades in terms of congressional support, with his party holding just 39 of 257 seats in the lower house and seven of 72 in the senate.
-Anglo American's shares fell 19% to £18.02 after the company announced plans to cut mineral production to cut costs and boost profitability. The FTSE 100 group said the production cuts would help lower capital expenditure by $1.8bn between 2023 and 2026 and reduce costs next year. The company plans to cut production at its Kumba iron ore operations in South Africa and reduce production at its Los Bronces copper operation in Chile. Anglo American's chief executive, Duncan Wanblad, has faced challenges such as commodity prices slipping from record highs and production snarls since taking over in April 2022.
-French AI start-up Mistral has been valued at €2B in a €400M funding round, a significant boost to the company's valuation. The €2B round was led by Silicon Valley venture firm Andreessen Horowitz, with other investors including Nvidia, Salesforce and BNP Paribas. The deal is expected to be signed soon, with an announcement expected next week.
-Harvard, the University of Pennsylvania, and the Massachusetts Institute of Technology have faced pressure from 74 members of Congress, mostly Republicans, who signed a letter urging their removal for failing to address antisemitism on their campuses. The letter follows Harvard's Claudine Gay, Penn's Elizabeth Magill, and MIT's Sally Kornbluth's disastrous appearance at a congressional hearing, where they struggled to respond to questions about violating campus codes of conduct. Despite subsequent statements, the uproar continues, with one donor rescinding a $100mn donation and the advisory board of Penn's Wharton business school calling for Magill's firing.

NEW YORK TIMES
-Split over Sam Altman’s leadership at OpenAI, board members and executives turned on one another. Their brawl exposed the cracks at the heart of the A.I. movement.
-The EU has agreed on establishing artificial intelligence rules with a landmark new law.
-The Texas Supreme Court has temporarily halted court-approved abortion. The court, responding to an appeal, put on hold a lower court order allowing an abortion for a woman whose fetus has a fatal condition. The state court’s ruling was in response to an appeal from Attorney General Ken Paxton of Texas, who opposed the woman’s abortion.
-The Biden Administration has bypassed congress for sale of tank shells to Israel. The State Department invoked an emergency provision in the Arms Export Control Act to send 13,000 rounds of tank ammunition to Israel.
-Iran-backed forces are assembling drones and retrofitting rockets in Iraq (presumably a US ‘ally’), prompting fears that the war in Gaza could grow wider.
-Fears of a NATO withdrawal rise as Former President Trump seeks a return to power. European diplomats said that there was growing concern that a second Trump presidency could mean the gutting of NATO.
-One law firm prepared both Penn and Harvard for a hearing on antisemitism. One of America’s best known white-shoe law firms, WilmerHale, was intricately involved in preparing the school leaders for congressional testimony.
-The Middle East conflict has pushed companies to extend diversity programs to faith groups. Workers are asking employers to respond to rising Islamophobia and antisemitism. But office discussions about religion are complicated.
-More architects in the United Arab Emirates, the host of this year’s U.N. climate summit, are moving past skyscrapers and focusing on sustainability.
-COP28 has brought the rare spectacle of limited protests to the politically repressive United Arab Emirates.
-Azerbaijan is expected to host the next UN climate summit, ending a deadlock in which Russia vetoed candidates.
-Although check usage has declined in the last couple of decades, check fraud has risen sharply, creating a problem for banks and customers.
-Wine snobs have a point about terroir, according to a computer model.
-Mayor Eric Adams is facing stronger pushback from the City Council and progressives, and prominent Democrats in New York are considering running for mayor.
-The ACLU has a new client: The National Rifle Association. The civil liberties group says it opposes the NRA and its mission but has agreed to represent it in the Supreme Court in a free-speech case.
-A man who has close ties to the Kremlin found the remains of World War I Russian soldiers in France. Moscow hopes to use the discovery for diplomatic purposes.

NY POST
-Eric Schwerin, a close business associate of Hunter Biden, will testify before the House Oversight Committee in January. Schwerin, who worked as president of Hunter Biden's investment firm Rosemont Seneca Partners, was served a subpoena to appear on November 9, 2023. Emails from the first son's abandoned laptop show Schwerin was intimately involved with the personal finances of both Hunter Biden and his father, President Biden. The committees have identified Biden family members, associates, and corporate entities as transferring millions of dollars to the Bidens, often from foreign sources. The closed-door hearing suggests the deposition will follow a similar format to Devon Archer, another Hunter Biden business partner who spoke to the committee in July.
-Starbucks has committed to bargaining with its unionized workers and reaching labor agreements next year, marking a significant reversal after two years of fighting for unionization of its US stores. Starbucks Chief Partner Officer Sara Kelly asked to restart bargaining in January and set a goal of completing bargaining and ratifying contracts by 2024. Workers United president Lynne Fox is reviewing the letter and will respond positively.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Both Wall Street and Main Street are focused on the outlook for interest rates

Cover:
-As the Federal Reserve heads into its final policy meeting on December 12-13, both Wall Street and Main Street are focused on the outlook for interest rates. With inflation falling steadily, the question is whether the US central bank will cut rates aggressively in the coming year. The likely answer is below today's target range of 5.25%-5.50%, but higher than many economists and policy makers expected a year or two ago. The consequences will be profound, affecting the global economy, investment portfolios, and monetary and fiscal policy for years to come. The long-term trajectory of interest rates lies at the heart of a debate over the neutral rate, which is pushing the neutral rate higher than it has been in decades. Factors at play include government spending without raising taxes, persistent consumer demand, and a slowdown in globalization.

Interview:
-Barron’s has interviewed Ramona Persaud. She is the lead manager of Fidelity's Equity-Income fund and Fidelity Global Equity Income fund, uses precision in selecting high-quality companies with a growing dividend and attractive prices. She studied engineering and computer coding before joining Fidelity in 2003. Since 2018, the fund has returned an average of 9.06%, outperforming its value-investing peers. Persaud's savvy stock picks and willingness to stray from her index have been praised by analysts.

Tech Trader:
-In 2023, tech investors have been focusing on buying the market's largest companies, including Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla. Apple has seen a nearly 50% rally, adding $1 trillion in market value despite revenue declines. This has caused market distortions, with many funds taking a market-weight position in Apple shares, despite skepticism about the company's near-term fundamentals. The year when bigger was better was also a factor, with the Nasdaq Composite rallying 37% and the Russell 2000 index up 4%.

The Trader:
-The stock market is aiming to return to its all-time high, but it needs a catalyst, possibly earnings. The S&P 500 finished the week up 0.2%, while the Dow Jones Industrial Average remained flat and the Nasdaq Composite rose 0.7%. The November jobs number was expected to move the market, but it was nonevent due to revisions, strikes, and other factors. The market needs solid fourth-quarter earnings to force sellers to step away, as aggregate S&P 500 earnings are expected to grow by 3.6% to $54.49 and sales by 3.5% per share to $470.35.
-Quality stocks are shares of companies with high, stable profit margins, stable sectors, long-standing brands, and large balance sheets. They are generally safer investments than lower quality ones. The iShares MSCI USA Quality Factor ETF has seen a 25% increase since the start of the year, topped by Apple, Microsoft, and Nvidia. However, since November 15, the quality ETF has only risen 0.8%, while the S&P 500 has gained 1.5%. Big Tech companies, such as Visa, Nike, UnitedHealth Group, and Eli Lilly, make up a significant portion of the ETF. 22V Research has screened high quality stocks that have performed poorly recently but have been executing their strategies. Cigna stock, down 19% year-on-year and potentially in merger talks, is attractive due to its low price and 9.3 times earnings per share estimates for the coming 12 months.

Features:
-The US Treasury Department is reducing an exemption for some mortgage lenders to offer "no doc" loans, which allowed them to bypass Dodd-Frank rules post-crisis. The changes are part of new regulations governing Community Development Financial Institutions (CDFIs), which now must consider borrowers' ability to repay loans. Change Company, a California-based lender, has become the largest issuer of nonqualified mortgages. Other CDFI lenders have also used the no-doc provision to offer loans to borrowers.
-Carrier Global is selling its Global Access Solutions business to Honeywell International for $4.95B. The division, which has 1,200 employees, will become part of Honeywell's commercial building technology businesses. Carrier's Global Access Solutions business provides tech to protect homes and businesses and is part of Carrier's Fire and Security business segment. In 2022, Carrier generated about $20.4B in sales. The stock moves added $1.8B to Carrier's market capitalization and took $1.8B from Honeywell's. The $5B price tag is about 17 times estimated 2023 earnings before interest, taxes, depreciation, and amortization (Ebitda). Honeywell paid a premium and expects to generate cost savings and synergies by slotting the business in its commercial building technology businesses.

Europe:
-The European Union is entering winter 2023-2024 with gas storage tanks nearly 95% full, with Germany and its neighbors activating terminals for importing LNG. France plans for six new nuclear power reactors, while thermostats are down and solar power capacity increases by a quarter. The REPower EU plan has worked, surprising Vladimir Putin and others. However, European gas prices have settled at about twice their 10-year average, and EU governments spent over EUR 600B ($647B) in consumer energy subsidies last year. The heaviest blow could fall on industry, as cheap Russian gas accounted for a third or more of EU supplies before Putin invaded Ukraine. EU steel production dropped 11% in 2022 and has fallen again this year, leading to Germany's first recession in three decades.

Emerging Markets:
-No update this week

Commodities:
-Gold, unlike stocks, has no cash flow, dividends, or underlying business to value. Despite its lack of intrinsic value, goldbugs love it for its history and hope it will act as a store of value during inflation. However, gold's limitations are evident in its returns over the past 20 years, with the S&P 500 returning 8.3% to the S&P 500's 9.7% over the past 20 years, 4.1% to the S&P 500's 11% over the past 40 years, and 5.6% to the S&P 500's 12% since Dec. 4, 1975. Deutsche Bank strategist Jim Reid has data showing that gold has returned just 0.32% a year after inflation since 1800, compared to 3.07% for 10-year Treasury notes and 6.83% for US stocks.

Streetwise:
-Intel's stock has outperformed Nvidia's year-to-date tripling, but its 62% total return puts it ahead of the S&P 500 and PHLX Semiconductor indexes. It's unclear whether Intel is a serial turnaround tease or a genuine blue-chip comeback. General Motors stock has been disappointing in the end, with recent shares dropping to $33 following bankruptcy restructuring. However, GM's recent actions, including scrapping an electric-vehicle pact with Honda and a big stock buyback and dividend increase, have helped it recover. Microsoft, which ended 1999 at $58, has remained at $369, despite occasional head fakes and a collapse during the 2008-09 global financial crisis. The internet has not killed desktop software purchases, but software is now selling well in the cloud.

Barrons : Gold Prices Are Near Record Highs. They May Keep Climbing for the Next

Gold Prices Are Near Record Highs. They May Keep Climbing for the Next 10 Years.

Gold has always been a hit or miss investment—usually more miss than hit. So I can’t believe what I’m about to say: It’s time to buy gold for the long run.

I know, I know: Gold, unlike stocks, has no cash flow, no dividends, no underlying business to value. It’s not a bond with promises to pay a certain interest rate over a fixed period. It’s just a shiny yellow metal that takes on the value that markets ascribe to it. Still, goldbugs—the true believers—love it for its history, for the hope that it will act as a store of value when inflation runs wild, and for the “intrinsic” value that fiat currencies lack. They believe it will survive when the apocalypse comes, forgetting that guns, food, water, and land will determine who is rich when civilization comes to an end and who is dead.

The numbers speak clearly to gold’s limitations. Gold has returned 8.3% to the S&P 500
SPX

0.41%
’s 9.7% over the past 20 years, 4.1% to the S&P 500’s 11% over the past 40 years, and 5.6% to the S&P 500’s 12% since Dec. 4, 1975, the earliest data available on the Bloomberg terminal.

Deutsche Bank strategist Jim Reid has data that goes back even further. Since 1800, gold has returned just 0.32% a year after inflation versus 3.07% for 10-year Treasury notes, and 6.83% for U.S. stocks. “Interestingly, we are only 15% above the peak during the American Civil War in the 1860s, when inflation was very high,” Reid writes. “So you can be a long-run inflationist but still be a bit underwhelmed by gold as an investment.”

And yet, gold is all the rage again. On Dec. 4, front-month gold futures traded at a record high of $2,152 an ounce, and it’s up 12% since Oct. 5. RBC strategist Christopher Louney argues that the rally in gold is a short-term response to the shift away from tightening monetary policy, the drop in bond yields, and a weak dollar. When those drivers end, he thinks, gold’s rally is likely to as well, leaving the metal stuck in a trading range. “Is there some room for gold to run in the short term?” Louney asks. “Yes, but...there are opportunities elsewhere.” He recommends taking profits.

Level headed as that view may sound, it overlooks some tantalizing possibilities. There are periods where gold can outperform for years even. It gained 56.3% annualized from August 1976 through September 1980, when the S&P 500 rose 10.8—a period of hyperinflation. It also rose 20.6% annualized from March 2001 through August 2011, when the S&P 500 advanced just 2.4%, outperforming when the tech bubble burst and the financial crisis unfolded.

There are signs emerging that a similar period of outperformance is now taking shape. Take the relationship between gold and U.S. Treasury yields. Normally, when bond yields go up, gold falls. That happened initially this time around, with gold falling from $2,055.30 in April 2022 to $1,634.20 in October, as the Federal Reserve began raising interest rates. Since then, gold has risen, despite ongoing rate increases that brought the benchmark rate to a range of 5.25% to 5.5%, from 0%. “As grizzled gold-bulls know, this is far from typical behavior and would, thus, seem to be sending an important signal,” writes Stephanie Pomboy of Macro Mavens.

For Pomboy, gold is confirming the disconnect she sees between gross domestic product, which rose 3% year over year during the third quarter, and gross domestic income, which fell 0.2%. Rarely are the two measures of economic activity so out of sync. The last time we had positive GDP and negative GDI was before recessions in 2001 and 2007. And, Pomboy notes, gold can indeed rise with interest rates: It happened in 2004-05, when gold bulls correctly anticipated that the Fed would have to cut rates drastically. Another possible outcome this time is that inflation starts rising again, effectively pushing real rates lower. “Either way, gold is sniffing out a heck of a lot more of something (rate cuts or inflation) than the broader,” she writes.

Higher inflation or a massive recession are clearly worst-case scenarios, but they aren’t necessary conditions for gold to continue its rise. Geopolitics has a role to play. The recent rally in gold began on Oct. 6, the day before Hamas attacked Israel, reversing what had been one of gold’s periodic pullbacks from the $2,000 level. If the world continues to add more flashpoints to what is already a combustible mix, gold should at least have support around $1,800.

The bigger change might be a shift away from the U.S. dollar. Too much has been made about dedollarization, as if, overnight, the world will suddenly stop using it in most of its transactions. That’s not the case, but there is a change happening as countries try to protect themselves from potential U.S. sanctions and from the massive U.S. debt, says Colin Fenton, commodity strategist at 22V. Notably, the Asean and BRIC+ countries in August committed to using local currencies as much as possible. It wasn’t just words. That month, India bought oil from the Abu Dhabi National Oil Co. in rupees for the first time. “This is erosion on the margin, enough to get gold to sustain above 2,000,” Fenton says.

Global central banks are putting their money to work buying gold—they’re on track to acquire a record 1,180 metric tons in 2023. Investors, though, appear reluctant to buy in, with money going in and out over recent weeks, according to Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “A further rise from current levels…would likely require a more convincing increase in exchange-traded fund inflows, compared with the more modest ebb and flow of trade seen in recent weeks,” she writes.

None of this precludes a near-term pullback in gold—Friday’s strong payrolls report suggests that the market may have to adjust its expectations for Fed rate cuts—but the charts point to gold getting to $2,400, up 18% from a recent $2,032.90. But let’s dream big. Chart Smarter’s Douglas Busch, for one, argues that gold could hit $3,000 if it can break through resistance on the monthly chart by closing above $2,100 at the end of December, a level that would still be below the inflation-adjusted high of $3,333 reached in early 1980.

That would be a gain even goldbugs would love.

Barrons : Europe Swears Off Russian Gas. The Unexpected Price.

Europe Swears Off Russian Gas. The Unexpected Price.

Last year at this time, Europeans worried about freezing without natural gas imports from Russia. That didn’t happen, and won’t this year.

The European Union enters the winter of 2023-2024 with gas storage tanks nearly 95% full. Germany and its neighbors have activated half a dozen terminals for importing liquefied natural gas (LNG). France laid plans for six new nuclear power reactors. Thermostats are down and solar power capacity up by a quarter.

The EU supertanker turned with an alacrity that surprised Vladimir Putin, and just about everyone else. “We can say that we have done it,” says Ana Maria Jaller-Makarewicz, lead European energy analyst at the Institute for Energy Economics and Financial Analysis. “The REPower EU plan has worked.”

But there has been a cost. European gas prices have settled at about twice their 10-year average, says Dimitar Lilkov, a researcher at the Wilfried Martens Centre for European Studies. EU governments shelled out more than 600 billion euros ($647 billion) in consumer energy subsidies last year, he figures, an unsustainable pace.

The heaviest blow could fall on industry, though. Cheap Russian gas accounted for a third or more of EU supplies before Putin invaded Ukraine last year.

That helped keep a range of energy-intensive factories pumping out aluminum, steel, fertilizer, or ceramics in Germany and elsewhere. EU steel production dropped 11% in 2022, and has fallen again this year.

That’s one reason Germany is facing its first recession in three decades, excepting a pandemic dip, Lilkov says. “If you break the German industrial model, that’s what’s driving all of Central and Eastern Europe too,” he warns.

Cyclical factors like weak Chinese demand and soaring interest rates are also slamming industry. Still, the energy shock could do lasting damage, says Jacob Mandel, a gas analyst at Aurora Energy Research. “There’s a risk that some industry is gone forever,” he says.

A more optimistic view comes from Anne-Sophie Corbeau, a scholar at Columbia University’s Center on Global Energy Policy. Global LNG supplies are on track to jump by half by 2028, mostly thanks to the U.S. and Qatar, she says.

China, which was expected to gobble much of this extra output, may actually use less LNG than it has already contracted for as its economy slows, she adds.

Europe can add import infrastructure fast and flexibly thanks to the emerging technology of “floating storage and regasification units,” which can be anchored offshore and relocated as necessary. Germany alone has leased five of them.

France and Germany have both sealed long-term LNG supply deals with Qatar over the past year, which should help stabilize prices, Lilkov says. Germany’s governing coalition, which includes the Green Party, faced down activists fearing that the rush for new gas supplies would endanger renewable energy goals.

“We may not need all these regasification terminals,” Jaller-Makarewicz comments. “Everyone panicked at the same time.”

One future no one in Europe is talking about is a return to dependence on Russian natural gas. Putin himself, not EU sanctions, cut most of the export flows, presumably hoping that would weaken Western support for Ukraine. His gamble didn’t work out.

Russia’s plans to sell its gas to China instead are creeping forward slowly and at enormous cost for new pipelines.

“Most of Russia’s gas is stranded in the Western part of the country,” Mandel says. “The era of massive sales to Europe is over.”