Not All That Glitters Is Gold
Since it has been almost a year since overt QE ended, I thought it might be instructive to take a look this morning at some "commodities" and how they have fared over the past 12 months. Something tells me the next 12 months won't be quite the same...
A year ago, when QE2 ended, commodities were soaring. Since then, not so much. With commodities, there are always other factors such as weather and geo-politics that affect price, so we have to take that into account, too. But these are "localized" phenomena in that hot, dry weather in Iowa has a great impact on corn but a minimal impact on sugar or crude. Monetary policy, however, has the power to affect things, across the board.
So, how have prices and conditions changed over the past 12 months? Let's take a look at the big four foods: soybeans, wheat, corn and sugar. Of the four, only soybeans have held in there, unchanged in price since last June.
Wheat is down about 15% and has been stuck in a range between $6 and $7/bushel for most of the past year.
Corn has been nasty (-23%) and looks like it might remain that way for a while longer. Watch the weather, though. It's beginning to dry out in the American Midwest. If this continues and deteriorates, corn will turn sharply higher, regardless of what the chart says.
And sugar has been brutal. Down over 30% since last July, it recently broke down even further and fell from 24 to 19 in about 6 weeks. Yikes!
So, the question is: How much farther can these fall? Well, obviously, they could fall even further. Who knows? But...if you think that we are once again on the edge of a massive, global money-printing event...perhaps they've fallen as far as they're going to. Again, anyone interested in fiddling around with the "big four" should take a look at the "DAG", an ETF which is comprised of futures contracts, equally divided between all four. Here's a link: http://finance.yahoo.com/q/pr?s=DAG+Profile
We've got to take a look at crude here, too. Frankly, it's amazing that crude has fallen over 20% in the past 6 weeks yet gold and silver have traded sideways. Why crude has fallen from $105 to $81 is a mystery to me, that's for sure, as the geo-political "dynamics" don't seem to have materially improved. Regardless, crude near $80 sure seems like a bargain. As discussed here in the past, anyone wanting to "roll the bones" a bit on crude should take a look at the "UCO". http://finance.yahoo.com/q/pr?s=UCO+Profile
Just a couple more things before we go take on the day. (MrsF is already hollering at me, so it promises to be a long one. Please pray for me.) First, if you haven't yet, please take 3 minutes to watch Nigel Farage discuss current events in front of his pals in the European Parliament.
And you should circle June 19 on your calendar. That day, Paul Coghlan is giving a free webinar that you should consider attending. Paul is Andrew Maguire's business partner but he is also an outstanding technical analyst, in his own right. Again, the webinar is free and I'm confident that you'll learn a few things. You can read more and sign up by clicking this link: http://www.coghlancapital.com/node/3767
OK, that's it for now. The metals are following along yesterday's gains quite nicely on the back of continued strong demand in London. Let's hope this keep going. Again, my main goal for this week is to close above 1610 and 29. Anything beyond there is gravy.