A Broader Perspective

525
Tue, May 14, 2013 - 11:37am

Time is short but I do have something interesting for you to consider today.

Look, there's a lot going on that will make tomorrow's gold (and silver) "market" different from yesterday's. Regardless, I still believe it's useful to look at yesterday's market in order to forecast where we might be going based upon where we have been.

Today, we're going to look at the Continuous Commodity Index. https://en.wikipedia.org/wiki/Continuous_Commodity_Index. Here's a little background info from the Wiki page:

"The 17 components of the CCI are continuously rebalanced to maintain the equal weight of 5.88%. Since CCI components are equally weighted, they therefore distribute evenly into the major sectors: Energy 17.65%, Metals 23.53%, Softs 29.41% and Agriculture 29.41%. While other commodity indices may overweight in certain sectors (e.g. Energy), the CCI provides exposure to all four commodity subgroups."

So, first, let's look at a 25-year chart. Some of you may not even have been alive at the start of this chart. Personally, I was just graduating from college and chasing my then-sweetheart to San Francisco. (That's an interesting story but we'll save it for another day.) The point is: This chart covers a lot of ground and time. Therefore, it is to be respected.

Notice that for the first half of the chart, the action is sideways. From 1988 to 2002, the index fluctuated in roughly a 50-point range. Though there was some action in individual commodities from time to time, overall the sector was a real yawner. The sideways action actually goes back even further, to the early 1980s, when interest rates were raised to choke the money supply and curb inflation. So, for roughly 20 years, commodities in general sucked.

Then what happened? The debt-induced easy growth of the 90's finally popped in 2001 and it has been off to the races for commodities ever since. Sure there have been pauses and corrections along the way but there also been periods of blowoff, parabolic rallies, too. In the end, though, the trend has remained. Here, see for yourself:

So now let's look a little closer. On the five-year, weekly chart below, you can see where we currently stand. Of course, I've tried to draw the trendline as accurately as possible but it's impossible to show exactly where it currently lays. Needless to say though, we're pretty much right on top of it. So there are three things to consider:

  1. First and foremost, is this 11 year bull market in commodities over? Did commodities go sideways for 20 years only to have a bull market end after just 10 years? Look at it another way...Have the fundamental conditions which prompted this bull market changed? Are the Fed and other central banks about to embark on a Volcker-esque tightening spree?
  2. Could commodities in general (and, by extension, gold and silver) bounce and rally right here and right now, just like they did the on the last two occasions they encountered the main trendline in late 2008 and mid 2012?
  3. Are commodities about to over-shoot again, similar to the circled area on the monthly chart above? If so, could a final drop toward 500 or even 475 be in the cards? IF that were to happen, what would be the short-term impact on the price of gold? Of silver? Would you finally capitulate/panic and sell or will you rely on your answers to the questions posed in point #1 above?

OK, gotta stop there but that should give you plenty to think about and discuss for a while. Have a great day and let's hope that CIGA BoPolny/BoPelini/BoDiddley/BoJackson is proven correct.

TF

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  525 Comments

Hagarth
May 14, 2013 - 7:26pm

PBS program, The Retirement Gamble.

By Pam Martens: April 25, 2013

Frontline Chart Showing Impact of 401(k) Fees Over 50 Years of Saving for Retirement

If you work for 50 years and receive the typical long-term return of 7 percent on your 401(k) plan and your fees are 2 percent, almost two-thirds of your account will go to Wall Street. This was the bombshell dropped by Frontline’s Martin Smith in this Tuesday evening’s PBS program, The Retirement Gamble.

This is not so much a gamble as a certainty: under a 2 percent 401(k) fee structure, almost two-thirds of your working life will go toward paying obscene compensation to Wall Street; a little over one-third will benefit your family – and that’s before paying taxes on withdrawals to Uncle Sam.

https://wallstreetonparade.com/2013/04/pbs-drops-another-bombshell-wall-...

VIDEO HERE:

https://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

pforth
May 14, 2013 - 7:28pm

Bo Polny not looking good...

If yesterday was the turn date for silver, I hate to tell you but it's lower today. Of course, maybe you're just off by a day so I'll cut you some slack ;)

ancientmoney
May 14, 2013 - 7:36pm

Public participation in PMs?

Designed not to happen. China makes it easy for their people to buy gold and silver--banks sell it most everywhere in urban areas. The governmeent there even advertises the wisdom of PM investing.

Here? No such thing. PMs are denigrated as archaic useless items of yore, unfit for modern usage.

Nobody knows how to buy them, in general. They must be sought out in relatively tiny retail, mom & pop stores.

ETFs were created to further obfuscate and frustrate PM purchases.

Public will be unlikely to ever participate to a level that will make a difference. That does not diminish the importance however, as the ROW is going that way.

alan2102
May 14, 2013 - 7:49pm

foggyroad

"Ten minutes, make up your own mind:
The Complete Idiot's Guide to the New World Order"

That was about just one portion of the "new world order" or very high-level power structure -- as I say, more properly called the "old world order": the U.S./U.K/Israel/Japan/Western-Europe/OECD axis, represented on a high level institutionally by the Bilderberg group, the CFR, NATO, the IMF, and the World Bank. But then there is another, competing world order in the making, represented by the BRICS, centered on the Eurasian land mass, particularly the Eastern portion of it.

SilverSurfers
May 14, 2013 - 7:54pm

Podcast

catch up, been distracted in never never land of lates, but turd did great on SD weekly, nice show, great vocals, good prodcast, lots of info, got the feel of the flow, which is where its at. Just Saying.

Harald
May 14, 2013 - 7:59pm

.

.

The Watchman
May 14, 2013 - 8:01pm
Just A Regular Guy
May 14, 2013 - 8:01pm

About Bo Polny

Sounds like Bo-LONEY to me. I find it interesting that Santa says TA is useless and that fundamentals win yet posts TA on his page? It doesn't bother me, he can do whatever he wants, it's his jig, but there's definitely conflicting messages there....

I'm in the gold going to 1300-1100 camp, then higher.... The chart is being painted with a perfect dead-cat bounce! Smash down coming this Friday in my opinion..... but WTFDIK ;)

Peace

alan2102 John Galt
May 14, 2013 - 8:05pm

John Galt

Thanks for your reply. I guess I'm still not convinced that the East/West rivalry is an illusion. But I'll think on it some more.

One thing: you write: "there is definitely a competition between east and west on a certain level, be it some combination of political, economic and military. This gets played out in visible arenas such as television where national leaders either vocally or through actions (such as moving troops/ships/aircraft) play out roles to look after their own national interests."

In addition to competition on political, economic and military fronts, there is arising competition on the monetary front -- competition sure to intensify in coming years (maybe even coming months!). The U.S./U.K./etc. axis is the dollar-based/paper-based system, and the BRICS, especially the traditional cultures of India (gold) and China (silver), as well as the Islamic world, are metal-based systems in their essence. They USE paper instruments, of course; that is a necessity in the current world in which dollars and paper are hegemonic. What I am saying is that metal is "in their blood" and will recrudesce when it is given the opportunity -- which could be quite soon. Of course, the U.S./U.K./etc. will move heaven and earth to maintain the dollar over metal, since that is the linchpin (apart from raw military power and force) of the empire's global power. As such, favoring gold and silver is in effect voting for the BRICS block and against the U.S./U.K/etc. axis. It is easy to see how this could be construed by some (crazy people) as "financial terrorism" or treason -- a thought that gives me the heebie-jeebies, now and then.

SRSrocco
May 14, 2013 - 8:06pm

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