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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Down Range
May 14, 2013 - 4:20pm

Why We Are Where We Are

It all boils down to ONE thing!

The MSM abdicating their responsibility to keep our government honest.

Think About It......

usk
May 14, 2013 - 4:16pm

That's all well and good but

That's all well and good but FND for the June contract still isn't until two weeks from Friday, the 31st.

As of yesterday, the OI was still at 209,286. Also as of yesterday, the total Comex registered stockpile stood at 57.10 mts. That's 1,835,000 troy ounces, enough to physically settle 18,350 contracts.

That said, both the Fed13 and Apr13 came in at about 13,000 contracts so we need about a 50% increase in June to clean them out. Of course, this is based upon yesterday's inventory data and that is certainly fudgeable well before any "crisis" would hit.

¤
May 14, 2013 - 4:10pm

Significant Milestone....Easier to Reach Out and Touch Someone

Aerospace & Defense

Carrier drone launch makes aviation history

By David Alexander

ABOARD THE USS GEORGE H.W. BUSH - The U.S. Navy made aviation history on Tuesday by launching an unmanned jet off an aircraft carrier for the first time, taking an important step toward expanded use of drones by the American military with an eye on possible rivals like China and Iran.

The bat-winged X-47B stealth drone roared off the USS George H.W. Bush near the coast of Virginia and flew a series of pre-programmed maneuvers around the ship before veering away toward a Naval air station in Maryland where it was scheduled to land.

"This is really a red-letter day. May 14 we all saw history happen" said Rear Admiral Ted Branch, the Atlantic naval air commander. "It's a marker ... between naval aviation as we've known it and the future of naval aviation with the launch of the X-47B."

Because of its stealth potential and a range nearly twice that of the F-35 Joint Strike Fighter, the X-47B and its successors are seen as a potential answer to the threat posed by medium-range anti-ship missiles developed by China and Iran, defense analysts said.

The missiles and other so-called anti-access, area-denial weapons would force U.S. aircraft carriers to operate far enough from shore that piloted aircraft would have to undergo refueling to carry out their missions, leaving them vulnerable to attack.

But with a range of 2,000 nautical miles, an unmanned jet like the X-47B could give the Navy both a long-range strike and reconnaissance capability.

"That makes it strategically very important," said Anthony Cordesman, a senior defense analyst at the Center for Strategic and International Studies. He described the drone as "essentially a really long-range stealth system."

The X-47B - one of only two demonstrator models made by Northrop Grumman - carries the equivalent of two precision-guided bombs. It was catapulted from the aircraft carrier on Tuesday using the same sling-shot system that sends manned aircraft aloft.

LANDING ON BOARD

It is scheduled to undergo two weeks of testing aboard the carrier leading up to a landing on the ship, in which a plane's tailhook grabs a wire that will slow it and keep it from plunging overboard.

While the carrier takeoff represented a significant milestone, defense analysts are focused on the next step.......cont.

https://www.reuters.com/article/2013/05/14/us-usa-navy-drone-idUSBRE94D0...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

AlexC......great idea...good luck fishing, I'm headed out this weekend to harass some big smallies hopefully.

Magpie....Wow! That's one big cat. Maybe Alex will find it's twin. Something tells me he's headed towards Alaska.

NedB....As always, a person has to do what a person needs to do no matter what. I have 29 SLW calls out in time (Jan. 14) that are my small lottery ticket just in case. Otherwise my stack is staying put like insurance and riding the incoming and outgoing waves and bobbing up and down.

Fortunately I can afford to just sit back on it and wait for time and inevitability to intersect. I'm anticipating another big buying opportunity that I'm hopefully locked and loaded to jump on. I think that'll be the case.

For the record...I have no qualms or regrets about buying any PM's at whatever price levels I have. Because quite frankly no one truly knows when something might break in the market system or breakout in a sensitive geopolitical manner.

My PM's are insurance and given the current ZIRP environment I like holding them and won't consider parting with them just yet. I'm still long and a buyer whenever I'm able to or it feels comfortable to do so. No regrets here at all.

Texas Sandman
May 14, 2013 - 4:09pm

Nice perspective

Bull & bear TA case for commodities. Not one-sided.

Very nice.

Thanks, Turd.

May 14, 2013 - 4:08pm

Not a big fan of Jon Stewart.

Not a big fan of Jon Stewart. The oversimplification of issues through sarcasm and a progressive lens isn't really my cup of tea. That said, this is somewhat funny and likely indicative of how most D-republocrats are feeling right now.

The Watchman
May 14, 2013 - 4:05pm

EXTREMELY odd

And I'm trying to get to the bottom of it.

The Watchman
May 14, 2013 - 3:33pm

Shanghai Gold Exchange- 0.3 tons in May Delivery Problem?

Shanghai Gold Exchange (SGE) Gold -- Au(T+D):

  • 14 May 2013 Close:

    • Trade Volume: 20.5 tons of gold, a change of -19.6% from previous close.

    • Open Interest: change of 4.4% from previous close.

    • Physical Delivery: 0 tons of gold.

    • Gold Price: $1454, a change of 0.4% from previous close.

  • Peak One Day Trade: 115.1 tons of gold, 16 April 2013.

  • Peak One Day Delivery: 35.7 tons of gold, 22 March 2013.

  • Current Month Delivery: 0.3 tons of gold as of 14 May 2013.

  • Peak One Month Delivery: 328 tons of gold, March 2013.

  • Gold Delivery Since 1 January 2013: Gold delivery (year to date): 1030.3 tons.

  • Shanghai Gold Exchange physical deliveries, past years:

    • 2012: 2,379.6 tons.

    • 2011: 1,897.8 tons.

  • Week of 26 April -- strange drop off in physical delivery? As of 25 April, physical deliveries on the SGE have been 1 ton (0 tons 22 April, 24 April and 25 April). The last time the SGE has a week of just limited deliveries as base in January 2011, a month that saw 21 days with less than 1 ton of gold delivered per day. Is this due to lack of inventory for delivery?

  • Just 0.3 Tons delivered in May -SOMETHING IS VERY ODD

hai
May 14, 2013 - 3:30pm

Pullback In Stocks & Gold ETF Outflows Would Recharge Gold Bull

Pullback In Stocks & Gold ETF Outflows Would Recharge Gold Bull

Of course, we’ve been harping on the downside potential for some time now, but we would be remiss if we didn’t touch on the flip side—the upside risks to our outlook. What could potentially send gold prices marching back higher sooner than expected?

https://www.hardassetsinvestor.com/weekly-commodity-reports/precious-met...

usk
May 14, 2013 - 3:27pm

Banksters needs to act asap

Kranzler reports that the current June futures contracts are 12.5 times the amount of deliverable gold. If more than 8 percent of these trades were to demand delivery, COMEX would default.

Last time Comex was ready to default they corzined gold futures holders.

They have something in their bag for this time, we can smell it. What exactly? They need to act in the coming days for sure.

May 14, 2013 - 3:10pm

Thanks, TF, Appreciate That

Just settled a case, actually. Going to stack some shiny. I want gold, but seems there is an irresistible impulse drawing me to secure a monster box locally . . .

I promise you TF, that I am here, at your service. Just ask. I'll do my best.

[p.s., as for the monster box, send PM and let's arrange details; you know who you are . . .]

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Key Economic Events Week of 8/24

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Key Economic Events Week of 7/27

7/27 8:30 ET Durable Goods
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