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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May 14, 2013 - 2:33pm

CA Lawyer

Great analysis

Looking at a 5 year chart it seems $1200 & $20 not only seems possible but likely. Hopefully not for long but it matters not if you're on a long horizon outlook.

If QE withdrawal MOPE comes to pass (or actually happens) and the market buys into it and rates appear to be gradually rising then $1200/$20 seem probable.

I've felt this way for a long time but never wanted to accept it or offer that up here for obvious reasons. I'll still maintain my prognostication of the early part or first half of 2017 after the 2016 US election as when the PM's start to turn.

I've picked that time frame based on the likelihood imho that the Yuan will be stronger and in play fully in the London/global FX markets while at the same time the Euro will be disintegrating while periphery debt saddled countries implode (& rise of the German Mark starts) with the Japan Yenzooka situation catching fire and beginning to melt down in 2015 or so.

I could be wrong naturally, but that's my basis roughly. It's all about the FX markets and bonds. Japan lights the wick on global bond uneasiness as their monetary structure melts down by first melting up.

Japan being the 3rd largest economy melting down and becoming devalued would be an enormous occurrence.

Ok....just caught up here during lunch, going back outside.

silver66
May 14, 2013 - 2:29pm

had to post this picture

Was over on the Chive, taking a break and saw this.

Silver66

P.S. hope I posted right

P.P.S. thanks

treefrog
May 14, 2013 - 2:26pm

longshot bet

i saw some discussion on another pm board about eagle hill exploration. canadian outfit drilling up some good numbers (228.5 g/t au over 12.4 m) in northern quebec. i picked up a modest position for the "sleeper" file. dyodd

AlexCojones
May 14, 2013 - 2:26pm

From One Fisherman to Another DPH - Timetable

DPH

Hope you have been fishing lately or just kicking back enjoying life.

I think your timetable seems to err on the side of caution, for a 2016-17 PM break out. That seems more than a bit distant.

I believe, as does our host, that we may see something sooner. Not as soon as the KingWorlders seem to imply (daily!) but for some time frame between yours and say, James Turk's.

Will be fishing in about another month and unable to post very much.

Alex

zman
May 14, 2013 - 2:25pm

10 year bond yield up to

10 year bond yield up to 1.95%, any reason for the recent sell off in US bonds?

cpnscarlet
May 14, 2013 - 2:24pm

Please! Bring it On!

One would HOPE for a long hot summer... something cataclysmic to stop this noxious environment of geopolitics and illegal finance. Give me a dose of horror and panicking masses so something in this G-D system can be dislodged.

dropout
May 14, 2013 - 2:22pm

One Week To Go

May 21, 2008 the Baltic Dry Index (BDI) hits a high of 11,771.00 points - next weeks 5 year anniversary.

December 4, 2008 the index bottoms out at 666.00 points. A loss of 94% in 6 1/2 months!

But wait, that's not the record low, it was hit on February 6, 2012 at 648.00 points.

Today, it's trading at 879.00 points and is trending lower at it's 50 DMA, with it's 200 DMA sitting at 1,802.73 points. Since the crash of 08 the index has not touched, nor even approached near it's 200 DMA on the weekly charts. The RSI is now heading lower and the MACD is flat at neutral.

This is a leading global economic indicator. The index sits just 231 points above it's all time low set last year. Folks, this is NOT good economic performance, despite all the MSM hype and governmental MOPE. There is NO recovery. There is ongoing bottom bouncing, with great quantities of "hopeium" being served to the gullible.

Just for your dessert, here are the latest update on rail stats concerning car loadings.

https://www.yardeni.com/pub/ECOINDRAILCAR.pdf

cpnscarlet
May 14, 2013 - 2:10pm

Must get back on my meds...

Problem is I didn't have any to start with.

We go from an AM post of "Go Bo Polny, Go!" to "...wary they're going to drop us to 1400..." at Noon.

Wheeee!!! This investing stuff is queasy!!!!

Time is even shorter.

benqueScottJ
May 14, 2013 - 2:08pm

ScottJ - Newsgroup ties to W-House

Thanks ScottJ,

That is very, very interesting.

As to the Rhodes Scholar assumption, only if they are descendents of Cecil Rhodes, developer of the Kimberly diamond mines (through the usual bankster means of theft, bribery, & murder), instigator of, and profiteer off Boer War, and founder of Rhodesia....etc, etc.

Rhodes scholar program set up circa 1905 to develop young potential bankster sociopaths into a continuous crop of thieving "elites".

AlexCojones
May 14, 2013 - 2:02pm

The False Flags are Unfurling on US, California Lawyer

I always enjoy reading your perspective, California Lawyer, and your recent post is no exception. BRICs vs the Western Nations; very valid points.

However, I did want to add that millions of us worldwide, including many veterans, who reportedly are now listed as potential "terrorists," believe that the majority of false flags, in the past 20 years, have occurred in WESTERN nations. Why? To keep the sheep terrified and constantly demanding MORE security. And thus the steady, pre-planned erosion of the Bill of Rights.

One respected blogger, Mike Adams at Natural News, even went so far as to WARN of another possible false flag here in the USA to distract the sheep (GMO brand name; Boston Strong), of another possible FF.

I would not put it past the EE.

- False Flag-O-Meter reaches the red zone: Why a government-orchestrated distraction event is highly likely to occur in the next 7 days

". . . Because the Obama administration is under intense fire right now and needs a quick distraction. In stage magic, it's called the "art of misdirection." In politics, it's called the "Clinton method. . . . This is exactly what Bill Clinton did over and over again during his administration: Any time he was about to be raked over the coals for some political scandal, he would simply order the bombing of another "terrorist factory" somewhere around the globe. Magically, the Clinton News Network (CNN) would shift coverage to this heroic act of "national defense" and stop asking questions about his scandal back at home...." AC

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