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

About the Author

Founder
tfmetalsreport [at] gmail [dot] com ()

  525 Comments

  Refresh
May 14, 2013 - 2:01pm

@silver66 -- re: Quartz (qz.com)

Yeah, I deserved that for failing to click to check the principals involved:

BUT, it's potentially even worse than that -- the whole outfit is merely the new business/economics news division of The Atlantic:

The Atlantic Names Its New Business News Site: 'Quartz.' Quartz? Yep. Quartz.

So it's a part of the Beast that is MSM. However, I maintain my contention that truth is like a virus in its ability to infiltrate even the most hardened defenses, and once it establishes a foothold, it begets more of itself.

Yeah, these guys needed a funding source and a corporate infrastructure to get started -- and are not (yet) speaking in the voices of advocates of sound money and integrity in business & politics (understood the latter is an oxymoron, but nevertheless). BUT, they are raising topics that deserve MUCH more scrutiny -- and if they cause a few more sheeple (or otherwise intelligent folks beholden to the current paradigm) to QUESTION things, then I argue they can be a force for good.

I started out down the road towards the 'red pill' by looking for answers, and MSM is the first place most people think to look:

Jamie Dimon’s friends have his back. But will it help him keep chairman title?

American mortgage debt still shrinking, but borrowing for cars and college keeps climbing

Currency wars vs. BRICS continued through other means: MOPE

A new forecast points to a plunge in oil and gasoline prices (by plunge they mean 10-15% decline over 5 yrs)

Just b/c Boeing is a sponsor, does not necessarily mean they get a lot of slack:

Airbus racks up new orders to rival a scandal-ridden Boeing

Novel uses for drone tech:

Drones would make the perfect drug mules

Gentrealitybiter
May 14, 2013 - 1:55pm

Mulligan Mint

I, too, am watching what's going on re: Duane & Gray. We'll have to wait and see what happens with Gray starting up selling the coins tomorrow & Duane's upcoming suing Gray to get control back

What's impressed me about the coins is that 1) they were only minted for a short time which, damnit, will be extended now and that 2) sellers are getting high premiums on ebay

I bought some FG's ... long time shipping but I got them ... and would have gotten more but for the fracas now.

Turd, I think you know Duane well .... what are your thoughts?

Zoltan
May 14, 2013 - 1:53pm

My laugh for the day

Rather than confuse people with the bizarro swings in the silver lease rate Kitco decides to just "start fresh" with a new one. Well played sir.

Nothing to see here (literally), please move along.

Z

Gold Dog
May 14, 2013 - 1:45pm

I am not buying any more AG or AU until...

...they rally and hit the 80 SMA on the one year daily chart. I just bought 50 oz's of AU last Friday and now I am going to start stacking fiat.

Time for this Dog to start eating his own cooking!

GD

EDIT- If you are going to lose sleep over anything...make it the upcoming RIFF-RAFFle...you should be like little kids on Christmas eve!

SIlverbee
May 14, 2013 - 1:44pm

Hey Turd

Why will they do that?

Also since they do the same thing ever time they need some action when will they realize that doing the same thing over and over again and expecting a different response is insane?

SIlverbee
May 14, 2013 - 1:41pm

@Gold dog

What could be a better prize than silver coins? Gold one's?

Mudsharkbytes
May 14, 2013 - 1:40pm

Cherry Tomatoes

We plant the sweet 100's here in the midwest alongside other tomatoes like Roma's and Brandywine.

We'll get several hundred cherry tomatoes from each plant, easily.

However, once the temperature goes up over 90 or so, they stop producing - something about how they stop flowering, or fail to pollinate at higher temperatures.

It's been cool here - tomatoes are just now in the ground - won't see any fruit from these for at least a month, but when they start producing, watch out!

Put fish emulsion on 'em - they love it.

May 14, 2013 - 1:40pm

Please be sure to review this post

And these charts. I'm getting increasingly wary that they are about to drop the hammer and jam things down toward $1400 and $23.

https://www.tfmetalsreport.com/blog/4709/here-we-go-again

hai
May 14, 2013 - 1:38pm
Hunt brother
May 14, 2013 - 1:36pm

Miners

Proven and probable reserves on the gold miners are selling for $200 an ounce.

This is 14 percent of the gold price. This is less than half the historical average.

Choose your location carefully, nationalization of mines is a risk.

I prefer Mexico for silver, and Canada for gold.

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 9/21

9/21 8:00 ET Goon Kaplan
9/21 10:00 ET Goon Evans
9/21 Noon ET Goon Brainard
9/21 6:00 pm ET Goon Williams & Goon Bostic
9/22 10:30 ET Chief Goon Powell on Capitol Hill
9/22 Noon ET Goon Barkin
9/22 3:00 pm ET Goon Bostic again
9/23 9:00 ET Goon Mester
9/23 9:45 ET Markit flash PMIs for September
9/23 10:00 ET Chief Goon Powell on Capitol Hill
9/23 11:00 ET Goon Evans again
9/23 Noon ET Goon Rosengren
9/24 1:00 pm ET Goon Bostic #3
9/24 2:00 pm ET Goon Quarles
9/24 10:00 ET Chief Goon Powell on Capitol Hill
9/24 Noon ET Goon Bullard
9/24 1:00 pm ET Goon Barkin again & Goon Evans #3
9/24 2:00 pm ET Goon Bostic #4
9/25 8:30 ET Durable Goods
9/25 11:00 ET Goon Evans #4
9/25 3:00 pm ET Goon Williams again

Key Economic Events Week of 9/14

9/15 8:30 ET Empire State and Import Price Idx
9/15 9:15 ET Cap Ute and Ind Prod
9/16 8:30 ET Retail Sales
9/16 10:00 ET Business Inventories
9/16 2:00 ET FOMC Fedlines
9/16 2:30 ET Powell Presser
9/17 8:30 ET Philly Fed
9/18 8:30 ET Current Acct Deficit

Key Economic Events Week of 9/7

9/9 10:00 ET JOLTS job openings
9/10 8:30 ET Initial jobless claims
9/10 8:30 ET PPI
9/10 10:00 ET Wholesale Inventories
9/11 8:30 ET CPI
9/11 9:45 ET Core CPI

Key Economic Events Week of 8/31

9/1 9:45 ET Markit Manu Index
9/1 10:00 ET ISM Manu Index
9/1 10:00 ET Construction Spending
9/2 8:15 ET ADP employment
9/2 10:00 ET Goon Williams
9/2 10:00 ET Factory Orders
9/3 8:30 ET Initial jobless claims
9/3 8:30 ET Trade Deficit
9/3 12:30 ET Goon Evans
9/4 8:30 ET BLSBS

Key Economic Events Week of 8/24

8/24 8:30 ET Chicago Fed Idx
8/25 10:00 ET Consumer Confidence
8/26 8:30 ET Durable Goods
8/27 8:30 ET Q2 GDP 2nd guess
8/27 9:10 ET Chief Goon Powell Jackson Hole
8/28 8:30 ET Pers Inc and Consumer Spend
8/28 8:30 ET Core Inflation
8/28 9:45 ET Chicago PMI

Key Economic Events Week of 8/17

8/17 8:30 ET Empire State Manu Idx
8/17 Noon ET Goon Bostic
8/18 8:30 ET Housing Starts
8/19 2:00 pm ET July FOMC minutes
8/20 8:30 ET Jobless claims
8/20 8:30 ET Philly Fed
8/20 10:00 ET LEIII
8/21 9:45 ET Markit flash PMIs July

Key Economic Events Week of 8/10

8/10 10:00 ET Job openings
8/11 8:30 ET Producer Price Idx
8/12 8:30 ET Consumer Price Idx
8/13 8:30 ET Initial jobless claims
8/13 8:30 ET Import Price Idx
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Unit Labor Costs
8/14 8:30 ET Cap Ute and Ind Prod
8/14 10:00 ET Business Inventories

Key Economic Events Week of 8/3

8/3 9:45 ET Markit Manu PMI July
8/3 10:00 ET ISM Manu PMI July
8/3 10:00 ET Construction Spending
8/4 10:00 ET Factory Orders
8/5 8:15 ET ADP employment July
8/5 9:45 ET Markit Service PMI
8/5 10:00 ET ISM Service PMI
8/6 8:30 ET Initial jobless claims
8/7 8:30 ET BLSBS for July
8/7 10:00 ET Wholesale Inventories

Key Economic Events Week of 7/27

7/27 8:30 ET Durable Goods
7/28 9:00 ET Case-Shiller home prices
7/29 8:30 ET Advance trade in goods
7/29 2:00 ET FOMC Fedlines
7/29 2:30 ET CGP presser
7/30 8:30 ET Q2 GDP first guess
7/31 8:30 ET Personal Income and Spending
7/31 8:30 ET Core inflation
7/31 9:45 ET Chicago PMI

Key Economic Events Week of 7/20

7/21 8:30 ET Chicago Fed
7/21 2:00 ET Senate vote on Judy Shelton
7/22 10:00 ET Existing home sales
7/23 8:30 ET Jobless claims
7/23 10:00 ET Leading Economic Indicators
7/24 9:45 ET Markit flash PMIs for July

Forum Discussion

randomness