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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California Lawyer
May 14, 2013 - 1:30pm
May 14, 2013 - 1:21pm

Great Post Tyberious, Thank You

I was looking for confirmation that BRICS have coalesced into an economic union with sufficient temerity to challenge US dollar hegemony. Such temerity could only be possible if the BRICS have or perceive they have sufficient military power to counter the US military, the very best in the world, hands down.

Here is my reasoning:

(1) there is but one superpower in the world, and it is the United States, backed with an incredible military force, weaponry, satellites, drones, and a civilian populace that is fast asleep at the wheel enjoying their bread and circuses to the point that ANY military engagement or confrontation will be cheered, rejoiced, and celebrated by the populace as further proof of US superiority.

(2) the ONLY manner in which to challenge the massive USA industrial military complex, which includes the beholden and complicit mainstream media with its comprehensive and effective propaganda methods, is either a military confrontation, certainly doomed to fail, or a protracted logistical battle, which gradually weakens the military force over time, thus creating opportunities for the BRICS to implement, gradually, their new paradigm and power structure.

(3) However, the Western banking elite will never accede to such a power transfer, will do everything possible, legal and illegal, to prevent it, to and including military action.

(4) Therefore, the BRICS, unless protected by sufficient military force, are doomed to endure false flag military confrontations, invasions, bombings, insurgents, political upheavals, precisely what we have been seeing throughout the Middle East and the other traditional hotspots.

(5) That is, until now. This whole Cyprus banking "bail in," is a direct confrontation between the Western banking cartel and the BRICS, through the BRICS' military protectors, the Russians, and perhaps in alliance with the Chinese.

(6) The system, as we know it here in the West, the fiat currency, Ponzi scheme, is under attack and is writhing and convulsing in front of us. There is ongoing paper versus physical price diversions, currency wars across the globe, perceptions are continuously actively managed, now, apparently shamelessly and without regard for consequences [IRS, Benghazi, AP spying, just THIS WEEK alone], and many brilliant commentators here, in the forums such as DOTS, etc., have linked it all together and there is no more denying the reality which we are in.

(7) The ending of US dollar hegemony will be the event of our lifetimes. It will be accompanied by radical change, perhaps war [I often say that war is a certainty, but then, I want people to take me seriously from time to time, including in this post, so I say now "perhaps"], and for certain fear by the populace of the unknown and the fact of change.

(8) The only thing stopping a panic of the USA sheeple is MOPE. And nothing is going to stop MOPE, not now not ever, and the only solution is knowledge and a quest for the truth. But all that takes great effort, and the USA sheeple know not the concept of hard work, risk/reward, sound money, so, MOPE works now and will keep working until there is a great awakening, like a US dollar hegemony rejection in favor of a different currency, or currency union from the BRICS.

Just my $0.02.

It's going to be a long, hot summer, for sure.

Gold Dog
May 14, 2013 - 1:21pm

The RIFF-RAFFel is coming!

You Turdites are going to LOVE this one!!!

Watch this space for updates!

Better prizes...cooler stuff.................

Your friend,

Dog

realitybiterSIlverbee
May 14, 2013 - 1:12pm

silverbee

In 2000 stocks were at highs and miners were at insane lows. The year before there was the almighty economist magazine cover "Drowning in Oil" - March, 1999 - below $10 forever- was the implication....oops. If you had told anyone that you were selling your Yahoo stock for XOM, they would have deemed you insane in March of 1999.....Time Warner had to become AOL - otherwise miss the future.....ooops....oh, and that xom for yhoo trade? you'd be ahead 600%

wouldyoubelieve...
May 14, 2013 - 1:10pm

Miners

how many miners are debt free?

exactly

what happens when the SHTF and gold has been in the dumps so they are cash poor?

exactly

and how much do the stock holders get when they go bk?

exactly

and who owns the mine after the bk?

EXACTLY

.....and boom goes the dynamite

SIlverbee
May 14, 2013 - 1:09pm

Miners

So they need to charge more for their efforts. Surely they realize the demand is out there.

Is irrational exuberance discriminatory?

tyberious
May 14, 2013 - 1:08pm

@John Gault

I have no doubt that those in power wish to remain in powers and most events are contrived by these same powers, for their benefit alone. But when it comes to the national sovereignty of Russia or China, these cultures are highly suspicious of the west and hold it in disregard. Granted that all power brokers make agreements, but the Russians and Chinese will not sell their souls to the west.

I just returned from a trip to China, Korea and the Philippines. The sentiment regarding the west is not very high, in that the Chinese and Koreans see Americans and the West as having become lazy, unproductive and engaged activities that do not produce a great benefit to the over all society, read wars.

Having said that the implementation of an all digital or electronic currency would only be feasible in the West. A majority of Chinese, Korean and Filipino citizens use cash and many have no bank accounts, though that is quickly changing. Further more with the bail ins, people will become highly suspicious of electronic currencies, as they watch their balances vanish.

The wealth of dynasties is in art, land, jewels and PM. PMs will always have value, 5,000 years says so!

AlexCojones
May 14, 2013 - 1:08pm

Little Off the Subject - But When Did That Ever Happen Here?

My investment in tomato futures has begun to pay off. I planted three of the commodities here in Phoenix mid March. One type I planted from seeds, Sweet 100, has so far produced 135 cherry tomatoes. I browse every morning and evening on ripe and near ripe little tomatoes and yes, they are sweet. Personally I find larger commercial grown tomatoes devoid of taste and never buy them. I'd rather eat canned tomatoes than most varieties sold in stores.

My gardener sister suggested that the name Sweet 100 might allude to the actual number a grower could harvest from that plant. I have another 40-50 ripening on the same plant so possibly I can get 200. Yes, I'm keeping score at home; each plant has a scorecard. We stackers are OC.

Another type I acquired at Lowe's in pots six weeks ago, called Husky Cherry Red, has only recently been producing ripe fruit. Temperature here exceeds 100, with a predicted high of 103 today. By late June, early July, when temps reach 110+, I expect these little guys to be fried, although I have sheltered them in place, as head of their homeland security.

Just a Farm Commodity Update.

I prefer the Sweet 100s

AC

Galearis
May 14, 2013 - 1:07pm

@Turd re CCI chart

Well, the CCI chart does resemble the gold and silver ones and we know why the crooks are painting those....So my conclusion is that there will be an effort to paint a similar price decline to hide the coming stagflation...They have their breakdown in that spits in the face of gravity to suggest that theme is valid...Would any of us be surprised at a similar outcome? It is all paper; it is all more or less rigged, and as the consumers of these tangibles start to get worried about the supply of stuff over the supply of paper, we will start to see the same default risks - or MF(ng)Global risks...It is all the same as ANOTHER envisoned....

As ANOTHER said: "ALL paper will burn". In the meantime "(it) will be sold at a discount." The higher the risk to the investor, the easier these markets are to rig. It would seem obvious that this was all planned a long time ago to work out for the banks even in a collapse reality.

I hope everyone noted the above name, ANOTHER on the Wikipedia description of Free Gold pasted in Santa's column the other day.

This isn't, IMO, a consolidation period, this is the FED's end game implementation plan for inflation sensitive paper markets that normally respond to monetary easing by rising..It has been clearly demonstrated that they can do this right in the face of an announcement by the FED that hyperinflation and debt monetization is the phase that we are in....There is no consideration for the real economy or primary industries...All will be sacrificed to the phony markets. And 'sacrifice' is another word for collapse.

They will do this until they cannot. They will be able to do this until the risk aversion is a meaningful force in these markets; imo this will require defaults. It could even mean systemic collapse....This is a process with goals that are out of sympathy with survival of the real economy...

Cheers,

G.

ScottJ
May 14, 2013 - 1:03pm

Interesting Infographic I found

Just shows some of the hard connections. I believe the "Rhodes" family is connected with the "Rhodes Scholar" program as well, but I am not sure.

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