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

  Refresh
May 14, 2013 - 12:28pm

Troll species

There do seem to be various species of trolls. The most dangerous are those paid trolls who spread misinformation for a living. They are versed in the art of sophistry, mercenaries who will write or say anything for money--intellectual prostitutes that probably really don't have any firm positions of their own and can't care less, as long as they get paid for trolling. IN fact I am not sure we can even call this type a troll. They are far more devious and dangerous.

But another species seems to be unpaid trolls who have something against the metals community. Did their heart turn dark after a poorly timed trade? Intellectually, do they hold a commitment to fiat and the system that is just to painful to release? They appear to have short half-lives on the site, especially after getting called out, but reappearing often and regularly.

Some trolls are an enigma. with the preponderance of mental disorders, who knows what motivates them. This guy here even has gold earrings, which I understand are favored by trolls.

Other trolls seem to just be hateful, negative people. I do not understand their motives for posting here. I don't want to waste my time trying to understand. Run the SOBs out.

But I don't want to mistake a bear for a troll. Some genuine PM investors see us in a long bear market and appear to be advising us to wait on our purchases. They have reasoning and experience to support their outlook. I am the eternal optimist, but I must discipline my response and consider their warnings. lately they have been correct. and with the availability of silver increasing lately, their advice has been solid.

I don't consider the FOFOA group to be trolls, though some do their fair share of troublemaking. Others seem reasonable and simply want us to persuade us buy gold instead of silver. Not bad advice for those who are risk-adverse.

Personally, I am moving toward that bear camp as we watch the CFTC do-nothings, the corruption, the manipulation and the powerful people with unlimited money who are keeping this system afloat. They are bailing the ship furiously, but keeping it on top thus far.

I think the sinking will happen suddenly and over a weekend. We will awaken in a new world on a Monday morning.

I argue that the BRIIICS countries also do NOT want to accelerate the buying so that they can continue to load up at cheap prices for the gold standard that approaches. Nobody with money who is expecting the gold standard wants higher prices right now--just us small time metals investors who still think this is a way to get rich quick. I do not expect a sustained rally in price up through $40 for AG or $1800 for AU until the cupboards are bare.

Now is the time to load up. Premiums say metals are in shorter supply than the spot price says. Get it while you can and hold on for the long haul.

Beware the sophist!

On th' other side up rose
BELIAL, in act more graceful and humane;
A fairer person lost not Heav'n; he seemd
For dignity compos'd and high exploit:
But all was false and hollow; though his Tongue
Dropt Manna, and could make the worse appear
The better reason, to perplex and dash
Maturest Counsels: for his thoughts were low;
To vice industrious, but to Nobler deeds
Timorous and slothful: yet he pleas'd the eare,
And with perswasive accent thus began.

The sophist is graceful, beautiful, dignified, and persuasive, but false, hollow, fearful and slothful. John Milton called BS on this type in the 17th century, yet still he slips past the guards and spreads lies. Often even getting elected.

Antrobus
May 14, 2013 - 12:22pm
Hagarth
May 14, 2013 - 12:22pm

@Zman Oil

One of the problems with that is OPEC is having structural problems. Seven out of the 10 member states have conflicts occurring within their borders. This makes for a dicey proposition for Oil companies to continue resource extraction and drilling operations. It not safe to send men out, if hostilities continue and governments cannot quell the violence government stability becomes questionable. Changes like we saw in Egypt can happen quicker than anyone expects.

Rui
May 14, 2013 - 12:19pm

@Indenture - Theory VS reality

Quote: "I see the Euro mandated to keep inflation at 2%. Yes, every other currency can print away their nations debts because they are single currencies representing a single nation. But the Euro is different."

So you think people would trust the mandates from these EU governors who just recently stole Cyprus savers' money (in addition to the other nonsense they have done since PIIGS crisis no less)? If they have told you in your face they are "willing to lie when it becomes serious" then why do you have undying faith in their mandates?

And especially for this "2% inflation" thing. Who in their right mind would give up the depreciation-proof gold for Euro that inflates 2%? If I run a bank that charges a negative interest rate, would you rush to open an account in my bank? Well, you would not be any more willing to stop by my bank than the rest of world willing to depart their gold for your beloved Euro. Look at the real world, not theories on paper.

Quote: "So why is the Euro different? Because when the system crashes a currency will be needed to bid for gold. A currency gold trusts."

After Dollar loses its GRC status, gold will take its place as it neither carries any counter-party risk nor inflates. A currency gold owners trusts is gold itself. If you wanna buy foreign nations' export, you pay them gold(not Euro or any currency). Gold will simply flow from debtor nations (e.g. PIIGS) to saver nations (e.g. BRIC). Euro is just another local currency that gets ignored in the future global trade.

Well there's a way to make Euro as attractive as gold, which is setting up a hard link w/ gold: this xxxx fixed amount of Euro can buy an ounce of gold. Now your Euro would look good as it ain't depreciate every year. But NO! You FGers insist it must inflate 2% b/c of some banker propaganda. Alright, you wanna shoot your own foot then fine. That kinda Euro would simply be ignored in future international trade.

Just A Regular Guy
May 14, 2013 - 12:17pm
AlexCojones
May 14, 2013 - 12:17pm

Logical Mensan Conclusion to Commodity Spurt?

Regards commodities.

I think Turd has lured us into drawing our own conclusions - to think for ourselves - like an inspirational professor rather than a droll troll.

I simply intend to follow his merry lead - and that of BRAZIL, RUSSIA, INDIA and oh yeah, CHINA.

In conclusion, are the BRICs buying the effing dip (by the tonne) but not Bloomberg or Goldman? Bwahahahaha. All I need to know.

So logical even a Mensan can understand it.

vonburpenstein
May 14, 2013 - 12:16pm

i aint no menza mimber.....

.....butt i dew no dis....DON"T NOBODY KNOW NUTHIN!

ah, ahh, ahhh, ahhhh, ahhhhh, ohhhhhhhhhhhhhh

ah, ahh, ahhh, ahhhh, ahhhhh, ohhhhhhhhhhhhhh.....what it's like watching things each week in the metals world.

You know what, I bet a bunch of folks are like me...they heard about silver a few years back, did some research, seemed to make sense, made a purchase (or two, or ten) and now you're like - FUCK! Anyway, I'm still glad I got some but going forward I'm just gonna pretend like I lost a bunch of money and start fresh - and only invest in what I know that I know that I know. Coming here daily has its benefits as I'm much smarter (esp now knowing I was hanging with a bunch of genius').

And here's my one and only prediction...whatever's gonna happen aint gonna happen the way we think and for sure not as fast....I'm gonna go sell some more houses because that's what I know. Takes a while to re-inflate a bubble...

PS....Can't one of us do some research and find someone who's a friend of the guy who decides how the .40-.75 swings are gonna go each day and then let us know ahead of time...this would seem to be a better tactic than pontificating daily...

hai
May 14, 2013 - 12:14pm

Video: Zephyr Management’s Managing Director Awad Explains Why

Video: Zephyr Management’s Managing Director Awad Explains Why Gold Hasn’t Done As Well As History Suggested

https://www.hardassetsinvestor.com/videos/4792-video-zephyr-managements-...

zman
May 14, 2013 - 12:10pm

I thought copper and oil

I thought copper and oil inventories were very high at the moment, and with global economies struggling, this would suggest lower prices in the future.

AlexCojones
May 14, 2013 - 12:08pm

Paging Katie Rose - London Calling: Bring George PRONTO

Commodities come in many shapes, sizes and forms.

George the Goat, the Fence-Climbing, Prodigious Breeder of Nipple Nuzzling Offspring for Overworked Katie Rose, might be an ENORMOUS boost to the City of London and all of England. Just get his fence-climbing little butt onto a plane and start breeding.

Sometimes a commodity just needs a "Jump start"

UK Lamb Births At 30 Yr Low After Drought, Rain, Snow

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