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

Hagarth
May 15, 2013 - 3:15am

This is about preserving wealth.

Uh huh.......................feeling really wealthy right now..................found a new home to buy.

Chibster
May 15, 2013 - 3:56am

Here's Ron Paul's Broader Perspective

Been a while since I've seen a Ron Paul interview. Just found this vid and thought I should share in case any one else has not already seen it.

The fundamentals have not changed. I'm not selling any of my stack. I wholeheartedly know the financial system is rigged and distorted. The media is 'owned' and hiding information that they do not want the public to know. My children will benefit from this stack as the economic crisis is just around the corner.

Ron Paul on Gold No One Knows Value; I'm Buying - Bloomberg 4_23_2013

Video unavailable
Hagarth
May 15, 2013 - 4:00am

Nobody said Ron Paul Was a Genius

Maybe smart...but that's not rare. He may in fact be correct that no one knows the value of gold but what if the true price is 43.00?

Silver Alert
May 15, 2013 - 4:03am

Bo Baloney

said yesterday "Silver bulls can relax now."

SilverSurfers
May 15, 2013 - 4:13am

@Admin

Please confirm package received at trudville HQ, pm message works. thanks

previous post, and hes no dummy, I do have a personal letter from him in thanks, but at last check has lots of shares of deep storage.

Watcher
May 15, 2013 - 4:15am

So...

...so your a central bank of India or China or Japan and you have billions of dollars in treasuries in your coffers. Dollars that you want to get rid of...

...so you decide to spend those dollars on gold. Why not take a billion or two and short the gold market to work the price lower. And all the time you work the price lower you are buying the physical.

...so you already spent your money on physical. You're right. All that is needed is patience. There are nations and banks with lots of dollars that still need the physical. Do you have strong hands?

Hagarth
May 15, 2013 - 4:17am

@Karankawa That quote is from 1997

"The commodity value of gold was forced so low in paper currency terms that all of the new mined gold, going out some 10 years is spoken for."

=========================================

Date: Thu Oct 09 1997 19:00
ANOTHER ( THOUGHTS! ) ID#60253:

https://theprofoundstoryofgoldandoil.tumblr.com/

=========================================

We are not in the same Power State that we were in 1997, at least not on the surface of things. I doubt containment of GOLD could happen more than a few decades.

S Roche
May 15, 2013 - 4:48am

GLD & SLV Inventory Explanation...

GLD holdings reduced in the recent price decline but SLV not, why?

Here is some sensible analysis, for those interested: https://goldchat.blogspot.com.au/

atomic180
May 15, 2013 - 5:03am

Bo GESTE...

So much for WAG's...

S Roche
May 15, 2013 - 5:11am

Bo Po'd...

Another one bites the dust. Looking forward to an explanatory post.

btw, watching GOFO, prints in about an hour, almost negative yesterday. Rarely goes negative, but when it does: shorts are toast shortly thereafter.

https://www.lbma.org.uk/pages/index.cfm?page_id=55&title=gold_forwards&show=2013

That's why I thought Bo might stand a chance.

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