Hammer Time

Wed, May 29, 2013 - 11:56am

Just because I've always wanted to post this.

But before we get to "Hammer Time", a couple of other items first.

Two weeks ago, we characterized the April NFP #s as the gift that keeps on giving, just like The Jelly of The Month Club. https://www.tfmetalsreport.com/blog/4713/it-edward More evidence of that has appeared over the past few days as the 10-year note has completely fallen out of bed.

Once again, this move in rates can be traced to the BLSBS report of Friday, May 3. Since then, the note has fallen four points and now rests near support at 130, which corresponds to a rate of about 2.15%. This level may hold but I suspect that it will not. More likely is a drop to what appears to be critical support near 127-128.

But here's the deal. There is no way, no how that The Fed is going to allow support to fail, thereby letting 10-year rates back up to 3%+. Not happening. Besides the detrimental impact higher rates would have on the U.S. budget deficit and debt, higher rates would also crush any nascent economic recovery.

Already we are seeing things slow down in the U.S. (Even that statement is nonsense because "slow down" implies that previously things had been really cooking.) Check this headline from ZH just this morning. https://www.zerohedge.com/news/2013-05-29/cash-and-tarry-mortgage-applications-plunge-fastest-rate-2009 And, as discussed last week, if the economy was booming and housing growth was robust, demand for inputs such as lumber would be soaring and soaring demand would lead to higher prices. Right? Right?? Apparently not. Here's an updated chart of the cost of lumber.

So here's what's likely to happen in the weeks ahead:

  • The 10-year note may fall a bit farther but then it will bounce and begin to rebound
  • Signs that the U.S. economy is weakening will get more mainstream press coverage
  • This will likely begin with a May NFP next Friday that comes in "weaker than expected"
  • A continuation or even increase of QE will shove stocks even higher
  • Gold and silver will finally stabilize and begin trending higher, the start of a summer rally

But first, Hammer Time. Now don't get all freaked out. I'm not talking about another big drop. However, recognizing that all of this silly "tapering" talk will soon be a thing of the past, the metals will likely be shaken out one last time over the next week or so. How much? I would not be at all surprised to see gold trade down toward $1350 again and perhaps bounce off of there a couple of times. Silver could see at least a drop to $21.50 if not a double bottom near $21.

The most interesting thing about the two charts below is the contrast. Gold and silver almost always trade in tandem, tracing out nearly identical chart patterns. But look below. Gold is in an "ascending triangle" while silver is in a "descending" one. Isn't that odd? Looking at these, I'm guessing that the bottom will soon drop out for silver and we'll get the drop toward $21.50, and maybe $21, that I mentioned above. Hammer time.

So, anyway, we'll see. The nice thing for me about predicting a drop in price is that, when I'm wrong, no one is pissed off. Maybe I should do this more often?

One last thing, someone mentioned yesterday something about the CAD and how it's down since QE∞ began. I read that and thought, "you know, that IS pretty funny". So here it is, in all it's glory. If ever there was a chart that showed you how utterly FUBAR the current markets have become, it's this one. Since the time that The U.S. Fed embarked on a printing regime where they are actively creating from whole cloth $85B/month in new greenback, The Canadian Dollar (which is not being actively devalued) is down over 7%! HOLY REALITY DISCONNECT, BATMAN! I know that I shouldn't be laughing. I have a lot of Canadian readers and I should have some sympathy but this is just incredible.

OK, that's all for now. Have a great day!


About the Author

turd [at] tfmetalsreport [dot] com ()


May 29, 2013 - 12:02pm


Well, it looks like Gold & Silver Maple Leaf sales increased substantially over last year. The Royal Canadian Mint updates their sales figures on a quarterly basis. I just put a new post titled:

Gold & Silver Maple Leaf Sales Increase in a Big Way


I believe this will be a NEW RECORD YEAR for sales of both the Silver Eagles & Maples.

El Dubya
May 29, 2013 - 12:04pm

MC Hammer lost his fortune

MC Hammer lost his fortune without investing in precious metals.

May 29, 2013 - 12:06pm

4th surely not!

Never before

May 29, 2013 - 12:07pm

Home Prices are rising

on the high-end homes. It sure feels like a repeat of 2006 times. However, this time the vacancy in office and business space is now VERY HIGH. I can't believe how people fall for the same things over and over.

Maybe, it's just "smart" funds leaving equities and going into "real" assets?! Even at high prices, homes are better than overpriced paper. Although, PMs are the best store of value in an over-valued, disconnected, soon to crash world...

May 29, 2013 - 12:07pm

All eyes on June delivery.

All eyes on June delivery.

May 29, 2013 - 12:08pm

Top 5...a shame that didn't

Top 5...a shame that didn't translate into raffle results! As they say, some days you're the pidgeon, some days you're the statue!!

May 29, 2013 - 12:09pm


Turd, would you not agree that the NFP numbers will be a cast iron smash on the metals?

Don't cast a clout until May (NFP numbers) are out!

May 29, 2013 - 12:14pm

Indian Mutual Funds say investments won't be hit by gold loan ba

MUMBAI: Reserve Bank of India's decision to ban banks and NBFCs (Non-bank financial companies) from extending loans against gold exchange-traded funds and gold mutual funds will not have any material impact on these investments, industry players have said. "Leveraging gold ETFs to buy other asset class or more gold is not a distinct phenomena here. Most of the investors invest in gold ETF kind of products for portfolio diversification," IDBI Mutual Fund chief executive Debasish Mallick told PTI here today. Yesterday, the Reserve Bank had asked banks and NBFCs not to extend loans against units of gold exchange traded funds (ETFs) and gold mutual funds in a bid to contain bullion imports, which is one of the major factors behind the high current account deficit which is estimated to cross 5 per cent of GDP in 2012-13 fiscal. Mallick also said that when the outlook seemed to be bearish on the gold prices front, investors would be less inclined to get loans against their ETF holdings. Assets under management (AUM) in the gold ETF segment stood at Rs 11,648 crore by the end of March quarter. While holding of companies stood at Rs 6,345 crore, retail investors were second with a holding of Rs 3,124 crore in the gold ETF category with rest coming from banks, foreign institutional investors and wealthy individuals. Referring to this issue, a top official from Quantum Mutual Fund said leveraging through ETF was very less in domestic market. "Unlike developed economies, leveraging of gold ETF units is very small. So, I don't think, investors would shy away from investing in this segment due to the RBI decision," Quantum Mutual Fund chief executive Jimmy A Patel said. Patel also said that despite the fall in gold prices, there is no significant outflows. Gold price is hovering around Rs 26,000 per 10 grams now from the peak of around Rs 32,000, prompting many investors globally to liquidate their gold ETF holdings. Meanwhile, another fund manager from a mid-size fund house said that though RBI's decision would not have major impact on retail investors, some institutional investors might get impacted due to this step.

Mr. Fix
May 29, 2013 - 12:14pm
May 29, 2013 - 12:15pm

Canadian Dollar Down

Many contributing factors.

- BOC stands pat on interest rates today.

- A Housing bubble that is slowly deflating and IMO about to burst on the next economic shock.

- Hedge fund shorting of the cdn dollar.

- Resource driven economy, Oil, Lumber, etc all down.

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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