“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


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Thursday, January 12, 2012

Gold, Silver and Copper responding to low interest rate environment

All three of the above commodities are responding to news today that inflation in China is supposedly slowing somewhat (one always has to read these numbers with a healthy dose of skepticism as the Chinese are becoming almost as adept as US official-sector statisticians). Also adding to the mix is news that the ECB will keep interest rates low and would not rule out additional rate cuts if necessary in their view.

This is music to the ears of gold as it thrives in environments when there is plenty of room for more liquidity. The thinking in regards to China is that they have room to back away from any rate hikes and actually ease credit restrictions which had been put in place over the last year as the authorities there grappled with inflation problems.

Copper liked the news very much as traders there are viewing the news as positive for future demand if credit stays easy.

Note that in this environment silver is outperforming gold. That will continue as long as traders adopt a psychology focusing on future inflation as a result of easy credit instead of the opinion that deflation is the evil genie to be focused upon.

We are basically back to the risk trade today as most commodities are higher (crude oil continues its Yo-Yo-like trade as it is now higher) as the US Dollar sinks back down while the Euro rallies a full point. Grains are dragging on the commodity indices however as a USDA report has sent corn limit down this morning with spillover being seen in the Soybean market. Wheat bulls were also kicked in the groin by the same report showing larger-than-expected supplies of wheat. That news is good for consumers but disappointing for many farmers who are probably looking at corn with a handle of "5" in front of it unless some sort of crop scare down in Argentina surfaces.

Gold has pushed through $1650 and run as high as $1663 but has fallen back from its best levels. The bulls are performing but need to keep it above $1650 to see it run to $1675- $1680.

If Silver, and this is a big "IF", can hold ABOVE $30, it has a very good shot at seeing $32 relatively quickly. It has been unable to hold gains above $30 for some time now so such an event would signal a shift towards the metal by large speculators and hedge funds. We will see how it fares the remainder of the session.

7 comments:

  1. FIRST!......oops wrong website.

    thanks dan.

    ReplyDelete
  2. Couple things come to mind:

    1) Just like I thought, China is reflating at all costs for it's 2012 "elections". They have publicly stated they plan to push investors into equities, which will support commodities.

    http://www.zerohedge.com/news/china-proud-announce-it-reflating-bubble-will-actively-push-investors-stocks

    2) David Rosenberg said as much that positive equity action leads positive commodity action.

    3) Gold and Silver are underperforming, and will catch a bid as "value" commodity investors step up to the plate and close the valuation gap.

    4) Europe finally put the last piece of the puzzle together with "successful" auctions of periphery soverign debt.

    5) And finally - we have those cockroaches at the bullion banks on the run! Keep the pressure up . PUSH IT UP!!

    ReplyDelete
  3. what a bunch of scumbags they were today. I watched tick by tick and they kept hammering it down, no matter what the correlated trades were doing.

    We're gonna need a little help from our friends to blow those bots out of the water once and for all.

    ReplyDelete
  4. I like this post, really great, christian louboutin will continue to focus on it.

    ReplyDelete
  5. the above post is a bunch of junk Dan....selling shoes.

    ReplyDelete
  6. Hi Dan,
    Sold as I said some gold just under the ma150 daily (or 175 on futures) which was on the 1665 level yesterday.
    One can choose to ignore this inflexion point because it is dynamic or because it is not the traditional ma200, but I see it allowed me once more to sell at a top, after helping me many times buying at the lowest.
    On my side, as long as this ma150 daily is a resistance, the trend is not bullish yet, just neutral and into consolidation mode, and I just saw a pullback on the line, no matter where the ma200 is.
    Not only the ma150 are on the 1666 levels today, but we have the daily Bollinger, and the weekly ema15, which I use as a signal for the end of retracements.
    Thanks for your insights, and have a very nice weekend all :)

    ReplyDelete