One of the casualties of all this chatter about another round of funny money from the Monetary Masters of the Universe is the price of Unleaded Gasoline. Throw in a dose of tensions in the Mid-East on top of this, and you get a market that is clearly going to cause headaches for the Central Planners if they stupidly unleash another round of Quantitative Easing at the end of this month or early in September.
Consumers will soon be reeling from the effects of rising grain prices related to the worst drought in decades to have struck the critical corn and soybean growing regions of the US. The impact of this surge in grains is going to be most deeply felt later this winter and into early spring of next year as the poultry, pork and beef industry will have no choice but to pass this surge in feed costs along to the consumer. However, it will not take that long for the impact to felt as cereal, bread, pasta, etc, all start rising within the near future.
Consider this, the central bankers have not yet given the decided go-ahead for another round of bond buying and already we are watching the price of commodities moving ahead, right at the exact time that the US economy is on life-support, with its job creating engine having blown a gasket.
These meddling Central Bankers may feel it is their divinely-inspired purpose in life to create an environment of ever-rising stock markets, but in the process of so-doing, they have sown the seeds for the ruination of the middle class and have heaped another lead weight on those already struggling to barely get by.
Food and energy are the two essentials for modern life. They are about to get more expensive if Wall Street pressures the Fed and the ECB into another round of bond buying.
Take a look at the CCI Chart below. Notice that it has been in a downtrend since early last year. This time however it looks as if it is trying to change that. It is currently bumping up against an overhead resistance level near 565. Unlike the rally in July-Aug of 2011 and that of Jan-Feb of this year, which rallies prompty and abruptly fizzled out as prices then resumed a sharp fall, this latest rally is showing signs of "sticking" and moving sideways in more of a consolidation type pattern rather than a bear market bounce.
If this index takes out the key 38.2% Fibonacci retracement level coming in near 575, look for gold to break out above its resistance levels on the chart as well. Why? It will indicate that trader psychology has moved past any deflation scares and is now shifting toward the inflation front. Such an event would have to be accompanied by a breakdown in the longer dated Treasuries and bond markets.
Note what has been happening to the yield on the Ten Year Treasury Note over the past two weeks, but particularly this current week. It has managed to clear a resistance hurdle at the 1.7% level. We need to keep a close eye on this. If we are going to get a full asset shift away from bonds and a solid rotation into equities and tangibles, yields will continue to rise steadily higher as money exits from this sector. My guess is that the Fed is also keenly watching this particular chart. The LAST THING That they want is higher longer dated interest rates.
