The reason? - the talk shifted back yet again to the US being the only major global economy in which long term rates were expected to rise. If those higher rates did not apparently impact the all-important real estate market, so the thinking goes, then rates have room to work higher and the Fed can indeed taper sooner rather than later again.
"She loves me; She loves me not; She loves me; She loves me not". We may see the exact opposite tomorrow for all that any of us know. Once again, we are back to FED-WATCHING. Sigh.....
The proof of this was the sharp selloff in the Treasury markets that dropped the long bond down over a full point and also sent the yield on the Ten Year Note back above the 2.5% level once again. It is currently up above 2.60% as I type these comments.
A rising US Dollar and rising interest rates sent gold lower with the market retreating from the zone near the 50 day moving average and thus unable to build on its gains from Monday and Tuesday of this week. Interestingly enough, the HUI is down quite sharply today (nearly 5%) surrendering all of its gains from yesterday and coming quite close to matching this week's low. It is still trading above that breakaway gap however. We'll have to wait and see if some dip buyers come in later this afternoon. For now, some of the shorter-term oriented metals bulls have been spooked out.
Silver is struggling to hold its gains above that key $20 level. If it can do that and do it convincingly, it can be construed as a moral victory for the bulls considering the sharp selling that is hitting the soybean market and a large number of other commodities in general. That macro trade of selling commodities in the face of a rising dollar picked back up again today with that housing report. If that trend continues tomorrow, it is doubtful that silver is going to be able to stay above $20. It needs help from a "buy commodities" theme and that is difficult to see if the Dollar does not weaken right away.
Crude oil looks as it is breaking down on the charts but there has been a rash of fund type buying supporting that market and whether or not that crowd is ready to give up on it just yet is unclear. From what I can see of the chart, if the price breaks below $104.25 or so, we could see a fair number of downside stops being hit with some of the funds exiting the market.
Moving back to the Dollar - it is not down quite as hard against the Euro as it is against the Yen today. Some of that is due to the fact that some economic data out of Europe was decent today. That is tending to hold some support under the Euro for the time being although the general theme of Dollar buying is dominating today's forex trade.
We'll see how Asia reacts on this retreat in the gold price this evening. I should note that while the spreads on the futures board are fairly tight, the futures board is not in backwardation. Thus there is no signal being given from the futures market itself that there is any shortage of gold at this time. That could change however but for now, nothing doing.
If gold is going to continue moving higher and not experience a deeper setback, it will be imperative that the price find support near the $1300 level if it does dip lower. Failure to hold there and it will see $1280. To generate a renewal of the upside momentum, $1350 needs to be cleared.
Here we go again.
ReplyDeleteAt the first whiff of trouble in emerging markets, credit markets, hinting at a potential "Black Swan" event, gold is the first asset class thrown over the side in haste.
However, retail stocks like Target and Best Buy usually remain unfazed from the initial selling in a stock market correction, as investors undeniably flee to the safety of the U.S. Consumer when all else fails.
And don't even get me started on the hysterical buying in AAPL, which is still up $125 from the start of 2011.
While poor gold is still struggling at that $1,300 barrier, where the "Angels" who have been beaten senselessly by the Cartel. Bruised, battered, and desperate to get out of the women's shelter after being knocked down from $1,650.
Anyone holding retail stocks in their paper E-Trade accounts are still sitting pretty.
Anyone who took direct registration of their gold stock shares are still down 70% and it could take 10 years to dig out of that hole.
Mark,
DeleteTaking direct registration of your shares DO NOT mean you have to keep them forever. You can keep them.... You can sell them. Please no confusion between having your shares under your name or broker name.
One more correction from your statement -because it is misleading...sorry but true!!- You should have your "holding retail stock" (those sitting pretty... like my 87 year old girlfriend and ready to die one of these days soon) under direct registration too. Jim's advice is for ALL shares not only gold ones, because when/if your broker goes down and needs to be "saved" Uncle Sam will use YOUR shares (the one registered under your broker name) to get it out of bankruptcy and it will make no difference if it is gold or retail stock.
Looking at daily gold chart it appears that the upward channel is between 1295 or so which also coincides with the "breakaway" gap and the upper limit of around 1355 or so. One day doesn't make a trend and at least for now it's good to have a short term correction which includes closing the gap.
ReplyDeleteGold hardly ever moves straight up run unless it's in a parabolic move which often ends badly and begins a long term consolidation.
On the weekly chart it does appear gold was stopped from moving past the resistance of around 1320 which needs to be cleared but if we break the daily support of around 1295 or so we can also see gold test new lows. So far daily up trend is our hope and that's one word I don't like using.
I suppose one can use charts for any argument but IMO I would like to see a weekly close above 1320, actually above 1328 as xx28 had always seemed to be a resistance point.
1333 is a pt to watch.... The convergence of 3 trendlines... 1) the top line of the parallel channel formed by the rally from the 1180 low; 2) the horizontal support shelf from mid-April; 3) the downward TL starting from the May 3 high of 1487.62
DeleteOn the downside, $1267 is crucial... a breach below that indicates the rally is behind us and 1151 is next target.
Availability of of 1-oz bars from my suppliers is limited. I used to be able to choose the refiner. Now, instead you must just accept whatever they can have or can get.
ReplyDeleteAlso the premiums are higher. So now you pay more and get no selection.
Question... How can a nation of mostly part-time workers employed in low paying jobs afford to buy new homes?
ReplyDeleteI guess they are over-mortgaged, like in the last decade?
(According to the stats, on average this year only 22k fulltime jobs have been created per month; the rest were p/t jobs.... and jobs created were predominately in the 5 lowest paying sectors)
@J: Looking at the graph of new home sales (via ZH today), they are up to about early 1990s levels, so there are about 10% more people in the US. If you add to this huge amounts of existing foreclosed home inventory that are held back, then couple that with institutional investing in spec. real estate, + threat of rising mortgages after 70 year lows, it makes sense.
Delete5 days left in the month for pm's. looks to me like inside month, which means indecision sports fans. funny thing about today's action in that despite weakness in Yen, no strength for once in Nikkei; stay tuned and we shall see; evidence mounts daily that China story is R.I.P. and that legendary short seller Jim Chanos is right; steve in sparks and that is all
ReplyDeleteAt the moment, Spetember 2013 is backwardated all the way through Dec 2014. Just a little, but backwardated nonetheless.
ReplyDeletethere is NO mkt out there and your argument is not correct; if you were truly bullish, you would bull spread the gold, which is to say you would sell into the front and buy the back; get it? unless of course you were bearish gold and expected short rates to go negative; steve in sparks
DeleteYes Steve, I'm fairly sure I get it. That's why backwardation in gold, a commodity that can theoretically never be in short supply, is so incredibly rare.
ReplyDeleteand yet, it has consistently appeared for hours and days at a time over the past few weeks.
Norcini, MISH, and others will dispute backwardation until the cows come home and so will yours truly. Then again, the perma bulls over at KWN and Mineset and so forth who drunkenly throw out the most outlandish bull calls , will say just the opposite. maybe I am wrong, but I do not think so. steve in sparks
ReplyDeleteWell I can look at the CME gold futures and discern of the near contract is more expensive than forward. You can't dispute math Steve. You can dispute it, but that doesnt make you correct.
ReplyDeleteStuart;
Deletehere are the closing prices for the various gold contracts on the Comex board:
August Gold $1319.50
December Gold $ $1320.1
February Gold $ 1321.10
June Gold $ $1323.50
There is NO BACKWARDATION STRUCTURE on the Board. Period!
Every month on out is running contango. The spreads have tightened up somewhat but are not in backwardation.
Many markets have spot market prices trading above the futures contract for near term delivery. That is not unusual as demand in some areas can be strong and impact the basis in that locale. But if the futures board is not showing a backwardation structure, it means nothing.
I hope this is the last post I have to put up about this nonsense. AS I have stated ad infinitum, ad nauseaum - IF and WHEN the futures board were to move into a true backwardation structure, I will duly note it here and will certainly then pay attention to it because THEN it will mean something.
Well Dan, I didnt say closing price. I've been watching the board all day and the curve was backwardated pretty much all day. Sorry, you're wrong.
ReplyDeleteStuart;
DeleteBefore you make a complete fool of yourself, you should know that I have a permanent indentation in my chair from sitting here over 20 years watching price action every single market trading day all day long.
What has you confused ( and I might say you should show some respect and not be so damned arrogant ) is that you are looking at LAST TRADE prices and not BIDS AND OFFERS.
The mistake you are making is that of a novice who does not understand that the liquidity in the off months and in the distant months is no where near that of the most active month. There are intervals in which NO TRADES whatsoever will be executed for those back month gold contracts all the while the active month is trading many times a minute. That will leave you with last trade prices that do not move all the while the more active months are moving and trading many times over.
Check the bids and offers tomorrow and you will see. By the way, I am currently sitting here watching the trade in the Asian session and not a single one of the nearer dated contracts is trading ABOVE the more distant ones.
In the meantime, tone down your arrogance or your comments will all be deleted. I do not suffer fools at this site.
And incidentally, all that matters in a backwardation market is the CLOSE. True supply shortages do not show up for 15 seconds and then disappear by the time the market closes.
If you want to learn look at the soybean market which has truly been in a backwardated structure and is now losing it.
Consider this my last response to you on this subject unless you get uppity and snotty in which case your comments will be deleted.
Why is it that all that matters is the close? Why is that the case? ?And I am well aware that some contracts are very thinly traded, and I know how to look at volume. The fact is that even the heavily traded contracts were trading backwardated pretty much all day. If you read my initial post, I did stipulated that the backwardation was minimal, but it certainly lasted a heck of a lot more than if seconds. We were backwardated out until 12/14 for over three hours today. If you want to boot me, its your site and I certainly understand, but that doesn't mean what I'm saying is incorrect. It is not.
ReplyDeleteStuart - do you want to learn or not? If yes, then fine - I will happily teach you at no charge. If not, then please leave the site.
DeleteYour posts reveal that you have not the faintest clue what a backwardation structure in a market means. It is not some fleeting thing that comes and goes and one might happen to miss if they leave the computer to take a bathroom break and the prices change for those few minutes.
It means that that the commodity is in a serious short supply which is not able to keep up with current demand levels. What the futures board then does is to move into backwardation to entice sellers to part with the metal RIGHT THEN AND NOW instead of holding onto it later in hopes of a better price in the future.
That is done by pushing the price higher ABOVE The back months and taking away the incentive to hold or store the particular commodity.
Now how in the hell can a market be in such short supply, with such unstoppable demand, that by the end of the day, all of the futures contracts are in a contango structure? Do you realize how foolish you sound by trying to press this point?
A market with a true supply shortage will REMAIN THAT WAY all the way into the closing bell and will maintain that structure for as long as is necessary for the current shortage to be alleviated.
According to your thesis - gold was in strong demand, so strong that the supply could not meet it, but hark, suddenly, that all went away for a few minutes. Oh, no, wait a minute, I made a mistake... the supply shortage just kicked in again... whoops, that went back away again... and over and over again.
Stop with the foolishness and learn something and be the wiser for it. Then again, you can always hold onto your foolishness and let your pride keep you from learning something and perhaps learning to read the markets a bit better in the future. Keep in mind I am not charging you a dime to impart this stuff to you. At the very least, you could show some respect and not be so damned bullheaded.
You keep saying "A few minutes" why do you keep saying that when it was hours, not minutes? I am well aware of what you're saying, it's not a difficult concept to grasp. But you know, as well as I, that any backwardationin gold, I repeat ANY backwardation is gold is extremely rare. And the fact that it has been slipping into backwardation for HOURS not MINUTES, is also extremely rare. The fact that the curve is in a position to slip in and out of backwardation DAILY< is also VERY rare. You believe it is of no consequence, I disagree. And for the record, you have repeatedly insulted me, I have simply disagreed with you and your dismissing the fact that this happening repeatedly, for HOURS at at a time is insignificant. Now you can go ahead and call me some more names, but for the record, I have not treated you nearly as disrespectfully as you have treated me. If I have, I ask you read my posts and show me where.
DeleteHi Stuart,
DeleteDan is only saying that a real backwardation starts at least at the close, on a daily time unit, and that any inferior time unit, even the hour, is mere "noise" but no real backwardation. Backwardation is the consequence of a phenomenon. The backwardation you mention on a hourly time unit doesn't seem to be enough to signify this phenomenon is occuring.
So, your position is that you choose to take into account minutes or hours of backwardation intraday, which is your choice.
I think by now, both positions are clear and it's your choice not to agree with Dan in the end.
I'm no specialist, but I think you are doing it at your own risk. It's your call.
Please don't lose your tempers...
Hubert du Haut;
DeleteThanks as always for your comments. What I am actually saying however is that backwardation is not happening at all on the Comex, not even for a for minutes. I was using absurdity to illustrate the absurd.
For example - here is the latest series of bids for the August, December, February and June gold comex contracts in order as of this snapshot.
August - $1324.2
December $1325.1
February $1326.1
June $$1328.4
As usual I am sitting here and have been watching this all morning as well as a goodly portion of last evening's trade and not once has any nearby contract had a bid higher than a back month.
There is no backwardation occurring on the Comex at this present time for any time interval whatsoever.
I am attempting to teach folks about this so as to prevent the spreading of more disinformation that so frequently afflicts the gold bug community. This is the reason why more often than not, many of them get discredited and end up doing disservice to their cause.
The reason why some contracts occasionally have a last trade price higher than a more distant month is because the more distant months are not trading as frequently because there is no liquidity in those months.
when you have a volume of trade of 182,000 in a nearby versus 2,085 in a more distant February for example - there are going to be times when the last trade price of a more distant month might be at a discount to a nearby. That is merely a function of low liquidity. If you want to see where the contract might trade IF AN ACTUAL TRADE OCCURRED, you have to look at the Bids and Offers and see where those are currently sitting.
In the time it took me to type the above comments, here is now the latest series of bids...
August $1325.3
December $$1326.3
FEbruary $1327.4
June $1329.7
Again, notice the market is in contango at all times. There is not a single instance of backwardation.
This might help dispel any confusion about this current misinformation going around but in all honesty, I doubt it. Most gold buys are pretty closed mind about this stuff having made up their minds beforehand, truth be damned.
Hey Stuart, did you ever read "Nobody Would Listen", by Harry Markopolos? He had a funny story where he took 6 guys from the SEC to Fenway and it took 5 of them until the 7th inning to figure out where 2nd base was. In the 11th inning, the 6th guy says, hey, I got it, "there's 2nd base"! Was that you, Stuart?
ReplyDeleteDan,
ReplyDeleteI want to thank you for this post. For the first time, I finally somewhat understand backwardation! Everyone that claims gold is in backwardation uses prices AT A POINT IN TIME to their advantage like politicians use stats to their advantage (manipulation of data, or garbage in/garbage out).
On the flip side, people like you that have kept saying it is NOT in backwardation, have not explained truly what backwardation is to beginners like me. So I have been sitting here scratching my head (in the birthing room of the hospital awaiting my first boy) trying to figure out how the heck objective arithmetic can be subjectified (my new invented word) by individuals pushing their own point.
So thanks!
Hi Nate. Actually, Dan has done this exact exercise before--perhaps in the comments section. Anyway, it was a few months back when other people were proclaiming backwardation.
DeleteDan, do you have a view on what people are pointing out as rapid depletion of comex inventories? (I may have missed it).
MDLGTO;
DeleteYes, the depletion of the Comex inventories is far more significant than the backwardation, that does not exist,chatter.
I for one will be curious to see how the delivery process for August goes as that will start next week.
If we were to have any sort of delivery issues, that would see the August contract run to a sharp premium over the December and we would then actually get a true backwardation.
For now, I am more interested in whether or not the Dollar continues to strengthen or if traders are going to start focusing on the upcoming US debt ceiling issue. We went through that back at the end of last year and here we are hitting right up against a ceiling again.
At some point, investors and traders world wide will begin focusing on the size of the US debt but as short-sighted as today's investors are, they will ignore it until it forces itself upon them.
my kids will certainly have to deal with it however.
Nate - congratulations BIG TIME on your first boy!
DeleteIt is he and his generation who will pay the price for our generation's profligacy....
Thanks, Dan. My 15 month old is gonna be shocked when little man comes home. Getting expensive buying them gold to help protect their future! We are ALL going to pay for our generation's profligacy, but they will pay more. I'm reading 1984 right now and am blown away by Orwell's foresight. It's like I'm reading today's news...
Delete15 months? Same here :) :) Congratulations.
DeleteOrwell was an optimistic.
He forgot that the population would be totally debilitated.
http://noam-chomsky.tumblr.com/post/13867896307/noam-chomsky-10-strategies-of-manipulation-by-the
Thanks Hubert and Pred,
DeleteAbout an hour to go:) Noticed the headlines today...
YAHOO Finance: GM profit beats on strong US demand
Drudge Report: GM Profits Plunge...
I kid you not.
lol, as long as it is not in the very same newspaper... (but I think it happened in Bloomberg :))
DeleteStill no mention on ANY site about the $17T debt announced at the last Bernanke testimony. JS Mineset did post the picture of the television screen I took, but still no CHATTER... Mind-boggling.
ReplyDeleteHi Dan...
ReplyDeleteI don't think the high housing cause the bull off guard.... whether it is bull or it is bear... it is control by market maker..they play both side.
Well ... base on TA ... the short need to stop loss at that level ... base on volume .. it do the math .. they just creampie all the short .... FYI ... there is little blood left for the bull HOWEVER ... I will leave this part for myself .
So daily news mean nothing in reality is just sentiment and short term situation...
cheer ....
Hi Nate ...
ReplyDeleteCongratulation on your new born ...
For investment idea.... there is lot of thing you need to learn not just TA .... Chart and reality is different thing ...
Of all indication , the best is fundamental and timing.
For example, if there massive short in near month, it is important to see the availability of the commodity in near month. at the delivery point the situation might cause exposition to either side .
Like rough rice, this structure is in extreme bearish ...
http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/rough-rice.html.
Always remember , undervalue commodity especially below cost of production will create future delivery problem as below cost of production automatic remove excess through market mechanism .
For the timing ... I would really would like to help you out.. but it is most value tool for me .. just remember that everything have it cycle ... master this , you will get 80% right most of the time ..
Dan,
ReplyDeleteFirst, I have to say THANK YOU for being so willing to share your knowledge. I have already learned so much but still feel incredibly lost. It's been difficult to find good material that explains how to trade commodities and everything that goes with it like technical analysis. I have a Scott Trade & E-Trade account but that's about as much as I know. Can you recommend any books?
wackzingo -
Deleteyou're quite welcome... for a good primer on TA in general there is an old but good book written years ago entitled, "Technical Analysis of Stock Trends" by Edwards and Magee.
It is dated but for an introduction, it will give you the basic nuts and bolts and allow you to obtain a scaffold upon which you can build in the future as your knowledge increases.
try that for a starter....
Dan
Just watching silver as we are in a triangle between two short-term trends, one up (red), one down (blue), maybe the way out will give a clue about gold as well.
ReplyDeletehttp://s21.postimg.org/405tk232f/slv.jpg
Dan - Thanks! I'm continually astounded by the generosity of your posts & willingness to answer questions.
ReplyDeleteDan,
ReplyDeleteisn't it strange to see the dollar going down while the 10 Year Treasury goes up?
It seems to me that higher interest should be positive for the dollar as higher rate means more dollar buying. Is it possible that despite higher rates foreigners are still not buying treasuries which seems to explain the lower purchases of treasuries as seen in recent stats?
IF this is the case there is no way for the FED to reduce its purchase of treasury (on the contrary as the FED would be the lender of last resort) and the "tapering" story is just that a story. This is what I think is happening and why I said a few days ago that checking the price of gold, the USD AND Treasuries is so important. IF I am right gold should go a lot higher and the USD down.
The fact that home builders are down and comments from executives (home builders) indicating that higher interest rates are putting sales down are an indication that something is terribly wrong and the FED is powerless.