"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

Trader Dan's free work will soon be available at www.traderdan.biz

Tuesday, September 17, 2013

Commodity Sector Stagnating

I mentioned in some recent posts that gold is having trouble sustaining any rallies due to the fact that as far as the bulk of traders/investors are concerned, inflation is a non-issue right now. You have falling grain prices as the market gears up for large harvests and now you have falling crude oil prices as well. Gasoline is backing off as the driving season/ vacation time is finished. The softs are struggling with coffee prices and sugar prices unable to get much going in the way of upside action and you even the livestock markets looking like they are liable to run out of upside. In short, commodities in general are seeing little in the way of strong buying. This is negating any influence from the sector as far as contributions to higher food or energy prices.

As you can see from the following chart, the commodity sector is heading lower once again. Note that the index here is trading below the 50 day moving average ( BEARISH) and is sitting right on top of the 100 day moving average. If it cannot find its footing there, it has more downside to come. That will not help gold but especially will it not help silver which needs an inflationary environment in which to thrive.

Throw on top of that an abysmal employment situation and a Velocity of Money reading that is moving lower, and the ingredients for wholesale inflation are not anyway in sight.

Gold, being a hedge against inflation, is therefore losing one of its fundamental pillars of support.

If we did not know this already, we were reminded of it today when the inflation number for August showed a mere 0.1% increase from the month of July, shy of the 0.2% that the Labor Department reported for the month of July compared to its previous month of June.

This sets up a rather interesting scenario was the markets focus on the upcoming FOMC statement for clues of "THE TAPERING". If inflation is not a threat based on the government's numbers, then will the Fed feel any particular urgency to go ahead and announce any tapering whatsoever? Given the weak employment readings of late, they may just stand pat and do nothing but repeat the same old mantra about monitoring economic data for clues to the economy's strength, etc.

IT seems as if the number floating around out there is a $10 billion reduction in the amount of bond/MBS buying from the current $85 billion. But that may prove to be too much. It is hard to say so we will have to see what the doves say and what the hawks say and go from there. If they announce what amounts to a "dovish" statement, gold may get a bit of a relief rally but until the rest of the commodity sector sees fresh inflows of speculative money, rallies in gold look like they are going to be sold at this point with equities remaining the go-to investment of choice for the big players.


  1. very heavy mkts to say the least; swb

  2. XAU and HUI seem to have caught a bid today slight but against the trend, someone or something putting their toe in the water!

  3. I'm guessing they will come out and do some taper talk, gum flapping, or as you say Dan - jaw boning, the metals will get sold off to say 1280 for gold and 20.50/21 for silver then rally back.

  4. And I saw somewhere that Gold in Rupees is expensive which could discourage Indian buying. But, I think, what else would an Indian farmer buy (who uses precious metals as his Bank)?

  5. Get your fading shoes on ladies because Egon says no tapering! swb

  6. Huge sell signal in gold. Egon the contrarian indicator Greyertz is spouting his nonsense again. I'm sure Egon is a nice guy, but he's clownish regarding markets.
    Also, why is it to be a member of the gold bug club, you have to be super bearish on stocks? Although to be a stock bug club member, you have to be super bearish on gold, so I guess there's the answer.
    I'm just looking to make money. If the trend is up, I'm focused on being long, if the trend is down, I'm looking to be short. Simple as that.
    Bringing personal biases into markets ensures losses.

  7. Egon is probably short gold. By the way they are going to taper.

  8. Tom and Concord and Dan; Pretty soon they will not be good fading barometers like Maguirre because, alas, all good things come to an end, but for now they are very valuable, so let us all see if they can ever find a new fundamental for us all; we could go sideways from 1180-1550 for a long, long time now boys; swb sparks

    1. steve,
      singing same tune regarding fundamentals, "there is a major shortage of physical gold (Greyerz)...."there is virtually no physical gold available at these prices"(Greyerz).

      Better get some, Steve before there is no more left in the vaults. Hurry!! hee hee ;-)

    2. Jim & Steve - do you read FOFOA blog? See FOFOA's latest post on TF & Sprott's 'smoking gun' about Central Banks not having any gold. Good logic in my opinion destroying the 'no gold left' argument.

      IMO also extreme hubris thinking that the Mcguire KWN news would move the gold market...more likely someone had inside information on Summers being out.

      I would kill for a few years of 1180-1550.

  9. Steve, How in the world are gold bugs going to be able to survive 2 more years of range trading.
    Not once did the usual suspects ever advise folks to sell into strength and lighten positions. Not even recommend hedging into the big rallies. Only buy advise - that's unforgivable IMO.

    Sinclair seems like a truly nice guy, but a comment that he made quite a bit ago that there were only 2 other people in the WORLD that knew as much about gold as he does. What a moronic comment to ever make - for anyone involved in markets.

    1. Re: to survive 2 more years of range trading...

      Guess the answer is to not be a "gold bug", ie just have interest in making a profit because that's the reason why you are investing or trading in the first place? If the money is going to be made shorting based on price action and technical- then go short. If the money is going to be made going long- then go long. No need to have loyalty to this market because being a gold bug implies just buy, buy and buy! this could mean hefty losses

  10. Gold finally broke 1300, so we need to watch, as it will first take some time and more downside, for a short term selling climax to set up. It's a process that has to play out, but some of the conditions are now appearing.
    Good job Egon.

  11. Sinclair missed the call in 2008 and in 2013. Both years he was jumping up and down days before the crash in 2008 telling "this leg is not over yet" and in 2013 proclaiming gold wouldnt see below 1600. I have a very good memory. Jim is clearly a good stock operator but i trust petunia over jims opinion on where gold will go any day now. I know he is a good friend of dan and jim knows a lot about economics sais yra harris ill grant him that but i think he is a quack. Dont trade on what jim sais ever.

    1. JSM means well and he's done a good service to bring issues to our attention. On one hand I appreciate his postings but now after the latest gyrations contrary to his postings you have to believe an agenda is firmly in place. I'll stick with Dan's more accurate assessments in the future

  12. ooops, looks like we may see 1280 before the fed statement!
    Hey Dan, just noticed your number of followers is about to have the "seven hundred handle"!

  13. Tom,

    Not true with Sinclair. There are some points where he has advised to SELL. Most people don't see that because he is wildly bullish and speaks to a large audience. I couldn't agree more about the Egon, Russell, Maguire indicators. Russell said BUY SILVER when it was just at $24. Unfortunately, I did, and I got pounded. BUT, I did not buy because he said to. I bought because I believe fundamentally:

    What Egon says is true about our country being morally bankrupt.
    What Dan says about our country being morally bankrupt.
    What Jim Sinclair says about our country being morally bankrupt.

    EVERYTHING they say about the direction of our leadership, economy, morality, is WITHOUT A DOUBT, TRUE!!! Look at our media and this tragedy in DC. They couldn't tell the truth if their lives depended on it. The WORST part of all was that many had to SHELTER in PLACE for so damn long. Think about that last statement for a while! 12 innocent people lost their lives to this mentally deranged person, while HUNDREDS OF THOUSANDS (lost their lives to preserve our freedom to move about publicly. Now we FORCE people to stay in their homes (I mean temporary prisons) while we make sure there wasn't a second or third shooter? What AR 15???? A pump shotgun doesn't LOOK, SOUND, or ANYTHING else like an AR15. Yet, Feinstein touts gun control, when the gun used is Biden's recommended home protector???? We live in sick times, and it gets scary. Unfortunately, the manipulators know there are those of us that worry over this, hence our emotions come into play and pummel us.

    What bothers me, when some of us are looking for heroes to step up and tell the truth, our heroes end up lying or deceiving.

  14. Well, its pretty much official tonight.

    $1,294 price right now.

    $1,650 is a distant memory, those "Angels" will be imprisoned in the "battered womens shelter" for many years now.

    Reputations and careers of many of the "acclaimed experts" pretty much ruined for life.

    Amazing to see 25 - 40 year careers destroyed in a span of a few months.

    Also amazing to see a world record number of smoldering fax machines sitting in the parking lot of the headquarters of jsmineset.

    As Bob Brinker would say,

    "Never before have so many been so wrong for so wrong"


    1. My sentiments identify with your post. followed JSMineset for years.. the latest concern being his posting re: "Dollar no longer primary oil currency as China begins to sell oil using Yuan September 12, 2012"... yesterday!

    2. LOL. One these days hell put his pants on the wrong way around and declare the end of the bearmarket like he did before.

      It would be comic if it werent so tragic.

  15. Re Gold: look at everyone of the above comments on gold.

    Each one, everyone, prices gold in terms on the USD.

    And what is the USD priced in terms of?

    The good faith of the USG.

  16. This comment has been removed by the author.

  17. Almost 50 tonnes of Gold delivered in Shanghai last two days, perhaps China is swaping their own QE proceeds or is it US treasury sales, for some reason they see value in Gold at this price, perhaps cashing in on the FED discount sale!

  18. JPM, GS and Co strangely net long COMEX Gold, this reminds me of 2001, obviously they have deep pockets and don't mind rolling those contracts for a while.

  19. Just a word about manipulation. Certainly its been a rotten year to be long gold. But people in the business look at the central bank buying by massive amounts and that must be supplied by other central banks and current production. Then they look at the futures market and have to wonder, who is doing all the selling? It has to be manipulation because there is not that pressure in the cash market. It makes sense. Do the sellers have the gold? Probably not. So then one has to wonder, if the buyers know that, why do they "allow" the sellers to make so much money selling in the futures market. So that is a perspective that makes sense but is derided by many on this board.

    1. Arnie;

      Here is the problem... any time a large entity wanted, they could go to the Comex and stand for delivery if they wanted to obtain gold. Nothing is keeping large players from doing so. The facts are that they are not doing that. Last month JP Morgan took delivery of rather large amounts of gold yet the price kept falling because it was not the bullion banks who were selling gold but rather hedge funds that are now selling it. Hedge funds play with paper - they do not want the metal as they do not want to deal with storage, insurance, etc. They just want to push paper around.

      One cannot logically state that the bullion banks are manipulating gold lower when they are buying gold and the hedge funds are selling it!

      On the way higher, hedge funds are buying gold and bullion banks are generally selling into those rallies. That has merit but only when gold is moving higher. I am on record as stating that the feds have a vested interest in keeping the price of gold under wraps as it competes directly against the US Dollar and is thus a confidence indicator. That being said, there are far too many in the gold camp that blame every single move lower on gold on the bullion banks. that is nonsense.

      The commitment of traders report bears this out. It is not bullion bank selling on downdrafts; it is hedge funds whose algorithms have them on the sell side right now.

      What you get is some out there who blame the bullion banks for every move lower in gold. That is simply not correct. They sell into rallies; not downdrafts.

    2. Thank you. Just a political thought while waiting for numbers. When the Republicans were in power if they would have behaved like Republicans instead of behaving like Democrats, then the Democrats would have never gotten in power to behave like Democrats. Kind of sums up the mess this country is in now.

  20. This whole episode proves that "Paper" trumps "Physical" today.

    Speculators could care less about gold bars, they are only interested in swapping paper on the COMEX.

    They will gladly accept cash settlement, proceeds of which would be invested in common stocks which have no other way to go but up.

    Because stocks are for "The Greater Good", ergo, they have the full faith and backing of the Federal Reserve and the Obama Administration.

    Gold is the enemy, since it is another instrument used for unethical purposes such as smuggling and money laundering.

    - Stay in the System

    - Keep your cash fully invested in Fed-Sponsored assets, and you will not have a problem.

    - A 20% haircut, which is a very remote possibility, will not really matter since the Russell 2000 is already up 50% year over year.

  21. looks like we are all Hoosiers and Egon is the man; I do not know about that, but watching Bernanke only strengthens my conviction that he is the point man for the most dangerous sonsofbitches this world has ever seen; swb

  22. watching bennie is quite pathetic in the question and answer session; he sounds very much like a assistant prof at a junior college, which is why I always keep my airsick bags by the desk when I watch these liars; swb

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