Some thoughts on the Gold Commitment of Traders

For gold bulls, this past week was rather traumatic to say the least. The near two month long support region centered at the $1280 level gave way resulting in a drop of an additional $40. The combination of reduced tensions in the Ukraine, some improvement in key economic data ( although the situation remains mixed ) and tame inflation, along with a soaring stock market, has resulted in Western investors selling gold and moving the funds into equities in order to gain the best possible return on investment capital.

Gold now enters a seasonally weak period during the month of June so additional losses are certainly possible as we move forward into that month. It looks as if there was some late-in-the-session short covering by bears in the miners this afternoon as they rang the register on a very profitable month.

To give you an idea of how successful they were - the HUI started the month of May at the 225 level and moved all the way down to 201 today before the slight bounce to end the month closing at 206.

The GDXJ, fared a bit better ( because it has suffered even more severe losses over the last couple of years than the larger caps) as is started the month at 36.50 and fell to 32.43 ( almost entirely erasing this year's gains) before it closed at 34.

Next Monday brings the start of a new trading month so it will be interesting to see how players position themselves the first entire trading week since the Memorial Day holiday shortened week.

For gold the technical damage done this week was severe. However, based on this afternoon's Commitment of Traders report ( which unfortunately did not include the $20 drop over the last three days of this week) the entire group of speculators, every category, still, in spite of the deteriorating chart pattern, remain net long.  That concerned me last week and it concerns me still this week.

They are still not getting out meaning that their losses are continuing to grow. At least in silver they have finally figured out which side of the market to be on ( short ) and might perhaps be making some money for a change, but when it comes to gold, it seems old habits die hard.

What I wanted to do was to graph out in visual form something showing the reader what the problem is for the longs in this market at the moment.

Take a look at the following chart which has as its beginning point, the middle of December last year. As you can tell, the gold price, which is on the right axis of the chart, was near $1200 then ( closing price). It climbed all the way to near $1381 on Ukraine fears before plummeting back to earth where it currently sits as of the close today slightly below $1250.

The blue line on the chart is the SUM TOTAL of all three categories of SPECULATORS LONG positions only. I am not noting any short positions or the NET position but rather just the Long positions.

If you note the second and third vertical lines in mid-April, you can see that there was a large influx of speculative buying. A great portion of this was related to safe haven flows tied to Ukraine fears. That buying was met with heavy selling by both the Commercial interests ( possibly some hedging by some miners) as well as Swap Dealers. There was also some selling in the large speculative categories as well by that was outnumbered by their buying. Some of the old pros and those with past experience knew that selling gold into geopolitical fears was the proper way to approach the metal as those rallies tend to be fleeting as a general rule.

Nearly all of those brand new longs, put on over a three week period or so, were put on when gold was trading between $1300 and $1290. As the crisis in Ukraine seemed to cool down, disenchanted bulls began giving up as can be seen by the fall off in their numbers early this month. About half of them threw in the towel (look at the horizontal line). That translates to another 9,000 or so that were left and whom did not get out which had paid north of $1290 for their gold. We do not have all of the movement among traders for the last three days of this week unfortunately but suffice it to say, a fall below $1280 was not good from a technical standpoint but from an account management standpoint, a further fall to $1260 and then to $1240 means some very severe losses for that crowd that purchased their gold above $1290 and on towards $1300. One has to wonder how deeply capitalized some of these guys are because included in this number of total speculative long positions is the little spec, the most undercapitalized trader of them all.

It is interesting also to note, ( go back to the first vertical line in early February, that almost all of the longs that bought into gold when it was first near $1260 and then carried towards $1380 are now gone from the market. However some of them still remain ( about 6000 or so). Those 6,000 put on long positions when gold was near the $1260 level so they too are now underwater completely. Their paper losses are not that severe  - yet. The question is at what level will their losses be sufficient to force them to exit?

What I am getting at is the fact that we currently have a still sizeable contingent of speculators on the long side of the market who are underwater on those long positions - if they did not yet exit Wednesday, Thursday and Friday of this week. We have no way of knowing that for sure until next Friday. My guess is however, that some of them did liquidate, either by choice or were forced out by margin calls.

Go back to the beginning of the chart  - As you further see from the chart, there still is a large number of these specs who moved onto the long side back when gold was near $1200 and who then added on more as gold climbed above $1250 in January. So far, those positions are safe, which is the reason for this continued bullishness among the specs when it comes to gold, unlike silver which is losing favor among them.

In going over this chart, I believe gold will need to fall BELOW $1240 to kick some of this crowd out with more coming out if gold falls through $1215.

If this does happen I would expect to certainly see the speculative side of this market also begin to ramp up NEW SHORT positions at the same time. That would bring us selling from two directions - long liquidation and fresh shorting.

 Perhaps we might see a true, lasting, bottom if that were to finally occur. In spite of what many seem to be saying, sentiment towards gold, while it has taken a big hit, remains, based on the still sizeable number of these speculators who are long at the Comex gold market, bullish. That is quite astonishing but at least we know some of the reason why. Many of them are into gold at much lower levels and still have their positions in the black. They do not need to exit as of yet. Just look at that blue line however and see where it stands today compared to where it stood at the middle of December last year. There remains enough specs on the long side to pressure this market lower if those key technical support levels do not hold and they are forced to abandon ship.

Gold bulls certainly do have their work cut out for them. As always, we will watch the price action and let it be our guide.

Silver Loses $19 Level; Gold Has Few Friends

I will come back to silver later on in these comments but for now want to discuss the gold chart and price action.

Today, the Chicago PMI numbers came out with a reading of 65.5 versus the April reading of 63.0. What was picked up by market players was the NEW ORDERS index which rose to 70.2 from its 68.7 reading in April Traders and investors are reading this as further evidence that economic growth, while not roaring higher, is undergoing a type of grinding improvement.

One can argue that case but the fact is that the market is choosing to view this recent rash of economic data in a friendly manner and wants to be bullish. That is why the Q1 GDP was sloughed off - traders blamed it on the severely cold and record breaking winter. I should note here that if the Q2 number does not come in much better, blaming the weather is not going to be a viable excuse!

Regardless, as one watches the long bond moving higher of late, and that TIPS spread which I detailed a couple of days ago, it is evident that as far as the broad market is concerned, inflation is not an issue. With traders/investors convinced that is so, and with no reason, in their mind, for the Fed to delay any further reductions in their bond buying program, gold is finally losing many more of its friends.

The stubborn bullishness that remains among so many speculators based on the Commitment of Traders reports IN SPITE OF what has clearly been a slowly deteriorating chart pattern, might finally be giving way to reality. Unfortunately for us, when we  get the release of the this week's COT data it will not show us what has happened to these specs since Wednesday. Gold has fallen another $20 since that time. It did lose $1280 early in the week so the report should pick up some long side liquidation as that was a very significant technical chart level.

Keep in mind that the last time I commented on that report, every major category of speculative interests was still net long. That means a very large number of those positions are deeply underwater ( especially those who chased the price higher based on Ukraine ) and are now either being met with margin calls or being forced to liquidate their losing long positions.

In looking over the chart, you can see that all three support levels noted, beginning first near $1280 and extending lower, have completely given way. Even the psychological support at the $1250 level could not hold the market. The next level of chart support surfaces near the $1240 level and extends down to $1232 or so. If that gives way, $1220 is next.

For bulls to be able to have a chance at improving this chart, they would have to take price ABOVE $1280 and keep it there at a bare minimum. That might be a tall order because based on the breach of that level and how significant it was from a TA perspective, sellers are going to be lurking there.

The ADX is rising once again but remains below 20. Combine that with the rising -DMI and it tells us that the bears are in firm control of the market for the time being. Speculators are not yet aggressively playing gold from the short side but with this steady, grinding move lower, many of those who are long are growing disillusioned and getting out. This sort of "disgusted selling" tends to have a snowball effect however so we will want to keep a close eye on how this market acts as it nears each respective support level. Failure to manage even a bounce would augur for sharper losses. We will just have to wait and see.

I would need to see the ADX get at least above 25 and continue rising to indicate that a strongly trending move lower is underway. For now, while the short term is decidedly negative, the market continues to GRIND LOWER. If gold cannot manage a bounce away from $1200 for any reason, it is quite possible that we see a move all the way back to that double bottom at $1180.

It is not gold just in Dollar terms that is looking lousy on the charts, it is also Eurogold ( Gold priced in Euros) as well. Take a look at the chart.

Notice how today's move broke it down below its level of chart support near the 920 region. Next support is near 910. If that does not stop the bleeding, it could fall below its round number psychological support at the 900 level.

Compounding gold's woes today is more weakness in the mining shares. The GDXJ has surrendered its mediocre gains from yesterday while the HUI has fallen to a fresh 4 1/2 month low.

GLD, the big gold ETF has not shown any chances in its reported gold holdings since that big jump the other day so I am especially curious to see what is going to be coming out of there when they get a fresh number up for us. That was the one saving grace that I could see for this gold market. If that goes, then that support will have gone the way with the miners. Hopefully they will have some data for us later on today after the close.

Moving over to silver - it finally cratered through that critical support level at $19. Markets that continue to flirt with resistance or support levels are generally going to go through them.

Here is the silver chart.

As you can see, the support level that has held it all the way back to late January was broken in a big way today. It fell through $19 yesterday but manage to squeak back above it but the sharp fall in gold, combined with another drop in the copper price, was too much for the grey metal to withstand. It is now decidedly down for the year. I have included a line showing where this metal closed at the end of 2103 for your reference point.

Silver is now sitting right at the bottom of the next support zone noted. If it cannot recover from here and climb back firmly above $19 in a hurry, odds favor the metal moving down towards $18.30 - $18.20.

One quick comment - I generally receive lots of gold/silver "analysis" in emails that many readers send my way asking for comments. I generally do not answer them because of time constraints hoping that the readers can glean an understanding of what my view might be at any given time based on how I am seeing the price charts. However, I do want to take a bit of time to comment on these perma-gold / perma-silver bull websites and advisory services, who somehow manage to constantly beguile their unsuspecting readers with one bullish "SPIN" after another when referencing the COT reports.

Just the other day I had one pop into my inbox telling the readers that the potential for a good strong short squeeze exists in silver because the swap dealers are long and the specs are moving to the short side. I read this sort of claptrap and shake my head in bewilderment that some people actually pay for this junk or read it with any sort of seriousness. Are these "experts" on the COT trying to tell their readers/subscribers to go long and wait for this expected short squeeze?

I have said it so many times here that I get concerned I might be taxing the readers' patience but the simple facts are that speculators drive markets. While the Swap Dealing positioning is always interesting, they do not drive the market, SPECS DO. If they are buying, the price will rise. If they are selling the price will fall. As long as specs are in a market, there is always the potential for a short squeeze or a bout of long liquidation. That is not news nor is it noteworthy. And I am certainly not going to take a position because a bout of short covering just "MIGHT" occur because the Swap Dealers are holding a position on one side of the market. The possibility exists every day in the futures markets that specs could cover shorts or liquidate existing longs. However, they NEED A REASON TO DO SO.

What is noteworthy is if a key chart level is violated for any reason. Then the spec positioning becomes important. Such was the recent case with gold as the specs remained stubbornly bullish in spite of a deteriorating chart pattern as I have noted. Not until that key downside support level gave way at $1280 did we see them bail out. Same goes for silver on the "potential" for any so-called short squeeze - you need to see a key UPSIDE chart support level give way before that does happen. The problem for silver however is that the resistance level that needed to give way to induce this potential round of short covering was not violated. Quite the opposite happened, a downside support level gave way meaning that is WAS NOT a bout of short covering that took place but rather a bout of long liquidation from those specs which remain long and are now being forced out.


A quick comment on the Goldman Sachs Commodity Index or GSCI. I am including a chart of it to show where it stands in relation to the closing price of the index at the end of last year. It is currently up 2.7% since then. I prefer using this index rather than the CRB because I feel that the latter is too heavily weighted in the energy component side and thus does not give an accurate view into the overall commodity sector as a whole. I liked the old CCI much better but it is pretty much becoming defunct at this point. Anyway, the GSCI is fairly evenly weighted and provides a good picture of how commodities, as a whole, are performing.

One of the reasons I am not too concerned about this index at this point making any stronger gains and breaking out into a trend ( at this point ) is because the makeup of these indices includes the front month futures contract when calculating it. Several of the commodity futures markets that I actively trade are showing lower prices for later in the year however. That will not be noted on the index until those distant months become the front months as the calendar moves ahead.

That being said, a 2.7% increase in the sector, while noteworthy is not setting off any alarm bells at this point. Could things change in the sector and move higher? Sure they could - after all we are talking about markets and NOTHING is ever set in stone in any market but for now, upward price pressures across the sector in general remain muted. I would need to see this particular index breach 675 to become concerned about rising commodity prices at the wholesale level becoming a more serious concern.

Along that line, all of the grains are moving lower today, even the discombobulated soybean market which cannot seem to figure out what it wanst to look at on any given day on a consistent basis. Growing weather is looking ideal at the moment for this year's crop ( remember - we are talking weather so that could change, and probably will at some point in the growing season ) with sufficient rainfall and ground moisture. Rain makes grain is an old but true adage. The lower grain prices are good news for consumers and livestock and poultry producers. Along that line, feeder cattle keep soaring to record highs as cheap corn makes it a bit easier to stomach prices up here in record nosebleed territory.

Today is the end of the month for trading purposes so some of these price movements in the markets today should be viewed through the prism of possible book squaring and positioning evening out. How we start ( and finish ) next week will be more telling but with that being said, the charts are what they are so any moves in price that impact those charts, needs to be respected and heeded.

I will try to get some more up later on......

Gold versus the TIPS Spread

I posted a chart last evening showing the TIPS spread going back to the spring of 2009. I have had a bit of extra time to overlay the gold price on that chart so as to be better able to compare how the price of gold is performing in relation to the changing inflation expectations among those who comprise the market.

I am particularly interested in the gold price performance when the reality dawned on most market participants that the extraordinary monetary measures that the Federal Reserve was engaging in was not producing the kind of upward pressures on inflation that most of us had believed it would when we watched it implemented.

Interestingly enough, this sea change in sentiment and "awakening" among investors, occurred in September 2012. That month the expected inflation rate peaked out above the 2.6% level. As you can see from looking at the chart, that was also the time frame during which gold could not maintain any sort of hold above the $1800 level. As it turned out, once gold failed at $1800 it was a steady downward move until it broke support near the $1530 level and entered into its current bear market.

In looking over this chart, I am struck by how closely the gold price has been moving with this TIPS Spread since it peaked out at the secondary high near $1800.

For another look at the overall commodity sector, take a gander at this chart of the GSCI ( Goldman Sachs Commodity Index) and notice how it failed at the 700 level at the same time ( September 2012) as both the gold price failed at $1800 and the TIPS Spread peaked. It too has been moving in a range since that time.

I find none of this to be coincidental. It helps establish me in my view that the market remains quite unsure about the future of inflation in this extraordinary time in financial market history. Economic data will seem to improve, then fall, then improve once again, etc.

A quick note about the mining shares - looking at the HUI chart, unless it can reverse course tomorrow or Friday, it looks to end the week BELOW another key chart support level on the weekly chart. If it does, there is a good chance that the index will test the psychological support level of 200.

The GDXJ is threatening to lose all the gains, what little it had managed to capture, of this year. Its low print for today's session is 32.43. It closed last year ( 2013) at 31.05.

Until we see these mining shares showing some signs of life, making a case for a good bottom in gold is unwise.

That being said, I am going to be most curious at to what the reported holdings in GLD are by the end of this week. That buying yesterday was rather odd so I want to see if it was an anomaly or the start of an actual trend.

The Euro fell below the 1.36 level in today's trade which is more psychological than anything but nonetheless, it continues weak against the Dollar. There is some support on its chart near 1.356. I don't see much below that until you get closer to 1.350.

The Dollar is inching towards overhead chart resistance near 80.70 - 80.80. It can close out the week above that level, it stands a good chance to make a run at 81.40 or so.

Gold did initially hold at even number support at $1260 but as the day has worn on and the mining shares continue to sink, it fell below that level. There is psychological support near $1250. Rallies in gold are now going to be sold as losing longs will use that to get out while opportunistic shorts are going to be aggressive. Something will have to turn on the fundamental front ( currency concerns or geopolitical events ) to take gold out of its current bearish posture.

Fed Balance Sheet Size

There is a fascinating report on the Dow Jones newswire this AM detailing a paper presented by Harvard University historian, Niall Ferguson at the European Central Bank's inaugural forum in Sintra, Portugal.

The gist of the story :

The authors ( Ferguson, Moritz Schularick and Andreas Schaab) traced the history of central bank balance sheet expansion and contractions of "12 advanced economies since 1900".

"The size of central bank balance sheets has fluctuated between 10% and 20% of GDP most of the time except during WWII and the most recent crisis, which 'has eclipsed all other historical precedents.'"

The authors detail the finding that in the three decades prior to the credit crisis, central bank balance sheets had shrunk significantly when 'measured as a percentage of GDP'. 

"By that yardstick, their (recent) expansion merely marks a return to earlier levels".

The authors state that central bank balance sheets had "become small relative to the financial sector".

Here is a key part of the study:

"Central banks rarely reduce their balance sheets by selling securities; instead they shrink as a share of GDP because the economy expands".

In their own words:
"We have not recorded a single incident in which a central bank has primarily sold long-term government ( or private market) securities to unwind a long expansion in nominal terms".

The authors also note:

"there is little historical evidence that large central bank balance sheets pose ' an imminent risk to price stability'.

Here is another key quote from the story:

"Over time, the size of central bank balance sheets closely tracks the size of the public debt. But there is an important caveat: the lesson of the 1950s is that once a central bank has been buying bonds to keep long-term interest rates low, it can confront political pressures when it tries to reverse course".

Here is a link to the story:
http://blogs.wsj.com/economics/

TIPS Spread

I have had some private emails discussing the TIPS spread as well as some posts recently dealing with inflation expectations so I thought it might be helpful to post a chart of the TIPS spread to portray what the market is currently expecting in that regards.

The TIPS spread is calculated ( I am using the 10 year ) by essentially subtracting the yield on the 10 year Treasury Inflation Indexed Constant Maturity Security by the yield on the 10 year Treasury Constant Maturity Security. The difference between the two is the market's expectation of the inflation rate over that period.

Here is the chart that I have created using that data.

As you can see, the expectations have risen and fallen since the start of this particular data series. As you look at this chart, you can practically see the shift in sentiment as the market looks for deflation, then looks for inflation, then shifts back to deflation, etc.

What is interesting is to observe this chart starting near the end of May 2013 - beginning of June 2013 and move forward to the present time. Note how the pattern on the chart constricts with the inflation expectation oscillating somewhere between 2.30 on the top and 1.93 on the bottom. Then the range tightens on the downside moving up from a low near 2.06 and rising towards lows near the 2.11% level.  The top has come down somewhat as well.

What this tells us is that the market is reaching an inflection point where this indecision will eventually be resolved. One would think that the resolution would be to the upside if the economy were to begin really improving. I maintain that it is slack in the labor markets that is keeping inflation low as wages remain relatively flat. Thus the Velocity of Money continues to either move lower or remain flat. As long as that is the case, it is difficult to see inflation pick up to any degree of noteworthiness. If however, wages begin to move higher, this would have significant impact on the Velocity of Money as many businesses might begin to feel more comfortable passing along any price increases at the wholesale level. So far, it seems that many are trying to absorb as much of those costs as possible to retain pricing competitiveness among very price-conscious consumers.

Along this line, a strengthening Dollar will generally tend to put pressure on commodity prices.


I do want to also point out that the constricting range in the spread above corresponds very closely to the range trade that we have been seeing in gold. In looking over the price chart for the metal, one can see that same sideways pattern going back to last spring and continuing to the present day.

I am going to fine tune this chart as time permits this week and will overlay the price of gold over it. I think you will find the results rather remarkable. One thing I can already tell you in advance from doing a cursory examination of the two, is that peaks in the price of gold have tended to correspond rather closely to peaks in the TIPS spread.

That would confirm that gold is moving based on inflation expectations or the lack thereof, something which I feel confirms the idea that gold is doing exactly what it ought to be doing during a period of uncertainty in regards to the future of inflation expectations. At the risk of again angering the gold manipulation crowd, if the gold price is moving in sync with the TIPS spread, then asserting that the price is being manipulated is a big stretch as one would have to make the serious case that the inflation expectation of the market place over the last several years has been completely misguided. Given the ( up until recently) rather mediocre at best payrolls numbers, stable to falling commodity prices in general, and a steady US Dollar, that would be a very difficult case to make except for all but the most imaginative.

GLD reports Big Jump in Gold Holdings

GLD, reported a very sizeable jump in reported gold holdings this afternoon, something which I felt has enough significance that it should be noted. Holdings were at 776.89 tons as of last Friday but jumped to 785.28 tons this afternoon. After all, an 8.39 ton increase is not a small matter.

Let's keep an eye on this, especially if gold continues to descend lower. It would indicate some buying from some larger players if this sort of buying is more than a one day wonder. Reported holdings are now back to the levels that they were back at the start of this month.

They were at 798.22 tons to start off the year so the holdings are down by some 1.6% so far this year.

I have had my share of dealings with those from the gold bug community who have continually dismissed my notice of falling gold ETF holdings as if it bore no connection whatsoever to the fall in the price of gold over at the Comex. I maintain it is a measure of Western-based investment demand and as long as it is falling, gold is not going to be able to mount any sort of sustained rally.

If GLD reports holdings that begin to increase REGULARLY, then the downside for gold from this point, will be limited. If however the reported holdings begin to drop again after today, and continue to do so for the remainder of the week, gold has more downside left in it.

Stay tuned.

I still am concerned about the number of speculators who remain on the net long side of this market. Maybe today flushed a goodly number of them out but as I stated in the earlier comments from today, I would feel much better about this market moving forward if I could see speculative sentiment become bearish over at the Comex. It is not there as the specs remain bullish at this point.

Gold Gives up Ukraine Premium as Bears Growl

This past weekend's election in Ukraine has come and gone and the long awaited outcome has sent gold bulls packing - apparently the beginning of WW III did not commence as a moderate businessman received the nod from the majority of those who voted. Russia seems to be taking more of a conciliatory tone for now.

Combine that with a stronger Durable Goods number ( 0.8% gain in April and an upward revision to the March gain) ,  and a jump in the Consumer Confidence reading ( from 81.7 in April to 83.0) , and you could hear the umpire calling, "Strike 2". When news about decreasing Chinese gold demand (based on Hong Kong data )  reached the ears and eyes of market players, that was all she wrote for the yellow metal. Bulls jumped ship, bears got aggressive ( something that they have not been doing while Ukraine simmered on the back burner ) and the downside stops were reached. Once $1275 was breached, those stops were activated and the snowball began its downhill roll.

Throw in an option expiration day and the selling was fairly intense.

 I mentioned in my Friday comments that the still fairly sizeable grouping of speculators on the net long side of the gold market had me concerned. With falling GLD reported holdings, a sinking HUI and GDXJ, and a Fed talking quite a bit about their concern for the lack of inflation, it is rather remarkable that many specs were still bullish towards gold. As long as the technical charts held up, they were hanging in there over at the Comex, but today's breach of that key technical downside level near $1280, has now become a market factor insofar as it flips the gold market out of the recent range trade and shifts it more towards the POTENTIAL for a fresh trending move lower. Those speculative long positions are now deeply underwater ( especially those who foolishly chased the price higher fearing global war from the Ukraine crisis) and they are exiting as new shorts also move in. Losing bulls should be very thankful for those recently lowered margin requirements for gold as it might give them a wee bit more ability to hold onto losing positions should they so desire.

The saving grace for gold is that it happens to be near the cost of production for some mining outfits ( not all of them ) and that might serve to slow the downside momentum somewhat.

I can see the metal in a grinding move lower rather than a sharp fall as it slowly bleeds out speculative interest off the long side while meeting some increased physical buying from India and perhaps China. But as far as Western-oriented investment demand goes, that is not going to be there until investors believe that the bull market in equities is over or some fresh geopolitical event arises. As far as the majority of investors are concerned, the lack of inflation in a low interest rate environment with improving economic data is the perfect recipe for continued money flows into that asset class ( stocks ). Money managers are going to put money to work where it can produce returns - it is really that simple.

I would like to make one more point in this regard - again and again we get the chorus from the gold perma bulls that gold sentiment is lousy and that is a great reason to expect a bottom. The problem with this goofy theory is that the Comex positioning indicates the opposite - as I mentioned last Friday, every major group of speculators, whether it be the large hedge funds, the other large reportables or the small traders ( general public ) are NET LONG gold. How in the world can someone say with a straight face that gold sentiment is horrible and that is a reason to buy? It would be better to say that bullish sentiment towards gold is falling but remains positive. That would be more accurate. This is why that talk of a "capitulation bottom" is premature. That is the last hook that gold  perma bulls are now trying to hang their hats onto after their wrong-headed theories on negative GOFO rates and backwardation have collapsed.

My own view on this is that it would be much better for gold if the speculative category of traders actually moved to the NET SHORT Side of the market on the Comex. Then we might start having an intelligent discussion about "capitulation". Anything prior to that is just wishful thinking dressing itself up as market analysis.

Looking at the gold chart ( daily) you can see the loss of initial support near the $1280 level. That was followed by an additional breach of the next downside support level that came in near $1266 or so. The next level extends from $1260 - $1250.

The ADX is just beginning to rise indicating that the market has not yet entered a trending move lower but the potential does exist for such a thing. I am of the view, at the moment, the more likely outcome for gold is a steady grinding move lower, rather than a sharp leg lower. We'll have to see. A breakout of a trading range market, especially the longer the duration of the previous range trade, tends to bring about some big moves. The issue here is the level at which gold is already trading. As mentioned above, it is down near the cost of production of some miners. The problem is that the speculative forces are still trapped on the net long side of this market; the wrong side I might add. They are going to be exiting barring some unexpected geopolitical event but as price descends from the current level, it should attract some decent physical demand from the East. I guess the question is are these speculators on the long side going to only grudgingly throw in the towel and gradually get out or are they going to say, " I am done with this crap" and abandon the metal rapidly. I am leaning towards the former view at this point but as always, will respect the price action. If it is the former, the market will grind lower; If it is the latter, the market will drop very sharply.


In the meantime, let's just watch the price charts and let that guide us. I am especially interested in seeing what now becomes of the HUI and the GDXJ. The shares led the metal lower and should lead it higher when the time comes for a true bottom in the metal. The GDXJ is down over 5% as I type these comments while the HUI is not faring much better, losing over 4% right now.

Here is a chart of the GDXJ:

Note that the market GAPPED DOWN below a key support level that has been in place since April 22 of this year and has extended losses to the point that it is now trading at its worst level since early January. In other words, it is at an over 4 month low.

Forebodingly, the ADX is now beginning to rise indicating that the potential for trending move exists. That trend is however down. Bears are firmly in control with the -DMI registering the highest reading in nearly two months.

The HUI has lost chart support at the bottom of its range as well. It reached a low today right on top of a support level that runs back to December of last year. If that does not hold it, it is probably going to drop below 200. That would essentially wipe out any gains in the index for the entire year.

Silver had best thank copper today that the red metal is bucking the trend towards lower prices. Silver remains caught between following copper and following gold. It is hanging around that $19 level which is becoming more and more technically significant. It is a lot like the $1280 level in gold. The more the price held near that level but failed to extend higher, the greater the damage inflicted if/when that support level fails. Until silver can scale the $20 barrier and REMAIN FIRMLY above that level, it is vulnerable.

Interest rates remain subdued as bonds actually ticked up some despite the new all time high in the equity markets and the improving economic data. What seems to be at work in the US Treasury market is that traders are becoming more and more convinced that some sort of monetary easing is going to be coming the way of the Eurozone with lower rates resulting over that way. This is causing those who want to own bonds to increase ownership of US Treasuries due to the higher yields in what they consider to be a tame inflationary environment. In other words, money is flowing to where it can capture the best yields and with many thinking that the US economy is improving at a better pace than the Eurozone, money is flowing to the US.

That is boosting the Dollar at the expense of the Euro, which initially moved higher after the election results there this past weekend. Those results should prove interesting to see how or if they are going to influence policy coming out of Brussels. Nationalism is on the rise as many Europeans from their respective countries are airing their discontent with being governed by a far-away group of unaccountable bureaucrats. I maintain that the experiment is eventually going to fail there simply because the idea of creating a melting pot of the various European nations modeled around the United States is not possible. Here in the US we share a common heritage, a common culture ( at least we did at one time ) and to a great extent a common Judeo-Christian set of shaped values. No such unifying factors exist in Europe. I would dare say that this weekend's election is a watershed moment for the Eurozone. Is it the high tide in a counter centralization movement or the start of something greater? Time and events will make it clear for us.

Given Europe's past history of warfare and conflict, along with the terrible loss of human life and suffering, it is easy to understand the desire to never again see the rise of nationalistic tendencies that are of such strength, that they foment war among some of the population there and among some political leaders. However, a shared set of traditions, religion, culture, language, etc., is necessary to bind people together. How that can ever be successfully implemented, except for the use of force and that only for a generation or two at best, escapes me.

The Russell 2000 is rebounding nicely today on that positive economic news moving up over 1.1% as I type this. Risk is back on today and that has investors upbeat as they chase equities higher. As you can see, it is quite a ways off of its best level this year but it has officially moved out of "correction" territory ( down 10% or more from a peak) and has actually generated a mild buy signal. I will be most interested in how this index closes not only today, but especially this week. A push through 1160 or so should be accompanied by another all time high in the S&P 500.

 

Here is the S&P 500 chart ( weekly )

 

 

This incredibly uptrend continues. The last time the trending move higher was interrupted was back in October 2011, two and a half years ago!

Switching gears to the grains - they were beaten with the proverbial ugly stick today, especially soybeans which have been on a tear higher of late. Today, beans came back down to earth. The bean market has been a classic example of traders moving prices depending on what factor that they want to focus upon on any given day. When the focus shifts to the tight supply of ending stocks, the market rallies. When the focus shifts to the upcoming new crop and the potential for a massive crop, the price falls. Back and forth; up and down, it has gone. Today, the focus is on the great planting progress that traders are expecting to see in this afternoon's crop progress report and the relatively beneficial weather the planted crops are experiencing.

I realize farmers want the highest price for their crops  - and who can blame them? - as those prices determine their economic welfare. But for the sake of the livestock industry, the poultry industry and the average consumer, I do hope that this year's crops are large ones. Rising food prices are tough on us all but they impact the poorest among us as those are the ones with the least amount of discretionary income to spend. A large harvest of corn and beans, along with wheat, and falling gasoline prices would be of immense help to the average consumer.

Corn is in a trending move lower as indicated by the daily price chart. Same goes for wheat. Beans, both old crop and new crop, had been trending higher. That might change however if we get some downside follow through in either the July or the Nov's. So far, retracements lower in price have been eagerly bought. Whether or not that pattern is going to continue is up in the air at this time.

By the way, the US Dollar is closing on a key overhead resistance near 80.80 basis the USDX. The Euro continues moving lower towards key support near 1.35. It could not maintain its footing at initial support near the 1.366 level. There is some mild support on the chart near 1.3590. If it fails there, it will more than likely test 1.35 - 1.348. That is a big level from a technical analysis perspective. The Euro might very well have seen its best level in a long time if it fails to hold there. All eyes on going to be on this upcoming ECB meeting in June.

Copper - A Case of Dueling Speculators

I have long followed the Copper market for its predictive powers and its relatively accurate assessment of overall global strength of the lack thereof. I put more credence in it and crude oil than most any other indicator.

I therefore find it fascinating in going over this week's Commitment of Traders report and discovering something there which fits with what I regard as the relatively confused, uncertain, and mixed sentiment out there among investors when it comes to assessing the state of the global economy.

Take a look at the following chart and note the positioning of the Hedge Fund category and the Other Large Reportables Category. I have circled their respective chart lines.

The hedge fund category, which has now moved to a net long position in the red metal, are 18,787 net long. The large reportables are -24,183 net short. These two categories are the BIG SPECULATIVE TRADERS. The large reportables can include CTA's, CPO's, and other large independent traders such as floor locals or private traders who have large enough position sizes that they are required to be reported.

One of these groups of powerful speculators are going to be proven very wrong. It is not too often that you see this sort of setup in a market in which the large speculators are positioned in opposite directions in fairly equal strength.

This setup will resolve itself in one of two ways;
1.) A bullish or bearish surprise on the fundamental front will force a big round of short covering or a big round of long liquidation resulting in a sharp move higher or lower depending on which side is wrong and is forced out

2.) A grinding type of range trade in which both sides can find data that provides fundamental support to their positioning with the result that any exodus by one side is matched by an exodus from the other. Or, any build from the one side is matched by a build on the other side.

Either way this is going to be fun to watch.

Which way is Dr. Copper going to go? Stay tuned and we will all find out.

By the way, the Hedge fund category has just moved to the Net Short side in the silver market once again. Here we have a similar development in silver as we do above in Copper, which again, is not that common. The hedge funds have been moving away from their net long positioning and reducing that exposure as they become progressively more bearish on the metal's prospects. The large reportables on the other hand, have been moving building a larger net long position as they become more upbeat on its potential.

This is the reason that the silver market continues to be stuck in a tight range between $20 on the top and $19 on the bottom.  Speculative forces are not in agreement. At the risk of further provoking the silver bugs, this has nothing to do with governmental conspiracies to suppress the price of silver. When the specs are in unison, the market will move in that direction that they are agreed upon. For now, it is stuck in a range going nowhere because of this lack of unanimity among the large speculative forces.

We'll see which side wins in this market.

Lastly, here is the gold COT chart. Not much to say about it this week except for this -those who keep talking "contrarian" in gold claiming how poor sentiment is for gold among speculators as a reason to get long the gold market, seem oblivious to the fact that all three groups of speculators, whether that be the Hedge Funds, the Large Reportables and the Small Specs, remain as Net Longs in the gold market. If these guys are bearish, I am not seeing it.

In spite of the fact that the reported holdings of GLD continue to drop, in spite of the fact that the HUI and the GDXJ continues to stagnate, specs are net long in gold. I have said it before and will repeat it; gold had BETTER NOT violate chart support by closing below $1280 or we are going to see a big surge in long side liquidation and that worries me as there is sufficient fuel for a sharp drop lower in the price of gold IF these specs are forced out. So far geopolitical concerns involving Ukraine are holding this market up but if interest rates here in the US start creeping higher once again, alongside either a rising Dollar/falling Euro, gold is going to be vulnerable.

Lots of uncertainties I will admit which however will require us all to be vigilant to monitor price action in the days and weeks ahead.

Copper Prices working Higher

In looking over the recent Commitment of Traders report, one can observe the steady migration of the hedge fund community from off of the short side of the market to the long side. That change in sentiment is reflected on the copper price chart. The red metal has rallied some $0.30 pound in two months.

It would appear that traders are keying off improving economic data here in the US ( today is was new home sales which rose 6.4% in April from March). There also is optimism that Chinese manufacturing might be stronger than originally anticipated. The last factor is shrinking inventory levels in the LME warehouses. Today, the amount of copper in storage there fell to the lowest level since September 2008.

These three factors were enough to prompt some remaining shorts to head for the exits as well as to entice some new buyers. Here is the takeaway however as far as I am concerned.

Copper is one of the best economic indicator around. ( I think crude oil is the other). As such I believe it tells us a great deal about what investors are thinking in regards to the prospects of the overall global economy. A rising copper price should therefore not be ignored, any more than a falling copper price should. When one combines that with the fact that crude oil prices remain stubbornly above the $100 level, in spite of the large amount of shale oil being produced here in the US, it should at least make one hesitant to become too pessimistic about the health of the economy moving forward.

Copper has managed to move into a resistance zone on the price chart. That big sharp drop lower in price that occurred back in March this year is still dominant on the price chart however. I would like to see this market clear the top of that drop zone to feel that copper is sending a firmer " All Clear Ahead" signal. We will watch  this closely, along with crude oil

Ukraine Election moves to the Forefront

All eyes will be on this weekend's upcoming election in Ukraine. Traders, especially gold traders, will be closely watching the reaction to the vote. Any sort of violence should provide support to the metal. In the event that little reaction occurs on the ground, some of the risk premium in the metal will be wrung out. We will have to watch and see how things transpire.

For the meantime, the range trade in gold continues with neither bulls or bears wishing to become too aggressive ahead of a long holiday weekend, especially with this big election taking place.

I am much more interested in the Euro, which continues to weaken ( European currencies are generally losing ground to the Dollar at the moment ). That is providing further lift to the Dollar as is the move higher in equities. Then again, it is early in the day when I am typing these comments. Refer to the chart of the Euro that I posted yesterday. It has fallen through that chart support as of this morning and barring a late session turnaround, looks like it will try to test the 1.35 region. The election might have some impact on the currency so traders will more than likely be content to even up some positions ahead of the weekend as well. If the Euro does lose the 1.35 region, it would push the Dollar through overhead chart resistance near 80.70 basis the USDX. That could work to pressure gold so we will want to continue watching this very closely. Id the Dollar were to push past the 81.50 region, I do not think gold is going to be able to maintain its footing above $1280. Again, we will simply have to wait and see what happens as we move into next week.

The GIAMATT crowd is pointing to a story in the Financial Times noting that the UK's Financial Conduct Authority cited Barclays had failed to "adequately manage conflicts of interest between itself and its customers as well as systems and controls failing, in relation to the gold fixing" between 2004 and 2013. The main focus however was on an event that took place on June 28, 2012. Barclays' trader was attempting to avoid a payment of some $3.9 million to a customer under an option. According to an email that the trader, by the name of Plunkett had sent to some of his fellow workers, he was attempting to create a "mini puke" the next day. That was understood to mean forcing the price lower ahead of the fix.

It is "Hallelujah" Time over there with them. "See - we were right all along - this is proof positive that every single big move lower in gold is the result of evil, nefarious forces suppressing the price of gold on behalf of the government". So what does the story show us? Simple - a big bank has been fined for knocking the price of gold lower in order to prevent having to make a payment to a customer. Indeed, this is most certainly a corrupt thing. Anytime the regulators can catch this sort of thing occurring and attempt to put a stop to it we should all be pleased. I have had more than my fair share of dealing with bizarre price swings in markets - just yesterday I was pointing out to a reporter at Reuters some suspicious activity in the hog market - but is this the same as saying that the price of gold is being CONSTANTLY manipulated by these big banks in order to do the bidding of the government? Not hardly. It seems as if it was much more mundane than that - as noted above, the trader was trying to avoid paying a customer $3.9 million.


It is interesting to note that the price of gold closed on the Comex that day in question at $1550.40. Three days later it closed at $1621.80. As a matter of fact, the price of gold worked steadily higher from that point running all the way to $1798 in October 2012. June 28 was the bottom in the gold price for the next TEN months! If the trader was attempting to knock the price of gold lower at the behest of the feds, he sure as hell did a lousy job of it didn't he? That low in price, near $1550 was not even seen again until April the following year. On April 12, 2013, gold then entered its current bear market.

What we can certainly bring away from the FT story is that Barclays' trader was attempting to keep the price of gold from moving higher  to a certain level until the option expired, and apparently succeeded in so doing. But did he suppress the price of gold at the behest of the government? Hardly! As said, he sure as hell mucked it up if we was trying to drive the price sharply lower!

Here is the actual price chart of gold for that time period. See for yourself.

Here is the point in all this - too many in the GIAMATT crowd lose credibility when extrapolating from one thing to another. It is the result of sloppy analysis in my view. As just noted, the very day on which the trader in question was singled out as having worked to produce a "mini plunge", marked the bottom in a market that then proceeded to rally $250 in the next 13-14 weeks. And this is proof positive that the feds are behind the gold suppression scheme? My goodness, if I were the feds looking for an entity to suppress the price in gold and just witnessed one of my "cohorts" somehow managing to induce a $250 RISE in the price, I think I would be looking for someone more effective!

Look, prices in our modern futures markets are slammed lower and jammed higher with increasing regularity these days. It is the new normal. Pick a market, any market, and watch it closely over the course of the next few weeks, and you will see it. Might I suggest soybeans or coffee? I just this week threw up a chart of the soybean market showing you the wild swings on an hourly chart to demonstrate how volatile the price swings have become. With computers now doing the bulk of the trading, all it takes to move a market is an order large enough to trigger them into buying or selling, depending on which direction the one pushing the market is wanting to take it.

One more thing and I am done with this. I have written more times than I care to remember at this point about the wild-eyed, breathless, sensationalized, much publicized, announcements and proclamations from our "new market wizards" detailing with excruciating exactness practically every sharp move lower in the gold price which they have dubbed as "flash crashes". They have made the conclusion that every sharp fall in the price of gold that results from any large series of sell orders, is proof that the feds ( government ) are working to suppress the price of gold. This shallow analysis is easily refuted as I have mentioned above by watching the price action of other commodity futures markets. But beyond that, the real problem with this "analysis" is that it has a flawed thesis at its foundation.

Those of you who understand anything about building know that if your foundation is flawed, the structure built upon it is shaky. You may have the finest quality of construction upon that foundation, but if is unstable, nothing is going to support that building when the foundation comes under stress.

The foundation behind the "flash crash" theory  is that every sharp move lower in gold is the work of nefarious evil-doers suppressing the price of the metal in order to do the bidding of the government, which, if we are to believe the GIAMATT crowd, is obsessed with a rising gold price under any circumstance. But where is it written that whereas other markets can rise and fall, only gold MUST CONSTANTLY MOVE UPWARDS AND ONWARDS? What magic is it about the yellow metal that it alone, out of all the various markets on this planet, MUST MOVE HIGHER? Their entire postulate relies on an assumption that is absurd - namely - that gold must constantly move only in one direction - up! If it does not, then that in itself is evidence enough that the price is manipulated by the powers that be; so goes their thesis.

But that begs the question: " what are the circumstances required for gold to be in a bull market"? If you answer that, then the shaky foundation upon which the GIAMATT crowd's entire thesis becomes apparent.

Here is a chart of the US Dollar compared to the price of Gold. Most of you know that I have dubbed the yellow metal, "The Anti-Dollar". The two markets tend to move INVERSELY to one another. Again, I wish to repeat -the correlation is not exact but it is pretty close. GENERALLY SPEAKING, gold tends to move lower as the Dollar moves higher and moves higher as the Dollar moves lower. By the way, if the relationship were an exact one, we would hardly ever see much change in the price of gold in terms of other foreign currencies. That being said, look at the chart below:

The Dollar is the green line; gold is the yellow line. You can clearly see the inverse relation existing among the two. There was a brief period noted in the rectangle back in 2010 during which both markets moved higher alongside of each other. That is the exception. Note how back in 2009 as QE ramped up, the Dollar began to sink as traders interpreted it as being currency debauchment which would usher in a round of inflation. Gold responded by moving higher as the Dollar sank lower. Then we saw a period in which the Dollar rallied ( I believe this was the interval when QE I was winding down and QE 2 had not yet begun) back in 2010. As the Dollar then sank after QE2 was underway, it collapsed all the way down to critical support near 73. It was looking incredibly shaky.

What did gold do? Answer - it shot sharply higher as expected and notched an all time high in the process. But what then happened in the summer of 2012 ( by the way, the time period noted above in the article about Barclays)?  Traders and investors both began to notice that the Bond Buying programs of the Fed were not producing the inflationary wave that many had come to expect. They noticed that Velocity of Money was actually falling and that the price of many tangibles ( the commodity sector as a whole ) was moving lower, not higher. In other words, inflation was falling, not rising. Guess what? Gold fell alongside the rest of the commodity complex as the US Dollar proceeded to strengthen. Traders began to suspect that the liquidity being supplied by the Fed was not making it into the broader economy. Such was the case.

Now look at the chart from the peak in the gold price and notice how it has moved gradually lower as the Dollar has moved gradually higher. Since late last year (2013) both markets have been range bound. What can you deduce from this? Answer - the Dollar has stabilized and so has gold. There is nothing sinister about any of this. It is merely a market biding time.

So here is the big question which no one in the GIAMATT crowd will HONESTLY deal with - why should the price of gold be soaring when the Dollar is no longer moving lower?

If you want to regale us with story after story about how the US Dollar is being discarded in trade and how it is going to be abandoned and crash lower, Fine. Then the gold price will rise. But at least be honest enough to note the price charts and observe the FACT, not theory, that the Dollar is not currently sinking. It has moved from off the 73 level to nearly 85 at one point. Why would you people expect gold to keep soaring? It has lost one of the primary drivers required for a SUSTAINED bull market - namely a falling US Dollar.

Here is my contention for the umpteenth time to these cultists - the feds did indeed attempt to slow the rise in the price of gold during the time in which the US Dollar was sinking and especially when it was threatening to crash through chart support. However, ever since gold entered its bear market when it fell through the $1530 level and could not recover that, they have not been interfering in the gold market. They have no reason to interfere because the US Dollar is no longer as weak as it once was.

Please note that I have called gold as being in a BEAR MARKET. There is a reason for so doing. Experienced traders know that a market can be pushed AGAINST its main trend with some temporary success but that any attempt to actually REVERSE a trend driven by fundamental factors will never succeed. This is the reason that while the feds resisted the rise in the price of gold during its bull market phase, they could never reverse the trend. The fundamentals were all on the side of being long the gold market. A sinking Dollar, rising commodity prices, falling interest rates, soaring government debt and generally currency unrest, all favored the long side of gold. The feds could not stop the inexorable rise as long as those factors were in place. Guess what - most of those factors are no longer in place. This is the reason, that until earlier this year, gold was in a bear market leg lower. The trend was lower because the fundamentals shifted. Now it has no clear trend but is moving sideways.

I am on record here as stating that IF ANYTHING, at this point in time,  the Fed is more concerned about a FALLING GOLD PRICE than they are about a rising gold price. I actually think that the Fed is more concerned about the lack of inflation than they are concerned about anything else. Why do I say this? Because you just have to listen to them to hear most of their various governors say this! The past week witnessed several of them all talking about the lack of inflation and how it concerns them.

The Fed fears deflation because they believe they have little control over it in the sense that they have much more direct control over inflation. They can easily hike rates and put the kibosh on any overheating economy in a real hurry but, as we have all learned over the last 5 1/2 years, attempting to pull an economy back from a deflationary spiral is much more challenging.

I have maintained for some time now that the big moves lower ( flash crashes as the cult members call them ) AS WELL AS THE SHARP SPIKES HIGHER, since gold entered its bear market, are being caused by hedge funds or HFT's. They are not evidence of an attempt orchestrated by the government to artificially drive the price of gold lower. These big players jam markets up and down and will continue to do so. They are interested in one thing and that is not obtaining the best possible fill price for their executed trades. (only us dinosaurs of a trader are concerned about that). They are only interested in getting in or getting out before the next guy does and pushing the market in the direction in which they are positioned so as to obtain the maximum amount of price movement in their favor as possible. Be it a Barclay's, be it a hedge fund, be it a large local trader, it does not matter. The goal is the same - either induce or start the MOMENTUM of the market in the direction they favor. The reason - our modern futures markets are not much concerned in the short term about fundamentals anymore -they are all about momentum.

A couple of other things before wrapping this up - I have to marvel at the temerity of those who can, with a straight face, point to the falling reported gold holdings in GLD as being BULLISH. Yes, you read that correctly! Never mind that FACT, ( once again facts are of no consequence to these folks ) that during the rise in the price of gold over the course of its former bull market, the holdings in this giant ETF consistently rose right along with the price. Western investment demand for the metal was strong, solid and sustained. Maybe we should follow their illogic and note that the once-rising gold holdings in GLD was BEARISH! Can you not see the utter absurdity and why so many in the gold community have no credibility whatsoever. "HEADS - I WIN;  TAILS - You LOSE". Nothing ever matters to them, nothing. Whatever it is, it must be bullishly construed for gold.

In closing this post, which has already consumed way too much of my time ( I apologize if I repeated myself anywhere in this post as I am trying to watch price quotes simultaneously to typing this) I will leave you with this.

I suppose it was that trader at Barclays that caused all those big Western based money managers and institutional funds to sell their gold holdings and take the money and put it into equities where they made some spectacular gains by not fighting the Fed. I suppose it was also that same Barclays trader that caused the shareholders of the mining shares to dump them all and buy into different sectors that were performing so strongly. I suppose it was that same trader at Barclays that induced so many index and hedge funds that were once hugely long the overall commodity sector to jettison corn, wheat, beans, copper, sugar, coffee etc, beginning back in 2011 and 2012. And lastly, I suppose it was that same trader at Barclays that was behind the decision by some of these major banks to sell their commodity warehouses and look for buyers of their commodity trading sections. How amazingly astonishing that the traders working for these banks can do all this! Yes indeed, such a air-tight, logically unassailable case that no one who has a normal functioning brain would dare dispute it.

Those of you who have taken the time to read this... you can make up your own minds. Believe what you want. The goal of a trader/investor is to make money from wise choices. I learned a long time ago, the hard way, not to argue with the price charts. Consoling yourself about why an investment class you have become married to is not performing is not a substitute for profits. Remember that. Follow the markets and the charts if you want to succeed and try to glean the sentiment of market participants. That is what drives money flows and ultimately price. Go with it and succeed; fight against it, complain about it, blame others and fail. It really is that simple.

Here is a chart of the HUI as it stands at this hour. Maybe it will stage a late session rebound. Anything can happen ahead of the closing bell but for now, the index is moving closer to losing chart support. Let us hope not for those who are still holding large positions in the sector.

By the way, a brief chart for you grain guys....


KC Wheat has fallen over $1.00 bushel this month as rains in that key growing area are convincing traders that the worst damage for the crop is behind us. Also, US wheat prices remain high on a global basis. The market is probing to see what price level uncovers demand. As a consumer, this kind of wheat, which goes into making bread, one always desires lower prices. Farmers who have a crop in decent shape are still making money at these prices however which is a good thing.

For my readers here in the US - have a great Memorial Day weekend with family and loved ones. Remember those fallen warriors who paid such a terrible price for your liberty. They have earned our respect, admiration and gratitude. It is especially galling to see the pathetic spectacle occurring at the VA during this time frame - a time in which we pause to remember our soldiers while many of them are dying from neglect and outright fraud.