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

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

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Tuesday, June 24, 2014

Bank of England's Mark Carney Sounds Dovish Note - Up goes Gold

Wow! What is it about these Western Central Bankers all of a sudden? First it was Trichet of the ECB; then it was Yellen over at the Fed, and now it is Mark Carney over the Bank of England! They all sound as if they are using the same notes and passing them around for each other to read.

Commenting today about Britain's economy, Carney remarked that wage growth remains subdued allowing spare capacity to remain and that needs to be taken up before a tighter stance in monetary policy would be appropriate. Translation - higher interest rates are not in the immediate future. Does that not sound eerily familiar to what Janet Yellen said last week? And of course, lest you have forgotten, Trichet and company actually went the "other way" on rates, namely down!

The British Pound, which recently had set a 5 year high against the US Dollar, moved lower on the news and gold moved higher.

This is really getting interesting to say the least. We are back, it would seem, to which Central Banker can undermine his or her own currency the fastest! No wonder gold is moving higher!

It really is becoming a rather tragic state of affairs when consumers are trapped in a box of stagnant wages at the same time Central Bankers are talking down their own currencies and pushing the price of basic needs higher! I really wonder if any of these people have the least bit of realization what they are doing to the average Joe? That of course was completely a tongue-in-cheek comment as they do not care about Joe and Jane - they care about the monied class and rising stock markets.

At least with deflation pressures dominating, the stagnant wage thing was not as big of a deal ( not that it is any good at all) because the cost of food and energy was sinking lower. What these constantly meddling monetary lords and ladies are doing however is  ensuring that the consumer continues getting squeezed as they set about their quixotic task of "reaching a 2% inflation rate".

I sometimes wonder which is more dangerous to consumers - a foreign invading army or a host of Western Central Bankers.

A saving feature, at least for now, is that benign weather is creating excellent growing conditions for this year's major grain crops and prices in that sector are falling. The meats keep rising however meaning that while the cost of our favorite box of cereal might go down ( I am not holding my breath waiting for the makers to pass along the lower costs) my bar-b-q brisket and ribs are continuing to rise. Hey, if you ever were thinking of going Vegan, now is the time to do it ( at least until later this year)!

Beans decided to forget about "Chinese demand" because of a manufacturing purchasing managers index print yesterday and focused on the Crop Conditions report which shows over 70% of the crop in good/excellent condition. I mentioned yesterday how goofy I thought the idea of manufacturing = soybean demand was to me. Corn and Wheat are also moving lower.

I want to take yet another opportunity to remind hog producers to continue any scale in hedging program that they might have instituted for late Q4 and Q1 2015 expected production. We have a major Quarterly Report out for the hogs this Friday. With the Board at high levels, corn prices sinking and incredible profit potential for you as a producer, make sure you lock in some before Mr. Market decides to take them away from you. Again, you don't have to lock up 100% of expected production, but get SOME coverage. It is always better to be able to shrug your shoulders and think, " I could have made a bit more if I had gambled" instead of kicking yourself and thinking, " I cannot believe I left all that potential profit disappear". Don't take risky chances with your farm's income - lock in some profits and leave the risky chance taking to we wild-eyed speculative types.

Shifting back to gold - I am watching the tape and noticing that it is meeting up with some pretty good selling here near the $1320 level. That is a key chart area and it is showing by the price action. Dip buying is very evident as well however.

You can see the selling on the chart. I am closely watching how gold performs right at this level. The indicator below the price graph is well up into the previous regions that foretold a move lower. The ADX is showing the bulls in control but the market has not yet entered into a trending phase. One usually wants to see a breach of a horizontal resistance level alongside of an ADX above 30. It is currently at 22.81 with the resistance level yet unbroken. The price however is not setting back very much which is indicative of that strong dip buying that is still taking place.

There is some light technical downside support coming in near the $1300 level followed by much stronger support back at our old friend $1280.

I should note that there still remains a great deal of skepticism as to this current move in gold among some of the larger banks. The general thinking is that the Fed can easily get control of any inflation ramp up. That may or may not be true but based on that TIPS spread chart I have been maintaining and following, it sure seems as if they are getting well behind the curve when it comes to managing the expectations game. That being said, some of the bigger boys are still looking at the current move higher in gold as a selling opportunity. We definitely have a battle on now.

By the way, here is a freshly updated TIPS spread versus the gold price chart for you. Check out the big spike! Our monetary masters want inflation - they sure as hell are beginning to get it, at least insofar as the market expectations are concerned. 

Silver is working closer to resistance near the $21.50 - $21.65 level. Above that lies $22. That would be a big deal technically if it breached $22 and held its gains.


  1. All, the DONATE button is in effect (right-hand side above Dan's picture) for this blog now. Please feel free to be generous towards Trader Dan for all of the priceless advice that he provides for free just about every day. Thank you Dan!

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  3. Dan -

    I think the world of you. Honestly, you know that no developed country in Europe or the US right now can raise interest rates to combat any commodity inflation.

    Reason - too much debt/can not negatively impact housing - or it would be suicide.

    Higher prices are the only thing that will stop inflation. I think you know that was the plan of the fed and other central banks in developing countries in North America or Europe.

    Now the emerging markets can raise interest rates - that would be interesting to see if India or China or some other country take the lead.

    1. Not to mention 300-400Trillion in interest rate sensitive derivatives. Especially those being used as a control grid to creat artificial demand for US PaPeR.

  4. Thanks for the heads up Bob.

    As always, thanks Dan.


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