If you have not taken some time out to read through the World Gold Council's recent report on the gold market ( see my earlier post from today for the link) I would strongly urge you do so. It is an excellent and illuminating read.
I already made some comments in regards to the section on ETF's.
In tracking the largest of these gold ETF's, namely, GLD, this afternoon is just more confirmation of the accuracy of that report. They have come to exactly the same conclusion as we have over here - namely that money is being pulled out of GLD in order to take advantage of obtaining better yields elsewhere, specifically in equities.
Notice that ever since that big upside day in gold last week (Nov 7), when we got a massive short covering burst of buying on the heels of the jobs report, the reported tonnage in gold has continued to drop. Simply put, investors are taking advantage of the moves higher in the price to exit and put the money to work elsewhere.
Here is the latest chart of GLD and it is a doozy. Since the day just before the big price surge last Friday, GLD has disgorged another 12+ tons of the metal. It's holdings are now down to 720.62 tons, the lowest level since September 2008. Interestingly enough, it is back to levels last seen PRIOR to the onset of any of the QE programs by the Federal Reserve.
Also, as of today, the ETF has shed an astounding 77.6 tons of gold this year alone. No matter how one slices it or dices it, that is one heckuva lot of gold.
As I have stated so often over here the last couple of years, the market sees no inflation worries whatsoever at this point so any buying of the metal as an inflation hedge is non-existent.
Just look at the carnage in crude oil today and the liquid energies! Crude oil prices are falling out of bed as the world is swimming in the black goo. The impact from this key market is being keenly seen on the various commodity indices.
Here is the latest for the Goldman Sachs Commodity Index. It hit a 51 month low today! The last time it was at this level was all the way back in September 2010!
Just look at this chart of unleaded gasoline. I recall posting a chart of unleaded just very recently and remarking that it might actually put a "1" handle in front of the price at the rate it has been plummeting, but I never expected to see it get there this quickly! Talk about a bonanza for the transportation industry and for the consumer!
This is coming at the perfect time for retailors as it puts more money in the pocket of the US consumer at precisely the exact time for Christmas shopping season. No wonder retail stocks are doing what they are doing!
I think this has a lot to do as well with the fact that the cattle market simply refuses to break down. As the frequent readers know, I am on record as saying that I believe both pork and beef prices would come down in Q4 and certainly by Q1 2015. Pork prices had come down somewhat ( they are now beginning to movce back up at the wholesale level) as had beef, but only slightly. My view was that the economy was too weak for consumers, who had been cash strapped to afford record high beef prices, especially in light of cheap pork and chicken. However, the beef market has been the beneficiary of these incredibly cheap gasoline prices which is freeing up money for consumers to spend elsewhere. As a result, packers have been able to force the wholesale price higher and so far, distributors and grocers have been willing to pay it. Apparently they are able to move it, high price notwithstanding. It is almost as if demand for beef is proving to rather inelastic due to the cheap gasoline prices.
Just look at this market. Talk about one helluva strong bull! I keep watching this for some evidence of a top but the funds are in the driver's seat and are pushing it for all their worth. Until the beef shows signs of end user resistance, feedlots are in control and are squeezing packers and forcing them to pay up, even though they are losing in the vicinity of $100 head for every single animal they put down. Good thing they have such excellent margins in the hogs.
A brief comment on the gold - again, nothing doing as it remains range bound. Safe haven buying related to the ongoing mess in Ukraine is propping it up with strength in the Dollar keeping pressure on the market. I expect this standoff to continue for a while until we get some piece of fundamental data to drive it either way.
The mining shares are proving to be of no help whatsoever to the metal as they displayed exactly ZERO upside follow through to last week's one day wonder.
Copper is trading below $3.00 and in my mind, that is a very big deal, especially if it stays below that level.
The Japanese Yen has entered Asian trade at this moment notching a fresh SEVEN YEAR LOW against the US Dollar.
Lastly, one of the things I must do as a trader is try to juggle all the various cross currents that buffet the markets that we trade and try to understand their impact on price. One thing I can say is that in an environment such as this one, where the overall trend for commodities is lower, it makes me suspect rallies that might break out in certain sectors. I have to respect the chart pattern but I do wonder about their staying power. Thus far cattle have been the exception as has been the meal market, which continues to drag the grains higher, but one wonders how much longer those stalwarts are going to be able to buck the wider trend.
"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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