Gold is down slightly as I type these midday comments but trading in the upper part of its daily range at this point. With the equities lower this morning, bonds are getting a bid once more as the safe haven trades are in evidence. We know this because along the higher bonds, the Yen is also a bit higher. The risk aversion is bringing some mild buying into the yellow metal.
Unfortunately for the bulls, two things are working against it at the moment. The first is the mining shares. They are doing what they seem to be doing best these days and that is sinking lower. A research note from RBC notes concern about excessively high levels of debt in both Tier I and Tier 2 producers. It cites headwinds these companies are having to deal with at gold $1200 and expresses concerns over the necessity for dividend cuts and other cost cutting measures at $1100.
The second drag on the metal today is a plunge in the various commodity indices. The Goldman Sachs Commodity Index is being dragged lower once more by sharply lower crude and energy prices along with weakness in the grains.
Here is a chart:
As you can see, we are now talking about a 50 month low in overall commodity prices. That is hardly the stuff out of which inflationary concerns, much less hyperinflationary events, are born.
Switching briefly, for the sake of time, to the grains, especially the beans. The meal spreads have been very erratic reflecting the nature of the concerns over soymeal logistical jams. Informa came out with their crop estimates for this year during the morning trade confirming that both the corn and the bean crops will be the largest in history. They did however slightly lower their final yield estimates from 176.4 bushels to 174.4 in the corn and from 48.5 in the beans to 47.9. There was some movement in the beans in particular as the estimates become more widely disseminated but it seems any impact was rather fleeting at this time. Most traders are trying to get their hands around information dealing with the much-toted ( and highly overrated in my view) logistical concerns due to transportation problems.
The meal bear spreads were reversed near mid-morning with the result that the December meal is once again pulling the beans off of their worst levels of the session. As volatile as this market has been however, especially at the close, anything is possible at this point.
Silver has managed to pop its head back above the $16.00 level once more. It looks like it, along with gold, are consolidating its recent losses with some sideways trade.
What more can I say about crude oil that I did not say already yesterday. It remains under strong selling pressure from continuing fallout over the Saudi price cut to the US. Unleaded gasoline is down yet another 4 cents at the NYMEX (CME).
Crude oil is sitting just atop chart support near the $75/bbl level. If it cannot hold there, and that is a pretty significant support zone, it appears headed for a test of the $72 - $71 region. To repeat from yesterday.... are we going to see a "1" handle in front of unleaded gasoline? WOW...
I will try to get some more up later on today as time permits...
For my fellow American readers - don't forget to get out and vote. Act as if your country's future depended upon it, because it does!
"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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