"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


Tuesday, November 4, 2014

Safe Haven Bids Limiting Gold's Losses

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!


  1. HG dr copper couldn't quite get to the 300 round number earlier, and now news is on the tape that peru's largest copper mine antamina (7% of world production) union spokesman says talks break down and strike still set for nov 10th.

    looking at why silver was underperforming gold on usa pit open, silver does follow crude oil for inflation and industrial production clues.

    note the futs SI silver 15.63 low and the CL crude oil 75.84 low were made while the usa was asleep! that happens so often!

    NDX low was around the sept high, and long bond futs US-ZB aren't inspiring unless can recover 142-00 (a former peak on continuation chart)

    good selling into the close on Ags!
    corn dn 9, meal dn 0.9, beans dn 20, wheat dn 6.


  2. Here is the PROOF that Silver is going to $200. Tomorrow. Maybe the next day


    Note to Diary: Worm firmly on hook, currently 15 inches below the bobber, slight breeze from SW, overcast, will spread groundbait if not bites within 30 min or so

    1. Pretty incredible how just about anything can be twisted and spun into whatever a person wants to see and needs to hear.

      Bix Weir and the $100, 000 silver calculation/prediction beats them all.

    2. Wow. The psychological term "backfire" comes to mind. As someone is proven more and more incorrect they become even more adamant in their original ideas and thought, regardless of reality.


    3. Ophelia Balls, you and Mark should get together. You could spend many happy hours reminding us of all the absurdities going on in the gold and silver markets but NOT the absurdities in the other markets. You guys shouldn't get so emotional, it just clouds your judgement - but I do have to ask WHY you get so emotional.

    4. I like the black swan analogies being sprouted for being perpetually long in the Gold market.

      Because you cant see the Swan and you don't know when it will show up, but surely it will one day so just keep buying and holding regardless of what the market is doing today...

      Faith based investing at its finest!


    5. Oh Peter

      Oh Peter indeed.

      Your primped-up pomposity and self-importance has blinded you from seeing a tongue-in-cheek joke when it is presented to you on a plate. For a day or so Dan and I have been idly exchanging subtle jokes about casting lurid bait into the water to see if we can generate a "rise", and I'm afraid you just swallowed this piece Hook Line and Sinker

      Emotional indeed. How very pretentious and up-oneself!

  3. Great articles. One after another helping people. Perversely, the average guy is getting beaten up with these markets, and economic and monetary policies (intentional?). They need sober and objective stuff like this. Unless they stumble upon sites like this how can they get the truth they need?

    It is a hard world out there for so many people. Imagine how difficult life must be for someone with an average IQ and does what everyone does, not knowing anything else to do.

    I am certainly not an expert in the grains, but you explain this stuff in easy to understand terms. Lots of opportunities.

    Oh my GDX getting destroyed again on close. agh. There may be only 5-6 large producers by the time this is done. Wow....

  4. Chickens coming home to roost. I'm surprised this hadn't happened sooner (warnings about increased debt levels).

    Things are not going much better for the Juniors. I read through TRX's 10k equivalent last night (I also posted it on a message board). First thing one notices is the Emphasis of Matter /Going Concern note on page 2 (E&Y are the auditors):
    Emphasis of Matter
    Without qualifying our opinion, we draw attention to note 1 in the consolidated financial statements which indicates that the Company has working capital of $1,325,667 and accumulated losses of $69,095,649 at August 31, 2014. These conditions, along with other matters as set forth in note 1, indicate the existence of a material uncertainty that raises substantial doubt about the Company’s ability to
    continue as a going concern.

    I am sure there other juniors/explorers in this boat.

    1. Forgot to post the link:

    2. It looks like TRX is barely hanging in there. Incredible.

      How long might it be before Sprott closes one of his funds? You would think at some point if silver reaches some really low number that he or other silver funds might have no other choice.

      With each passing day it looks more likely that GDXJ might surpass GDX's current price. That would be a significant and dubious milestone.

  5. These comments below were on Jim Sinclair' site.

    Regardless of the dollars direction over the last few years more money printing is always perceived as good for the stock markets, and not precious metals. The current deflationary trend does not affect stock markets as money printing overrides the deflation trend it seems for stock markets only.

    "Thursday and Friday were very bad days for gold, silver and the shares. The explanation on Wednesday afternoon and Thursday was because the Fed discontinued QE3. Along came Friday and guess what, the QE baton was passed to Japan as they announced an increase in their QE operation to roughly the round number of $1 trillion per year. With this amount of QE, the Bank of Japan will now be purchasing every single bond issued and then some. Outright monetization has arrived in Japan!

    This was seen all around the world as "good" for stock markets as they rallied to new highs (Japan rallied to 7 year highs)! …but bad for precious metals? Yes I understand, this is "good" for the dollar on a relative basis to other fiat currencies (especially the yen) but how is the news of outright and full on monetization in the 3rd largest (and Western) economy bad for "stuff"? The answer to this question is "it’s not …but it has to be seen this way".

    Any comments as to why stock markets always go up when more money printing is announced but not precious metals?

    Money printing has always been bullish for both stock markets and precious metals history shows?

    1. barneyb6;

      one of the reasons that most people fail in their investments and fail as traders is because they are incapable of adapting to changes in sentiment, in perception and in market responses.

      The notion is" "It has ALWAYS Worked this way in the PAST, therefore it must work that way now and in the future".


      Each age has its own set of circumstances and its own challenges. Reading those correctly and being able to adjust makes one successful. Those who cannot, bellyache and blame "manipulation" or HFT's or Algos or anything except themselves.

      The idea that they might actually be WRONG never seems to enter their mind.

      I told folks many times here, no one, and I mean NO ONE, knows exactly how all of this is going to play itself out because NO ONE alive has ever lived through anything quite like this before. That should have immediately ruled out dogmatism from the priests and prophets of the gold cult, but instead they dug in their heels and kept digging a deeper hole for themselves and sadly, their blind, devoted followers.

      "If the blind lead the blind, they both fall into the ditch", said the Lord Jesus Christ in the gospels and that is PRECISELY what has happened to those who blindly followed their gurus instead of the market.

    2. Thanks for the reply Dan.

      Yes its either history repeats or perhaps its a new era now where most of the current crop of investors have been educated to always buy the stock markets when money is printed.

      Money printing = buy stocks

      Deflation seems secondary to stocks if money is being printed.

    3. QE DOOOOOEEEESSS NOOOOOOOT Equal Money Printing!!!!!!!! It is merely a mechansism to control interest rates....YIKES!

    4. But what is the end game?


      Even Paul Singer and James Grant say everything is mispriced.

      Do asset prices really factor in the real risks out there?

      I don't think many goldholders are bellyaching about today's prices. They're wondering how much longer before this grand Central Bank experiment will run. remember that game Lunar Lander at the arcade? If you left the LEM float w/o proplulsion too long it didn't matter how fast you hit the thrust button it was going to crash. Same thing with all this debt. The intervals between interventions are getting smaller and smaller. Without QE somewhere there is no propulsion and credit/debt fails.

    5. This comment has been removed by the author.

    6. Interest rates go up at some point within 1-2 years or sooner.
      They'll rise ever so slowly and in small increments but they'll go up.

      "Forever" and "never" is an unrealistic time frame to prophesize anything let alone interest rates or QE etc.

      What will the "experts" say when rates eventually go up? That rates didn't really go up?

      Sinclair and others should just clam up because they're losing credibility the more they make things up to fit their script.

    7. Gustav touches upon something important. The fact the higher money aggregates are falling means deflation is winning and this where most get confused about HI. It's as the time value of money disappears and M3, M2, and M1 all morph into MZM that Hyperinflation manifests. If bank reserves were to be lent out then the M's would increase. This would be inflationary, not hyperinflationary as the goldbugs mistakenly tout.

      If you are rooting for HI then you have to have deflation first.

      DarkPurpleHaze, when rates do go up it'll be because money is fleeing bonds, not b/c of a strengthening economy. There's too much debt. That's why we've been at ZIRP for 6 years. Six YEARS! The system died in 2008. It's been a bankruptcy proceeding since. QE was to allow foreign creditors to move down duration scale in Treasuries and return fraudulent mortgage securities where they'll mature into the ether on the Fed's balance sheet.

      Again if rates go up then what'll happened to banks leveraged to the hilt on these sovereign bonds? These bonds will go down in price when rates go up. Don't you see how the whole system is on one side of the boat? And why the end game is gold revaluation to heal balance sheets?

    8. This comment has been removed by the author.

    9. Nice thoughts Grumps.
      I think they'll make up new financial regulations at some point to accomodate those UST losses for the largest and most important TBTF's when or if the time comes.

      It seems like the US Treasury/Fed might soak up as many UST's as possible (like they seem to be doing these past several years) of all durations and absorb the losses or as you alluded to...they'll just hold them off their balance sheets because they can doalmost whatever they want.
      How can the US Treasury/Fed hold it's own feet to the fire if it own's a huge amount of it's own future debt?
      They're making it up as they go along and given enough time they might mostly get away with it by and large.

      I can't help but wonder what the effect of a new 50 year UST (as proposed by Goldman Sachs)might be in all of this.
      Could it be that the US Treasury moves bonds of one duration into a longer dated bond which technically wouldn't be a default on US debt even if it reeked of desperation?

      We haven't seen anything yet...but we will.
      Creative accounting methods and new financial regulations are their ticket out of this. If lots of other countries are in the same boat and they might need to pull similar shenanigans then no one will really complain too loudly.

      They're all in the same boat more or less.
      It's in no one's best interest for a major economy to burst at the seams no matter who it is.
      If the US, China or Japan etc imploded they will take everyone down with them.
      So to that end they'll do whatever it takes to prevent that from happening.

      Gold would have to go up tremendously to heal those potential losses.

    10. I've noticed the last couple years how the Treasury has been trying extend the maturity on its debt. A lot of that 1 year paper was issued since the 08 crisis. So much debt and so much is under 4 years in duration and we are still adding a trillion per year. I don't know where this 486B deficit number comes from. I've tried to get an explanation from the Treasury, but no response. In fact I went back to about 2000 and added up all the official annual deficits and it amounted to about 3+ Trillion less than the actual debt issued. Either the annual deficit is under-reported or the Treasury is funding something not on the budget. Maybe Catherine Austin Fitts is right. They built those UFOs seen flying around.

      If they did try a 50 or 100 year bond what would the interest rate be? At least 6%. But that would break the budget if the average yield on the debt went up to 4%. It's just too late. We need a Shemitah, a Jubilee. They can go ahead and knock gold down to a 1000, the HUI to 100. I don't care what they're worth now. I've got my sights set on 2020. And the thing is you really can't get cute trying to time this reset thing. They are not going to tell you about an imminent revaluation. It'll just be done with no warning.

  6. (Bloomberg) Archer-Daniels-Midland Co. (ADM), the world’s largest corn processor, said ethanol margins will be “softer” in the fourth quarter as oil prices decline.

    weaker CL is a negative input for corn. dec corn support at the 20-day SMA of 357.

    Egypt releases another snap tender to buy wheat for mid-December delivery.
    ZW the 20dsma at 519 and change.

    Dan mentioned the informa forecast, and fc stone had theirs yesterday, both those have reminded the trade that next mondays usda wasde report due to be 'big crops getting bigger'

    the 3 large index funds are 'rolling' out of december contracts this week in Ags.

    smaller oil companies are now exposed to failure in the same manner as gold mining companies, as their 'collateral' is worth much less.

    let's see if the election results can yank anything around while the usa sleeps!



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