"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


Wednesday, November 19, 2014

TIPS Spread Echoes FOMC Minutes

I mentioned in an earlier post today that the FOMC essentially downplayed inflation fears in the minutes released today. That seemed to be one of the big factors involved in the sharp move lower in gold after it had spiked higher and moved back not only to the unchanged level but had tacked on some mediocre gains as well. That was all abruptly reversed after the market had some time to chew over the minutes.

Along that line, here is an updated chart of the TIPS spread comparing the price of gold to the movements in the spread. I want to point out that the most recent spread fell to more than a 3 year low this week! Clearly, the market has no concerns whatsoever about any budding inflationary fears. Such a thing is not good news for gold bulls.

When I look at this chart, I am struck by how closely the gold price has tracked this simple spread since September 2011. There were only two brief intervals when the spread went one way and the gold price went the other and that was Q4 2012 and briefly again in Q4 2013. It will be interesting to see if something changes in this current year as we are in Q4 and the two lines are tracking very closely to one another.

Gold is going to be especially dependent therefore on very strong offtake from India to keep it supported. I just do not see a fundamental driver right now that would entice Western-based investment demand to ramp up in a large way at the moment.

The metal is going to continue taking its cues from the Foreign Exchange markets therefore. Strong support has emerged at and below $1180 in the past week. That needs to continue or else bears are going to pounce once again with the FOMC minutes giving them some more confidence after the recent torrid rallies had dealt a big blow to it.

It seems to me that bulls have been pinning their hopes on the Swiss Gold Referendum Vote and a Dovish Vote. Scratch the latter after today's FOMC minute release. The former is still unclear.


  1. GDXJ pole-axed again today, down on 40 million shares, second highest trading day ever.

    Institutions still dumping it, trying to shake off positions like a dog shaking off fleas.

    Retail, consumer discretionary, and transports is where its at right now.

    1. Today's ETF action recap...


  2. The Forex markets is the place to watch for a trend change. If a bond bear market in US debt can ever exist, then those sold dollars will flood the Forex markets. But that's impossible.

  3. If you want to see where the real action is, check out LOW, TGT, WMT.

    All breaking out to new record highs on huge volume as the institutional investors are rushing to buy these names.

    In anticipation of the biggest consumer spending boom in a generation.

    Thanks to a record collapse in oil prices, ultra cheap and easy monetary policy, and an improving economy after years of stagnation.

    Get ready for the good times.

    1. Mark, you don't get it. This is a sign of hyper-inflation that is induced by QE. Finally, it is happening and all that printed money is finally flowing into areas like over flowing water from a river. OBVIOUSLY the thing to do is to go buy lots of gold!

    2. Victory laps are not wise in this business.

  4. If gold loses $1180, which it appears is going to happen, what's its next support level? Around $1150?

  5. LOL, Eric, love 'ya man but there is no sign of inflation anywhere whatsoever.

    Just look at all the pressure on heating oil and natural gas amidst the greatest cold wave in years. When the cold spell snaps, we could see crude plunge to $50.

    It is no accident why the retail stocks and transports are skying right now.

    1. That's not entirely true. Have you been to the grocery lately?

    2. Mark - you gotta just walk around, close your eyes, and believe in things that are not real! LOL

      BTW - this is why the energy revolution is so darn important to me. Not only will it create jobs in the energy sector, but also entice manufacturing to move from China back to America (which is currently occurring).

      But, the lower oil prices are a huge natural stimulus package - NOT from government. According to Deutsche Bank, a $10 fluctuation in oil prices translates to a 25 cent fluctuation in the retail price of gasoline. Each penny of increase or decrease in the price of gasoline equates to $1.4 billion in household energy consumption. And, the consumer savings are made greater when you take into account the reduce impact on the transportation of goods and services across the nation. What is so interesting about this “energy stimulus package” is that it should not have an inflationary effect — or at best a dampened inflationary effect — as increased consumer spending would be offset by declining energy prices. In a way, this could be as close as the Fed and federal government ever get to a free lunch. A stimulus package which doesn’t raise inflation prospects. The U.S.’ strength as an energy producer — and as the eventual world's leading oil exporter — should also help push up the dollar, putting further pressure on oil. And when all said and done, this will put the final nail in the coffin of gold as they ready it for burial on the day Ezekiel 7:19 arrives. Then, you can take that which they throw out onto the streets.

    3. LOL, Gilliom, there is always the hyperinflationist in the crowd who sites pork prices as evidence of catastrophic inflation. yada yada yada yada yada yada -- you people are like broken records or a residual ghost that just keeps going through the same motions over and over and over and over.

    4. Gold is nearing the final liquidation phase, I just don't think we have put in the final low yet. A strong flush needs to take place and I will be looking to buy at the 1100-1000 range. If the gold price were to fall substantially, a bankruptcy or 2 in the mining industry could be an indicator before putting in a final bottom. This is blood on the streets right now in the mining industry. I am big gold bug, however, I have always maintained the belief that the drop in price was due to a technical break and not price manipulation. The fact that it went up 12 years in a row was highly unusual and this correction was very necessary. So far, other than Dan, no one in the industry has been more dead on than Jim Rogers. While gold was peaking in 2011 he said that he would buy a little when it hit 1200, and A Lot if it went below 1000. He still maintains the view that gold could drop below 1k bc there are still too many "Mystics" who believe gold is "Holy". I think everyone reading this blog knows the perma-bulls who he is talking about. He said we are in the process of a complicated bottom and once the mystics are washed out we can finally make a bottom in gold.

    5. There IS no "final low!"--that's just more lies put out by the gold shills. The implication is that, once that magical, low price is reached, gold will rise eternally after that.

      I remember very clearly when gold rose ABOVE $1000/oz for the very first time in history. It wasn't very long ago! Gold can easily retrace that move--and will. There is nothing magical about $1000/oz...

    6. Gold hovering around $1000 +/- for awhile would mess with some people's heads who might capitulate and sell their phyz while they can still get $1000 for it.

      I wonder sometimes how much the redemption of tons of retail phyz gold would effect the price when or if it gets to that point if $1000 becomes a catalyst for people to sell and get out.

      There's no doubt lots of folks will be buying around there also. I guess we'll find out if that prolonged $1000 +/- scenario plays out.

      Continued GLD redemptions will play a big role in this I believe and it'll lead the way just like it's initial issuance coincided with golds ascent in the early 2000's. Just picture what a similar descent in reverse might portend.
      GLD closing at a certain point seems very possible.

    7. I can remember when the FEDs balance sheet was 800 billion, it wasn't that long ago.

  6. As I suggested would happen a few days ago, now that the opinion polls are running against a Yes vote, the Goldbugs have now started treating the Swiss referendum as a Win-Win narrative:

    "should the actual day come where there was a ‘Yes’ outcome, the Swiss will already have a significant amount of metal that they can take in. This is part of the reason why lease rates have gone negative..... So it’s been difficult for them to hold the market down, and obviously with the lease rates going negative, that’s put a bid into the market.

    should a ‘No’ vote result, it’s quite possible that we will get another chance to buy this market at lower prices........ we’ve already put in a bottom

    So, whichever way the Swiss vote goes, we the inevitable Money Shot :

    . "This is unequivocally the time to be buying gold and silver...."

    whoever would have thought that?


    1. I honestly do not know why so many folks are making a big deal about this. There is NO chance this thing will be ratified by the 26 Swiss Cantons. The Cantons are almost completely against this referendum. The public may vote yes, but the Cantons will almost definitely vote NO - which means this thing is a pointless exercise!

    2. Eric, you may well be right about the vote, but Switzerland is more of a democracy than any other country in the world. If a National Referendum vote went through and was just trampled on by the Cantons the Swiss would be outraged, and those cantons could be looking for new governments. This is unlikely to be tested, as the initiative will probably be rejected.

  7. You guys all saw the price action in Gold yesterday, right? First,when the FOMC minutes came out it fell from $1195 down to $1178. 30 mins later it shot from $1180 back to $1195 in an instant, before gradually slipping back to $1180 again

    Clearly, for a Goldbug that will never do, so, as Jesse tells it

    "the metals were hit hard in a typical bear raid selloff this morning."


    "Who could turn a blind eye to such obvious market abuses?"


    There is no helping these people - they see only what they want to see

    1. I stopped reading Jesse because he just can't stop himself from throwing in the manipulation dog whistle comments. That, plus the fact that WW2 has been over for a long, long time.

    2. Who IS Jesse, anyway??

    3. Ophelia, I actually rate Ben Davies. One of the smarter analysts out there.

  8. Gold up again today. It's the War of the Titans between the bears and the bulls. My strong feeling is that we go through 1200 on to 1250 or so, then plunge again. That plunge will probably be followed by another rebound. Who can be certain of anything? If one could only get the timing right one could come away a rich man.

  9. the long bond futs US or ZB have taken out the 142-00 former peak on continuation chart, so that's a buy until a stop or stop and reverse under the 142-00 rounder.

    eur/usd held the 20-dma test, and usd/jpy dropped a full point from the high o day.

    ZW looks interesting- a buy at the 20-dma test with 5 pt stop or stop n reverse.

    corn down 4 sessions in a row, last down streak ended at 5 sessions in sept.

    Open interest changes in corn: Dec14 down 30,700, Mar15 up 23,200, May15 up 3,400.

    export sales were a new low for beans, with corn wheat unimpressive.

    101,600 tons of #Corn to unknown 14-15: 140,000 tons of #Soybeans to unknown 14-15.

    for those about to rock.. we salute you!

  10. hammer the hogs!

    Ags those tons above were usda daily reporting system sales, not the export sales report.
    also 2 wheat usda daily reporting sales.

    Reuters Ag News ‏@ReutersAg
    Egypt’s GASC buys 60,000 tonnes of #wheat from France .

    gold stocks pop on opening.. HUI XAU didn't touch 20-dma as GC SI did, thus stronger than physical.


  11. long bond can't handle best philly fed since 1994, and leading indicators was huge as well.

    GLD SLV HUI XAU on inside day thus far.
    GCg5 buy 11/19 to 12/4 is a long trade in traders almanac

    VIX popped above 20,100 day MA's to hit the 50-day MA now faded back to 200-day MA..might not mean too much as the range is scrunched in and it's a bullish stock mkt historical thru black friday.

  12. That move in the USDJPY almost kissing 119 last night and then dropping back quickly below 118 looked similar to that 117 to 115.5 drop on Sunday night where the yen restarted it's trend towards 120.
    We're seeing the JPY starting to regularly move in 1.00 basis point chunks at this point either very quickly or on a daily basis.

    120 or very close to it by friday seems possible. That would be an approx. 4.5 BP move in 5 days!

  13. Gold wants to go through $1200 but we await Indian government curbs to be instigated. They could be held back for correct psychological impact. However, there is a dilemma: if they do nothing and gold goes up, will that reduce Indian buying, and thereby help the government with its currency?or will curbs just
    increase smuggling and not improve the situation at all? If curbs are stringent, this could hit the gold price, and that would also help protect the Indian currency. So much for the new free market in India. One thing is likely, though, and that is the introduction of more significant curbs will cause great volatility for gold again. Under such circumstances, it may be wise to wait until this is out of the way.

  14. wonder if the bonuses will be withheld to the traders in the FX scandal.

    The so called “Santa Claus rally” so institutional managers can lock up performance fees. In the FX realm, Santa Claus is clearly focused on USD/JPY as trading desks keep spouting year-end targets of 125.00.

    SP and NQ trade into the highs from Wednesday:
    "Vertical is as vertical does"
    -- Forrest Gump

  15. Mad panic buying in Best Buy and Bed Bath and Beyond.

    Williams-Sonoma up 9% to another world record high. That stock is a 7 bagger off the 2009 lows.

    The consumer cannot be stopped. The girls are going to shop at Pottery Barn come hell or high water, LOL....

  16. Dan

    I am not smart enough to be coherently able to argue against your gold viewpoints. I'll just share with you Mr. Singer of Elliott Management viewpoints that he recently noted in his Q3 letter to investors:

    “There is a current set of delusions that is powerful and dangerous: that monetary debasement can be infinitely pursued without consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008.

    The above is part of a larger article at this website.


    Best wishes

  17. Anyone lucky enough to load big on airline stocks a month ago just retired.

    Delta Airlines up 45% in just a month.

  18. The Swiss National Bank repeated in sept. that it will intervene in the foreign exchange market to prevent the Swiss franc from surpassing 1.20 against the euro, saying the limit remains the "key instrument" to curb upward pressure on the currency.

    so thats eur/chf not the usd/chf typo from other day.
    Fast market in the eur/chf today as we have had another run up to 1.2025 again, like yesterday. No accompanying gold move so it doesn’t look like another poll story.

    the SNB maintains an office in Singapore saying the office, “makes it easier for us to monitor and enforce the minimum exchange rate round the clock”

  19. The Retail Holders Index (RTH) needs to be added as the 8th Wonder of the World.

    Never before in financial market history has so much wealth been created.

  20. Interesting article talking about Hedge funds using computer HFT systems to move gold during Asian hours. Does this suggest the whole move below $1180 was a fake move?


    1. Eric , only time will tell. The Shadow knows but he is not even whispering, so we all stay tuned.

    2. I have no idea what the truth is. But I wonder why someone would unload a LOT of gold at a point when the volume is at it's lowest. Why do that unless the person was intending to buy an even larger amount at cheap prices to go long? Jim Cramer used to do this with stocks; wait for low volume, sell enough to drive the price way down, and then pile on with a much larger number of shares to go long - then sell when everyone else was trying to get in on the action. Had some kind of name ..... but forgot what it was called.

  21. Gold could get horsewhipped one more time tomorrow or Monday, then it is set to cruise through $1200. Hope you were in on this gold share gig to set up your retirement, Eric. Better than airlines.

  22. Gold shares? MUX is down from $9.50 to $1.50. I guess it could rally 50% from here. As long as you have cash and are not sitting on a mountain of losses already from buying "This Is It!! back in 2012.

    1. I meant the gig starting 2 weeks ago which I forecast would lead to a huge rise in the HUI. I think a lot of the low hanging fruit has been taken, and one could soon be looking in the other direction.

  23. Try reading a tea leaf whereas Dan talked about animal entrails Someone think me as being delusional but I see 1500$ not far fetched. In order to be down to sub 1000$, this 1400-1500$ must reach first. A big bull trap ahead. Seasonal and COT report indicate the last upswing of gold coming soon. Meanwhile USD needs to rest for a while.Stay tune

    1. Linh, you are not delusional, anything is possible in our lunatic asylum of a world. Because everything is so crazy and unpredictable, holding gold in your portfolio is very wise. Up, down, sideways, who knows. I just think it is going to go through $1200, and I sniff profits.

    2. Linh, many of us are only looking short-term, and like any self-respecting opportunistic animal, if we see some juicy meat on the ground, we grab it. So it may be with gold short-term, as we go through $1200, with a bit more to go on the HUI. But the HUI is getting dangerously high, and I wouldn't hold on too long.

    3. Thank but I don't have any portfolio so don't have any gold in my safe. I just a day trade doing crazy stuff.

  24. INTC breaking out to new highs today. Wonder if Tyler Durden will post a chart of that with:

    "Presented With No Comment"

    "This Time It's Different"

    "Buy The Freaking All Time Highs"


  25. Do any of you people do your own shopping ? Inflation is at least 5% !!! grocery's alone are up 11% yr over yr in my area !!!

    1. Sure ain't true with beer...one of my main purchases. At an 11% rate that would mean a sixer of craft brew would've only cost $4 eight years ago. That was not even close to true. That wasn't even true 15 years ago. In fact, craft brews are at almost a 0% inflation rate over the last 5 years...but it is a thriving, competitive industry.
      Plus, I'm getting baby loafs of Tillemook cheddar for $7 these days...same as 5 years ago. Quit buying so much damn beef, Titan. That is where the inflation (currently) is.

    2. ...don't get me wrong. I love beef in all its forms and it is annoying how expensive it is running. Even chicken is pricey.

  26. TitanAE, you are correct. However, we do not trade grocery prices. For me here in Sparks I pay $13-14 lb. for choice ribeyes and porterhouses. So, agreed, there is inflation out there, but there is also cross currents of deflation blowing also. We all have to realize that and not make blanket inflation/deflation arguments. Chocolate and soap are keys as far as their shrinking sizes go. None of us can be stubborn and dogmatic about these busted mkts as they do not have to make sense short term. I do not want to fight them, but rather exploit them. Last but not least, the Russell trapped all the bears recently and is looking to me like it wants to break out upside sometime in the new year. Kind of like big money getting off the grid as Spellcheck Armstrong has been saying and I think he is right.

    On a lighter note, lay the chalk tonite on the Chiefs, and that is against my home town dysfunctional bunch. Good trading tomorrow.

  27. I am beginning to wonder if gold is nothing more than a medium for which hedge funds can go to war with each other through their super computer trading algorithms. The traditional fundamentals may be nothing more than trigger points to take out the other guy.

    1. Ive been thinking the same lately - they just call it "volatility" though

    2. Gold is a "video game" for these Billionaire hedge funds. So why is anyone trading it?

    3. Thanks to the internet, online brokerage accounts and high frequency trading the entire stock mkt has turned into a video game. Or a gambling imporium needing the general public to take on the losing trade. Theres a reason banks want you to try a practice trading account

  28. chicago wheat must be the leader of the ags now, as it was the last to touch it's 20-day MA and bounced nicely off the touch. haven't checked those charts of the weird wheats KC MN or SM BO as only Dan can trade those widow makers!

    activity was related to the december option contracts that expire tomorrow, check about the 5:50 mark on the closing ag mkt report to hear about it:

    On the demand side, average guess
    on tomorrow’s Cattle on Feed report are expected actual cattle on feed at
    99.8% of last year. Placements are expected to be in the neighborhood of 96%
    if ZW ZC ZS can close green tomorrow, then will look good for a bounce in the light volume holiday week.

    gold had closed poorly on fridays for many moons, then the last 2 fridays made lower lows and then reversed to close strongly, on volume. what'll it be!


  29. There is inflation. It's in the debt markets.


  30. There is inflation in stock prices. I don't complain about it though. I say "Thank You Very Much, and Keep it Coming!!"

    1. It's all about being on the right side of the trade.

    2. I'm way behind on my Goldseek shows.


      Navellier echoes what Gordon Long says about the bigcap buybacks. He admits it's financial engineering, but it will continue as long credit is this cheap.

      And Quinn article today is worth a read. The tards should take it to heart about what really is an inflation hedge, and it's not gold.

      "The 20 year bull market took the Dow from 759 to 11,722 by January 2000. The S&P 500 rose from 98 to 1,552 by March 2000. You also averaged about a 3% dividend yield per year over the entire 20 years. Your average annual return, including reinvested dividends, exceeded 17%. Anyone who even saved a minimal amount of money on a monthly basis, would have built a substantial nest egg for retirement. If you had invested in 10 Year Treasuries, your annual return would have exceeded 11% over the 20 years. Even an ultra-conservative investor who only put their money into 5 year CDs would have averaged better than 7% per year over the 20 years."

      Inflation went into yielding assets--RE, stocks, and bonds. Gold only shines when bonds fails to offer an expected real return, that is, debt deflation.

  31. Well, this explains a good reason why gold and miners are so crazy volatile. Hedge funds are basically gambling.


    Forget fundamentals - it is all about gambling ....combine this with crazy computer algo trading, and you have a completely messed up market....

    1. You know what's scary. I was looking at the AUM of several well-established gold mutual funds that have been around forever. Tiny. Nothing. Nobody owns the sector. Everybody either has no allocation or is short.

      Miner Market Cap
      GG 16B
      ABX 14B
      NEM 9B
      AU 4B
      AEM 5B
      AUY 4B
      KGC 3B

      AAPL 700B
      FB 200B

      What's this going to look like when miners become monetary utilities and the trillions in managed funds try to shoehorn a smidgen of an allocation into a wee sphincter when the offer stack is thin at best?

    2. Why would large hedge funds want to waste their time playing in such a small market like the gold and miners market?

      Seems only peanuts for money would be made in the gold market, especially if they are short miners at these ultra low levels.

    3. Not hedgies. They will always be flaky. It's the SWF's and pension funds. Trillions. Go thru the 13F's. At best a token 0.1% in a Barrrick or Newmont.

  32. Well an another investor may have had the opposite, pleasant experience of receiving a raise or an unexpected inheritance as informed by Epicresearch.co.

  33. Something happened overnight. Stocks up, oil up, euro down. Metals yawn.


    Just when you think stocks have to run out of gas, something comes along and gives new life. Shorts get crushed. That's how bull markets work. Don't fight the tape.

    1. Just woke up and saw that turbulence.
      It seems like if the CB's & friends are involved in the markets as heavily as assumed or reported that they'll do whatever it takes (even if it's just words/Draghi) to keep the wealth effect going strong.

    2. Two years of ECB ABS purchases around $1TRILLION EUR...


  34. Just when you think it can not get dumb or dumber, out they drag an old fart calling for $250 silver. Perhaps he should consider hanging up his spikes and heading off into the sunset? Myself, I would be ashamed to see my name listed at the bottom of the swill page. That is all.

    1. Keep the faith, Steve.
      Bo Polny foresaw it : doesn't matter what the price of gold is, it will reach 2000 $ before year end.
      Hope many will send him a happy new year e-card at that time :)

  35. the race to debase! go china go draghi!!

    rio tinto and vale the big miners are gappn over 10%

    GCz4 the 50-day SMA touch at 1207.5 and the .618 fib of this current range 1131-1255 at 1208+.

    will surging outside markets support the Ags, or will they look at the USDX and better growing weather in south america.
    ...a green close in the complex today will support the view that the low end of a trading range has been achieved.
    ...let's see what jan beans do at 100-day MA touch around $10.275.

    crude oil open interest was making a 3 yr low, and non-commerical net long at a 52 week low.


  36. Hilarious.

    Never before has Central Banking been so easy.

    Due to the resounding success of the Bernanke/Yellen experiment, whereby printing trillions of dollars:

    - Levitated stocks up 200% in 5 years
    - Crashed the 10-year yield to 2.5% for a world record number of months
    - Cratered commodity prices, sending ags and energy prices to 4 - year lows

    Money printing will now be the first choice among all Central Banks around the world to solve any and all problems.

    Why not?

    This has been one of the most fantastic, successful monetary experiments in financial market history.

    Why stop?

    Enjoy the coming economic boom that will be one for the record books.


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