As some of you who regularly read this blog are no doubt aware, from time to time I will comment on the cattle/beef and hog/pork markets as those are the markets that I cut my teeth on and still are my bread and butter. While the consumer has thus far been insulated from any negative fallout from the massive money creation of the Fed and its QE programs, something has been happening in the livestock markets which will affect everyone who enjoys a good quality steak or beef roast. What I mean by this is that a shortage of cattle has sent wholesale beef prices soaring into record all-time high territory with the trade unsure of just how high prices are going to go before this balloon runs out of hot air.
Take a look at the following chart of the wholesale price of choice beef ( this is a composite price). I have included the data going back exactly 4 years to give you a sense of what has been quietly occurring. Beef prices have increased a whopping 65% in this period! Think about that again!
Yet, many consumers have not yet noticed it because grocers and restaurant owners have been trying to absorb some of the price rise so as not to hurt their business. They share the same concern that many of us also have, namely, an economy, that while the consensus is that it is slowly improving, certainly has not experienced any of the type of growth rates that we are accustomed to seeing with economies coming out of recession. They are aware that consumers remain extremely price conscious and thus have opted not to pass on the bulk of the increase in prices. That is about to change and change rapidly.
The price rise has been of such magnitude that they are no longer in a position to absorb the impact of the high prices without passing it on the consumer. It generally takes a while for the beef that has been purchased to work its way through the pipeline so the brunt of this increase will not show up for a few more weeks, but show up it certainly will.
Just get ready folks - that steak is going to seem like a meal that only royalty can partake of! Personally I am of the view that it is too bad that beef is a perishable commodity - I could have sold gold and loaded up on beef steaks and unloaded them out of the freezer and retired had I been able to do that!
Three Morgan analysts were reported today as issuing some research which essentially is calling for a bottom in the gold market. That is what Dow Jones is reporting from Barron's Blog.
They were especially upbeat on some S. African miners, most notably Harmony and Sibanye. They were downright negative on Randgold and not at all enamored with Anglo.
Regardless, the report was enough to have investors chasing gold mining shares today as well as putting a bid back into gold over at the Comex. It did seem to me that as the session wore on and as news about the call became more widespread, gold continued to move higher. Nothing like a big name bank to give traders/investors their convictions....
You do have to ask why JP Morgan has been loading up on all that gold when it comes to the Comex delivery process. Hey, nothing like acquiring lots of the metal and then letting your analysts give the market a bullish call which essentially guarantees that the price is going to rise and you are going to secure some excellent profits.
It will be interesting to see how the "gold is always manipulated all the time" guys and gals are going to deal with this. AS I have been saying, the big bank(s) have been buying gold - why would they be interested in capping it now that they have amassed so much of it? They have been buying from the hedge funds who were dumping it. That is an incontrovertible fact.
From a technical analysis perspective, gold's ability to hold support down near $1,220 - $1,224 was very constructive. It is now challenging firm overhead resistance. Note that it has moved decidedly above the 50 day moving average which is also constructive but more importantly, look at the DMI lines ( Directional Movement Indicators). The +DMI or Positive Directional Movement Indicator has now touched the -DMI or Negative Directional Movement Indicator Line for the first time since October of last year. What this means is that the bulls are very close to gaining control of this market, if they have not done so already. I personally want to see the price push through $1260 on the topside at a bare minimum to confirm that the near term trend has changed.
