Wednesday, November 5, 2014
The West Greets Gold with More Selling
The selling kicked off in gold last evening when the comments from the Bank of Japan's Kuroda hit the newswires and has not let up as trading moved into the West.
Please refer to the chart I posted last evening showing the various support levels for the metal. The first zone of support, near the $1150 level, has been shattered conclusively. Gold now looks to have its eye on the psychological round number of $1100.
As usual, the gold perma-bulls are screaming their usual nonsense about "Flash Crash" once again. Funny how we never hear a peep out of these nitwits when we get what I have contemptuously dubbed, "the Reverse Flash Crash".
The point they are making is what? That big sellers unloaded on the metal during the Asian trade? And this is supposed to be proof of what?
Has it ever occurred to these Johnnie one-notes that there are some longs in SERIOUS trouble in the gold market? The latest Commitment of Traders report showed large speculators overwhelming LONG and WRONG in the gold market ( and this does not even include the over the counter markets). They are abandoning gold in droves.
The assumption that these perma gold bulls sites make is that "this would not be done if a LEGITIMATE SELLER wanted to ensure the best possible price". Again, who says that a trapped long wants the best possible price? The only thing a trapped long wants is "OUT".
"GET ME OUT before I am ruined" is what the motivating force is behind such moves.
I have to shake my head at the appalling ignorance that somehow passes for sound analysis in the gold bug community when it comes to the breathless commentary on gold whenever there is a sharp fall in price. Those of you who are regular readers at this site are keenly aware of what has been transpiring in the soybean markets of late. I have been especially detailed in discussing the meal markets in particular. If you want to see a market in which one group was "engineering a reverse flash crash" ( My words denoting sarcasm) just go back and look at the price chart of December meal. Panicked shorts were saying the same things as panicked gold longs were saying: " GET ME OUT AT ANY PRICE BEFORE I AM COMPLETELY RUINED".
These huge volume spikes speak of fear, panic and devastating losses all being compounded by margin calls from busy margin clerks at the various brokerage houses.
The idea that somehow huge sell orders in gold indicate the presence of "market manipulation" is patently absurd. We see this sort of thing all the time in the futures markets as one side or the other gets run over whenever a key technical support level gives way to the downside or a key technical resistance level is taken out on the upside.
Of course those that are on the winning side of a market move are going to press their advantage. That is a REGULAR occurrence in the futures market and is simply how they work. Ask the feeder cattle bears who had been obliterated by the bulls in that market since late August until only just recently if the ones doing the buying were interested in "buying at the best possible price". That one should even venture to ask such an insipid question would betray a breathtaking ignorance.
The simple facts are that gold is in a bear market and those who remain long are losing tremendous sums of money. Some have had enough and are done with the metal from the long side. Expect to see more of this the longer it takes gold to show any signs of stability. Each fresh push lower will take its toll, both psychologically and financially on the remaining longs. Bears will push until the downside momentum slows and then they will halt their selling. It really is that simple.
At some point the bleeding with temporarily halt and a respite will follow. Objective traders will watch key indicators to see if they can discern where and at what level.
I might point out here at the risk of incurring even more wrath from the gold cult members, but in the hope of waking some of them up, that their whistleblower hero and priest, the one who keeps regaling them with claims of special insider information about "massive gold buying", "massive rally of epidemic proportions", etc,. has once again proved to be nothing but a bag full of hot air. Wake up out there. Gold is in a bear market. That is what you really need to realize.
Until such time as the charts indicate a true bottom and a true turn in the direction of the main trend, rallies are going to be sold. Maybe the US Dollar will become weak, maybe inflation will begin to become a problem, maybe the commodity sector will turn sharply higher, maybe the GLD will start showing strong inflows of money with rises in its reported holdings, maybe this and maybe that, but until you see something on the fundamental front change that favors sharply higher gold prices, just remember a very simple but always ignored axiom: " The trend is your friend".
Please refer to the chart I posted last evening showing the various support levels for the metal. The first zone of support, near the $1150 level, has been shattered conclusively. Gold now looks to have its eye on the psychological round number of $1100.
As usual, the gold perma-bulls are screaming their usual nonsense about "Flash Crash" once again. Funny how we never hear a peep out of these nitwits when we get what I have contemptuously dubbed, "the Reverse Flash Crash".
The point they are making is what? That big sellers unloaded on the metal during the Asian trade? And this is supposed to be proof of what?
Has it ever occurred to these Johnnie one-notes that there are some longs in SERIOUS trouble in the gold market? The latest Commitment of Traders report showed large speculators overwhelming LONG and WRONG in the gold market ( and this does not even include the over the counter markets). They are abandoning gold in droves.
The assumption that these perma gold bulls sites make is that "this would not be done if a LEGITIMATE SELLER wanted to ensure the best possible price". Again, who says that a trapped long wants the best possible price? The only thing a trapped long wants is "OUT".
"GET ME OUT before I am ruined" is what the motivating force is behind such moves.
I have to shake my head at the appalling ignorance that somehow passes for sound analysis in the gold bug community when it comes to the breathless commentary on gold whenever there is a sharp fall in price. Those of you who are regular readers at this site are keenly aware of what has been transpiring in the soybean markets of late. I have been especially detailed in discussing the meal markets in particular. If you want to see a market in which one group was "engineering a reverse flash crash" ( My words denoting sarcasm) just go back and look at the price chart of December meal. Panicked shorts were saying the same things as panicked gold longs were saying: " GET ME OUT AT ANY PRICE BEFORE I AM COMPLETELY RUINED".
These huge volume spikes speak of fear, panic and devastating losses all being compounded by margin calls from busy margin clerks at the various brokerage houses.
The idea that somehow huge sell orders in gold indicate the presence of "market manipulation" is patently absurd. We see this sort of thing all the time in the futures markets as one side or the other gets run over whenever a key technical support level gives way to the downside or a key technical resistance level is taken out on the upside.
Of course those that are on the winning side of a market move are going to press their advantage. That is a REGULAR occurrence in the futures market and is simply how they work. Ask the feeder cattle bears who had been obliterated by the bulls in that market since late August until only just recently if the ones doing the buying were interested in "buying at the best possible price". That one should even venture to ask such an insipid question would betray a breathtaking ignorance.
The simple facts are that gold is in a bear market and those who remain long are losing tremendous sums of money. Some have had enough and are done with the metal from the long side. Expect to see more of this the longer it takes gold to show any signs of stability. Each fresh push lower will take its toll, both psychologically and financially on the remaining longs. Bears will push until the downside momentum slows and then they will halt their selling. It really is that simple.
At some point the bleeding with temporarily halt and a respite will follow. Objective traders will watch key indicators to see if they can discern where and at what level.
I might point out here at the risk of incurring even more wrath from the gold cult members, but in the hope of waking some of them up, that their whistleblower hero and priest, the one who keeps regaling them with claims of special insider information about "massive gold buying", "massive rally of epidemic proportions", etc,. has once again proved to be nothing but a bag full of hot air. Wake up out there. Gold is in a bear market. That is what you really need to realize.
Until such time as the charts indicate a true bottom and a true turn in the direction of the main trend, rallies are going to be sold. Maybe the US Dollar will become weak, maybe inflation will begin to become a problem, maybe the commodity sector will turn sharply higher, maybe the GLD will start showing strong inflows of money with rises in its reported holdings, maybe this and maybe that, but until you see something on the fundamental front change that favors sharply higher gold prices, just remember a very simple but always ignored axiom: " The trend is your friend".
Tuesday, November 4, 2014
Bank of Japan's Kuroda Talks Stimulus
There are two things working against gold this evening. The first is the election results showing a wave election in favor of the Republicans which can be interpreted as a repudiation of Obama and his policies. Equities seem to like the results and are moving higher. In the current environment, rising stock markets work against gold.
The second item is the set of comments coming from Bank of Japan governor Kuroda. He is essentially confirming the view that deflation is the major concern of his Central Bank. Along that line, he has noted that "falling commodity prices are positive for the Japanese economy in the long run". Such comments undercut any reason to own gold in the mind of most investors.
Gold has responded accordingly by plunging below last week's low.
In trying to find support levels for the metal, I am forced to move to the long term monthly chart. Please note that gold has fallen to the first Fibonacci retracement level noted by the shaded ellipse. That comes in near $1155. Failure there and gold is set for a test, first of psychological round number support at $1100 but more critically, technical chart support near $1088.
The second item is the set of comments coming from Bank of Japan governor Kuroda. He is essentially confirming the view that deflation is the major concern of his Central Bank. Along that line, he has noted that "falling commodity prices are positive for the Japanese economy in the long run". Such comments undercut any reason to own gold in the mind of most investors.
Gold has responded accordingly by plunging below last week's low.
In trying to find support levels for the metal, I am forced to move to the long term monthly chart. Please note that gold has fallen to the first Fibonacci retracement level noted by the shaded ellipse. That comes in near $1155. Failure there and gold is set for a test, first of psychological round number support at $1100 but more critically, technical chart support near $1088.
GLD Holdings Continue to Fall
Gold continues to rapidly lose friends over here in the West as the steady fall in holdings indicates the growing disillusionment of those who bought the metal thinking it would respond upward during this period of Central Bank actions to provide low interest rates and more liquidity.
One gets the distinct sense from watching the price action that even some of the more resolute bulls are now reading the handwriting on the wall and getting out as the bear market in gold becomes more deeply entrenched.
Look at the updated chart of the holdings of GLD, the big gold ETF. They fell another 2.39 tons since Friday of last week to sink to 738.82 tons. That is the lowest level of reported holdings since the last week of September in 2008. In other words, a fresh 6+ year low!
To further add insult to injury, both the HUI and the GDXJ, the latter which is especially pulling a disappearing act, surrendered their feeble gains from yesterday closing down near session lows.
As a matter of fact, one must go all the way back to October 27, 2008 to find a LOWER CLOSING PRICE in the HUI. Just for the record, the closing price of the HUI on that date was 151.57. We are talking about 6 years here as well. Prior to that, we are talking about going as far back as July 2003 to find a lower closing price. In other words, we are a mere 3 points away from seeing an ELEVEN YEAR LOW.
Of course we have the gold perma bulls talking the usual "capitulation" but such a "strategy" is the last resort of those who have lost so much money in an asset class that they have nothing else to lose at that point. Capitulation does one no good whatsoever if the stock they are invested in disappears from sight and the company ceases to exist as a viable entity. I expect we shall be seeing this occur.
There is no lesson that bites as harshly and stings so fiercely as a financial one. Listening to others without listening to the voice of the market itself is courting financial ruin. No man alive knows the future and those who speak with a feigned authority as if they do, prey on the unsuspecting and the naïve.
The vast majority of people who have set aside some money with which to invest have worked very hard to secure that. It represents their life, their dreams, their hopes for their children or grandchildren or their security in their old age. To lose it, to watch it go up in smoke is a bitter, bitter thing but to realize that they have blindly followed someone else to their own ruin makes it an even more bitter pill to swallow.
It would be well to keep in mind an admonition from the Scriptures against those who mislead or deceive others.
"Hear this, you who trample the needy, to do away with the humble of the land, saying, "When will the new moon be over, so that we may sell grain, and the Sabbath, that we may open the wheat markets, to make the bushel smaller and the shekel bigger, and to cheat with dishonest scales, so as to buy the helpless for money and the needy for a pair of sandals, and that we may sell the refuse of the wheat."
...
The Lord has sworn by the PRIDE of Jacob, "Indeed, I will never forget any of their deeds... Then I shall turn your festivals into mourning and all your songs into lamentation; and I will bring sackcloth on everyone's loins and baldness upon every head, and I will make it like a time of mourning for an only son, and the end of it will be like a bitter day". Amos 8: (4-10)
One gets the distinct sense from watching the price action that even some of the more resolute bulls are now reading the handwriting on the wall and getting out as the bear market in gold becomes more deeply entrenched.
Look at the updated chart of the holdings of GLD, the big gold ETF. They fell another 2.39 tons since Friday of last week to sink to 738.82 tons. That is the lowest level of reported holdings since the last week of September in 2008. In other words, a fresh 6+ year low!
To further add insult to injury, both the HUI and the GDXJ, the latter which is especially pulling a disappearing act, surrendered their feeble gains from yesterday closing down near session lows.
As a matter of fact, one must go all the way back to October 27, 2008 to find a LOWER CLOSING PRICE in the HUI. Just for the record, the closing price of the HUI on that date was 151.57. We are talking about 6 years here as well. Prior to that, we are talking about going as far back as July 2003 to find a lower closing price. In other words, we are a mere 3 points away from seeing an ELEVEN YEAR LOW.
Of course we have the gold perma bulls talking the usual "capitulation" but such a "strategy" is the last resort of those who have lost so much money in an asset class that they have nothing else to lose at that point. Capitulation does one no good whatsoever if the stock they are invested in disappears from sight and the company ceases to exist as a viable entity. I expect we shall be seeing this occur.
There is no lesson that bites as harshly and stings so fiercely as a financial one. Listening to others without listening to the voice of the market itself is courting financial ruin. No man alive knows the future and those who speak with a feigned authority as if they do, prey on the unsuspecting and the naïve.
The vast majority of people who have set aside some money with which to invest have worked very hard to secure that. It represents their life, their dreams, their hopes for their children or grandchildren or their security in their old age. To lose it, to watch it go up in smoke is a bitter, bitter thing but to realize that they have blindly followed someone else to their own ruin makes it an even more bitter pill to swallow.
It would be well to keep in mind an admonition from the Scriptures against those who mislead or deceive others.
"Hear this, you who trample the needy, to do away with the humble of the land, saying, "When will the new moon be over, so that we may sell grain, and the Sabbath, that we may open the wheat markets, to make the bushel smaller and the shekel bigger, and to cheat with dishonest scales, so as to buy the helpless for money and the needy for a pair of sandals, and that we may sell the refuse of the wheat."
...
The Lord has sworn by the PRIDE of Jacob, "Indeed, I will never forget any of their deeds... Then I shall turn your festivals into mourning and all your songs into lamentation; and I will bring sackcloth on everyone's loins and baldness upon every head, and I will make it like a time of mourning for an only son, and the end of it will be like a bitter day". Amos 8: (4-10)
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!
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!
Monday, November 3, 2014
Bean Harvest Wrapping Up
The USDA Soybean harvest progress report was out this afternoon and it showed some hefty progress was made last week. Bean harvest as of the past weekend was at 83% compared to 70% last week and 85% for the same week last year. The five year average is 83% so it is dead on schedule.
The story essentially remains the same as last week... harvest progress out in the western regions of the Belt was very, very strong.
Iowa is at 91% complete, compared to 81% last week and 94% last year but it is also now ahead of the five year average of 90%. Minnesota is essentially done at 98% compared to 94% last week and 95% last year. Its five year average is 91%.North and South Dakota, along with Nebraska, are wrapping up as well. In short, the western part of the Belt looks great.
Just like last week, it is the eastern part of the belt that is lagging. However, very good progress was made last week in Indiana, which jumped up to 70% complete compared to only 50% the previous week. The five year average there is 87%.
Ohio also made good progress jumping from 50% the previous week to 72%. That compares with last year at 90% and its five year average of 83%.
Illinois had a nice ramp up as well with 83% now harvested compared to only 63% last week. Last year it stood at 91%. The five year average is 84% so Illinois has really made up some ground and is now essentially right where it ought to be.
Based on these numbers I find it hard to believe that we are going to continue to hear issues about "meal shortages" much longer. The beans are going into the bins and the crop is very large. As the harvest winds down, more trucks should become available to move meal that is produced as crushers have incredible margins right now in the beans with the heavy buying jacking the crush to some quite profitable levels.
It would not surprise me one bit to hear talk going from "meal shortages" to "meal gluts" sooner rather than later. The tightness in transportation will eventually clear up and the product is going to move.
Switching ever so briefly to the corn... the harvest is 65% complete compared to 46% last week ( farmers have opted to go after the beans and leave the corn for later) but is catching up to last year's pace of 71%. The five year average stands at 73%.
There does not seem to be a standout feature in the report as to a clear cut difference between the eastern and western portions of the Belt. I should note that Illinois is essentially tracking its five year average of 78% with this week's 77% complete.
Iowa and Indiana are lagging with the former at 58% compared to its five year average of 75% with the latter at 58% compared to its five year average of 70%.
This is perhaps the reason that the funds have been able to jam corn prices off their worst levels right at the closing bell both last Friday and today. The trade is waiting for a larger percentage of the harvest to come in before they begin to get aggressive on the hedging but I look for that to pick up this week. Opposition to the hedge funds and other large specs is building between $3.80-$3.70.
The forecasts show some moisture in the belt but the amounts forecasted vary. Also, some regions look to see sunshine and clear weather, but colder temps on the way. Depending on location, farmers will have some open windows available to get some more done before next Monday's reports.
The story essentially remains the same as last week... harvest progress out in the western regions of the Belt was very, very strong.
Iowa is at 91% complete, compared to 81% last week and 94% last year but it is also now ahead of the five year average of 90%. Minnesota is essentially done at 98% compared to 94% last week and 95% last year. Its five year average is 91%.North and South Dakota, along with Nebraska, are wrapping up as well. In short, the western part of the Belt looks great.
Just like last week, it is the eastern part of the belt that is lagging. However, very good progress was made last week in Indiana, which jumped up to 70% complete compared to only 50% the previous week. The five year average there is 87%.
Ohio also made good progress jumping from 50% the previous week to 72%. That compares with last year at 90% and its five year average of 83%.
Illinois had a nice ramp up as well with 83% now harvested compared to only 63% last week. Last year it stood at 91%. The five year average is 84% so Illinois has really made up some ground and is now essentially right where it ought to be.
Based on these numbers I find it hard to believe that we are going to continue to hear issues about "meal shortages" much longer. The beans are going into the bins and the crop is very large. As the harvest winds down, more trucks should become available to move meal that is produced as crushers have incredible margins right now in the beans with the heavy buying jacking the crush to some quite profitable levels.
It would not surprise me one bit to hear talk going from "meal shortages" to "meal gluts" sooner rather than later. The tightness in transportation will eventually clear up and the product is going to move.
Switching ever so briefly to the corn... the harvest is 65% complete compared to 46% last week ( farmers have opted to go after the beans and leave the corn for later) but is catching up to last year's pace of 71%. The five year average stands at 73%.
There does not seem to be a standout feature in the report as to a clear cut difference between the eastern and western portions of the Belt. I should note that Illinois is essentially tracking its five year average of 78% with this week's 77% complete.
Iowa and Indiana are lagging with the former at 58% compared to its five year average of 75% with the latter at 58% compared to its five year average of 70%.
This is perhaps the reason that the funds have been able to jam corn prices off their worst levels right at the closing bell both last Friday and today. The trade is waiting for a larger percentage of the harvest to come in before they begin to get aggressive on the hedging but I look for that to pick up this week. Opposition to the hedge funds and other large specs is building between $3.80-$3.70.
The forecasts show some moisture in the belt but the amounts forecasted vary. Also, some regions look to see sunshine and clear weather, but colder temps on the way. Depending on location, farmers will have some open windows available to get some more done before next Monday's reports.
Unleaded Gasoline Strikes Fresh Four Year Low
Could we possibly see a "1" handle on the price of unleaded gasoline before the year is out?
I don't know but I can say that the chart shows a region of congestion between today's session low and the $1.80 level.
Wouldn't that be something?
I don't know but I can say that the chart shows a region of congestion between today's session low and the $1.80 level.
Wouldn't that be something?
Crude Oil Price War Stirring?
I sure think so... What I am referring to is the move by Saudi Arabia to CUT its oil price for oil sold to the US while raising its price to other countries, notably in Asia.
There are some analysts who are downplaying the move as only an attempt by the Saudis to maintain US market share but I think not. I think they are going after the US shale industry.
This is rather interesting if you ask me because of the impact on Russia as well.
Either way, the cut in price by the Saudis has oil traders thinking along a common line right now and that is burgeoning supplies. Economic growth is just too slow to burn through all of the oil that is accumulating.
The impact of falling energy prices should not be underestimated. It does two things:
1.) It benefits consumers and businesses with heavy energy usage such as those in the Transportation sector
2.) It harms the one bright spot in the US economy, namely the energy industry and the companies associated with production, exploration and service to some extent.
I might also mention something more along the psychological front - it feeds the DEFLATION psyche. Look at the plunge in the commodity indices today. Given that sort of environment, gold is going to continue to fall out of favor. Why buy a metal that throws off NO yield in an environment in which commodity prices in general are heading lower?
Here is a chart of crude oil...The black liquid hit a 2+year low today.
If it breaks the support level noted on the chart, we could see another $2.50 break lower from current levels. I also want to remind the reader that based on the most recent Commitments of Traders report, large speculators still remain heavily long in this market by a more than 3:1 ratio.
Just like they are in gold, they are caught on the wrong side of a plunging market meaning the resulting money issues at work will tend to keep the price depressed as rallies are viewed by losing sides as opportunities to get out and cut their burgeoning losses somewhat. It is all about reducing the pain at this point.
There are some analysts who are downplaying the move as only an attempt by the Saudis to maintain US market share but I think not. I think they are going after the US shale industry.
This is rather interesting if you ask me because of the impact on Russia as well.
Either way, the cut in price by the Saudis has oil traders thinking along a common line right now and that is burgeoning supplies. Economic growth is just too slow to burn through all of the oil that is accumulating.
The impact of falling energy prices should not be underestimated. It does two things:
1.) It benefits consumers and businesses with heavy energy usage such as those in the Transportation sector
2.) It harms the one bright spot in the US economy, namely the energy industry and the companies associated with production, exploration and service to some extent.
I might also mention something more along the psychological front - it feeds the DEFLATION psyche. Look at the plunge in the commodity indices today. Given that sort of environment, gold is going to continue to fall out of favor. Why buy a metal that throws off NO yield in an environment in which commodity prices in general are heading lower?
Here is a chart of crude oil...The black liquid hit a 2+year low today.
If it breaks the support level noted on the chart, we could see another $2.50 break lower from current levels. I also want to remind the reader that based on the most recent Commitments of Traders report, large speculators still remain heavily long in this market by a more than 3:1 ratio.
Just like they are in gold, they are caught on the wrong side of a plunging market meaning the resulting money issues at work will tend to keep the price depressed as rallies are viewed by losing sides as opportunities to get out and cut their burgeoning losses somewhat. It is all about reducing the pain at this point.
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