"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


Friday, September 23, 2011

Commodity complex reeling but still standing

Please examine the following chart to see where the complex is as a whole in terms of its technical posture. With traders currently leaning towards the "slowing global economy" theme, the complex is moving lower to revalue many of the individual markets comprising this index. That is more of the deflationary emphasis and is reflected in the breach of chart support and accelerated move lower once price broke out of the downside of the recent channel.

There has been some chatter that the G20 will attempt to take some sort of concerted action to assuage investor fears. also, today there was news of a speed up in the formation of a European Stabilization Mechanism by some of the European nations. I would also not be surprised to learn at some point further yet down the road that the Fed will openly buy equities to prop up the US market should they feel the need to do so. This will be another form of QE but would target stocks instead of interest rates. The idea would be to influence investor sentiment and "revive the animal spirits".

If the investment world believes that some sort of liquidity mechanism will be introduced that might serve to reflate stock markets and stave off deflationary pressures should those get too far out of hand in the minds of monetary officials and some policy makers, the commodity complex would get a jolt higher once again.

Sadly, until we get structural reforms and changes in fiscal policy, the efforts to shock the economy into getting a stronger heart beat are destined to fail. The economy in the US is being held back by policy blunder after policy blunder by the current administration, which is in way over its head and is actually making matters worse.


  1. Please, spare me.

    The bubble is popping. Any attempt to explain it away is just gold bugs in denial.

  2. Well there "unknown", I've been a "gold bug" since 1964, and the only explaining I'm doing is telling friends it’s time to buy.

    Maybe we don't find a solid bottom until $1,250 (Au) and $24 (Ag). So what? The DJIA was 800 in 1964, silver $0.65 and gold $35.

    I'm popping the champagne cork on my bottle of bubbly; there will be a month or two or three of good buying on the fall of the metals (if it lasts that long), then when the austerity programs completely kill consumption, and new massive QE's programs surface, I'll be a seller on the upside.

  3. Many thanks Dan. Especially comforting is the monthly chart that you posted with your gold chart comments which shows the 2008 gold price smack-down amounting to little more than a speed bump. Nonetheless, it did give the shameless MSM financial news outlets an opportunity to trot out their Chicken Little bubble callers and, come to think of it, I believe that I heard some of the same birds squawking the same BS today.

    BTW, this bubble talk I see posted here in the comments section is not only disrespectful, it signals deep personal issues related to fear and insecurity, and the author is most likely just be a troubled bed-wetter in denial. The rest of us absolutely love your take on the markets Dan. Thanks again.


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