"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 18, 2014

Gold Taking Cues from Forex Market Movements

Take a look at the following chart comparing the price of the Euro ( in BLACK ) to the price of Gold ( in YELLOW).

During December of last year, and January of this year, the linkage broke down but beginning in February the two have moved in almost perfect lockstep with one another. The connection has been especially tight since this past summer.

The take away from this is rather simple at this point - Tell me what the Euro is going to do next and I will tell you with relative confidence what gold will do.

This morning there was news out of Germany that their ZEW index, a measure of economic confidence, rose in the month of November, the first time it has done so in a year. That produced a big impact in the Euro which completely erased its losses from yesterday ( do you ever get the feeling we are trading yo-yo's and not real markets?) and then added some for good measure. Back down went the Dollar and what do you think gold did? Yep - it moved higher.

The point in all this is that gold is completely at the mercy of developments occurring in the Foreign exchange markets at the moment. There is still widespread weakness across the commodity sector with crude and the grains move lower today.

I should also note that it looks to me like there is a line of thinking that continues to be seen out there which is regarding the sharp selloff in the crude oil and liquid energy markets as STIMULATIVE IN NATURE for the global economy. It is not the majority view but it is out there nonetheless.

Thus far the sell off in crude has fed into the deflationary/slowing global growth scenario. This scenario is NOT BULLISH FOR GOLD OR SILVER. I cannot say this strongly enough.

I have said it before and will say it again and again - my inbox is filled with articles from gold and silver perma bulls constantly finding fault with the US economic performance as they focus on this negative aspect of a set of economic data or that negative aspect. I have yet to find ONE article sent by any of them noting anything positive about the global economy, anywhere. It is all uniformly negative. Yet, they turn around in the very same breath and announce how bullish this is for gold and silver prices? Excuse me - but what in the world do they think has been has happening to gold and silver prices over the last three years, and in particular, the last two years?

SLOW GLOBAL ECONOMIC GROWTH IS NOT BULLISH FOR PRECIOUS METALS PRICES. It is that simple. They need growth, lots of it. The kind of growth which sends the Velocity of Money rising and kicks up inflation worries. That has not been present and as a result, metals prices have been sinking lower. It has nothing to do with some supposed manipulation of the prices of the metals by bullion banks acting as agents of the Fed and everything to do with deflationary fears and a strong US Dollar.

Today we got a bit of a glimpse what might happen to metals prices if the Central Bank efforts to produce an inflation rate of 2% might actually be successful. Notice the very sharp response in the Euro to that improved economic confidence reading!

I would suggest to gold and silver perma bulls that they stop dissing US economic data and actually start rooting for solid growth prospects, not just here, but globally if they wish to see their metals run higher for more than a short period of time.

Just a head's up - along that line, we are going to get some fundamental type news this week.

Gold managed to briefly change the handle from "11" to "12" but it has not lasted very long. Mining shares are still strong at this hour however, so the bull's prospects are improving. They will however have to face the FOMC minutes and see whether or not they can weather any potential impact from those.

The HUI chart looks quite strong at the moment, exactly what one wants to see if they want gold prices to move higher. Notice that the index has closed another downside gap and is actually trading above that gap at the moment. That is very bullish price action!

The index is essentially attempting to work its way back to the downside breakout point made in early October. I have noted that area as "BIG TEST". If this is something more than a bounce in the ongoing bearish trend, albeit a very strong bounce, the index will have to push past this zone and CLOSE ABOVE IT.

If it were able to do this, gold should easily regain a "12" handle and one can say that a more lasting bottom is in this market. If it fails to do that, and retreats lower back down below that gap, that will signal a period of sideways movement in price or what we refer to as consolidation. Stay tuned.

By the way, those of you who want to do so, might wish a Happy Birthday to GLD. It was exactly TEN YEARS ago that it opened up and began trading. There was a note on the wire services that in its first three days of trading, it took in more than $1 billion!


  1. most XNLT commentary Dan!

    The combination of SPY going on 23 days above its 5-dma after QE and POMO has ended is pretty hilarious... this is also a record number of sessions in a row above 5dsma for SPX.

    some gold stocks have made it to 50-dma touch, that would be next goal for HUI XAU.

    SLV barely to 20-day sma touch, looking at inflation/industrial brethren copper and crude perhaps.

    cheerio pip pip!

  2. interesting the ags staying red -The Brazilian real traded at more than 2.6 to the dollar last Friday, which was
    the weakest it has been in over nine years.

    russia grain sales are up 37% with it's diving ruble.

    gold had the geo-political in the trading desk instant messaging overnite with blurbs on ukraine out there and 'Four killed, eight hurt in terror attack at Jerusalem synagogue'

    GCz4 the 1210.3 is the 50-day SMA touch in conjuction with .618 of 1130-1255 in the 1207's.

  3. For the last 2 years or so gold price movement seemed directly related to Yen. That link seems to have broken now.

  4. Gold will go through $1200 but Indian government will put a damper with new curbs. Failed Swiss Referendum vote will be a further damper. Critical is US dollar. Gold shares have yielded big profits as predicted, and may have a bit further to go, but probably not so much. Stand by to bail out of gold and the gold shares within a week. It was fun while it lasted, and very profitable.

  5. Gold bulls leap on negative economic news purely because it likely delays interest rate rises which is good for gold. It also increases the chances of more central bank stimulation which is also good for gold. Stagflation doesn't require an economic recovery.

    Look at the ECB saying they could even print Euros and buy gold if they were forced to. I'm not saying this is likely but another example of negative economic news being potentially good for gold.

    Deficit spending and implicitly increasing debt is also usually good for gold. Especially when the likes of China are using gold as a hedge again currency destructions happening worldwide. Look at what's happening to the Yen. How long before that economy blows up and we have another banking crisis?

    So I can understand why bulls want to see more bad news. After all the 2008 crash and resultant central bank policies are what sent gold to $1900.

    1. Dominic Lewin;

      Please show us all how Central Bank stimulus efforts are "good for gold". Please produce price charts from the last three years detailing why the gold price has gone down in spite of QE$ and QE4, the first ABE Government stimulus measure and the recent stimulus measures from the ECB.

      That is simply not borne out by the facts. What is good for gold is not stimulus measures but rather stimulus measures that actually have some sort of beneficial activity on economic growth which can be measured by producing a ramp up in inflationary pressures and an increase in the Velocity of Money.

      You are stuck in the past - the reason gold went to $1900 is because everyone and their dog believe, wrongfully it turned out, that QE would produce rampant inflation. It did not work out that way and as soon as everyone realized that it did not, and that deflationary headwinds were beating back central BAnk attempts to stimulate, they sold off gold, silver, copper and everything else that looked remotely like a commodity.

      Those are facts.

    2. Commodities are fascinating to me. I once provided a chart showing cycles that have peaks roughly every 30 years for the last couple hundred years. It seems that investors and traders pile into these commodities and drive them way up once they get to a point where they’ve forgotten about prior commodity peaks & declines. Takes a new generation of investors and traders to drive the prices up. And they use certain fundamental triggers to justify these moves – like wars, etc. The latest run from 1999 to 2011 was a confluence of factors associated with the Iraq/Afghanistan war, booming emerging markets, development of new ETFs and then fears of hyper-inflation as a result of monetary policy. Too many piled on to the long side – and now they are moving out and into other asset classes. I think the selloff will intensify and then perhaps end after the US Federal Reserve announces that it will raise rates and make an attempt to move back toward normalized monetary policy – while other central banks remain accommodative. Then – we can see some horizontal consolidation for few years and perhaps another long run up for the next generation of traders to create yet another peak.

    3. Trader Dan, QE has continued to be good for stocks inflation though has it not?

      Gold has been dragged down by a combination of a deflationary mindset and in my opinion, a heck of a lot of intervention which has led to investment money fleeing gold and only going in to stocks. Why have stocks continued to rise and not fallen along with the cci? Deflation isn't traditionally good for the economy (although I would argue differently). Can your charts tell me this?

      No doubt the false belief in economic recovery built on spending and consumption rather than saving and production has contributed to this stocks inflation somewhat. But how long will the world continue to finance the US federal deficit?

      Going back to your point on an economic recovery being good for gold, well a lot of people believe in this current recovery and money simply flows in to stocks.

      What you really mean is we need inflation to drive money in to gold and silver or at least an expectation of inflation. Well if you look at Japan recently you'll see that inflation is really picking up over there finally. No doubt with the recent semi currency collapse their CPI will be much higher over the coming few months.

      When this happens and when the US is forced to begin QE5 pm's will rocket.

      Dan you can't have an economic recovery without rising interest rates and our economies can't recover in a rising rates environment.

      This is why gold bulls don't hope for a recovery but "bad news is good news".
      I'm not living in the past. Just because QE hasn't currently caused skyrocketing inflation doesn't mean it won't. The Japanese model is going to show us all what the end game of all these policies are as they get the inflation they've wanted for so long.

    4. Dominic;

      "Stock inflation"...
      Are you going to define a new term to try justify your assertion that QE produces inflation. Back where I come from that is called, "changing the topic".
      Please produce charts demonstrating the rising prices of commodities, (hard assets, tangible goods) to prove your point. The CRB and GSCI are at 50+ month lows for goodness sake.

      How many times have I written here on this site over the years but many keep missing the point - In an ultra low interest rate environment, money managers will move money to wherever they can generate the highest return on investment. That happens to be the equity markets.
      I for one do not believe stock prices should be making all time highs given the moribund state of both the US and global economy but I am realistic enough to understand that is where money is going to flow until some other viable option is available.

      The leveraged carry trade will thus keep enduring until we get more normalized interest rates, whenever that might be.

      But to blame gold being dragged down by "intervention" gives the story away - the gold is manipulated by the powers that be to discredit it. Never mind the soaring US Dollar, sinking commodities sector and REAL interest rates, and a narrowing TIPS spread. It is all because of those nasty bullion banks.

      Once you went there Dominic, any credibility that might have attached to your assertion, went out the window.

      Try again another time.

      By the way, methinks you might want to check your Japan headlines....

    5. eric webber
      That's why I'm not waiting around for the next thirty year cycle. I waited through the last one, and I'm not doing that again. I want all my money working hard for me all the time, not going into deep cold storage for decades at a stretch. Been there, done that, and it's just a drag on returns. It turns out, in hindsight, that the best hedge over the past 40+ years, a whole cycle and then some, against inflation and all kinds of calamity, has been common stocks, not gold.


    6. Dan why are you asking me to produce charts? I'm not saying commodity prices are rising. Actually if you want to see a chart go look at John Williams' shadow stats inflation chart. You'll see it's been relatively stable at just under 10%. So I'd argue that QE has been very inflationary as it has managed to prevent a deflationary collapse and at least give us relatively stable inflation.

      My point on manipulation is my opinion and I don't claim it to be fact. I also said commodities have been in a deflationary environment so I'm not debating that gold and silver were due a dip. I personally think central planners have taken advantage of this weakness and funnelled even more money in to stocks but this is just my feeling. No one on here knows 100% do they.

      Why do I need to revisit my comments in relation to Japan:


      Notice a trend? Yes inflation has fallen slightly over recent months but it certainly looks like QE is finally starting to produce inflation. Perhaps you should keep a close eye on this on your blog as they are many more years in to a QE program than anyone else.

    7. Dominic -

      First; Anyone who uses Shadow Stats has major issues - and you are delusional if you are using these stats to govern your trading/investing decision. There is very little that is believable from Shadow Stats – they Exist SOLELY to scare the shit out of YOU – and they have been doing it nonstop since 2004! Sounds like it worked on you Mr. Hoodwinked man. If you want to learn more about the doom and gloom whack job Walter J. Williams who runs the site – then go here: http://rationalwiki.org/wiki/Shadow_Government_Statistics

      Second; Japan has been fighting disinflation/deflation off and on EVER since the early 1990s when they began deleveraging from their housing bubble. Go type in "Japan inflation" into Google images. Japan has been attempting to reflate their economy ever since, but only managing to rummage through oscillations of deflation and recession. Today is no different ….

      Third; QE is NOT inflationary. At least it is NOT in the long term. And if you use it over and over and over – it actually become deflationary because there becomes no one left to barrow. I know a bunch of folks on here who keep saying that hyper-inflation will someday into the future result from QE that happened years ago – but they are purely speculating on something for which there happens to be absolutely no evidence for. NOT a good way to make investment/trading decisions by trying to be accurate dooms day speculators!

      Fourth; The market that matters most as far as many commodities and especially gold is concerned is the United States of America. The US is not in deflation – rather it is in a state of disinflation or low inflation. The inflation rates in America stabilized at around 1960 and have averaged about 3% to 3.5% since then. But, if you do not include the 1970s, the average is more like 2.5%. Right now we are just under 2.0% - which is not a disaster! Don’t believe me? Then go type in “US inflation 100 year chart” into google images. Prior to 1960, inflation rates in the US were erratic and wild – now they are quite stable. Yet, the hyperinflationists keep attempting to all alarm us all over something that is NOT really very alarming.

      Fifth; you can claim that stocks are over-valued. Fine, maybe they are. BUT, they are by no means a bubble. Go look at a chart of US corporate earnings – by typing “SP500 earnings 1970 to 2014” – and you will see that yes indeed the Sp500 has mostly moved lock step with these earnings (R2 is 0.89 or VERY highly correlated). There is NO bubble like what occurred in the late 1990s when valuations FAR exceeding earnings. In fact, the large gain in the Sp500 in 2013 was all about valuations catching up to earnings. That has happened, and now the valuations are more volatile and moving more sideways.

    8. Problem is our nominal growth in income has to exceed our growth in debt. 2% is not going to cut it. Erik Janzen touted this several years ago that coming out of the 2009 recession, the US had to quickly get to a certain growth rate to achieve escape velocity, otherwise all the new debt incurred ( short duration debt) would prove too burdensome. I think it was by 2012 we had to have 4+ real percent gdp growth by 2012. We didn't make it. We succumbed to the debt equivalent of the Schwarzschild radius. We already dipped below the event horizon. And the CB's know it.

    9. eric webber;

      Excellent comments! Thanks!

    10. Eric

      First anyone who relies soley on statistics published by governments need their head checking so it seems to me they you have been hoodwinked. Personally I like to read around and get my facts as figures from various sources so I dot rely on one potentially biased source of information.

      The us government regularly changes it's definition of inflation which is why when you look at a long term chart it appears to be stable.

      Anyone can make up a bunch of statistics and claim pretty much whatever they want. Shadow stats at least tries to offer a more reliable form of statistics. It sounds like you don't like to hear bad news well that's fine, keep believing your government statistics. According to your government your unemployment is now around 6%. We all know this is only because they don't count long term unemployed as unemployed!

      Honestly some posters on here beggar belief.

      As for my example of Japan go look at at a longer term chart and you will see that inflation has picked up recently and there is a definite trend upwards. I read a very interesting g article about a year ago which explained the complete history of Japan's QE and why it hadn't produced inflation but predicted this would change it the next few years. I'll have to try find it.

      "QE isn't inflationary". Please don't insult my intelligence. Increasing the money supply is by it's very definition inflation. What we don't have right now is velocity of money. I personally think a lot of people don't realise that a lot of QE has in some ways taken the place of the credit creation the banks are not doing at the moment. This is one reason why we haven't seen inflation... Yet.

      QE is only not inflationary if the Fed don't roll over the debt they printed. What we are seeing now is stealth QE as they are not letting their securities mature. The balance sheet has quadrupled and will no doubt increase even more. They will never be able to shrink it materially.

      Have a good day.

    11. Dominic,

      First; you are using data to make investment decisions that NO ONE else in the market places uses. There is NOT one Billionaire investor/trader that gives one jack squat about Shadow Stats. This makes it irrelevant.

      Second; The government is not hiding anything. They compute the inflation stats for any basket of goods that you can think of. They know what is going on; it is not all about the standard CPI. And, they use the PPI as an even better illustration of what's going on. No one is trying to hide anything from you.

      Third; For crying out loud -- walk outside and take a look, do you honestly think we have 10% inflation? If we’ve had 10% inflation rates, as Shadow Stats suggests, then a $20,000 car in 2008 would now cost about $35,000. Is this what you are noticing? Nope – go look at the stats and you’ll see that there is almost NO change in the price of a new car from 2008 to 2014. And, in electronics – prices are falling tremendously. Food has fluctuated all over the place – as it generally does.

      Forth; QE is not money printing and does not increase the supply of money. The purpose of QE is to flatten out the rates on the high end of the maturity curve. The Fed Funds rate affects the short end, and QE affects the long end. It is all about encouraging lending – which could theoretically spur economic movement and higher inflation rates. The problem is that if lending is already saturated, banks will not be motivated to lend, and the public will not be motivated to barrow. QE really just helps increase the saturation point of lending – because it brings future lending into the present. This means that on the back end of QE you have a drop off in lending and therefore disinflation/deflationary pressures. THiS is what we are currently seeing. Stop obsessing over the balance sheet – it means nothing. The inflationary bet on QE is associated with the idea that it is increasing new financial assets to the private sector. BUT, this is completely FALSE. The assets already existed! They are merely swapping reserves for bonds. They are giving the banks a “checking account” instead of a “savings account” – so What changed? Nothing. Just the duration and rate of the paper. The number of assets in the system is the exact same.

    12. Dominic;

      You would do well to heed the words of eric webber here. No one will ever make a dime basing trading decisions on Mr. Williams from Shadowstats' work.
      I assume you have been coming here for a while to read but it occurs to me that you are not understanding what I am writing here or what some of the posters are echoing and that is ths:

      The market trades on sentiment which direct money flows. Get on the right side of that and make money. Get on the wrong side and lose money. What do you want to do? Profit or Lose money?
      Traders use the numbers that the government gives us. One does not have to personally believe those numbers but any would be investor or trader who ignores them, such as the followers of shadowstats, might as well be spitting into the face of a hurricane.
      The hurricane is unaffected and all one gets for their disdain is a wet face.
      deal with the data that the market deals with whether or not you agree with it. Following some set of data from a private analyst which is so at odds with the numbers that the investment world uses is a sure fire recipe for failure.

      And one last bit of advice - stop looking for inflation until the market becomes worried about it. The TIPS spread is the collective voice of the market in that regards - ignore it at your own peril.

      I will leave it at that as I do not have the time to try to help you any further other than to say this one last time to you:
      Check your opinion at the door of the markets and leave it there.

    13. Thanks Dan. I do completely get your point but I am not a trader so I have the luxury of having an opinion. Like you say, the markets don't care what your opinion is, bet against them and you will lose a lot of money.

      When I comment on here I do so more as someone looking at longer term trends so day to day or week to week or month to month movements aren't that important to me. If I was in the market every day like you guys I wouldn't care who was right and who was wrong, all I'd be interested in is where the market was going next whether i agreed with it or not.

      Please bear this in mind when reading my posts. Cheers.

    14. Eric.

      The point is that CPI now doesn't mean the same thing as it did 20 years ago. Shadow stats merely recalculates CPI using the same methodology as was used originally so you get a like for like comparison of historic rates. Understand?

      I'm not a short term trader so I don't trade on any of this. I like to understand the fundamental picture and what is really going on. So I don't place much faith in government stats.

      Shadow stats also quotes different measures of inflation. Why don't you tell me where you think John Williams calculations are wrong then? The 10% figure I chose was CPI inflation today if it were calculated in the same way as the government did in 1980!

      I think you've completely missed the point. Yes there is a swap of bonds for reserves but the reserves came from nowhere. They were printed into existence . The balance sheet shows the assets are increasing, I don't see why you find this difficult to understand.

      The key is that the for QE not to be inflationary the fed would have to ask for their money back once their assets matured (like the banks who did hold them would have). In fact they just roll the debt over and it's never paid back. This is why it's inflationary, the balance sheet increases in size and is never drained.

      The fed are essentially trying to do what the banks were doing ie lend money. Difference is that when banks create money they ask for it back and the debt is paid and the newly created money is removed from the money supply. In this instance the fed never asks for it back so the money supply increases permanently, voila inflation!

  6. Judging by the way miners are moving we might have a big bear mkt rally, then one more dive and bottom in 2015.
    Or are miners moving cause of surreal drops in energy - mainly crude.
    Time only tells.

  7. Thanks Dan, strong thoughts as always.

    And yes, the markets do seem like a yo-yo or a game of Pong...just ranging back and forth lately. Kind of boring.

    Like Newton's 3rd law of physics...

    3.)For every action, there is an equal and opposite reaction.
    Was he talking about the Forex markets way back then and didn't realize it?

    1. DPH, Newton was also Master of The Royal Mint, and was involved in the creation of the Gold Standard, amongst all his other extraordinary achievements. Maybe he knew more than we think about the Forex markets, as in the pound then being as good as gold.

    2. Additionally...it seems to me that if Japan's Abe calls for a vote of confidence doesn't work out the way he might hope that the loose Yen policy might drastically reverse course.
      Watch the Yen closely around the time that vote unfolds. It seems like it could be a pivotal moment.
      Abe loses, JPY strengthens.
      Abe wins, JPY weakens considerably.

      And another thought regarding GLD...at what point does that fund close? How low does the GLD inventory need to sink to before that happens?
      And what will the effect be on golds price if that happens? Not good I would imagine.
      My guess is that's the direction we're headed if the deflationary trend continues.
      Of all the fatalistic doomer/collapse scenarios I've run across I don't recall the possibility of a hyper-deflationary scenario being discussed as more likely then the oft-mentioned German hyper-inflation situation.

      I'm not stating that I think a hyper-deflation is going to happen. But a long period of oscillating between stagflation/deflation could be the norm for awhile and by all appearances it seems to me that's where we are.

      For how long is anyone's guess.

    3. PD...I didn't know that.
      Interesting stuff, thanks for sharing that bit of trivia.

      Seems to me we have a pretty diverse/interesting group of folks on here. A welcome breath of fresh air. Thanks to all. :-)

    4. No skin in the game, as I don't play the yen, but, in my experience, no leader calls for snap elections that expects to lose, so I think Abe will keep his job.

    5. Good point. It does seem like he's confident if he's willing to stick his neck out.

  8. A case of a Bridge Too Far I think. Probably more big profits on the downside. JDST will do the trick. Gold is already feeling leaden, but may splutter through $1200. Indians on the warpath tomorrow or very soon, will be bad news. Then maybe an opinion poll that Swiss referendum hasn't a chance. Action stations ! Action stations! Bail out! Bail out!

  9. New record highs for stocks. And the Doomsday Crowd has pretty much missed the whole thing. Here's why:


    1. Incredible to think that many of the meme's out there were to avoid the equity markets (they can't be trusted!) and to instead trust some fictitious/anonymous personalities that implored people to instead horde metal at any price (the vaults are empty!) for "The End".

      End of what?

  10. The double whammy of lost opportunity is the real nightmare part of it for the victims. Gold topped in Sept. 2011 and is now down @ 38%. Silver and miners are worse. Meanwhile, SPY is up @ 63% plus divvys, over the same period. It's a ghastly, life altering loss. But the pimps in the permadoomer industry don't care in the least who they ruin. It's just business.

    1. Who says we're out of the woods? What would have happened w/o CB intervention? Where's the real growth? Is a rising dollar a good sign if the world has already been levered in dollar terms? I don't think so. It's not good for the debtor nor the creditor.

      Did you catch what Jaime Caruana said about the global debt trap recently?

      Did you catch what Draghi said about buying gold to combat deflation? A coy reference to Ben's 2002 speech.

    2. Grump -

      I'm wondering, at what point do you stop being so darn alarmed? What does it take? What do you need to see before you finally say to your self "OK, the world will not come to an end after all"?

  11. The simple fact of the matter is that the reason perma pm bulls scream bloody murder all the time is that they have overloaded themselves % wise. Had they allocated 5-20% there and gone elsewhere with the rest of their portfolios, they would not be constantly bellyaching and pointing fingers here, there and everywhere. Like I always say, lots of specs, traders, and gamblers, DEEP DOWN INSIDE, are basically looking to lose. That is all.

    1. Not only did they allocated a large %, most of them were late to the party.

  12. Seems the news out of Germany that their ZEW index rose in November, may be an argument for the ECB not to do any further stimulus for the time being. Reuters reported on Nov. 4 that the Governing Council members were not in total agreement on further sovereign-debt purchases. The market seems to be voting for a more hawkish ECB with the support in the Euro.

  13. Depressed economic conditions are good for the real price of gold. If we have real deflation then what happens? Debt default. What becomes the safe haven then?

    An inflationary scenario where real rates are positive is not good for gold. The nominal price may rise, but what about the real price? There's a misconception due in large part to the myth of the 70's that gold needs inflation. But that's not what drove gold in the 70's. It was negative real rates. The expectation that bond yields would not suffice to compensate for the future elevation in general prices.

  14. the keystone pipeline vote is happening, perhaps part of the weakness in crude oil is that they expect it to pass. api inventories of crude were large tonite as well.

    the swiss vote on gold is 11/30 and said to be a large part of the short covering now, as the best case for gold is that the swiss will have to double their reserves.
    ...leasing is tightening in europe as dealers prepare for a return of the swiss gold, they certainly can't lease it out now.

    soybeans continued the 'alternation' up down up down whipsaws on daily chart.. corn has 20-dma at 370.25 and chi wheat held the 10/30 swing high of 545....


    1. LOL.......what many folks don't understand is that the oil industry between Canada and US have pulled one over on the Obama administration. We already are getting that oil - through existing pipelines, by merely increasing the capacity of older lines. Whether our government likes it or not, the energy revolution is marching forward.

  15. Like I said last summer, when plat was +$220 to gold, you do not want to see it fall out of bed, like it has. You do not have any kind of economic recovery going on out there, not here, not Europe, not Asia, Virginia. BUT, what you can have is rising stks, like Spellcheck has been talking about and I have to admit that I think he is right. The $ is going into the dollar and stks and that is a fact. It can blow higher than we all think and if you think there is any correlation between reality and these mkts, you need to go into the backyard and play jacks with your daughters. Playing Akron and Ohio tonite for fun. Good nite All. Sparks

  16. Dan, Eric Webber learned what I didn't: get off of gold after the parabolic. Now guys like me need to find a decent out on the forming bounce. Not selling physical, need points on mutual funds and ETFs, mining stocks, Sprott Resources. Again, thank you for your excellent studies of the markets. Thank you for your integrity.

    1. Marty;

      We all learn best through the school of hard knocks Marty. I guess it is just human nature.
      The big thing I have tried to do is to teach folks who visit here how to read the markets and hopefully either profit as a result, or at the very least, minimize losses.
      I do not always get it 100% right. ,No one does and those who say they do are flat out liars. But one thing we can try to do is stay on the right side of a move or get out of the way of one that can inflict some serious damage.

      Most gold perma bulls, especially those who came to the party three years ago, are sitting on tremendous losses that they will probably never recover from. It was all so avoidable if they had just learned how to tune out and ignore the carnival barkers that infest the world of precious metals.
      Tread lightly in the markets, don't get careless or overconfident, stay humble and make a habit of staying in tune with the charts and you will be just fine.

  17. Weren't the neg real rates of the seventies a result of high inflation?

    1. Perhaps inflation was the result of money leaving bonds for commodities. Even as bond yields rose the market psychology was that CPI would continue increase. A self-reinforcing feedback loop that takes root when inflation expectations aren't anchored.

      During the Autumn between 1982 and 2001 we had monetary inflation but it went into bonds. Real rates were positive. Now what's going happen when bond prices drop incurring capital losses after everybody and his brother has bought into the top the last 6 years?

      You have to look where has the money flowed to.

    2. Initially in the 70's, real rates were negative because it was perceived that the Fed was "behind the curve" on inflation. Rates were too low, the Fed was still too easy. Up with gold. Then Volcker came in and jacked rates to the moon. Got "ahead of the curve". Real rates went positive. Fed was tight. Down with gold. There was inflation, and expectations of more, through the whole period, but what mattered was whether real rates were negative or positive.

      2009-2011, expectations were that the Fed was insanely easy, inflation would follow as sure as night followed day, and rates would go strongly negative. Good for gold. 2011-2014, markets realized inflation is nowhere in sight. Unwind the gold trade, even though rates haven't really changed yet. Instead of the Fed jacking up rates, this time around it was inflation expectations that cratered. Same effect. Down goes gold.

    3. Currently of course, the core hard money crowd still has dogmatically very high inflation expectations. But they are entirely alone in that opinion. The market as a whole has turned it's back on that line of thinking.

      Gold won't really start doing better until market expectations for inflation return, and start to rise faster than rates, pushing real rates more negative. Deflation is the big fear right now, not inflation. Gold is a nonstarter in this environment.

    4. Gold is not about inflation and in this cycle it, as a squarely risk ‘OFF’ asset, is about the opposite, the deflationary unwinding of the inflated excesses which now are no longer clustered in commodities and global markets, but in US stocks and the balance sheets of certain corporations set up to benefit.

      In a dis-inflationary environment, which is the preferable one for the gold stock sector, the pain comes first and the rewards for those left standing come second. We have not exited the pain phase for gold bugs and most people still think ‘no inflation, bad for gold’ when they should be thinking ‘no inflation… that means eventual deflationary impulse… bad for the economy and stock markets and one day, from the ashes good for the gold sector when and only when gold out performs other assets positively correlated to the economy’........Biiwii.com

  18. Anyone else ever notice that right at 6:00 pm EST the gold/silver are almost always down as soon as trading re-opens regardless of whether they had a good or bad Comex day. Just seems kind of odd. I wonder if there is anyway to see a history of trades between 6:00 - 8:00pm.

  19. How about a chart lay over gold and Feds balance sheet
    We need a level playing feild bud.

    1. Here you go...


      Despite the assertion of the author I see gold dropping off while the balance sheet and the S&P are clearly trending up.

      Do an overlay chart of gold and the USD and things become a bit clearer I think. The Fed's balance sheet/gold price meme is a UScentric worry that no longer correlates these days.

    2. Article link...

      It's pretty eye-opening to go back and see the predictions of the "experts" out there and where they projected the PM's to be and why after 2013 didn't pan out as expected.

      I think it all boils down to the pumpers almost being in unanimous agreement that the USD was going to collapse while instead it was actually rising throughout.
      The concept of a strong USD was inconceivable to even consider to all the "experts" out there.
      How could they not see the USD was far from dead before then or where it was headed from that point on up until today?

    3. I see the USDJPY is on the move tonight.

    4. Slower growth in China slows down Asia...

      "Economies across Asia face falling inflation rates"
      By Tom Wright
      Published: Nov 18, 2014 10:17 p.m. ET

      Inflation rates are falling across Asia, raising expectations that central banks will lower interest rates to help their economies and ease the region's high debt burden.

      Consumer-price rises are moderating almost everywhere as the cost of oil and commodities like rice, soybean and sugar drop sharply. While prices are falling partly because of abundant global supply, China's slowing growth is also having a knock-on effect across Asia, reducing demand for the region's exports...(cont.)


  20. Here's the sick thing about gold the tards won't acknowledge for it totally smashes their dogma. Gold does well when the expectations are that real rates will be negative. But what about the inverse?

    What happens to the nominal and real price of gold when real rates are positive? The tards mistakenly have faith that gold will keep up with CPI, hence an inflation hedge. Sorry, this is not true. In fact it's worse. Gold will underperform CPI when a bank deposit will offer a real rate of 2% and above.

    I've seen cases in which CPI is 8+ percent yet the nominal price of gold stayed flat. How can that be? Inflation is raging, you say. Well, you have to look at deposit rates to get the whole picture. Bank deposits were offering 12%! The fiat currency was the store of value, not gold which actually went down in real terms since its nominal price stayed flat.

    1. Grumps;

      That is an excellent set of comment.. very well said.

  21. @ grumps

    Any real rate of interest would bankrupt the U.S. Govt 3 times over.

    So with that in mind, what is the real quality of US govt bonds ?

    Worse then junk obviously. But these things take time.

    1. You nailed it M, rates aren't going anywhere anytime soon.

    2. M
      Don't think so.
      US treasury obligations are fixed rate and term.

      So what happens if t bill rates jump to day 10% overnight? The resale value of the bond drops a bunch so they will be held to term when they are redeemed at face value.
      New bonds are them issued at current interest rates.

      This it will be years before USA faces any significantly higher interest payments. By then they will have changed to laws to give them an out our something.

      Don't think the USA bankruptcy the doomers expect is high probability.

    3. M, exactly. That's why the debt needs to be remitted, defaulted on one way or another. It's unserviceable.

      Okay, so now what happens when there is no more odious debt burden? No more debt saturation? It's then a positive real rate can exist, because the debt reservoir is empty.

      If you insist on staying in gold at that point you'll be eating your capital, eating your seed corn. Whereas if you chose to get a positive real yield and if you have critical mass, then you can live off the interest ncome and leave your principal alone, maybe add to it. This is how prudent savers and Giants behave.

  22. All wrong.Gold is money when keystrokes and paper lose their value in relation to other paper and keystrokes. There is no graph for that until after. Insurance is expensive only if you have faith. Those who gather evidence become the newly wealthy. Righteousness.

  23. like I said, just look at the plat/gold and see if you want to get bullish economic conditions

  24. Somebody is turning into a real nut case. Oil should be the topic of discussion. Will oil ever see the $100 mark again in our lifetimes? It is amazing that lower oil prices will help lower consumer prices but destroy governments.

    Pooh'in is another lose cannon everyone ignores.

    Germany is part of a convoluted whole, if they have money, you can bet the Euro bank wants it.

    It is over for Japan. Treading water for years, now they are going down into the drain.

    An interest rise anywhere around the globe will mark the end of making bond payments affordable and that entire scenario will have to play out with countries defaulting one by one. Will not happen tomorrow but by 2020 every downfall will be in full swing.

    Those miner bargain shoppers are early, they will begin to dump a week or so into December.

    TD unknowingly will be marking the bottom in silver and gold in the months to come. That will be a good time to stock up on a few krugs and junk silver or silver rounds. In the meantime, go with the flow into regular equities. Gold and miners just don't have much more room to fall and is a waste of time trying to play them.

    Those volatile swings are wild but no one said it was going to be easy.

    1. "TD unknowingly will be marking the bottom in silver and gold in the months to come."

      I'm pretty sure he'll (we'll) see the trend turning. There's no need to predict/boast about an exact bottom call on here.

      And yes, we will see. $100 oil again in our lifetime and it could happen rather quickly for reasons now unknown.

      And yes, Japan is headed into uncharted territory in this modern monetary experiment.

      I see ZH is crowing how they foresaw JPY 120 back in Sept. when no one else did.
      Huh, seriously?

  25. Sorry, off-topic...but a c-r-a-z-y amount of snow is happening where I live...unreal!


    1. Thanks, I'm laying low and relaxing inside nice and warm.
      The blue-ish colored lightning that accompanied the heavy snow was kind of surreal to see/hear while heavy snow was falling.
      The prospect of heavy winds at some point blowing around 5-6 feet of fresh snow will complete the snow globe effect.

    2. Are you living near Buffalo NY? I live right down the road in Rochester .... so glad we are missing it ...LOL

    3. This is indeed very alarming! I think you should buy some gold!

    4. Lol...I'm walking around with a Big 50 in my pocket just in case I need to barter my way onto a dog sled enroute to an igloo saloon somewhere. ;-)

      And yep, Buffalo 'Haze it is.

  26. soybeans got some technical selling on 1st close <20dma in over a month.
    oct low to recent hi: 38.2% = 1019'6 (breached) 50.0% = 999'2

    bottom line ags: Meal basis is still firm, we’re still exporting and crushing soybeans, but the farmer has sold a lot of grain on the rally, and all of that supply might be finding its way to desired parties. We need exports for corn and wheat or swoon we will.

    the biggie for gold today:
    Nov 19 14:00ET FOMC Minutes

    Dan posted the chart for AUD/USD other day, a big oooops today:
    AUDUSD has posted 8 week lows of 0.8621 this morning after continuing declines in the price of iron ore has put the skids under the rally that yesterday got a helping hand back down from 0.8750 by RBA gov Glenn Stevens.

    cheerio pip pip!

  27. 77, why is that the 'biggie' for gold today? We know exactly what they are going to say, which is precisely nothing. Fed's policy is simple: don't rock the boat. Greenspan taught us that, and admitted recently that FEDSPEAK was all about pretending to say something with circumlocution, oxymorons, and downright gibberish, but actually saying nothing at all. Meanwhile the whole world was hanging on his every utterance, but he is now considered outré and almost senile. Not to mention the fact that all the members of the Fed have their assigned roles to nudge and cajole the markets by nursing those laughable 'expectations', and have agreed beforehand what is going to be in those so-called 'minutes'. What actually goes on in those meetings is anybody's guess. Maybe sometimes sheer nail-biting panic, like "gee folks, we're still levitating by managing those expectations, but don't say anything to upset the apple cart."

  28. If we get through a negative poll for the Swiss gold referendum, and then further curbs on gold importation, gold could trundle on to 1220-1250. Then, watch out below, especially for the gold shares that have already put in massive gains.

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  30. Gold down $20 but now only $8, back above the magic number of $1180. What does that say? Fed minutes not relevant, but new Indian curbs are another threat. Indian government, crooked as bent hairpin may be holding this card back for double whammy effect. Where gold sits at the end of the day is critical if we are to go through $1200. If all storms are weathered, expect gold to go to $1250. It's in the mood for love! Then, maheuresement mon Cherie, down we go again. Can we catch these swings for massive profits? It's the timing, see, that's the rub.

    1. Somebody made a small fortune on those moves or lost their shirt today.

      Interesting day so far.

  31. Mind blasting! I looked again and it's only down $2. Que pasa? One bogie down and two to go: Fed Minutes and Indian curbs. If weathered, gold to $1250.


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