The second half of the year could be huge for commodities

March 4, 2014

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    Mar 04, 2014 04:12 AM

    It is ONLY a matter of time. As Rick Rule has said. This trade of PM’s has become not an “IF” trade but a “WHEN” trade. That is what you want. Actually, and for the record, he was talking about URANIUM. But, I believe, the PM’s are in that category too. I am not Rick Rule, by any means, but I see a long-side trade that is just begging to kick back in to gear. Let me remind you of a thought by Howard Katz (AGAIN)….90% OF THE UPSIDE is MADE within 10% of the MOVE….(paraphrased)!

    Mar 04, 2014 04:37 AM

    This just in from Tricky Ricky:

    ‘Frothy’ Gold, Natural Resources Rally Will Pull Back, Says Rick Rule
    He explained his take further during an interview at the recent PDAC convention: “I suspect that the rally we are in now is a false rally,” he said, explaining that we will see more of a drawn-out ‘bottoming’ process than a swift bounce off of a bottom.

      Mar 04, 2014 04:03 AM

      Rick Rule is participating in a webcast in about an hour. I can post the ‘take away’ here, afterwards.

      Incidentally, I had read that article too. However, he seems to also believe that we are on the cusp of an historic uptrend. If that is the case, the issue becomes how cute you want to be about trading around the positions.

        Mar 04, 2014 04:11 PM

        I listened to the webcast…
        Mr. Rule did not focus on the short term at all. With regard to the metals and miners, he said that we have endured a cyclical decline within a secular bull market.

        With the juniors down 75%, he now says that a move of 500 to 700% is possible.

        Note: there were about 6500 people listening in. Some interesting charts included.

        A replay of the webcast is available on their site.

          Mar 04, 2014 04:16 PM

          Thanks Eric

          Mar 04, 2014 04:19 PM

          Yup, thanks. I agree with Eric there. This is a cyclical within a secular. Also agree that more consolidation will take place before the real launch of gold and silver. This recent burst of activity was just a warm up to get us all interested again.

    Mar 04, 2014 04:18 AM

    Gold, silver, uranium, coal, oil; all these suppressed commodities can and will be suppressed as long as the ones in power want them to be suppressed. Every year that goes by sees them tie more and more power, and money, and influence to their goals of suppression. Which is why I believe for gold and silver and other commodities to reach their higher prices the entire system that suppresses them must be broken.

      Mar 04, 2014 04:05 AM

      I buy suppression in gold and silver, but need convincing on the rest. What, in your view, is the motive for suppressing uranium, coal, oil?

      Supporting the dollar? Buying them up cheap? Both? Neither?

      Is this also done in the futures market?

      ‘Broken’…Or until the suppressors change flip, and make $$ in the other direction. I don’t see many interested in challenging their power, except others who would probably like to have the same power.

        Mar 04, 2014 04:17 AM

        The reason for suppressing coal – Our president stated his goal as such by making coal-burning electrical companies “too expensive to operate” back in 2008. It’s an overall energy reduction strategy with a front of environmentalism but a backside of artificial scarcity for profit.

        Right now everything that can be sacrificed to keep the petro-dollar slow bleeding inflation will be sacrificed.

        As for making money as stocks/commodities go up: I agree, but from their actions in the past, the controllers don’t allow too much scarcity too quickly because people might find alternatives. Yes, oil did go to $147 a barrel…but only for a short time, and then it fell down below $60 again. Slow, unstoppable 2-3% inflation is desired. Precious metals are suppressed because of their alternative status to the petro-dollar. Change one side of the seesaw, and the other side should theoretically change as well. Not that I wouldn’t mind gold going to $8,000 overnight, and silver to $225, but we might see some keys turning in locks on missile silos if that happened.

    Mar 04, 2014 04:45 AM

    this guys been so accurate upto this point! amazing!

      Mar 05, 2014 05:25 AM

      who SD Mark?

    Mar 04, 2014 04:06 PM

    Nice one Gary – I see June 2014 as the start of PM’s upsurge.

    Mar 04, 2014 04:50 PM

    Does anybody know any good options broker that doesn’t charge too much? I have been using TD for stocks but the options are too expensive.

    Mar 04, 2014 04:15 PM

    Thanks Gary. I happen to agree that commodities will stage a comeback. It is my view that the supercycle itself will resume forcefully although exactly when is not known. We are just getting an early taste of that now though so this is important to pay attention too. Like you I have also been focused on this key area for quite some time. So I have a chart for you to check out. It is the Personal Consumption Price Index (PCE) that is used by the Fed as a proxy for inflation tendencies in the economy. This version is care of Doug Short who posted it today. Anyway, take a look at the chart formation in the period from 1960 to 1965 and then compare it to the pattern on the chart of today. Notice the similarity? There was no reasons back in 1965 for anyone to expect a massive surge in inflation but indeed it did happen in two stages. In fact the PCE index rose tenfold in the decade between 1965 and 1975. It also drove gold ballistic. It blew minds back then. I just noticed the odd formation on that chart where the blue line touches down three times at 1% and then explodes in an inflationary hellfire thereafter…….but can it predict the future? I really do not know but it is surely worth considering because if the past indicates the future then we may be on the threshold of an explosive move in commodities including precious metals…….and one more point……We have not had the index at this current low point in all of the last 54 years. To me, there is only one way for it to move. And that is up.

    Doug Short – PCE Chart – Headline and Core.
    Article “PCE Price Index Update: Core Inflation Remains Far Below the Fed Target”

      Mar 04, 2014 04:25 PM

      Eric, you’re a pretty sharp tack. What do you make of that chart? Could be I am reading too much into it of course. But it is interesting if it offers a clue about the future trend.

    Mar 04, 2014 04:28 PM

    Hi, Bird
    A couple of things about that chart. I remember John Hussman talking about the PCE from time to time. I went back and found one such mention in his update of December 17th, 2012.

    In that article, he mentions that the Chicago Fed National Activity Index and Philly Fed are good leading indicators of economic activity and that real sales, personal income, and PCE are good coincident indicators. He goes on to say that they typically show a downturn once a recession is under way and reach their highest correlation with recession about six months into an economic downturn.

    With this in mind, I went back to re-examine the chart you provided. Sure enough, notice the gray high-lights for periods of recession and how they are well under way by the time the PCE typically exhibits a downturn.

    However, I am reminded that the National Bureau of Economic Research (NBER) — the organization that officially determines the start and end dates for periods of recession — does so in hindsight. That is to say, that GDP figures out of the government are typically still positive when the country enters recession and then are revised into negative numbers well after the damage has been done.

    So with that in mind, I would think that if you follow this chart over time, and see a meaningful downtown, we are more likely to be in recession — whether or not the GDP figures are currently confirming it.

    My next observation on this chart concerns the changes that took place over several decades. Notice that after the recessions in the 60s, 70s, and 80s, the indicator would turn up.

    But beginning in the 90s, in the aftermath of recessions, the indicator did not turn up in a meaningful way. In some respects, it’s behavior since the peak in the early 80s is like the trend in interest rates.

    Especially in the Core PCE, it is has been relatively dormant now for more than 15 years. We know, however, that there has been inflation during this period.

    So is it ‘broken’ to a certain extent — perhaps in the way that CPI is? Don’t know — just an observation.

    On a side note, since Hussman thinks the Chicago Fed National Activity Index is a good leading indicator, I checked for the most recent data. You can find it at this link:

    From that page, click on the link underneath the heading “Latest CFNAI release”, which will bring up a pdf file.

    In looking at that chart, it appears that when the index gets below the zero line, it could be a useful indication of a coming recession. Although you will notice that it gave some false signals in recent years. I think this may have been one of things that Hussman (and others) were looking at a year or two ago, in thinking that a recession was on the way.

    But as some have observed, the Feds QE may have pre-empted the recession to a certain extent.

    Mar 04, 2014 04:16 PM

    Great answer, Eric. I appreciate your views and insights and tomorrow will take a closer look at Hussman’s commentary. It is late in the night here now and I think I am well worn after spending the day trying to keep up with what is happening in Ukraine but I will get back to you once I am rested again.

    Mar 04, 2014 04:24 PM

    I think today’s gold action was the final straw

      Mar 04, 2014 04:29 PM

      Did it finally get an “A” James?…………(just fooling around).

      Mar 04, 2014 04:20 PM

      From my perspective, the mining stocks held up pretty good in the face of the decline in physical. They’ve repeated a pattern we’ve seen a lot lately, where the lows come first thing, or in the morning, and then the stocks recover quite a bit during the day.

      This is another indication to me that a meaningful change has taken place. Last year, if you had physical down like it was today, the miners would have gotten their head handed to them.

      Fast forward… they are now buying them on weakness, even after the run we’ve had. So we’ll take it day-by-day, but it is encouraging.

    Mar 04, 2014 04:27 PM

    I’ll be a homeless silver investor by the end of the month. It seems like the price rise is aways going to be 2 years after tomorrow.

    Mar 04, 2014 04:18 PM

    This is just how silver moves. It will bore you to tears until you finally give up, then it will rally 100% in a matter of months.

    I heard the exact same comments about silver in 2010 also.

    Mar 04, 2014 04:19 PM

    Putin wins and is about to rub it in, if US tries anything.

    Mar 04, 2014 04:09 PM

    The gov’t men took away the war premium in seconds like the problem is solved.

    Mar 04, 2014 04:20 PM

    Well in 5 years the Big Zero will have had his way and destroyed the healthcare system in the US, as we knew it.

    Mar 04, 2014 04:26 PM

    When you have a national health care system and the government is low on money, what do you do?

    In the words of Goldfinger to Mr. Bond “I expect you to die”.

    When you kill a working insurance-based system as the Big Zero is planning, where do you go, when you get refused treatment, because National Healthcare costs too much?

      Mar 05, 2014 05:30 AM

      the death panel?

    Mar 04, 2014 04:13 PM

    Scanning the Ukrainian TV, sometimes one has to laugh. On a placard with protestors, obviously aimed at US watchers, could be seen the following:
    “No Putin, Putout. “

    Mar 05, 2014 05:01 AM

    Even a 100% rise in silver ( which you can’t possibly know will happen) will only bring it to $42 an ounce. Still 16% below its high.

    It’s been and continues to be a horrible investment.

    I don’t even to bother calling it an investment anymore

    It’s a day at the crap tables, only the pain goes on and on and on…