Are we seeing any new trends for the markets?
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Doc,
Have you noticed any symmetry or relation with 10 year treasury and gold?
Seems to me when 10 year tops, gold tends to put in a temporary bottom.
Matthew,
What does this chart mean lol?
That’s the ten year treasury note yield divided by the two year treasury yield. The black line is gold. Notice that the ratio and gold peaked at the same time? When the ten year yield is outperforming the two year, it tends to coincide with a good time for gold. 2003 to 2007 was a big exception as gold didn’t seem to care what it was doing, but both were pretty flat in the ’90s and both turned up at about the same time, so there is a correlation.
Anyway, the ratio ratio appears to be relatively close to a bottom while gold looks reluctant to fall further. Could it be that gold will decouple and head higher before the ratio turns up? The ratio did plunge 42% in late ’08/early ’09 while gold rose about 35%…. BUT, notice that the ratio jumped 55% from December ’14 to January ’15 while gold was also rising. So the two are still moving together.
Thanks Matt!
Thanks Doc. As Gary also mentioned earlier, the dollar and oil are moving inverse to one another so when we agree crude will fall deeper it is the same as saying the dollar will begin to rise again.
How far though? I guess that depends on how much further oil slides and we can try to project it out from there. This also warns us that more trouble is coming for the Euro though and perhaps we will see parity reached sooner than some expected (a rising dollar has really been a Euro and crude oil story thus far).
It is fascinating to me how these are all linked together. What is even more interesting is how oil behaves as a reserve currency and a function of money even better than gold. I suppose we can assume that were a large conflict or war break out in the Middle East and oil producing regions that would be our signal to go short dollars and long oil again.
That is when the USD devaluation so many expect might really begin to materialize.
The other day I was pointing out the strong correlation between US and Canadian GDP growth and periods of expansion / contraction. Canada is heading into recession which strongly suggests the US will be going there soon enough too.
I don’t think we can rule out that a war will start at such a time and that it will send oil prices back up and conversely send the dollar down to support domestic export markets. I don’t mean a US war by the way…any war that seriously impacted energy supplies would amount to a devaluation of the dollar. Iranian sponsored ISIL attacks on Saudi oil facilities is a hypothetical example.
What we need to ask ourselves is WHY would commodity prices be on the rise. And part of the answer is obviously that the US dollar is in decline. So we need to watch closely for signs of when it peaks to confirm that resources have bottomed.
Im betting that dollar gets to at least a 1 buck. The mind is a powerful thing and they will want to get many on the wrong side of the train.. A buck makes the sheep feel good that it is heading much higher.
This parity trade gary talks about with euro is very hard to digest. 1 buck per eueo and vice versa? Anyone else on that train? That is a big bet.
I am on that train Glen. Yes, I believe the Euro goes to dollar parity or lower.
Don’t see Dollar/Euro parity. US economy struggling now, imagine what it will be like @ parity. Strong Dollar is very deflationary, expect it to start falling anytime soon.
Gold & gold stocks benefitionaries.
Ian In UK.,
There was an article on Zerohedge this week.
Using the same methodology, it seems CPI in the US and the Eurozone are similar – ie both demonstrating “deflation”.
Sure the FED and all the big boys in the TBTF already know that.
Europeans, as opposed to US households, have savings which need to be re-invested, and it SEEMS to me that institutional money is not exactly keen, at this moment in time, to deploy those funds (savings) in the Eurozone but rather in the US market (and esp. in large caps US stocks).
Beside, UST are yielding, at least on a 10yr basis, a bit more than a growing number of EU countries (Eurozone constituents or not, PLUS Switzerland) and reinforce the attractiveness of US$ yielding assets (hence, ultimately, US$).
There are 2 things against that arguments though:
1) “everybody” with their mom and dad is on that same boat… so when things tilt, they (will) tilt hard. That’s the perfect “contrarian” argument.
2) a currency “yielding more than another one” via its sovereign bonds is more attractive… until the point it is seen as not safe anymore as its sovereign bond yield reflect mistrust from market participants. So better yields are more attractive…. until they aren’t anymore. I think this is underway, but it is a s-l-o-wwwwwww process.
Best to you,
LPG
High dollar is causing industry flee and rising trade deficit. If US government just cares about short term gain, dollar index can get really high but it is already very damaging at this level. Reason is simple, other countries may just cooperation by driving their currency lower to stimulate economy.
Yes Ian, I too am expecting the dollar to go into a decline but that is an intermediate trade. On a longer horizon the dollar has a lot of power at its back and too many reasons to rise. Not least of which is that the Euro is in trouble as just one reason and that global capital is flowing to the land of the safest debt instruments (I mean Treasuries of course).
Sounds good.
Bird conversely you could look at the loonie for a bottom and it might give us the same result:)
Top in dollar=bottom in loonie=final bottom in gold?
food for thought…
The USD / Canadian dollar is a tougher nut to crack. But I will be looking at it.
Bird….I must ask….Can you show me any evidence that Iran would sponsor ISEL to carry out attacks on Saudi oil .
Irish, that was purely hypothetical. I just made it up out of my head as an example of an unanticipated incident that might drive oil so don’t read anything into it. I could have created any theory really. Maybe that the Suez gets blocked or that Japan and China go eyeball to eyeball and close the straights of Malacca in a shooting war. Or maybe Ukraine blows up and the taps get closed for most of Europe…..it is only a thought experiment, not reality. A black swan.
Irish, I will comment about ISIL (Islamic Scum in Syria)
You might want to check out this Fox News piece:
http://www.foxnews.com/politics/2015/02/11/secret-iranian-unit-fueling-mideast-bloodshed-with-illicit-arms-shipments/
(just yesterday, but there have been other reports for several months on BBC and in the US……But NOT on the 3 main news channels, ABC, CBS and NBC.
CFS…While there may be some truth in the article , I take everything the MSM says or prints , with a pinch of salt….Too much bloody propaganda out there.
No question that Iran is in the process of trying to project influence across the region. They are muscle flexing lately in a lot of ways and one of them is to create relationships that deny dollar hegemony. They remain one of the most serious threats to Israel and Saudi Arabia but for different reasons while they cozy up with Russia. It is a dogs breakfast to keep track of who is supporting whom and who is the others enemy lately. But Iran is on the rise and they have an agenda with backing and support from the East.
If I may provide some different perspective on these Middle East, Iran, KSA, Isis etc… topics.
Something to think about – maybe.
In the 16th century, about 1500 yrs after the year “0” marking the birth of Jesus Christ, there was the chasm within Christianity between Roman Catholics and Protestants. A few conflicts, civil movements later etc… things are now pretty much “cool” between these branches of Christianity.
But it took these conflicts with deaths etc to sort things out within a few hundreds of years.
Shifting to Islam, about 1400 yrs after the “times” of prophet Mahomet (7th century in the Gregorian calendar), there is still the chasm between Shia’a and Sunnis, Shia’a feel – for good or bad reason – they have been humiliated by Sunnis. And the conflict in the Middle East is, IMHO, nothing more but a conflict about which branch of Islam should be on top.
Almost the same time frame of c.1500 yrs.
Best to all,
LPG
PS: tomorrow, I will be camping in the desert somewhere in the Middle-East so no blog post.
If you don’t ever hear from me again, depending of your personal political/geopolitical/religious inclinations/beliefs, just blame my disappearance on ISIS-ISIS-ISIS or Iran-Iran-Iran 🙂 🙂 🙂
Just curious LPG…are you camping in Wadi Rum? Or maybe you are out on the Dunes in the White Desert of Egypt on some remote Oasis. I am pretty sure you will be fine. Tourists who come to drop a dime are pretty much welcome everywhere. The Bedouin will talk your ears off. Worst that happens is you don’t get any sleep because they won’t shut up! Keep your eyes open for anything shiny poking up through the sand. A lot of treasure was lost o buried in those areas over the centuries.
Hello Birdman,
No idea where that will be as my other 1/2 was in charge – albeit I assume she doesn’t know either. 🙂
But it will definitely be East from Egypt.
Catch up later this week or “Adieux” 🙂
Best to you, and GL to all for Friday.
LPG
My guess is Iran does not back an attack on Saudi, that would require all out war imo.
Iran has drawn a line to hold isis back from Iran.
I actually thought it pretty aggressive for Iran to send troops to Syria awhile back.
I expect them to continue support of Palistine thru Hamas etc
Their route is to do commerce with the Chinese, India and Russia etc without the American dollar.
A more plausible route of attack on Saudi pipelines etc would come from Russia, theyre the ones to benefit most, but they have no need at this point.
The more likely war by the Americans is against isis in Iraq.
Especially if this recent negotiation in Ukraine holds.
All just my opinion the generals havnt called me in awhile now.
Have a look at this article, bb. Hostilities between Saudi and Iran are running high.
http://www.politico.com/magazine/story/2015/01/saudi-arabia-king-salman-114583.html
Hello bb,
A good bunch of KSA’s oil fields are located on what is called the Eastern Province.
Due to its geography (East of the country), this is in that province that lies the biggest “concentration” of Shia’as in KSA. Looking at a map, it’s pretty obvious why.
So somewhat, no need of an “Iranian” attack on KSA pipelines per se. Plenty of Shia’as in KSA to do the job – potentially – if need be.
Re: your comment on Syria and Iran sending troops, I didn’t find it – personally and fwiw – surprising at all. As a matter of fact, I found it totally “natural”.
Syria is run by allaouites – think about same-same, ballpark, as Shia’as – and Iran is THE home country of Shia’as.
Add on top of that that ISIS is a sunny movement at war with the Allaouites in Syria (incarnated by President Bashar Al Assad)… and there’s no reason why – at least in my book – big brother Iran wouldn’t help the other Shia’a bastion in the Middle-East – Syria. (granted, to some extent, Iraq is another large one). It’s about Shia’as keeping their ground in the Middle East, and Iran doesn’t want Syria to fall (simply put).
Finally add on top of that some gas pipeline project supposed to cross Syria that Syria doesn’t want to hear about, and you have the energy layer on top of the religious divide.
My 2 cts.
Best to you,
LPG
Its proxy stuff Bird, yes both sides will back whoever tries to mess the other one up, but neither Saudi or Iran is set up to invade anyone.
Ive followed the weapons Iran has for example, theyre all defensive, sure they could send a few guys even a few thousand, they have a few rockets that could hit Israel but other than that?
Very unlikely Iran actually invades anyone.
Also, if Iran invade Saudi that’s all the excuse Israel would need as well as the American 5th? fleet sitting in Barhain (sp)
Don’t count on an Iranian invasion anywhere, most they will do is defend against isis which might mean setting up lines of defense in Iraq.
Absolutly LPG, sounds like proxy stuf tho, what surprised me about Iran sending troops to Syria, which was some time ago now (a year?) is just the fact they sent troops beyond their boarders, totally out of character for he Iranians, except for their war with Iraq of course.
But as you say, Syria is very important to Iran.
bb,
You mean you are surprised Iran sends troops ONLY a few hundreds of km away (ok, maybe 1-3 thousand km) as opposed to dozen of thousands of km away like the US does across the globe 🙂 🙂 🙂
I know… that’s surprising. 😉
As an aside, I’m pretty convinced some Iranian “operatives” are in Hezbollah “controlled” areas of Lebanon. And I also find this “normal” due to their religious proximity.
Best to you,
LPG
OK…. as a follow-up on my post above… I just checked on a map…
On the widest point it seems the Iranian and Syrian borders are about 6-700km apart -give or take 50km.
At the closest point (in the North), they seem to be about 200km apart… Hmmm… that’s much less than the 1-3k km I though about…. but certainly less than any place from the East Coast to the most western point in the Middle East 🙂 🙂 🙂
Having said that, if one considers Israel as a US outpost… then Syria is next door… but that’s a view of the mind. 🙂
Best to all,
LPG
Best to all,
LPG
As soon as I read “any war” I thought of the Ukraine. That could have a similar effect as Saudi Arabia.
My post should be under Birdman’s post above.
more like economic war… europe aligning w the East… ? Japan has mostly older folks..
For those of you found of relationship – and remember, relation is not necessarily causation – here’s something interesting from Tom McClellan:
http://www.mcoscillator.com/learning_center/weekly_chart/crude_oil_leads_the_euro/
I won’t be around tomorrow so I won’t be bothering you all with posts.
Best to all and GL investing/trading.
LPG
Oh Yeah!!!!! Now THAT’s what I am talking about LPG. Thanks man! Excellent article by the way and right up my alley as I wrote about in the above post.
Knew you’d like it Birdman. 🙂
I’ll make a confidence: I emailed the article to Al/Cory/Richard earlier today, and given what I was reading in the post a few minutes ago, thought some of you might find it “interesting” – “for lack of better terms” (Al Korelin Copyrighted expression 🙂 ).
Best to you and to all,
LPG
Everything is connected (to use a famous line from our friend Martin Armstrong) and this is just more evidence of that fact. But you really need computers to model it all and make the connections that can lead to great reading opportunities. Mostly I do it in my head (on the fly) but I have tried in the past to plug data into spread sheets to bring the relationships into focus. I am a crappy programmer though…… I need more staff!
LPG……………..THAT IS A GREAT ARTICLE……………………thanks j………..
Totally uncanny, LPG. Practically lock-step synchronization.
The article [3rd paragraph] states: ” The movements of crude oil prices are getting repeated about 3 weeks later in the movements of the euro. Why oil and the euro, and why 3 weeks? Trying to solve that can be a maddening exercise. I do not have a ready answer, but after seeing it work so well for so long, at some point one gives up on the insistence to know why, and accepts the fact that it is so.”
Would you have any idea as to the time span which the article’s author(s) had in mind when they state ”…but after seeing it work so well for so long…” ? The ”…for so long…” may possibly be referring to other time periods which they didn’t include in the article.
LFP,
I tried to come up w. reasons about the timing, and I couldn’t find any that was intellectually satisfying.
Mind you, Tom Mc Clellan is a very good analyst and looks at correlations all the time between various asset classes. Pretty sure if there was one that made some remote sense, he’d had thought about it – and I’m also pretty confident that he scratched his head for quite some time to find an explanation…
Best to you,
LPG
intellectually satisfying…. a Tom Clancy novel would have more depth…..than trying to reason what is happening …………..
Valuable article LPG.
Pleasuer bb.
Best to you,
LPG
*** RECORD TERRITIORY *** BALTIC DRY INDEX DOWN NOW……….at 540 POINTS, and dropping…………it’s continuing to fall………………this is not good people………not good at all !!!!
Mark………….I left you a question concerning the BALTIC DRY INDEX,,,my question was,,,
,Do you think the DOCKER’S STRIKE on the WEST COAST, has anything to do with the low number on the Baltic………………….thanks j…………..
disregards…………saw you answer……………..j………..thanks
NO……….NO AT ALL !!!!!!!!!!!!!!!!!!!!
So this is why some of our congress ( mostly the older ones ) want troops on the ground in the ME and the Ukraine.
Wow, they changed the content of the article!
Guess the truth gets people a bit angry when they are about to be exposed..
I answerded your question.
Is there any reason that 2 comments I posted (one here and one to the previous editoria) well over 1 hour ago have not shown up?
Each one consited of 1 line of text, followed by one web address link/URL ..?.?.?
Your time is presently 9.33 pm PST
Correction: Your time is presently 9.33 pm PST => Your time is presently 6.33 pm PST
Doc,
You are correct as usual and a very solid voice of reason. The PM stocks are going no where anytime soon. A trader may get some nice bid/ask opportunities for swing trading for basically pennies but I suspect not much more in this current mid 2015 cycle.
Of course there are always caveats for those exceptions of buyers that chose to hold some high quality juniors and a few select senior producers that you think will be around ten years from today and you plan on holding them even in the face of further declines.
I think PM investors will get their a final washout capitulation at a potential $1,000 price level and possibly even sub $1,000 level from a completely unforeseen, unbelievable and unimaginable sequence of events that has already been placed in blue print form with-in the deep bowels of the banking hierarchy and will be unleashed around the open admission of the next round of global QE by the FED.
These stunning counter intuitive events will leave the PM sector in utter disbelief as to what is happening and usher in market forces that will be centered on the ultimate breaking of wills, producing a massive capitulation on the equities side and your long awaited throw in the towel moment.
The next round of foreboding QE counterfeiting operations will subliminally and covertly include the FED carrying out a mafia style kill job on the PM’s again.
This time it will be even more powerful in its magnitude and scope and will be timed to coincide right before the dollar starts it’s real cyclical down trend into late 2015 – 2016.
The FED and the vampire squid mega banks who exist at the sole behest of the FED will once and for all, try to kill what’s left in the west of gold’s allure to the public, the overall trend and any remaining positive sentiment in the sector through a massive never before seen naked shorting attack of the sector on a scale not even the most hardened conspiracy theorist could have ever envisioned possible.
It may well end up being an event so large that it is written about in history books not controlled by gov agencies.
My hypothesis is so twilight zone in its extreme connotations that not one in a million are expecting this outcome. The trillions in counterfeit QE currency units that will be created and funneled to protected and complicit players in the private FED RES global banking cartel will be so large in scale that even in the face of a weakening dollar; they will still possess the power and illicit funding to carry out this symbiotic concerto to kill what they hate most (Gold).
This will very likely inflict a mind-numbing barrage of hopelessness amongst PM aficionados that are weak mined and uninformed and invoke a sector wide waterloo moment.
For those who know how this game of hubris and deceit is played, that will be your bottom.
V
Interest forecast of the impending scenario to come Vortex. It will probably be some coordinated plan like that the banksters are already putting in motion.
So if I am understanding you correctly, that will be the blood in the streets moment to take solid long positions during the washout.
Shad,
You nailed it. To be specific, I expect the next round of open acknowledged QE to be the lynch pin for this take down.
Additionally, the blood in the street moment or phase will not really effect the folks that hang out here if your reasonable in your assumptions and view the world not as you wish it to be, but as it really is.
Everyone here for the most part understands what the PM sector is facing with unrelenting intervention, so this will not be an event that takes place as a result of natural market forces.
Just one mans opinion.
All the experts everywhere are calling for $20 to $35 oil but that might not happen when everyone is waiting to load up down there. The bottom might be already.
+1
+1 Paul
I agree Paul.
Yes, I agree Paul, and at this time don’t think there is an eminent threat to oil for about a month. However, I believe the whole commodity complex will bottom in the late spring/summer and could see one last move down to the $41-$38 range when the whole complex bottoms.
I agree on that price and timeline.
GREAT ARTICLE……………….
I liked the part…..where most want to believe their elected officials, as being good.
I doubt it but it is possible. Too big to pull it together by administration. If it is a conspiracy, it might be Israel plot with the help from Saudis.
If you like conspiracy, check apollo moon landing hoax.
to the MOON…..
FRIDAY……………same old bs…………HONG KONG UP……..LONDON FIX…
This is tradable, unbelievable high odds. You just need enough money and time to trade.
I Keep buying oil mutual fund every day
Kitco Attempts Corporate Suicide
By Turd Ferguson | Thursday, February 12, 2015 at 10:42 pm
Already on the “avoid” list for many gold investors and traders, the latest from Canadian metals dealer Kitco will leaving you shaking your head in disbelief.
Actually, I just stumbled upon this article a few moments ago. I stopped by Yahoo to check my email and, as I scrolled down the “news” headlines, this caught my eye:
“Metals exec: 25% of physical gold buyers are crazy”
I figured that this story was good for a laugh so I went ahead and clicked it. And what did I find? Yes, there is a “metals exec” quoted in the story and the guy in question works for…
…wait for it…
KITCO!
The same Canadian metals firm that employed the permabear Jon Nadler all through the previous bull market for gold. The same Canadian metals firm that made headlines after being alleged as a tax fraud in 2011 and 2013. (http://business.financialpost.com/2013/12/09/kitco-metals-among-gold-traders-facing-quebec-tax-fraud-allegations/) The same Canadian metals firm that gleefully reported Jeffrey Christian’s smears of Andrew Maguire and GATA.
Yep, that Kitco.
So what, exactly, did this “metals executive” from Kitco allege? From the story:
“A lot of people who buy bits of physical gold aren’t looking to make a bracelet or ring. They buy gold because they believe disaster is imminent.
These investors are convinced gold will spike to $10,000 an ounce (it’s currently around $1,225) when the U.S. government implodes, said Peter Hug, an executive at metals retailer Kitco.
Hug calls these people “crazies” and says they form a substantial amount of the U.S. physical gold market — at least 25%.”
Nothing quite like insulting 25% of your customer base, huh Pete? (I’m still shaking my head at the arrogance of this guy.)
Anyway, you can read the entire article here: http://money.cnn.com/2015/02/12/investing/buy-gold-market-fear/index.html
You’ll notice that there’s at least some balance provided by Peter Schiff and, for the most part, the article isn’t the usual mainstream media hack job that you might have expected. Regardless, the question remains…Why on earth would anyone do business with a company that so utterly disrespects its customers, particularly when so many other options are available?
TF
Agatha, your post went to moderation because you have more than one link in it. It’s always been that way for some reason.
Peter is not my go to guy for info……………..jmho
I think Kitco is a good resource for ideas, and they do a number of different interviews with top people in the mining, resource, financial, and political arena, and have a number of daily editorials that are worth following. Daniela & Alex do a good job on their daily interviews. I also like all the charts available at one glance on one webpage.
As for Peter, I take what he says with a grain of salt, I listen to his perspectives on the macro picture, but feel he trades much more in line with the mainstream media talking heads. He is not a dummy though, and is typically gruff in his comments, so at least he says what is on his mind. 25% of gold bugs are a little crazy & conspiratorial, but so is 25% of my mind, so I enjoy the doom & gloomers as contrast to the mainstream medias mantras that “everything is going great in the US & World economy and the job market is back on track.” Sometimes crazy is also, contrarian, and sometimes “crazy people” get mega-rich thinking against the grain.
On their shows I think Jim Wyckoff is the best technical analyst, and is very grounded, with minimal fluff or hype. I also get a real kick out of the weekly interviews with Frank Holmes, mostly because of his enthusiasm.
Kitco seems not care about its customers, first by Nadler and then by this Hug. They also have a lot of misinformation in their site. I used to go there a lot and bought a lot of metals from them. Now only thing I do is to check price. I will try not go there again. I will definitely not buy anything from them. There are a lot of other resources. Goldseek is better.
It says my Peter Hug remark from yest is awaiting moderation….
because Kitco sponsors this show…
lets see if it gets on here…
you might get lucky,,,since it is Friday…..and AL is usually asleep getting ready for the week end show…………………JUST POST IT AGAIN ……………..
Are we seeing new trends?
I just had a conversation with an old university friend who is associated with the Bank of England. He says the current dollar weakness is due to China increasingly getting rid of US dollars and to expect more of the same.
Till Yesterday, Shanghai exchange delivered 315 tons of gold to the industry. I don’t think it includes domestic production but some people suggest it does. So China is on track to consume 2800 tons of gold a year. It was 2100 tons last year.
CFS – That may be a contributing factor, but really the dollar just needed a breather, for about a month, I expect that it will top in the summer in harmony with the bottom of the commodity cycle. At that point, countries like China may accelerate the process, but mostly China is converting its US dollars into raw commodities and energy to but them in something tangible. Something we could all learn from.
That should have said to “put” them (US dollars) into something tangible. I sincerely hope China is not putting US dollars up its “but” (butt).
gold silver ration is dropping. It reached 78 on Nov 7 it is less than 71 now. GSR goes down with bullishness rising.
That chart shows the SGR, not GSR, btw. It’s bullish when it rises.
Here is the chart I use for the GSR.
I like to look at it from both perspectives. Either way, silver looks more appealing to me.
http://stockcharts.com/h-sc/ui?s=$GOLD:$SILVER&p=D&yr=1&mn=5&dy=0&id=p87072756290&a=380143640
Today sold my FNV that I bought couple days ago.
A bit of cash in the pocket for the long weekend.
Will play again next week.
Yes sir. If things drop on Tues & Wed like Doc, Birdman, Glen, and Rick think down to 1206 Gold, and then sub 1200 Gold, then you can purchase more Franco-Nevada at that time. However, if today is the beginning of the bounce and it follows through at the beginning of next week, you can also get back in and ride up the bounce as it develops.
BTW…. Franco-Nevada, Royal Gold, Silver Wheaton, and Sandstorm Gold are my favorite plays in this space. The streaming companies are a unique exposure to the miners, but with less risk, regular income, and good margins. I love this business model, and when the PM markets turn around, these companies will be sitting on a fortune.
This is another reason I like Sprott’s new Gold ETF – (SGDM), because a big percentage of the fund is in the streaming companies.
I still have some RGLD.
Was looking at the options chain for RGLD – some of the calls look juicy.
I may forget about FNV and play around with RGLD instead.
Doc I sure hope your right that we will hit a bottom in gold next week.
Every mining stock seems to be doing it’s own thing. Your probably right that if you see a good price in a particular miner, best to buy some.