Commodities Gone Wild

click on each image to enlarge

The pictures tell more than a thousand words, thanks to the excellent long-term perspectives from Decision Point. I have to hand it to Carl Swenlin: he's maintained a premium site for a number of years, with consistent improvements and unique features. It's one of the subscription services that I gladly pay for year over year.

You can see from the top chart that the U.S. dollar broke long term support and continues to head lower. Meanwhile, note the parabolic moves in gold and commodities overall. One can only surmise that the Fed is so concerned about the banking system and economic collapse that it will do whatever it takes to provide economic stimulus. So far that's not exactly inspiring the stock market with confidence--and it's not lifting financial issues, which are getting close to January lows.

With Treasury rates plummeting--the 2 year rate closed at 1.65%, down from over 5% last June--it's difficult to see what will entice investors to hold U.S. dollars. And that, so far, is creating panic buying among commodity traders and a buyer's strike among equity participants.

Comments

[sdavid0419]

Its hard to imagine the best spin doctors of all time are missing their opportunity to sell treasuries. Here's the spiel:

Inflation is 12% so when you invest in our treasuries you are actually getting 13.65%, the 12 you are no longer losing plus the bonus 1.65 we are paying.

Never mind, I'll stick with Gold

[bhakta]

I am sticking with gold and commodities. The Dollar is dead for now and we may one day be papering our walls with them.

[renecohrt]

Under way to economic chaos, what elsxe than gold and silver

[DougM]

How is it that the same bears that were trotting out charts of parabolic house prices during that bubble are apparently blind to the exact same thing happening in an asset class they like (commodities generally, gold particularly)?

[mwphnh]

doug - u r so right.....parabolic upward ,ovrements are ok when u r long i guess eh? This is the next bubble and my guess is oil breaks first; than the euro and then finally gold....

[User 81852]

I went to purchase copper water piping this weekend from Home Depot. Prices are half what they were just a few weeks ago. If that is not a signal that at least copper is in a bubble, then I don't know what is. All I can say is that buyers of commodities beware.

[mkreisel]

Why don't you use the semi-log plots, as all pros do?

[nonaldehyde]

Gold tripling in six years in non-inflation-adjusted (!) US$ (!!) makes a parabola, yes. It's a parabola in Zimbabwean dollars, too.

Price it in a strong currency, adjust for inflation, use a log scale, and its a lot less creepy. Like this, it's just a double:
stockcharts.com/h-sc/u...=$GOLD:$CDW&p=W&am...
I won't own miners b/c they go first when the margin calls come in. With bullion, ya just get more US$ that don't buy any more than they used to...