Playing the Economic Numbers

by Brad Zigler

What if the president is right? George Bush proclaimed recently that the United States, while in an economic "slowdown," hasn't sunk into recession.

Reports coming from inside the Beltway are backing up his case, which is enough to send the conspiracy-minded into paroxysms. While not rosy, the latest economic statistics seem to indicate braking just short of the "R" line. GDP eked a 0.6% gain at last look, today's employment numbers were actually better than expected. A little bit here, a little bit there, it all adds up to ... to ... what?

A countertrend sell-off within a secular commodity bull market, that's what. While fears might have been soothed a bit by the not-so-horrendous reports from government statisticians, there's been no real sea change. The factors that heightened investment demand for commodities are still embedded in the economy.

Still, there are only 262 days left in the Bush economic era. Perhaps the light at the end of the tunnel isn't an oncoming train.

The Continuous Commodity Index [CCI], the recent incarnation of the venerable Commodity Research Bureau Index, took a punch in its solar plexus back in early March and hasn't been able to catch its breath since. Investors in the GreenHaven Continuous Commodity Index ETF (AMEX: GCC) have seen losses approaching 11% since the fund peaked near $36 on March 3.

The equal-weighting scheme of the ETF's underlying index effectively underplays the energy complex's influence that tends to dominate other broad-based commodity benchmarks.

CCI's 17 constituent futures are pretty much downtrending across the board. The number of standouts-those showing bullish pulses aside from crude and heating oil-are limited to orange juice, corn and live cattle. On the downtrend side, the weakest components are clearly the precious metals.

 

Gold vs. Gold Stocks

 

Both gold and silver futures posted new short-term lows Thursday and are trading under their 20-day moving averages. For the week, London spot gold dipped 4.1% while cash silver's 2.6% easing brought the gold/silver ratio down 1.5% to 51.9. For those playing the ratio using nonfutures instruments, the DB Gold Double Short ETN (NYSE Arca: DZZ) rose 7.5% for the week ending Thursday, while the iShares Silver Trust (AMEX: SLV) lost 3.3%.

On the stock side, the Market Vectors Gold Miners ETF (AMEX: GDX) backed off 3.7% over the past week.

 

Gold/Silver Ratio

 

 

 

 

 

 

 

 

Comments

[captbob]

"What if"--Get real!. Political spin +phony stats+"inside the beltway" buddies reports call for tons of "Pixie Dust" to garner belief outside the asylum.
Just check your week to date gold/stock charts to rate your accuracy!
Try throwing darts without the blindfold!