Gigem77

What if Bernanke Succeeds?

Let's see how the 10 yr auction goes today and the 30 yr tomorrow. The idea that Timmy and Bernie will succeed is comical. Thanks for the laugh.

Short-Term Correction in the Commodities Bull Market

First you say, "... smart investors should take advantage of currently depressed prices to aggressively accumulate shares in select precious metals and energy companies."
Then you add, "The next few months might continue to be painful for commodities." So which is it? If commodity prices are to remain "painful" for months, then why buy now?

And at the end we see that you have no disclosures, apparently not long any of the things you advise others to aggressively buy. That speaks volumes about your confidence in your own analysis.

De-leveraging, redemptions and writeoffs are not done. Unless and until some big buyers come back to the commodity sector, prices will remain moribund. Who might these big buyers be?

Inflation has two components, money supply and the velocity of that money. You correctly note the increase in supply but completely neglect the velocity. Wages can't grow as unemployment rises and productivity falters. Americans are being forced to clean up their individual balance sheets, paying off or defaulting on debt and and reducing spending. Retail investors aren't going to be the buyers.

Equity Markets, Forex and Precious Metals

Central banks in western countries have dishoarded several thousand tonnes of gold over the past 30 years. This has postponed the day of reckoning for the fiat currencies. It also effectively controlled the price for that time.

Mining is increasingly more expensive and production is not keeping pace with demand. As the bank dishoarding slows, the price of gold will move inexorably higher.

Central bank selling is not some vast conspiracy, it's a move away from a non-interest paying asset with storage costs to paper assets that pay interest. And the selling is controlled by treaty. The Eurosystem banks are agreed to sell up to 500 tonnes per year with weekly statements published.

Last year and this, they have not reached the limit of 500 tonnes. More banks are either not holding any gold (BOE) or they don't want to sell (Germans).

All of these factors are positive for gold over time.

The negatives now are economic slowdown and de-leveraging among hedge funds. It's a calculus problem that won't be solved with tin foil hats.

This Gold Correction Has Further To Run

The problem with using other peoples charts and screens is that you are stuck with their assumptions and date selections. In this case, the assumptions are pointless because the date range is arbitrary. Go look at a 10 year chart of gold and try to find a 34% correction.

This Gold Correction Has Further To Run

Bespoke picked 1975 as the start date for their data collection. So their "averages" include the 18 yr bear market for gold between '82 and '01. Look back over the 7 years of this gold bull market and see that the average correction is not 34% nor does it last 18 months. The sharpest correction was in '06 and that dropped the price 25% over 5 weeks.

Understand also that the COT cutoff is Tuesday for the Friday report, so the high volume washout on Thursday and Friday is missing from the latest report.