“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput






Friday, October 24, 2014

Has the Bean Market Rally Finally Halted?

Beans have rallied an astonishing $0.98 since the first of this month. Why I say, 'astonishing' is because we are in the midst of harvesting a massive bean crop with the possibility of having a carryover nearly 4X as large as what we were left with for the 2013-2014 marketing year.

Part of what has contributed to this very unexpected ( because of the sheer size of the rally ) move higher has been that extremely tight carryover of which I just wrote. With the beans ( and the corn ) lagging the normal maturity levels somewhat, harvest has been running a bit behind the normal pace. ( Remember - I submit that the reason for the lag in maturity has been the near ideal finishing conditions for the plants, warmth and moisture, which has kept the plant pumping nutrients into the ears/pods instead of beginning the normal shutdown process. Translation - bigger yields!).

The slower pace of harvest means that some end users have been scrambling for supplies while they waited for the new crop to hit the pipeline. So we are faced with the anomaly of soaring bean prices over the last three weeks during a time frame in which we normally see prices working into a harvest low.

What has led this move higher has been the meal. For those who are new to grains, meal is made from crushing beans. The other by-product is soy oil.

There have been some reports coming out of the Eastern belt that processors are having trouble getting enough beans to crush. I do not know how reliable those reports are but let's just say that apparently the meal market believes it.

Look at this chart and you will see what I mean. Meal has rallied $65/ton since October 1! it is this strength which has driven the beans themselves higher. This is the normal for bean rallies - they are always led by meal.


However, this market may very well have run out of upside steam this week. It is still too premature to call an end to this rally but there are some signs that need to be heeded.

Look at where the rally has run. It stalled out just above the 50% Fibonacci retracement level which is near $353 before it closed BELOW that level today ( Friday). The market did however manage t to close over the 100 day moving average which is a big deal technically; however, the key for that next week will be whether or not it can sustain any upside follow through and remain ABOVE that 100 DMA. If not, there is a good chance that the meal has topped and with it, the beans.

By the way, every now and then we get the occasional "self proclaimed trading genius" who scoffs at those of us who employ Fibonacci numbers in our trading strategy. What I can say to them is that in all the years I have been trading, I find myself constantly amazed at how close these various levels are to reversal points that markets make. They are not fool-proof ( no trading method is ) but they are reliable enough that any professional trader ignores them at his or her own peril.

So has the bean market rally finally halted? We shall certainly see next week.

One other thing - the Cattle on Feed report confirms the tight supply of cattle that livestock traders are well acquainted with by now but it did show a bit larger number placed than at the same time last year. Still, the comp was already tight. That being said, while the cattle chart is one of the few charts in the entire commodity complex that has been very strong, the December is having trouble cracking the ceiling at $170. For long time cattle traders, some of us remember during the bust years seeing cattle prices at a THIRD of that. I am talking about a "5" handle in front of the cash cattle prices! That is to provide some perspective just how high these nose-bleed prices are in the cattle industry.


I am still keeping a close eye on this market for signs of a permanent top. I still think that cattle are living on borrowed time, giving the overall trend towards lower prices in the commodity sector, not to mention the increased competition from cheaper pork and chicken. The one thing that has kept beef elevated in my opinion, longer than I originally expected, has been the sharp - and I do mean SHARP, fall in gasoline prices. Cheaper gas leaves mom more money to buy high-priced beef but even cash-flushed moms have their limit.

So far, while this market has bent, it has yet to break. Big specs keep coming in and defending their long positions and have had the wind at their back as packers keep paying up for cattle to fill their slaughter schedules.

Lastly, hedge funds have been huge buyers in the corn of late and that is partly responsible for the $0.45 rally in corn since October 1. Based on today's COT report, hedge funds have covered, or bought back, 60,000 short positions since the start of the month. Yes, you read that correctly. We have seen a MASSIVE Short covering rally in the corn. I am also watching that market to see if it is running out of steam to the upside as well.

With wheat putting in an Downside Reversal Pattern today, it could be that the corn is ready to move lower into a final harvest low. Still, with all that has transpired in the grains these last couple of weeks, I am certainly treading lightly!

Here is the wheat chart. An interesting thing about the price action. I have noted that on the way up, $5.20 was a tough nut to crack but if cracked, wheat could run to $5.40. Guess what, it ran through $5.20 and managed to close above that level yesterday for the first time, then promptly ran to $5.39 1/4 before COLLAPSING BACK DOWN through both levels today! WOW...



With all the goofy money flows this week and huge spread positions being piled on and taken off, I am a bit leery about prognosticating anything about the grains with much certainty right now but this is usually one of the more reliable technical signals. Then again, Wednesday's sell signal in the beans and in the meal immediately was negated on Thursday so there ya go! The motto is: "NOTHING IS EVER SURE IN COMMODITIES - NOTHING!". Just about the time you think you've got things all figured out, a steamroller flattens you and leaves you wondering what the hell just happened to you!
 
Enjoy the weekend - the drill starts over again Sunday evening!
 
 
 
 
 
 
 
 
 

Mining Shares Continue their Meltdown

Before getting into the particulars of the charts from the mining sector, take a look at the continued exodus from GLD. The gold ETF shed yet more tonnage dropping nearly 5.5 tons from yesterday and is now down to a mere 745.39 tons of gold. At the risk of beating a dead horse, we now have to go all the way back to OCTOBER 2008 to find such a trifling sum in this once proud flyer. At its peak some two years ago, there was over 1351 tons of metal in this exchange traded fund.


Western-based investors simply want no part of the metal right now which brings us to the mining shares. The GDXJ, an index composed of junior miners is pulling a disappearing act. Down over 2% today alone, the index made not only a NEW WEEKLY LOW close for the year, but has now gone negative on the year with today's close at 30.95.

The Index is now a mere two points away from its all time low!


Simply put, if it looks like gold, guys running investment portfolios are not interested in it.

The exception is some hedge funds who are still buying gold over at the Comex as can be seen from this updated chart of the Commitment of Traders report from this afternoon. They were sizeable buyers this past week. However, this is noteworthy, the bulk of that buying was SHORT COVERING, not fresh buying. There were some 13,000 shorts covered as opposed to some 10,000 new longs instituted. It was this strong wave of short covering that took the metal up to its high made this week near $1255.

It has been downhill since Tuesday however, ( the cutoff day for the COT report) with the gold price shedding some $24 since then. I cannot say for certain as I do not have the data in front of me and will not be able to see it until next Friday, but I suspect we had some decent long side liquidation from Wednesday on. As long as the VIX sinks lower and stocks ride higher, gold will be sold by speculative interests.

Would you like to see the main driver of the gold price? Contrary to the perma gold bull camp, it is not the bullion banks but rather the big speculators; more specifically hedge funds.

Take a look at this chart using their NET POSITION and overlaying it against the price of the metal. As shown before here on this site, the price rides up and down in perfect harmony with their buying or selling.


Just for illustration purposes, here is a chart of gold over at the Comex.




As you can see from the indicator below the price graph, the market remains trendless and stuck in a choppy back and forth type of trade since holding above that former double bottom ( now triple bottom ) near $1180. Short covering and some bottom pickers managed to run the price up to the 50 day moving average before the sellers showed up and the buyers backed off from chasing it. One cannot blame them when they look over at the falling holdings in the GLD and the collapsing mining shares.

The metal has so far managed to hold above support near $1220 but is stuck below $1260. One or the other of these levels must give way to generate some more volume and bring in some excitement into the lackluster trade that is being seen in there for now. Bears would dearly love to kick the floor out below $1220 and run the metal down to test $1200 but there has been pretty good demand coming out of India for the festival season which is propping the metal up for now. Bulls know where the upside stops are lurking; they just cannot reach them however.

Speaking of new lows - the commodity sector, as illustrated by the GSCI or Goldman Sachs Commodity Index, notched a fresh new WEEKLY CLOSING LOW of 49 months!


There was a great deal of short covering in the grains this week and that component of this index helped keep the index from finishing even lower than it otherwise would have. However, grains were all weak today once more along with crude oil and its products.

Gasoline futures remain new FOUR YEAR LOWS. Once the beef finally tops out, which I still expect very soon ( today's Cattle on Feed report discussed later ) we will finally see grain prices, meat prices and fuel prices all moving lower in sync. Red meat has been the exception for reasons cited here very often the last few months but as I said back then, expect lower pork, chicken and beef prices in the 4th quarter and continuing into next year. Hallelujah for we meat lovers!

Let me shift gears just a bit ( still commodity related however ) and throw up a chart of a metal that I rarely post here. I am speaking of platinum, and of its sister metal palladium. The reason I bring these up at this time is to illustrate why silver is having problems ( note - it has nothing to do with some supposed nefarious plot by the feds to manipulate its price lower ).

Platinum and Palladium are industrial metals primarily. Yes, some buy them in the role of alternative precious metals but such demand makes up only a small percentage of their use. It is in the industrial arena that demand is generated.



What do you see when you look at these charts? If you answer: "FALLING INDUSTRIAL DEMAND DUE TO SLOW GLOBAL GROWTH", go straight to the head of the class!

Take platinum for example - the price recently made a FIVE YEAR LOW! This year alone it fell more than 15% from its starting level at one point although it briefly recovered and is now trading down only about 10-11% for the year.

Palladium fares much better than Platinum as it has a different set of fundamentals but it is currently essentially flat on the year.



Heck if I had to pick a metal to own, it would be palladium based on its rather stalwart chart, given the overall weakness plaguing the commodity sector in general.




The Dollar ended the week still stuck in the midst of its trading range from 87 - 85 basis the USDX. The Yen was initially higher overnight as equities were weak but as they recovered in the West, it gave back most of its gains. Just remember if you are trading the yen, it is essentially a currency trading the "RISK ON;  RISK OFF" trade.

I will get some more up later about the grains and the moo-moos. The Cattle on Feed report was out today and it contained no surprises that I could see. The trade estimated the numbers pretty well so I would except little reaction from the report on Monday morning. If anything, the market will trade the sharply lower beef on Friday but with the sharp selloff today, in anticipation of a less friendly report than what we have been used to seeing the last few months, any bearishness that some might see in the report is already dialed in. As I said, the beef and the cash will be key, much more so than this report, which does tell us that cattle numbers have picked up ever so slightly.

The grains? All I can say is that I am overjoyed that November soybean option expiration is over as of today! What a nightmare the antics tied to the massive amount of options written against that month contract created this week for we grain traders! First it was the 960 call writers, then the 980 call writers and finally the $10 call writers that got obliterated. The market had what I and others refer to as a "MELT UP". Simply put, there was no one on the sell side of sufficient size to absorb all of the buying generated by professional option writers who had sold a slew of calls and were forced to buy futures as the price moved past their strike level and put those calls into the money.

From a fundamental standpoint, I see nothing ( other than some harvest delays and some surprise big export numbers from China yesterday ) that could have justified a run of nearly $1.00 higher in the beans this month. That being said, short term technical always trump fundamentals. I am betting that we are going to see Chinese cancellations sooner rather than later on those bean 'sales'.

More later.... I Need a break!

Wednesday, October 22, 2014

HUI to Gold Ratio Collapsing


There is only one comment that I can make based off of what I see from this chart; either the gold mining stocks are tremendously UNDERVALUED compared to the price of the metal or the gold price is way too high.


This ratio just touched a level last seen in DECEMBER 2000! That is FOURTEEN YEARS AGO!

Perhaps some more of these gold miners need to head to bankruptcy but with the ratio at current levels, and with the HUI itself trading at a SIX YEAR LOW this month ( refer to that chart I posted previously today) I am leaning to the view that the gold price is too high.

Talk about a disaster....


Gold Mining Stocks Continue to Sink

Please review the following two charts.

The first is an index of the junior mining stocks, the GDXJ. Note well that it has completely given up all of its gains for the year and is essentially where it began the year on the first trading day of January 2014.


The second chart is one of the HUI. Notice that this chart is even worse than the former! The index is off 6.6% from its starting level at the beginning of this year.
 
As we are approaching the end of the month, I thought it might benefit the reader to take a long term view of this sector's performance. To say it has been, "poor" would be a huge understatement.
 
Notice that at its current level, the index is on course for the LOWEST MONTHLY CLOSE since May 2005! That is NINE YEARS AGO! As it now stands, the index is at levels last seen 6 years ago, during the height of the credit crisis.
 
 
The reason for the charts is simple - the mining shares still tend to lead the price of gold. They did it on the way up during the bull market phase of gold, and they did it on the way down during the current bear market in the metal.
 
So far gold has been able to stay above $1240, which is constructive for the bullish cause but failure to hold this key level will embolden bears, especially given the abysmal charts of the mining shares, not to mention the plunge in reported holdings of GLD ( more on that later).
 
As mentioned yesterday, if the price falls through $1240 and cannot immediately recover, it will moves towards $1220. Below that is $1200.
 
Here is an updated chart of GLD. Once again, the reported holdings dropped. This time it was a reduction of 2.11 tons, bringing the total reported holdings to 749.87 tons, down 48.35 tons since the beginning of the year.
 
 
 
This is the lowest level since November 2008.
 
Bulls - fear not however since we are assured that this gold is being "drained" to head to meet soaring Asian demand.
 
Let's add this new bullish spin to our long list of bullish theories propounded by the gold permabull crowd.
 
To refresh your memory, here are some of them.
 
1.) Backwardation - Bullish for gold prices
2.) Negative GOFO rates - Bullish for gold prices
3.) J P Morgan long side corner on gold - Bullish for gold prices
4.) Chinese warehouse doubling counting of gold - Bullish for gold prices
5.) Big hedge fund short position - Bullish for gold prices
6.) False Taper - Treasury buying US bonds out of Belgium - Bullish for gold prices.
7.) Big gold buying underneath the market as reported by "Mr. gold insider/whistleblower" - Bullish for gold prices
8.) GLD being drained to meet Asian demand - Bullish for gold prices.
 
Here is my response and that which any objective trader/investor should greet these fabrications with:
 
 YAWN!
 
With crude oil plunging to near $80 this week ( it actually put a "7" handle in front of it last week for a brief moment) and with the TIPS spread showing deflation is the fear of the market, not inflation, not hyperinflation, gold is going to need some very strong fundamental spark to keep it afloat.
 
I am especially interested in what the VIX is doing this week as gold will draw support if the VIX moves higher. It is the "fear trade" that is supporting the metal at the moment.
 
Incidentally, the Dollar had a nice move higher today with the Euro continuing to move lower once more.
 

As long as the Dollar can maintain a weekly close above the bottom of its short term range ( 87 - 85), it looks like it is basing for another leg higher. A failure to hold 85 on the downside by the end of this week, will negate that view. For the next leg higher to commence, 87 needs to fall to the bulls.
 
 
Switching a bit to the ags - Feeder cattle finally had a day in which they did NOT make a limit move. Packers have been able to push the beef higher to end users and that caused bulls to rush back in to buy back what they were throwing away in that complex yesterday. Perhaps the falling unleaded gasoline prices are allowing consumers to afford that insanely high beef for the moment but cheap pork and cheap chicken are going to soon undercut that in my view.
 
Meal looks like it might have run out of upside steam in today's session. If so, the beans will follow as it is the meal which has been dragging the beans, and the corn I might add, higher.
 
Expect to start seeing stories dealing with the difficulty in moving/storing this year's harvest surfacing soon.
 
 

Tuesday, October 21, 2014

Gold Stalling Out?

Gold has had a nice rally off what is now a TRIPLE BOTTOM ( which amazingly held) near $1180. In the process it has managed to clear two resistance zones; the first near $1220 and the second near $1240. It has subsequently been unable to best the 50 Day Moving Average however and has set back after some early session buying popped it above that key technical level.



The HUI, in spite of an extremely powerful rally in the broader equity markets ( the S&P 500 is up over 2% today) has been comatose which is worrisome if one is a bull.

I mentioned in yesterday's post that if the equity markets rally and especially if the VIX moves lower, gold was going to encounter some selling pressure. That it is doing at the moment. It does however remain higher on the day although well off the best levels reached earlier in the session.

Tomorrow will therefore be important for the short term future of the yellow metal. If it does indeed set back from here, how it handles itself if price does fall towards $1240 will be key in deciphering its next move. Failure there and it will drop back to $1220 as discouraged bulls and emboldened bears will assert themselves.

If the metal manages to attract enough dip buyers to keep it afloat above $1240, the action will be more indicative of a pause or rest in a market that wants to make a run towards $1280. Thus the jury is out at this point.



Buying has been good out of Asia ( what else is new ) but Western-based investment demand is miserable as witnessed by the plunging reported holdings in GLD.

Some want to make some sort of big deal out of this claiming that the "GLD is being "drained" or "raided" to meet demand from the East" but that is an explanation looking for an argument. Who cares who is buying it? No one in the perma gold bull camp seemed to care when the reported holdings were soaring several years back now were they? We could turn the latest theory on its head and say the following:

"Western-based investment demand is pulling gold from all corners of the world to meet it". The simple truth is that for every buyer there is a seller. Some act as if once this gold is bought by some nebulous "East" that it will never be sold again. That is pure rubbish! Gold is bought and sold every day in China as well as in India or Vietnam or anywhere else in the nations that comprise the "East".

Western-based money managers chase yield. If they feel that gold is going to put in a good performance or if they require a safe haven asset in which to park some excess funds, they will buy the metal. If they do not, they will not buy it.

I am on record here as stating that I believe falling reported holdings in GLD is not bullish. If was bullish on the way up for gold way back when, then it is bearish on the way down. One cannot have it both ways.

That is why I am watching this rally with some skepticism. For now, the bulls are in technical control of the market with the chart in their favor.

Let's see what we get tomorrow.

By the way, the Euro plunged on the ECB potential corporate bond buying news.



It stalled out exactly at the former support zone near 1.2800 which is now serving as overhead resistance. The recent bump higher has relieved the oversold reading on the weekly chart so perhaps the currency is reading to resume its move lower. We shall see on that as well.

Lastly for now, the soybean meal market which I noted earlier today, posted a very strong close above the $340 level. It continues to pull the soybeans, AND THE CORN higher.

Wheat was pulled higher by talk of planting delays for the soft winter wheat crop in the Eastern portion of the Corn Belt. It popped above $5.20 which is a big level but failed to CLOSE above that line. Wheat bulls can expect to see $5.40 if they can dislodge the bears near this level.

There has been a rather significant amount of short covering by the funds in this market but that is the reason why one has to closely watch these resistance levels. The stronger hands, who have not been squeezed out, are still looking for a level against which to sell. For now they seem to have found it near $5.20. This is shaping up to be an interesting battle.




Nearby Meal Tightness Driving Beans Higher

It is the same story that it has been for much of this past year, the tight carryover from last year's bean harvest is meeting up with a reduced current year harvest pace and that has processors scrambling to secure enough beans to produce meal, which seems to be experiencing some tightness right now. That has the meal moving higher on the charts which is pulling both the beans and even the corn higher.

Take a look at this chart and as you do, keep in mind that we are on our way to one of the largest bean harvests ever with a huge expected carryover.



That dark line is the 50 day moving average. Yes, believe it or not, in the face of a massive upcoming harvest, the meal is over that key technical indicator. That is why the funds are buying. Remember, none of that group gives a hoot about fundamentals.

Meal has gone up nearly vertical some $44/ton since the beginning of this month and is trading at levels last seen in early September as traders began to get a true sense of the whopping harvest that was on the way.

I am closing watching its performance near this level however to see if it is going to fade. Farmers continue to be tight-fisted sellers of this year's crop, ( a huge mistake in my view ) as they cannot bring themselves to sell at current levels after being spoiled by years of sharply higher prices for their production. IF ( and I do not know ) meal is going to fail, it will fail near this level.

What makes me extremely nervous about this market is that once the panic selling begins among farmers, it is all going to come at once. The big question a trader has is exactly when that is going to be. I have the utmost respect for farmers who work long hours and deal with a multitude of obstacles at times. However, as marketers of the crops which they so proficiently grow, they suck! They turn bullish at exactly the worst time and become excessively bearish at the wrong time. In other words, they tend not to sell when they should and sell when they ought not to be selling!

By the way, the feeder cattle market hit limit down this morning. It was limit down on Tuesday and Wednesday of last week. Then it hit limit down Thursday early in the session only to move higher and close at limit up that day. It then went limit down on Friday and closed there only to start off this week ( MOnday) by closing Limit up. Let's see now, that is SEVEN CONSECUTIVE TRADING DAYS in which this market has either closed limit down or limit up.

And someone tell me that our markets are not utterly broken! I have been trading cattle for many, many years and have never seen them do this, ever! This is also the reason I strongly advise many would-be traders from NOT trading livestock unless you know exactly what you are doing.

ECB Planning a Corporate QE?

The wire services are reporting this morning that the European Central Bank is considering a plan to purchase corporate debt as part of a response to the Eurozone's sluggish growth. That has pushed the Euro sharply lower and the Dollar higher by consequence but commodity buying is being seen regardless.

Copper, silver and gold are all higher and even crude oil has firmed. Equities of course love that news. Even the grains are moving higher.

More volatility, more uncertainty and more factors for traders/investors to now digest.

Hold onto your hats.... don't you love our monetary masters? They have such a "calming influence" on the markets.

Monday, October 20, 2014

USDA Harvest Progress Reports

Here are the latest numbers on the harvest from USDA.

Corn -

93% of the crop is mature compared to 87% last week and 93% last year at this time. The five year average is 94%.

31% of the crop is in the bin compared to 24% last week and 38% last year at this time. The five-year average is 53%.

Soybeans -

95% of the crop is dropping leaves compared to 91% last week and 93% last year at this time. The five-year average is 97%.

53% of the harvest is done compared to 40% last week and 61% last year at this time. The five-year average is 66%.

The weather looks very conducive to rapid harvest progress this week so expect to see some pretty strong progress by the time next Monday rolls around and we get more of these numbers from the USDA. As of now, skies should be clear with lots of sunshine through Sunday at least.

There is some fund buying in these grains for some reason that I cannot seem to put a finger on. Might be some more of that supposed rotation out of stocks and into what is viewed as "cheap" ags but that still seems a rather irrational reason for professional funds to throw money into a market. That big down day we had in the Dollar last week threw the macro trades into some convulsions and I suspect we are still encountering some residual fallout from that move in the currencies for mere technical reasons.

There is apparently a contingent of large speculators who seem to enjoy buying the grains nearly ever evening in the Asian session as they go stop hunting after shorts in the market. Whomever it is that has been doing this, has been at it for some time now. We are seeing more of it this evening as I type these comments.

I should note that guys like me who trade the livestock markets heavily have been complaining to the CME for several years about the antics occurring in that sector during the thinly traded Asian hours. After getting an earful from the industry participants as well, many who got sick and tired of watching their hedges get blown all to kingdom come for no apparent reason other than specs moving the markets around because they can do so, CME finally has moved to end the Asian trading of livestock. As of next week, FREEDOM is the new word for we long-suffering livestock traders.

Perhaps enough of the grain market participants can begin to make some noise about this same thing and maybe get the exchange officials to cut these insanely long grain trading hours back to size as well. I have to give credit to the exchange - it took them a long time but they did listen and they responded!
Hey guys - take a look at the grains now and let's shorten these trading hours. All we are getting in the Asian trade is hedge fund games.

By the way, for those who happen to keep an eye on cattle every now and then. They were limit up today. Limit down, limit up, limit down, limit up... I am having difficulty recalling ever seeing anything quite like this in the cattle.

Some quick comments on gold... the chart is showing the bulls currently in control of the market as they have been able to take price through two resistance zones on the chart. The first was near $1220; the next was near $1240. Just above the latter resistance zone, the 50 day moving average comes in near $1246. From a purely technical analysis aspect, bulls have a shot at making a run to near $1280 if they can manage to post two consecutive closes above that 50 DMA. The reason is because of the internal structure of the market with a fairly good sized contingent of hedge funds on the short side of the market.



The problem with this market for someone such as myself who likes to view a range of inputs in markets I am analyzing, is that fundamentally, the case for gold is not compelling. I am not alone in this view as the GLD continues to rapidly bleed out gold. The latest reported holdings out of that ETF, showed a sharp FALL in gold holdings of more than 9 tons from Friday! Clearly rallies in gold are being viewed as selling opportunities by some very big entities.

Total tonnage is now down 46.26 tons from the start of the year and is the lowest reported level of holdings since early November 2008! Think about that - it was only a month or so after the news of QE 1 was announced that the amount of gold was anywhere near current levels being reported in GLD.


In spite of this, gold over at the Comex continues to squirt higher. We also have the VIX coming down somewhat indicating a lessening of fears over equities, at least for the moment.




Here is the most current TIPS spread chart... notice that gold has been moving higher and inversely to the spread for the last week or so - something out of the normal pattern we have come to see over the last few months. This is suggestive of gold functioning as a safe haven, NOT from inflation ( which the market is not the least bit concerned about ) but rather as a place to park some funds for those who have been getting nervous over the wild price movements in the equity arena.




What this suggests to me is that any sign of stability in equities and/or a falling in the VIX, is going to spur selling in gold once more. Falling tonnage in GLD, a falling TIPS spread and a falling VIX do not bode well for gold. If one could tell me what these three things just mentioned will do the next day, or the next or the next, I think I would have a pretty good idea what to expect from gold but since none of us know for certain what we are going to get, especially in the way of stock market moves, the jury is out on gold with the short term technical dictating the price action at the moment.

Also, the Dollar is back down near the low end of its 85-87 range. What it does will also determine what gold will do. Tell me what the Dollar will do tomorrow, and I will tell you what gold does. In other word, short term technical will rule this market while traders wait for other fundamental inputs to plan their next approach to the metal.