"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


Sunday, February 9, 2014

China Gold Stats

Dow Jones is reporting this evening that the China Gold Association has provided some numbers detailing both Chinese gold demand and production for 2013.

According to the Association, Chinese gold output rose 6.2% on the year reaching 428.16 metric tons.

That continues the trend of China being the world's largest gold producer for the last seven years.

Chinese gold consumption hit a record 1,176.4 tons in 2013 - that was up 41.4%.

Chinese gold jewelry was up 42.5% to 716.5 tons while gold bar demand rose 56.6% to 375.7 tons.

My take on this is that it continues to underscore that demand from Asia, particularly China has been robust and looks to remain that way, especially on dips lower in price.

Western based investment demand is still the missing ingredient in the gold equation. If the Dollar continues to weaken, gold should be able to breach overhead technical price chart resistance levels but that will entail the inflow of hedge fund monies back to the long side of the gold market. We will continue to monitor the reported holdings of GLD to get a read on this.

There seems to be enough concerns about the both geopolitical concerns and monetary/currency/credit issues to keep gold from breaking down in price at this time but it still lacks a catalyst to kick it into a strong uptrending move.

Will we get one? We'll see. Keep an eye on the commodity complex as a whole. If hedge funds begin to view commodities as undervalued in relation to equities, they will return to the buy side across the sector although they will tend to be a bit more choosy as to which markets they will embrace. Specific demand/supply factors will be more closely scrutinized rather than the strategy they took back when QE was first introduced. That consisted of buying everything in sight in the commodity complex no matter what it was.

Higher beef and pork prices are a given this year. Soybean prices have been sneaking higher even in the face of a record S. American harvest expected. Corn, which was one of the worst performing commodities last year, has picked up in price somewhat while coffee prices have shot up sharply. Sugar has been bouncing around a bottom for some time now. We all know what natural gas and heating oil prices have done this winter.

It could very well be that the old adage: The best cure for low prices is low prices" may be at work again as demand is picking up for some of these low priced commodities.

I remain leery of the "February break" as it is a fairly regular occurrence across the commodity sector but as to its specific timing, it is difficult at times to read its arrival. Sometimes it comes early; sometimes it comes late. And to answer a question from a reader, yes, it does tend to affect the precious metals as well.

Based on the price action of some of these individual commodity markets, the break may have already occurred. I simply am not sure but am waiting and attempting to discern from the price action across the sector whether we have seen the "break" or not.

Just to repeat a warning I posted the other day in a column - traders - be careful in the commodity sector right now as many markets are treacherous. Action has been of the whipsaw nature and can really damage you if you are not alert and nimble. Whatever you do - do not remain too dogmatic but rather stay flexible and above all, humble!