Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Commodity Markets Breakdown Of 2015 Is Now A Fact

Commodities / Gold and Silver 2015 Jul 26, 2015 - 06:58 PM GMT

By: GoldSilverWorlds

Commodities

We wrote on July 5th that markets are increasingly looking scary. Now, only 3 weeks later, the situation seems to be escalating.

Let’s get it straight: this is a serious deflationary bust in the making. The most worrisome fact is Dr. Copper’s technical breakdown, as seen on the first chart.


Source: StockCharts.com

The price of copper, being a leading indicator for the health of the global economy, has broken through a multi-decade trend channel. This is really bad news for the global economy, and for markets in particular. This setup carries a message you simply cannot ignore if you are a serious investor.

Part of the problem resides in China. As the next chart shows, the correlation between the price of copper and the Chinese Manufacturing Purchasing Managers Index (PMI) has been very high. In particular, the copper price has a track record of anticipating the direction of the PMI index. The latest PMI reading earlier this week came in at 48.2 this week, still below the critical 50 level. It indicates that purchasing managers believe economic contraction is prevailing at this point.

china-pmi-copper-price-July-2015

Source: Capital Economics

It is not only copper, but almost all commodities are tumbling right now. So here must be more going on than contraction in China.

The price of gold, apart from the fact that last Sunday’s crash was more than suspicious (given the low number of sellers, high number of contracts, in a overseas thin trading market), has broken through key support as well. What is more worrisome, however, is the trend of the gold miners. Traditionally, the miners are a leading indicator within the precious metals complex.

Calculations of our analyst team at SecularInvestor.com show that prices of various gold mining stocks are factoring in a scenario of $600 gold in the not too distant future.

Scary movie? It will probably become worse, as from a technical point of view there is still quite some downside in the leading commodities (copper, gold, crude oil).

The key question of course is what central bankers will do with this deflationary cabal. If anything, they cannot ignore the fact the economy is doing exactly the opposite to what they are aiming for, i.e. a 2% inflation rate.

China’s central bank has become quite aggressive in their monetary easing. Also, they have plenty of room to set interest rates lower, as a tactic to stimulate inflation. In the U.S., however, the trend is towards higher rates, at least that is the message of Mr. Bernanke and Mrs. Yellen in their forward guidance since two years. On the other hand, both the U.S. and Europe have not much room left to bring interest rates down.

Is Mrs. Yellen caught between the proverbial rock and a hard place?

Potentially yes, but it could be that this deflationary scenario is exactly what she wants. Or what to think of the scenario in which she created this situation. As we explained in our latest article, we believe it is fair to think that Mrs. Yellen has created this scenario on purpose. The thinking behind this is that her relentless endeavor to raise interest rates will undoubtedly make things worse; so at a certain pint, she has to intervene and come out as the big hero who ‘saved the world’ (similar to what Mr. Bernanke did in 2009). Fact or conspiracy? We will never know for sure, but one should not exclude this scenario.

Trying to determine what is going to happen in the markets in the coming weeks and months is a fool’s game as there is always the possibility of intervention of central banks. But as long as they don’t intervene, it seems an easy call that commodities will continue their downtrend, and that they will take emerging markets and most key stock markets of the world with them. We are seeing the first cracks even in the U.S. stock market now, undoubtedly the strongest worldwide in the last 3 years.

Ironically, in such an environment U.S. Treasuries seem to do well as they attracted quite some inflows of money last week, according to an article on Zerohedge based on data of Bank Of America. However, would Mrs. Yellen decide to raise interest rates, then bonds would see a strong outflow, according to our view.

So here is the trilion dollar question: where is your money safe going forward? We have to say that these are rough markets, and the challenge to be successful is becoming bigger with the day. Meantime, having sufficient cash and remaining at the sideline seems to be a good strategy.

As far as commodities and precious metals are concerned, we will release a special edition of the next Commodity Report and the Gold & Silver Report. In it, we will focus on the debt position of the companies we are featuring. Given the long anticipated interest rate increase, some of the companies will be hit very hard.

So if this commodities and precious metals crash is setting up for a buying opportunity, it will only be for a very select number of companies.

Secular Investor offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies are transformed into the Gold & Silver Report and the Commodity Report.
 
Follow us on Facebook ;@SecularInvestor [NEW] and Twitter ;@SecularInvest

Source - http://goldsilverworlds.com/

© 2015 Copyright goldsilverworlds - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules