Analysis and Charts of Global Markets

written by Gary Dorsch, Editor and Publisher

Wild Gyrations in Commodities & Gold – what’s Next?

Jan 4, 2012

Looking at the big picture, the “Commodity Super Cycle” that began 10-years ago has been interrupted for the short-term, but still remains intact for the longer-term, - a cycle that could extend for at least another decade. Each day, the world’s population increases by 225,000-human beings. The middle class globally is growing at 70 million people a year, so just the marginal demand for these commodities is enormous and being driven by the major emerging markets. By 2030, the world’s GDP is expected to double in size to $130-trillion, assuming a +3.5% annual growth rate. Such massive demands on the earth’s finite resources will eventually outpace supply and lead to severe shortages of many commodities worldwide. Tighter supplies would be rationed through much higher prices.

ECB Expected to Unleash QE after Launching of Euro-Bonds

Nov 29, 2011

Hardly a week goes by, without a major summit between German Chancellor Angela Merkel and French President Nicolas Sarkozy, trying to devise a clever scheme to save the Euro. Yet after 1-½ years of trying to contain the wildfire, - the Euro-zone’s debt crisis is more dangerous than ever. To prepare the groundwork for full scale QE, - the monetization of toxic debts, - the political cronies in Berlin and Paris are maneuvering towards a new arrangement that would blackmail member states of the Euro, into surrendering their sovereignty over fiscal policy.

Illusions versus Reality in the Copper market

Oct 12, 2011

Yet how does one explain the sudden sharp drop in copper prices that sliced off a third of its value? At last count, global demand for copper is not too far from record highs. Furthermore, the global demand for copper is expected to exceed new supplies by roughly 200,000-tons this year, leading to a supply deficit, which would usually buoy copper prices. Is the Copper market presently out of touch with Reality?

Can we Trust Government Statistics on the Economy?

Aug 30, 2011

Statistics conjured-up by US-government apparatchiks on consumer spending, which accounts for 70% of US GDP, are completely at odds with the results of private surveys, that are not under Big Brother’s control. The government’s report on July’s consumer spending is far beyond the stretch of the imagination, and appears to be solely designed to jig the market higher. Thus, trying to profit in the stock market is a game of seeing correctly through deceit and deception, and “smoke and mirrors.”

Gold Eyes $2,000 /oz, - Is it a Bubble that´s Ready to Burst?

Aug 23, 2011

Even the most avid gold bugs, who’ve been stockpiling vast quantities of the barbaric metal for decades, and endured their fair share of panic shakeouts, were probably in a surreal state of “shock and awe,” while watching the price of the yellow metal soar to within 1% of the psychological $2,000 /oz level this week.

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Tug-of-War between China and Fed over Commodities

Updated 8:08 PM, Jan- 4, Wed

At the peak of the commodities boom in April 2011, about $412-billion was stashed away in managed commodity funds, buoyed by the Fed’s radical QE-1 and QE-2 money printing schemes. The Fed’s experiment with QE was a huge success, that is to say, the Fed was able to conjure-up the illusion an economic recovery by simply printing vast quantities of paper currency that was covertly channeled into the stock market through its agents on Wall Street. Furthermore, the Fed proved that it could prevent the specter of deflation, by cheapening the value of the US-dollar in relation to other currencies. ------------------ For eight straight months, the Dow Jones Commodity index zig-zagged its way higher, as the Fed fulfilled its pledge to inject $600-billion of freshly printed US$’s into the coffers of the Wall Street Oligarchs. -------------------------- When the Fed first telegraphed its QE-2 scheme in August 2010, the high octane MZM money supply was languishing at a -2.3% annualized rate. By the time the Fed finished QE on June 30th, 2011, - MZM was expanding briskly at a +9.9% clip. ------------------------ Commodities are priced in US-dollars, and with the Fed flooding the world with dollars, traders piled into markets. Copper climbed to a record $10,000 /ton in London, North Sea Brent rose to $125 /barrel, Corn futures in Chicago hit $7.50 /bushel, Silver futures soared to $49.50 /oz, and rubber jumped to all-time peaks in Shanghai and Tokyo. Coffee, cotton, and sugar also soared to all-time highs. --------------------------- While the Fed wasn’t scheduled to turn-off QE-2 until the end of June 2011, some commodity traders decided to jump off the QE-2 bandwagon a few months early. They figured that the bullish trade had become too crowded, and that the timing was ripe for a nasty shakeout. On April 12th, Goldman Sachs shocked the markets, by urging its clients to dump positions in crude oil, copper, cotton and platinum. ------------------ On May 3rd, Societe Generale joined Goldman Sachs in warning of tougher times for commodities prices. “The conclusion of the second round of quantitative easing, (QE-2), will deprive commodities of a key ingredient of their winning streak,” the French bank said. “This suggests that the commodities bull-run support by QE-2 may run out of steam in the third quarter if the global economy shows any signs of weakening. The end of QE-2 on June 30th could well herald the end of the commodities bull market. If emerging market economies slow and abundant liquidity dries up after QE-2, deflation fears may be back on the agenda in the second half of 2011,” SocGen warned. -------------------- Two-days later, on May 5th, commodity markets were rocked by a nearly unprecedented onslaught of panic selling as modest early profit-taking snowballed into one of the worst days on record. In a slide reminiscent of the steep sell-off in the wake of the 2008 financial crisis, Brent crude oil dived a record $12 /barrel, and natural gas dropped over -7%. Tin was the biggest loser among industrial metals, shedding -7% to $28,500 /ton at one point. Chicago Corn fell -3% to $7.05 /bushel and soybeans fell -2.3% to $13.19 / bushel. ------------- Silver was the catalyst for the slide, tumbling by nearly $5 /oz, its biggest one-day dive since 1980. Prior to May 1st, the white metal was zooming higher in a speculative frenzy, touching an all-time high of $49.50 /ounce from around $18 /oz in late August 2010 when the Fed first telegraphed QE-2. ------------------- Silver was on course for its steepest fall in almost 30-years, losing -27% in a single week to $35.287 on May 6th. After the May 2010 commodity plunge, fund managers were still divided over what direction prices were headed next.

Archived Comments:
Tug-of-War between China and Fed over Commodities

Gold Toppled by Slide in Commodity Inflation, Flat MZM growth

Updated 8:11 PM, Jan- 4, Wed

The historic Gold rally, lasting for 11-straight years of gains, squeaked out a +10% gain in 2011 versus the US$. But since peaking in late August, Gold stumbled to the threshold of a Bear market, tumbling -20% lower from its record high of $1,924 /oz. In hindsight, Gold topped out soon after the Fed halted QE-2, - MZM, began to flatten out and receded a bit, after many months of explosive growth. The US-dollar’s rally against the Euro, combined with monetary tightening campaigns in Brazil, China, Chile, the Euro-zone, India, and Russia, all contributed to a broad sell-off in the commodity indexes, and sweeping Gold lower. -------------------------- The Dow Jones Commodity Index, - utilized as a measure of real-time inflationary pressures in the global economy, began to tumble significantly in the second half of 2011. The inflationary pressures that were bubbling in the first half of last year - began to rapidly unwind in the second half. By year’s end, the Dow Jones Commodity Index closed at the 140-level to stand -15% lower for the year. Official government statistics on inflation should ratchet downward in the months ahead to reflect lower commodity prices. Gold traders are several steps ahead, having already discounted a lower global inflation rate, by knocking Gold to $1,565 /oz. .

Archived Comments:
Gold Toppled by Slide in Commodity Inflation, Flat MZM growth

Saudi Arabia boosts Oil Output to Cap Oil prices

Updated 8:14 PM, Jan- 4, Wed

North Sea Brent crude oil found a floor at $100 /barrel last year, buoyed by “quantitative easing” in England, Japan, and the US. Thanks to QE, the price of crude oil is roughly $25 /barrel higher than otherwise. To counter the inflationary effects of QE, the People’s Bank of China hiked its overnight loan rate +125-bps higher to 6.56%, in order to drain liquidity and cool its economy’s demand for crude oil. Also, Saudi Arabia, the central banker of crude oil, boosted its daily output to 10-million barrels per day, to offset the loss of Libyan oil, and to allow Asian and Western clients to build-up their oil stockpiles. ------------------ Saudi Arabia, Kuwait and the United Arab Emirates, are expected to increase their oil exports to the European Union and Asian nations once sanctions on Tehran’s energy exports and its central bank begins in the coming months. ----------------- Oil prices could quickly surge far above last year’s high of $125 /barrel, if Tehran makes good on its threats to bomb the Strait of Hormuz. After 10-days of naval exercises by Iran in the Gulf, Iran’s army chief Major General Ataollah Salehi issued a stern warning, “Iran advises, recommends and warns the US not to move its carrier back to the previous area in the Gulf because Iran is not used to repeating its warnings and warns just once.” ------------------- Many traders brushed-off Salehi’s comments as empty rhetoric, and instead, poured more than $1-trillion into world equity markets on the same day. Yet other traders saw the situation differently. The US-dollar soared +30% in a single day to 17,800-Iranian Rials, and the price of Gold jumped $50 /oz to as high as $1,615 /oz. If crude oil turns sharply higher, it could also boost the price of corn, ethanol, heating oil, gasoline, rubber, silver, and sugar.

Archived Comments:
Saudi Arabia boosts Oil Output to Cap Oil prices

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Analysis and Charts of Global Markets

Global Money Trends Audio Broadcasts Audio Broadcasts are uploaded Monday and Wednesday evenings, to our subscriber section, with the latest news and analysis moving markets

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