Goldtent TA Paradise

THIS AIN’T “NORMAL”

1. Homer says:

   July 14, 2022 - 10:44 am at 10:44 am

   Why have I have this gut feeling that copper prices have been rigged for the last 50 years?
   I wouldn’t be surprised if ‘they’ take the price of copper back down to $2 per pound.

2. Nautilus says:

   July 14, 2022 - 11:08 am at 11:08 am

   It’s really not normal market behaviour. While I somewhat expected a severe correction in oil, I didn’t think the broader unweighted complex (GCC) would or could get hit quite this hard.

   Interest rate differentials (thanks to the BoJ, ECB and SNB mostly), which have been completely coordinated with the Fed, are clearly enough to smash PMs and commodities. While the absolute quantity of money will show up in price levels in the very long run, it is clear that currency flows and interest rate differentials are more than enough to inflict serious damage to commodity prices.

   The irony is, all the Fed is doing is exacerbating future commodity supply problems by smashing prices in the short run. How the hell can someone be expected to finance a well or a mine when commodity prices swing this wildly in the span of 24 months? Moreover, I’ve mentioned ad nauseum that during the Covid crash, the CRB hit the same level it was just after Nixon closed the gold window in 1971–i.e., a 50 year low! And that is in absolute terms. Adjusted for inflation (and certainly global money supply), commodities may have been the cheapest they have been in the history of the world in 2020. How many producers are willing to do the extremely hard work of expanding operations under those conditions? None. And certainly not when central banks can just smash prices in the short run–enough to probably run marginal producers out of business!

   In any event, to say I am disappointed in silver miners is the understatement of the decade. Since the Covid low, SIL has barely outperformed high yield corporate bonds (HYG). And if the carnage in silver continues, I don’t see why that 2020 low in the SIL:HYG ratio won’t get hit again. Absolutely pathetic.

   I am reminded of Obi-Wan’s line to Anakin–“You were the chosen one! You were meant to destroy the Sith, not join them!” Yeah, silver miners=Anakin.

3. Nautilus says:

   July 14, 2022 - 11:16 am at 11:16 am

   I will say, the Japanese are taking it up the a$$ thanks to the BoJ, who are merely doing the Fed’s bidding. The CRB priced in yen almost quadrupled off the Covid low. There is no way in hell Japan’s CPI is running at only 2%!

   And while the CRB has certainly been smashed in USD term over the last month, it really hasn’t been that bad when priced in yen, since the yen has basically gone straight down. And the only ones who know when to get long are the banksters. They are literally playing god.

4. silverboom says:

   July 14, 2022 - 11:18 am at 11:18 am

   If copper is to be believed as the ultimate thermometer of the economy, we are in for some serious implosion.

   Restaurants still jammed, people still traveling like no tomorrow, stores jammed…what the hell is going on??

   • Nautilus says:

     July 14, 2022 - 11:29 am at 11:29 am

     Since when have low commodity prices correlated with a tanking economy? Did you see what the CRB did between 2011 and 2020? Conversely, did you see what the US stock indexes did over that same period?

     If anything, disinflation is a boon for US companies, as they get increased profit margins and benefit from currency flows into the US.

     Now yes, if there is a repeat of 2008–i.e., a bonafide liquidity crisis, I would expect the stock market to tank along with commodity prices, but I wouldn’t call this correction in commodities a meltdown just yet.

     Absolutely nothing would shock me at this point. Hell, it wouldn’t shock me if the US indexes made new all time highs while commodities are put in the sh!tter.