Category Archives: Commodities

The gold is historically a hedge against the market. It`s a safe heaven. In volatile markets, we often see increasing gold prices. So, why is it so calm out there now?

Commodities use to move in a very long cycles that last many years. That`s what we call a super cycle. In the historically chart below we can see the cycle goes on between 20 and 30 years. The last cycle was a declining cycle that started in 1980 and ended in the year 2000.

As you can see from the CRB chart I have added today, the new super cycle started in 2000. The commodity prices increased in eight years, and plummeted in 2008 during the financial crises. Reuters/CRB index is an index with 28 commodities, which is commodity prices ranging from metals to oil and grains. 26 of the commodities are listed on the US and Canada exchanges.

As you can see in the chart below, we are now in the middle of the bottom in 2000 and the top in 2008. Where do we go from here? Are the commodities bullish trend over? Or is it starting a new trend? A bullish trend?

First of all; the bullish trend started in 2000 because the demand increased. At the same time the supply was at a minimum because of the downtrend we have seen since 1980. Many of the miners had to shut down their businesses. Rising demand and minimum supply means increasing commodity prices.

Most of the demand came from emerging markets. The GDP in China rose 12% a year. The supply startet to increase again which had an impact of the commodities prices. The first phase seems to be over. Do we have a phase nr two comming up soon?

If so, China will be the trigger to the next cycle by consumer spending as they spend Yuan like never before. The Chinese people are earning more money now than ten years ago. In 2004 the average income was 8500 Yuan per year. That`$1400 dollars. Today they earn about 25000 Yuan or $4200 per year.

No one is paying attention on the ernings this week. Everyone`s eyes is on Capitol Hill and the White house now. I look forward to see the earnings of Google and Apple. News to for today: Empire State Manufacturing Index at 8:30am.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

What a bullish week for stocks last week. S&P is above $1700 and finished the week up 12,70 points or .75%. On the other hand; commodities are struggling. Gold is below it`s important $1300 level and are now trading at $1273. Next support to look for are $1200.

I told you about Barrick Gold and the big drop in their stockprice. Some say that many miners have a production cost of $1000 and $1200 to mine an ounce of gold. That means if we see a goldprice below $1200, we will see many miners closes their businesses.

If that is the next scenario, we will see a bigger demand and less supply, which means (in theory) a level of $1000 and $1200 is a strong support. Goldman Sachs say the gold is a «slam dunk sell», and they do not say that too often. Morgan Stanley are also bearish on the gold`s outlook.

ETF`s see liquidation into the goldrallies and money managers do not see the gold as an good investment right now. Commodities are deflationg right now and so are the gold. It will probably take some time for the «insurance buyers» to come back to the market again and take it higher.

In my opinion, what`s happening in the white house on thursday this week desides the direction of the goldprices. Desember gold futures fell on friday to $1268,20 an ounce. Down -3,2% on the week. Silver also fell on friday to $21,259 an ounce. Down -2,3% on the week.

As I have talked about earlier, the P/E ratio (price-to-earnings) in the USA is now 20. A company`s standalone P/E does not give you the full picture of how expensive a stock is. Therefore you need to look at the company`s industry or the broad index to understand the price.

The total price of the index divided by its total earnings is the P/E of an index. In Europe the P/E is 10. In USA the P/E is 20. But is that expensive? Today I have added a chart for the P/E in the USA. Take a look at the P/E ratio for S&P500 during the financial crises in 2008.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.