Metals melt, financial markets drop

Register
Jun 21, 2013

Here is this week’s edition of Futures File, our weekly commodities wrap-up:
 
Fed’s words melt metals
 
The US Federal Reserve continued indicating in an announcement on Wednesday that it was going to end its stimulus program. Although a definite timeline has not been set, Federal Reserve Chairman Ben Bernanke has begun talking about an end to the $85 billion per month stimulus program.
 
Investors had previously piled into the gold and silver markets on the expectation that Fed stimulus would cause inflation, pushing prices to record high levels. Over the last year, as inflation remained low and stimulus’ end was in sight, prices have dropped sharply. Wednesday’s announcement caused another plunge in the metals, with gold falling over $100 per ounce (-7.6%) and silver sliding as much as $2.38 per ounce (-11.0%) in the aftermath. Both markets fell to the lowest price in over two years.
 
As of midday Friday, gold for June delivery was worth $1,293. Worse yet, silver stood at $19.96, down a staggering 60 percent from its all-time high made in 2011. Going forward, some analysts believe that gold and silver will be traded more like industrial commodities and less like investment assets, possibly making them much more reactive to industrial demand than central bank actions.
 
Financial markets lose
 
Alongside gold and silver, other financial markets tanked as well. Stock markets, foreign currencies, crude oil and US Bonds all plummeted this week on the expectation that diminished stimulus would slow economic growth.
 
Crude oil, which rallied last week on Mideast concerns, had the largest percentage move, dropping as much as $5.50 per barrel (-5.6%) in the wake of the Fed announcement. Crude prices were also dragged lower by rising stockpiles and weak economic data from China.
 
As of midday Friday, crude oil for delivery in August was worth $93.30 per barrel, the lowest price since early June. In coming weeks, geopolitical concerns may begin driving the crude oil market again, especially if the conflict in Syria spills across borders.

Comments

Contango

Re: "Stock markets, foreign currencies, crude oil and US Bonds all plummeted this week on the expectation that diminished stimulus would slow economic growth."

IMO, overblown reaction - a head fake.

U.S. economic growth WILL slow, causing the Fed to continue, if not increase QE and maintain ZIRP.

Hot money moved into cash, pushing up the value of the dollar. Money mgrs. don't get paid for holding cash. It's gotta go 'somewhere.'

shucks

"Got gold?" ... Sucker.

Fromthe419

Not sure why you said that, I see it as a great buying opportunity. A wise man (and very wealthy) told me over 20 years ago when I graduated from college...."buy when others are selling and sell when others are buying." In short, buy at the dips and sell at the crests. I personally own very little gold, I got into silver when it was around $12 and bought quite a bit and continue to buy a few oz per week. The thing with precious metals is they have never been worth $0, but fiat currencies have collapsed in the past.

Contango

@ Fromthe419:

I've been dollar cost averaging in. Ya buy less when the price is high and more when the price is low.

The (GLD) I've owned since late '09 is still up 21%.

IMO, a maximum of 5-10% of a total portfolio's assets should be in an alternative asset like gold.

Real estate is good too.

shucks

Fromthe419-
According to the experts, if you bought gold within the last few years, that " hedge" cost you a loss that you aren't going to retrieve soon.

Contango

@ 4shizzle:

So in what are your retirement assets invested?

Contango

Re: "cost you a loss"

Paper loss, not a realized loss.

It's only a loss if sold below purchase price.

shucks

"Paper loss, not a realized loss. " = Nonsense

"It's only a loss if sold below purchase price." = No duh?

Contango

Re: "Nonsense"

Only to the grossly ignorant. :)

"Definition of 'Paper Profit (Paper Loss)'

"Unrealized capital gain (or capital loss) in an investment. It is calculated by comparing the market price of a security to the original purchase price. Gains or losses only become realized when the security is sold."

http://www.investopedia.com/term...

shucks

Just more "baffling with BS" in your world of ambiguous statements : )

Fromthe419

I think you missed my point, "buy at the dips and sell at the crests," if I had a lot of gold I would have sold it when it was flirting with $1900 and waited for other buying opportunities. As for my silver, I'm quite content with my dollar cost average as I made big investments when it was $12 per oz and I have continued to buy 2 oz or so every week even when it was at $32-33. I would also think the experts would say if you invested heavily in the market in the past two months you would have a loss :)

Contango

Re: "experts"????

I often enjoy listening to the highly paid talking heads on CNBC contradict each other.

It's like the "Jewish sports" channel. :)

shucks

"Re: "experts"????"

Right !... Something you ain't.

Contango

Re: "experts"????

For one, the "experts" said that housing prices would NEVER go down.

And for another, the "experts" created the Federal Reserve so that we would NEVER have another financial crisis like the one in 1907.

https://en.wikipedia.org/wiki/Pa...

Yeah, the "experts" are ALWAYS right and NEVER EVER contradict each other. :)

anthras

Look not to what is seen but to what is unseen; for what is seen is transitory but what is unseen is eternal.

Contango

Gold?

A currency hedge - NOT an investment.

Buy on the dips & lower the cost basis.

Currently the Fed is busy fighting deflation.

Eventually all this money printing will cause inflation to raise it's ugly head - THAT'S where (GLD) comes into play.

The Fed's QE? Nice for the BIG banks who get paid to hold it. :)

http://www.newyorkfed.org/market...

Fromthe419

Nice to see someone agrees with my investment strategy :)

Contango

@ Fromthe419:

I expect a financial crisis, NOT a Mad Max scenario.

European banks are a mess! They have nothing like FDIC.

http://www.reuters.com/article/2...

Best to remember: The Great Depression started in Europe.

Money flowed from there to the U.S. which caused the dollar to strengthen, which in turned prompted FDR to set up currency and trade protections.

He wanted Americans to use the greenback and therefore needed to confiscate the gold. (Bleeping) fascist!

Mr. Bernanke is a student of the Great Depression. Most likely out in Jan. 2014.

History doesn't repeat, but it rhymes.

shucks

This a case of the blind following the blowhard.

Contango

^^^ Got any retirement assets other than hot air?

shucks

I should tell YOU ?... and I should take YOUR advice ? LOL !!!

Contango

@ Fromthe419:

Ever heard of the Permanent Portfolio?

http://en.wikipedia.org/wiki/Fai...

Interesting concept. But IMO, not for the faint of heart.

I admired Harry Browne greatly.

Fromthe419

Interesting investment strategy, I'm not sure I would invest in US Treasury notes in the long term though (not 25%), I fear with the 10 year rate on the rise the good ole' US might not be able to pay them 10 years from now, if rates go up to normal levels our ability to service our debt will exceed our incoming revenues. To be honest, I think when the Fed tapers its buying (money printing) there will be no one left to buy our debt.

grumpy

Gold is not being subjected to free market forces. India and others who are seeking it can not get it in the quantities they wish, yet the price is falling. Much the same with silver. Unlike others I am not holing myself out as an expert, but when money is being pumped into economies, free market influences are being curbed, curbed not done away with. They will come back eventually, and maybe with a vengeance when such pumping comes to a close. When will the pumping end? Since it has never been done, to this degree, who knows? I am sure some experts will have the answer, at least in their minds they will. How many trillions have been pumped into the banking sector during this fed buying spree?

Contango

Re: "if rates go up to normal levels our ability to service our debt will exceed our incoming revenues."

Around $360B for 2012, can EASILY go to $1T annually.

http://www.treasurydirect.gov/go...

Yep! Historically, the creditors tend to take it in the shorts when the debtor defaults.

Look at Detroit: 10 cents on the dollar! YIKES!

IMO, the govt. will REQUIRE pension plans, insurance cos. et. al to buy U.S. debt.

Countries like Argentina have used this approach.

Fromthe419

IMO, the govt. will REQUIRE pension plans, insurance cos. et. al to buy U.S. debt.

When that happens the end is near. People better have gold and silver if that happens because the death of the US Dollar would soon follow.

The Big Dog's back

All the doom and gloom winnie has predicted, none of it ever came to fruition.

Contango

^^^ So in what are your retirement assets invested?

JudgeMeNot

OBAMA KOOL AID

Relax -- Drink Up -- No Worries

2cents's picture
2cents

In my ex's bank account : )

Contango

Re: "my ex's bank account"

Reads like TWO poor performing "investments." :)

2cents's picture
2cents

LOL, that was good.

Contango

"Rising Interest Rates – Bullish for the Market":

"Consequently, artificially low rates set the stage for shortages in cash that manifest is rising interest rates.

What we will see going into 2015 will be that the Fed raises rates trying to stop what they have set in motion the next inflationary bubble."

http://armstrongeconomics.com/20...

The Big Dog's back

Isn't this the 5th year now you said this would happen? Keep repeating it and maybe after 20 years when a Repub gets in it will be true.

Contango

Re: "...after 20 years"

The next financial crisis will occur on Pres. Obama's watch.

Other than "Bonz" and chew toys, what do dogs invest in? :)

The Big Dog's back

So when it doesn't, and it won't, then what?

Contango

Re: "then what?"

With inflation, your "Bonz" & chew toys will be more expensive. :)

2000 & 2008. Two financial crises within the 21st Century. They're coming more frequently than in the past.

Your pal Mr. Krugman is upset with Mr. Bernanke:

http://krugman.blogs.nytimes.com...

Guess that the "experts" don't always agree huh? :)

Contango

Re: "then what?"

So when it does, and it will, then what?

BTW: Finance and commerce are GLOBALIZED. The U.S. is NOT insulated or isolated.

For one: The Asian financial crisis of 1997 rocked our markets.

Europe is a mess. Japan is a mess. And an economic slowdown is occuring in China.

shucks

The next financial crisis will occur BECAUSE of a Republican.

Thanks Republicans !... for screwing up the present Economy.

grumpy

The only thing the self-proclaimed experts on here agree on is it was the other guys fault. Funny thing is they are correct.

shucks

The world is bigger than this Comment section.

Real experts also agree on who the quilty party is.

Fromthe419

So Clinton passing the Modernization Banking Act didn't have a hand in this 4shizzle. I say both parties have a hand in this, the bankers who support both parties bought and paid for this legislation and it took them a mere 8 years to nuke the economy. You can believe the Democratic leadership is your friend and cares about you, but I have come to the realization that neither party care for any of us, they care about getting re-elected and bow to their masters (Banksters and Multi-National Corporations). I do believe the next bubble will occur under Obama's watch, but it doesn't matter who is in office, monetary policy has consequences.

shucks

"I do believe the next bubble will occur under Obama's watch..."

You do huh? Just because contago says so?
What "bubble" are you speaking of?

"...but it doesn't matter who is in office"

No, you're wrong.
Democratic monetary policys leave America in the black.
Republicans leave America in a big mess mess

Contango

Re: "Democratic monetary policys (SP) leave America in the black."

How so?

Contango

Re: "Republicans leave America in a big mess mess"

"Mess, mess"? :)

Fromthe419

@4shizzle are you watching CNBC? The next bubble is beginning right now. There is a global market meltdown beginning to happen right now. I'll admit I didn't think it would happen this soon, but the 10Y is up over 100 basis points in the past month and a half. Stocks futures are down, oil is down, precious metals are down. As the 10Y rises financing our debt will become more difficult, imagine if it gets to 5 percent, the interest alone on the 17T we owe will eat up most of the revenue our government brings in.

shucks

Helloooooo?... I'm talking about America?

Fromthe419

I never said it was Obama's fault, I said it was the fault of monetary policy which is controlled by the Federal Reserve, which is independent of either political party.

shucks

Yeah, I changed it.

Fromthe419

RE: Democratic monetary policys leave America in the black.

The Fed controls monetary policy, neither party controls our monetary policy, Congress gave up that responsibility in 1913 with the Federal Reserve Act. Banksters run it, 4shizzle, answer me this...do you know how a dollar is created? I'm not joking, can you tell me how money comes into existence.

shucks

Do you want to quibble like the other "financial genius"?
What party borrows and spends and doesn't want to pay taxes?

Answer this-
What media of currency will you turn your gold and silver into?

Fromthe419

Both parties spend and borrow, you really think Clinton balanced the budget? Social Security and Military were excluded from his budgets, look it up. I am not defending either party. I've decided to take a neutral approach to politics, neither party is looking out for you and me. As far as what currency I will turn my gold and silver into is the last one standing, gold and silver has never been worth zero, but just about every fiat currency in history has collapsed (just ask the Germans, Brits, Argentinians, etc).

shucks

^^^^^
Poor answer.

How about into a mark?

Fromthe419

Are you referring to the German currency in WWII? The Germans got paid twice a day during the war because the cost of a cup of coffee changed twice a day...LOL. Seriously 4shizzle, we are at a very interesting time as far as monetary policy is concerned, never in history has Central Banks been on a printing spree like this. You can bash me, Contango or anyone you want but you can not deny that this experiment in monetary policy will have unknown (for now) consequences.

shucks

Mark of the Beast, that is.
You WON'T be able to use your precious gold, silver, "fiat" money without it.

Fromthe419

Mark of the Beast, that is.

I'm not sure what you meant, but if you are saying that the creation of money as debt to the public is bad then we are in total agreement. I've always been of the belief that money should be created for the general good of the population. That's why I have been bashing Nixon for taking us out of the Bretton Woods agreement. If you look at our deficit spending since 1971 it has been out of control, the loss of control was because our currency in a is sense worthless. Without the constraint of gold on hand to back it up, they can print and devalue and you and I end up working harder for less.

Contango

Re: "it doesn't matter who is in office, monetary policy has consequences."

Fed Chair Volcker hiked interest rates - early 1980s Recession.

Fed Chair Greenspan hiked interest rates - 2000 Tech Wreck

Fed Chair Bernanke hiked interest rates - 2008 Financial Crisis.

Mr. Bernanke has been fighting DEFLATION.

Eventually, unless the next Fed Chairman can pull a magic act, all this money printing will cause INFLATION.

U.S. 10 yr. at 2.63% this morning. The "bubble" in bonds is bursting.

"Don't fight the Fed," tends to be good advice.

Laszlo Birinyi believes that stocks are headed for a break-out.

When this guy talks - I listen.

http://www.bloomberg.com/news/20...

Contango

Re: "who the quilty party is."

"Quilty party"?

Is that a get-together for making a quilt? :)

Fromthe419

Maybe it is a new third party that will challenge the D and R parties in the next election. Maybe the Quilty Party will end the Fed :)

shucks

Moderators have removed this comment because it contained Off-topic comments.

Contango

Re: "I should take YOUR advice ?"

Never personally gave YOU advice and never would. You’re too financially ignorant.

Enjoy trying to survive on the crumbs that the govt. and charities will 'hopefully' give you in your old age.

shucks

Moderators have removed this comment because it contained Off-topic comments.

Fromthe419

The best advice I can give for those that have 401k's right now is to call your financial adviser (not your HR person, but the company that controls your 401k) and tell them "you want your investment in cash and to sit on the sideline while the sell off continues." This will protect your investment from losing value and you can tell them to jump back in when the sell off ends. Too many people sit by and watch their retirement erode when a simple phone call can be made and stop the losses.

The Big Dog's back

winnie should be happy with Capitalism/Globalization. One in the same.

KURTje

I'm rich because my health is good. Have many friends that also help if needed. Have most of my own food that I produce. Have reliable transportation that I can maintain & said vehicles are paid for. Don't need no stinkin gold.

Fromthe419

That's a good start, being debt free and having a food source you produce on your own is also very good. Do you can your veggies? I started doing that about 2 years ago (my grandmother taught me how to when I was young). You may not need gold, but in the event of a monetary crisis having a skill that you can barter would be good. I'm not all gloom and doom but there are things going on with our monetary policy that has me concerned. If the 10Y continues to rise and money gets pushed into it and stocks fall there will be more layoffs, more unemployment expenditures, more foreclosures, more inflation, etc. As I said earlier, we are in a very interesting time in history. No one knows the outcome of all of the Central Bank printing, we shall see in the next few years.

shucks

Moderators have removed this comment because it contained Personal information.

shucks

You guys already know- I'm "preaching to the choir".

Contango

Re: "How about into a mark?"

Deutsche Marks don't exist. Euros. :)

http://en.wikipedia.org/wiki/Deu...

You're a financial illiterate.

shucks

You tried to silence my comments again.

Contango

Re: "No one knows the outcome of all of the Central Bank printing, we shall see in the next few years."

A world-wide phenomena with the Fed Resv., the ECB and the BOJ all participating in money printing.

Those who are solely focused on only the U.S. are too narrow in their viewpoint.

The Great Depression was a world-wide phenomena which was precipitated with the failure of Austria's second largest bank.

http://www.businessweek.com/maga...

World-wide patterns of malinvestment are being woven again.

Contango

Re: "...sit on the sideline while the sell off continues."

Market timers tend to buy high and sell low.

IMO, better to have an asset allocation strategy. I use 60/40 - 60% stocks, 40% bonds.

Rebalance when either gets out of whack by 5% or more.

A good investment book:

http://www.amazon.com/Winning-Lo...

Fromthe419

My advice was for people to protect what they have, at least sitting on the sideline in cash prevents a loss, I watched many of my friends have their 401k's drained because they didn't know they could use this option, I agree moving allocation into bonds would be good during a sell off, but as I stated earlier in this tread, if you move them into gov't bonds I doubt the ability of them to pay the principle and interest.

Contango

Re: "...at least sitting on the sideline in cash prevents a loss,"

"Cash" are money markets - short term loans.

Lousy yield, managememt fees and inflation risk.

If you use 'em IMO, use them ONLY for a short-term.

Contango

"17 Signs That Most Americans Will Be Wiped Out By The Coming Economic Collapse":

http://www.zerohedge.com/node/47...

And the "hopium" smoking Obamabots are singing: "Don't Worry, Be Happy." :)

The Big Dog's back

Fool.

JudgeMeNot

Yes you are big dog.

It’s startling sometimes to realize just how

much self-delusion is necessary to make it possible to believe in

someone as inept as Obama.

OBAMA KOOL AID

Relax -- Drink Up -- No Worries

44846GWP

I collect silver in bars and coins, some gold. I agree with Winnie, 5%-10% of your portfolio should be in gold and silver. I bought a one oz. gold coin for $934 in 2008, sold it for $1,718 two years ago, not a bad profit at all. Buy low, sell high. But some silver now, it will go up again.