Metals melt, financial markets drop

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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.'

4shizzle

"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.

4shizzle

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.

4shizzle

"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...

4shizzle

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. :)

4shizzle

"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.

4shizzle

This a case of the blind following the blowhard.

Contango

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

4shizzle

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

In my ex's bank account : )

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