Friday, June 27, 2014

Happy Friday -- Stephen Colbert Weekend Funny

Watch Stephen Colbert rip apart the soccer conspiracy theorists at Fox Business ...

By the way, here are some charts on that "overwhelming negative" US economy, as Stuart Varney describes it. Have some more. They're pretty easy to find. Here's another one

Have a great weekend

Thursday, June 26, 2014

Ohmergerd, Gold Is Doomed! Oh Wait!

Boy, you couldn't surf between videos of funny cats this morning without hearing about The Doom of Gold all over the internet.  Why? Blame those sadistic fiends in China ...

China Discovers $15 Billion Worth Of Loans Tied To Fake Gold Deals
Spot checks on 25 companies that process bullion, such as jewellers, showed they made a combined profit of more than 900 million yuan by using the bank loans to take advantage of the difference between onshore and offshore interest rates, as well the appreciation of the Chinese currency, according to a report published this week on the National Audit Office's website.
Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals by the end of 2013, the World Gold Council said in April, indicating a big slice of imports has been used to raise funds due to tight credit conditions, rather than to meet consumer demand.
At current prices, that would be worth about $42 billion.
Bad news, eh? Over at, they had slightly different numbers, but, you know. Doom. Destin. Verhängnis. 厄運!

Surely, the professional hand-wringers said, this is the rough hour of gold's doom come round at last! Why, it's enough to make gold-plated A.U. McGold jump out of his golden helicopter without a golden parachute. 

Except, that, you know. It didn't.

(Updated chart)

Is that doom I see before me? Why, fetch the smelling salts as I clutch at my pearls. Oh wait ... I'm underwhelmed.

In fact, that looks like some rather ordinary consolidating after a big run-up.

So maybe, just maybe, this morning's hysteria was just another chance for Wall Street's breathless doom-meisters to slam yet another investment class. 

Here's an idea: if $15 billion worth of Chinese loans are based on gold that doesn't exist, maybe gold that does exist has more value?

Here's another idea: If Germany asks for its gold back from US vaults over a multi-year period -- and then basically just gives up trying to get it back -- maybe there's another problem.

To quote Sprott on the German situation -- and yeah, I'm goin' there, because he has at least as much if not MORE credibility on gold today as Wall Street's paper pushers of record: 

Reparations began last year, which resulted in a pathetically low amount of gold returned to Germany. To date, only 37.5 tonnes made its way home. Sadly to meet their goal, Germany would need to see 87.5 tonnes per year. Clearly, the FED did not have the gold it claimed to have.
Sure, China could stop importing gold, and prices could crash. On the other hand, maybe we're near the beginning of a 20-year trend of rising gold imports into China.

Do what you want in precious metals. Buy gold or don't. Buy miners or don't. I am buying miners, because I see some priced like the earth is swallowing them up.

Whatever you do, don't listen to the fear-mongers.

Monday, June 23, 2014

Gold and Miners Chart Teaser

Here's a teaser from the Investment University column I just turned in for this week. It's a percentage performance chart comparing, gold, the GDX and the GDXJ.

(Updated chart)

4 Rules of Thumb in Oil -- & 2 Pieces of Hard-Earned Wisdom

Rule of Thumb #1: Every 1 cent rise in the price of gasoline sucks a billion dollars worth of spending power from other areas of the economy. That's because rising oil prices are a consumption tax. See below for more.

Rule of Thumb #2: An increase of $10 in the international (Brent) price of oil tends to lead to an increase of 25 cents in the price of gas. This is because America still imports much of its oil, so that's what sets the price at the pump. The rule also states that if you divided the price of oil by 40 and then added 75 cents you’d get pretty close to the national average price of gasoline.

(Updated chart)
To give you real-life examples, if the Brent Crude international oil  benchmark price hits $120, America's national average price of gas will be around $3.75 (that is, $120/40 + $0.75). If Brent crude falls to $100 a barrel, it’s a good guess that gas will head toward $3.25.

Rule of Thumb #3: Every $10 rise in the price of oil cuts 0.2% from GDP growth. Rising energy prices are essentially a consumption tax. All that money we spend at the pump gets diverted from other spending.

Rule of Thumb #4: A change in oil prices will lead to a change 1/10th as large to the Consumer Price Index

With those four rules of thumb in mind, let me share with ou two more pieces of hard-earned wisdom:

When All Speculators Are Bullish, The Easiest Path for Oil Is Down

A piece of Trader Dan's comment on that chart: while the big commercial category is not at a record net short length, they are not far from one. The difference in the short positioning in this market at the current time, compared to when the commercials held their record net short position during August 2013, is that back then, the SWAP DEALERS were actually on the net long side of the market as well. Now those Swap Dealers are net short as well. As a matter of fact, the only category of traders that was net short the crude oil market back then, was those commercials - everyone else, including the swap dealers,  was net long.

Crude Oil was just shy of $112/barrel at that time. It then promptly proceeded to collapse some $20 barrel in the matter of three month's time all the way to $92.
Read the rest from Trader Dan himself.

That said, trying to pick a top in any market can be very expensive. Why? I'll tell you why ...

Market Trends Can Last Longer Than You Believe Is Possible. What's more, bullish moves generally last longer than bearish moves.

Saturday, June 21, 2014

Could Gold Keep Rallying? If So, How Far? CHART

The past two weeks have been quite good for gold. And last week, short-term momentum shifted to the bulls, and on higher-than-usual volume, too.

(Updated chart)

The set-up is a potential inverse head-and-shoulders pattern. RSI is a short-term momentum indicator, on the bottom of the chart. It just gave a "buy" signal this past week.

If, down the road, the inverse H&S pattern works out, this gives us a target of $1,600 on gold.

That's longer-term. Short-term, I think that we'll see gold continue to rally. I think we're going to see a test of the "neckline" of this potential inverse head-and-shoulders pattern.

Now, in Gold & Resource Trader, we've been adding positions to ride this train (in Oxford Resource Explorer, my monthly newsletter, we already held positions, as that service doesn't trade as often or as quickly). The new GRT positions are working out fine. Better than fine.

Are you too late to this gravy train? I don't think so.

The next gold futures settlement is on June 26th. We usually see gold futures sell off into the settlement (you can insert your own joke about market manipulation here) because the market makers don't want to pay off on the bullish gold call options they've been writing.

So, if we get that pullback, that should suck some wind out of gold miners. And that would be a great time to buy, if you dare.

By the way, silver is outperforming gold in this rally, as it usually does.  And silver miners are on fire.

This will not be a straight-up move. And the big question is what happens around that $1,400 area. I recently gave my subscribers a long list of fundamental reasons why I think gold and silver will keep rallying for the next five to six months.  Your reasons, bullish or bearish, will be your own.

Good luck, and good trades


Thursday, June 19, 2014

Gold Miners Make Break-Out Attempt -- Chart

Here's a chart we should all be watching.

So why is this happening?

Well, gold bottomed anyway. You can see my post from last week about that ...

And as for the recent acceleration, well, we can thank Fed Chair Janet Yellen’s speech yesterday.

She said the central bank plans to keep its interest-rate target low for a considerable time after it ends bond-buying. That sent the Dollar Index to the lowest level this month. Since gold is priced in dollars, the two often move in opposite directions.

And here’s yesterday’s FOMC statement: “The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." 

In other words, low rates FOREVER!

To be sure, gold could tuck its wings and swan-dive from here. This market is a mean bitch. But when you get on the right side of it, it can be darned profitable, too.

Monday, June 16, 2014

What's the Fastest Growing Energy Source? You Won't Like the Answer

Coal is now the fastest-growing fossil fuel, with China and India combined accounting for 88% of global growth. Natural gas consumption growth is below average in all regions except for North America.

In fact, Bloomberg tells us that coal's share of world energy demand is at the highest level since 1970. Coal’s share of global energy use reached 30.1%, just below the 32.9% share for crude oil, which lost market share for a 14th consecutive year. 

As for natural gas -- Natural gas consumption rose 1.4% , below the historical average of 2.6%, to account for 23.7% of world primary energy use. 

Natural gas consumption rose 1.4%, below the historical average of 2.6%, to account for 23.7% of world primary energy use. 

Read the rest HERE

Sunday, June 15, 2014

US Energy Production Soars, Boosting Manufacturing -- Charts

The New York Times offers two great charts showing how energy production in America is changing, and how this is affecting US employment.

First, total US energy production is up. Even though coal production is down, nat-gas and oil production is soaring. After ramping up for years, renewables have flat-lined, but that may be temporary.

Second, look at how this has changed employment on a county-by-county level. The energy-rich middle of America is booming.

And it's not just oil-field jobs. Cheap natural gas has been a lifeline for manufacturers struggling to compete with overseas rivals; it has helped revive production in energy-intensive industries like chemicals and plastics.

Read the rest of the story here. 

Friday, June 13, 2014

Will the Gold Rally Continue Next Week? Look at This Chart

Gold had a strong week. And my Gold & Resource Trader subscribers added a new position after banking some gains on non-gold positions. But will this rally continue.

I could get into a long list of fundamentals about gold. But let's stick with a chart that may shed some light on the subject ...
(Updated chart)

Looking at this chart, you can see that gold tends to rally every six months. If gold follows the pattern it set previously, we can expect a rally to the $1,400 area. 

What happens there is hard to predict. I have my reasons for thinking the rally might continue. You'll have to do your own analysis.

Wednesday, June 4, 2014

My Recent Articles on Palladium, Shale, Nickel, Oil

Here are some recent articles I've written.

It's San Andreas' Fault


Last week, the EIA said that it expects to release a new detailed estimate on the recoverable amount of oil from the Monterey Shale in California. You could hear jaws dropping all over the California oil patch when the EIA announced its preliminary findings. According to the EIA’s revised estimates, the Monterey Shale contains only about 600 million barrels of oil. That’s 96% less than the 13.7 billion barrels previously predicted.

In one stroke, the EIA put an end to California Dreamin’ about vast, new oil wealth. The EIA’s revision also slashed America’s total recoverable shale oil estimate by two-thirds. That’s because the Monterey Shale represents a huge part of America’s undeveloped shale oil deposits.

“Not all reserves are created equal,” EIA Administrator Adam Sieminski told reporters at the Financial Times and Energy Intelligence Oil & Gas Summit in New York. “It just turned out it’s harder to frack that reserve and get it out of the ground.”

It’s true things look bad. However, the EIA’s latest report is not the last word on this topic. Let’s take a brief look at the challenges facing drillers in the Monterey Shale, why the EIA changed its mind on how much oil can be recovered… and why I think they’ll change their minds AGAIN down the road.

The Rodney Dangerfield of Metals Gets Respect


Palladium recently jumped to $830 an ounce. Soon, it could challenge its 2011 highs just above $860. And once it gets above that, I think we’ll easily see another 10% rally. But how about longer term?

So let’s take a look at three factors that are greatly affecting the palladium supply and demand picture.

The Nickel Supply Squeeze Is Just Getting Started


... the supply/demand squeeze powering nickel's surge is likely to get stronger.
The biggest user of nickel is China. Nickel is used to make stainless steel, and China makes a lot of it. Stockpiles of nickel in China are falling. According to Deutsche Bank, China's nickel stockpile is now down to one month's supply, a drop of 26% in just a month.

A big supply crunch is coming for China.

What's more, the global nickel market will swing to a deficit of 132,200 tons next year from a surplus of 13,800 tons this year, according to Citigroup.

What will that do to prices? The price of nickel was recently $8.91 per pound, or $19,615 per metric ton. Citi forecasts nickel prices to rise to more than $30,000 per metric ton next year. That's a rise of more than 50%!

The Oil Boom Has Reached a Tipping Point


U.S. exports of gasoline, diesel and other petroleum products jumped to a record 4.3 million barrels per day (bpd) at the end of last year, according to the Energy Information Administration (EIA). That's more than twice the 2.1 million bpd of petroleum products that the U.S. imported.

As a result, total U.S. net imports of energy declined last year to their lowest level in more than 20 years!