Commodities Reporter

John Brynjolffson 5/16

admin — Sat, 19 May 2012 05:46:14 +0000

John Brynjolfsson, CFA, is the founder & managing director of Armored Wolf. He oversees all investment activity at Armored Wolf. He is an expert in the area of managing alternative real assets; and his experience includes commodities, global inflation-linked bonds, event-linked catastrophe bonds, asset allocation and risk management.

A popular and provocative communicator, Mr. Brynjolfsson is a frequent guest on CNBC, Bloomberg TV and PBS’s Wealth Track; has been quoted in The New York Times and the Wall Street Journal and featured in Fortune; is a member of industry advisory committees; and has testified before the House Financial Services Committee as an expert on catastrophic risk transfer.

Mr. Brynjolfsson is co-author of Inflation-Protection Bonds and co-editor of The Handbook of Inflation-Indexed Bonds. He has 19 years of investment experience and holds a bachelor’s degree in physics and mathematics from Columbia College and a master’s degree in finance and economics from the MIT Sloan School of Management.

Written by Bullion Vault

Two Down, One to Go

admin — Fri, 18 May 2012 22:34:21 +0000

It was probably the easiest prediction we’ve made in the last decade…

When news came out earlier this week that North Dakota supplanted Alaska as our second-largest oil producing state, we couldn’t help but smile and pat ourselves on the back.

North Dakota has rocketed past our largest oil producers, California and Alaska, in just a few years by developing their shale resources.

We’ve witnessed oil fever overtake the Midwest since 2008.

Today there are 209 drilling rigs plugging away beneath North Dakota’s soil.

But it’s more than just the Bakken that has propelled North Dakota past the Last Frontier State in oil production…

On Alaska’s North Slope — where 97% of the state’s crude output is located — production has been in a veritable free fall:

When the Prudhoe Bay oil field peaked in 1979 at 1.5 million barrels/day, it was the beginning of the end.

Last year, the state pumped out an average of 562,000 barrels per day.

In March, more than 575,000 bbls per day flowed out of North Dakota’s portion of the Bakken.

Unfortunately for North Dakota’s oilmen, next up on the list is Texas. And don’t expect Texas to fall easily — they’re one of the few producers left in the country that’s also expected to increase production.

Last year we touched on just a few of the reasons why Texas’ oil future was brighter than most.

If you want a good idea of how important these two states are to our domestic supply, keep this in mind: The Bakken, the Eagle Ford in southern Texas, and the Permian Basin in west Texas make up 40% of our onshore production.

Of course, when you toss in the various capacity issues that come as a result of the rapid growth in the Bakken, we’re looking at years — decades, even — before North Dakota ascends to the top spot.

But you don’t have to pick a “winning” side in this fight…

According to the U.S. Department of Energy, our domestic production is expected to climb as high as 6.7 million barrels per day by 2020 — and stay above 6 million barrels per day through 2035.

In other words, we’ll need an extra half million barrels per day over the next eight years.

And it’s not hard to guess where we’ll find that new supply…

North Dakota alone is projected to top one million barrels per day within the next five years, which would add at least 500,000 bbls/day to the mix. In 2011, Texas increased production by nearly 300,000 bbls per day.

For us, this is just the beginning.

Enjoy your weekend,

Keith Kohl
Editor, Energy and Capital

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Two Down, One to Go originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Is the Gold Price Manipulated?

admin — Fri, 18 May 2012 19:01:14 +0000

Doug Casey gives his view on the idea that governments and banks are colluding to control the Gold Price…

Written by Bullion Vault

Is Major Decline in the Precious Metals Stocks Underway?

admin — Fri, 18 May 2012 18:00:59 +0000

Based on the May 18th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

All eyes are on Greece which is heading toward national elections six weeks after the last vote. Many feel that a Greek euro exit would be a chance to cauterize a festering wound and move on. There are also those that feel that Greece could be the first of several dominoes to fall, much larger economies such as Spain, Italy, for example.

Meanwhile, Spain’s 10-year borrowing costs had hit as much as 6.5 per cent on Wednesday with the risk of the country paying astronomical prices to borrow in the future. Spain has now issued more than half of its total debt needed for this year, yet concerns that Madrid will struggle to meet its deficit reduction targets for this year and next have pushed the risk premium between German and Spanish 10-year bonds to the highest in the history of the single currency.

What is the most likely scenario if Greece exits the Eurozone? It isn’t pretty for Greece.

The Greek government (if one is formed soon) could legislate that all corporate and personal savings in Greek banks will be denominated in Drachma. The Drachma would swoon so that almost immediately Greek consumers will need more Drachmas to buy one Euro.

A run on the banks would be most likely followed by a run on the Drachma, with Greeks constantly converting their drachmas into Euros, or other currency. The drachma constantly plunging against foreign currencies could cause a new crisis of hyperinflation.

Of course, there are examples of other countries that have left what’s effectively a common currency zone without suffering hyperinflation. A Greek exit could stimulate the same growth dynamic that’s recharged Iceland and Argentina. Greece will once again become a cheap country, attracting tourism and with attractive exports.

Having briefly discussed the political and economic events, let’s move on to today’s essay technical part. Before analyzing the recent developments in the mining stocks, let’s see what’s happening in the general stock market (charts courtesy by http://stockcharts.com.).

In the long-term S&P 500 Index chart (related ETF: SPY), we see that prices moved lower this week and are at the long-term support line. Last week we wrote the following:

Taking a relative comparison to the similar rally that we saw in the second half of 2010 with the current price patterns, it seems quite possible that we could have simply seen a correction with a rally now to follow.

This is the long-term support line based on previous highs and if it holds the decline, higher prices could be seen for the short term.

If the support line is broken, however, significantly lower prices are likely. In other words, stocks would be expected to begin a medium-term decline. Since the support line was not broken so far, the above picture is bullish. However, the financial sector provides us with a very different signal.

In the Broker Dealer Index chart (a proxy for the financial sector), we see that the financials are below the lowest Fibonacci retracement level based on the previous rally. Since they have broken below it, further weakness and additional moves to the downside appear likely.

So, all in all, the situation in the general stock market is rather mixed – a bounce or breakdown will tell us what type of medium-term move we should expect: a rally or a decline.

This is what makes the situation similar to what is seen in the HUI Index (proxy for gold stocks; related ETF: GDX)

In this week’s long-term HUI Index chart (if you are reading this essay on sunshineprofits.com, you may click the above chart to enlarge), we see that the current decline has been more significant than previous ones. Only the decline of 2008 was greater. At this point we can no longer say that the current decline is very similar to other declines and that it’s not similar to the 2008 one. This is a bearish development and the RSI levels also suggest that a major decline might be underway. This is concerning, because once the RSI level moved below the thick horizontal line in the chart, downside momentum has increased in the past.

It now seems that after a sharp consolidation, further similarities to the 2008 decline may be seen. This is something which has become apparent only in the past few days. Based on the RSI level and the HUI confirmed move below the 395 level, the outlook here has changed considerably this week.

Summing up, the continuation of the decline in the general stock market appears unlikely based on the long-term support line. However, since we have bearish signals from the financial sector, the situation is mixed for stocks and there are no specific implications for the precious metals sector at this time. The situation in mining stocks is mixed as well (even though miners bounced on Thursday and Friday) as the recent decline make a repeat of 2008 more probable than was the case previously.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It’s free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
www.SunshineProfits.com

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All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Written by Bullion Vault

Late Surge for Gold Prices

admin — Fri, 18 May 2012 17:48:26 +0000

Gold Prices rally after hitting 2012 low…

Written by Bullion Vault

Bottom in, but is it September 2008 or October 2008?

admin — Fri, 18 May 2012 17:37:39 +0000

We began the week by making a ballsy prediction about the precious metals complex. We believed a major bottom could happen this week. In the wake of the European debt crisis and potential “credit events,” the precious metals became extremely oversold based on a number of metrics. Technically, we saw that Gold and Silver were nearing the December lows which produced a good rally. The gold stocks were nearing the 50% retracement of their 2008-2011 bull move. The combination of an extreme oversold condition and technical support usually produces bottoms. It wasn’t a difficult call but putting it on paper was. With the low in, the question now becomes, is this an interim bottom or will it be the major low we initially expected?

In this piece we are going to look at the equities because they lead the metals at key turning points. This was the case in 2007-2008, the end of 2008 and most recently, in 2011. Predictably, the mining equities will lead the next rebound.

Below we show a weekly chart of GDX. GDX was down 9 of the last 11 weeks and until yesterday, 10 of the last 12. The market has formed a very bullish reversal candlestick at the 50% retracement and on the highest weekly volume.

Next we show GDXJ, the “juniors” though it is comprised of mid-tier producers and larger explorers and developers. GDXJ has declined in 13 of the past 16 weeks. The market plunged at the start of the week but has now reversed most of the losses. The volume has been massive this week. Look at the tail on that candlestick!

Ok Jordan, those charts are great and all, but how do they compare to 2008? First, let’s compare the breadth which is a fancy word for how much of the sector is going up or down. One breadth indicator anyone can use is the bullish percent index (bpi) which shows the percentage of stocks on a Point & Figure buy signal.

In the chart below we compare 2008 and 2012 using the BPI. During the initial respite in August and September of 2008, the BPI (using a 5-day moving average) bottomed at 32%. Presently, the BPI is at 11%. At the ultimate low in 2008, the BPI was at 5%.

Next I want to compare the current price action to the price action in 2008. Presently, the gold stocks put in a great weekly reversal, at the 50% retracement after declining in nine of the past 11 weeks. In the summer of 2008, the gold stocks attempted to rally after declining for five straight weeks. The HUI formed a bullish hammer at the 50% retracement (2000-2008) after declining in seven of the past eight weeks (with one week being a push).

Judging from the technicals and recent sentiment data (presented in our Monday editorial), it is clear that the gold stocks are currently more oversold and much closer to a major bottom relative to the failed recovery in the summer of 2008. Breadth is far more oversold and the market has been in decline for several more weeks. Moreover, in our previous update we noted how sentiment indicators were nearing October 2008 levels. On Wednesday, the daily sentiment index for Gold reached 5% bulls. Assets in the Rydex Fund, which were $350 Million at one point, fell in three days from $103 Million to $91 Million.

We can form a conclusion based on the technicals and sentiment but developing events can can have an unforeseen and unpredictable impact. There are two fundamental forces that will impact the charts. First, we need to consider the ongoing turmoil in Europe and how and when it could negatively impact the market. Second, we have to juxtapose that with the inevitable monetary response which will be very bullish for Gold and gold shares. At the same time, we need to weigh those events with the market’s response. Currently, the gold shares have begun a predictable rebound, and this rebound will go a long way in confirming or not confirming our previous prediction. If you’d be interested in professional guidance along the way, then we invite you to learn more about our service.

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

Written by Bullion Vault

Good Times for the Dollar

admin — Fri, 18 May 2012 16:57:38 +0000

The Dollar is ugly. But look at the competition…

Written by Bullion Vault

“Counterattack by Bulls” Sets Up Gold for Weekly Gain, Greek “Can of Worms” Could Be “Messy” for Investors

admin — Fri, 18 May 2012 16:28:34 +0000

“Counterattack by Bulls” Sets Up Gold for Weekly Gain, Greek “Can of Worms” Could Be “Messy” for Investors

WHOLESALE MARKET gold prices climbed as high as $1594 an ounce during Monday morning’s London trading, jumping 1.5% in the first two hours, while Eurozone stocks looked to have stemmed four days of losses despite Greece and Spain seeing negative ratings decisions.

A day earlier, Dollar prices to buy gold jumped 2% in two hours during Thursday’s US trading.

“The bulls staged a big counterattack,” says the latest technical analysis note from Scotia Mocatta, a bullion bank.

“In terms of the longer-term technical [though], the picture is still bearish so long as we remain below last week’s high at $1642.”

On the currency markets, the Euro recovered some ground against the Dollar this morning, after sinking to a four-month low in Friday’s Asian session, during which time gold prices held most of the previous day’s gains.

Heading into the weekend, gold prices looked set for a slight weekly gain by Friday lunchtime in London – having risen 4% from Wednesday’s low.

“We’d like the market to hold at $1,550-$1,560,” says Nick Trenethan, Singapore-based senior metals strategist at ANZ .

“If it does that, then I think there’s a fair chance we could continue higher towards the $1,600 level, perhaps re-establishing the range there…but if the headlines out of Europe continue poorly, we may retest the lows.”

Over in India, the world’s largest source of gold demand in 2011, “demand has come down [from Thursday]” said Ketan Shroff, director at Mumbai-based wholesaler Pushpak Bullion, speaking this morning.

“People were waiting for a correction and all of a sudden prices went up yesterday. If prices go up further then we may see more fall in demand.”

By contrast, the world’s largest gold ETF, the SPDR Gold Trust (GLD), added 2.1 tonnes to its gold bullion holdings Thursday, taking them to their highest level this month at 1278.7 tonnes.

Silver prices meantime rallied as high as $28.66 an ounce this morning – though they remained 2% down on the week by Friday lunchtime.

Here in Europe meantime, the European Commission and European Central Bank are planning for scenarios whereby Greece leaves the Euro, according to European Union trade commissioner Karel De Gucht.

“A year and a half ago there maybe was a risk of a domino effect,” De Gucht tells Belgian Dutch-language newspaper De Standaard.

“[But] a Greek exit [now] does not mean the end of the Euro, as some claim.”

Ratings agency Fitch however cut Greece’s credit rating by a further two notches Thursday evening, reflecting “the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union.”

Fellow ratings agency Moody’s last night downgraded 16 Spanish banks, including the Eurozone’s biggest bank Santander, following its downgrade of 26 Italian banks on Monday.

“Amidst the ongoing Euro area debt crisis, the Spanish government’s rising budget deficit and the renewed recession, sovereign creditworthiness has declined,” said a Moody’s statement.

Despite the downgrades, shares in Spanish banks were among the biggest gainers in Friday morning’s trading, with Bankia – which was partly nationalized last week – seeing its shares bounce by over 30% at one point following losses in recent days.

Spain’s government has hired Goldman Sachs to undertake an independent valuation of Bankia, according to Spanish newspaper Expansion. Spain is also expected to name independent auditors later today to determine how big a bailout the banking sector needs.

Yields on 10-Year Spanish bonds meantime eased slightly this morning, though remained above 6%.

“Volumes are light,” reports one trader, “just bits and pieces on the screens…there’s a [potential] can of worms to be opened [if Greece leaves the Euro]and it can become very messy and people don’t want to be too involved.”

As gold spiked this morning, yields on German 10-year bunds fell to fresh all-time lows below 1.4% at one point, as investors pushed up the price of German government debt.

“To see a return of gold reacting positively to macro stresses is indeed refreshing,” says a note from Swiss investment bank UBS.

“But it is still far too early to make any firm conclusions from here that gold has indeed turned the corner…[gold] will have to consistently exhibit its safe haven properties, and do so for some time to attract strategic buying.”

Gold prices by Friday lunchtime remained 3.3% down from their levels on May 6, when Greek elections failed to produce a government.

European stock markets managed to pare early losses on Friday, with the Euro Stoxx 50 Index – which tracks blue-chip Eurozone stocks – showing a gain on the day by lunchtime following four straight days of losses. Here in London however the FTSE was still showing a 0.8% daily fall as we headed towards US open.

Across the Atlantic, stock market futures trading suggested the S&P 500 would open higher Friday, with Facebook set for its first day’s trading.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Written by Bullion Vault

Europe: Another Step on the Road to Farcedom

admin — Fri, 18 May 2012 16:06:03 +0000

The situation in Europe seems to get sillier by the day…

Written by Bullion Vault

Marcellus Boom Brings Rock Bands, Directors

admin — Fri, 18 May 2012 16:04:34 +0000

A very interesting story broke this week from Frackland.

Indie rock band Here We Go Magic was getting on Route 70 in eastern Ohio when they passed a hitchhiker.

Bass guitarist Jen Turner wanted to pick him up, but a sound guy convinced the band to turn back around.

And boy, are they glad they did.

Frackin’ and Hitchin’

But it’s the reason the band was on the road in this particular area that’s most fascinating…

It was because of the major hydraulic fracturing operations now under way in southwestern Pennsylvania.

When you’re on the road playing shows, you don’t book accommodations ahead of time.

And the band learned the hard way that the fracking boom is so massive, workers have occupied all vacant motel rooms.

Having not booked ahead of time, the band had to keep driving until they reached Ohio, where they finally found a Days Inn with vacancy at four in the morning.

There are about 5,000 wells on top of the Marcellus Formation in that part of Pennsylvania.

Nearly 2,500 new ones are being added each year, with some estimates saying there will be more than 100,000 there in the next few decades.

There will be many more in the rest of the formation that spans from West Virginia to New York.

This one formation alone supplied 6% of our natural gas last year.

That figure will more than double by 2020.

Five years ago drilling companies started showing up, offering to lease the land below the homes of ordinary citizens…

People who, until then, had an average income of $18,285.

Now they’re leasing their land for hundreds of thousands of dollars.

Bill Hartley, a 63-year-old cattle farmer, leased his farm for more than $110,000. He gets a 12.5% royalty on any gas produced there.

That’s not why iconic cult film director John Waters of Pink Flamingo and Hairspray fame was thumbing down an I70 on-ramp when the band’s van flew by.

But it’s part of the reason he got picked up.

If it hadn’t been for the fracking boom, that van wouldn’t have been there.

More than Marcellus

Current fracking operations cover much more than just a corner of Pennsylvania.

There are pockets of shale formations spanning the entire continent.

Trillions in capital are being moved around — going to landowners, pipeline operators, drillers, truckers, water cleaners, and more.

We’ve come to call this outcropping of gas fields the ‘Ring of Fire.’

But be careful when investing. It’s easy to get burned.

With natural gas prices at decade lows, not all companies are making money…

~~nat_gas2~~

~~nicks_signoff~~

Marcellus Boom Brings Rock Bands, Directors originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.