GOLD FORETOLD THE COMMODITIES DIP
By Tom McClellan – McClellan Market Report
May’s big drop in commodities unfolded with a lot of help from the CME Group, which upped the margin requirements on silver repeatedly. And it led hedge funds and other portfolios to start selling other commodities to meet margin calls.
It might seem like this selloff was solely caused by the intervention of the exchange officials adjusting the rules, but it arrives right on schedule according to the leading indication given by gold prices. The way it works is that gold prices travel down the road first, and then commodities follow in the same footsteps about 4 months later.
The price plot of gold in this week’s chart is shifted forward by 80 trading days to reveal how its patterns get repeated in the CRB Index. This effect also works if you use the old CRB Index, now called the Continuous Commodity Index (CCI). The dip underway in the CRB Index matches one that occurred in gold back in January, and even the triple top pattern in gold got repeated by the CRB Index.
It is worth noting that the 80 trading day offset pattern used in this chart is somewhat approximate. At other times, a lag time of 75 days seems to work better. This does not change the inherent truth of the relationship. But it does suggest that we should not chisel that May 24 date into stone. The predictive relationship is not always that precise.
The significance of this story is not just that there is a commodities price decline occurring on schedule in May. Gold moved higher out of that bottom last January, and has zoomed to higher highs. That same script should be in store for commodities prices as we head into summer. But before then, a lot more people have to get convinced that commodities prices cannot ever again go higher, and that we are headed for deflation. Once that is accomplished (around May 24), the CRB Index should follow gold’s path toward higher highs this summer.
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Funny stuff. He drops an 80 day lag on gold (or 75), and presto – he has the answer key the the global commodities market.
Literally dangerous for your financial health. People pay for this service?
Data fitting with a capital D.
THats exactly, what i wanted to post in ” is the commodity boom over?” post.
When everyone tinks the boom is over, its going to continue, like we had the sharp fall of now when noone expected it. Maybe only a few who watch the COT closely bu then again timing was very difficult.
THus i expect further FED accomodation, that noone is expecting right now.
Two thoughts:
1. Scharfy nailed it.
2. If the chart is valid, does this indicate that gold is the world’s real currency?
while it sounds like ougie-board stuff his graphs DO line up.
i realize correlation does not neccessarily imply causation, but it is worth considering….look we consider the ECRI n its a black-box.
graph also indicates this is a commodity correction, not a dumpster dive.
geez, this was lined up like a roadmap, afterall…..sell in may n go…….QE2 ending in june…..summer historically bad for commods
hey, sost, there’s alot of us planning on QEX–its all they can do…..congress in no mood to make TPC notes from electrons……i say Q1 GDP reported at 1.8 gets revised down……
this is all along way from over.
This is so f**cked it’s unbelievable. Of course, nothing is to be unexpected.
They change the damn margin rules daily!!!! Hiking left and right.
Guess what fellas, soon enough there will be somebody investing not on margin, it’s happening right now, the rest is laughable.
tbills the biggest bubble ever. yen notes as well.
keep piling er in though, cuz this time it’s different!
This is some pretty haphazard analysis. If you tinker with the time period you get a plethora of idea lags. Try a 2 year series… 0 day ideal lag.
I don’t understand this statement: …”But before then, a lot more people have to get convinced that commodities prices cannot ever again go higher, and that we are headed for deflation.”
All this is supposed to happen before summer?
BUY COMMODITIES!
The world has a serious supply and demand imbalance for natural resources. Plus, the money printing is acting as icing on the cake.
Remember, commodities have been rallying since 2001, so QE is not the only factor at play here. The world’s oil production is about to peak – get ready!!!
LOAD UP THE TRUCK
bingo!!
there’s always subsitution innovation issues, but pretty much, that’s my read as well. Comex can’t hike margins to infinity…
There is NO substitute for oil.
All the world’s pseudo intellectual economists will get their back side kicked when they realise that oil’s supply is not based on price but on geology.
Then, this crazy obsession with endless growth will end and there will be an outright panic in the world’s energy markets.
Peak Oil cometh – get ready and prepare now.