Commodities tipped to collapse

What do you mean ? Are you talking about the fall on wall street. Not a bad thing it you tell me

wayneL said:

...or a collapsing US dollar.

http://www.futuresource.com/charts/charts.jsp?s=DX1!&o=&a=D&z=800x550&d=LOW&b=bar&st=

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Fantastic---The richer we become and there is ONLY 23 Million of us.

....financed by the biggest debt bubble in history.

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If your talking US or any other country debt then Duc's response re % GDP calls it pretty plainly.
Talking in percentages brings it into real terms.

If it costs the US 3.2% in GDP to service debt thats like a $1000 a week PAYE
taxpayer needing $32/week to service his debt.

If your talking of houshold debt then the US is still powering and needing interest rate hikes to pull it up and they are STILL lower than ours!

Any pullbacks or slowings are a good thing.

Fab said:

What do you mean ? Are you talking about the fall on wall street. Not a bad thing it you tell me

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I'm talking about the opposing forces that will be at work today on the market. Commodities rising to ever increasing levels, verses the big drop on US due to increasing inflation [due to increasing commodities]. Cheers.

one rarely hears mentioned the reasoning of the 70s of why POG went up

it was commonly put down to @ that time to Pres Nixon removing the the
$us from the gold standard

the Yanks simply had built up to much debt to pay for Vietnam
seems their pulling the same stunt now !

exccept for housing we haven't seen real inflation in Oz for around 15yrs I suppose
but when you start seeing retailers building up inventories 6-12 months ahead
of the time they are due to be sold, you will Know it's coming big time

we have had inflation during a recesion --- shortage of supplies -- hence higher prices -- but projects put on hold due to shortages --- so unemployment



Coyotte

Everywhere I look I'm seeing more and more evidence of inflation of business input costs. With retail prices of many items having not risen greatly yet I think there could well be a lot of inflation gradually working its way through the system that hasn't hit the checkouts (yet).

Just a few things I noticed over the past week.

If filled up a company vehicle with petrol. It was virtually empty but $106 just to fill it. Nothing unusual, a Ford Falcon utility.

I don't smoke anymore but whilst waiting at the counter in the service station I noted that cigarettes are up about 170% in the past 11 years.

Household bottled gas (delivered) price is up 75% in the past 8 years.

Various pipe fittings we buy at work are up around 300% in the past 5 years. We keep getting faxes every month or two about yet another (usually about 7% at a time) increase in the cost of the pipe itself.

A letter landed on my desk saying that electrical cable prices (wholesale) just went up 13%.

Ordered some custom made plastic products from a local supplier and found that prices were up about 22% compared to the last order (January this year).

An independent inquiry into fares has recommended that bus fares in Hobart need to be incresed by 50% because the CPI increases in the past just haven't been adequate to cover costs.

House prices have more than doubled in the past few years in most cities.

So it looks to me like trying to contain inflation is becomming a bit like fixing a worn out hose. Fix one leak and a bubble appears somewhere else. That bursts, you fix it and then another one appears. The only way to win that game is to get serious and replace the hose altogether. In the context of inflation, the only way to contain it ultimately is to stop inflating.

coyotte said:

post on Kitco last week 9.5%
(US 8%)

Coyotte

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thank you kind sir.
That figure was alot higher than I would have guessed!

"Last person out shuts the door", more likely, "the door is shut very early on, locking most in", as "log of cash" moves out suddenly.

http://www.iht.com/articles/2006/04/30/business/web.0430oil.php

coyotte said:

From what I remember it was it's generally a situation very similar to now (should have kept records )

Building Boom comes off the boil

Rising interest rates -- when inflation is rising due to higher costs and NOT due to higher consumer demand

Shortage of materials --puts projects on hold --leads to rising unemployment ---onto falling property values ---hence a surplus of materials

dueing the boom & bust of the 70s you could not even buy nails @ one stage


BUT then we didn't have CHINA


Cheers
Coyotte

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Thanks Wylie. It would be good to know bullmarket's thoughts as well- he's been around a while and has a bit of a cautious streak (I think).

http://www.telegraph.co.uk/money/ma...d=242&sSheet=/money/2006/05/13/ixcitytop.html

Banks face vast losses in copper mayhem
By Ambrose Evans-Pritchard (Filed: 13/05/2006)

The spike in copper prices over recent weeks has left a group of banks and operators on the London Metal Exchange (LME) nursing vast losses, raising concerns about the stability of the commodities market.

Simon Heale unexpectedly said that he would be stepping down by the end of the year
The banks have been caught out by a sudden widening in the gap between the price of three-month futures and that of long-term futures, for December 2010 or April 2011.

"The dramatic differential we have seen over the past six weeks has cost them a huge amount of money," said a market source. "The bigger players can absorb the losses but smaller operators have nowhere to hide."

Copper surged this week to an all-time high of $8,875 a tonne, rising almost 10pc on Thursday. Yet futures prices for April 2011 are just $3,778 a tonne.

Barclays Capital denied reports that it faced losses of £500m on copper trades, saying that it would have issued a statement if such claims were true.

Banks help to finance the LME's $3,000bn trades each year, often taking on long-term hedges from metal producers, which they cover by selling short-term futures. If the two suddenly diverge, it plays havoc with their books.

Adding to the intrigue, the LME's chief executive, Simon Heale, unexpectedly said on Thursday that he would be stepping down by the end of the year. His spokesman denied that there was any link to the metals mayhem this week, insisting that

Mr Heale wished to spend more time with his family.

Copper has doubled in price this year even though industrial demand is flat.

"This is fairyland," said Richard Elman, head of the Noble Group. "We have

never seen such a disconnect between reality and pricing

of raw materials. The long-term story is sound but the short-term froth is patently frightening."

William Adams, an analyst at BaseMetals.com, said demand for copper tubes was collapsing as producers switched to PVC plastics. The market in Germany has halved from 90,000 to 45,000 tonnes. "There's a very rapid switch from copper. When it turns, copper could easily drop $1,000 a tonne in one day," he said.

David Threlkeld, a veteran copper trader, said the market had been "out of control" for months, allowing speculators to run roughshod over industrial producers and users. "The LME has been seduced by hedge funds, [which have] pushed prices to levels unsupported by fundamentals. There's a vacuum below and the crash could set off a chain of margin calls running through the whole commodities sector. We've got a crisis on our hands and it is a lot bigger than copper," he said.

Falls on the LSE and NYSE may move the ASX into the red, mining and oil stocks were the hardest hit. Reports from China, that they require less steel and other metals than forecast, caused the falls. Reports in the London Evening Standard outlining the position of speculators, particularly in copper, added to the market wobble.

HMMmmmmm.... dont these comments sound familiar!

Andrew Bell, head of research and strategy at Rensburg Sheppards, said: "It's beginning to feel like it's five minutes to midnight, and for commodity investors there's a danger that everything turns to pumpkins and mice."

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From the Telegraph

Looks like the Chinese are trying to get the price down to me, its a juggernaut and it was almost out of control. Looks like they have a driver in it now but its still travalling in the outside lane at a reckless speed and its still got full tanks.

brerwallabi said:

Looks like the Chinese are trying to get the price down to me, its a juggernaut and it was almost out of control. Looks like they have a driver in it now but its still travalling in the outside lane at a reckless speed and its still got full tanks.

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Yep
Consumers have to buy physical, so are propping up the prices with the funds at the moment.
These same consumers will need to pass costs on finished products to retailers, who pass it on to us.
Consumer price inflation cannot now be contained as the high cost of commodities has been too enduring.
Zinc, copper and nickel are in such tight supply that irrespective of any short term retrace, there will be a rush for market offtake - so dips are highly likely to be backfilled quickly by frantic consumers.
There is no present end in sight to this market tightness: Indeed, right now the screws are tightening.
About the only thing different to a year ago is that the commodity bull is a year older and metals prices are so much higher.
The nay sayers simply can't conceive of a bull run built on such high levels of speculation: Odd, that seems to have driven gold north for 5 years now!
The nay sayers point to rising metal production: And the evidence they offer is?
Indeed, evidence is mounting that in many cases mine output in the previous year was higher than it will be this year.
Why?
Last year mines took the opportunity to optimise output by mining best grades. So even by pulling more ore from the ground this year, metal production will be less because the head grades are poorer.
How many newspapers said that?
This is a game where staying ahead is about being well informed.
If you want to be well informed on commodities, stop reading the newspapers.
Start going to the major producers' websites and review their "market presentations".
The BHP's of the world are committing billions of dollars on capacity expansion, infrastructure and exploration: Read why.
Then think about it.
Do you reckon BHP makes such huge commitments without doing an incredible amount of research into future demand?
They can't afford to get it wrong because their performance bonus payments go down the gurgler.
If they do get it wrong it will be from an event "from left field", something quite unlikely, possibly "unthinkable" (like the US economy going into melt down).
Tomorrow and the next day (possibly) represent buy opportunities and my bids are in.

After watching several views on Bloomberg TV, it is a case of "you pays your money and takes your choice". One view suggests that China may consider raising its gold reserves and another, that several countries are considering taking advantage of present high gold prices.
Other commodities are seeing swings of views, one that demand and a wall of cash will see commodities go on up for several more years and the other that speculators could become nervous and send everything crashing down.

noirua
Really does not matter when you do it as the market moves all over the place all the time.
Today is/was a buying day.
Tomorrow might be too.
If you find someone that can give you a definite answer on "tomorrow", please buy her/him and I will go you halves, OK!
Day traders that don't close out each day may have got burnt this last week.
None of my 4 buy orders were filled today - so I am happy if there is more carnage overnight.
If there is not a considerable retrace north-east in the next 6 months, my view of the markets will need a substantial revision.
Today's standout buy still is (while it lasts) OXR.
As an unhedged producer its upside potential remains barely scathed.
I find gold a great barometer of sentiment and today it has moved within a narrow range after rising immediately over $718 at open.
It's still a bit early, but the narrow range in gold's price today tells me that the DOW is likely to consolidate tonight. What is certain is that gold has "absorbed" Friday's poor bourse reactions and has every likelihood of closing this week well above $720.
Base metal prices need to see further downside to them in order to shake out the overly speculative elements in them. Unfortunately, as consumers are now fighting on the buy side at LME rings, dips in price are going to be met by some robust bidding action. So let's hope a big hedge fund wants to unwind a large position and scare the bejeebers out of the metals complex.

rederob said:

So let's hope a big hedge fund wants to unwind a large position and scare the bejeebers out of the metals complex.

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Well, so far gold has fallen $15 from today's peak and silver is down 80cents - and both remain in current free fall.
Looking better for some bargains tomorrow already.
Keep it down boys!

Even the bulls would have to concede we're due a correction.

....and if you're bullsih, a nice correction (of one helluva lot more than 20-50 dollars) would be healthy and would set the market up for further upside.

As luck would have it, I was itting at the 'puter when it broke lower, and trading this as a healthy correction... maybe 50 - 100 bananas with a bit of luck. But not discounting the possibility of buyers moving back in soon.

Gotta trade it though

Just for a bit of fun... and reference, here is the 1979-80 chart of GCM80 (COMEX June 1980 Gold)

Here's the 15 min chart as of now:

Also Oil pleasingly tanking, which gave me a nice short setup on thursday.

Corrections all round.

However, I am overall bullish on these.

Wayne
I think the bottom (for the moment) has just been hit.
POG needs a $650 to set it up for a good run again, but even if we consolidate in the present $680 - $720 range for the week or two, a bit of sting will be taken from the market.
I am hoping like heck that when the US opens we can knock off another $30 so let's see.

Yes,

That was a big move, about 2 x ATR, and wouldn't expect much more today. If it does its a bonus. Prolly should have taken some off at 690ish.