Gold Dollar Food Price Inflation Egypt

Great Article posted by Dan Norcini

Last evening during the Asian trading session, front month gold dipped into the $1310 region where it uncovered considerable buying interest. The buying was large enough to absorb the selling pressure that carried over from the poor performance of yesterday’s trading session. Once gold was able to punch through the $1317 level, there was additional buying that came in which looked like a combination of shorts booking profits as well as some bottom picking. That buying took it up through $1320 which then began sparking short covering. Their forced exit provided further upward progress which then enticed additional buying as locals began looking gunning for the stops above $1330. Around 10:00am Central time, they reached $1330 but were unable to get to the stops. Apparently however some additional recruits came in and on the second approach they took it out. That forced another wave of short covering taking prices to $1340 with more short covering taking the metal up towards $1350.

There is no doubt that some of the buying in gold is tied to events in Egypt and across some of the other nations in the Middle East. There are many nervous investors who are eying that tinderbox of never ending troubles and are concerned about these demonstrations spreading and moving into the OPEC nations. That is the reason crude oil was up nearly $4.00 a barrel at one point.

It seems to me that the catalyst for the huge amount of unrest in the region of the world was the surge in food prices. One of the things that the wheat market has been watching and anticipating has been Egyptian wheat purchases. They are one of our largest buyers of wheat and there was talk that began last week and continued earlier this week that Egypt was going to be forced into buying a good deal more US wheat in an attempt to make sure that there was sufficient supply for one thing and that they could snag it before its price moved even higher. Their leaders no doubt saw what happened to the government of Tunisia and wanted to nip any potential problem in the bud. Apparently things moved too quickly for them. Regardless, we have been warning that this outbreak of the inflation virus, a virus I might add which has been fed, nourished, propagated and even lovingly caressed by the US Federal Reserve, was going to result in global instability as its effects were primarily being seen in the cost of food. Rising food prices in the undeveloped world are NOT INGREDIENTS for peaceful society.

Truthfully, it has happened even more quickly than I had considered it would. I was looking more towards the spring of this year as the price rises work through the global distribution channels. A question for Ben and the boyz at the Fed, (Governor Hoenig exempted), “How do you like your handiwork now?” Is it any wonder that the Chinese are so rightfully disdainful of what the Fed is doing.

I will repeat – the Federal Reserve of the US is exporting runaway inflation across the entire globe with its reckless policy of QE. Bernanke has hubristically asserted in his interview on “60 minutes” late last year that “this fear of inflation is overstated”. We need to record this for history to make certain that it is not forgotten or dismissed. Try telling that to the leaders of the nations across the globe who are now dealing with riots and anarchy in their streets. I am sure that they will take comfort from Ben’s words.

Some may think I am leveling a bit of an exorbitant charge but one has only to look at price charts of the grains in particular to see that they all bottomed exactly during the month when QE was first announced back in 2009 with many of them accelerating sharply higher when QE2 was then successively announced last year. It did not help matters any that the weather caused sharp falloffs in the supply equation at the exact same time that speculative hot money was entering these markets in a quest for tangibles to protect against the deleterious impact of the inevitable currency devaluation resulting from QE. The deadly cocktail has led to an explosion in price for the basics of life.

When the price of wheat effectively doubles in 7 months, corn increases over 90% and soybeans surge more than 55% over the same time span, the quaint notion that the fear of inflation is overstated is stupendous for its sheer brazen audacity in the face of glaring truth.

When you tie this surge in food prices to the potential spike higher in crude oil prices if this unrest in the Middle East takes on additional life, it is not difficult to see why the shorts in gold are getting out.

In the past, moves higher in the gold price that were associated with political turmoil have tended to be rather short lived but this unrest is occurring against a backdrop of huge amounts of excess liquidity that continues being pumped into the system in an effort to keep it moving ahead; not to mention food prices are not going to drop sharply anytime soon. Talk continues to surface that the Fed will soon begin to withdraw this liquidity as the economy “improves” but the facts are that without these continued injections, there is too much debt in the system which will act as an anchor on any so-called “growth”. In my mind it is akin to injecting a nitrogen and trace mineral enriched solution directly into the root zone of a plant that is potted in a mere one inch of soil. What you create is a monstrosity that cannot be supported and will tip over without getting some support from elsewhere.

Changing the subject 

I am very impressed with the action of the HUI. As noted yesterday it refused to follow gold much lower even as the metal took out support near $1320. Even though it was down on the day, it remained well above Wednesday’s low. Today’s good showing gives further credence to the idea that it has been sold out and has put in a bottom near the 500 level. The trading session is net yet over as I write these comments but its ability to push past 517 has just about all of the short term technical indicators generating buy signals from deeply oversold levels. I want to see it close above that level (517) as it would shore up the weekly chart seeing that it spiked down towards the 50 week moving average and held. To really cement the bullish cause, it would need to get a weekly close above 530. We’ll see what happens on the close today.

Some of you have written to ask me about the current correlation between Gold and the Dollar. As you know, gold has been almost tracking the Dollar in the same direction of late. The greenback moves lower; so does Gold. The Dollar moves higher; so does Gold. This is obviously a change from its historic pattern and one that has to a large extent marked a large portion of this decade long bull market.

What I believe is currently at work is a temporary phase during which as fears regarding the overall state of the US economy subside and talk increases of an improvement, the Dollar comes into focus as a result of the massive structural problems overhanging the US economy. That leads to selling in the Dollar as there is no need of it as any sort of safe haven. You will note that as the equities charge higher, the dollar continues moving lower breaking major downside chart support level in the process. That same sentiment that the economy is improving and growth is returning have been leading to selling gold as investors move out of the metal in favor of equities and the “growth trade”. So essentially we have the “risk trade” being moderated somewhat towards the “growth trade”. That is the reason why we can see copper higher while gold moves lower.

Such thinking is more short term oriented in nature and is hoping to catch some profits playing the liquidity game using the Fed as a backstop.  Those who macroeconomic view looks past the short term stimulative effects of the liquidity injections will understand that the root causes of our economic woes have not been dealt with and will come back to bite us all down the road. Once one understands that the goal of the Fed is an attempted slow devaluation of the Dollar, they will gravitate towards gold once again and the inverse link between it and the greenback will become more the norm. Even at that, gold can move higher on its own merits as the integrity of many of the world’s fiat currencies continue to be called into question.

Today you will note that the Dollar is higher as it gains as a safe haven play. Bonds too are higher (the Fed loves to see this). You will also note that a mere day after S&P downgraded Japanese sovereign debt to “AA-‘, the Yen is sharply higher as it too reverts back to its “safe haven” status. For the life of me I do not understand how any rational human being can see the Yen as a safe haven with their Debt to GDP ration approaching the 200% level but there is nothing rational about our modern markets.

Equities have actually moved lower today. I have taken a photograph of their price chart to record it for history since one begins to wonder if this “anomaly” will ever duplicate itself ever again. After all, we live during an era in which the official monetary policy is to create a perpetually rising stock market as a way to generate rising consumer confidence to fuel the giant spending machine. How can it be that the stock market does not know this and dares to move lower in the face of unrest in the middle East? Maybe Goldman and Morgan had their electricity fail them as they moved to windwills for their power source to curry favor with the administration and the snowstorm knocked out the turbines. Their traders probably are unable to slam their usual buy orders into the S&P futures pit. Perhaps after the snowstorms subside….. Hey guys – get a generator if you want to get this thing right.

A last note – Eric King and I did our regular weekly metals wrap yesterday instead of today so when you do tune in, we will not be commenting on today’s price action in gold. I hope that this summary will make up for that. Also, if I see anything significant in the COT report today, I will post it up later. Like many of you I am anxious to see how the internals changed with these big drawdowns in the total OI. I am thinking that it is going to show up particularly in the “Other reportables” category.

Enjoy your weekend – who knows what we will wake up to Monday morning. A weekend of turmoil in the Mid East can lead to just about anything.

Thursday Recap

Overnight news that S&P cut Japan's debt rating had little impact as traders were focused on sentiment data out of Europe and the economic data here in the U.S. Orders for long-lasting goods fell again in December. The Commerce Department reported that Durable Goods orders fell by -1.3% during the month, which was below the consensus expectations for an increase of +1.4%. When you strip out the volatile orders for transportation, orders rose by +2.4%, which was above the consensus for +0.8%. The November reading was +3.6%. The Labor Department reported that initial claims for unemployment insurance for the week ending January 22 rose by 51,000 to 544K. The week’s total was well above the consensus for a reading of 406K. Continuing Claims for unemployment for the week ending January 15 were above consensus at 3.991M vs. expectations for 3.828M and last week’s revised (higher) 3.897M.

The session began without a significant gap and zig-zagged higher to put the high of the morning on the chart at 10:34. Following a quick down move the SPX put the low of the day on the chart at 11:35 only six points lower. Most of the last four hours of the session traded within barely a two point range but as we have seen so often, buyers came in during the last hour and pushed the index to the high of the day near the close. This was a session that the Dow assaulted 12,000 and the SPX challenged 1300 but it was yet another sleepy creeper session that lulled you to sleep.





For the SPX Index there were 294 components advancing and 189 components declining. On the NYSE 3,134 issues were traded with 1,706 advancing issues and 1,332 retreating issues, a ratio of 1.28 to one advancing. There were 255 new highs and 9 new lows. The five day moving average of New Highs is 183 while the five day moving average of New Lows is 14 and the ten day moving average of Net Advancing is 121.
 
Advancing volume was higher at a ratio of 1.52 to one. The closing TRIN was 0.84 and the final tick was 662. The five day average of TRIN is 1.24 and the ten day average of TRIN is 1.27. The NYSE Composite Index gained 0.16% today while the SPX gained 0.22%.
 
For the NYSE, relative to the previous 30 session average, volume was 2.56% above the average. Of the last 15 sessions 12 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 94.7% of the average daily volume for the last year. Volume was 89.4% of the last 10 day average and 93.1% of the previous day’s volume.
 
Total tick for the day was 161,000 and the average tick for the day was 104. There were 53 ticks greater than 600 and 20 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
 
No clear intraday volume pattern is visible today because the market simply moved too sluggishly for any pattern to have a chance to emerge. Checking the Nightly Breadth Indicators is also unrevealing as the indicators are mixed as a result of the sluggish session. But once again, it is worth noticing that the New High/New Low ratios all dropped today.


Sectors Performance: 
 
Sectors stronger than the SPX for Thursday:
- Financials -- Outperformed the SPX by +72%.
- Industrials -- Outperformed the SPX by +15%.
- Technology -- Outperformed the SPX by +12%.
- Utilities -- Outperformed the SPX by +15%.
- Health Care -- Outperformed the SPX by +3%.
- Consumer Discretionary -- Outperformed the SPX by +59%.
 
Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -105%.
- Energy -- Underperformed the SPX by -71%.
- Consumer Staples -- Underperformed the SPX by -124%.

Wednesday Recap: A Look Inside the market

The Fed day morning began with futures pointing toward a modestly higher open with improving sentiment regarding the prospects of a global recovery. The President's State of the Union address was credited with helping improve the mood based on the prospects of reduced corporate income taxes and a pledge to freeze domestic spending.

The session began with a small gap higher and momentum continued to build throughout the early morning as the high of the day was put on the chart at 10:46am. The mid day part of the session was mostly a stall as traders awaited the FOMC announcement. When the FOMC statement came out the SPX traded within a five point range after the announcement. It was a muted response, we usually see ten point moves or more. Volume also remained quite low.

For the SPX Index there were 304 components advancing and 177 components declining. On the NYSE 3,148 issues were traded with 2,119 advancing issues and 928 retreating issues, a ratio of 2.28 to one advancing. There were 241 new highs and 11 new lows. The five day moving average of New Highs is 188 while the five day moving average of New Lows is 17 and the ten day moving average of Net Advancing is 215. The Net Advancing data indicates a bullish trend.
 
Advancing volume was higher at a ratio of 1.58 to one. The closing TRIN was 1.45 and the final tick was 334. The five day average of TRIN is 1.21 and the ten day average of TRIN is 1.24. The NYSE Composite Index gained 0.64% today while the SPX gained 0.42%.
 
For the NYSE, relative to the previous 30 session average, volume was 20.06% above the average. Of the last 15 sessions 12 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 18 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 103.8% of the average daily volume for the last year. Volume was 96.9% of the last 10 day average and 95.4% of the previous day’s volume.
 
It gets tiresome writing much the same each night; we’re sorry. But the ratio of advancing stocks was weak compared to the advancing volume today. New Highs was also weak for a time that new 52 week highs are being made by the indices. 17 New Lows was also a bit high for the New Lows today. But nothing matters because Mr. Bernanke says inflation is not a problem and that a rising stock market will create confidence and promotes hiring, so all is well as long as the propped up market keeps rising.
 
Total tick for the day was 178,000 and the average tick for the day was 115. There were 90 ticks greater than 600 and 22 ticks more extreme than -600. There were 2 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
 
Intraday volume clearly spiked on the down moves today. Looking at the Nightly Breadth Indicators suggests that we have seen "the pullback" and are bouncing. Pullback? Really?!?




 
Sectors Performance: 
 
Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +163%.
- Energy -- Outperformed the SPX by +203%.
- Industrials -- Outperformed the SPX by +17%.
- Technology -- Outperformed the SPX by +15%.
 
Sectors weaker than the SPX for Wednesday:
- Financials -- Underperformed the SPX by -42%.
- Consumer Staples -- Underperformed the SPX by -68%.
- Utilities -- Underperformed the SPX by -80%.
- Health Care -- Underperformed the SPX by -55%.
- Consumer Discretionary -- Underperformed the SPX by -27%.
 

Food Stamp Map Usage Increased Almost 60% Since 2007

A new time-lapse video illustrates the depressing rise of food stamp usage throughout the U.S.

The video's creator, Zero Hedge's John Lohman, points to the alarming levels -- food stamps now feed a record 43 million -- and warns that the program is the only thing keeping Americans from going "postal." Sinatra's upbeat tune "I've Got The World By A String" serves as an especially disturbing soundtrack.

According to a recent Wall Street Journal report, food stamp usage has increased almost 60 percent since 2007.

Original Source

E-mails Suggest Bear Stearns Cheated Clients Out of Billions

E-mails Suggest Bear Stearns Cheated Clients Out of Billions Jan 25 2011, 1:01 AM ET By Teri Buhl

Lawsuit alleges the bank took extreme measures to defraud investors, and now JPMorgan may be on the hook

Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering. Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit’s supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of shit."

Original Source

Bondholders Left in the Dark

Bondholders Left in the Dark 
Concern Grows Over Lack of Financial Disclosure by State, Local Governments By IANTHE JEANNE DUGAN

Investors and regulators are growing increasingly concerned about the quality and timeliness of information that state and local governments are disclosing about their finances.

The Securities and Exchange Commission is inquiring about public statements Illinois made about its pension funds amid the agency’s increased scrutiny of the municipal-bond market, a representative for the governor said.

original source

Metals Update

Gold support at $1320 held  and attracted a decent amount of buying. The buying was not enough to push it up significantly on the day but it was enough to reject the lower support level which is a friendly development on the price chart. It looks as if the selling is drying up for now in gold above the 150dma.

Gold needs to get back above $1340 in short order to give the bulls a bit more breathing room however as it is not out of woods just yet. Bears are hoping for something in the way of news releases or economic data that will allow them to take out $1320.

Remember that huge rally in the bonds yesterday on the long end? It all disappeared today as this roller-coaster continues.  Bond holders are watching the $CCI and thinking in terms of inflation while the Fed comes in and messes with long term rates as part of their QE2 program. Up and down, up and down, with rallies being sold and dips being bought. It will continue until we get a convincing breakout one way or the other.

Gold Miners

HUI was finally higher as that index, looked oversold, it tested the 200dma yesterday and couldn't break the early selling today. They are a decent amount of buyers who are willing to buy the shares down near these levels as from a money management perspective, they have a rather small and well defined downside risk should the trade go south (using the 200dma)

One day does not mean we are in rally mode we'll have to see how the rest of the week pans out, no pun intended.

I'm modestly optimistic by today's action, the technical indicators were so deeply oversold on the HUI that any signs of stability will turn them to issuing buy signals rather quickly. If nothing else, it will force the bears who have made some pretty good profits on the way down to snatch them before they disappear.

The HUI will need to get above 516 – 517 or so to give us some signs that the low of yesterday is the bottom in this latest reaction. If it can hold 490 its a very very good sign.

Tuesday Recap: A look inside the market

This morning it appeared that the bears were attempting to provide a rebuttal to yesterday's romp on the back of a disappointing GDP report out of the UK and a revenue miss at Johnson & Johnson.

The session began with a three point gap lower. The opening half hour was choppy but the high of the morning was put on the chart at 10am, several points above the open, just into positive territory. But the rest of the morning belonged to the bears as sellers took the index down nine points from the highs just before noon. Bulls then took control of the tape for a five point rally during the noon hour before that faded as sellers arrived and the next couple of hour belonged to the bears. The ping-pong match continued in the final hour as a ten point rally ensued to close at the highs of the session after the low of the day was just before 3pm. No one can afford to be short this market, the fed has pumped in so much funny money that there is real paper inflation. The malls are blistering you cant get a parking spot as people are feeling good about their 401K's, let them eat cake and so on. Party on Garth!


For the SPX Index there were 224 components advancing and 255 components declining. On the NYSE 3,135 issues were traded with 1,629 advancing issues and 1,394 retreating issues, a ratio of 1.17 to one advancing. There were 106 new highs and 19 new lows. The five day moving average of New Highs is 188 while the five day moving average of New Lows is 19 and the ten day moving average of Net Advancing is 151.
 
Declining volume was higher at a ratio of 1.57 to one. The closing TRIN was 1.83 and the final tick was 430. The five day average of TRIN is 1.41 and the ten day average of TRIN is 1.17. The NYSE Composite Index lost -0.2% today while the SPX gained 0.03%.
 
For the NYSE, relative to the previous 30 session average, volume was 9.06% above the average. Of the last 15 sessions 12 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 18 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 100.8% of the average daily volume for the last year. Volume was 103.2% of the last 10 day average and 119.1% of the previous day’s volume.
 
Breadth was mixed today with the SPX having negative breadth and the NYSE having positive breadth with declining volume significantly higher than advancing volume. The broad NYSE Composite Index also fared worse than the SPX. Overall, the breadth today was not bullish.
 
Total tick for the day was 132,000 and the average tick for the day was 86. There were 123 ticks greater than 600 and 44 ticks more extreme than -600. There were 5 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
 
The volume pattern today clearly spiked with each market downward move. That doesn't feel overly bullish. Looking at the Nightly Breadth indicators is also interesting this evening. First, notice that the McClellan Oscillator was negative despite the SPX closing green. Second, the Cumulative Volume Index closed lower on an up day; this is a bearish signal. You know I keep talking technical's but I give up no one cares these days (print and spend), this market is going to keep going up like 1999 and the party will end one day this year and it will be ugly. Stay tuned.









Sectors Performance: 
 
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +10%.
- Technology -- Outperformed the SPX by +44%.
- Consumer Staples -- Outperformed the SPX by +35%.
- Consumer Discretionary -- Outperformed the SPX by +3%.
 
Sectors weaker than the SPX for Tuesday:
- Energy -- Underperformed the SPX by -31%.
- Financials -- Underperformed the SPX by -17%.
- Industrials -- Underperformed the SPX by -15%.
- Utilities -- Underperformed the SPX by -17%.
- Health Care -- Underperformed the SPX by -2%.

Global Price Fears Mount-WSJ

WSJ- Inflation fears—fueled by spiraling food, oil and raw material prices—are mounting around the globe, prompting the head of the European Central Bank to signal that it could raise interest rates in the future even though some countries have been weakened by the Continent's debt crisis.

Jean-Claude Trichet, president of the European Central Bank, pictured last week at a euro group finance ministers meeting in Brussels.

In an interview with The Wall Street Journal ahead of this week's annual meeting of the World Economic Forum in Davos, Switzerland, Jean-Claude Trichet warned that inflation pressures in the euro zone must be watched closely, and urged central bankers everywhere to ensure that higher energy and food prices don't gain a foothold in the global economy.

Mr. Trichet's warning comes at a time when inflation concerns are mounting among investors around the world. Fast-growing emerging markets such as China and Brazil are seeing rising inflation at home, and their demand for globally traded commodities is pushing prices higher elsewhere.

read more

Cuomo Weighs More Than 10,000 Layoffs-WSJ

By JACOB GERSHMAN

Gov. Andrew Cuomo is weighing plans to lay off more than 10,000 government workers, rivaling the number of pink slips handed out by his father a generation ago, according to individuals familiar with budget discussions.

While Mr. Cuomo has not settled on a figure, the governor in recent days has told lawmakers and other officials that he is looking at dismissing 10,000 to 12,000 workers, or more than 5% of the state's public work force, the individuals say.

read more

Friday Recap "A look inside the market"

Friday morning found futures moving higher on the back of earnings from Google and General Electric as well as news that Spain is taking steps to restructure the banking system and would be willing to invest directly in the banks. There was no U.S. economic news scheduled for release Friday.

With the tailwind from the futures, the SPX opened with a five point gap higher and was up eleven points to put the high of the day on the chart at 10:01. But the bulls struggled to hold onto gains and by noon eight points had been given back. The afternoon traded within a four point range and essentially was a wash as neither bulls nor bears could force a large move into the weekly close.

But this session was different. Last week we saw down days that felt like up days; hours were spent moving higher after morning lows. But on Friday it felt like a down day despite the index gaining several points. The highs were early in the day and hours were spent giving back the gains. The tone of the market seems to have changed.

The SPX lost 9.89 points during the week. The range for the week was 24.80 points, 1.92%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 67. Pullbacks often occur as this RSI reaches 80 and bounces near 20.

Total tick for the week was -116,000. On the NYSE, the advance/decline line decreased during the week by 2,000 and the 10 day average of Net Advancing decreased from 239 to -24. There were 613 New Highs and 105 New Lows.

This holiday-shortened week was ruled by sellers as the extreme ticks were doubled on the negative side (135 positive and 272 negative) and the ultimate extreme ticks (greater than 1000) were twelve negative, zero for the bulls.

We have now gone 98 sessions since the last 2% range day. Since 1990, the average is one 2% range session every 5.25 days. The last similar such extended period without a 2% range session occurred in 2007 leading up to the all-time market top. The lack of intraday range certainly puts the damper on day trading the indices.

Market breadth was not strong on Friday, although it remained positive on the NYSE. New Highs were low despite the up session. Closing a Friday session with a negative tick has been unusual for months.
 
Total tick for the day was 23,000 and the average tick for the day was 15. There were 25 ticks greater than 600 and 28 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000.
 
The intraday volume pattern was driven by options expiration; high volume at the open followed by low volume the rest of the session. This was typical but the volume was notably low. Looking at the Nightly Breadth Indicators continues to suggest that we have had a significant interim top but today's indicators are quite mixed. We're following the McClellan Summation Index closely. It hasn't been in negative territory since very early in September.

Sectors Performance 
 
Sectors stronger than the SPX for Friday:
- Energy -- Outperformed the SPX by +25%.
- Financials -- Outperformed the SPX by +55%.
- Industrials -- Outperformed the SPX by +57%.
- Health Care -- Outperformed the SPX by +4%.
 
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -48%.
- Technology -- Underperformed the SPX by -81%.
- Consumer Staples -- Underperformed the SPX by -7%.
- Utilities -- Underperformed the SPX by -32%.
- Consumer Discretionary -- Underperformed the SPX by -13%.

Uranium vs. Gold

Uranium vs. Gold

By the Casey Energy Team

Think gold is the hottest yellow metal? Think again.

Uranium is taking off, its price jumping up US$3.50 per lb. this week to US$66. It is the biggest price jump in a long time, and it shows that even though uranium has been heating up for six months already, the pot has yet to boil over.

The other yellow metal, as it is known, spent 2008 falling from a ridiculous and unsustainable high of $136 to the low $40s, then spent 2009 doing nothing much at all. In mid-2010, though, the beast started to awaken. China began searching out long-term contracts with suppliers in order to feed its 13 operating nuclear power plants and guarantee fuel for the 25 reactors under construction and the many more planned. Official targets for nuclear capacity in the country are 80 gigawatts electric (GWe) by 2020, 200 GWe by 2030, and 400 GWe by 2050. China’s current nuclear power capacity is just 9.1 GWe.

To reach its 2030 target of 200 GWe, China will need some 95 million pounds of uranium annually. In 2009, the world as a whole produced just shy of 112 million pounds – production clearly needs to increase if it is going to meet demand. And the looming end of the Megatons-to-Megawatts program will only sharpen that divide. The Russian program converted 400 tonnes of high-grade uranium from old Soviet warheads into low-enriched uranium suitable for American nuclear power plants over the last 15 years. This created enough fuel to produce roughly 20% of the United States’ energy needs, but it is scheduled to end in 2013.

The growing pressure on uranium production from swelling demand is no surprise, and it started to lift the price of uranium in 2010. In fact, contrary to popular belief, uranium actually outperformed gold last year. Hard to believe? Here’s a chart showing the indexed prices of gold and U3O8 over last year:

Gold started 2010 at US$1,121.50 per oz. It had a great run, to be sure, and ended the year at US$1,405.50. That’s a gain of 25%.

Uranium started last year at US$45 per pound. For the first half of the year, the price remained stagnant, but in the second half it started on a steady climb and by the end of December had reached US$61. That is a gain of 35.5%.

As for where uranium is headed this year, we certainly don’t expect another crazy run-up, like in 2007, but rather predict gradual gains to the $70 level. So there is still opportunity to climb on this horse; check out Casey’s Energy Opportunities to find out about our current uranium company picks.

Our recent track record in the uranium sector has been far from shabby. In the second half of 2010, we recommended two uranium stocks, one large-cap and one small-cap, and both generated healthy returns.

The large-cap was Denison Mines, a company we have bought and sold for more than a decade. In late 2009, we recommended buying Denison at 90¢. Then in July we recommended it again, at $1.30 or less. Three months after that, the stock hit $2.24 and we took our initial investment off the table, or as we like to call it, a Casey Free Ride. Denison is now at $3.30, providing a 13-month gain of 267% or a three-month boost of 156%. Not bad!

On the other end of the size scale is JNR Resources, an Athabasca Basin explorer with a host of projects and an experienced management team. The Denison recommendations went out in both Casey’s Energy Report, our monthly newsletter aimed at investors with mid-level investment knowledge and tolerance for risk, and Casey’s Energy Confidential, an alert service directed towards more sophisticated investors with a higher risk threshold.

For JNR, in August we alerted our Confidential subscribers to a 17¢ private placement. By the end of December, the company was trading at 45¢ and we took our initial investment off the table, leaving our 165% gain on the books as a Casey Free Ride, to continue to grow with the company and the price of uranium.

Fraudulent Practices In Precious Metals-Harvey Organ

I wrote to the CFTC voicing my concerns over many matters.  I am open to your comments   You will notice that I sent it to only 4 commissioners. I left out Bart Chilton. From: harveyorgan@rogers.com

To: GGensler@cftc.gov, somalia@cftc.gov, MDunn@cftc.gov, JSommers@cftc.gov

Subject: Position limits and elimination of exemptions. Date: 1/20/2011 9:40:56 P.M.

I am rather disappointed that you have allowed the major banking short interests to continue with their fraudulent and manipulative practices in the precious metals. You have allowed another 60 days of massive shorting by the bankers to allow for yet another public input. The public for the past 2 1/2 years have bombarded you with millions of emails with the hope that you will see the light and put position limits on silver and eliminate the phony exemptions. Mr O'Malia was the lone dissenter on your latest vote voicing his concern that the swap books on JPMorgan once opened would be a shock and that the CFTC would not know how to handle the situation. It has been my contention all along that the major short, is in reality the Chinese government who lent their hoard of silver in support of the suppression of gold. It would be difficult to suppress gold while allowing silver to advance in price. The gold was supplied by central authorities. The USA ran out of silver in 2003 and in order to receive most favoured nation status, the Chinese have done a swap with the USA with a date certain to re-swap. It is quite conceivable that the Chinese have asked for their silver back but were refused as global supplies for silver are vanishing.

Yesterday, the USA Mint announced a record 4.6 million oz of silver eagles sold in the first 3 week period of January which is a record. The USA produces 40 million oz from their mines so for the first time, the USA must import silver from the rest of the world to satisfy the mint's requirements.

The comex is witnessing massive movements of silver into and out of registered vaults signifying turmoil as this silver is putting out fires in other jurisdictions. In gold we are witnessing the opposite. How on earth is gold being settled?

What is even more troubling to me is this:

How could you even discuss position limits and the elimination of exemptions without first telling us what happened in July 2008 which caused you to bring in the enforcement division of the CFTC? Mr Chilton has decided to act unilaterally in proclaiming one trader, JPMorgan, with fraud, and from his statement to the press, major class action law suits have been initiated and filed.

It is frustrating to many of us who witness time and time again massive un-backed paper driving the commodity price of silver and gold down like today. I guess the CFTC's motto that the futures market is a price discovery mechanism is out the window. Mr Dunn has stated that he needs more manpower to try and catch manipulation. Yet when a whistle blower is presented to you and this person describes in detail the accounting of how the crime has been committed in the past and how it will happen in the future and yet you refuse to listen to this gentleman.

Mr Sprott of Sprott Asset Management is having a tough time trying to find any physical silver for his silver fund and yet the bankers massive sell huge amounts of paper silver. The SLV also has liquidated massive amounts of "paper silver". The real stuff is difficult to find in quantity.

Sooner or later, this fraud will end and I guess there is going to be a lot of explaining to do.

I urge you to do the right thing and order JPMorgan and friends to stop this massive fraud and manipulation immediately.

Harvey Organ.

China buys gold and the world follows-Marketwatch

 China buys gold and the world follows 

The Chinese are building on a trend that’s likely toast 

By Myra P. Saefong, MarketWatch 
Jan. 21, 2011, 12:01 a.m. EST

SAN FRANCISCO (MarketWatch) — Gold prices have lost around $75 an ounce this year but analysts are unfazed by the drop, with many betting the slump in prices will soon be cut short as the Chinese New Year feeds an increase in global demand that’s destined to last.

“We are entering a period of strong seasonal growth in gold demand and Chinese New Year is a big part of that,” said Brien Lundin, editor of Gold Newsletter. “Physical demand has been supporting the gold prices on the downside even during the typical slack periods, and I expect that upcoming increase in demand will also support the price, but at higher levels.”

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