Correlation Economics Backup

There has been much talk about central banks becoming net buyers of gold since the start of the economic crisis in 2008. I want to elaborate on that. The world gold council (WGC) yearly reports on the amount of central bank gold sales. As of 2010, central banks have shifted from net sellers to net buyers of gold ( Figure 1 ). And this has only happened recently! As we look at history, during the inflationary years of 1980, central banks were buying gold. Then a period of gold selling occured from 1989 till 2009 where gold went into a bear market. Central banks only shifted to buying gold since 2010. Which means we are going straight back into a bull market of gold. Figure 1 The WGC expected growth in gold buying from central banks to continue throughout 2012 . The projected growth of central bank gold buying was projected to be 336 tonnes of gold per year in 2011 ( Figure 2 ). Their predictions were right as central banks added 450 tonnes during 2011 . Figure 2 By far, the increase in...

At the beginning of 2012 agriculture prices are starting to turn around after the big correction that occured in 2011. Speculators have started to add net long positions in agriculture due to drought concerns in South America. Global demand is still going up. Soy Bean prices are going up on dry weather in Brazil and Argentina. Palm Oil prices benefit from the problems in the Soy Bean crops. Cotton prices are improving but are still weak. Cotton prices are bottoming out though. The rubber market is likely to continue the uptrend due to bad weather conditions. Demand for rubber is strengthened by the buying up to the Lunar New Year. Wheat prices are still weak due to large wheat production. Coffee prices had a surge in 2010 and were correcting in 2011. Prices will remain firm though due to supply shortages. Sugar is in an uptrend, but speculators are turning bearish. Corn prices are weak due to a surplus in inventory, but seem to be bottoming out. Rice prices are turning in a do...

At the London Metal Exchange (LME) the copper stock levels keep declining as can be seen on following graph: LME Copper warehouse level The Chinese were importing copper at record levels during December 2011 to restock their inventory. There has been a concern that in 2012, there will be a copper deficit , which resulted into this buying frenzy. As a result we can see that since September 2011 the copper price was going up, just at the same time that LME stock levels were going down. Copper price I can't blame the Chinese to buy copper, they want real assets and not some US government paper, which they are dumping by the way as can be seen on following graph: China US treasury holdings I think the buying frenzy is not over yet, as China is positioning itself to create competition against the London Metals Exchange in June 2012. On that date China will open the Pan Asia Gold Exchange , also known as PAGE, challenging the LME and COMEX. I predict that gold and silver will explode on ...

Today Belgium was downgraded by Fitch from AA+ to AA with negative outlook. All of this due to the Dexia fiasco. I'm from Belgium and I can say that the bailout of Dexia was the most immoral thing the government has ever done. Dexia has an enormous amount of Greek debt (US$5 billion write down)  and everyone knows Greece is going to default sooner than later. Supporting Dexia was the dumbest act ever. The only reason why Belgium government bonds are doing well is because Belgians have an enormous amount of savings and the unemployment rate is improving. But we see the consequences already from Dexia. Several cantons lost several millions of money. Of course, we tax payers will need to pay for this. Amount of shares in Dexia per capita 4 other countries were downgraded as well: Italy: A => A- Spain: AA- => A Cyprus: BBB => BBB- Slovenia: AA- => A Surprisingly, the euro went up...

Today there was this large gold spike to 2263.65 EUR/oz during New York Globex time. I have no idea what this phenomenon is. If somebody could point out what this is, it would be really helpful. Maybe it's an omen of what is yet to come! Spot gold in EUR/oz

Commodities like copper are correlated to the Baltic Dry Index  or Dry Bulk Rates . Old post: The last few weeks we see that the Baltic Dry Index  has been dropping while copper prices surge. How can this be? Is the economy slowing down as evidenced by the falling BDI, or is the economy growing as evidenced by the rising copper prices. Nobody really knows. My take on this is that the economy actually is growing, on phony money that is (or you can equally say the money supply is increasing). What is happening to the BDI though, is a consequence of the massive creation of ships during the period of 2005-2008 . BDI VS Copper While the BDI may keep falling, the copper price is steadily going up, together with the S&P. The chart below shows the high correlation between copper prices and the S&P. S&P VS Copper Another evidence of the improving economy can be seen in the BullandBearwise index, which measures the performance of key macro-economic metrics (capacity utiliza...

Today Ben Bernanke said he would keep the benchmark rate essentially at zero percent till 2014 . Earlier he said he would keep it at zero percent till 2013 . My take on this is that they will never increase interest rates again, until the whole system collapses. Marc Faber already pointed this out in 2010 . Look at what effect it has on the silver and gold price... To see the whole interview, see below: