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Commodities Are Crumbling

Tyler Durden's picture


Despite the surge in prices for NatGas (and record time-of-year prices for gasoline),  WTI crude oil prices are stumbling back to $93.50 this morning. Copper is also sliding but the real action - once again - is in Gold and Silver. Following yesterday's flash crash in gold, silver is having a conniption this morning as the 8amET period once again brings volatility. The selling coincided with the smaller-than-expected trade deficit - perhaps indicating indirectly less room for Fed QE? But in this new normal market, do they really need a reason to smack them down. Stocks are not moving as this occurs but bonds and the USD are modestly bid.



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Tue, 01/07/2014 - 10:23 | 4307744 Johnny Cocknballs
Johnny Cocknballs's picture

Look at 10 an or so.   If you didn't know better, you might suspect that some fuckery was afoot...

Tue, 01/07/2014 - 10:33 | 4307790 Serfs Up
Serfs Up's picture

Ah....not this shit again.

I was kind of hoping that 2014 would not be a repeat of 2013...a waste of a year if ever there was one.

Tue, 01/07/2014 - 11:51 | 4308107 Canadian Dirtlump
Canadian Dirtlump's picture

Something is fucky alright.


Either way I'll just  keep praying the bastards responsible for this end up drowning in a pool of used asshole bleach.

Tue, 01/07/2014 - 10:23 | 4307746 IridiumRebel
IridiumRebel's picture

Bitcoin is up off the lows! I spoke to my unicorn today and he said it should continue to rise past 1000 on its way to nirvana.

Tue, 01/07/2014 - 10:23 | 4307747 Max Damage
Max Damage's picture

As long as Twitter gets manipulated up and then transfered to everyones pension funds all is well in the Wall Street world

Tue, 01/07/2014 - 10:24 | 4307753 Possible Impact
Possible Impact's picture

If you stand for delivery, is it there?

Tue, 01/07/2014 - 13:34 | 4308516 MarsInScorpio
MarsInScorpio's picture

That is exactly why the price is being manipulated down - because the people responsible for coming up with the hard metal are having to buy to replenish their stock - and they want to buy as low as possible, for obvious reasons.


But sooner or later, the demand will put this game on hold, and the price for the metal will climb in response to the demand for the metal (as opposed to the promise of the metal on paper).


My popcorn is popped, and I'm enjoying watching how long the West can pump the price down to fulfill the orders of the East. It's a dead-end strategy for the West - and they know it.


Tue, 01/07/2014 - 10:24 | 4307754 jubber
jubber's picture

So what happened to this from UBS this morning/

UBS sees gold demand of 1.49mln oz this week due to the rebalancing of the DJ-UBS Commodity Index

On silver, DJ-UBS Commodity Index rebalancing may mean 44.27mln oz, or 8.86K contracts, of silver buying this week.

Tue, 01/07/2014 - 10:26 | 4307760 shepherd
shepherd's picture

Gold is useless. Warren Buffet was right. When will you learn.

Tue, 01/07/2014 - 10:31 | 4307779 akak
akak's picture

What good is Warren Buffet?  You just dig him up out of some snakehole only to bury him right back in the ground again.

Tue, 01/07/2014 - 10:34 | 4307791 Smegley Wanxalot
Smegley Wanxalot's picture

Warren Buffet is good for compost.

Tue, 01/07/2014 - 10:58 | 4307885 buzzsaw99
buzzsaw99's picture

-1 that old fart is mostly nonorganic by now

Tue, 01/07/2014 - 13:33 | 4308508 Manthong
Manthong's picture

I seem to recall reading that Buffet was smart enough to sell 130 million ounces of real silver for about 7.50 in 2006.


Smooth move.

Tue, 01/07/2014 - 13:38 | 4308528 MarsInScorpio
MarsInScorpio's picture



You were being sarcastic, right?


Today, silver is selling for 260% of what he sold it for.


Tue, 01/07/2014 - 13:28 | 4308491 Kirk2NCC1701
Kirk2NCC1701's picture

What's he good for?  Traci Cool. 

She takes good care of his... "barbaric relic", while he looks after her... assets.  No doubt.  ;-)

Tue, 01/07/2014 - 10:45 | 4307828 wisehiney
wisehiney's picture

He said bonds were the worst investment on earth when the 10 yr was yielding 5%. Glad I ignored him.

Tue, 01/07/2014 - 10:50 | 4307854 shepherd
shepherd's picture

I'm not here to defend Warren Buffett. Just making the point that if you want to see a bunch of crying losers, Zerohedge is the best place on the interent.

Tue, 01/07/2014 - 11:00 | 4307892 wisehiney
wisehiney's picture

I remember seeing that same post in early 2008. Was that you?

Tue, 01/07/2014 - 12:17 | 4308195 shepherd
shepherd's picture

You're here since 2008? Will there come a time, when you realize that you are as much bullshitted here as you are elsewhere?

Tue, 01/07/2014 - 12:42 | 4308288 Jack Napier
Jack Napier's picture

Leading the sheep to the slaughter are we shepherd?

Tue, 01/07/2014 - 12:46 | 4308303 shepherd
shepherd's picture

Sheep are sheep. Wether on Zerohedge or elsewhere.


Tue, 01/07/2014 - 15:04 | 4308821 Dickweed Wang
Dickweed Wang's picture

How about this shep - go fuck yourself

Tue, 01/07/2014 - 13:02 | 4308385 DebtSlaveZombie
DebtSlaveZombie's picture

The website didnt begin until jan 2009.

Tue, 01/07/2014 - 12:59 | 4308373 DebtSlaveZombie
DebtSlaveZombie's picture

This site didnt exist in 2008.  

Tue, 01/07/2014 - 11:05 | 4307915 jcaz
jcaz's picture

Wow- quoting Buffett AND picking on ZH-  you must be, like, some sort of super-trader or something,  or maybe you run the biggest hedge fund on earth-  you should go on CNBC Fast Money next and dazzle them with your knowledge of finance.....

Tue, 01/07/2014 - 11:08 | 4307929 Kina
Kina's picture

So people shouldn't complain about corruption, madoff, LIBOR, etc.... because that would be acting like a looser... also complaining about NSA and so forth.



Tue, 01/07/2014 - 12:18 | 4308198 shepherd
shepherd's picture

I'm talking about the goldbugs, sucker.

Tue, 01/07/2014 - 14:55 | 4308775 GoldenGal
GoldenGal's picture

Shepard you may be right ....all these pms are just worthless  barbarous relics.. Perhaps I should cut my losses now and sell so I can free up some capital to buy netflix stock

Tue, 01/07/2014 - 15:32 | 4308930 Agstacker
Agstacker's picture

Member for 1 week 2 days...

Tue, 01/07/2014 - 10:28 | 4307764 arkel
arkel's picture

Gold is so undervalued today when you compare it to the Fed's balance sheet / Money Supply. In relative terms, it's cheaper now than it was in 2001. Back up the truck.

Click here to see the chart I created illustrating this

Tue, 01/07/2014 - 10:37 | 4307804 TheHound73
TheHound73's picture

Nice chart.  But doesn't change the fact I have to work 3 times as many hours to buy an ounce.

Tue, 01/07/2014 - 10:41 | 4307817 arkel
arkel's picture

Sure, but how much less could you buy if gold were at $5,000+? Consider $1,200 a gift.

Tue, 01/07/2014 - 12:04 | 4308156 Gallopin Gold
Gallopin Gold's picture

What an awesome chart, Arkel!  Thanks!

Tue, 01/07/2014 - 13:29 | 4308493 malikai
malikai's picture

Nice work mate.

The first thought that comes to mind is what TPTB would say about the 40% number: "It's irrelevant."

Of course, it's only irrelevant until it becomes very fucking relevant.

But I guess our overlords probably think they have a plan for that, too.

Tue, 01/07/2014 - 13:47 | 4308553 quasimodo
quasimodo's picture

Be thankful you have the option to buy an ounce(?)

Tue, 01/07/2014 - 10:46 | 4307836 Quinvarius
Quinvarius's picture

I have been pondering whether or not to create this chart myself.  Good job.  The gold price is crazy low vs what the US says it has.  But the US doesn't really have anything at all.  They can pull 400 tons a year out of their asses to replenish on a good year.  So I would hold them at around that level.

Tue, 01/07/2014 - 10:54 | 4307868 arkel
arkel's picture

I created the chart assuming the US has 8,133 tons of gold. Obviously if that number is lower, the gold price should be higher in terms of dollars. 

Tue, 01/07/2014 - 11:14 | 4307954 Tinky
Tinky's picture

While I am sympathetic with your view that gold is currently undervalued, I find your chart to be flawed given that your stated correlation is gold/currency in circulation. Do you really imagine that all of the money/credit that has been created in recent years is in circulation?

Tue, 01/07/2014 - 11:20 | 4307981 arkel
arkel's picture

What difference does it make if it's in circulation? The dollar was created... You're probably talking about the velocity of money which may be slow now, but that doesn't change the fact that there are more dollars in the system. 

Tue, 01/07/2014 - 15:47 | 4308987 Tinky
Tinky's picture

Do you have a reading comprehension problem, or do you not understand the distinction between "in the system" and "in circulation"?

Tue, 01/07/2014 - 10:28 | 4307765 LawsofPhysics
LawsofPhysics's picture

Crumbling?  All my commodities look just fine, a little cold, but quite intact.

Gold is special, can I take delivery for under $500 an ounce?  Wake me when I can, then you can say it "cumbled".

Tue, 01/07/2014 - 10:33 | 4307786 IridiumRebel
Tue, 01/07/2014 - 15:35 | 4308944 Stares straight...
Stares straight ahead's picture

What is the little pizza-looking icon at the bottom of the board supposed to be?

Tue, 01/07/2014 - 18:37 | 4309545 TheHound73
TheHound73's picture

The first known commercial application of Bitcoin was 10,000 BTC for 2 pizzas.  The icon tracks how much that amount of BTC is worth at today's exchange rate.

Tue, 01/07/2014 - 10:36 | 4307792 akak
akak's picture


All my commodities look just fine, a little cold, but quite intact.

Just as long as they aren't tin --- it turns into a non-metallic powder after prolonged periods under around 60 F, and rapidly so in below-freezing temperatures.

Tue, 01/07/2014 - 10:45 | 4307832 LawsofPhysics
LawsofPhysics's picture

Tin? my god man, stop living in the fifties.

Tue, 01/07/2014 - 11:00 | 4307866 akak
akak's picture

I like the look and feel of tin --- nicer than pewter --- but the solid tin cup that I bought years ago in Bolivia has long since crumbled into dust.  Guess I don't keep the house warm enough.

It's called "tin pest":

Tue, 01/07/2014 - 11:02 | 4307901 Possible Impact
Possible Impact's picture

There is a YouTube for everything:

grey tin (tin pest) time-lapse video

Tue, 01/07/2014 - 11:07 | 4307925 wisehiney
wisehiney's picture

Tempest in a Tin cup.

Tue, 01/07/2014 - 15:06 | 4308829 css1971
css1971's picture

Pewter is basically tin these days. No lead in it, a wee bit of copper.

Tue, 01/07/2014 - 10:37 | 4307802 wisehiney
wisehiney's picture

One last big stall before yellenphant hits the turbo booster. PLEASE!

Tue, 01/07/2014 - 10:46 | 4307835 gjp
gjp's picture

After a short aberration to begin the year, back to your usual programming: stocks up, bonds up, dollar up, commodities down.  An American love story.  The chosen people.  Keep printing Ben/Janet, the world will just keep sucking it up it seems.

Tue, 01/07/2014 - 10:53 | 4307865 Atomizer
Atomizer's picture

Look at DXY

Tue, 01/07/2014 - 10:58 | 4307888 akak
akak's picture


Tue, 01/07/2014 - 10:54 | 4307871 Xibalba
Xibalba's picture

Gold and Silver drop due to FED CHAIRWOMAN confirming she will debase the USD further.  

Tue, 01/07/2014 - 11:02 | 4307903 youngman
youngman's picture

I would have thought the Yellen put would have been good for a jump in gold....she is going to print...more than Bernanke ever did...she will hit the 10 trillion mark for the Fed....easy....a woman can never say no ....

Tue, 01/07/2014 - 11:12 | 4307945 orangegeek
orangegeek's picture

CRB is tanking - largely due to dropping oil prices


most markets have rolled over - but US indexes still move higher


gong show

Tue, 01/07/2014 - 11:17 | 4307968 DUNTHAT
DUNTHAT's picture

<a href=""><img src="" alt="Yen" width="480" height="480" class="aligncenter size-full wp-image-2977" /></a>


<a href=""><img src="" alt="Wheat" width="480" height="480" class="aligncenter size-full wp-image-2976" /></a>


<a href=""><img src="" alt="USDollar" width="480" height="480" class="aligncenter size-full wp-image-2975" /></a>


<a href=""><img src="" alt="ThirtyYrBond" width="480" height="480" class="aligncenter size-full wp-image-2974" /></a>


<a href=""><img src="" alt="TenYrNote" width="480" height="480" class="aligncenter size-full wp-image-2973" /></a>


<a href=""><img src="" alt="SwissFranc" width="480" height="480" class="aligncenter size-full wp-image-2972" /></a>


<a href=""><img src="" alt="SoybeanMeal" width="480" height="480" class="aligncenter size-full wp-image-2967" /></a>


<a href=""><img src="" alt="Silver" width="480" height="480" class="aligncenter size-full wp-image-2966" /></a>


<a href=""><img src="" alt="RoughRice" width="480" height="480" class="aligncenter size-full wp-image-2964" /></a>


<a href=""><img src="" alt="Real" width="480" height="480" class="aligncenter size-full wp-image-2963" /></a>


<a href=""><img src="" alt="OrangeJuice" width="480" height="480" class="aligncenter size-full wp-image-2962" /></a>



<a href=""><img src="" alt="MexPeso" width="480" height="480" class="aligncenter size-full wp-image-2955" /></a>


<a href=""><img src="" alt="HO" width="480" height="480" class="aligncenter size-full wp-image-2949" /></a>


<a href=""><img src="" alt="Gold" width="480" height="480" class="aligncenter size-full wp-image-2948" /></a>


<a href=""><img src="" alt="FeederCattle" width="480" height="480" class="aligncenter size-full wp-image-2947" /></a>


<a href=""><img src="" alt="Euro" width="480" height="480" class="aligncenter size-full wp-image-2946" /></a>


<a href=""><img src="" alt="CrudeWTI" width="480" height="480" class="aligncenter size-full wp-image-2945" /></a>


<a href=""><img src="" alt="Cotton" width="480" height="480" class="aligncenter size-full wp-image-2944" /></a>


<a href=""><img src="" alt="Corn" width="480" height="480" class="aligncenter size-full wp-image-2943" /></a>


Compliments of :

<a href=""><img src="" alt="Copper" width="480" height="480" class="aligncenter size-full wp-image-2942" /></a>


Tue, 01/07/2014 - 11:20 | 4307982 muleskinner
muleskinner's picture


One troy ounce of gold will yield 13.347 barrels of oil.

If oil was priced at 2.00 in 1910, then one double eagle would buy 10 barrels of oil.

Either oil is underpriced or gold is overpriced.  Gold at 1000 and oil at 100 would be in line with historical prices with gold as standard to determine a value, oil.  Oil at 1.60 per barrel ca. 1910 bought 12.5 barrels, which places gold at the 1250 frn level with oil at 100. 

Got to meter the oil too, not just the electricity. 

Electricity, a man-made resource that became a commodity.  It is now the number one commodity, thanks to oil and coal and nuclear and wind and solar and water.

Thanks to Nicola Tesla.

When Tesla finished wiring Niagara Falls and built a 400,000 horsepower hydro-electric power plant, JP Morgan, the cat who had the bucks to build the plant, observed his work and said to Tesla, "Where's the meter?".

No electricity would be far worse than no oil.

Luckily, there is plenty of electricity, along with all the oil.

Long utilities.

Loss of gasoline sales due to weather problems, nobody can move around, spikes the price of NG.

Tue, 01/07/2014 - 14:18 | 4308649 Kirk2NCC1701
Kirk2NCC1701's picture

+1 for good research, clear thinking based on math. 

I say the following half joking, half serious and in keeping with my avatar (purely as a metaphor for rational innovation), when I say...

Unless you're from another universe, the laws of this one suggest that basing money (i.e. 'honest currency') not just on (a) "good faith of a free market", but also on (b) a Precious Metal  (PM) and (c) on Precious Energy (PE).  Thus, in a universe where we use both matter and energy, it only makes sense that we index money on the most precious forms of each.

A year ago I teased ZH blogger "Paul Krugman" that he adopt monetary economics based on the PM 'Latinum' and on Dilithium Crystals.  Applying these Trekkie concept to our world, I suggested that he base national currencies on their supply of PM (Gold+Platinum) plus Energy (Watts).  I even teased him that such a work might earn him another Nobel Prize (Swedish Central Bank Prize), and that I'd be happy to collaborate with him.  It would not surprise me that Paul "does not play well with others", that his ego prefers the limelight for himself, and that he'd therefore prefer to plagiarize and write this as a solo Opus.

Whenever this "Big Reset" that like to discuss on ZH comes about, it still makes perfect sense to adopt a 2-dimensional system of PM + PE, rather than on just Gold.

Perhaps this is not what "gold people" (rational fans, lovers, purveyors, traders, shills, speculators or fanatics) want to hear with their 1D world-view ("Gold and nothing but gold... well, maybe silver too"), but it does not contradict their view.  It merely EXPANDS on it, giving all nations the chance to base their currency on Precious Assets (PM + Energy) that can meet the various requirements for "money". 

Furthermore, using "electronic/cyber/crypto" currencies for daily use in private and public commerce is also consistent with the above -- when e-money is indexed to the above assets plus "Good faith of a free* economy".

   * 'Free', insofar it has a level playing field (robust rules + oversight + enforcement), to prevent manipulation, cheating or theft by individuals or groups, or by politicians and central bankers.

If nothing else, I hope it gives clear-thinking and rational people something to mull over.

Tue, 01/07/2014 - 15:01 | 4308802 css1971
css1971's picture

Average gold to oil ratio is closer to 15:1. We're a bit below average, if it keeps dropping 10:1 and lower is back up the truck territory.

Tue, 01/07/2014 - 11:26 | 4307993 10mm
10mm's picture

I bought a case of shotgun shells (250 ct). Guy retired from POOlice Dept and has a stash of ammo. Paid 150.00 cash for Winchester Super X #9 Pellet Buckshot for .64 a round. Avg price is anywhere from 1.00 upwards.

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