I wrote last week of the expected takedown of gold as early as Friday, maybe Monday. It appears that the central planners have figured out that a quick smackdown will be met with immediate increased buying in the physical market. A slow decline causes investors to deal with sustained emotions of loss. How much pain can one take? The offset is the belief that the current environment is only temporary and that requires commitment.
The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."
The BDI has never recovered from the 2008 slide. This ought to tell us that the stock markets around the globe do not represent consumer demand for products.
![CropperCapture[180]](http://www.servias.org/wp-content/uploads/2013/05/CropperCapture180.png "CropperCapture[180]")
Source: http://www.bloomberg.com/quote/BDIY:IND/chart
If the markets reflected true demand for goods, they would be down well over 50% of their current levels. The central banks continue to “goose” the numbers hoping that consumers will be convinced of a real recovery but that is not happening. 23% unemployment in the U.S. is a constant reminder that all is not well. The BDI is not a popular index by the media so it has no focus placed on it by central planners. Instead, gold & silver continue to be where the battles are being fought. The mainstream media accommodates those who want to depress the price and this has been the case for the last twelve years. The markets have a serious disconnect with main street reality.
Interest rate suppression has caused investors to chase returns. Junk bonds are now yielding 5%. In 2008 junk bond yields were 20%. There is no way that a high risk bond should yield only 5%!
Gold buying volumes in China year over year are up four to five times. India is also a big purchaser. And the price of gold is declining? During the last smackdown there was the sudden appearance of a naked short sell order for 400 tons of gold. Who has 400 tons of gold? Goldman Sachs put the order in. This should be investigated but I seriously doubt that anyone will take the “perp walk”. These acts by central planners indicates desperation at the highest levels.
“The stock averages are over-bought, over-valued, over-loved and at record highs. Margin debt is sky-high, showing that there is a great deal of speculation built into this market.” says Richard Russell, a seasoned investment newsletter writer. I agree.
Power Consumption in China is no longer on a growth pattern:
If their economic engine isn’t supporting global growth, who is? This virtual reality being promoted in the markets cannot last indefinitely. When the curtain is finally pulled back, I would not want to be on the wrong side of the gold & silver market. The foundation of the shell game is deceit and a slight of hand where your eyes are misled by distraction. We are in the midst of a “super bubble” and the inside of the bubble looks calm… until it bursts.