Will gold join crude and other commodities lower into the deflationary abyss by Bill Downey


	INTRA-DAY NEWSLETTER ~ Dec 12 2014 The deflationary scenario (one that GoldTrends has discussed for a few years now) continues to gain traction as everyone is jumping on the bandwagon. Today's articles are no different. They all warn of a major deflationary scenario unfolding. Since Nov 7th, gold has been the counter, but the pattern warns us that it's no slam dunk and gold prices can turn down also. A close above 1242 favors higher into the Xmas Holiday. Otherwise, we can still move lower. Watch 1217-1222. A close below there is a warning shot that gold can still drop next week. A close below 1199-1204 on Friday warns that gold is most likely heading lower along with everything else. (Gold charts and analysis for short term included after the articles) Presenting the $303 Trillion In Derivatives That US Taxpayers Are Now On The Hook For Submitted by Tyler Durden on 12/12/2014 Courtesy of the Crony bus (sic) last minute passage, government was provided a quid-pro-quo $1.1 trillion spending allowance with Wall Street's blessing in exchange for assuring banks that taxpayers would be on the hook for yet another bailout, as a result of the swaps push-out provision, after incorporating explicit Citigroup language that allows financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp, explicitly putting taxpayers on the hook for losses caused by these contracts. Oil Producers' Currencies Are Collapsing Submitted by Tyler Durden on 12/12/2014] Despite numerous interventions by Mexico, Russia, and Nigeria, the free-fall continues in their currencies. The Russian Ruble is the poster-child (down 40% since June alone - testing 58/USD today) but the crash in Mexico and Brazil is accelerating in the last week. Default risks are surging for all of the Oil-Producing nations with Russia topping 450bps (5Y CDS). Crude Oil & Treasury Yields Are Plunging Submitted by Tyler Durden on 12/12/2014 After a brief respite overnight, the selling of crude oil and buying of US Treasuries has resumed in the early US session. WTI is comfortably back below the $59 level and rapidly looking to test the $57 handle. Treasury yields are down 3-5bps across the complex with 30Y as low as 2.76% and 10Y 2.10%. With bond yields and crude 'oddly' correlated to the collapse in global GDP expectations (and stocks anti-correlated in their "just wait until next year" delirium), we wonder how badly this will all end. PPI Slides, Misses Estimates, After Finished Goods Prices Tumble Most Since July 2009 Submitted by Tyler Durden on 12/12/2014 Final Demand Producer Prices fell 0.2% in November, more than the expected 0.1% drop, for the largest deflation since October 2011. This leads to a 1.4% YoY PPI, the weakest since March and has fallen for 7 straight months. The driver - unsurprisingly - Energy prices fell 3.1% MoM (5th monthly drop in a row) with fuels & lubricants plunging 7.7% MoM and there is more good news - alcohol fell 0.1% YoY for the 2nd month. Beef/Veal prices continue to surge (+28.6% YoY). Core PPI was unchanged on the month, also missing expectations. Prices for finished goods moved down 0.7 percent in November, the largest decrease since a 1.2-percent drop in July 2009. Goldman Warns Greeks of "Cyprus-Style Prolonged Bank Holiday" If They "Vote Wrong" Submitted by Tyler Durden on 12/12/2014 Overnight the bank with the $58 trillion in derivative exposure issued a note "From GRecovery to GRelapse" which is quite absent on the usual optimism, cheerfulness and happy-ending we have grown to expect from the bank whose former employee is in charge of the European printing press. Here is the punchline: "In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point." Dear Greeks, you have been warned, and "don't vote wrong" as EU's Juncker urges the Greeks. (our thanks to www.zerohedge.com for the above articles) Gold Chart The upper mini blue channel is the one odds favored as 1st weekly resistance at so far it has held. We’ve combined two price points with an upper dual black channel line. This week’s high is going to be either the line touch we hit Tuesday or gold takes another stab at the mini blue line on Friday. If it happens to break above and close above 1242, odds favor higher next week. The 1254-1258 level then is the 2nd weekly resistance point. If the cycle has turned up, then the upper black channel should be reached next week. We have either peaked with the Tuesday high and are now going to head lower into the 23rd, or if we close above 1242, odds favor we’re moving higher. Support is 1212-1217 and 1199-1204. A close below those levels negate this uptrend potential on the short term. I’ve mentioned that I don’t like is the price pattern since the low. It’s choppy and overlapping and while we can move higher, it is still warning it’s a counter trend move. THE THINK BLUE DOTTED channel line I’ve added is to isolate what may have MORPHED into an impulse (bullish) pattern since the plunge during Thanksgiving. AS LONG AS WE CLOSE ABOVE THAT LOWER FAT BLUE LINE FAVOR WE’RE MOVING HIGHER. If we go into defaults and a liquidity squeeze, it’s not out of the question for gold to sell off with other markets. As long as we remain above 1210-1217 the odds tilt to the upside. We have reached that fat lower line on this week’s pullback. Now it is decision time for direction in the short term. A close below 1199-1204 warns we are going to move lower into the Xmas holiday and 1st target will be the 1180 area and then 1150. Cycles Here is the dilemma we face. We made a new closing high during the last 24 hours of the the short term cycle turn window on Tuesday. That means it’s possible that gold is peaking here and getting ready to turn down. ANY NEW CLOSING HIGH above 1242 on Friday (or later) favors we are going higher into the 23rd (plus or minus 72 hours). ANY CLOSE BELOW 1217-1222 puts us on guard, any close below 1199-1204 negates this outlook and will favor lower into year end. Be careful. It basically comes down to whether gold is going to join the “crowd” of markets going lower. If gold has entered a bull trend, it should continue higher. The deflationary turmoil that is spreading could certainly suck gold in. But when we get close to panic levels like this, it can also become a place where the worrisome begin to move in. It won’t take much to scare the shorts, that’s for sure. The opposite of course is true for the bears. A failure here could very well totally discourage the gold bulls. We need another push here with a close above 1242. That would tip the odds in favor of the bulls and favor a rally towards 1255-1272. If we close above 1256, favor higher towards 1272. Until we close above 1242, we can’t rule out the downside. Silver We’ve reached the point of make or break. If silver can move above this mini black dotted trend line it’s possible to head towards 18. Support is the lower thick dotted blue line and the moving averages at 16.62-16.94. Resistance is 1725-1734 then 1775. The short term trend is up but this is where silver has to move higher. A close below 1650 will favor a test of the lower black line at around 1610. A close below 16 will favor silver has peaked for the next two weeks. A close above the black trend line on Friday will favor higher into Dec 23rd (plus or minus 72 hours).

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Will gold join crude and other commodities lower into the deflationary abyss?