Commodities Trade Differently & Always Have

Wheat Vol 5 & 10 Years

 

QUESTION: You said gold trades in bursts? This seems to explain the nonlinear patterns you speak of. Is this correct?

ANSWER: All commodities, including gold, trade substantially different than stocks or real estate, which is the slowest moving asset of all until the final 2 years. Pictured here is wheat back to 1200. Note that you see what appears to be a brain wave. Commodities trade different because they are subject to nature. Manufactured items can be produced on a more regular basis. But commodities are subject to weather and even mining is subject to discovering supply. Look at energy. The US was dependent on the imports and now it is virtually self-sufficient. This has been caused changes in production.

Wheat1220-1375

Here is wheat impacted during the Black Death. Two trends were clashing. There was a 50% drop in population so demand dropped, but also there was a collapse in labor so production declined. Prices rose because there was still a shortage of supply because land went vacant and that forced landlords to begin paying wages. There are always far more complicated trends involved in commodities.

WholesalePrices

War has also impacted commodities. But when gold was MONEY, it declined in purchasing power WITH inflation. When gold is a free market as present, it moves opposite to inflation because yes it too is then a commodity. Making gold money will NEVER prevent the cycles as illustrated above and it will decline in purchasing power with inflation that is in part driven by nature.

GCSV1560

Consequently, even gold makes runs to the upside (bursts) that are largely catch-ups. It does not remain constant even against silver. Gold is the worst investment from a inflationary standpoint if you expect it to track inflation for it does not and will not. From this perspective compare it to the Dow that rose from 1,000 to nearly 17,000 since 1980. You would have made far more money in stocks than gold. Nonetheless, Gold will rally sharply in a burst and catch up to some extent. It is a matter of time – not if. That is true of all commodities.

Gold2014

Cyclical analysis is all about defining WHEN such events will take place. Price is entirely a different aspect. The burst is just that – a rally that appears to come from nowhere playing catch-up because EVERYTHING has an international value. This will be laid out in our upcoming special report on gold to nail down that timing.