Significance of Rhodium Prices on the automotive industry

Rhodium is a metal in the platinum group metals group (PGM) that nobody really knows about in the investor world. It isn't traded online through futures, while gold, silver and platinum does. You can only buy this metal physically through dealers which makes this metal perfectly unmanipulated. So I am very keen on using rhodium prices to find correlations in the macro-economic world as they are a very reliable indicator.

Rhodium prices are extremely inelastic, which means that its price is very dependant on supply and demand. If there is no supply and a lot of demand for rhodium, the price will skyrocket. The rhodium market is very small compared to the gold market and will have high volatility and low liquidity. For example, prices in 2003 were below $US 1000/ounce, but went up to $US 10000/ounce, which is a ten fold increase (Chart 1).

Chart 1: Historical Rhodium Price

To read more about this trend correlation, visit: Significance of Rhodium Prices on the automotive industry.

China about to start trading in gold and silver futures

In one of my previous articles about silver, I told an anecdote about how it was impossible to buy silver in China and Hong Kong. There was little to no incentive from the Asian public to even look at silver.

Little by little, a trend change is emerging. China approved silver trading on the Shanghai Futures Exchange on 26th April 2012. This will increase the liquidity in the silver market in China and is a first step into combating the manipulation of silver. The trading of silver futures will start on 10 May 2012. Additionally, PAGE is starting to trade in June 2012.

To read my analysis go to: China Initiates Gold and Silver Futures Trading.

For more background info go to this article: http://samcheekong.blogspot.com/2012/02/page-which-stands-for-pan-asian-gold.html

Time to go long turbo gold/silver

I see positive signals everywhere on many blog sites about the price of gold moving higher.

First, the technicals are suggesting a surge in gold prices to above the $US 2000/ounce level. On Chart 1 we can see that a bounce could occur of the 50 day moving average above the 200 day moving average.

Chart 1: Gold Price

Second, Citibank analysts are suggesting price goals of $US 2400/ounce (Chart 2). Indicating that we are at the bottom of the upwards channel. Time to go turbo long gold.

Chart 2: Gold Price (Citibank Analys)

Third, I read an article about Mish Shedlock going into silver. You only go into silver if you're absolutely sure the gold price is moving upwards. If Mish goes into silver, he's betting on gold going up and thereby leveraging his bet with the silver price.

Chart 3: PHYS gold premium V.S. gold price

Fourth, we see that gold premiums are at an all time low for physical gold (PHYS) (Chart 3). Sentiment is very bearish (1.18% premium) and should indicate a bottom.

Last but not least, we saw gold being slammed down yesterday, but it moved back up later in the day (Chart 4). Bull markets always have sharp declines and gradual increases. This is also a bullish signal.

Chart 4: Gold slammed down and moves back up

And by the way:

ECB's LTRO I and LTRO II didn't work

On Zerohedge, the article of the ECB deposit facility sparked my attention. Apparently, banks are depositing their money into the ECB at an alarming rate (Chart 1).

Since the crisis of 2008, this deposit facility had risen a lot (250 billion euro), but has only recently skyrocketed to more than 800 billion euro.

This deposit facility at the ECB is a macro-economic indicator of market tension residing at the European banks. It is seen as a "safe haven" during economic turmoil in Europe. The higher this ECB deposit facility rises, the more banks favour the safety of the ECB deposit over higher returns in the interbank market. It shows that banks aren't lending to each other and also shows that appetite for European government bonds is declining.

Even though banks borrowed 489 billion euro (LTRO I) and 529.5 billion euros (LTRO II) in loans (at 1% lending rate) from the ECB, a lot of that money just went back into the ECB deposit facility at 0.25%. This means that banks are actually opting to lose money due to fear of a eurozone break-up.

To read the full analysis on this matter go to: The European Central Bank's LTRO Isn't Working Out.

Velocity of MZM slowing down

In one of my previous articles I monitored the velocity of MZM, to see if treasuries were likely to go up or down. The new numbers of velocity of MZM are out today at 1.434 (Q1 2012), down from 1.451 (Q4 2011). To see what this means for your portfolio, go to: Velocity of MZM going down.