Saudi Purge Prompts Higher Prices for Oil, Precious Metals

Midday Monday, the commodity complex (especially gold, silver and WTI crude oil) took off to the upside, and, by the end of the day, had maintained their newfound levels, oil hitting a nearly three-year high.

This dramatic rise in the price of oil coincides with tumultuous incidents in Saudi Arabia, wherein 11 princes, four ministers and several former ministers have been detained. Some prominent businessman have also been placed on a so-called "no fly" list, as Crown Prince Mohammed bin Salman purges his enemies in an overt effort to considerate power in the kingdom.

Oil rising and Saudi unrest are not isolated events, as neither is the incidental visit by President Trump some months ago and the more recent visit by Trump advisor and son-in-law Jared Kushner.

The Saudis have seen their profits collapse as oil has languished under $50 for years, but the political shakeup may have more to do with overall foreign interests, primarily focused on investments in US companies such as Citibank and Twitter, via the kingdom's sovereign wealth fund.

Silver and gold also rising at the same time during the day as oil confirms that there was coordinated buying of commodities in the futures market. The move was far from insignificant and was presaged by a similar move to the downside in the complex on Friday, prior to the Saudi purge, which went public on Sunday.

With President Trump safely traveling in the Pacific, the intrigue is high that something major is afoot globally, recalling Trump's cryptic tweet a few weeks ago, "the calm before the storm."

It seems that the storm has arrived, at least in the middle East. Whether it continues to lash out across Europe and the United States is, at this time, still conjecture.

As has been demonstrated periodically in the past, commodity futures can be highly volatile and can have profound effects further into the supply and demand chain. If oil continues to rise, it may be time to take any number of protective measures, from purchasing a fuel-efficient vehicle, to selling the dollar, to buying precious metal in anticipation of a major - and long overdue - breakout.

While nothing in the interconnected world of finance operates in a vacuum, stocks could also feel some heat, though the markets have more than ample protection on the downside via central bank stealth and overt (Swiss National Bank) purchases.

It is apparent, however, that given the Saudi purge and the rise in the price of oil, something big is happening.

At the Close, Monday, November 6, 2017:
Dow: 23,548.42, +9.23 (+0.04%)
NASDAQ: 6,786.44, +22.00 (+0.33%)
S&P 500: 2,591.13, +3.29 (+0.13%)
NYSE Composite: 12,400.93, +27.87 (+0.23%)

Tech Wreck? Hardly. Stocks Shaky, But Steady Late Monday; Gold, Silver Slaughtered

Not to worry, the sky isn't falling... yet.

Tech stocks got bashed again, this time in foreign markets, after Friday's mini-meltdown, but cooler heads (or those more in control) late in the day, bringing the NASDAQ back to its best level of the day into the closing bell.

However, the S&P and Dow both suffered losses, albeit minor. What's interesting is that amid all the noise and clamor, gold and silver have been dashed, the selling merciless over the past week. This is the same pattern that developed at the onset of the GFC. As strange as it may seem, precious metals were liquidated before stocks, purportedly to make margin calls. Apparently, most of those in brokerage-land just think PMs are nothing more than hedges and fast cash in case of emergencies.

While that may be true, one wonders why such violent action in gold and especially in silver is occurring at this juncture. Sure, the FAANGs are overvalued and should be taken to the whipping post, but liquidation of PMs is a more serious business, though admittedly, quick.

If, indeed, margin calls have been making the rounds, there's little doubt that the PMs would get sold, and also no question that more trouble is on the horizon.

Tuesday and Wednesday are set for the FOMC policy meeting, so there may not be much in the way of wild swings until 2:00 pm ET on Wednesday, when the policy is set. There have been strong indications that the Fed will raise the federal funds rate by 25 basis points and this hissy fit in techno-land is unlikely to disrupt that.

The remainder of the week, after the FOMC meeting, should prove insightful for market participants. Continued weakness could signal significant trouble ahead and a serious turn of fortune for stockholders.

Stay tuned.

At the Close, 6/12/17:
Dow: 21,235.67, -36.30 (-0.17%)
NASDAQ: 6,175.46, -32.45 (-0.52%)
S&P 500 2,429.39, -2.38 (-0.10%)
NYSE Composite: 11,746.46, +1.73 (0.01%)

China's Commodity Carnage Crushes Crude, PMs

Overnight, China stocks fell as more poor economic data was presented, as hopes for a domestic recovery were sidelined by declining import and export data.

Additionally, commodity prices were negatively affected by government regulations which aim to crack down on speculation.

This translated into a very confused day for equity pros, though commodity traders apparently had the sell button surgically attached to their index fingers, with prices for oil down more than three percent while gold and silver took deep declines.

At the end of the day, stocks leveled off roughly where they began the day, though markets appear vulnerable to a downturn.

Monday's Mingle:
S&P 500: 2,058.69, +1.55 (0.08%)
Dow: 17,705.91, -34.72 (0.20%)
NASDAQ: 4,750.21, +14.05 (0.30%)

Crude Oil 43.24 -3.18% Gold 1,265.80 -0.06% EUR/USD 1.1382 -0.02% 10-Yr Bond 1.76 -1.07% Corn 369.25 -2.19% Copper 2.10 -0.19% Silver 17.07 -0.14% Natural Gas 2.10 -0.24% Russell 2000 1,118.25 +0.32% VIX 14.57 -1.02% BATS 1000 20,677.17 0.00% GBP/USD 1.4410 +0.03% USD/JPY 108.4335 -0.01%