Let's start with gold. First, gold is a proxy for inflation expectations. If traders are concerned about inflation rising they will bid up the price of gold as a hedge against perceived or real inflation. The reverse is also true.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uHFM--01u9S8-mdkzpF-gSCMyS50lPAFL-a4WEYpbBKiNREPtRpcGm1V6q2oF89JVVUNBqP7B6XR9tPghcRERiTGdSyia1JGfyvV_a7o8VvFfVhnq2eNgVes_rLlHZOA=s0-d)
The three year weekly gold chart is in a clear bull market. It has continually moved higher, consolidated gains and then moved higher. This is a good example of what an extended rally should look like.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_sXaggdFzJnLNm3wMIjxohJj-6mshK7Fh09f_4QjQAhlty4EtQQ-Q1qStSkEHlWZWM3SaE_hvVTVfzQHlJq5ZDDPGBErJEg-fFYuLvx99sl-6aEJI0GziYnHrzT=s0-d)
On the daily chart, notice the following:
-- Gold consolidated in a triangle from mid-April to late June of this year
-- Prices have broken through upside resistance from the triangle
-- The shorter SMAs are now above the longer SMAs
-- All the SMAs are moving higher
-- Prices are above all the SMAs
This chart is short-term very bullish.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_ud2pzpFKceMI1ZazN-_znB7KD3DrlEiIVNHnv1HE1AxohyxNpjYymPpCGJhArKbo6rSMzYkxH2l5D2eOb0-3d28kimLIZe2Yab1XwyNktPKFvBF94YuUwP=s0-d)
On the weekly agricultural prices chart, notice that prices are forming a double top. This is to be expected for several reasons. First, nothing cures high prices like high prices. In other words, as prices increase they lead to a change in the nature of supply and demand -- either people will demand less (unlikely with food) or more supply will come on the market. Either way prices start to drop.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vnWW_dvflFwY9LA2yRpEPm70H43oqZL7goKqfBoTbeKOZbsczu4GkVF3_fBmOZ07tDc-jCVnMA7qErrUKc6mlajPWosB2MthQQZOKhPw6GIj4PDYw=s0-d)
On the daily chart the double top is clearer. Also notice the following:
-- Prices have moved bellow the 10 and 20 day SMA.
-- The 10 and 20 day SMA have both turned lower
-- The 10 day SMA has crossed below the 20 day SMA
-- Prices are currently using the 50 day SMA as technical support
The recent run-up is a direct result of the Iowa floods. As the flood waters receded, the reason for bidding up prices disappeared. Also note that before the Iowa floods prices were already dropping, indicating a change in the market's psychology. This chart is shifting from a bullish to a bearish chart, but hasn't quite made the transition complete yet.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uz8gRb1WYsKAFyZ9BgQKb6StExtD2Nd0vk4HTVDmQCM9Oc9x8v9ppoCeqJ1GQOiV1EhUTiwlyr55kNR__ZzZ-pTa0waF92gbBhyl9q31dJzo4-RoiT7Vbe8m-_=s0-d)
Overall, the CRB is still in the middle of a strong bull run that started in mid-2007. Prices have continually moved through upside resistance, consolidated gains, and then moved higher.
![](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vhYArA8Mpepqztl3ShCdWqz85Z6kXx7wcBEIPWln2XPrWTLtS4nt19-V0fKx_G7rVtn7jKcBz-7BRUNEmQband30c1bWeCdU3WKj9wMX8pUridi7KJDL8NSu4=s0-d)
On the daily chart, notice the following:
-- Prices have been rising since late March, although the 420-430 area provided a great deal of upside resistance
-- Prices broke a mini-rally that started in June
-- Prices have now dropped a bit and are consolidating in a triangle pattern
-- Notice that prices and the 10 and 20 day SMA are bunched together. This is still bullish, but a bit less so then the other charts we have seen.
-- Also note the 10 day SMA is now headed lower, although it is still above the 20 day SMA
-- Prices have moved below the 10 and 20 day SMA
-- Note that in the past, prices have used the 50 day SMA area as support. They may be looking to do that again.
Overall, this is still a bullish chart, but less so then others we have seen. There are some incredibly strong bullish trends, but it looks as though we're going to see a bit of a consolidation or correction in the near future.
So, we have gold telling us inflation expectations are increasing. With oil in a rally that shouldn't be surprising. However, agricultural prices are dropping which is putting some downward pressure on the CRB.