Last time I checked, the price of soybeans, cocoa or orange juice had absolutely no relationship to whether Microsoft (Nasdaq: MSFT), Disney (NYSE: DIS), or Google (Nasdaq: GOOG) declined in price.

But these days, we’ve got a serious blurring of the lines between global marketplaces. In addition, the prevalence and ease of electronic trading, coupled with well-capitalized hedge funds, means we’re seeing all kinds of different markets having an affect on one another.

Not so long ago, it used to be that money typically flowed from one asset class to another – for example, from stocks to commodities. But that isn’t happening now as most players have either bailed out of everything completely, or are selling assets to meet margin calls.

For commodity-watchers like me, I’ve looked on in surprise (as well as a little frustration) as commodities head the same way as stocks and pickings are slim. All the different commodities have suffered a hammering over the past few months, as the stock market’s mess spills over.

The selling wave has taken all the major commodities to new lows for the year, with most markets giving back all their gains for 2008 and more. Let’s see if we can pinpoint the next moves…

Oil’s Slippery Downward Slope… Have We Hit Support?

There’s no question that the oil has dominated the commodity headlines this year, topping out at $147 a barrel back in July.

But somewhat quietly amid the financial crisis, stock market slump, and bailout talk, oil has bounced down to around $60 a barrel. In turn, this has resulted in gasoline prices declining to the $2 a gallon level.

Although there might be more downside to come, it seems we may have hit a temporary support area here.

Natural Gas Could Be Nearing A Bottom… But We Need More Evidence

Oil’s partner in crime – natural gas – has also endured a vicious selloff. Having topped out in July, it’s given up just as much ground as crude oil, with the December 2008 futures contract dropping a solid 8100 points from top-to-bottom. That’s a whopping $81,000 change in equity.

Like crude oil, natural gas seems to have found a temporary support level as prices have consolidated a bit over the past two weeks and remained in the same area. In order to feel confident about a support level, prices have to tread water for a while without giving up more ground. We’re going to watch the price action for a while, but we could be getting near a bottom here.

Even The Safe Havens Are On Shaky Foundations

Ask most folks to name which markets are usually the beneficiaries of an unstable financial market… and you’ll likely get the resounding answer: “Gold and silver.”

Nine times out of ten, they’d be right. But not today. Even amid the economic turmoil, the safe haven hard asset metals can’t muster up any bullish action.

Sure, they got caught up in the bullish frenzy over the summer, just like the other markets. But when the music stopped, investors decided to bail out of the metals, too.

However, take a look at the charts and you can see that they’ve joined oil and natural gas in trying to establish some support. We can see evidence of this in the fact that neither metal has made a new low over the past two weeks. If the stock markets can find their footing here, then the metals may move up just the same.

As you can see, the December silver futures currently sit at $10.40 an ounce, while the December gold futures are trading around $753 an ounce – a far cry from their highs this year of $19.70 an ounce and $1,000 an ounce respectively.

If the market feels confident that the Federal Reserve’s bailout plan will work, investors could start dipping their toes into the long side of the market. If so, that could result in gold and silver moving higher. Until that happens, however, remain cautious, as it doesn’t take much for widespread selling to rear its ugly head again.

It seems that “support” is the word of the moment for the commodities sector. The rest of the markets (corn, wheat, soybeans, coffee, cocoa, sugar, orange juice, and cotton) are all trying to find a foothold and establish some support.

Having been torn apart in the nasty selloff over the past few months, though, it may take some time.

Source:The Commodities Buzzword Of The Moment: Support

I am thinking to myself that I would love to get a piece of that luscious arbitrage action where I buy the gold and/or silver futures at a low price while simultaneously selling the same gold and/or silver bullion at a higher price, telling the buyers that they must pay in advance and then wait up to a few months for me deliver their gold and silver, pocketing a hell of a lot of money on the buy-sell spread and the interest the money earns until the futures contract matures so that I can take delivery and settle up, and then spend the rest of my life on a wild, hedonistic spree of spending, spending, spending!

Then, sadly, I remember that such a plan requires money, and I don’t have any money because I have already spent all my money thanks to inflation in prices killing me, thanks to the damned Federal Reserve and the demonic, loathsome Alan Greenspan who was its chairman from 1987 to 2006, and who is directly responsible for all our economic problems; and every time I think about it, I get more angry, and I want to scream, scream, scream in my Anguish And Outrage (AAO)!

I see that I have gotten off-track, and I apologize for starting off with an idea of how to make a lot of money by playing the huge, gaping, unbelievable arbitrage opportunity between gold and gold futures, but then let it degenerate into a personal attack on Alan Greenspan, ex-chairman of the Federal Reserve, whom I despise for what he has done to us, and who deserves some cruel punishment for it.

Yet, I’m the one at the police station being held for “creating a disturbance” just because I helpfully informed a group of Girl Scouts at the supermarket to, as security video reveals, “Hang it up, you stupid kids, as your entire future has been destroyed first by the Federal Reserve under Alan Greenspan creating too much money and credit for almost two decades, and now Ben Bernanke at the Fed and Henry Paulson at the Treasury have grossly exceeded even those insane monetary excesses by huge, huge multiples of that!

“And in a matter of weeks, too…all of which guarantees roaring inflation and all its miseries and horrible, screaming pain and suffering for everyone, so that now you, and your parents, and your brothers, and sisters, and aunts and uncles and cousins and all the ponies and everyone you love will all die horrible, lingering, painful deaths of starvation and disease, crying out in ceaseless agony! Ya ever sing any songs about THAT around the campfires, you little doomed morons?”

I was quite proud of myself that I had “gotten through” to them, as they all ran off, screaming in terror, just like I do when I hear about this stuff! “Congratulations, Mogambo!”, I thought to myself!

However, this is not about what you can and can’t say to children, as it turns out, but about education; and for some reason, John Embry of Sprott Asset Management has never earned his Junior Mogambo Ranger (JMR) merit badge in “Mogambo Educational Initiatives (MEI)”, and thus is also shocked and appalled at my teaching methods designed to make sure that little kids grow up having the correct information about the true nature of the Federal Reserve and the government.

Apparently leaving the education of the masses to me and not getting tied up in the clutches of a vengeful legal system, Mr. Embry is thus free to be both shocked at my behavior, and to concentrate on other things, like this glaring disparity between the futures contracts for gold and silver versus the market prices of gold and silver bullion; and he probably figures that there are lots of greedy little bastards like me out there who are looking to make a pile of money with this luscious arbitrage opportunity, which leads him to conclude that some holders of the December gold futures contracts may try to take delivery of enough contracts so that there will not be enough physical gold in the Comex warehouses to deliver! Rising demand and zero supply! Wow! What will that do to the price? Hahahaha!

This would, of course, bust the whole “paper gold” and “paper silver” scam wide open on the commodities exchange, although Mr. Embry is quick to note that this would “prompt a claim of force majeure when the exchange cannot deliver enough real metal”, which is legalese butt-covering crap that says now that the crime has been uncovered, the commodity exchange negates the contracts, the guilty do not have to pay, nobody goes to jail or loses their jobs, and the investors get screwed out of the profits that they had coming to them.

The hapless investors thought they were going to get gold and silver at a low price, deliver it to buyers who have already paid for it, and everybody makes a fortune by when the price subsequently soars, thanks to governments around the world creating so incredibly much more money and credit so that governments can spend, spend, spend.

But now these investors get (probably at best!) their money back; and probably only then after years of legal wrangling where the lawyers end up with most of the money anyway! Hahahaha! Welcome to the full faith and credit of American markets! Hahaha!

If your nerves are on edge at the way I laugh so maniacally at such calamity, take comfort that gold will (theoretically, at least) soar when physical demand finally swamps physical supply, especially if the Europeans and Asians are serious about replacing the dollar as the world’s reserve currency with something else, as there is nothing else that will work.

One way or the other, for the last 4,500 years, gold has always preserved buying power, at least, while nothing else has, and sometimes gold was actually an investment opportunity because it was so under-priced. Like now! Whee! This investing stuff is easy!

Source: Gold, Faith and Credit