In The Woods

The overnight action is the PMs is certainly encouraging and it would seem as though the half-life of central bank gold intervention is now about as long as central bank currency intervention. We all know, however, that it is still too soon to let our guards down. The quick recovery in price may only serve to embolden our increasingly desperate adversary, so, much caution is still warranted.

That said, I do not want to minimize the importance of the overnight reaction in price. The SNB attack of early yesterday sent the metals markets reeling. The attacks were timed to have a spillover effect onto the Comex and December gold traded as low as $1794 by mid-morning. In the old days, this would have sent gold into a tailspin as weak-handed longs began to race each other for the exits. They knew they were no match for the central banks and The Cartel.

Note, though, how yesterday was different. Once the Comex was closed, things began to improve almost immediately. Baby steps at first but then a full-blown rally overnight in Asia. Our longs are no longer weak-handed. They are resolute. They are buyers of size and they seem to pounce on discounted prices. This must be very discouraging to The Cartel. They are trapped in an untenable short position and they are being forced to cover at increasingly higher prices. HAHAHA!

To that end, I feel I must state this again. Please be sure you are making note of which "analysts" and "traders" are calling a "bubble". One only needs a cursory understanding of the Commitment of Traders data to deduce that there is no such thing as the CoT data since early August has clearly shown that the primary driver of price to this level has been Cartel short-covering. A bubble presumes retail buying. Average, everyday investors rushing in to buy something. The greater fool theory in action. Think dot com. Think Las Vegas real estate. Cartel short-covering does not create a bubble. As stated ad nauseam, the weekly CoT report is a very important, fundamental statistic. Any serious metals analyst knows this. Accordingly, any serious metals analyst knows that gold is not a bubble. The boneheads calling gold a bubble are, therefore, not serious analysts and should be ignored. Do not forget them, though, as they will most assuredly resurface in the future to once again proclaim an end to the gold bull. Remember who they are so that you can ignore them in the future, too.

The next question we need to ask is: Why are the banks so desperate to cover? Ponder that one for a while. I've got my thoughts on the subject. I'd be curious to hear yours.

Here are your charts for this morning. I see they are already becoming outdated as the metals have continued to rally while I type.

paper_9-8amgold.jpgpaper_9-8amsilver.jpg

Remember today that my warning of yesterday was not to sell, it was not to buy. I stand by that. With the active central bank intervention of earlier this week, it is still too dangerous to be boldly buying with confidence. For now, I am simply holding my positions. The only trades I made yesterday were to re-cover my October gold calls. You may recall, I have been long October calls but, from time to time, I've been selling some calls against them (creating a spread) whenever I felt that risk was high. I've been taking the "short" side off and  "opening up" my calls when I feel that risk is minimal. My current trading portfolio is as follows:

Long Oct 1900 gold calls vs short Oct 2000 gold calls

Long Dec 1900 gold calls vs short Dec 2200 gold calls

Long Dec 50 silver calls vs short Dec 60 silver calls

About 25% cash. Patiently waiting.

Lastly, I would be remiss if I didn't print the chart below. Several Turdites have sent it to me looking for my opinion and I feel it deserves your full consideration.

large_110901-gold-swiss-franc.jpg

About the quickest way to go broke trading futures is to go around declaring that "this time is different". However, in this case, I feel this time truly is different.

This chart covers the previous 32 years of Keynesian central banker-dominated thinking. We are at the end of the Great Keynesian Experiment. The current system will not be continuing much longer. A new paradigm will soon be emerging. Therefore, while price will still correct from time to time, historical correlations such as this one are of minimal significance.

I've got lasts of 1862 and 42.42. It will be a very interesting day so try to keep an eye on things. More later.   TF

312 Comments

Watcher's picture

Thanks TF for the charts and

Thanks TF for the charts and updates.

That chart tells me 'three taps and out'.

Jasper's picture

Truely amazing

Gold and silver along with our host is amazing.  These horses want to run!

Thank you Turd.

Bull's picture

Up

Good Morning.

AU up AG up!

unknownrider's picture

Thanks Turd. 

Thanks Turd. 

Tesla's picture

Good Morning and Thanks Turd

Ahahaha EE!

3294504117_fe02d5d101_o.jpg

beinki's picture

If I've said it once...

I've said it a hundred times.

Tesla's picture

NO Currency safe havens (re-post)

Looks like NOBODY want their currency to be the safe haven (as this would cause a recession type set up for that nation) Very bullish for our metals ..

I think the SNB currency devaluation is the start of a chain reaction of valuation management in other currencies / nations... Source was a peice on CNBC - interpretation is my own.

Waiting for more news to confirm (G7 is coming up right?) should be VERY bullish for the only real safe havens = gold/silver.

I will search for more dope on this topic and post links when I find it.

(I'm re-posting this because it is IMPORTANT)

chuckscharf's picture

This time really is

This time really is different, as the Swiss Franc is no longer the Swiss Franc.

readingalot's picture

To me that long term Swiss

To me that long term Swiss franc chart is superseded by their central bank announcing to the world this week that the franc really is a fiat currency.

Dr G's picture

Always nice to start the day

Always nice to start the day with a message from Turd. Nice that more and more often my personal thoughts are echoing the ones that he puts to paper. I appreciate the upward trend we have today, but am still somewhat hesitant.

If pit trading closes above 42.50 for silver, then I'm a buyer.

Agree with the above posters who state that the franc is now the Euro. Therefore, the chart posted has no more relevance other than to point out conclusively (which gold will help us do) that it has no more relevance.

​Nice that the Bernank is speaking today. Undoubtedly to assure us that the Fed has "tools" they can use if they need to. Also nice choice to set the stage for the Manchild's "speech" this evening.

agNau's picture

Bubble?

These same commentators will be screaming "buy" while I am selling.A Contrary indicator.

Meanwhile, back at the farm......I am buying shares. The HUI is a real trooper. I am still looking for 800+ this move.
MANY will be surprised with the speed of the rise.
As I have stated before we have now moved into the phase of the metals bull where more participants enter. We will see leadership move from metals to miners, and then back to metals. This has happened before. Watch, and position yourself accordingly.

Quintus's picture

Margin Increase

If I were the EE and wanted to create maximum fear and confusion, I'd pull a margin increase out of my hat about now - just when everyone is full of hope that the worst is over.

Maybe I'm jumping at shadows, but (a) It would be a masterstroke from their perspective and (b) I'm amazed that they haven't done it already given the massive volatility this week.

vegasrick's picture

It is different this time...

Turd, you asked: "Why are the banks so desperate to cover?"  I think you answered your own question when you also said, "However, in this case, I feel this time truly is different."  Here's an example:

The other night Paul Krugman, the Keynesian economist and deflationista, found himself wide-awake thinking about gold prices.  He says so in his September 6, 2011 New York Times op-ed piece entitled Treasuries, Tips and Gold. In his article Krugman explains how he finally figured out why he has been wrong about gold.  His explanation involves the Hotelling Rule, which in effect says that as a resource is depleted its price rises (duh…).  Of course, Krugman’s explanation is more long-winded and talks about the “flow demand for gold” and “choke prices”, but this kind of blather is what it takes to convince an intellectual that he’s right.  Now this is what is important about Krugman’s Eureka moment:  He now has a reason to buy gold, and so do all like minded deflationistas.  If a deflationista like Krugman is getting on board the gold train no matter the reason, then things are truly different.    

cwavec's picture

Please excuse me

Please excuse me if this post is out of line. I don't intend it to be but as I made
a similar post at the tail of the last thread, it appears it may not be seen very
much. So I am asking again here. This may even be a more appropriate location as
Turd makes extensive mention here of Central Bank intervention, Comex,
opening and closing times, COT report, spillover effect, etc..

I have some weird and possibly naive questions about the putative 7000 contracts
offered by the SNB some 20 or so hours ago.

Please bear with me as I am no expert but woke up this morning wondering about this.
So here goes:

Being offered after hours, were these 7000 contracts compliant with the Comex
"standard" or are they something else? Since it is believed that the "seller"
was the SNB, does anyone know, or have a guess, who the buyers might have been?
Who would have been around at that time to even absorb that much?

That said (asked), will this activity or open interest now show up in the COT
reports or is it something else even flimsier than, say, "real paper". Is it
likely, or even possible that the "buyers" of this stuff could stand for
delivery? If so, when and where?

Finally, if this stuff doesn't show up in any actual statistics, where will it have gone? Does it have to come back into the market as long interest? Could it
be that a "left hand" may have sold something to a "right hand" and that
these hands might later "shake hands" so that in the end everything disappears
except the damage?

As I said, I am no expert and it would be interesting to see some others, better informed than I,chewing on this cud.

Travis Bickle's picture

Why are the banks so desperate to cover?

This is the exact reason in my opinion, there are now no other safe havens left in the world where money of size can hide, so the metals will absorb all the money looking for a safe home.  The banks have to know this.

OC15's picture

Subplant

The term "correct" with "manipulated down".

Thanks for your work Turd!

Dr G's picture

For your consideration:

For your consideration: Obama's speech tonight will unveil a job "plan" that will cost over $400 billion. Now, tax receipts aren't flowing in, and people are pissed. Where do think that additional $400 billion will come from? Why not just tack it on to whatever Ben is printing later this month?

http://www.cbsnews.com/stories/2011/09/07/eveningnews/main20103022.shtml?tag=contentMain;contentBody

argent rampant's picture

Thanks, Turd.

Can't say it enough. Sooooooo glad I found this site!

There are five categories of wealth: Spiritual, Physical, Intellectual, Relationships, and Financial. 
Pay attention to them all!
opalboy's picture

would'nt the difference be

that they capped the swiss franc?

Dr G's picture

@cwavec

I have no data for this, but just a hunch that it whoever dropped that massive amounts of contracts on the market could be the same parties that bought them back. I mean, why not? Dropping those lowers the price drastically (especially when stops are busted up) and gives you a chance to buy back in at bargain prices.

Tom L's picture

The Chart Above

This time it's different iff the Swiss Intervention is the inflection point in the currency markets, ie. a return to gold as the safe haven play.  In the past the Swissie was backed by gold, this time it's run to that line w/ no gold backing, b/c the Swiss sold it to get into the IMF.  So, it's safe haven status is mostly, in The Bernank's words, 'tradition.'

Now the Swissie is just another crappy fiat PoS.  Pigitha's better-looking sister.  But, it's still a P.I.G. pig.

So, yes, this time it should freaking be different.

Ta,

ScottJ's picture

Modern Day RoofTops...

Turd you keep getting better, appreciate the work you put into your posts, as I know how long it can take to put together a worthwhile piece, let alone with the consistency that you do!

What makes you that much better is that you adapt to what you become aware of, instead of staying the course with one perspective in which only gets at parts of the truth instead of the whole truth.

You are the modern day "shouting from the roof tops."

Yet -- Being mad is only the first step... then we must understand one another in order to create a new reality, as anger is not a basis for cooperation.

http://thehardrightedge.com/thesame/

The 7,000,000,000th human being will be born in 2011, each on his/her own individual cycle of life, with our own unique circumstances in which  manifests our reality.  For there is no inherit difference between any single human being on this planet, no matter how such an argument else-wise may be justified.  Statistically there is no root difference between any man, woman, or child of any heritage, as each of us are a culmination of circumstances in which we cannot consciously decide.  While we may differ in skin colors, languages, ethics, habits, beliefs, cultures, countries of origin, sufferings, injustices, struggles, luxuries, and overall environment, we all as individuals share a root common ancestry in which ties the human race together, better known as history.

Children of the world are taught by those who are older and have more experience under the pretext that age brings wisdom.  In this paradigm, the elders are the trustworthy holders of the future.  Yet the reality of the situation is far from this fading illusion.  For age and experience can be deceiving, as all individuals are all susceptible to being young or foolish to the greater perspective of history.

And the words of the prophets are written on subway walls, and tenement halls.

ericplatham's picture

New to the whole charting

But doesn't the 2hr Gold chart (dating back to June) look like it will continue to consolidate, given the powers that be continue to paint the top around 1900, until the FOMC meeting in late September?

Woods's picture

Check out HLLXF.....

Check out HLLXF on no news?

Moderator Washington's picture

Hello Folks!!

MODERATOR

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I particularly like #7  "Treat others the way you like to be treated".  Sounds like the Golden Rule to me.  If you just follow that, then you'll be in good shape.

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I think I'll sign off with that.  I'm happy to be here and happy to help.  I see green screens all around.  Let's have a great day, have some fun, and make some money!!

ModWash

Shill's picture

When I think of Swiss I think

When I think of Swiss I think of Cheese, with Ham, and hot mustard.

mrgneiss's picture

Thanks as always Turd for the

Thanks as always Turd for the great insights and sound advice.

Could the resilience in gold and silver be something as simple that the TPB know some form of QE will be announced at the end of the month (since they always get a heads up, well, the big banks ARE major shareholders in the private entity that is the FED, aren't they?) - and hence they are trying to cover as many shorts as possible before this announcement?  It seems to me that that S&P downgrade, even though hinted at, truly caught them off guard, and the EE thought they would be announcing more QE with gold and silver at much lower levels?

Then there is the Wynter Benton prediction that some nation would soon announce it had been accumulating silver as part of their reserves...........?

I'm sure everyone saw this from John Embry, one of Sprott's top guys:

When asked about silver specifically Embry replied, “The noted bullion bank, and we all know who it is, has an enormous short position (in silver), which can never be covered with real metal. They are moving heaven and earth to try to prevent the inevitable price rise. They will be overcome and the price will go berserk as a result of that. So once it clears $50, which I suspect it will do in the not too distant future, it’s onward and upward.”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/8_Embry_-_JP_Morgan_Trapped_Short_in_Silver,_Gold_Strongly_Bid.html

lamare's picture

This time it's different...

http://wikileaks.org/cable/2009/04/09BEIJING1134.html :

CHINA'S GOLD RESERVES
 
"China increases its gold reserves in order to kill two birds with one stone"
 
The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."

:)

http://wikileaks.org/cable/2009/06/09BERLIN725.html

According to Sueddeutsche Zeitung, "the Russians want it, the Chinese want it, and the Arab countries want it in any case, but in the West hardly anyone listens.  At issue is a new global monetary system, one that is more independent from the dollar, which is losing prestige the longer the economic crisis lasts.  In the meantime, the dollar is considered an unreliable weakling.  With every billion that the U.S. government and the Federal Reserve spend in Washington, the tone of the dollar critics is getting louder. And if the flow of money from Moscow and Beijing dries up, the Americans will be unable to pay for their economic stimulus programs.  The West still has it in its hands to shape the new global financial order.  If the West continues to ignore the proposals of the new economic powers, it is risking an uncontrolled change to a new key currency.  A sudden flight from the dollar would lead to further distortions.  Serious monetary turbulence would be the consequence with the corresponding implications for the global economy.  It would be better to introduce a broadly based basked currency that is based on natural resources and precious metals. In the past, there were many wars about gold.  This alone should be warning enough and an impetus to pursue a policy that would eventually replace the dollar [as key currency]."
 

In other words: the rules of the game have changed. Dramatically.

:) :)

 

Shill's picture

Moderator Washington welcome

Moderator Washington welcome aboard m8...

joe rocker's picture

That chart is over a year

That chart is over a year old...so what happened?  DID gold crash?  Gone sideways?

The thing that IS different this time...the Swissy is pegged to the Euro...isn't that the latest news?  So why bother watching it now?

Personally...I think everything does a crash (including the metals) before they pull out there "real" plan.  WWIII.

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