What's Really Going On

After a wild and crazy Globex opening, the metals have rebounded. Is the massacre over? Maybe.

As you can see on the charts below, the PMs are going to try to form bottoms tonight and Monday. Whether they will is another question, altogether.

{​CHARTS REMOVED. USELESS WASTE OF SPACE.}

With the margin hikes that go into effect tomorrow evening, you should still expect a lot of volatility overnight in London and on the Comex tomorrow. However, it is likely that we are fast approaching the point where everyone who is going to sell has sold. When that happens, you are left, of course, with nothing but buyers and UP goes price. Of the two, gold looks to be the closest to the bottom and safest to buy. It has stopped twice now almost exactly at its 100-day moving average (around $1633) which tells me that there are bargain buyers willing to step in here and halt the slide.

Silver, on the other hand, has been beaten so severely that it is almost unrecognizable. With the latest move by the criminal C/C/C, silver margins are now so high that it is going to be quite a challenge for silver to mount a significant rally. Yes, it will bottom and, yes, it will rebound but silver margins are now so high that it's going to be quite difficult for silver to generate the open interest necessary to drive the Comex futures price back to $50. Mission freaking accomplished, JPM. Well played.

Look, what do I know? I'm just a dope with a Macbook but, after a weekend of consideration and thought, here's what I believe:

1) Dodd-Frank and the pending civil lawsuit put "the fear of God" into JPM last spring. For the first time, they could see the writing on the wall for their ongoing, massive silver manipulation scheme.

2) They began covering their massive short position but, when no speculator selling and or profit-taking materialized, price quickly got away from them and they were forced to cover at higher and higher prices.

3) Sensing the risk of a runaway price, they orchestrated a huge, criminal $6 takedown of silver on the Sunday evening Globex, April 29.

4) This move started a cascade of selling from momentum-based, traditional and HFT algo traders.

5) Their friends and co-conspirators at the CME willfully played along by raising silver margins 5 times in 9 days.

6) Covering shorts at lower prices all the way down allowed JPM to significantly lessen their total silver short position. But they didn't get rid of all of it. Not even close.

7) Enter the CFTC and their next, scheduled meeting on 10/4 where, supposedly on the docket, is the discussion to finally mandate a timeline for the imposition of a strict, 1500-contract position limit in silver.

8) Caught flat-footed, JPM panics and institutes another ruthless attack in silver that is even greater in size and scope than the attacks of late April and early May. A 25% drop in 2 days!

9) By once again setting off algo-based sell signals, they are able to drive price substantially lower, all the while covering as many of their long-held shorts as the can without reversing the downward momentum.

10) Silver margin rates are now so high that the Comex has basically become a physical market. In the absence of speculators, there is little chance that silver will skyrocket again anytime in the near future. In this environment, JPM will be able to cover (buy) all of the shorts they'll need to, to be in compliance with Dodd-Frank. They'll be able to do so in an environment of stable prices, thereby alleviating the danger of steep financial losses, similar to what they incurred last spring.

11) Once position limits are implemented and JPM is, for all intents and purposes, out of silver, the price of silver will finally be free to trade. It will, in time, rally past $50 and move toward $100.

When will this be, you ask? Why don't you email Commissioner Chilton and/or Chairman Gensler. Maybe they can help you with that.

OK, so maybe that makes perfect sense. Maybe ole dopey Turd is onto something. If that's that case, why did gold get whacked? Same reason, actually.

Longtime readers and astute marketwatchers will recall that the month-long move in gold from 1650 to 1920 was almost entirely due to short-covering by The Cartel. Almost entirely. (This is why all of the "bubble" talk in gold is so much BS.) By early September, The Cartel found themselves in the same position in gold as JPM found themselves back in April. Solution: It worked so well in silver, let's try it in gold! Gold has now seen three margin hikes and the gold Comex is rapidly becoming an unleveraged, physical market, too.

Position limits will also apply in the gold pits but the short-covering in gold stems from a different kind of banker panic. Losses. Potential steep losses. The bullion bankers may be ruthless but they're not stupid. They can see what's coming just as clearly as you and I. They want no part of it. When the true nature of global demand for gold is finally realized, would you want to be short thousands of contracts with a cost basis near $1000? Me, neither. Like silver, however, a month ago they were covering into higher and higher prices. Something had to be done, and, there you go. Will gold halt its slide tomorrow? Who knows? Who cares? All I know is that it's going higher. Much, much higher. Very soon.

So what is your strategy from here? Keep buying physical metal but, for the love of pete, don't fiddle around with the criminal C/C/C. The ole Cartel's got a little "Mississippi Leg Hound" in 'em. Now that they've begun the process, it's wise just to let them do their business. When they're done, they'll get out of the way and leave us alone. Do understand this, however: The time for a massive, upward explosion in price is drawing near. Be patient and you will be rewarded. Do not get frustrated. Do not act in haste. The final days of Evil Empire price suppression are upon us. Prepare accordingly.

TF

8:25 am EDT UPDATE:

​As we await the Comex opening, I just wanted to prepare you for further volatility. Do not be surprised to see the overnight lows tested at some point this morning. I must admit that it was with incredulity that I mentioned $27 and $24 as possible lows for silver back on Friday. Now, not so much.

http://www.tfmetalsreport.com/blog/2481/ok-here-are-some-charts

Let see what happens today, a day when literally anything can happen. I'm chuckling to myself as I type this because, personally, I'm only out the money I have in December calls (and, frankly, for those there is still some hope). My stacks of physical, however, just keep getting shinier by the minute. If you can find supply, I strongly urge you to use this weakness to buy more metal. Enjoy the show! TF

425 Comments

Turd Ferguson's picture

Cousin Eddie

MODERATOR

more from Cousin Eddie

spiral_eyes's picture

What does the liquidation mean?

From azizonomics:

What does this last liquidation mean for gold’s long term fundamentals?

Not much. The liquidation in gold is occurring parallel to a liquidation in stocks, meaning that the DJIA:AU and FTSE:AU ratios (etc) haven’t changed much. Here’s the FTSE 100 from Friday:


Gold “crashed” in 2008 on a similar liquidation. Except — in real terms — it didn’t:



That “crash” between January 2008-9 was really a small correction in the long-term downward trend in the amount of gold your dollar can buy.

The next few months may be tougher for silver.

From the FT:

“Gold and silver are very different beasts,” says Kathleen Brooks, research director at Forex.com. “Gold has surged to record highs in recent weeks, because it is a haven and it is a good store of value in times of economic uncertainty. By contrast, silver has industrial uses, so is much more closely connected to the global economic cycle.”

She says the threat of another recession has weighed heavily on the price of silver: “The grey metal’s uptrend in 2010 and part of 2011 was fuelled by expectations of a strong global recovery and also by weakness in the dollar.”

“While the dollar remains weak, the growth outlook has deteriorated markedly. Unless expectations for the global economy change or the US Federal Reserve embarks on more policy stimulus, then silver may be in the doldrums for some time.”

Simply, global financial engineers and central planners do not have the stomach to watch asset price slumps, margin calls, liquidations, a cascade of defaults, and debt deflation — it's too threatening to their Keynesian comfort blankets. I expect gold to fully rebound to well over $2,000/oz once the next flood of central bank liquidity commences and the perspective shifts back to dollar debasement. Silver may be in the doldrums for a while longer, but silver is such an industrially critical metal that I fully expect industrial demand to keep the price significantly above 2008 lows. There will be little respite for Blythe in liquidating her short position.

Kegfreak's picture

Third

Didn't even read anything yet and the Steelers are kinda sucking.  I NEED THIS!

Edit:

Thank you Turd!  Being a silver bug, I appreciate the info and agree for the most part.  I'm backing the truck up but keeping it in neutral until we are under 30.  If I miss it, no big deal.  I'm still dollar cost averaged under 32.

I also want to suggest a convention/get together in Vegas for all of us turdites.  A weekend of PM talk and fiat expansion at the roulette table could be fun and therapeutic.

Marcus's picture

My 2 cents

I'm not going to make many friends by saying this, but I can easily see gold continuing its plunge below below $1500 and silver getting bludgeoned down to $22 (and it would still be in a bull market, for crying out loud). Nope, I'm too chickenshit to try catching any knives and the decline thus far has been fast and furious, with more likely on the way. How do I know this? I don't. I'm just guessing based on a gut feeling. I hope I'm wrong, but like I said, I ain't buying here.

Alex Costa's picture

Thanks TF

Great read for a Sunday evening. I'm thankful I discovered your blog.

sir's picture

This is as good as the road map on the old site

Thank you once again Turd, for explaining it all so clearly.

I bought a bit of physical silver this morning (aus) as US$29 seemed too good to pass up.

I wish I had more fiat to spend on phys gold but nevermind.

Shill's picture

Interesting stats from last

Interesting stats from last week from July TIC data...

ISRAEL HAS DUMPED 46 PERCENT OF ITS U.S. TREASURY BILLS; RUSSIA 95 PERCENT

19-SEP-11

...article...
http://www.cnsnews.com/news/article/israel-has-dumped-46-percent-its-us-treasury-bills-russia-95-percent

¤'s picture

Thanks T

Should be a interesting overnight session to watch.

brad_pitts_betterlooking_brother's picture

TF and the rumor

so... what about the rumor you alluded to a few posts back?

dead end?

Dolomite's picture

Those old Mississippi Leg

Those old Mississippi Leg Hounds won't shake any shiny from these pockets!  I think Turdites have been the Leg Hounds all along with the cartel wearing "short" pants! cool

redwood's picture

Wow ! Molleyratchet (from

Wow ! Molleyratchet (from previous thread), nice of you to share that with us.  Keep us up to date with your communications.  It could affect many people's lives.

Air Garcia's picture

Excellent Point there

However, it is likely that we are fast approaching the point where everyone who is going to sell has sold. When that happens, you are left, of course, with nothing but buyers and UP goes price.

Excellent point. 

HeNateMe's picture

@Kegfreak - Vegas Weekend

I am there for a Vegas weekend!  I would love to hang out and talk silver in Sin City. A weekend with Turd and the gang?  Dude, that's like my #2 fantasy behind my wife, Amy Adams, a slide whistle, and me.

Seriously.  I am DOWN for a Turdite Vegas retreat!!

HeNateMe

Economical Disaster's picture

BANG SILVER DOWN $1.60

GOD

mouser's picture

SO FAR in Asia the precious metals rout continues

Looking rather scary out there. Appears even Asia not seeing this as a buying opportunity on silver and gold. Copper, lead and zinc up a tad so far , and crude kinda flat. So it appears the attack is on real money, and the point seems to be propping up phony baloney, as in US $$. Apparently the more greenbacks there are being created ( out of thin air) , the more value they have. Pardon me if i dont quite get it.

schmederling's picture

Not over.... not yet...

IMHO.. this is still not over...  I have been saying for a couple days now...

Test the low for silver in the low to mid 20's and GLD to test the low the mid teens....

Could expect to see a small recovery up before the final turn down... careful not to get caught!!!!!!!

stoneeh's picture

You have approximately 20k$

You have approximately 20k$ margin vs the 150k$ that a 5000 oz silver contract is worth. In my math that is still 7,5x leverage. Hardly can be called a physical market yet.

We have margin hikes in effect as of begin of trading Tuesday, and we have options expiry on Tuesday. Prices should continue to fall, or at least not rebound sharply, until Tuesday is over.

small_potatoes's picture

I appreciate the different perspectives I read on this site.

In light of that I welcome anyones opinion as to whether I should convert some of my silver stack into gold at this time. BTW I'm a stacker, not a trader.

Waffen's picture

I second, in regards to what

I second, in regards to what the rumor was about?  Even if its now proven false, its hard to sit by with no answer as to what it was.

redwood's picture

Not over tomorrow, or next

Not over tomorrow, or next month, or maybe not till next year, but it WILL be over....and that's all that really matters.  You only get caught if you sell.

Hagarth's picture

UK Increases Treasury Securities....

by 245 Billion to 352 Billion in the past year, from 107 Billion.  As well Canada increased it holdings in the past 18 months from 24 Billion to 83 Billion dollars.  Turkey 56.9% and Brazil 25.2%, have also increased their holdings, likely for political purposes rather than economic as has Columbia which is vying for a free trade deal.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

Waffen's picture

lol.. gainesvillecoins is

lol.. gainesvillecoins is down over sunday night.  Nice move, routine updates on a night like this, of course.

Dealers need to hold the line.  Honestly I cant imagine any of them have anything to sell that would be very profitable

grebel10's picture

Margin hikes speaks for itself

Why else would they increase the margins unless they expect buyers to come in? If they didn't expect buyers then what would be the purpose of a hike? I'm going to keep my eyes on the open interests big time they had a small loss on Thursday let's see Fridays and the first two days of this week. If they hit bottom and start rising. If so then game on!

ScottJ's picture

Be careful of being lulled to sleep....

Look how quickly greed turned to fear... when nothing has changed. What's that motto?

Buy fear/blood.

Sell greed/exuberance.

I think this explanation you so kindly have written has merits, but at the same time there is much more to the story than meets the eye.  This story focuses too much about JP Morgan acting as a separate entity from the Federal Reserve and the global financing system.  This is not the case at all.  The owners of the morgue and the owners of the Fed are all in the same conversation circle.  Bernanke is nothing but the spokesman, and a good one at that.

All western currencies are tied to this gold and silver trade because the US Dollar is the reserve currency of the world.  The physical gold and silver represent the coming of a new system and out with the dollar. Physical will be the sign of things to come, and I think it is really starting to show itself now.... I fear you may be suggesting a false sense of security to imply that "this trade is over for now".... when it may have just taken off to the next level. 

The emotions that vary among this community depending on what the comex future price is (when it is manipulated upon and not representing the real price of physical gold and silver in our understanding) at a given time is quite intriguing to learn from.  I have done a lot of learning myself, teaching myself a lot of unpleasant truths about my own mindset... but hey we are all learning here right?

Maybe it is just me, but something so important as the price of gold/silver is not to be threatened by something as petty as a group of "rogue traders" who decide to go long.  The patterns that gold and silver make are far from normal trading behavior.  Everything looks algorithmic to me.... and even preplanned to a certain extent.  How hard would it be to know of the events that are going to transpire when you are the creators of this whole scheme....

To say that these banking entities have ever "lost control" of this trade is highly dangerous of being ignorant to a greater control scheme at hand.  I worry a misunderstanding of this power's scope and what it may foreshadow for our everyday life.  At least in my current opinion....

JP Morgan has bigger concerns than the losses on their short positions.  These losses don't exist in the mainstream perception, and the realized losses won't either.  Who knows how these shorts are "financed," but they have a direct feed into all central banks, especially the FED.

Something bigger is going on here.... that is all I am saying..... and I think there are a lot of people in this community are starting to articulate it very nicely.  Thank you everyone here for participating in what is going on.  What a testament of what people can achieve when they work together.

For it takes the good people of the world to do nothing for the tyranny to arise.

Being receptive to all ideas and to constantly be re-arranging your perception of reality is of upmost importance these days.  Don't be afraid to stretch the imagination.  Even if you find yourself to be wrong in the future, you can never get anywhere without taking risks... mindset included.

-

Humbly,

Scott J

Wallyworld's picture

Gainesville came back online

Gainesville came back online for about an hour and then when silver dropped below $30 it went off line again. I was looking to buy a few ozs when we got down to about 29.50.  The way things are going, it's probably going to dip lower yet.

MontyHigh's picture

Monty Unexpectedly Finds Himself With Good Reason To Be Bullish

Simultaneous Gold And S&P500 Stocks Hard Drops
 

This part of my analysis of the current gold situation looks at previous cases where the price of gold and the general US stocks (as measured by the S&P500) drop "hard" as they did this week.

20110924goldspx 
 

The above chart (thru the magic of GIMP, the "free" photoshop program) provides a simultaneous 10 year view of the S&P 500 5-day rate of change and the price of gold 5 day rate of change. Thin red lines near the bottom identify those occasions where gold fell more than 7% in five trading days while simultaneously (or nearly simultaneously) the stock market fell by at least 5%. There are five such occasions: Mar 07, Sep 08, Oct 08, Mar 09 and Sep 11.

Here's gold's current situation:

01

First gold was a safe-haven (rising while the general stock market fell), but then we had (just this week) a double-drop where both stocks and gold fell hard. The gold silver ratio pops up as gold and stocks plunge. What comes after this plunge is yet to be revealed.

02 
 

In march of 2007 gold was rising with the stock market, but the stock market started falling before gold. Gold and stocks plunged together for five days with a gold silver ratio pop and then gold and the stocks recovered with both reaching levels that exceeded the start of the double-drop. Nice.

In September of 2008 gold had been falling for a while but recovered a little as stocks faded. The last few days are a lot like Mar 2007. The double drop lasted 7 days accompanied by a gold/silver ratio pop. A stiff gold recover ensued (easily topping the start of the double-drop) while the stock market continued to plunge.

03 
 

In October of 2008 (scary days), after the recovery from September completed (again gold rising, stocks falling), the double-drop commenced upon a stock market recovery failing. The gold/silver ratio popped during the double drop. After about three weeks of bottoming, gold started a nice rise, exceeding its price before the double-drop about 8 weeks later. The stock market during this period bottomed and recovered a bit.

04 
In March of 2009 (the end of the 2008 financial panic), gold was rising while the stock market was tanking when the double-drop began accompanied by a gold/silver ratio jump. The ensuing recovery in stocks was quite impressive, but gold did not immediately achieve pre-double-drop levels.

So, the pattern we generally see associated with double-drops (where gold and the S&P 500 drop hard) is:

  1. Gold rises while the stock market starts falling.
  2. The stock market falls hard and gold goes with it. Trader Dan is probably right (click here) about why this occurs: Leveraged Hedge funds are selling gold, either to protect year-to-date profits or to avoid margin calls on other leveraged positions (stocks and commodities).
  3. Once those hedgies have sold there are no more sellers and the strong hand buyers of gold step in. Gold has a nice rise immediately thereafter up beyond where it was when the double-drop started. The only time that gold did not recover that level (but did recover significantly) was at the very end of the big financial scare (Mar 09). I don't think we are at the end of the current financial scare, do you?
 
This result is quite different from what I expected (and quite different from what I concluded in my previous post). The fundamental explanation seems sound and more of a match for the current circumstance than that of the previous post. This leaves me unexpectedly bullish. I'm expecting that I'll hold my options at least until the start of the current double-drop is achieved (around $1800). If this works out I'll get quite a bit of fiat back.
 

MontyHigh, www.worldofwallstreet.us

20101212worldofwallstreetbusinesscard
 
Turdle GG's picture

10 year gold bull market in photos

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Nugget_0203.jpg

Nugget0405.jpg

Nugget0607.jpg

Nugget0809.jpg

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Bezalel's picture

Nations Unloading U.S. Treasuries

China supposedly has a huge number of unsold condos, so they could have a crash in the real estate market. Combined with the global recession, China may not be exporting many doodads. So how will they feed their people (or their army)? If it comes down to unloading their gold or their U.S. treasuries, what do you think they'll do? Considering how critical they are of the U.S. economic policies, I think they'd love an excuse to dump the dollar.

That would seem to be bullish for precious metals.

Waffen's picture

Its nice to see how Perth has

Its nice to see how Perth has improved the quality of their coins.  I ordered a 2012 kook kilo and must say i am very excited to see it.

BASEBALL 13's picture

Be careful of being lulled to sleep....

"The owners of the morgue and the owners of the Fed are all in the same conversation circle."

First it was Obama's "Attack Watch" site encouraging people to report on their neighbors or anyone else defaming the pres. Now the Fed is using cyber space to accumulate intel on anti-Fed forces...

http://www.zerohedge.com/news/here-comes-fiattackwatch-bernanke-goes-watergate-prepares-eavesdrop-everything-mentioning-fed

Big Brother IS watching YOU!

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