The Only Charts That Matter

Boy, oh boy. Lots of wailing and grinding of teeth this morning. Look, I know it's hard to see paper gold at 1610 and paper silver under 30. Frankly, it sucks. Again, though, I must ask you: Which fundamentals have changed? Additionally, why on earth would you sell your metal here and convert it back to fiat? However, I know it's hard and many of you feel like Clark Griswold. (Substitute Jamie Dimon or Jon Corzine for "Frank Shirley")

Now, of course, things can change. Perhaps we are at the beginning stages of a complete, global liquidity collapse. If so, I suspect we'll know pretty soon. For the time being, the correct analysis is this:

Gold and silver are simply oscillating down toward the lower end of the channel in which they've traded since the Great Financial Crisis of 2008. For those looking to capture some bargains and perhaps "catch the falling knife", your opportunity to buy is not very far away. Gold has momentarily caught a bid in the area of its 200-day moving average, near 1610. As I mentioned yesterday, I do not expect the decline to end there. I have high confidence that gold will soon trade down toward 1550. That will be your opportunity. Silver is similar but different. It might bottom near 28. It could stop at 26. However, I think that, in the end, it won't bottom until it reaches its long-term channel boundary, near 25.

paper_12-14amgoldw.jpgpaper_12-14amsilvw.jpg

Again, things can change and we must be mindful of the possibilities. I think paper gold at 1550 and paper silver at 25 are extraordinary buying opportunities BUT, IF PRICE CONTINUES TO DECLINE, THROUGH 1500 AND 23, we'll need to stop out any new trading positions and seriously re-assess where we go from here.

Lastly, many have asked how I could successfully warn you of this debacle a week in advance. Like most things around here, it's not complicated. Take a look at this chart of gold lease rates:

paper_12-14amlease.jpg

Again, the "lease rate" is the net rate of interest a bullion bank like JPM pays to a central bank like the Fed to borrow gold. The bank then takes the gold and sells it on the LBMA or the Comex. After painting the tape and initiating the beatdown, the bank can then cover the new short position, thereby reclaiming the gold it borrowed for return to the central bank. With one-month lease rates at -0.5%, the bank actually gets paid interest by the lender to borrow the gold. Its a win-win for JPM et al. They make interest (which they like) and prop desk trading profits (which they like even more).

After a lease rate-induced selloff such as this, the key to confidently calling a bottom will not only be technical price levels, but a lessening of negative lease rates, as well. IF, by later this week or early next, we see gold at 1550, silver at 25-26 and one-month lease rates back up to -0.3% or so, we'll be able to call another bottom similar to January. Stay tuned.

So there you have it. As I wrap up, we're down to 1602 and 29.10. Looks like the 200-day isn't holding. No big surprise there. Keep the faith.   TF

3:55 pm EST UPDATE:

Searching for a bottom? I think we're pretty close. These charts tell the story:

paper_12-14pmgold.jpgpaper_12-14pmsilv.jpg

And if you haven't read this yet, you should do so now. It might put a smile back on your face. You'll likely recognize many of the price targets listed in the report. (Full disclosure: Though I did work for Smith Barney for a few years back in the 90s, I did not write this report. blush)

http://www.zerohedge.com/news/citi-predicts-gold-3400-next-two-years

A full update later today. TF

266 Comments

Mudsharkbytes's picture

First?

What a rancid day to manage to be first.

Get it over with.

NW VIEW's picture

Silver Dollars

Colorado Gold has Maple Leafs at $31.84

TheFool's picture

Thurd!

Thurd! Now BTFD!

PaullyMoore's picture

Thursday

The U.S. government has $145B in treasuries to roll on Thursday.  This is a massive one day amount!  Only $8.5B is owned by the Fed who has already agreed to roll all of their maturing treasuries.   The planners have to keep gold and silver suppressed in the meantime.  As long as there is the perception of demand for USD and USbonds, the Ponzi survives.

PPT all over BAC this morning.  It seems $5 will be defended to the death.

Mudsharkbytes's picture

RE: Colorado Gold

Yup the maples are $31.37 as of this moment, but you have to be ready to buy a monster box worth of them.  I'm not ready for that big an order yet.

As I was typing this, silver broke into $28 range - $28.92.

Bay of Pigs's picture

Whats that smell?

Gartman says the Golden Bull is dead. 

“Since the early autumn here in the Northern Hemisphere gold has failed to make a new high,” Gartman wrote. “Each high has been progressively lower than the previous high, and now we’ve confirmation that the new interim low is lower than the previous low. We have the beginnings of a real bear market, and the death of a bull.”

jmsvett's picture

Turd Interview

Hi Turd -

It would be great if you could interview one of the executives at the gold/silver producers to find out how they sell in this environment.

For instance - do they hold back inventory/or do they sell at a higher physical price than the paper market.

I would find that fascinating!

Strongsidejedi's picture

CME Broke?

I've written an op/ed piece on the CME behavior in the last 90 days.

http://www.tfmetalsreport.com/forum/3148/cme-broken

I'd like to get other's take on my comments.

Please feel free to destroy my argument.
Please!

However, my current conclusion is that the CME is broke.

I think we're seeing an attempt to paper over the default of the market itself.

CME can not back the trades being made on its market.

CME can not claim to have a legitimate price action on gold or silver because the settlement of the contract itself is broken.

Therefore, my conclusion is that the MF Global bankruptcy is a financial 9-11 event.

MF Global has taken out the entire agricultural industry's financial structure.
MF Global is much worse than 9-11.

MF Global has essentially interfered with the planting season for 2012.

Slick's picture

They just prove

They just prove the fact that everything of their's which is paper is really in fact WORTHLESS.

Look how adjustable it all is. Zero Credibility.

Fr. Bill's picture

@jmsvett:

If you'll trying singing your posts, you might be able to avoid the stutter.

Irish-Mic's picture

Titanium Balls

I credit the former husband of a colleague of mine with accelerating my interest and education in PMs after the '08 crash, when I vowed "never again."  Never again will I simply follow the leads of a financial advisor, never again will I invest without dedicating the time (usually late at night after the kiddos go to bed) to learn as much as I can about the markets and my investments, including specifically PMs.  I'm presently 55%-45% phyzz/miners.  Anyway, I haven't seen the guy in a while but when I first got into PMs he cautioned "remember, these are highly volatile and manipulated markets that require patience, discipline and, most of all, titanium balls."  He wasn't kidding.

My balls are bruised.  Hell, I may even be Johnny-One-Nut at this point.  2010 has been rough, to say the least, especially on the miners.  Days like yesterday/today still test my mettle, even with the benefit and luxury of Turd's prescient counsel.  It is relatively easy for me to buy more phyzz on days like these, and I did so yesterday.  Miners are tougher. But, I'll be damned if I'm going to suffer this b.s. without capitalizing on highly subsidized miner shares.  I don't know where the bottom is, but I ain't leaving the 20's without increasing my shares and averaging down.  I'll be so pissed at myself.  It's hard enough being pissed at the shysters who abound.  Plan the trade.  Trade the plan.  I'm no trader, but this helps me stay focused, and disciplined.

We are lucky to have this community.  I'd be going nuts if I was relegated to enduring these beat downs alone and in a vacuum with nowhere to turn for incredible insight, knowledge and/or commiseration.  Hang in there friends.

Strongsidejedi's picture

@Bay of Pigs

Is that smell burning bacon?

About Gartman's call for the "death of a bull", do you believe gold's secular bull trend has ended?

My view is that by the time you can make this call, you would have to see several quarters of trend reversal.

My eye sees that the short-term price of gold fluctuates in December and January down to the 150 DMA.

Green Lantern's picture

Interesting interview with

Interesting interview with Kyle Bass on CMBC about 30 minutes ago.  Not posted yet.  

Take away. 

The liquidity they pumped into the system was just an air-bag for a collapse.  

They will not push more liquidity into Europe until post collapse.   No pre-collapse bullishness.    

Green Lantern's picture

The Yips 

The Yips 

Nephi's picture

Mississippi hound leg

After buying 50K worth in silver and gold and now seen it literally burn a hole of fiat in my pocket during Christmas time is maddening. Many of us are getting fleeced in minor stocks and PM’s… I was certain inflation instead of deflation was coming.. what do I know… no pool this year

God bless

Boardwalk's picture

TEP from Last Thread for pforth

pforth

 

"I admit I feel like I'm inches from capitulation...

I'm tired of this shit.  Just touched my May lows.  I'm inches away from taking my physical silver (25%) and throwing it in a hole and the remaining 75% (PHYS, PSLV, CEF, GDX, GDXJ, SLW) -- some of which I've held for years-- and go completely to cash--never to buy back with it again."

​You're a buy and holder.   When you bought, were you planning on selling today, Dec. 14, 2011?  Do you need to sell today?  Has something about the fundamentals, or your investment thesis changed since yesterday?

​Why do you want to wallow in self flagellation?  I've got soggy paper positions from being underwater too.  What works for me is forget them.  Forget them because today is not the day to be thinking about doing something with them.  The day for that was last week. . . and an other day for thinking about doing something with them will come in the future.  The day for doing something is certainly not today.

​The day that I've picked for me to start selling is the day when PM's have been on a multimonth tear and everybody is giddy with excitement and projecting linear hockey stick charts.  That's when I'll be selling my paper and like you, never to buy back into paper again.  

That day is not now.  Turn off your computer.  Go outside and enjoy the day.   You'll be glad you did.

RGINSAT's picture

FWIW a potential bottom area

FWIW a potential bottom area for the metals market is coming, and the weak hands are definitely being shaken out.

When I was actively trading the metals markets (6 to 10 years ago) two of the many items I followed were:

1.- the 84 day gold cycle (T-T), (B-T), (B-B), etc.

2.- the Mercury retrograde period, which happens about 4 times yearly.

From the August 22 top, it is 84 trading days, this coming Friday, December 16th.

The Mercury retrograde period started on Nov. 25th, and ends today, Dec. 14th.

RG

Slick's picture

With silver sub $30 all

With silver sub $30 all this really means to me is that the 100 oz of REAL silver I buy later today will cost me less than $3000 and such purchase will not require me to show ID :)

As little Timmy(not giethner) would say:

Merry Christmas to everyone

PS, I'll be grabbing some gold too ;)

Fr. Bill's picture

Acronym help, please?

I've been around a few weeks, carefully attempting to ferret out the various acronyms deployed here.  I guess my skills (if I ever had any) are getting rusty.  I can, for example, intuit that FUBM begins with the f-bomb, followed by a single-letter representation of the word "you."  But, I'm clueless on what "BM" signifies.  Surely it's not what it would signify in a medical chart in a hospital which reports on a patient's bowel movements.

So, for the sake of myself and other newbies, who look to the Turdisms in vain, can someone supply a list of the common acronyms and their meanings?  

Sterling's picture

BM=Blythe Masters

BM=Blythe Masters

readingalot's picture

Another funny market cycle image

http://marketing.dundeewealth.com/Advisors/sferris/InvestorReactions-MarketCycles.pdf

Humorous look at market cycle psychology. Sorry I don't know how to post images.
Slick's picture

BM = Blythe Masters

FU is a given

Dr G's picture

this IS the most wonderful

this IS the most wonderful time of the year! So grateful that I have more time to buy metals cheap, and to prepare for what lies ahead!

Bay of Pigs's picture

StrongSideJedi

No, I totally disagree with that buffoon. This is capitulation. Reminds me of 2008 when gold fell 30%. Gartman said the same thing then.(2008 gold was $690, 2011 it was $1920). I see gold above $2000 next year.

The gold bugs are throwing in the towel

Commentary: Contrarians detect strong wall of worry in gold market

"To be sure, I reported two weeks ago that, on the basis of the HGNSI being as low as 13.7%, contrarian analysis was already bullish on gold’s prospects. And yet, far from rallying, the yellow metal since then has fallen by more than $100 per ounce"

 http://www.marketwatch.com/story/the-gold-bugs-are-throwing-in-the-towel-2011-12-14

OC15's picture

Trading?

If you just lived through the MF Global debacle and have decided to continue trading, you deserve to lose everything.  If you still have paper wealth that is not in your possession, you deserve to lose everything.

Teach's picture

Taking the gay off...

Today be for : "hangin with my man, Jim Beam...,n the ghost of ole Tom Joad..."  No doubts and no regrets.  FTWBTWFY!  I still feel right..the world feels wrong.

Slick's picture

I must say.. Some of them

I must say..

Some of them miners are really starting to look tempting down around these levels,... but never forget the MFG heist! Never!

Turd Ferguson's picture

Get ready

MODERATOR

We may see 1550 today.

That said, be cautious. As mentioned over the weekend, the MFGRAP (MFG Rehypothecation Awareness Program) may cause sensible investors to utterly flee paper metal. IF that happens, gold isn't going to stop at 1550. 

http://www.tfmetalsreport.com/blog/3120/thought-experiment

Buying the dip at 1550 does make sense but keep a tight stop.

Green Lantern's picture

"FU is a given" Feline

"FU is a given"

Feline uterus? 

fried udon?

fresh water urchin? 

faded underwear?

Do I have scrabble yet? 

Bay of Pigs's picture

Makes sense...

1 Month -193.85   -10.89%

LOL...in two weeks? No doubt...

Syndicate contentComments for "The Only Charts That Matter "