The Moment of Truth

If you're about my age, you probably can't read that title without thinking of this song. By the way, Elizabeth Shue sure was freaking HOT back then.

Well, anyway, we've reached our own Moment of Truth. It's all on the line. This is the place. This is the time. Tonight, gold rests squarely upon the trendline from the lows of three years ago, back during The Great Financial Crisis. Back then, Dennis Gartman couldn't even spell "quantitative easing", much less define it. Back then, the great con artist Bobby P was trying to convince all of his clueless subscribers that gold was immediately headed to $275. Back then, the idiot GeorgeW was still president and my mother still referred to me by my given name.

Its been a long, crazy road. Gold has approached the trendline at least seven times over the past three years. Each time, gold has held and the uptrend has continued. Will it do so again? Maybe.

Notice that I did not say "definitely" or "absolutely". I said "maybe" and I mean it.

Look, fundamentally nothing has changed. In fact, the fundos for gold only improve with each passing day. Each fiscal year, the U.S. government spends roughly $1.5T more dollars than it takes in. This simply cannot continue and the only way out is to significantly devalue the dollar. The euro and the EU are an absolute disaster. The only way out for them is money creation on a massive, never-before-seen scale. Current holders of dollars and euroes, from central banks down to regular folks,  see what is coming and are clamoring for all of the physical gold upon which they can lay their hands. Again, fundamentally, the rationale for holding physical precious metal has never been stronger.

BUT

The fundamentals for physical metal are of absolutely no consequence in this current, Comex/LBMA system. As I type, it appears that sane and rational investors are shunning the Comex. As mentioned as nauseam, post-MFG, why on earth would anyone purchase and hold gold or silver through the Comex? One would have to be ignorant, naive or foolish to still be operating within that system. The problem is, the Comex operates as a closed system...for every seller, there most be a buyer. Well, if buyers are rapidly exiting the arena, you are left with an overwhelming amount of sellers. And, as well all learned in Econ 101, when sellers outnumber buyers, prices will fall.

So, here we are, caught in this strange new paradigm of extreme physical demand in the face of plummeting paper prices. In this environment, why on earth would we expect the gold price to suddenly stop and reverse exactly at some trendline on the chart? That makes no sense. The trendline is a reflection of market price history that simply has no bearing on today. Simply put, the trendline held in the past because investors still had some measure of faith and confidence in the current system. But this is the dawn of a new day. The Comex is dying. Soon, the spread between the price of paper and physical metal will diverge to such a point as to make the Comex an obsolete joke. But that day isn't here yet. It may still be weeks or months away. Until then, the imbalance between buyers and sellers will only increase so I expect the price of paper metal to decline even farther. All of this likely makes my little trendline as obsolete as a sliderule.

How far paper price falls is, quite obviously, tough to say. I suspect that we'll know we are approaching a bottom when we see the commercial long position in the gold market exceed the spec long position. The latest CoT looks like this:

  • Spec longs = 172,973 down 11,495 (-6.23%) from previous week
  • Spec shorts = 39,037 up 5,072 (+14.93%) from previous week
  • Cartel longs = 159,783 up 7,426 (+4.87%) from previous week
  • Cartel shorts = 324,337 down 14,237 (-4.20%) from previous week

Let's watch for spec longs to keep falling while spec shorts keep rising. All the while, The Cartel will be covering shorts and adding longs. At some point in the near future (sometime in Q1 2012), spec longs will dip to 150,000 or less while spec shorts exceed 50,000. Cartel longs may reach 200,000 while Cartel shorts dip below 300,000. Maybe, at that point, gold will find a bottom. Again, it's tough to say for sure.

Regardless, I have a high level of confidence that paper metal will stage a massive rebound in 2012 once The Cartel has shifted the loss burden from themselves to the specs. I will be here to guide anyone attempting to secure fiat profits from this expected, incredible rally. Until then, traders need to exercise extreme caution when trading paper on the Comex. Personally, I feel it's best, at this point, to stand back and let this process play out.

paper_12-27pmgoldw.jpgpaper_12-27pmsilvw.jpg

Now, of course, I could be wrong. Maybe gold did in fact find its bottom today, just as I had speculated for months that it would. If so, you must completely disregard this post and pretend that you never read it. Got it? wink In the meantime, do not be surprised to see The Cartel put the hammer down tonight or tomorrow. There have got to be a ton of sell-stops below 1550. If the monkeys can succeed in triggering them, paper gold could rapidly fall toward $1500. Again, after MFG, who or what will be buying what The Cartel and the remaining spec longs will be selling?

Please be patient. The physical metal that you own and hold in your own two hands are your only insurance against the indescribable financial horror that is to come. Do not let the day-to-day machinations of the criminal, fraudulent Comex frighten you into selling this precious commodity. Be strong. Be confident in knowing that you have made the correct decisions. Persevere and keep the faith. 

TF

p.s. For good measure, here's a little more Karate Kid for you. Think of yourself as Daniel-san. The Cobra Kai are Jamie and his monkeys.

345 Comments

cpnscarlet's picture

On a day like today

No one really cares who'd first.

jaynutter's picture

First second.. Everyone cares

First second.. Everyone cares about the first second.:)

Strongsidejedi's picture

lol

Ladies - what can the guys do to get you to bring back that hair?

cool

On the other hand.... To Count Blythe - your party is over on Jan 3, 2012.

Have a nice day

go to 5:10 in this clip.

"This party is over"

Count Blythe:  You're impossibly outnumbered.

Me:  I don't think so.

Bsong's picture

Destroy price discovery and

Destroy price discovery and print BITCHEZ!

Tesla's picture

Thank You Turd!

Scary days indeed. Pretty tempted to buy NOW smiley

silvergoldsilver's picture

QE rumours

Hearing from some insiders if EUR touches 1.24-1.26 Fed printing is eminent. 

Bay of Pigs's picture

Survivor?

LOL...I guess it fits. I couple of weeks ago I said nobody would be left around here except the old vets and diehards.

The newbies and weak hands are all throwing the towel in. The Troll Brigade is now coming out in force as well.

Maybe time for a Bottom Calling Contest TF?

sir's picture

Short term casino, long term?

Red or black at the moment. Now is either:

- an amazing trading opportunity before a bounceback

Or

- the start of the end for spot pricing as we know it

I reckon it's both and phys is the only logical way to make the trade work

CBDooper's picture

Elizabeth Shue was hot in

Elizabeth Shue was hot in Leaving Las Vegas

agNau's picture

Daniel-San,

"Best defense,......No be there!"....... That would be in paper!
;)

Shill's picture

 Couch time for precious

damijan's picture

Turd, what is your opinion on

Turd, what is your opinion on buying ATM 1 year call options on silver? I think it is a pretty good bet. If it goes to low 20s, even better.

Maryann's picture

Best karate kid

Thanks TF for the hand holding.  And especially for using the original Karate Kid.  Hated the PC remake! 

Tesla, nice to see you. smiley

Tesla's picture

Hi Maryann

Nice to see you as well smiley

punchbowl's picture

Historic day..

and despite the river of tears and handwringing there have been plenty of intriguing pragmatic posts, not the least of which from the preeminent Turd -- who pretty much nailed  this (decoupling) event. 

as far as 4700 ounces goes -- suck it up princess.

agNau's picture

Euro?

Remember Rickards says below 130.
We gettin there.
So, essentially when we say they will print, what we really mean is they will step on the pedal a little harder.
The way this works, once the pedal has moved a little further it can't come back. Each step taken fills a void that the next is built upon. This system in design MUST have a continuous fuel of debt to survive.
Until the last dollar is gone, there will still be debt.

Vagabond's picture

Moment of Truth

And if your my age, you probably can't help but think of this song.

Ojibwemowin's picture

We have been up north on our

We have been up north on our homestead near the MN/Canadian border recently, enjoying a winter wonderland with friends and family. We had a great trip up into the Ontario bush to visit some friends and do some pickerel, pike and perch fishing.  I hadn't thought about or checked PM prices in several weeks, which is a good thing.  

There is only a little snow on the ground so the woods are easily accessible. More grouse have been shot, venison has been secured, and several snow shoe hare have been snared with picture wire suspended over their winter travel routes. The back country lakes are very accessible this year and an easy hike in versus years when there is already in excess of 2 feet of snow on the ground by now. Many fish have been iced by dark house spearing and by hook, which will continue through March, and soon we will be preserving them beyond freezing by pickling, smoking, and canning. The elderly aunts, parents and uncles have received fresh fish.

Like many of You, I very much like the opportunity this temporarily strong US dollar and deflationary period is providing  us. I can only hope it lasts long enough for all of us to exchange much more fiat to buy physical metals over the next months or even years?!!  I am spending my hard earned money "off the grid," and away from shopping malls/restaurants/wall street (other than my 401k up to the company match and my pension) and into hard assets. Lately we have been stacking liqueur, quality outdoor gear, ammo, non perishable food items, and consumer staples, in addition to our church offerings, PMs, cash, gifts to our loved ones, and the regular PM purchases. Our plan feels as right as the time we spend in the woods and out on the lakes gathering sustenance in the form of memories, knowledge of new fishing/hunting spots, meat and firewood.  I wish all of you the best in the new year, and an unwavering  perspective on the things that will sustain and ultimately matter in the long run. 

Fred Hayek's picture

I can't be the only one waiting for the new year

I can't be the only one waiting for the new year to have some of what's mine sent to me and not have to face the tax implications for another 15 and a half months.  It's ghoulish but . . well . . if the "official" price had to be hammered at any time, now is not a bad one.  It can rocket back up in another 10 days.  Hell, I want it to.  But it will be very interesting to see if there are a lot of people doing the same thing.  If I take what's mine now I have to pay by April 15, 2012.  If I wait till January 2nd, I can wait till April 15, 2013 to pay.  There have to be a significant number of people wanting to get what's theirs the hell out of the system and making the same choice about it.

texasbmc's picture

A Different Perspective

Turd and all you regular contributors thanks for making this the best PM educational site on the web. I have devoted the last 3 years to learning how to become a skilled investor.  After MF Global I realized that by continuing to invest I am supporting their corrupt system.  

We are in a war. The war is being waged against us to strip us of our assets, paralyze us with fear and bring us to our knees.  MF global was our advance warning. We, the People, can win the next battle if we move quickly. We must withdraw all of our support from their system by taking our money out of brokerages and big banks.  Move it to credit unions and use it to buy PMs and tangible things that we can physically own. I have invested in 400 rolls of toilet paper, 100lbs of beans and rice, a bread maker etc. Unlike stocks I feel confident that their price will be much higher 2 years for now.  

Strangely I have no regrets about selling my beloved miners at a loss or my recent PM physical purchase that was made at a much higher price. All I know is for sure is that I don’t want to end up like MF Global’s customers.  In a few more days all of my family’s assets will be parked in a credit union, Gold Money, PMs and physical necessities.  I no longer care if PMs pull back because owning them physically instead of fiat means I refuse to play their  games anymore. 

After the TPTW finish imploding the world’s financial system, perhaps what will matter most, is what we still have not what we have lost. 

I Run Bartertown's picture

I still say we win in the end!

I'm buying. It might drop some, but too far and then availability and premiums just get worse for my little buys.

Maybe tonight, maybe tomorrow depending on how the blips look.

I hope everyone had a Merry Christmas.

Puck T. Smith's picture

I'm still here. I'm still buying.

Waiting for my latest thirty ozs.  Soon as the month turns it'll be time for my regular monthly buy (less that 30 oz.  I can't do that every month.)

Time is on my side.

Peace.

DavidSilverSwe's picture

everyone

Everyone is getting real bearish right about now, even perma bulls. to me that feels like a buy signal, I'm waiting until next year though, for several reasons. It's sad, but I think it's too dangerous to buy derivatives now (wrt decoupling etc) but it sure is tempting to leverage right about now :)

lairdwd's picture

Bulls back out tommorrow

The Italian banks will do their duty , at least once. EU will put the pressure on the banks to buy the shitty long term Italian debt, and the auction will be viewed as a "success". Euro will rally, with the Feds help shorting the dollar, stocks will rally. S&P back up to 1265. Gold 1580, silver 27.60.

Buy when everyone HATES. Especially when fundos aren't aligned with prices. I have no doubt the cartel will keep hammering it down as general markets selloff, but at least for tommorrow I expect a bounce. 

pourty's picture

Good to see strong hands hanging tight

I have to admit, I'm a bit surprised to see so many people suddenly give in to emotion and start talking about feeling betrayed or that those of us investing for our future in PMs must have been duped.

Think about it for a minute... How many times have you read that the cartel is in near full control of the spot market? How many times have you read that the spot price is predicted to eventually go to zero, while the price of physical diverges in an upward trend?

If you bought several hundred or thousand ounces of physical hoping to make a buck or two by selling at high prices to get more fiat in a month or six months, you haven't been paying attention.

Santa has been very clear about this: the price will go up, but there will be massive volatility in the short term. This is what he meant. Volatility is in both directions... Not just up. We had volatility to the upside earlier this year and hit $49 silver and $1920 gold. Did you think volatility was only going to be on the upside?

Be strong, young padawan. Storing physical is for the LONG term. In the short term, you need to control your emotions. They betray you.

Velocity's picture

Thanks Master Turd...

...for the Charts and words of wisdom regards "keeping the faith" ....i'm keeping the faith by being short as of last week and hoping to back up the truck and pile them (heavy metals) high as soon as we've found this elusive bottom of yours

On the downer side can i express my choking mechanism was at "maximum entropy" at the cheesy Karate Kid trailer and the even cheesier rock song on the previous thread (the band looked more like slightly over-dressed gardeners than rockers spread about the Japanese garden). I'm not a big fan of either sugary teenage US films or rubbish US rock (the English bang it out so much better)

...and they do heavy metal better too (Van Halen honourably excepted) 

Heavy Metals Rule

Victory's picture

Trendline#2

Turd, you-d-man, you put me onto the game (I affectionately think of you as 'the goodfather,' Luke Wilson's character  in 'OldSkool'...that being said and fwiw hear is another possibility I'm looking at.  Check out the two trendlines on my chart below.  As you know this trendline game is part art / part science and the more points on a trendline the stronger and more reliable it becomes.  In included the trendline you used in this post but then I also have - lets call it - trendline#2 the alternate.  This trendline actually has more points of contact and will put us right around 1500 for another contact (and hopeful bounce). 

Also I noticed two H&S patterns, one small, one larger.  The smaller one bottoms at 1500 as well so we have a nice convergence.  The larger one bottoms about 1375.  I think the smaller H&S looks like it will complete, the larger one I'm hoping is a scare tactic.  I marked these on the chart also.

-v

Velocity's picture

Armstrong lays down some markers..

...for possible bottoms in $Gold

http://www.martinarmstrong.org/files/Gold%20Report%2012-27-2011.pdf

Armstrong also makes crystal clear the Deflation versus Inflation argument that's kicked off (again) in the last thread. It boils down to the crumbling collapsing credit (debt) mountain being far larger than anything Bernankes puny printer can counter even flat out

I'd add to those complaining about their daily shopping if your usual can of beans rises by 60 Cents and $30,000 drops off the value of your house, are you inflating or deflating?

I trust this is a no-brainer!

TitanAe's picture

The strangest thing just happened !!!

I'm not even sure what to think of this !!!! My 6 year old so just came up to me and said silver is going to be up 80% !!! I asked him why he said that and he said because you like the stock market !!!! Not sure what it means if any but very strange !!!!

LaMachinna's picture

Intuition

LaMachinna's humble intuition is screaming tonight....

They've miscalculated, underestimated and don't know what they don't know.  

Syndicate contentComments for "The Moment of Truth"