The Significance of 1665

I was recording this week's podcast yesterday when it finally dawned on me. Frankly, I'm disappointed in myself that I didn't figure it out sooner. Take your eye off the ball and get a little distracted and this is what you get. No matter, at least now we know.

First, some history. Without a doubt, the $250 run in gold over five weeks in August and September was almost entirely caused by Cartel short-covering and we spent a considerable amount of time discussing this last fall. In summary, the gold CoT numbers told the tale. The CoT from Tuesday evening, August 2 was:

Spec long = 292,000

Cartel long = 155,000

Cartel short = 443,000 (Cartel net short almost 3:1)

Gold price = $1650

By Tuesday evening, September 6, the picture had changed rather dramatically:

Spec long = 248,000 down 15%

Cartel long = 174,000 up 12%

Cartel short = 402,000 down 9% (Cartel net short almost 2.5:1)

Gold price = $1900 up 15%

Again, this is why the reporting of a gold "bubble" was such utter nonsense and any reporter/blogger espousing that idea is to be permanently avoided because that person is either stupid or deliberately misleading you. Gold went up 15% in five weeks because The Cartel panicked and began to rapidly decrease their net short position. As you can see in the data above, the speculative (supposedly dumb) money was selling into the strength, undoubtedly locking in gains along the way.

So, now, put on your thinking cap. Try to recall what happened shortly after August 2, 2011. Anyone? Anyone?

After the close on Friday, August 5, S&P announced that they were downgrading the credit rating of the U.S. from AAA to AA+. I believe this singular event was the "final straw" for the banks that have been willfully manipulating gold and silver for decades. All of the market action since has been a reaction to the S&Ps move. The massive and deliberate takedown of gold and silver in late September was orchestrated to drive price lower so that The Cartel and The EE could continue covering their massive short positions but at a much more profitable, lower price. This effort continues to this day. Look at the latest CoT numbers:

Spec long = 166,000 (down 43% from early August)

Cartel long = 160,000 (flat from early August)

Cartel short = 327,000 (down 26% from early August) (Cartel net short now 2:1)

Anyway, the point of going through all of this again is to demonstrate that The Bullion Bank Cartel clearly got spooked and changed their modus operandi post the S&P downgrade announcement of 8/5/11. Getting back to current day, how does this affect current price and technical action. Well, my brothers and sisters, $1665 is exactly the opening level of gold on Sunday evening, August 7, when the metals resumed trading on the Globex. For the next several weeks, we speculated upon whether or not gold would ultimately fall back and "fill the gap". Nature abhors a vacuum and charts abhor gaps. Always have and always will.

It didn't take too long, unfortunately, for us to have our answer. Here's a reprint of a chart from September 23 where we were watching the 1665 level very closely:

paper_9-23pmgold_1.jpg

Clearly, by reviewing the action of this week, a line has been drawn by The Cartel. They do not want to see gold move back above 1665...at least not yet. They may soon get overwhelmed and lose the battle but, as we've seen on the charts and in the daily growth of open interest, The Cartel would like very much to keep gold under wraps for a little while longer. Do they want to get their gold net short position to 1:1., similar to the progress the EE has made in silver? Maybe, but the fundamentals in gold are so overwhelmingly strong that I don't think that they are going to have the time to pull this off. (It's taken The EE almost 9 months to move from the same 3:1 net short position to the current 1.5:1. It will be nearly impossible to hold gold in its current range for another 6 months.)

Anyway, now we know why 1665 is so important to The Cartel. Hopefully, near-term pressure will force gold higher and through that level. The Pig and DrC are helping its cause. However, next week is option expiry for Feb12 and first day notice, too. You've got to expect that The Cartel will try to keep gold down for a while longer.

paper_1-20amgold.jpgpaper_1-20amsilv.jpg

paper_1-20amcop.jpgpaper_1-20ampig.jpg

By the way, you can bet your batooty that the next, major resistance for gold will be 1705. Longtime turdites will undoubtedly recall the significance of that level, too.

Lastly, here are three items that you need to check out, either today or over the weekend. First, another KWN interview of Santa. (I've tried to get Santa to do a podcast but he won't commit. I'll keep trying.)

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/1/19_Jim_Sinclair_-_There_Will_Be_a_Run_on_Gold_Stored_in_the_US.html

Someone sent me this article that discusses the PAGE. The author claims that the exchange won't be open until June. Nuts. I've sent a few emails trying to confirm this. I'll let you know if I hear anything.

http://www.marketoracle.co.uk/Article32678.html

And, lest your heart despair with CNBS et al fawning over the "earnings" report of Bank of America, Dave in Denver knocks it out of the park with this analysis. Be sure to read:

http://truthingold.blogspot.com/2012/01/bank-of-america-earnings-comedy.html

That's all for now. Please check back later this afternoon as I will be posting TFMR podcast #11. As I mentioned above, I recorded it yesterday and it's a pretty good one. Thanks again for all of your support!  TF

12:20 pm EST UPDATE:

Very, very nice FUBM rallies this morning, particularly in silver where the price is now $31.50, well clear of $31 and headed toward stout resistance near $33. (Do you recall the significance of that level, too?)

That said, we must watch things very closely here. The charts below are self-explanatory.

paper_1-20amgold4.jpgpaper_1-20amgold2.jpg

paper_1-20amgoldh.jpg

Stay vigilant. TF

275 Comments

lairdwd's picture

@balz - SLV options expiry today

And you see that there are a lot more calls than puts at strikes at or near the bid.

http://quotes.stocknod.com/stocknod/quote/optionchain?Symbol=SLV

In fact, it wouldn't surpirse me to see some weak hands sell on globex at  4 PM close. 

balz's picture

32!!!

32!!!

Of course options expiry can be a cause... But in the end we are going much higher.

PAGE will be our best friend in a couple of months...

David Morgan calls for 60$ at the end of 2012. We have to start somewhere!

Justin's picture

Blue Horeshoe loves...

... Ag.   I think I sniffed too much glue last night because it looks like silver jumped $1.50 since yesterday.  Going back to bed until the Elmers wears off. 

PaullyMoore's picture

UBS

just released their decade ahead overview for the sheep called "The Great Deleveraging" Here are their thoughts on your portfolio and gold: 

"Well-diversified portfolios

Many investors were not adequately diversified heading into the Great Recession. High-quality bonds and several alternative strategies provided positive returns throughout the crisis. Despite this lesson, we believe there is still too much focus on cash and equities (see Fig. 3.4) and not enough on portfolio diversifiers. While intra-market correlations rose in 2011, Figure 3.5 shows that diversified investors were rewarded. Specific alternative beta strategies (discussed in the Alternative beta chapter) and high-quality bonds can both provide significant diversification benefits.

It is important to note that we do not include gold in our recommendations. Although gold has done well during recent tail events in which real interest rates have fallen (see Fig. 3.6), a deleveraging-related tail event (e.g., a Eurozone break-up or deflation in the US) could result in the opposite: higher real interest rates and a flight to the US dollar. Based on its recent behavior, gold might perform poorly in such a scenario. Accordingly, although gold has a role in hedging tail risks, it is unlikely to protect portfolios in all conceivable tail events."

T's picture

Must I be the naysayer here?

this blog sure is a sharp weather vane for emotional sentiment. lets see....havent looked at the market yet.....gold must have gone up a few dollars and silver a few cents....maybe crosses what looks like a trendline....or not....depending on How you draw the lines. (Turd is saying it crossed the key line....I'll wait and see on that ...lines are funny things...they make for great whipsaws) 

The wave structure  of this latest wave from the bottom at gold 1530 area to the current top.... has hit major resistance here at the 1665 area.   as has silver at 31 area.   fully expected , these resistance points.    resistance  zone starting really around 1625  gold and 30.50 silver.  31 silver is  still IN the resistance zone...even 32.

gold under 1700 is still resistance zone but  stronger  under 1675.

The ONLY emotion or logical vision I will maintain  ongoing for now....is that price is AT Major Resistance Here.....and I fully expect the next normal natural  Correction that  EVEN in a free and fair market would/should pull back to  somewhere like 1600-1580 gold.  silver should pullback to  28 again. But in this rigged manipulated controlled market, where  the idea of the Cartel slamming metals back down in at least one more attack ....where should that sort of slam down happen? Here at This resistance zone.... would be my guess.... so I  remain with  the  antiicipation of a whipsaw that  disappoints everyone again..... and the next wave Down to target the  downside targets.....gold 1580 area and silver 28 area.

Did someone say something about options expiration feb 12 and  timing stuff like that....

just enough time  in the coming weeks to   see the next  downwave play out. 

Its all just a best guess. 

I would love to be able to buy some gold  at 1575 and silver at 28 ....which could become the last chance  for these prices. 

Mammoth's picture

PM Novice

A while back I wrote a post, about my Ukrainian friend who I call 'Crazy Tatiana?'  She had called me out-of-the-blue, saying, "I HAVE to buy some Gold & Silver, now!" back when it was around $1,800/oz.  I had discussed PM's with her and her husband on and off for the past 5 years, and when I asked her "why buy right now?" she nearly bit my head off.  So I shared with her what I know about PM's and suggested she make her own decisions.

Well, last weekend I visited them, and after asking for my advice she did just the opposite.  She paid $3,000 each for some graded 1-oz Buffalos from some outfit that I have never even heard of.  Apparently she talked to some hot-shot salesperson who, detecting she was a novice, sold her something which nobody else was interested in.

When I told Crazy Tatiana that she paid too much, and that she does not need to buy numismatic-quality, graded bullion coins for an investment or to preserve the value of her money, she again asked me what should she buy.  Exasperated, I told her that when I make my next PM purchase I will let her know what I am buying*, and she can then decide what she wants to do.

Also, when I visited, I brought along a peanut-butter jar filled with Morgan Dollars & Silver Halves.  Kinda funny - when I talked about 'junk' Silver, she seemed to shun the idea; it appeared she was turned off by the word, 'junk.'  This all just shows how dumb & gullible some people are, with respect to PM's.

I guess one reason why I am sharing this with Turdville is to make the point that if you do 'convert' somebody into a PM believer, do them a favor and warn them about some of the pitfalls in buying.  Of course, they may ignore you as Crazy Tatiana did, but at least you will not feel like you sent someone across a minefield without a map.

* I am leaning towards Gold Buffalos & 1/10 oz Gold American Eagles.

T's picture

junk silver

funny you should mention it....I was just thinking of some more junk silver instead of maples or eagles.  If one is concerned about survival...junk silver is what you want,isnt it ?

or something about how government could enact laws in the future that taxes the sale of bullion , so we might lose the profit  when we go sell....could that ever happen?  like the  possible taxon miners...profits tax or whatever they would call it. 

One of the reasons why Jim Willie and Andy Hoffman dont like the miners. 

I guess my question  is what will happen when we try to go sell our bullion coins and bars ......

Lumpy's picture

The before picture.

Thank heavens the CFTC is protecting us from the wolves.

The silver market is their playground.  We will be lead to the shears when "It's different this time."

thumbnail.aspx?q=1446714550814&id=22665f

Dr G's picture

Silver. The best ride ever.

Silver. The best ride ever.

EDIT: now 32.11, so my 32.20 is coming into view. C'mon silver!

Turd Ferguson's picture

Wow, I've got this OI thing down.

MODERATOR

Today's OI numbers (totals as of the close yesterday) were exactly as I had imagined they would be. Exactly!

Gold was held in check and suppressed yesterday in a trading pattern that resembled Tuesday. On the day, gold was down about $5. A "normal" OI should have contracted. Once again, it expanded by about 3000 contracts to 441,320 as all kinds of fresh short positions were initiated with the intent of capping price. This is continued proof of The Cartel's attempts to contain gold below 1665, for whatever reason.

Silver acted perfectly. In fact, as I switched the page to the silver OI, I looked away for a moment and thought, "given that yesterday saw silver rise about 40 cents, it was probably a continuance of the trend of short-covering and, therefore, OI will probably be about 102,000". Lo and behold, the official OI number for silver is 102,055 for a decline of about 800 contracts.

My guess for Monday's numbers would be this:

Gold, up $9.50 on the Comex session, will likely see an OI bump of about 3000 contracts. This will be due to some new longs and the fresh, late-session shorts that the Cartel had to deploy to keep gold from closing over 1665.

Silver will probably see another decline in OI. I believe that today's rally was almost all short-covering. The pace of the rally being the clear sign. Certainly some new longs were added but they were likely outnumbered by the closing of short positions. If I'm right, the total OI we get on Monday will be between 101 and 102,000.

Turd Ferguson's picture

I should add

MODERATOR

I haven't seen the CoT numbers yet for this week. I would expect that the silver bank short position was flat to down while the gold bank short position rose, probably quite a bit.

Groaner's picture

4 times now at $1666 for gold

is it a charm this time? doubt it

theBuckWheat's picture

Maybe the recent gold/silver

Maybe the recent gold/silver ratio is also indicative of the ratio of paper gold to paper silver!

balz's picture

Thanks Turd. Please let us

Thanks Turd. Please let us know when the COT is out.

zilverreiger's picture

any world playground

any world playground decisions happening this weekend?

Dr G's picture

Turd, using the OI numbers,

Turd, using the OI numbers, can you give us your price predictions for the action we will see on Sunday evening & Monday in both gold and silver? Nobody is holding you to it, I'm just curious if you think we will see continued short-covering or a flat-out raid.

Turd Ferguson's picture

I usually just wait to see

MODERATOR

I usually just wait to see the numbers on Harvey's Saturday update.

Smiddywesson's picture

@Dr. G

Either money has arrived into the Comex and contracts are getting purchased OR the Cartel is retreating back to the next point of resistance (for reasons I do not understand) OR this is a set-up to suck money in for a huge raid given the dates we have coming up OR somebody leaked QE3 at the FOMC next week OR this is simply rumor of QE3 next week.

I don't like the smell of this.

Yes, Obama's in desperate need of a sugar buzz or he is out, so the timing is right for more sugar.  On the other hand, they don't have to give up an opportunity to push PMs down during an options expiration week to announce some sort of QE, so why do so at the FOMC next week?  Luring PM bugs into the market on a rumor of printing only to crush them sounds about right to me.  Gold only moved $11 today, and is only .001% above the $1664 level.  I don't call that a break out, I call it suspicious.

The second mouse gets the cheese, so I am flat for the weekend.  If I miss some of the move, I don't care.  We are going to devalue and/or hyperinflate.  That means gold is going to go up 30-60 times in price.  I can afford to miss part of that move.  What I can't afford to do is miss all of it because I got wiped out in a raid.  They still have margin hikes remaining if they need them.  If the PM bulls are correct, then they need them.  Does anyone think they won't use them?

Sigh, I will just have to cuddle with my physical this weekend.

Caution and patience everyone, this isn't over yet.  Hopefully, you get a nice big payoff next week and I can join the party.  If not, I won't say "I told you so" because I just don't know.

treefrog's picture

just how tight is the control of the media?

we've been at war for ten years straight and still no anti-war songs. 

***********************************

john prine, the great compromise

I knew a girl who was almost a lady
She had a way with all the men in her life
Every inch of her blossomed in beauty
And she was born on the fourth of July
Well she lived in an aluminum house trailer
And she worked in a juke box saloon
And she spent all the money I give her
Just to see the old man in the moon

Chorus:
I used to sleep at the foot of Old Glory
And awake in the dawn's early light
But much to my surprise
When I opened my eyes
I was a victim of the great compromise

Well we'd go out on Saturday evenings
To the drive-in on Route 41
And it was there that I first suspected
That she was doin' what she'd already done
She said "Johnny won't you get me some popcorn"
And she knew I had to walk pretty far
And as soon as I passed through the moonlight
She hopped into a foreign sports car

(Repeat chorus)

Well you know I could have beat up that fellow
But it was her that had hopped into his car
Many times I'd fought to protect her
But this time she was goin' too far
Now some folks they call me a coward
'Cause I left her at the drive-in that night
But I'd druther have names thrown at me
Than to fight for a thing that ain't right

(Repeat chorus)

Now she writes all the fellows love letters
Saying "Greetings, come and see me real soon"
And they go and line up in the barroom
And spend the night in that sick woman's room
But sometimes I get awful lonesome
And I wish she was my girl instead
But she won't let me live with her
And she makes me live in my head

(Repeat chorus)

GoldMania3000's picture

oooo

doesn't if feel good to see gold and silver up like this. it feels really good. i guess this is things to come.

Pablo's picture

Looks like the Silver Bullet might be rollin' out the station...

Looks like the Silver Bullet might be rollin' out the station again. Luckily ol' Pablo had a couple months to attempt to balance down his horrible average $ cost from last summer. I wish it would stay $30 range for a while longer. But I tell you what if the GSR hits 1:30 again I'm not going to miss out this time.  Our gold/silver physical ratio is out of whack already (too much silver, not enough gold - silver is easier to buy weekly). We'll probably keep up our small weekly buy as the price rises but I've seen the writing on the wall, and I want to be in mostly gold before it hits the fan.

Smiddywesson's picture

Junk silver and taxes

T, I don't think we will see confiscation or oppressive taxation of our PMs.  We may see the miners heavily taxed, but if we move to a gold referenced system, they don't want gold going to ground in your stash, they want it flowing freely in commerce.  The government may do something stupid like tax your gold, but how many of us are going to submit and cash in our gold for $8k when PM bugs overseas are selling their maples for $50k?  I will eat oatmeal and sour gruel before I give my physical away.

If they don't tax it, people will cash out into the new currency.  If they don't tax it people will melt their jewelry and buy into the new system too.  Other arguments are that most of the gold is held by rich people who don't want their stash taxed.  After everyone but PM bugs lose everything they have in the world, do you think they are going to want to pick a fight with the masses over grandma's wedding ring?  If they don't tax the sales of jewelry, how are they going to stop you from melting your gold and casting it into jewelry to be sold?  The whole thing is unnecessary and too difficult to administrate.  TPTB want your gold out in the marketplace.  They want you to cash out.

Turd Ferguson's picture

We'll be watching these VERY CLOSELY next week

MODERATOR

Regular readers will recall that I mentioned these charts back on Tuesday. Well, the breakdown today not only helped push the PMs higher, it may be telling us that QE3 is just around the corner. WATCH THESE LEVELS VERY CLOSELY NEXT WEEK AND BEYOND. I'll go into more detail on this over the weekend.

large_1-20pm10yr.jpg

large_1-20pm30yr.jpg

Dr Jerome's picture

I am wary also...

Seems too easy this week. I love the AG action. I'd prefer to see it move up slowly and steadily.

If silver continues this move upwards, I think I'll insure my stack over the weekends with some long-dated SLV put options, just in case the cartel slams it for 4$ on a Sunday night again. I will buy in-the-money SLV puts, two months out, on fridays at 3:45 and sell them back on Monday mornings at 9:45. I don't expect to fully insure my stack, but if I can recover 50-75% of a smackdown, that would sure make it more bearable. 

This weekend I am sitting tight...no options positions. If we get over the 37 level that Turd says is critical, that is my plan. Advice? comments? reality checks?

GoldMania3000's picture

it's interesting...

all the news over the past day and a 1/2 has been taken about QE.  turd, do you agree/disagree with jim rickards take on EuR/USD 1.27/1.26 would trigger QE. or are all these things inter-related? listen i dont' know but i read very few people these days.  you, Richard Maybury, Jim Rickards (and a couple of others i glance at) and all say QE will happen around a certain destination point.  All three of you are saying it could be coming for different reasons...and assume that there are some relationships to them all? 

Turd Ferguson's picture

I have no idea

MODERATOR

Maybe he's right. He's certainly smarter than I am.

However, the real "tell" will be the action in the U.S. bond market. If rates begin to back up, overt QE will become a necessity. Watch those 10-yr and 30-yr prices. They will warn you.

Much more on this later this weekend. 

Response to: it's interesting...
Be Prepared's picture

Caution! Caution!

There's a trap in running with the smallest indicators of movement in silver or gold.  Today was nice, but next week is whole 'nother ball of twine.  The Cartel have so many things in their arsenal to crush any paper movement that it really isn't funny.  I present this caution because we all should be battle hardened by the many takedowns we've experienced over the years.  We are on a steady march and there are hills and dales everywhere..... peaks and valleys.... before we reach a true escape from the clutches of control.  Our way of life is changing upon us and the price of achievement in PMs is hard times for many.  Use every forward movement as an opportunity to understand what may be around the bend.... what's the next bump in this road....will the bridge be washed out ahead.

Caution.... we have taken the road less traveled and, with it, for everything we see.... there is much we do not.  I'm glad I'm on this road with you all..... we few, we happy few, we band of brothers and sisters.

Bsong's picture

My guess for Monday's numbers

My guess for Monday's numbers would be this:

Gold, up $9.50 on the Comex session, will likely see an OI bump of about 3000 contracts. This will be due to some new longs and the fresh, late-session longs that the Cartel had to deploy to keep gold from closing over 1665.  

Question:  TURD

Trying to get a grip on this.  Before this above statement, Your logic was that the price capping was caused by new shorts and it was proof of the cartels game.   Now we can expect longs to push price higher on Monday?  And was a necessary move to keep price suppressed and not closing above 1665?  My brain hurts and is captivated here as i can sense the awareness, but I'm not quite grasping the logic as the cause and effects seem to differ.  The gold analysis of Thursdays price suppression and Mondays projection  seem to conflict in logic.   I'm sure it's me, can anyone help me out here?  Thanks !!

I'll continue to study this and appreciate any help.

lakemike49's picture

re: DR G's options statement

I actually LOSE money on options because I'm retarded! you must have taken a peek at my trading account,about sums it up for me. also I feed the turd once a month, as should we all.

live to fight another day

lakemike

Turd Ferguson's picture

Thank you for catching that.

MODERATOR

Turd typing too fast. Meant to say "fresh, late-session shorts". 

Now fixed.

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