Please Read This Extremely Important Post

I hope you're ready. Everything that has transpired since May in silver and September in gold has led us to this moment. The next five to seven trading days will tell us everything. Either the metals will win their individual Battles Royale or they won't. If they win, price will accelerate to the upside. If they fail, the metals will likely settle into another sideways consolidation that lasts well into spring. I, for one, can't wait to find out!

So, let's get started. First, in case you missed it, here's a re-print of a comment I posted yesterday afternoon about the continuing increase of open interest in the metals:

"For yesterday, gold rose $15 and the April12 contract rose by 6,500 contracts to 264,250. Here's something interesting: The June12 OI fell by 1800 to 62,263. Hmmm. Total OI rose by over 4000 to 470,255.

You'll recall that yesterday was a big day for silver and also the day that the March options expired. First day notice is just 4 days away but March12 OI fell by just 3,600 contracts to 21,393. The May12 picked up a lot of rollovers and new money and grew by nearly 8,000 contracts to 49,471, a 20% increase in one day! Total silver OI is now 115,874 and that level is the highest its been since August of last year."

A short time later, I posted this comment, right after this week's CoT was released:

"Remember that massive OI jump during the rally on Tuesday? It was +17,000 contracts Tuesday alone and for the reporting period, the total OI rose a massive 25,000.

Well, we just found out how. Total spec long grew by 14,000 but the Cartel net short grew by 20,000! They are about to drop the hammer or get their nuts squeezed off.

Considering that OI has expanded by over 14,000 contracts in the two sessions since, you can imagine that the spec net long has continued to increase while The Cartel net short has done the same.

Silver, too. OI rose by 6000 contracts as the EE net short rose by 1900 and spec longs rose by 2100.

At first glance, this all just confirms that the stage for The Battle Royale has been set. We are up against it technically and the CoT shows that The Cartels are getting up against it from a net short perspective. Next week promises to be wild. Get ready."

Before we get to the charts and discuss the technical importance of this upcoming week, let's dive into that CoT a bit and look at some history for perspective. First, gold.

The CoT does indeed show a massive expansion of spec longs. 14,000 contracts! That's a lot of new money. It also shows that The Cartel supplied the new paper to those spec longs as The Cartel added 20,000 new shorts. The question is, as always, why do The Forces of Darkness do this? Are they:

  1. Flooding the market with fresh, unbacked paper gold because they are trying to cap price, suck in weak-handed longs and preparing for a massive raid through which they will profit?   OR
  2. Is the bullion bank cartel simply performing their duty as a market maker? The specs demanded 14,000 contracts this week. Without a brand new, unbacked Cartel short on the other side of the trade, price would have had to have risen to the point where a current long was ready to sell. What would that price have be to in order to pair 14,000 contracts?

Have the bullion banks profited for years by naked shorting the PM "markets" and then initiating waterfall declines into which they can cover and profit. ABSOLUTELY! Is that what they're doing here? I don't think so. As I've repeatedly stated, I believe that The Cartels were completely freaked out and frightened by the events of 2011 and they have spent the last 10 months manipulating PM prices in an attempt to minimize and/or extricate themselves from their perennial short positions. What they didn't expect was $2T in fresh global liquidity in the past 90 days. As I laid out yesterday, everything is going higher, just like during overt QE2. Throw $2T around and it spills everywhere. Crude, gold, beans, cattle, copper...everywhere! The race higher is unfolding so quickly that The Cartels have been left with no other choice but to maintain their roles as market maker. Like the Specialists of old on the NYSE, The Cartels must take the "offer" side of the trade when things get disorderly to the upside, just like they must supply a bid when things are disorderly to the downside. (Though, during coordinated raids, The Cartels have obviously been reluctant to aggressively supply that bid.)

So, here we are. $2T with more to come are flooding the markets with liquidity and The Cartels are getting painted into the same corner they found themselves in last year. What will they do? Attack, of course! That's what they have always done and so you can imagine that an attack will be their first course of action here, too. But can they? Seriously...can they? Take a moment and consider the global investment landscape at this exact moment. Even if you had unlimited funds, would you want to continue building a huge net short position in the metals right now? I don't think so. And you'd have to greatly increase your short position to initiate an attack. No...I don't think they're going to attack, at least not in the massive, coordinated style to which we've grown accustomed.

Their only real option is to attempt to continue "managing" the demand. This means they will continue to create paper when demand is heavy and they will attempt to cover some shorts on every selloff. In an environment like that, you'd expect a steady, increasing, predictable price channel where demand remains constant and forces price higher within a channel of higher highs (demand surges) and higher lows (Cartel covering into selloffs). Hmmm. Do you think the environment I just described would look anything like these charts once you plotted all of the price action graphically?

paper_2-25goldd1.jpgpaper_2-25silvd.jpg

So, how long can these price trends continue? As discussed in yesterday's post, from a fundamental standpoint the firehose of liquidity that is currently flooding the global markets shows no sign of slowing. The question then becomes, how long can The Gold and Silver Bullion Banking Cartels continue to provide the unbacked paper metal necessary to manage the ascent of price? Are they already stretched to the limit like they were last April in silver and last September in gold? If so, we can expect imminent attacks and margin hikes. For answers, let's consult some past CoT reports to see if we can gain some perspective. (For simplicity's sake, I'll start with the gross numbers.)

SPEC LONG                 2/22/11        4/5/11         8/2/11       9/6/11        10/4/11           2/21/12                     

Silver                                50,937          48,890        38,265      37,185        23,859            34,819

Gold                                 246,967       259,792       291,974     248,457     180,635          214,343

As you can plainly see, spec long positions in both gold and silver are still well below their peak levels in April and September, respectively. Additionally, though up considerably from the lows of Q4 2011, these markets are not yet "overbought", at least terms of market participation and liquidity. Now, let's look at The Cartel shorts.

BANK SHORT              2/22/11       4/5/11        8/2/11        9/6/11        10/4/11           2/21/12

Silver                                 89,728         89,827        75,029      77,869         58,807            70,923

Gold                                  389,757        415,992     442,648     401,815       345,040         375,306

Just as plainly, from a gross perspective, Cartel shorts are nowhere near the levels they were when silver and gold were making their respective highs last year. To me, this indicates that The Cartels have plenty of "ammo" still available from a paper supply standpoint. But, we have to look at the net numbers, too:

BANK NET (short-long)   2/22/11       4/5/11       8/2/11        9/6/11        10/4/11            2/21/12

Silver                                       57,793         56,414      44,588       47,216         18,923               39,188

Gold                                        234,804      258,665    287,634     227,714      164,751             229,302

As you probably expected, the net short position also shows that The Cartels have plenty of room to grow here as they are nowhere near the extreme levels attained at the price peaks last year. Other things to note from this data:

  1. From 2/22/11 to 4/5/11, silver rose from roughly $33 to $40 but the large spec long and Cartel net short positions barely budged. Why? The small specs drove the market as their net long position rose from 18,000 to 54,000. That's a triple of the small spec net long in 6 weeks.
  2. But it wasn't the specs that caused the panic, it was the EE. From 4/5/11 to 4/26/11, price rose from $40 to $48 but the large and small spec net position were both declining. However, over those three weeks, the EE net short position contracted by an amazing 14,000 contracts! The EE panicked, pure and simple.
  3. At that point, The CME stepped in and raised margins 5 times in 9 days.
  4. From 8/2/11 to 9/6/11, gold rose from roughly $1650 to $1900. Though the media and the know-nothing paid disinformation agents of The Cartel would have you believe that this was a speculative "bubble", the numbers tell a much different story. Over this time period, the large spec net long position declined by almost 25% from 247,175 to 184,371 and the small spec net long only increased by an insignificant 3,000 contracts, rising from 40,459 to 43,343.
  5. Again, this "panic" was caused by a cartel, The Gold Cartel. From 8/2/11 to 9/6/11, price rose $250 as the net short position of The Gold Cartel declined by a whopping 60,000 contracts, falling from 287,634 to 227,714. What happened to instigate this panic? The S&P downgrade of U.S. debt on 8/5/11.
  6. At that point, central bank intervention drove gold lower in the wee hours of 9/6/11 and the raid was on. The CME also conspired to raise margins in gold, too, thereby increasing the selling pressure.

All that history notwithstanding, it's clear to me that we are still in the early stages of this rally. With this history as our guide, PM prices will continue to ascend in two legs. This first leg is the ongoing expansion of large and small spec net long positions. These numbers will probably continue to grow until they begin to reach the levels attained in April and September of last year. The second leg will be another Cartel panic leg where prices rapidly surge to the upside. Since I think we are still in the middle stages of Leg #1 and, since global liquidity should only continue to surge, I just don't see a huge risk of a coordinated C/C/C smashdown at the current time.

That said, we can't be complacent, either. The charts are at a very significant juncture and silver lease rates are scary-low so a raid, particularly in silver, cannot be ruled out. Ignore the silver lease rate chart below at your peril. I don't think it's a direct indicator of an impending raid but even Stevie Wonder can see the obvious correlation between the last two forays into deeply negative territory and steep price selloffs.

paper_2-25lease.jpg

And now here are your charts. As you can see, we are now at the Battle Royale...the points at which gold and silver will either be forced to reverse or they will overcome this last line of resistance and charge higher. My point in dissecting all of the CoT data was to help you see why I feel that the Battles Royale are going to be won not lost and that, after a likely period of serious volatility over the next 5-7 trading days, gold and silver will begin accelerating higher. First, here are your gold charts showing the same view but from different angles.

paper_2-25goldd1_0.jpgpaper_2-25goldd2.jpg

paper_2-25goldw.jpg

And here are your silver charts. Note that silver is fighting two technical battles. There is the horizontal resistance from the recovery highs of late October (35.50) and there is also diagonal resistance from the down-sloping trendline connecting the highs of April and September (about $36). When silver is able to move through and close above both of these two lines, it will be off to the races for a while as there won't be much resistance until price reaches $40.

paper_2-25silvd_0.jpgpaper_2-25silvdw1.jpg

paper_2-25silvdw2.jpgpaper_2-25silvd2.jpg

In closing, let me just say that I sincerely hope you enjoyed reading this as much as I did writing it. It's not exactly how I intended to blow my Saturday but I felt it was imperative to get this information to you today so that you could study it before Monday. The next 5-7 trading days are very, very important and if you don't approach them with a plan, you will instead be prone to acting on your emotions and, as we all should know by now, letting your emotions get the best of you is about the only way you will lose fiat money trading gold and silver in this remarkable, continuing bull market.

Keep the faith. Be patient. Have courage. Believe in yourself. Prepare accordingly.

TF

403 Comments

Irene's picture

@DrG

So glad to hear of your little one's recovery!  It's good to also hear that by next week your family will all be home together.

BTW, that was our gas station when we were living in LA.  Wherever did you get that photo?  It wasn't the cheapest gas station in LA, but there were plenty of places even more expensive. 

nathan1234's picture

Re: Does the EE know something we don't? Submitted by Louie

If you ask me. This is not dollar positive. This is PM positive. As also Crude positive

Countries that are broke cannot  run a war when strong hands like China & Russia are in the opposite camps.

And this looks more like a WW3 in the offing.

Asia will prefer PM's-  neither the US$ or the Euro. The US$ demise will be faster IMHO.

yadane's picture

Note it is just my opinion 1)

Note it is just my opinion

1) Bombing raid on Iran: 100%

2) International intervention in Syria: 0%

3) The Greek bailout fall apart: 50%

4) Headline grabbing terrorism strike somewhere in Europe/US: 99.99%

Be Prepared's picture

@Dr G - Wow.... Gasoline gone Crazy!

Oil Speculation.... It's Market Effects!

With all that we know, what has happened to do something about curtailing speculative oil traders? Not much. While hearing about oil speculators jacking up prices, in terms of stopping excessive market manipulation and speculation, it's like ground hog day. Literally speculators, not producers and users of oil, now make up 70% of the total oil commodities trading.

CFTC Commissioner Bart Chilton seems to be hopping mad nothing has been done about oil speculation and said in a February 24th speech:

The CFTC has not yet been able to implement Congressionally-mandated position limits to put the brakes on excessive speculation in oil and other commodity markets. Meanwhile, trade associations representing Wall Street interests have sued us in federal court in order to impede our imposition of position limits.

So, I find myself repeating—and repeating—the same message: it’s high time to kick it in gear and use the one tool we have to appropriately address high oil and gas prices.

In Chilton's speech are some incredible facts on what oil speculation does to the price of a barrel of crude. Yes, you and I are paying to line the pockets of Wall Street. What a surprise.

A Goldman Sachs study last year stated that each million barrels of net speculative length in the markets adds as much as 8 to 10 cents to the price of a barrel of crude oil. As of February 23, 2012, the CFTC Commitment of Traders Report showed that “managed money” held net positions in NYMEX crude oil contracts equivalent to 233.9 million barrels. Using the Goldman Sachs research figure, and multiplying 10 cents times 233.9 million would mean that, theoretically, there’s a “speculative premium” of as much as $23.39 a barrel in the price of NYMEX crude oil.

Information Handlings Services (HIS), a global information company, has estimated that a $10 rise in the price of a barrel of crude oil translates into a 24 cent rise in the price of gas. Accordingly, the “speculative premium” of $23.39 a barrel translates into a 56 cent a gallon increase at the pump. In other words, each dollar increase in a barrel of oil equals a $.024 cent increase, $.24/10 = $.024), and $.024 x $23.39 per barrel equals $.56 per barrel.

If you drive a Honda Civic with a gas tank capacity of 13.2 gallons, that means the “speculative premium” costs you $7.39 every time you fill up (13.2 x $.56= $7.39).

If you drive a Ford Explorer with an 18.6 gas tank capacity, the total is $10.41 (18.6 x $.56 = $10.41).

And, for the Ford F150, the most popular pick-up in America, with a gas tank capacity of 26 gallons, it’s $14.56 more per fill up (26 x $.56 = $14.56).

Multiplying each of these figures by 52 weeks in a year, if you fill up once a week, the Civic owner is putting out $384.28 more per year, the SUV owner $541.32 more, and the pickup owner $757.12 more.

ClinkinKY's picture

@ Fred and Dr J

B.O. is so breathtakingly brilliant that "they" won't release his college transcripts (among other things) that would no doubt demoralize the rest of the population once they saw his 5.0 GPA (on a scale of 4)wink

agrock's picture

question

so with the rising crude + gas - what are the best ways to invest in it?

can anyone point in the direction of etf's?  not looking for financial advice just checking some out.

Perfidious Albion's picture

And as its Sunday.. heres a

And as its Sunday.. 

heres a song for all investors.. 

and another classic..

As ever All hail TF the mighty President of Turdonia. ( what happened to the benign dictator?) .

images?q=tbn:ANd9GcQ58u8DBPOycx8-bNFFnRb

Meanwhile. "Lets be careful out there".. 

ClinkinKY's picture

@ Goodgarden

Remember when George Stephanopoulos, at the New Hampshire Republican debate on January 7?
 

Posted on Sun Feb 19 15:39:00 2012 by Kenny

Remember when George Stephanopoulos, at the New Hampshire Republican debate on January 7, brought up and harped on whether the candidates thought states could ban contraception? Everyone, at least on our side of the aisle, shook their heads in disbelief as to why Stephanopoulos was bringing up the issue. There was no active controversy over contraception, it wasn’t in the news, and there were far more pressing political issues, yet what seemed like an eternity of debate time was devoted to the subject at the insistence of Stephanopoulos. It was, shall we say, something out of left field.

When Romney said, it’s working just fine, leave it alone, everyone laughed.

Newt’s comeback was prophetic in hindsight:

Well what do you know, about a month later the Obama administration proposes administrative rules under Obamacare which would require free contraception be provided even by religious institutions which oppose contraception on religious grounds.

It’s almost as if Stephanopoulos got the memo first. Unless, of course, you believe in coincidences.

Remember when no one understood why ABC asked about contraception at the NH Republican debate?

____________________________________________

Below is excerpt from actual debate:

Stephanopoulos struggles with fairness during NH debate

In another line of questioning, Stephanopoulos asked Romney if he believes “that states have the right to ban contraception, or is that trumped by a constitutional right to privacy?”

Romney responded by questioning Stephanopoulos’ logic and his choice to raise a hypothetical situation that would never happen.

“You’re asking — given the fact that there’s no state that wants to do so, and I don’t know of any candidate that wants to do so — you’re asking could it constitutionally be done?” Romney asked, with a hint of incredulity.

Stephanopoulos, undeterred, pressed Romney again: “I’m asking you, do you believe that states have that right or not?”

Amid a chorus of “boos” from the audience, Romney again parried the impossible hypothetical.

“George, I don’t know whether a state has a right to ban contraception,” Romney responded. “No state wants to. I mean, the idea of you putting forward things that states might want to do that no state wants to do, and asking me whether they could do it or not, is kind of a silly thing, I think.”

Goodgarden's picture

States Rights

Big L  -  To me this is a question of government power.  I don't care whether we're talking about the Federal govt,   State govt  local or county level govt -  none of them belong in the decision making process around contraception.  If my wife and I choose to have 1 child or 5 children, use birth control or not -  I shouldn't have to negotiate that with a Federal, State, Local or County govenment official.  I'm not denying that some of our politicians want to go there (mr. Santorum) but - I believe that it's just wrong for the country -  and that kind of regulation is probably an unconstitutional deprivation of our privacy regardless of which level of govt gets involved.  In terms of "who pays"  -  private citizens should be able to enter into contracts with private insurance companies to buy insurance for it  -  like anything else.  It shouldn't matter that a government or a religious leader doesn't like it because this is a private matter and an individual liberty that should be non negotiable.        

Be Prepared's picture

Iran banging on Their Oil Drum

Patrancus's picture

The only real contraception that is needed...

The only real contraception that is needed at this particular time is inside the Washington DC beltway.

Eternal Student's picture

@DrG

I'm truly sorry to hear about your daughter. That is indeed hard. Best wishes for her, and you and your wife.

Patrancus's picture

States Rights

Are you kidding?, government has legislated itself into the supposed private sovereign of American bedrooms for many decades, I don't see this argument on contraception as being any different than all the current law involving the melding of body parts in the law books and argued daily in courtrooms across this republic. 

Dr G's picture

That photo was taken from

That photo was taken from Yahoo. There wasn't an article associated with it, just a caption. It was probably a reader submitted photo, but the caption didn't say.

Keep in mind that IF there is a PM raid, there will be a nice FUBM. The entire commodities complex is moving up with strength. It will tricky for them to implement a successful raid with crude heading to $115+.

Antrobus's picture

Republicans in the bedroom

So the Republican position on birth control is all about cost - who pays - so if I get this right, the "richish" folks who can afford contraception won't have kids, and the poor, who can't afford contraception, will have kids. OK I guess - if that's what the plan is.
 

Patrancus's picture

The sooner the price of gasoline...

The sooner the price of gasoline goes to the moon, the sooner the Obamtrons will snap out of their hack hypnotic trance and then in November maybe sit on their hands or even vote to kick his sorry marxist ass out of Washington.  

Irene's picture

@DrG

Thanks.  I remember how I felt paying almost $4/gal there - it was brutal, but how can you live in LA without a car?  People are truly going to be hurting soon and we're not even close to summer yet.  Economic slowdown in 4..3..2..1. 

Goodgarden's picture

Clinkinky

You make a good point and I wouldn't doubt that Stephanopoulos got the memo in advance.  At the same time   Santorum has been talking about the evils of contraception for the past ten years, so there's plenty of smoke around this issue.  The religious institution issue is a complex one.   The govt exempted churches but not hospitals that are affiliated with churches.   These hospitals are deriving a huge proportion of their income from tax payer money.   I'd be more sympathetic if these hospitals would no longer feed at the public trough, because they could then claim to be genuine private religious institutions.  The reality is that these places derive a huge percentage of their income from medicare and medicaid.   That's my money were talking about.  If I go to a hospital,  I want medical care first and a sermon only if requested. In some places, Catholic hospitals are the only ones for miles around -  so it's an important question.  If I'm not catholic and I'm paying with taxpayer money, why should the hospital director or a church have the power to force their religious belief on me.  What about my religious freedom?    

zilverreiger's picture

@Iran banging on Their Oil Drum

only complete sheep would interpret it like that!

Dr G's picture

@BePrepared, love the Obama

@BePrepared, love the Obama lies cartoon, especially the unicorn coming out of his mouth. Heh.

Keg's picture

This thread has fallen for the thing as the R candidates

The economy is a disaster, the money printing presses are running 24/7 worldwide, commodity pricing rising, another war brewing in the middle east and people are discussing contraception?  Some of you are falling for the same stupid trick that the R presidential candidates have fallen for.

tmosley's picture

@The Vet re negative interest rates

If that is true, then the current 1-month LIBOR (o.25%)+current 1 month lease rate (-0.426)=-0.176% ie the rate is still negative.

What am I doing wrong?

ClinkinKY's picture

@ Goodgarden

I'm in total agreement with you. My only point was as to who initiated this whole "debate". Very devious machinations by the current administration and the "unbiased" press.

Tabberto's picture

TURD

you are a total dude as ever - closely followed by vivekmert5 who is serving up some quality technicals, I find the combination of you two to be highly reassuring, the www is a wonderful thing....

ClinkinKY's picture

@ zilverreiger

@Iran banging on Their Oil Drum

only complete sheep would interpret it like that!

-----------------------------------------------------------------

Baaa!  Of course this was already your opinion of me so IDRGAF. Only "enlightened people", like you, know that the U.S. is to blame for every  current problem in the world.

It's a f#*king cartoon, lighten up a bit will you?

Mariposa de Oro's picture

Wyoming

Wyoming to be declared a terrorist tribal zone in 3, 2, 1......send in the drones.

http://trib.com/news/state-and-regional/govt-and-politics/wyoming-house-advances-doomsday-bill/article_af6e1b2b-0ca4-553f-85e9-92c0f58c00bd.html

The task force would look at the feasibility of

Wyoming issuing its own alternative currency, if needed. And House members approved an amendment Friday by state Rep. Kermit Brown, R-Laramie, to have the task force also examine conditions under which Wyoming would need to implement its own military draft, raise a standing army, and acquire strike aircraft and an aircraft carrier.

Big L's picture

Antro - thank you for making my point.

Which is, who pays for what? And who is responsible for what?

Who pays for contraception? Contraception, violates some people's beliefs. Does the government have the right to force people to support anything that is in violation of their beliefs? Yes or No?

Who pays to support all the poor babies/people, that will be created if no contraception is provided? Are we all responsible? Yes or No?

Your argument might have some teeth if condoms weren't ubiquitous and cheap but they are. You might have a point if all contraception were terribly expensive, but they're not. People make decisions, to have sex or not, with whom they want, where and when they want.

Why am I responsible for the consequences of those decisions?

Responsible. Not your moral position, on right and wrong or who needs what, and who has what or who ought to do what or what a shame it is, etc. etc. etc.

I'm responsible because the government forces me to be responsible in exactly the way they think I should be responsible which just happens to be about money.

Why?

If it wasn't a matter of people being FORCED to be responsible for decisions they didn't make, the discussion wouldn't even take place. We would all be free of the government sticking their noses into our bedrooms and subverting our religious beliefs. Nobody want's them in our bedrooms and it doesn't appear that people understand truly why they are there.

For the government it's about the money. For them, morality has nothing to do with it, we have been reduced to COST.

It's about cost and payment. And we're only having the discussion because the cost is distributed, and the government is out of money.

Don't forcibly distribute the cost and there isn't any problem of morals. You can't see the link?

The government doesn't belong in our bedrooms, but they believe they are FORCED to go there because babies and people are expensive and they don't want any more of the expensive ones.

Holy Cow, just think about that for a while. Think about those ramifications. The government doesn't want people? Just some people? That is worse than chilling, it's terrifying!

There, I said it. Right out loud. The truth. I'm sure to be in trouble now because the truth usually causes trouble. So go ahead and flame me, then lets take this to the forums where it belongs.

Turd went to an enormous amount of work to create a very important piece of information for all of us and I would dearly love to debate this issue and I think debate is healthy and good, but I don't believe it belongs on Main Street today.

Main Street ought to be about the price action in PM's.

Big L

zilverreiger's picture

@ClinkinKY

Your foreign policy views are hypocrite indeed, one day you will see this contradiction. For the rest I don't hate you or anything. Keep stacking.

ClinkinKY's picture

@ zilverreiger

Your foreign policy views are hypocrite indeed, one day you will see this contradiction. For the rest I don't hate you or anything. Keep stacking.

Gee, thanks. I feel all "warm and fuzzy" now:)

ps-Your "foreign policy" views are "on the money" though, right?

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