Monday Morning Silver and Gold

As we begin what will surely be another crazy and wild week, let's spend a little time with the basics, just to be sure we've got our heads screwed on straight.

Let's start with gold. First of all, the OI and the CoT. As you'll recall, total open interest collapsed last week as the April contract expired yet there wasn't a full rollover of OI into June. This, in itself, is strange. That total gold OI is now back to levels last seen in September of 2009 (when price was near $1100) is even more strange. As of last Thursday, total gold OI was just 406,388. This is down an extraordinary 72,656 (-15.17%) since the price and OI peak on 2/28/12. Breathtaking and amazing. As will be continued to be mentioned here to the point of exhaustion: The only entities left trading gold on the Comex are Cartel monkeys and HFT-Algo WOPRS. The monkeys can paint the tape and the charts to trigger either buying or selling from the brainless WOPRs and profit in both directions. That this is currently the accepted mechanism for "pricing" the only true and historic measure of money and wealth in the world is literally astounding and, frankly, criminal.

Remember that the CoT report is issued on Friday afternoons but the data is compiled on Tuesdays. Therefore, the information is always dated and often subject to conjecture and interpretation. Case in point this week. On the surface, the gold CoT was not very bullish. Large specs (HFR-algo WOPRs) increased their net long position by over 16,000 contracts while The Cartel increased their net short position 19,000 contracts. (The other 3,000 net long addition coming from the small specs.) But remember, this is only through last Tuesday and what happened on Wednesday and Thursday? The total OI dropped by 11,000 contracts to its current 406,388 level. With price falling $34 over those two days, it's safe to conclude that much of the 16,000 spec long net increase in the CoT has already been drained back out. Therefore, the CoT is really neither bullish nor bearish and it's my belief that the true structure is nearer to the bullish levels of the previous CoT report of 3/23/12.

The gold charts continue to be neither bullish nor bearish, too, but with an obvious bullish theme. To note, on the 8-hour chart below, you'll see that every attempt to take gold down below $1650 recently has been met with significant buying. This support seems stout and points us to a very logical buying area for trading. On the weekly chart, note that the long-term trendline from 2008 is now above $1600.

paper_4-2amgold8.jpgpaper_4-2amgoldw.jpg

One last thing about these gold charts. It always amazes me how certain levels continue to hold long-term significance. Notice that I've drawn the 1665 level onto these charts. An autographed Turd hat will go out to the first Turdite to correctly identify and describe, in the comments section below, the history and significance of the particular number.

OK, onto silver. The silver CoT on Friday was very bullish and, after the action of late last week, is still valid and perhaps has even improved. On the report, the large specs decreased their net long position by 2,500 contracts while the EE decreased their net short position by roughly the same amount. The EE net short ratio is now back to just 1.77:1, which is a level last seen on the CoT of 1/24/12 when price $32.03. All in all, signs point to a bottom here and we should be confident that a resumption of the 2012 rally is right around the corner.

paper_4-2amsilv8.jpgpaper_4-2amsilvw.jpg

One quick group of headlines before I go. The metals came under a little pressure earlier this morning when these headline suddenly crept up:

*FED'S FISHER SAYS U.S. ECONOMY IS IMPROVING
*FED'S FISHER SAYS U.S. ECONOMY IS IMPROVING
*FED'S FISHER SAYS LATE 2014 INTEREST RATE PLEDGE WILL NEED TO BE ADJUSTED
*FISHER SAYS FED SHOULD `SIT, WAIT AND WATCH' ON POLICY
*FISHER SEES TIME OF `SURVIVAL OF THE FATTEST' NOT FITTEST
And finally: *FISHER SAYS FED HAS `DONE ENOUGH' IN EASING

I certainly hope that none of this nonsense caught you by surprise as we predicted all of it last week when The Bernank gave his "dovish" speech. I "missed" by two days because Fisher was probably too busy golfing or surfing porn on the internet to be dragged out into the public for a speech.

"Look, there will always be "hawkish" and "dovish" statements by The Bernank and the assorted Fed governors. No doubt, after this speech by The Bernank today, later this week we'll get Fisher or KosherDakota rolled out to try to proclaim a counter message. All of this is simply MOPE and SPIN and means absolutely nothing long term."

http://www.tfmetalsreport.com/blog/3578/thank-you-mr-ben-bernank

OK, that's all for now.I hope that everyone has a terrific and glorious Monday. It's going to be a great week!

TF

161 Comments

agrock's picture

first

first

BrentLawrence's picture

I'll take second!

I thought you might be in early, when I saw the rally.

Turd Ferguson's picture

One more thing

MODERATOR

Our pal, Winston, has been expecting a nice rally this week as Q2 begins. Looks like he's right...so far.

Chepo's picture

3rd??? Shouldn't matter

Not even worth in saying I'm 3rd...  :)

Igiveup2's picture

third

Can't read the article and type fast enough.  Five minutes to post and third!

¤'s picture

It's good to be green

Nice way to start the week and new quarter off so far.

The Fed is always rolling one of these guys out to tamp down anything preemptively. That's how I read whatever it is they have to say. It's not what they say but why they're saying it when they do.

Thanks for the update TF.  I'm upbeat yes

beardeus's picture

May 36 call went from .22 to

May 36 call went from .22 to .27! This is what I was hoping for!

FUBM!

ReachWest's picture

$1665 level.

Significance of $1665?? Isn't that one of Santa's angels?

Turd Ferguson's picture

Nope, that's not it.

MODERATOR

You're thinking 1764.

Response to: $1665 level.
Dr G's picture

1650 and 1681 are Santa's

1650 and 1681 are Santa's closest angels. 1764 is the following one and a big one.

RH&S coming into play. Should take us up to 34.50 on this rally.

Hammer's picture

http://www.tfmetalsreport.com

http://www.tfmetalsreport.com/blog/3283/significance-1665

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.

Silver Sooner's picture

1665

Was the opening level of gold on Aug 7th, first day of trading after S&P downgraded the US...and was the gap created by gold's reaction to that news.

BUDDHA PRINCESS's picture

Dollar May Emerge as Winner After Key Manufacturing Data Roundup

Talking Points

  • Chinese PMI Fails to Yield Sustained Momentum as Traders Pare Rate Cut Bets
  • Eurozone, UK PMI Figures to Reinforce Expectations of Regional Slowdown
  • ISM Manufacturing Gauge at Risk of Disappointing Following Soft Survey Data
  • US Dollar Has Scope to Rise on Haven Demand Amid Global Slowdown Fears

The Australian Dollar outperformed while the Japanese Yen traded broadly lower to start the trading week after official Chinese Manufacturing PMI data printed markedly better than economists expected, boosting risk appetite amid hopes the world’s second-largest economy and key regional growth engine may not experience as sharp of a slowdown as had been feared over recent weeks. Optimism was short-lived however, with Asian bourses shedding early gains to trade relatively flat heading into the European opening bell.

The quick reversal seemed to be linked to the unusually large gap between official PMI figures a closely-watched private sector version from HSBC. The spread between the two measures has average 1.5 index points over recent years compared with a whopping 4.8-point disparity this time around. Indeed, while HSBC data showed China’s manufacturing sector shrank at the fastest pace since January 2009, numbers fromChina Federation of Logistics & Purchasing argued for the strongest growth in a year.

With this in mind, traders seemed to conclude that the official PMI figure mattered less as a gauge of actual growth – which the HSBC outcome clearly called into question – and more as a monetary policy signal. In this context, a strong reading meant that Beijing was projecting less scope for reducing borrowing costs than markets hoped for to stimulate an economy expected to face significant headwinds as the Eurozone – China’s largest export market – dips back into recession.

Looking ahead, European manufacturing data enters the spotlight. The final revision of March’s Eurozone PMI reading is expected to confirm that the sector contracted at the fastest pace in four months, while UK PMI for the same period sees activity growing at its weakest since December. This bodes ill for risk appetite, where the central theme driving trends in the second quarter is likely to be the degree of global downturn on tap for 2012 after investors spent most of the first three months of the year preoccupied with Euro-area debt woes.

The key consideration in shaping the growth outlook is to what extent a healthier North America can offsetslowing performance elsewhere. That brings the US ISM Manufacturing print into the conversation, where median forecasts point to a pickup in March. The risk of a downside surprise seems significant however following uniformly disappointingresults on leading activity surveys released last week. On balance, this sets the stage for a difficult start to the trading week, with risky assets vulnerable to losses and the US Dollar(ticker: USDollar) aiming to capitalize on safe-haven demand as the breadth of acceleration in the US recovery is called into question even as growth cues from elsewhere continue to appear ominous.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

1:00

CNY

PMI Manufacturing (MAR)

53.1

50.8

51.0

2:30

CNY

HSBC PMI Manufacturing (MAR)

48.3

-

49.6

23:01

GBP

Lloyds Business Barometer (MAR)

31

-

1

23:01

GBP

Hometrack Housing Survey (MoM) (MAR)

0.2%

-

0.0%

23:01

GBP

Hometrack Housing Survey (YoY) (MAR)

-1.0%

-

-1.4%

23:30

AUD

AiG Perf of Manufacturing Index (MAR)

49.5

-

51.3

23:50

JPY

Tankan Large Manufacturers Index (1Q)

-4

-1

-4

23:50

JPY

Tankan Non-Manufacturing Index (1Q)

5

5

4

23:50

JPY

Tankan Large Manufacturers Outlook (1Q)

-3

2

-5

23:50

JPY

Tankan Non-Manufacturing Outlook (1Q)

5

6

0

23:50

JPY

Tankan Large All Industry Capex (1Q)

0.0%

0.8%

1.4%

0:30

AUD

TD Securities Inflation (MoM) (MAR)

0.5%

-

0.1%

0:30

AUD

TD Securities Inflation (YoY) (MAR)

1.8%

-

2.0%

1:30

AUD

Building Approvals (MoM) (FEB)

-7.8%

0.5%

1.1% (R+)

1:30

AUD

Building Approvals (YoY) (FEB)

-15.2%

-5.3%

-14.7% (R-)

5:00

JPY

Vehicle Sales (YoY) (MAR)

78.2%

-

31.9%

6:30

AUD

RBA Commodity Price Index (MAR)

99.7

-

97.9 (R-)

6:30

AUD

RBA Commodity Index SDR (YoY) (MAR)

2.7%

-

3.2% (R-)

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:15

CHF

Retail Sales (Real) (YoY) (FEB)

-

4.4%

Low

7:30

CHF

PMI Manufacturing (MAR)

49.5

49.0

Medium

7:45

EUR

Italian PMI Manufacturing (MAR)

47.6

47.8

Low

7:50

EUR

French PMI Manufacturing (MAR F)

47.6

47.6

Low

7:55

EUR

German PMI Manufacturing (MAR F)

48.1

48.1

Medium

8:00

EUR

Euro-Zone PMI Manufacturing (MAR F)

47.7

47.7

Medium

8:00

EUR

Italian Unemployment Rate (FEB P)

9.3%

9.2%

Low

8:00

EUR

Italian Unemployment Rate (4Q)

8.7%

8.1%

Low

8:30

GBP

BoE Housing Equity Withdrawal (£) (4Q)

-8.2B

-8.6B

Low

8:30

GBP

PMI Manufacturing (MAR)

50.7

51.2

Medium

9:00

EUR

Euro-Zone Unemployment Rate (FEB)

10.8%

10.7%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3299

1.3382

GBPUSD

1.5958

1.6087

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

ReachWest's picture

Price Discovery

Turd wrote:
That this is currently the accepted mechanism for "pricing" the only true and historic measure of money and wealth in the world is literally astounding and, frankly, criminal.

How long can this Cartel monkey/WOPR algo system continue to be the price discovery method for the worlds Physical metals? Crazy.

BUDDHA PRINCESS's picture

Commodities Vulnerable on Threat of Disappointing US ISM Data

Commodity prices are showing mixed results in European trade as markets await US ISM Manufacturing data, where consensus forecasts suggest factory-sector growth accelerated in March after a pullback in February snapped three consecutive months of improvement. The print carries heavy implications for global economic growth expectations at large as traders look for accelerating recovery in North America to offset a recession in the Eurozone and a related slowdown in China (data released over the weekend notwithstanding).

The risk of a downside surprise on the ISM reading seems significant however following uniformly disappointing results on leading activity surveys released last week. This sets the stage for selling pressure to emerge across the spectrum ofrisk-sensitive assets including copper and crude oil, where prices remain closely anchored to the MSCI World Stock Index (on 20-day percent change correlation studies). Such an outcome likewise opens the door for the US Dollar (ticker: USDollarto advance on the back of safe-haven flows, which bodes ill forgold and silver both in de-facto terms (considering both metals are benchmarked against the greenback) and with regard to reduced demand for an alternative to paper currencies.

WTI Crude Oil (NY Close): $103.02 // +0.24 // +0.23%

Last week, prices completed a Descending Triangle chart pattern with a break through support at 104.75, the 38.2% Fibonacci retracement level, implying a measured target at 99.57. An inverted Hammer candlestick above interim support at 102.97, the 50% Fib, hints a near-term bounce may be ahead to retest 104.75 before the larger down move resumes.

Commodities_Vulnerable_on_Threat_of_Disappointing_US_ISM_Data_body_Picture_3.png, Commodities Vulnerable on Threat of Disappointing US ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1668.35 // +6.78 // +0.41%

Prices found support at 1658.49, the 23.6% Fibonacci expansion level, and swung back above resistance at 1690.04. The bulls now appear set to challenge the 38.2% Fib retracement at 1690.04. Alternatively, a break back below 1658.49 targets 1634.62.

Commodities_Vulnerable_on_Threat_of_Disappointing_US_ISM_Data_body_Picture_4.png, Commodities Vulnerable on Threat of Disappointing US ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $32.27 // +0.25 // +0.08%

Prices continue to consolidate below resistance at 32.93, the former neckline of a Head and Shoulders (H&S)top carved out between late January and mid-March, and horizontal support at 31.04. A break blower exposes the first downside barrier at 29.79. The H&S setup broadly implies a measured downside target at 26.84.

Commodities_Vulnerable_on_Threat_of_Disappointing_US_ISM_Data_body_Picture_5.png, Commodities Vulnerable on Threat of Disappointing US ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.826 // +0.030 // +0.79%

Prices continue to trace out a Triangle chart pattern above support at 3.696, the 38.2% Fibonacci retracement level. While the setup is typically indicative of trend continuation, which in this case would be a bullish development, confirmation is needed on a break of either of its boundaries before firm conclusions can be drawn. Near-term support is now at 3.770, while resistance stands at 3.893.

Commodities_Vulnerable_on_Threat_of_Disappointing_US_ISM_Data_body_Picture_6.png, Commodities Vulnerable on Threat of Disappointing US ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

DeltaCharlie's picture

gold @ $1650

Is it because of the 200-day MA?

Turd Ferguson's picture

Excellent

MODERATOR

Though it looks like we have two winners. "Hammer" and "SilverSooner", please send me your mailing address.

tfmetalsreport

at

gmail

dot

com

Hammer's picture

LOOOOOOL...and well spotted

LOOOOOOL...and well spotted that we posted at the same time. Fair play yes and kudos.

Kcap's picture

For those who didn't see it on the last thread...

We all look forward to Miles Franklin gold and silver through Turd.  Sorry to spoil the surprise.

Kcap

Dr Jerome's picture

Gaudy Jewelry

I am holding in my hand a silver earring that we inherited from my father-in-law's late third wife. They were well off. When she passed, her natural daughters and granddaughters rummaged through her extensive jewelry collection. The step-daughters were sent the leftovers. Among what my wife received were these silver earrings marked 925. They are a bit gaudy, in fact a lot gaudy. 
I pondered the ultimate fate of these earrings. My wife would never wear them. In most homes they would be sold already. Since they came to this house, they go in the stack. But at some point we will sell them to a dealer. That dealer will sell them to a refiner and they will be melted into a 100 ounce AG bar. I suppose that is the fate of most gaudy jewelry.
But that fate got me thinking a bit deeper. When silver rose to 40+ a year ago, I bet the big dealers with refining capability were collecting truckloads of gaudy jewelry as sheeple rushed to the scrap dealers to sell out for fiat. That silver was refined and poured into bars, some of them finding their way into the COMEX and used for those reluctant deliveries last summer. I bet Sprott now has much of that gaudy jewelry. 
So the price spikes, silver flows in from the jewelry boxes, and it floods the system. Blythe is able to make a few more deliveries. I bet there is tones of this stuff still out there, and when the economy gets tougher people will, more reluctantly this time, start bringing it to the dealers. Maybe Blythe needs the silver and will allow the price to spike just enough to collect it? Maybe she also suckers in some long contracts at the same time. and then plots another smashdown.
 
I have noticed on the one year daily chart that AG will rise for about 90 days, and then  a smashdown plus a month of steady downward pressure before it finally starts pushing back up for 90 days. Rinse and repeat. If the Comex needs more silver they just might do the following: A steady rise, then a cap at 38-40, combined with calls for a crash in silver from the MSM, junk dealers putting their signs everywhere, and then another smashdown after the gaudy jewelry comes in. The Turkish Government is just outright telling people to bring the stuff in. We do things more clandestinely here in America. But of course all of this depends on the Keynesian system holding together long enough and the dollar can survive. Seems that the dollar has its enemies.
 
I just received my copy of Currency Wars. Just in time for my NY vacation this weekend.
Xeno's picture

1665

Battle lines being drawn, nobody's right if everyone is wrong. Young people speaking their mind, getting so much resistance from behind.

1665 - Stout cap, or stout support.

Turd Ferguson's picture

Sorry to burst your bubble, kcap

MODERATOR

but you are not correct. TFMR is not going to be a MilesFranklin affiliate. I do like Ranting Andy, though. I hope he comes to the convention.

Xty's picture

1665

http://www.tfmetalsreport.com/blog/3283/significance-1665

maybe should also post

Third!

I am going to blame the internet in my fabulous hotel room over-looking the Toronto harbour, which you can almost see through the forest of cranes building condos that start at 2.3 million, etc.  It is like looking at what it will look like after it crumbles.

Strongsidejedi's picture

Good morning

We're right.

End of message.

labestiol's picture

PM & USD up ?

I am dreaming or are both PM and USD up ??

Number 47's picture

@kcap

Mentioning it once could be construed as accidental, traipsing over to another thread and posting it again kind of ruins the apology for spoiling the surprise.

Dr G's picture

@labestiol, not dreaming.

@labestiol, not dreaming. They don't always trade inversely, we are just so accustomed to it that it shocks us when they don't.

Silver Sooner's picture

1665, Hammer and Turd

I'd say it's more than generous.  Turd's WOPR actually showed you posted before me...would love to see the Nanex action on that!  cheeky

And if Andy makes the convention, I'm definitely buying him his choice of adult beverage (unless we get the open bar....)

Dr Jerome's picture

Interesting photos

Here is another non-sequiter from Jerome...

Link to photos of the Falklands war (guerra de las Malvinas) between Britain and Argentina.

I visited Argentina in 1990 and bought a map at a small shop in Beunos Aires. The lady at the counter opened the map, pointed to the Malvinas islands and emphatically claimed that these belonged to Argentina, not Britain. The photos are striking-- A big world power enforcing their colonial domination over disputed territory with a weaker nation that clearly has as valid a claim as Britain. 

Not sure why this strikes me as significant this morning...  Why the heck does Britain want these islands anyway?

J

JimmyTheHand's picture

Who? What?

I wonder who/what is ramping the h3ll out of silver this morning?  A commodity like silver shouldn't just shoot up .95 cents on no news.  Not that I am b!tching about it of course, but I am curious.

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