Updated Gold and Silver Charts

As you might imagine, yesterday's action has changed the complexion of the charts just a bit so I figured we should spend some time today trying to figure where we are going from here.

First of all, the FB/Ag contest is already over. I know of at least one winner, "thesandbox". Did anyone else have 6/1/12? At any rate, Mr. SandBox needs to email me his shipping info so that I can send off his new, genuine and authentic TF hat.

Next, if you haven't yet watched all or parts of "Rollover", I suggest you do it soon. The links are all contained within the "sticky" post at the top of the homepage. Santa expanded a little bit on this theme last night. Here's the email he sent out:

My Dear Extended Family,
QE to infinity is for certain. About that there is no question whatsoever. It cannot be avoided.
Operation twist is a damn joke stimulation wise. At this point in time it is a dark joke.
The Fed is playing with something worse than fire. That fire is posted in a video today on www.jsmineset.com. This video references a worldwide financial crisis that if it starts cannot be stopped by any power on the planet.
They are already easing up on the rhetoric. The Fed will downright panic as the world's economies go from slow to dropping out of sight. That is what is on the plate tonight, this night, right here and now.
Safety only exists in gold bullion and in the outrageously depressed good gold shares now shorted out of sight.

Love, Santa

Yikes! Sounds like everything really is as serious as it seems. Perhaps you should read this next: http://www.dailymail.co.uk/news/article-2153324/Markets-facing-rerun-Great-Panic-2008-Head-World-Bank-warns-Europe-heading-danger-zone-bleakest-day-global-economy-year.html And this: http://www.zerohedge.com/news/why-grexit-would-make-lehman-look-childs-play

Regardless, it looks like next week is going to be quite interesting. One item not getting a lot of national attention (yet) is the recall election in Wisconsin on Tuesday. Sort of like the French elections of last month, the vote on Tuesday will be framed as an American referendum on "austerity". Watch this one closely. http://www.nytimes.com/2012/06/01/us/politics/wisconsin-recall-vote-could-foretell-november-election.html

This week's CoT is even more bullish than I had hoped, particularly in gold. Here is a link to the report: http://news.goldseek.com/COT/1338579201.php And here is a C&P of the comments I posted immediately following its release:

Submitted by Turd Ferguson on June 1, 2012 - 2:48pm.
MODERATOR
Granted, we've already worked off some of this. Regardless, nearly historic numbers.
In gold, the Cartel net short ratio fell to 1.76:1. The lowest I've ever seen it. Again, for the sake of comparison, the 4/5/11 net short ratio was 2.64:1 and the 2/28/12 net short ratio was 2.69:1, so the Gold Cartel net short position has now been cut in half from those peaks. Additionally, LargeSpecShorts added 5281 contracts (10%). This is exactly what I've been telling you for weeks and is, in large part, the cause of the explosive rally today.
In silver, the Cartel net short fell to 1.31:1 and a total, aggregate number of just 14,334. This likely means that JPM is now under 10,000 in net short. By far, the lowest I've ever seen. For the sake of comparison, the 4/5/11 ratio was 2.69:1 and the 2/28/12 ratio was 2.32:1. This means that the net short ratio of The Silver Cartel has been trimmed by 75% since 2/28/12. Additionally, the total long position of The Cartel is 45,817 contracts. On 4/5/11, it was 33,413 and on 2/28/12 it was 33,802. So, the total Cartel long position is up almost 36% in just 3 months. Large specs went short silver, too. Spec longs shed 1519 and spec shorts added 720. Ooops. Dummies.
All in all, another great CoT.

I want to draw your attention to the underlined part of the commentary as I have not heard anyone else mention this yet. Recall that on 2/28/12, silver was winning The Battle Royale and breaking out. Despite the announcement of LTRO2 the next day, the metals were smashed lower and the bottom to this latest manipulation has only recently been found. On the 2/28/12 CoT, the net short ratio of The Silver Cartel was 2.32:1. As of last Tuesday, their net short ratio was just 1.31:1. This is a reduction of over 75%!!! Claim what you want about fair and free markets and no manipulation. If you do so, you are a fool. This entire "episode" was manufactured to allow The Evil Empire to reduce their short position...and it worked!

I'll give you one more. On 4/5/11, just prior to the beginning of The Great EE Panic which led to a near signal failure later that month, the cumulative net short position of the EE was 56,414 contracts, i.e. they were short 89,827 and long 33,413. As of last Tuesday, the cumulative position is just 14,434 contracts as they are currently short 60,151 and long 45,817. Do you see how significant this is? Do you understand now why silver has been mercilessly attacked over the past 13 months?

75% is a huge reduction but they're not net long yet, are they? Perhaps this is why silver is still rangebound between 27 and 29 while gold broke out yesterday? I don't know. We'll get some answers next Friday. Regardless, I think that silver is about to run away from them for reasons they aren't anticipating. If they were smart, The EE would BUY here, cover as many of their remaining shorts as possible and then get out and let silver run free. If they don't, they face disaster. This is your chance, Ms. Masters. I encourage you to act now, before it's too late.

Here are your charts. First, let's look at gold. Here's the long-term, weekly chart:

On the daily chart below, you can see the importance of maintaining a toe-hold above 1610. For the week ahead, let's hope that gold extends its gains on Monday and then survives some attempts to sell it back on Tuesday. After that, let's hope that gold can begin to solidify and base above 1650.

Here is your updated, long-term silver chart. It looks just fine.

As mentioned above, silver remains rangebound on the shorter-term charts. Perhaps The Forces of Darkness will attempt to keep it there while they continue cover and flatten their net position. Perhaps they may not be afforded that opportunity. The next few days will tell us a lot. For now, $29 is our target. After that, $30.

OK, that's all for today. Remember that London is closed on both Monday and Tuesday for Her Majesty's "Diamond Jubilee". Not having a physical trade will allow for greater level on shenanigans on the Comex so be prepared for some volatility. Now, go get some R&R. Next week promises to be crazy.

TF

240 Comments

recaptureamerica's picture

GM to cut about one-fourth of

GM to cut about one-fourth of U.S. pension liability
http://articles.chicagotribune.com/2012-06-01/classified/sns-rt-us-gm-pensionbre85014s-20120601_1_pension-liability-pension-shortfall-pension-overhaul

Let's say the company that took it over goes broke...these people are screwed.

recaptureamerica's picture

Voters say yes to euro

Xty's picture

re voters say yes to austerity

It really is a wonderful Orwellian world when the people who campaigned for 'austerity' did it on the grounds of getting access to bailout funds.  An interesting austerity indeed - and one I fear will lead to the people getting poorer and the bankers getting richer, for all this does is extend the ponzi scheme a little further.

Xty's picture

re GM pension 'restructuring'

Loved this quote:

"There are lots of companies with pension plans. Very few have plans in the absolute or relative size as us," Chief Financial Officer Dan Ammann said during a conference call.

"We would like to get back into the category where this is sort of a non-issue for us," Ammann added. "That doesn't mean eliminating it completely, but obviously we've taken a big step in the right direction today."

.

And who would buy this huge liability? as you say, what about when Prudential goes belly up?  GM certainly offered up some good money to have them take it.

If I were offered the lump sum, I would take it and buy something lumpy with it.

Xty's picture

lodmund

the general euphoria on here is both astounding and alarming

​If gold having a $65 dollar up day (just over 4%) doesn't allow just a little happiness to shine on people who have been getting it in the gizzard for weeks and weeks than what does?  And why are people always so concerned that somehow people are going to do the wrong thing because they read something on the web?  And then someone writes something on the web to convince one not to listen to the other voices on the web.  At least one voice on here has been consistent and honest for years, and as we blindly, with euphoria and alarming stupidity, follow him over the cliff, I for one will be proudly wearing my hat (but not my pajamas -- is there a problem with the mail? the sizing? the selection?) as I hum the mantra:

gold is money, gold is money, gold is money

JohnnyR's picture

10 year bonds - can you help me understand

Dear all,

Over the last few posts, there’s been a lot of chatter about the 10 year bond reaching this 1.5% level. Can I ask you for help in understanding the importance of the figure and also about bonds in general, please ?

Do I understand things correctly ?

Let’s say I buy a 10 year bond for $1,000,000 and I get it at 5%. So each year I can earn $50,000 interest, and at the end of the 10 years I get my original $1m back.

I’ve read that a bonds value can go up and down. So my $1m bond can be sold for say, $1.2m, but the return will drop to say, 4%. Or, my bond could be sold for $800k and the return will rise to, perhaps, 6%. I’m guessing that sometimes, bonds are popular and higher demand pushes the price up, and sometimes the demand falls, causing the bond to fall in value.

So, question 1 …

Why does the return on the bond rise and fall ? What I mean is, whether my $1m bond is worth more or less than that figure, why can’t I, or the new buyer of my bond, count on the original 5% return ?

Question 2 …

Perhaps my next question is related to the first question. Recently, the return on bonds is around the 1.5% figure as has been highlighted by various Turdites. Why is this figure dropping ? Is it because more people want to get into bonds, and are therefore pushing the price of the bond up ? If so, can I refer you back to question 1, Just because the bond price is rising, why does the return fall ?

I’d appreciate you helping me understand things, please ?

Cheers, J.

sengfarmer's picture

something to think about

Since there have been no arrests for fraud or theft of the customers segregated accounts in the MF Global case, what are the chances of it happening again?

As I understand it and please correct me if my reasoning is in error, JPM was the custodian for MF Global customer cash accounts. MF used them for collateral for repo agreements with JPM. It is illegal to use the cash accounts for collateral but JPM claims MF assured them they weren't using this segregated money for collateral. Well it turns out they were being used and JPM seized the money.

They can seize collateral used for hypothecation or rehypothecation ahead of any stock or bond holders of a failed company under a rider added to the BAACP, (bankruptcy abuse and consumer protection act), of 2005. This act alone has added fuel to the derivatives market because it removes risk from what should be risky derivatives trading.

JPM has since returned 168 million which they said was excess collateral, my big question is why can't all of the customer money be clawed back? It was used illegally so why is the theft allowed to stand?

I think JPM is in huge trouble on several fronts and needed that cash to stay above water for awhile longer. 

Eric Original's picture

to put it bluntly

I'm not ashamed of a little euphoria.  It's not even euphoria so much as a brief weekend pass out of the dungeon.

Astounding and alarming?  How about the guys who've been stepping over each other, scaremongering the blog with lower and lower targets?  The more strident those voices, the more it's a screaming buy signal.  

​Watching those guys get their shorts ripped off...now that's euphoria! 

El Gordo's picture

10 Yr Bond

Bonds have a stated interest rate.  Bond prices move inversely to market rates; therefore, if interest rates go down, the market value of the bond goes up to reflect that change.  If rates move up, bond prices go down.  Government bonds are very liquid and trade solely based on current interest rates since they are considered to be risk free.  So, when the Fed manipulates interest rates, it also manipulates bond prices.

Xty's picture

Johnny R and John Mauldin

Just going to try one of your questions - the 5% bond you bought for 1 million will be more attractive when rates fall, so when you sell it for 1.2 million, the other person will be getting 5% on 1 million, but they paid 1.2 million.  So they are in effect getting a lower interest rate, even though the original 1 million dollar bond will pay 5% on 1 million dollars.

This might answer your other questions, as he specifically mentions the 1.5 number (but I haven't read it yet):

First Deflation, Then Inflation. But the Timing...?
By John Mauldin | June 2, 2012

One of the more frequent questions I am asked in meetings or after a speech is whether I think we will have inflation or deflation. My ready answer is, "Yes." Then I stop, which I must admit is rather fun, as the person who asked tries to digest the answer. And while my answer is flippant, it's also the truth, as I do expect both outcomes. So the follow-up question (after the obligatory chuckle from the rest of the group) is for a few more specifics. And the answer is that I expect we will first see deflation and then inflation, but the key is the timing. Today we will examine that question in more detail, as we look at how interest rates could actually be negative (!!!) this week in German and Swiss bonds and why the US ten-year has dipped below 1.5%. The very poor May employment number needs some analysis, too, and we'll check the prospects of a synchronized global slowdown. Rarely have I come to a Friday with so much data that simply begs for a more thorough look, but we will try to hit at least the most important topics....

(this copied from my in-box, but here is a link to the site:)

http://www.johnmauldin.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline

 
Eric Original's picture

Johnny R

If you buy your bond at 1,000,000, and the coupon is 50,000 per year, and you hold it to maturity, then yes your yield is fixed at 5%.

It's the new buyers, say the guy who buys that same bond, with the same coupon, for 1,200,000 or 1,400,000, who is getting a lower effective yield to maturity.  That's what's going on when you see these yields dropping.  Prices are being bid up, as investors are getting scared into accepting smaller and smaller yields.

Your decision, if you bought that bond for 1,000,000 is whether to sell the bond and pocket the upfront gain when it's trading at a premium or not.  At that point, you've really already made a bunch of money up front, and there is really just a smaller yield to maturity going forward.  

Xty's picture

went looking for pajamas, but found foot-wear instead

I know there is a lurking foot-fetishist, and today is for him.  While my quest for perfect silver and gold pajamas continues unfulfilled, I do believe I have found an excellent summer style for the fashionable, historically-minded, gold-bug ladies out there, and as the site itself said, "I would wear these with pajamas even while in the house they're gorgeous":

Xty's picture

99th monkey

I think you have your answer already.

Eric Original's picture

99th

Shaming, yes.  Naming, not really my style.  They know who they are, and so do we.

JohnnyR's picture

El Gordo, XTY and Eric Original,

El Gordo, XTY and Eric Original,

Thanks guys, your comments and info have given me my Eureka moment. That makes sense - you still get 5% but only on the 'face' value of the bond. Hence a lower return on rising bond prices and higher return on falling bond prices.

I guess, when the bond matures, no matter what a second buyer of the bond pays, $800k or $1.2m, - they are going to get back the bonds face value of $1m.

I owe you all a beer. Will a hat tip each cover the beers ?

J.

Eric Original's picture

JohnnyR

images?q=tbn:ANd9GcQb7fU0BoTsELeJE8pWFUD

Xty's picture

EricO and JohnnyR

I do NOT want to know what kind of work that 'fellow' (?) will do for beer.

JohnnyR - I had a similar eureka moment about that issue, and will accept both virtual beer and hat-tips - bartering is good, and super easy when imaginary!

edit: just noticed your second question wasn't quite answered - the dropping rate is on new bonds being issued - the national governments are all frantically borrowing money by issuing bonds.  So the quoted rate is on the new bonds, which, because they are strangely attractive if US, have a lot of demand, so the government can offer a really low rate of return.  This demand for bonds extends to other existing bonds with higher  different rates attached to them, which also trade.  So while their rates remain the same, the amount people are willing to pay for them fluctuates with the new bond rate.  If you are Spain or Italy and nobody wants your bonds, you have to offer really high rates, and a short time frame, or nobody will touch them.

(I think, please someone correct me, as I am still a total amateur at this.)  

El Gordo's picture

JR

Just send one Turd's way with my name on it. 

Pining 4 the Fjords's picture

Eric O: The most interesting man in the world

ChiTownHustler's picture

CBNC recommendations

ChiTownHustler's picture

Gold weekly

ChiTownHustler's picture

gold 60 min.

TomMack's picture

retail gasoline

gasoline retail prices on the street are very competitive.  they do trail the market when prices are falling but the fight to maintain market share will force them down.  there is plenty of downside to go on the gasoline at the street with $85 crude.  Also diesel exports (a relatively new phenomenon past 2+ years) has kept swing crude production (3-7%) in diesel instead of gasoline contributing to less gasoline production.   

TomMack's picture

No Naming

opinions differ.  mods will take care of most egregious offenders.

John Galt's picture

Retail Gasoline Competitive?

For sake of comparison when oil spiked at around $147 per barrel (in early 2008?) the price per litre of gas in this part of Canada was about $1.47. As oil prices fell the gasoline prices fell in near perfect unison such that you could determine the price of gas by moving the decimal point of oil to one side. In other words $125 oil = $1.25 per litre gas.

Flash forward 4 years and we have $85 per barrel oil and gasoline prices around $1.20 per litre.

I am aware that one can make the argument that gas prices will slowly catch up, but I've seen no evidence to support that in the last few years....the gap keeps getting wider in an allegedly near zero inflation environment.

zman's picture

Here is a question, why

Here is a question, why doesn't the hedge fund money (which is very short gold and silver) know that the bullion banks have reduced their short position?

Do the hedge funds read the stats in the paper market, or do they blindly take a position?

It would seem very obvious that the hedge fund money could be squeezed like they were on Friday when the bullion banks want no part of being short.

Gramp's picture

Chuckle Chuckle...:)

That was good for an a.m. laugh there Pining for the images?q=tbn:ANd9GcTBEz7ZwAEy9KsVd6_vK52

   So London Markets are closed Moonday and tooosday Darling for The Queen's "Diamond Jubilee"... WTF ...lets see here...

The Diamond Jubilee is set to take place in 2012 and will mark 60 years of the Queen’s reign.

"The Queen’s coronation was held on 2nd June 1953.  With her Silver Jubilee marking 25 years on the throne in 1977 and the Golden Jubilee was held in 2002 marking 50 years."

http://2012-queens-diamond-jubilee.com/home.html

Stock_Canines's picture

Can Someone (Smarter than me) Respond to Byzantium

Above, Byzantium makes an interesting point, at least I think so (but my knowledge of this is fairly limited). Turd argues it is positive or bullish that the Cartel have so drastically reduced their shorts in gold and silver. Furthermore, they have smashed the price so as to be able to cover at a much lower price than where we were only a few months ago. Byzantium makes the argument that rather than this development being bullish, perhaps this is something that should give us pause. The cartel now has the price much lower and their book is much more balanced (no longer the risk of being too heavily short). Doesn't this also give them the ability to now pile on new shorts driving the price even further down to a significant degree? They have reduced their shorts and managed to keep the price down . Now they can reload their shorts crushing the price even further in the hopes of destroying the last bits of hope and optimism of those pesky gold and silver longs. This makes a lot of sense to me, and I'm curious as the thoughts of the more experienced and perhaps Turd himself. I typed this on a iPhone do I apologize for grammar and spelling in advance.

ChiTownHustler's picture

CCI weekly update

ChiTownHustler's picture

reducing their shorts

Their reducing their shorts because they know something is coming, other wise they would just stay short. Remember they always know more than the peasants.

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