A Good Start

This is certainly a better start to the week than many had expected.

If you read the previous post, though I expected the rebound to begin this week, I figured the weakness from Friday would spill over into today. Instead, after the predictable drop at the Globex open last evening, prices turned within the first half hour and look at it now! Gold has reclaimed and held its 50-day and silver is attempting to do the same.

And those 50-day MAs will be the key levels this week. Much energy was spent attempting to pierce them last week, particularly in silver, and if prices simply rebound back above them, those shorts will be squeezed into covering rather quickly.

Then it gets interesting. The 50-day MA in silver is $32.59 but the 5-day is just a shade higher at $32.71. If enough new buying or short squeezing develops and price rises, not only through the 50-day but the 5-day, too,  the silver rally will really begin to get legs as the momo-chasers flip to the long side. Silver will then surge toward 33.30 and 33.60. That is our primary goal for now.

Gold, having held above $1723, can sets its sights upon its 5-day near $1740. Above there, it will head toward $1755 before taking a breather and perhaps forming a reverse head-and-should bottom on the hourly chart.

All Turdites know that I'm a big believer in physical demand and the idea that this overwhelming desire to exchange fiat for metal is underpinning the paper markets and prohibiting The Bad Guys from causing another crash like 4/11 or 9/11. Physical demand for metal right now is so great and consistent that, just like January 2011, this "correction" will soon end.

So, now wrap your head around this...I spoke with our pal Andrew this morning and he provided this little nugget: Central Bank and other sovereign demand is currently so strong in London that, this morning, the bullion banks themselves were observed to be seeking allocation and buying metal. Think about that. You're a bullion bank. You're supposed to have literally tonnes of metal on hand in order to fulfill orders on the LBMA. Instead, because the demand is overwhelming and requesting fully-allocated physical, you're left buying on the open market and competing for metal just like everyone else.

This is a signal of a complete divergence between the bullion banks on one hand and the non-delivery (short) Comex commercials and specs on the other. If this is, in fact, the case (and I have no reason to doubt Andy and his sources), then we are set up for a potentially explosive bout of short-covering and prices could rebound very quickly from these levels. Therefore, be on the lookout for the breakage of resistance and MA levels discussed above.

A couple of other items for you on this fine Monday morning. First, another great piece from Jim Quinn. Please read it when you have a few minutes: http://www.theburningplatform.com/?p=41873

And then there's this. Do you recall the guy that left Goldman Sachs last spring and, upon his exit, wrote a damning op-ed in the NY Times? Well, now he has a book to pimp and, in the process, he showed up on "60 Minutes" last night. There are no earth-shattering allegations of fraud or anything like that but the interview will certainly leave you shaking your head at the utter lack of integrity and honesty shown by The Squid. Please take the time to watch this segment:

http://www.cbsnews.com/video/watch/?id=50133578n&tag=contentBody;storyMediaBox

OK, that's it for now. I see that, despite continued pressure, the metals are holding firm. Keep your fingers crossed and lets see if we can turn the tables on them.

Have a great day!

TF

259 Comments

BillAuAg's picture

first?

Whiskey Tango Foxtrot 

TJeffson's picture

The lower it goes...

the more I can stack.  Is the bottom in?  I have no idea, don't really care either.  

Thanks again Turd for all you do here.  

Avocado Lover's picture

turd ?

Yes ! turd place !!!

According to my calculations :  Sweet spot for free yellow hat on November 9 is $29.97 to $30.19 for the closing price of the Dec 12 Silver Future contract.

Just need to go down a little bit more, but not too fast....

nice and easy ......

Peace Brother,

Silver Lover

ReachWest's picture

Bullion Banks

Thanks Turd. Bullion Banks buying on the open market and competing with the rest of us? Holy crap - that sounds very bullish. Let the short covering begin.

Turd Ferguson's picture

Commentary from JB Slear

MODERATOR

JB is a good guy. I have had several conversations with him and he is genuine and sincere. Below are his thoughts and follow up to the stuff Santa posted last week regarding BBs and their spread trades.

When Jim talks about spreads you have to consider who is doing the spreads and how they work them.
Spread trading by definition is having a long and short contract at the same time supposedly on the same product. Spreads or hedges are supposed to be used to protect companies from futures price fluctuations, like if a sudden shortage or an abundance of a product pops up. In the futures markets, spreads are activated in a calendar format.

Hershey’s Candy is a perfect example of a legitimate hedger since they need cocoa/sugar and various other commodities to produce the products they sell. There are other types of hedging that are now called “synthetic hedging” where I personally think the misuse is occurring. A real hedge company should normally break even against a produced product. If Hershey needed to purchase a large amount of Sugar and needed delayed delivery of the product, they would enter into a long position to hedge against higher prices. Say there is a natural disaster that destroyed the sugar crop for Hershey’s’ Co. Prices would rise and force Hershey to pay higher prices for the product and thus would pass that onto their clients (that is if there was no real hedge). A proper hedge would offset the loss by acquiring a profit in the commodity trade against the higher price move of the real product which would keep the costs lower on our favorite Chocolate bars (mine are Hershey Kisses).
This is how I think the misuse of the word Hedge is being applied, and please remember this is my opinion, I don’t have the ability to obtain factual information because these are considered a hedgers privacy and I’m not an investigator with the ability to demand the necessary information.
Say ABC Hedge Co has 50,000 positions in a contractual spread, that means they should be short 50,000 contracts and long a different month contract but the total of 50,000 contracts combined are being held overnight. This is how I think they move the markets with impunity yet claim they are hedging. Say ABC Hedge Co sells all their long positions at “the market;” this causes the price to fall and a large amount of volume pops up at that moment. At the end of the day, ABC Hedge Co re-enters its long contracts again but at a far lower price and will re-enter their positions slowly as to not show a jump in volume like they did on the sell order. This is called a “sudden flush” or what we now call a “waterfall event” on the charts,http://www.jsmineset.com/wp-content/uploads/2012/10/clip_image00113.gif, and by re-entering into the long contracts at the end of the day they can still claim to be a hedge Co.
Paul Volcker mentioned in his discussion with the British Parliamentary Commission on banking standards that this approach to a trade is not how a hedge company is supposed to act.http://www.c-span.org/Events/Paul-Volcker-Debates-Banking-Standards-in-British-Parliament/10737435049-1/. This really is speculation, a hedge against price fluctuations is what the legal definition of a hedge company is supposed to be, but these types of trades cause the market to move in a specific direction, that’s speculation and if so titled, should be considered manipulation (here’s an example of a hedge co. not hedging properly http://nymag.com/news/businessfinance/bottomline/21978/)
When these 1 minute charts are posted showing a waterfall event, this is exactly what is being done to the product shown (IE Gold/Silver), and in my opinion there is an orchestration within the hedge funds (and Algorithm) software that gives a sell signal to all so more contracts can be activated to create the bigger moves. Of course this is simply conjecture on my part and I have no real proof.
Even though we have been on the bad side of these so called hedgers/spreads, there is always a comeuppance moment in a manipulation, that changes everything, that is the moment a recognized trade pattern no longer works in the original manner intended. This might be happening now in Silver and Gold as we’ve seen this tremendous attempt to scare out the weaker longs, and yet the open interest in not changing in any big way as we’ve seen in the past, are we witnessing that comeuppance moment now?

Stay Long and Strong!!

JB Slear

Fort Wealth Trading Co LLC.
866-443-0868 Ext 104
817-717-5489
Fax: 817-764-2537
www.FortWealth.com

El Gordo's picture

This will answer a few questions

This academic article explains a lot about what is going on around us which we may not have previously been able to explain.  The principles are universal and apply to all classes, age groups, etc. any way you want to slice and dice it.  Take the time to familiarize yourself with the concepts and you may avoid a lot of grief  by recognizing the situation for what it is sooner rather than later.  Enjoy.

http://cantrip.org/stupidity.html

Missiondweller's picture

Speaking of massive physical demand..

I thought I'd reprint this from yesterday on ZeroHedge:

Chinese Gold Imports Through August Surpass Total ECB Holdings, Imports From Australia Surge 900%

Tyler Durden's picture

First it was more than the UK. Then more than Portugal. Then a month ago we said that as of September, "it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings." Sure enough, according to the latest release from the Hong Kong Census and Statistics Department, through the end of August, China had imported a whopping gross 512 tons of gold, 10 tons more than the latest official ECB gold holdings. We can now safely say that as of today, China will have imported more gold than the 11th largest official holder of gold, India, with 558 tons.

http://www.zerohedge.com/news/2012-10-21/chinese-gold-imports-through-august-surpass-total-ecb-holdings-imports-australia-sur

Watcher's picture

Thanks for the Slear comments

He is saying what Santa is saying, and what Turd is saying. A religious experience is coming to the short side of the PM market. And if it's true that the BBs are in the market for the phyzz, buckle in. Imagine these same criminals going naked long?

dropout's picture

Indecision - Fundamentally Flat

Both gold and silver chopping sideways. The USD 'sawtoothing' making lower lows.

The markets sputtering along attempting to digest the latest earnings reports.

The Eurozone still caught in a big bag of political hot air, with nothing resolved.

The US trapped in pre-election mode and both candidates spewing frivolities as the fiscal cliff draws near.

Asia is starting to hurt as contraction is biting into their bottom lines. Japan is on empty. 

The mideast is set to explode any minute.

South Africa is paralyzed by labor strife.

The souther hemisphere is the incredible shrinking economies.

So, fundamentally speaking, this global down turn has the economies headed back to the wood shed!

Shnozberries's picture

Fluctuations

"hedges are supposed to be used to protect companies from futures price fluctuations,"

Fluc you white people too.

tyberious's picture

One can only hope

IMF’s epic plan to conjure away debt and dethrone bankers

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.

Some readers may already have seen the IMF study, by Jaromir Benes and Michael Kumhof, which came out in August and has begun to acquire a cult following around the world.

http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html

treefrog's picture

sure - fire strategy

Can-Do.gif
50Jim's picture

wynter benton

how much longer do they have to show us their stuff?  2 days..............and then their credibility is gone........

ggnewmex's picture

Turd

Hey, A big thank you for all you do to encourage us and hold this "community" together, even if you are a cornhusker!!

Seriously

The statement you made in your post---

So, now wrap your head around this...I spoke with our pal Andrew this morning and he provided this little nugget: Central Bank and other sovereign demand is currently so strong in London that, this morning, the bullion banks themselves were observed to be seeking allocation and buying metal. Think about that. You're a bullion bank. You're supposed to have literally tonnes of metal on hand in order to fulfill orders on the LBMA. Instead, because the demand is overwhelming and requesting fully-allocated physical, you're left buying on the open market and competing for metal just like everyone else.

That is quite the statement! Just like everyone else here, including you, it just seems like the waiting gets tedious. While I have heard the story, and believe it, ( I subscribe fully to it) just seems like it will never come. Yet, I believe that one day, we will wake up and collectively say. WHAT HAPPENED!!

Anyway, thanks for passing along what you can. While logically, I know we are right, in the haze of this constant manipulation, it is nice to hear there are others out there, and we/ I am not alone.

thanks TF

GG ( badger fan)

The Green Manalishi's picture

Latest from Detlev

Printed money

"But there is no inflation!" - Really? Photographer Graeme Weatherston.

“But there is no inflation!” – This is a statement I hear quite often, sometimes from people who are, in principle, sympathetic to my arguments, sometimes from people who are less so. In either case, those who state “but there is no inflation” consider it to be a statement of fact and one that they assume must pose a challenge for me. Should the man who argues that we are heading for the collapse of paper money, for some kind of hyperinflationary endgame, not be concerned that all this money printing by central banks around the world has not led to much higher inflation yet? Do present inflation statistics not provide comfort to those who believe in the practicability and even superiority of central-bank-managed fiat money, and do these statistics not allow them to discard my analysis as paranoid?

The short answer is, no.

More: http://detlevschlichter.com/2012/10/but-there-is-no-inflation-misconceptions-about-the-debasement-of-money/

peckerwood's picture

JB Slear

if only the other financial whizkids could write so purposefully and SIMPLY.   It really does no good to the little soldiers (in the fight against the crooks), when certain authors make things more complicated than they really are.  THANK YOU Mr. Slear! 

TF - is it OK to forward JB's post to the CFTC?

realitybiter's picture

Coal stocks

are trading like they know the election results.

Love em or hate em, the stocks are trading like they are done with their 4 year decline.  Granted, some are better than others, but they all have been in the tank since they peaked in the Summer of 08.  Energy goes higher, coal gets a nod....from zero to hero...  wtfdik?  nuthin..  Most solar stocks are on the mat and no smellin salts will rouse them....It never made sense anyway. Someday.  What will JRCC be worth when they are making 3, 4 bucks a sh again???

I commented on SLW in the old thread.  That stock is freakin Nostradamus.

agNau's picture

DN

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/10/20_Incredibly_Key_Chart,_This_One_Worries_The_Gold_%26_Silver_Bears.html

This is the "Pole" with flag formation I mentioned in post last week. I am referring to what appears to be pole on multiple days trade, with flag pointed out by Norcini.....
This same type formation appears on multiple charts, in varying similarities.

A rapid move higher....followed by consolidation into narrowing trade.

rocoach's picture

So basically, situation normal

Hasn't it been this way forever?

Indecision - Fundamentally Flat

Submitted by OutLookingIn on October 22, 2012 - 11:47am.

Both gold and silver chopping sideways. The USD 'sawtoothing' making lower lows.

The markets sputtering along attempting to digest the latest earnings reports.

The Eurozone still caught in a big bag of political hot air, with nothing resolved.

The US trapped in pre-election mode and both candidates spewing frivolities as the fiscal cliff draws near.

Asia is starting to hurt as contraction is biting into their bottom lines. Japan is on empty. 

The mideast is set to explode any minute.

South Africa is paralyzed by labor strife.

The souther hemisphere is the incredible shrinking economies.

So, fundamentally speaking, this global down turn has the economies headed back to the wood shed!

4406PACK's picture

Put on the Glasses

put on the glasses or start eating this trash can

Rui's picture

Silver OI stays stubbornly high

Wow, what the heck is going on? Unlike gold where OI went down after weak hands left, silver OI stayed above 140K despite a week of assault. Perhaps CME # is really cooked?

pickaxe's picture

FOMC this week

Before we consider ourselves out of the woods on this correction, remember please that the FOMC is meeting this week. Who knows what kind of fun-and-games will result in this political season from the pronunciations of this august body of blowhards?!?

~pickaxe 

Rui's picture

In addition to FOMC ...

option expiry at the end of month is up next also.

SaratogaPrepper's picture

A package

Met the postal worker at my door as I was leaving for work an hour ago. Had me sign for a package from Provident Machine Bearings. Seemed odd since I had just hit the buy button last night. Their service has always been very good, but that was a little too fast. Checking it over I see that it is addressed to my wife! 25th wedding anniversary in 2 two weeks. Coincidence.....I think not. Feel like a 5 year old at Christmas time.

Kcap's picture

Excellent post Turd.

I give credit where credit is due.  This TA stuff is just silly at this point. 

The critical thinking conjecture from JB Slear was great stuff though because what these people are doing in their thought experiments is laying out the situational blueprint for all to see based on their many years of experience in that line of business.  Its respectable and much appreciated.

Kcap

Monedas's picture

Head Start Program For Recovering Metal Muppets !

Do not be a Muppet enabler for JPM .... stick to raw, red meat Hoarding !          Monedas       1929     Comedy Jihad The Anti-Muppet World Tour      devil

ClinkinKY's picture

Change

http://confoundedinterest.files.wordpress.com/2012/10/prices2008.jpg

¤'s picture

The ZH Article

I hate posting from a cell phone and especially so while I'm sitting in the sun on a patio on a warm, sunny fall day.

However, did anyone see the recent ZH article on Germany having their gold from abroad audited and also slowly repatriated?

If or when this occurs is a really big deal. Huge!
Let your imagination run wild a bit. China and Germany are strong allies and trading partners.

Not only does Germany's decision make sense and is long overdue it also helps China out by making the Fed/Treasury take the gold reserve issue up in a very public way down the road. Especially so if there's a fly in the ointment. (no gold or refusal to comply by the Fed).
Besides Germanys decision right now, the implications and China's eventual playing of their gold card at exactly the right or wrong moment (China & US respectively) looms larger imho.

The story that ZH is covering seems like the beginning of something monumental.

rocoach's picture

TA

Dunno why you guys all say TA doesn't work.  It seems to me that, looking at SLV, Bollinger Bands, Ichimoku, RSI and MACD all continue to work just fine.  You may not like what they say, but they still work.

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