Wrapping 2012

2012 is nearly over and it feels like it has been a tough and lousy year. And it has. But has it been that bad? Could it have been a lot worse? Damn straight it could have been.

As we entered 2012, silver had bounced off of $26 but was still only trading near $28. Gold had touched $1550 and was near $1570. There was no current, overt quantitative easing program, only Operation Twist, and we were just beginning an election year with all of the attendant MOPE and SPIN regarding an economic recovery. Things looked pretty darn bleak.

Of course, we know what happened next. The metals rallied through January and February. They swooned until August and then rallied again into October before being beaten back again. It was all painful to watch and very little fun to write about...BUT...the metals have eked out a gain this year. Gold is UP nearly $100 and silver is up $2 or about 7% each. Again, I'm not trying to slather lipstick on the proverbial pig here but...given all of the things we faced in 2012...that's not too shabby and, as we head into 2013, the situation looks almost entirely different.

The U.S. economy is dragging along the bottom. The U.S federal deficit and debt are growing hopelessly out of control and the country's credit rating is poised to be downgraded again sometime very soon. Global central banks are accumulating physical metal at an increasing pace and the Federal Reserve is openly printing $85B/month. My point is: If the metals can survive 2012 with all of the headwinds, how might they trade in 2013 with the wind at their back?

Exactly.

Yesterday's CoT showed a continuation of spec long liquidation in gold and the silver specs finally gave up, too. For the week, gold was only down $12 yet the specs shed over 14,400 net longs, which allowed the Gold Cartel to cover another 14,400 net shorts. But silver fell almost $2, with most of the damage coming on the successive days of 12/19 and 12/20. The specs responded by dumping almost 8,400 gross longs. Apparently the pain became too extreme to hold on any longer.

So, as we head into 2013, here is a CoT snaphot. The large specs are long a gross total of 200,436 contracts. The Cartel is short a gross total of 327,413 and the Cartel net short ratio is 2.34:1. As we entered 2012, the large specs were long 167,413 but The Cartel was short a nearly identical 326,454 with a net short ratio of 1.95:1.

The silver picture, once again, is more intriguing. Ponder these numbers:

DATE          PRICE      LARGE SPEC LONG      CARTEL LONG       CARTEL SHORT     CARTEL RATIO

12/27/11        $28                    24,026                                     41,224                             55,356                       1.34:1

2/28/12         $35                    38,012                                      33,802                            78,395                       2.32:1

8/14/12         $28                    32,317                                       47,797                             71,199                        1.49:1

10/2/12         $35                     47,236                                      35,788                             93628                       2.62:1

12/24/12       $30                     39,620                                     44,302                             91,010                      2.05:1

A couple of things that jump out at me:

  • The Cartel gross short position has risen by 64% since over the past twelve months.
  • The Large Spec gross long position is also up 64% over the past twelve months.
  • The Cartel gross long position is nearly back to levels which have twice indicated price bottoms in the past.
  • The current Cartel net short ratio could be considered "neutral" at 2.05:1.

Finally, just a few words about price. The charts don't look too hot so don't be surprised by some further weakness in the short term. This would undoubtedly inspire even more long liquidation which would "improve" the CoT structure even more. But, as noted above, the fundamentals for 2013 are vastly better than 2012 AND this whole "fiscal cliff" nonsense will only serve to make them even more positive. Therefore, hang in there and buy the dip. Take delivery and add to your stack. Trust your instincts and be ruled by logic, not emotion. Look around and prepare accordingly.

TF

632 Comments

Capt. Willard's picture

First (in 2013 I'll grow up, promised!)

BillyBoy's picture

Second

Second

Owtovit's picture

Thurd

Thurd

Revelation's picture

4

4 more Obama years. Yeah!!!!

Revelation's picture

Remember that 90's Bull?

Great vid with a great description!

Cramer "IBM Aug 95 Calls, I want an offering on 1,000 x 3" "I want a thousand" - What a Joker.

Missiondweller's picture

A decent year but

the day of reckoning is still coming.

Gramp's picture

Here's to  a productive 2013!

Here's to  a productive 2013!

images?q=tbn:ANd9GcQIONEAE_vpwsn2kL9-NuJ
silver66's picture

top 10

Silver66

treefrog's picture

a prayer for the new year

dear god, please help me, in the coming year, to become more like the person my dog thinks i am.

Moderator Lincoln's picture

Great job in 2012, Turd - and Happy 2013

MODERATOR

You've done a great job in 2012, boss - keep up the good work in 2013!

fertzeltwist's picture

Odd

0

DayStar's picture

Harvey's Up!

Harvey says the gold COT cannot get any more bullish than this week.  Gold closed down for five weeks straight.  Japan's national debt is seen topping ¥1 quadrillion.  Lots of "generalists" contacting silver miners.  CME cut the margin on gold.  Spain's property woes to continue for years.  Europe experiences a liquidity shortfall.  BOJ needs to print 2X the annual JGB issuance.    Mississippi River shipping around Illinois to shut down by 3-4 Jan.  DS rant on the planned demolition of the world economy.  All this and more on...the Harvey Report! http://www.tfmetalsreport.com/comment/253557#comment-253557

DayStar

Urban Roman's picture

Be sure to practice

Fergusonism in the new year!

kpd13's picture

Price action

Turd thanks for a great year of posts. 

Can you comment on this statement/question:  it's hard to believe the COT when the commercial net silver short swings almost 9,000 contracts to the positive , but the price barely moves. How is that possible?

thanks and happy new year

achmachat's picture

youngest turdite!

I'm proud to announce the birth of my son! Mother and kid are super healthy and the cash gifts were quickly turned into a beautiful 10oz Year Of The Dragon coin for him!

Katie Rose's picture

archmachat

I'm so glad that all is well!

Congratulations on your new son!

10 oz Year of the Dragon coin for him, awesome!

I hope your wife survived the birthing process. wink

Kuchek's picture

Eagles

It is my understanding that the ASE's are mandated to be minted with silver mined IN the US. Not Mexico etc. With their production suspended recently can that be shown in the production #'s from the mines? Are the mines directly exporting their full production than? It will be interesting to see what happens when production is supposed to continue and maybe the delay is just kicked down the road like everything else. Thoughts? Thanks again to Turd and all the Turdites for providing a place where I don't feel like Cassandra or Yossarian.

Excalibur's picture

Beautiful boy

Achmachat, Congrats! Hope you get his personal stash up to his body weight, and keep adding to match his weight as he grows.

tpbeta's picture

@Daystar

"Harvey says the gold COT cannot get any more bullish than this week."

Harvey is bullish? Who would have thought it.

Stock_Canines's picture

No Talk of HEH

Turd, you are noticeably quite on any explosive and historic events in 2013. You actually appear rather temperate in your views of the future only referencing some of the potential catalyst of price moves in the precious metals; staying away from any obviously bullish prognostications. There is no mention of historic behind the scene maneuverings that will catapult price in multiples rather than simply dollars. No mention of historic price moves sooner rather than later. I wonder if this is simply a change of approach or if it reflects change in sentiment. I won't go so far as saying you appear deflated, but you certainly seem more measured.  It will certainly be interesting to see what the future holds. The catalyst you mention have all been with us for some time, either explicitly or implicitly, yet price has not moved. Perhaps once we move into the new calendar year, these factors will influence price as you predict or perhaps the metals will continue to lag this communities expectations. I appreciate the great effort you and everyone put into this site. Happy new year. The one thing we all can be sure about is 2013 will surely not be boring.

ancientmoney's picture

@Kuchek

I believe U.S. mint is to use metals from U.S. mines unless it is unavailable.  Then they can outsource it as needed.

Excalibur's picture

Mod Lincoln

Nice to see a post from you. I guess you are quietly going good work behind the scenes, so appreciation for you and whatever you do for Turd and this site.

daveyboy's picture

FWIW Armstrong doesn't

FWIW Armstrong doesn't envisage any kind of move in metals until July-August time, until that point he predicts metals are consolidating. Not that you should put stock in what one person is saying but it's good to get a feel for what others are saying although ultimately the price and trend will dictate my trades. I am not adding to my physical position now, because I refuse to pay 25% plus premium. (VAT in this country).

I Run Bartertown's picture

UR - Fergusonism?

"but also pushed for a state sales tax and corporate income tax.[3]  ...Mrs. Ferguson's infamously generous granting of pardons was her way of relieving the overcrowded conditions in Texas prisons... rumors persisted that pardons were available in exchange for cash payments to the governor’s husband. In 1936, voters passed an amendment to the state constitution stripping the governor of the power to issue pardons and granting that power to a politically independent Texas Board of Pardons and Paroles (see Capital punishment in Texas). [9]

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Hmm...a big-taxing,  pardon-selling pol so corrupt as to require Texans to strip powers from the Governor...

No thanks.

BillyBoy's picture

I love these charts, looking

I love these charts, looking good to me.

So It Goes's picture

Stock_Canines

Hey dude - cool off.  You're Trolling 4 sure.

"I won't go so far as saying you appear deflated, but you certainly seem more measured."

You just called the Turd "deflated".  You know you did - so don't even bother to argue the point.  Are you out of your mind?????  The way I read his blog he seems elated.  Just can't see the immediate future.  But nobody gets tomorrow's WSJ - get it?

My .02 - get a life.  Seems you weren't the brightest bulb in propaganda school.  We see right through you - try a different tactic next time.

Keep stacking :-)

FMOTL's picture

@daveyboy

you can avoid VAT by buying hallmarked sterling silver or pre 1920 British coins on the second hand market at close to or just above spot ( deduct 7.5% from bullion price to get sterling equivalent)

ivars's picture

Armstrong seems to be right.

Armstrong seems to be right. My calculation was the same once fiscal cliff became reality, just did not want to spoil the atmosphere here. But a dose of reality would help to bear the coming months.

June-August 2013 looks like the time for an event or accumulation of events  that would finally unleash USG debt creation into the next HIGHER gear after a brief pause during  H1 2013. And consequently, pull up metals. In the meantime,  we can continue education, and the ones who have spare paper, add to stacks.

QE is not covering/barely covering  the loss of money created by deleveraging, so there can not be any real inflationary effect from it. More so, while deleveraging destroys money-reduces real  supply in economy, the QE money sits in FED in bank reserves and does not enter economy- until new bank lending counters deleveraging-  hence the drastic drop in money velocity.  There is no multiplier applicable to to QE money, while in "normal" times banks would lend out 10 times more than FED infuses into banking system against USG debt. Today the multiplier is may be 1 (see pictures below) and loan growth speed is far below precrisis levels despite huge excess reserves.

What gold price is measuring, is the amount of high power money ( issued by FED vs. USG debt=USG public debt ) by now plus discounted future USG debt flows. If the speed of USG debt generation will fall below certain limit, they will have neutral or negative effect to gold prices due to discounting. The factor by which future USG debt flows are discounted into gold prices  has so far escaped me, but I will figure it out one day before August 2013, as gold prices and debt development will indicate it.

QE: since 2009, banks have created net 2 trillion USD in loans:

But FED has created for banks about 1,5 trillion- so in fact, QE is almost 1 to 1  transferred to net loans . No new circulating loan money is created in banks themselves (well, about 500 billion in 3 years, or 170 billion/year).

Before recession, this speed of new money creation by banks was 4 trillion a year (and FED was not adding any QEs) :

So today WITH QE banks are creating money at a rate about 1/4 th of what it was prior to crisis ( 1 trillion billion/4 trillion) . See the last chart. Where would the hyperinflation come from? If FED gave money directly to people, what would they do? Spend, partly, or pay down debts, annulling FED efforts same way its happening now.

beinki's picture

Some family members waking up

Another Christmas come and gone, only this year silver rounds were given out by my mother-in-law! And her first husband used to be a bank manager(deceased) I really enjoyed the look on my brother-in-laws face when he opened up his silver eagles(he is a business professor at University of Missouri and we constantly butt heads-he still doesn't believe their is any market manipulation)Oh there was also lots of ammunition being unwrapped also. Yes I am still considered the conspiracy theorist but they listen a little more each year. Stay safe next year  turdites.

daveyboy's picture

  Re buying hallmarked pre

 

Re buying hallmarked pre 1920 silver, I am not sure that I can purchase 1 ounce of junk silver (assuming you mean 0.925 or above otherwise kind of pointless) for around spot price.

I have certainly never seen it, I see a lot of old collectable coins but that's a very dicey game as they are extremely expensive and their collectors worth is best left to those who really know that market inside and out.

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