Gold and Silver Prices Still Rangebound
As we wrap up another rangebound week, let's look ahead and hope for a better week next.
First of all, thank you for your patience as we've tried to fix the site. The server company took the site down last night in order to update a few things and then The Tech Team did the same this morning. For now, here's the deal: We need to curtail certain types of attachments to comments. Photos and gifs are clogging up the site as they often link back to another source and, if that source has slow or disabled servers, it jams up the servers here. YouTube links and charts are OK but some of this other stuff needs to be diminished if not removed entirely. Thanks for your help with this. (Speaking of help...I've run up quite a tab with The Tech Team this week trying to fix the site. Any "Turd Food" you care to pass along would be, as always, greatly appreciated.)
Regarding the "sticky" post at the top of the homepage, I just want to clarify one thing. Though it's true that JPM is TooBigToJail and that their influence on the markets remains, my point regarding the "London Whale" investigation is this:
There are, quite literally, millions of people who do not believe that the metals markets are manipulated. Within the blogosphere, there are quite a few vocal naysayers who parrot the views put forth by JPM that their activities in the metals are "fully hedged" and "made on behalf of clients". So I ask you, if JPM is willing to deliberately mislead Congress in the London Whale investigation, do you still think that Blythe Masters was being truthful when she appeared on CNBS a year ago to address silver manipulation?
Here is what you need to understand:
- Bruno Iksil dug himself an impossibly deep hole trading in interest rate futures.
- Once word got out that he was cornered, the other banks and hedge funds attacked.
- Losses first estimated at $2B ended up approaching $10B.
- Similarly, JPM finds itself increasingly isolated as the seller of last resort in silver.
- Once word gets out that they have lied and deceived and that they are cornered, other banks and hedge funds will attack.
- Is this already happening? Is this why the gross commercial long position remains well over 50,000 contracts when the historical norm is closer to 30,000-35,000?
I'm continually asked how I think this will all end and, frankly, I don't know. It's impossible to say. The most likely scenario would still seem to be a "managed default", similar to the Maine Potato Default of the 1970s (http://news.google.com/newspapers?nid=1988&dat=19760526&id=a2YiAAAAIBAJ&sjid=06wFAAAAIBAJ&pg=1377,2637833) and a cash settlement of Comex futures contracts after which some measure of true price discovery will be found on other, global exchanges. Again, though, who knows? What I do know is this...This will all be ending, relatively soon. It won't continue forever.
And while we pound away on JPM today, let's wrap up with this link, sent to me by email overnight. It's lengthy but it's certainly well-written and interesting. http://www.nakedcapitalism.com/2013/03/david-dayen-out-of-control-new-report-exposes-jpmorgan-chase-as-mostly-a-criminal-enterprise.html
And now let's get to the charts. This week, we have seen a very active and spirited defense of the $1600 level in gold. In continued in earnest today and there must be a considerable amount of buy-stops above that level for it to be defended so vigorously. Regardless, pressure continues to build under the market and I expect $1600 to give way early next week (pre or post FOMC?) and then a move toward the next resistance level of $1620. Silver has also been capped this week and it's $1 trading range has now been extended to an incredible 17 trading days. Remarkable! Again, though, I firmly believe that a brief rally is building that will take silver back UP to the red trendline that has contained it since early October. As of today, that lines resides near $30.50. The main question then becomes: What happens next? Do silver and gold roll over again and retest the mid-February lows or do they break through and begin a new trend, back toward the top of the broader, 18-month range?
Lastly, another new CoT will be released in a few hours. For the reporting week, gold was up $17 and its OI rose by about 9,000 contracts. Silver rose 57¢ and its OI rose by 1,200. I think we can anticipate what the gold CoT will show...namely a 9000 net long increase for the specs and a 9000 net short increase for The Gold Cartel. Silver, though, will be interesting again. What if the entire increase comes from commercial longs with an equivalent increase in the JPM and friend short position? That would be quite interesting, indeed. We shall see. As usual, I'll post some thoughts immediately following the release of the report so check back later today and be sure to look through the comments section of this thread. (While reading/commenting just don't post a 2-second gif of something getting flattened by a steamroller or a fat guy dancing. Thanks!)
Have a great day and a great weekend. Get ready for a wild week next with the FOMC Tuesday and Wednesday!
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