The Extra "F" Is For "Final"

As anticipated last week, the metals have been severely beaten again this morning. So, is this it? Is gold going to $1400? Is silver going to $22? Or is this your opportunity to BTFFD?

I lean toward the latter. That said, just a few observations on this fine Tuesday morning...

First, the draining of the GLD resumed in earnest yesterday. After sitting tight for seven, consecutive days, the total gold in "inventory" dropped by another 4.11 metric tonnes. For those keeping score at home:

  • 132.87 metric tonnes year-to-date or 9.84% removed. That's just short of 4.3MM ounces.
  • According to the World Gold Council, 133 mts is slightly less than the entire holdings of Thailand and slightly more than Singapore. Holding 133 mts would put you at #25 on the global list.
  • 4.3MM ounces is the equivalent of 43,000 Comex contracts.
  • 4.3MM ounces is 10,750 London Good Delivery bars. "That's a lot." Seriously...think about that for a moment. Ten freaking thousand gold bars! Oh my goodness!!
  • 4.11 mts yesterday is 132,139 troy ounces or 330 London Good Delivery bars.

So now think about this. What if this isn't just "investor rotation"? What if those 10,750 gold bars haven't simply been returned to Authorized Participant vaults? What if I'm right and the lion's share of those bars are leaving due to liquidation and conversion? If so....from where will the gold materialize to restock the GLD "inventory" when price inevitably reverses?

Uhh.....moving on.....

Now chew on this: The "Cyprus Story" broke on Saturday, March 16. I seem to recall that even the FOAD, Gartman, stated that weekend that he'd be "shocked if gold didn't open above $1625 on Sunday evening". Well, it didn't. In the entire time since, it hasn't seen $1625. In fact, ponder this one:

  • On Friday, March 15, gold closed at $1594.70 and had a total open interest of 447,314.
  • Two weeks later on Thursday, March 28, gold closed at $1595.70 and total open interest stood at 408,594.

Now wait a minute. Hold on just a second. I thought that "Cyprus" was about failing confidence in fiat currency. Isn't it also about lack of trust in the financial and banking system? ( Hint: IT IS!) So, then, why on earth would open interest in Comex gold be DOWN 10% since the event began?

I'll pause here for a moment while you ponder that...

<pause>

<pause>

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Before you say "contract expiration", I'll certainly grant you that that had an impact. But 10%?!? Seriously?!? If ever there was a time when open interest should be expanding, it's now. Yet, it declines. So, again, what does this mean? Why is it happening?

Simply put, this is just more evidence of the growing disconnect between paper and physical. Gradually, The Comex is losing credibility and relevance. That global physical demand is soaring while Comex paper demand is declining is a clear signal of just how FUBAR the entire, current system of price discovery has become. 

Now, this alone does not mean that metals trading on the Comex will cease to exist tomorrow. It won't cease next week, either. But in this post-MFG world where physical possession is paramount, the current system is slowly fading away. Ernest Hemingway once wrote (and I paraphrase): "How do you go bankrupt? Slowly and then all at once." This same reasoning applies here. How did The Comex...and by extension the BBs and the BIS...lose relevancy and control? Slowly and then all at once.

Lastly...getting back to the title of this thread. I firmly believe that this is the final dip. I've urged you to buy all the way down since October and I'm not stopping now, confident that every purchase I've made over the past 6 months will soon be deep in the black.

We are now back down to the bottom of the current, 18-month price ranges. I wrote yesterday about the extreme condition of the CoT report and the last crop of "greater fools" about to parade into the short side. As those specs sell into this market today, whom do you think is taking the other side of those trades, remembering that for every seller there must be a buyer? This week's CoT survey is today so we are likely going to see the single-most bullish CoT in memory when it is released on Friday. By then, price will have likely rebounded considerably, leaving many to complain once again about the lag/delay in publishing the info. Whatever. It doesn't matter anyway when we already know how the report will look.

Expect silver to show near record (if not outright record) low levels of Spec net long and Cartel net short ratios. These are, of course, not date-specific bottom indicators. However, when we look back at these price levels 8-12 weeks from now, it will be obvious to all that the next move was going to be sharply higher, not sharply lower.

OK, as I type, I see that another wave of selling has hit the pits. Gold is at $1580 and silver is at $27.41. Good. Take a look at this gold chart. Note that on every occasion since Feb 20, when gold dropped below $1575, it was aggressively bought back up. No reason to think that this won't happen again. 

And let's take a more long-term look at silver. On these weekly charts, you can plainly see that we are:

  • Once again at the bottom of the range
  • In our third ultwa-scahwey "declining triangle"
  • Expecting strong buying interest again at $27-27.50

Finally and fwiw, earlier today I "put my money where my keyboard is". I had a pretty good night at an actual casino a few weeks ago so I thought I'd roll some profits into the Comex casino. I am now the proud owner of three July silver $35 calls. (Astute Turdites will note both the strike price AND the contract month.) I'm also hoping to pick up some AGQ again very soon. I'll keep you posted if and when I do. I'm looking to move when silver approaches $27 and obviously we're getting close.

Have a great day and keep smiling. I know this is painful and doubt is a much easier human state than confidence. Do your best to keep you chin up, though. We are on the right side.

TF

3:30 pm EDT UPDATE:

Just a few points of order as the day closes:

  • Always keep in mind that CME-reported OI figures are 24 hours delayed. That stated, note that total gold OI fell again yesterday, this time by 1,400 contracts to just 407,112. Again, this is lowest level since 8/22/12. Also, do you suppose the number reported tomorrow (for today) will show a further drop or an increase?
  • In contrast, silver OI ROSE again yesterday, by 1,200 contracts to 155,109. This is the highest level since the multi-year high of 157,030 seen on 2/22/13. I have no doubt that all of the Greatest Fool spec shorts that were added today will bring today's OI back up to the 157,000 level tomorrow.
  • Because the U.S. mint fails to report sales figures daily, two things have happened. First, March has magically come in with a lower ASE sales total than February. January was 7,498,000. February was 3,368,500 and March was 3,356,500. However, because late March sales were posted to April, total April sales (after just one day) are shown as 812,000. WOW! And I wonder how many they'll sell today and tomorrow? Again, just another sign of paper market FUBAR.
  • Both metals fell almost exactly to where I thought they would today. Though there may still be some weakness, I expect any dip toward $27 in silver and $1565 in gold to be aggressively bought and a quick rebound will follow. We may bang around this area for a couple of days but I'm confident that these levels will hold.
  • This week's CoT will be spectacularly bullish, particularly for silver. We'll see a silver LargeSpec net long ratio that could come in as low as 1.2:1. This would put the Silver Cartel net short ratio near 1.30-1.35:1. Both levels extremely and extraordinarily bullish. 
  • And I just got today's GLD update...DOWN another 8.13 mts or 261,385 troy ounces, the equivalent of 653 more London bars removed. This brings the total "inventory" decline YTD to 10.44%.

More later if necessary but likely not until tomorrow. I'll continue adding comments into this thread, though.

TF

394 Comments

Istack's picture

Sometimes I enjoy a dip...

...and today is one of those days.  I am going to my folks place in a couple of hours.  They want to make a large purchase of the shiny stuff.  Going to order a nice variety for them.  Some monster boxes.  Some bags of junk silver.  Some 1 oz buffalos (i like the graded MS-70's,  i know it's more premium but they stay nice and pristine otherwise i would want to touch them too much).

I keep having to refresh the price because I continually can buy more for my(their) money.  A good problem to have when you are buying.  Continually buying more shiny every once in awhile is the best medicine to help deal with all this price suppression.  And I agree with you wholeheartedly Turd.  I don't believe these prices will go much lower at all.

nminihan's picture

Let’s hope $27 holds!

Love your analysis Turd so I created an Android app to keep updated.

http://bit.ly/XoccqO

Mammoth's picture

Just a Reminder...

Just a reminder about what is on sale today...if you can find Physical.

Cheers to all!

-Mammoth

Mammoth's picture

Oops. Double post!

Oops, just bumped someone out of the top ten and ruined their day.

Sorry...

Fr. Bill's picture

Tried for Furth...

... But only got fufth.

treefrog's picture

suxth! ...ounces

my ounces still weigh 31.1 grams

PeterLemonJello's picture

Do it

This will be the last and best opportunity to buy....let's get some.

Turd Ferguson's picture

Screw it

MODERATOR

Close enough.

I just bot 200 AGQ at 34.99

The Toronto Minnow's picture

First = Top Ten!?

Arrgh!  My first first and couldn't remember my password!  This is how long it takes to reset my password and post!

At least my Litecoins are looking good from my entry at $.65

The Toronto Minnow's picture

First = Top Ten!?

Arrgh!  My first first and couldn't remember my password!  This is how long it takes to reset my password and post!

At least my Litecoins are looking good from my entry at $.65

Turd Ferguson's picture

fwiw

MODERATOR

News Headline Summary

BNP Paribas says sees potential Silver buying on oversold outlook

whopper's picture

thanks turd

enjoy your website!

slaughterer's picture

I see very, very little of

I see very, very little of dip buying in PMs today--in fact, hardly any notable buying interest at ll.  In fact, a dip has not even formed yet.   

Groaner's picture

@ slaughterer

We get it.. you are short.. join the OCS 

zman's picture

What if that important

What if that important support level of $26 oz breaks in silver?  And on the chart the price falls out of the huge triangle?

My only concern is that the "cartel" now has plenty of ammo to do a massive attack on silver, why wouldn't they try to drop the price down into the low 20's?

If only silver investors actually bought physical metal, instead of paper silver, until that trend changes (if ever) there will be no upward pressure on the silver price.

Nana's picture

Ahhh The F Word

Felony is what the PTB and their puppets should be charged and convicted of for all their rigging of the markets....and suppression of gold and silver....

Groaner's picture

DUCK!!!

I just saw the kitchen sink fly by!

This is totally an act of desperation by the OCS gang... it will bounce and big!

just bought more AG  what a bargain for one of the best silver mines going!

tpbeta's picture

@mninihan

Your app wants access to Phone ID - includes phone number, IMEI & IMSI, basically giving you a massive list of subversive types.  I suggest you rewrite it if  that wasn't your intention and you want people to use it.

Groaner's picture

@Nana

Dont hold your breath,, it will never, never happen,,, since when would the Mob arrest itself?

¤'s picture

Hot off the press...you have 90 days after June 3rd

Soak this in. 

I'm pretty sure there is an existing  popular thread where this can be hotly debated without derailing this fresh thread. Thanks.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

U.N. approves first-ever global arms trade treaty

A soldier removes a weapon from a pile of confiscated weapons, which are about to be destroyed, at a foundry in Santiago December 19, 2012. REUTERS/Ivan Alvarado

A soldier removes a weapon from a pile of confiscated weapons, which are about to be destroyed, at a foundry in Santiago December 19, 2012.

Credit: Reuters/Ivan Alvarado

UNITED NATIONS | Tue Apr 2, 2013 12:21pm EDT

(Reuters) - The 193-nation U.N. General Assembly overwhelmingly approved on Tuesday the first-ever treaty on global arms trade that seeks to regulate the $70 billion international business in conventional arms ranging from light weapons to battle tanks and warships.

There were 154 votes in favor, 3 against and 23 abstentions.

IranSyria and North Korea last week prevented a treaty-drafting conference at U.N. headquarters from reaching the required consensus to adopt the treaty. That left delegations that support it no choice but to turn to a General Assembly vote to adopt it.

The treaty will be open for signature June 3 and will enter into force 90 days after the 50th signatory ratifies it.

Major arms producers China and Russia joined Cuba, Venezuela, Bolivia, Nicaragua and other countries in abstaining. A number of countries complained that the treaty favors exporting over importing states.

The United States, the world's No. 1 arms exporter, said last week it would vote in favor of the treaty despite opposition from the National Rifle Association, a powerful U.S. pro-gun lobbying group.

The NRA opposes the treaty and has vowed to fight to prevent its ratification by the U.S. Senate when it reaches Washington. The NRA says the treaty would undermine domestic gun-ownership rights, a view the U.S. government rejects.

Syrian U.N. Ambassador Bashar Ja'afari repeated that his government opposes the arms trade treaty because it does not ban the sale of weapons to non-state actors and "terrorists" like the ones active in Syria, where a two-year-old civil war has claimed at least 70,000 lives, according to U.N. estimates.

Syria routinely refers to rebels trying to oust President Bashar al-Assad as "terrorists" supported by foreign governments.

http://www.reuters.com/article/2013/04/02/us-arms-treaty-un-idUSBRE9310MN20130402

department of truth's picture

Down until the final divergence

My vote is that the Boyz plan on dropping the price until there is a final divergence between paper and physical prices.  That is, until the trucks line up for delivery until there is no more to deliver. 

Kind of like with ammunition supplies here in the New Amerikan Republic . . . with Homeland Security cornering the market, you can't even by 22s at WalMart these days, absolutely *no* ammunition available unless you go online and pay double previous prices (or more). 

So as Willie says, keep on buying until there is no more to buy.

Of course, he is out of country . . .

SILVER May 2013 (E) (NYMEX:SI.K13.E)

Bill of Rights's picture

Those that own physical

Those that own physical precious metals probably have nothing to fear.  This game has been going on for sometime and priming the pump on the dollar will have the well dry in the future.  The dollar is strong not because of the dollar, but due to the failure of the Euro zone.  Most physical precious metal bugs have not bought to sell in the near term.  It only provides buying opportunities.  Remember the gold and silver market crashed after a big run up in the 70's to only consolidate and go to the moon.  Trust me when men are involved with solving a crisis, the end game is not pretty.  One day you will all wake up to a 25-33% haircut in your fiat currency portfolio and ask yourself what happened as your backside puckers.

buzlightening's picture

Saw it right off.

EE moving fast to slam the financial iron curtain down upon sleepy hollow masses; ameriCON'd!  http://maxkeiser.com/2013/04/02/cyber-attack-alert-you-are-not-facing-a-financial-haircut-but-financial-decapitation/

Now under 30 daze to MAY DAY! 

Missiondweller's picture

Been amazed the last two years

The fundamentals (Cyprus disaster being the latest) for PM's have constantly improved, providing more reason to own gold  than I could have even imagined, and yet, gold has been mostly sideways over last few years even with central banks buying the most (as some have written) since 1964!

Enormous resources are being spent to keep gold price down. I'm no longer looking at price to be the big "tell" but am instead looking at supply. At this price, gold will likely become unavailable BEFORE the price moves up again..

twippers's picture

Trader Dan

Byzantium's picture

Peril abounds

It isn't just horizontal support that we need to worry about.

If my understanding is correct, then we are close to, or have today, violated the long term logarithmic uptrend channels in both gold and silver. If we don't get back in quick, then adopt brace positions. 

This goes back to the topic Achmachat raised in the last thread; yes, PMs were a lousy investment for most of us so far. They may even decline from here. But their primary utility was always that of insurance, and of survival. Just look what is happening in Cyprus right now.

Cyprus' real treasure, is that they will never freeze, they can grow or fish their own food, and have strong community networks. Nobody will starve, and there is no need for social breakdown. We don't have that; our PMs and other preps are all that we have. These may even make us rich one day, but let us demote that from expectation to aspiration, and get on with our lives.

Big Dutch's picture

Miners

Every miner I own...  and I own a boatload... now have forward P/Es below 9.  I should have gone mad long ago, but luckily I self-medicate with booze.  Anyhow, has anyone seen a really well thought out article with regards to the miners lately?  Seriously, with no debt, low forward P/Es, and tons of cash how long can this continue?

AlexCojones's picture

Casino - One of The Best Movies about Life & Gambling & Sociopat

TF Wrote: "I had a pretty good night at an actual casino a few weeks ago so..."

Okay; so what or who did you bet on? And if the UM Wolverines win it all, (Big If) will you bring out the Heavy Gun, G. Edward Griffin for a podcast?

Turd Ferguson's picture

More hindsight analysis

MODERATOR

Look, I told everyone LAST WEEK that, when silver was raided at 2:00 am Wednesday morning in order to break $28.60, it was a sign of future nefarious intent and that silver was going to 27.50, if not $27.

This is not complicated and NOW is not the time for panic and doubt. 

Once again, the only consistently profitable trading strategy for the metals is to sell some when everybody is buying ANF buy some when everybody is selling.

tyberious's picture

Bix's take on this sell of

I've been waiting for the new US Treasury Secretary, Jack Lew, to tip his hand as to how he plans to play the silver manipulation game and today's price slam is the first sign. Every person that has taken over the reigns of silver manipulation has tipped his hand in the first couple months of taking over. In the case of Bill Daley it was his first weeks as Obama's Chief of Staff that he began the famous 2011 Silver Drive By Shooting...
 
JP Morgan Operation Silver Slam
 
Jack Lew replaced Bill Daley as Obama's Chief of Staff and now Treasury Secretary so you can be sure that he was all about controlling the silver price. It is, and always has been,  the #1 most important issue that must be contained to continue the unbacked fiat monetary system.
 
So Jack's signature has been the opposite of Bill Daley's. He is not going to "jack" the price up to $50 bringing in all the weak hands and then slam the market with silver derivatives. That's too obvious for this rigger. He's been lulling us to sleep with his silver price rigging. Wearing us down such that there is absolutely NO excitement around the precious metals. And now he has forced the price of silver down below $28 with massive silver derivatives on the COMEX and LBMA. Looks to me like he is going to try and "choke us all out" of silver.
 
It won't work. If you have followed my writings on the Road to Roota you know that there IS NO freely traded silver price discovery exchange on earth and there hasn't been since the early 1970's. With the use of computer trading programs "THEY" can place the price of silver at $0 or $1M per ounce in a fraction of a second. It's very easy to hit that computer key!
 
That is why the MOST important thing you can do as a silver investor is to buy PHYSICAL SILVER and remove it from their system. No ETF's or 3rd party storage and definitely no safe deposit boxes. Physical metal in your own possession ONLY!
 
The latest slam is a sign of the END GAME so I am very happy to see it.
 
If you are sitting on the sidelines with your metal in hand as I have suggested for years...then you should be happy too.
 
May the Road you choose be the Right Road.
 
Bix Weir
 
 
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