Saturday Summary

Just a collection of stuff to ponder over the weekend.

First, GLD lost another 9.93 metric tonnes yesterday. That brought the total withdrawal for last week alone to 35.5 metric tonnes. At 1,1233.06 metric tonnes, total "inventory" is now down 16.8% for the year. Stated differently, for every 6 bars in "inventory" back on 1/2/13, there are now 5.

The U.S. Mint reported another 14,000 ounces of gold were sold on Friday. The MTD total for April is now 167,500. This is more than the entire month of January. This is more than the combined sales for February and March. This is now the 2nd-highest moth of sales ever recorded, behind only the 231,500 from December of 2009, and there are still 11 days to go in the month. https://www.usmint.gov/mint_programs/american_eagles/?action=sales&year=2013

After this week's CoT, there are bound to be more and more voices stating that the data is fudged/nonsense/controlled/manipulated/etc. Maybe those voices are right. I mean, seriously, how would we ever know? The reason that so many will be up in arms is the uniqueness of it. FOR THE FIRST TIME EVER, A MASSIVE PRICE DECLINE OCCURRED YET THE CARTELS WERE UNABLE TO SIGNIFICANTLY COVER. In gold, they covered a little but not in silver. In fact, while silver fell over $4, The Cartel actually had to add 5,100 new naked shorts. Here's a C&P of my CoT thoughts from yesterday:

REMEMBER, THIS SURVEY WAS TAKEN ON TUESDAY, AFTER THE MASSIVE 2-DAY BEATDOWN. FOR THE CoT WEEK, GOLD FELL $200 ON AN OI DROP OF 3,400 AND SILVER FELL $4.25 ON AN OI DROP OF 4,900.

Two main things:

Both the gold and silver LargeSpecs aggressively covered shorts. The gold LargeSpecs added net long 9,500 contracts. Even larger on a % of total OI basis, the silver LargeSpecs added net long 9,700.
But that's not the BIG NEWS. What is truly breathtaking is that the silver commercials who are long...and gross long at a record-breaking 60,000+ contracts...and which suffered incredible losses during the reporting week...and were subjected to Tuesday's margin hike...ACTUALLY ADDED MORE LONGS. THEY WERE NOT DEFEATED OR DISSUADED. THEY ARE STEADFAST.

GOLD

For the week, the LargeSpecs added 850 longs and covered 8,650 shorts. The SmallSpecs really got burned by the drop and also felt the sting of the margin hikes. They sold 7,150 longs and compounded their future issues by adding 4,250 shorts. Yikes! This allowed the Gold Cartel to only cover 1,900 net shorts as they added 6,800 shorts while they also added 8,700 longs. (I would imagine that almost all of this Cartel activity took place on Monday.) The updated Cartel net short ratio is a still-bullish 1.98:1.

SILVER

Just as in gold, the silver Large Specs added 1,200 new longs while covering 8,500 shorts. Their updated net long ratio is 1.8:1. And the silver SmallSpecs were burned just like the gold SmallSpecs. They sold 3,100 longs and added 2,000 new shorts. Double Yikes!

And now check this out. As mentioned above, not only did the everybody-but-JPM crowd NOT sell last week, they actually BOUGHT! They increased their already record breaking gross long position by 581 contracts to 61,641. Incredible mainly because they are subject to the margin hikes, too. Not only did they not bail...they gave JPM the finger and bought more!

This forced JPM and their two pals to issue even more naked paper. For the week, they added 5,155 new shorts, bringing their total back up to 84,139. The new Silver Cartel net short ratio is still extremely bullish at 1.36:1.

Let me state this clearly:

THIS

NOT

HOW

SUPPOSED

WORK!!!!

On massive selloffs, whoever is long (be it the specs or some commercials) is supposed to sell. This allows JPM and their friends the ability to cover. This is how it has worked for time immemorial. Period. End of story. NOT THIS TIME! Silver fell over $4 (15+%) in two days and yet JPM had to ADD SHORTS?!?! Are you kidding me???

Fully consider this:

Think about all of the physical demand, the anecdotal supply shortage info, the pace of ASE sales and the wholesale disruptions after Monday's decline.
Think about the Pascua Luma and Kennecott mine "issues".
Will either of these "situations" be exacerbated or enhanced by another steep drop in price?
But yet, what must JPM now consider? They only have two choices and both of them are BAD.

Raid price again in the hopes that you can force the "other commercials" and specs to finally give up and sell. Into this selling you can finally cover your naked position. However, it would appear at the surface that an even-deeper discount will only worsen the already-tenuous physical supply situation.
Start covering your shorts, even if its at a loss. Hope that the other commercials sell into your buying (covering) so that price doesn't go screaming higher, out of control to the upside

Alright, so now having an additional 24 hours to think about it, what if anything can we deduce. It's still hard to say because this data is so surprising.

First and foremost, it appears that the blame for the huge beatdowns can be laid at the doorstep of The Cartels. Why? Well, who was selling? Not the Large Specs, they were buying and covering! The SmallSpecs were selling but that was only after the pain of the price drop and the margin hikes. Nope, the blame for the initiation of the selloff clearly lies with The Cartels.
But they didn't accomplish anything. From time immemorial, waterfall declines have been rigged so that Specs would sell and The Cartels could cover (BUY) into the selling. Not this time! Prices dropped precipitously but the roles were reversed. Huh?
And, so, what happens now? More volatility, that's for sure.

But, now, here's the thing. When prices fall, speculators and retail investors/stackers are supposed to be frightened. They're supposed to be selling. INSTEAD, THEY'RE BUYING. Not just on The Comex but globally. See here:

I'll stop there but do your own Google searches and you'll find all kinds of data point "dots" that you can connect into a bigger picture of demand, premiums and shortages.

So the question of the day is: WHAT WILL THE CARTELS DO NEXT? Crushing price again in order to create a waterfall into which they can cover may only serve to exacerbate their existing problem. If buying only continues to ramp higher on successive "discounts", what will The Forces of Darkness do? They would only be digging their hole even deeper. Perhaps this is the luxury you have when you operate with impunity because of your perceived too-big-to-fail and too-big-to-jail status. But...paper and physical price will only disconnect even further...which makes The Comex even less significant...which means The Cartel is merely shooting themselves in the proverbial foot.

At any rate, I don't have any answers for you today. I've just give you all of this to ponder. The entire Comex-controlled paper metal market seems to be FUBAR. Frankly, your only winning move at this point is to avoid it at all costs. Head down to your local coin shop (LCS) and buy some of whatever they have. Add it to your stack. Then head over thee again in a few days and buy some more. Wash, rinse and repeat.

I'm now seriously late for LT#1's track meet so I'm going to sign off right here. Have a great weekend and come back Monday, ready for more craziness.