Getting Ready

I suspect we are about to have a rather consequential week, therefore, here's a Sunday post to get you started.

There's certainly a lot of disgust and angst out there at the price action from Friday. Put me in that category, too. The U.S. unemployment rate rises from 7.5% to 7.6% and it's used as a rationale for a 2.5% selloff in the price of gold? Uhhhmm...yah...that makes a lot of sense. I guess what doesn't make sense is going over it all again as I made my frustration pretty clear in the previous post. In the end, the desperate scheme of The Bullion Banks to transfer as much short obligation onto the backs of the Specs continues unabated.

This week's CoT report showed next-to-nothing in terms of weekly changes to net bullishness or bearishness. The real action, though, sprang forth from the monthly Bank Participation Report. Again, it is this report that many analysts use to calculate the net long or short positions of the individual Bullion Banks...and this month's report is a doozy!

The report shows that not only are the major Bullion Banks no longer net short, they are actually NET LONG gold futures. I've seen one report that suggests this is the first time the Bullion Banks have been NET LONG since 2001. I've also seen a report suggesting that JPM itself is now net long as many as 50,000 contracts! IF this is true, and it's simply a matter of correctly interpreting the data (of course the DATA ITSELF has to be accurate), then there can be NO DOUBT that the precious metals are on the verge of a MAJOR BOTTOM followed by a ferocious rally.

The only thing I'd like to add to the discussion is the rationale for JPM's move into NET LONG territory. The shortages in their gold vaults has been well-documented and clearly this has much to do with it. But there seems to be a lot of curiosity this weekend as to how JPM can be net long so many gold contracts yet still be net short so many silver contracts. The answer likely lies in offshore and OTC positioning, but as this relates directly to The Comex, I think that part of the JPM gold position is actually a hedge against their remaining silver position. Huh? Let me explain.

As you know, I watch the OI and CoT levels pretty closely and I've been banging the drum pretty hard for months about the unusual and exceptionally large Comex Commercial GROSS LONG position. This gross level of Commercial long contracts has historically and consistently fluctuated between 30,000 and 45,000 for the past several years. At price peaks, the gross level would be close to 30,000 and, at price bottoms, the number would rise to somewhere near 45,000. Essentially, these "other commercials" added contracts at lows and then closed them out at highs, making a tidy profit from anticipating how JPM was going to once again fleece the Spec Sheep.

Well, something flipped with this last price cycle. At the lows of last August, the Commercials had again built up a large gross long base (47,797) and, by the time price was capped at the announcement of QE∞ in mid-September, this position had been trimmed back (32,206). During this entire Cartel operation in the nine months since, you would have expected that the Commercial gross long position would have grown again. But, would you have expected this?

DATE           PRICE           GROSS COMM LONGS

8/14/12          $27.78                           47,797

9/11/12             33.46                           32,206

10/23/12          31.66                            35,786

11/27/12           34.03                           42,525

12/31/12           30.29                           45,415

2/5/13               31.79                            46,293

3/12/13             29.13                            51,929

4/9/13               27.97                            61,060

5/7/13               23.94                            65,703

6/4/13               22.52                            66,857

OK, so what the heck does all this mean? I'll try to bring it all together in some sort of coherent form:

  • Caught flatfooted and enormously short paper metal at the initiation of QE∞, a deliberate and calculated plan has been orchestrated by the major Bullion Banks, in particular JPMorgan.
  • By driving price the price of gold almost $400 lower, The Gold Cartel has been able to reduce their general liability by nearly 80% (http://www.tfmetalsreport.com/blog/4750/speechless-turd) and, by virtue of the latest Bank Participation Report, some Bullion Banks have been able to move NET LONG for the first time in over a decade.
  • If reports are correct the JPM has flipped from 50,000 net short to 50,000 net long, we must conclude that the operation to smash gold is close to complete.
  • However, even though silver has been smashed a greater price percentage than gold, JPM has been been blunted in their attempts to completely cover their net short silver position as the "other commercials" (who at least on the surface don't appear to be JPM itself) have added at least 20,000 more longs than they have historically ever carried.
  • And notice that the gross long position shown above has continued to rise, even in the face of sharply lower prices over the past eight weeks. These are some very deep pockets that, clearly, are not being shaken out. Instead of selling on further weakness, they continue to add.
  • JPM could attempt to jam silver prices even lower in an increasingly desperate attempt to frighten these longs but at what cost? By doing so they lose big on their gold position and further exacerbate their already tenuous physical/deliverable gold position.
  • And it is this "juggling act" that leads me to think that this entire operation, which began a brutally-long nine months ago, is nearly finished.

You see, by moving so deeply long in gold futures, JPM has effectively hedged much of the remaining silver short position that they've been unable to cover. At its most basic level...if they are forced to cover silver into a rising price, the potential losses they'd incur will be more than equaled by the gains they'd show in gold. (Just for fun...If you're long 50,000 contracts and price rises $500 back to the August 2011 highs, you make $2.5B!)

Now, all of this is well and good and NO DOUBT foreshadows much higher prices for both metals in the weeks ahead. However, none of this is going to matter much to the Spec HFTs which are expected to pounce on the metals this evening, particularly in silver. The fact that China is "closed" through mid-week will only serve to exacerbate the paper price volatility. However, IF I'm right about the ideas laid out above, price should show surprising resilience this week. Gold has been very well bought each and every time that attempts have been made to drive it down through $1350. Let's see if this continues. Silver, too, has hung tough around $22 and has bounced back twice from "shock lows" near $21.

So, I'll close this post the way I began. This is going to be a very consequential week for the metals...one that will tell us a lot about the short-term and intermediate trend for price as we head into summer. Nearly every indicator that I've traditionally followed is indicating that a bottom is near and trend change is coming. Let's see where we go from here.

TF

342 Comments

Turd Ferguson's picture

Contest winners

MODERATOR

In case you missed it in the previous thread comments, the winners of the latest Hat Contest are:

BongoJim (1378.67 gold)

Chi-Town Deadhead (21.49 silver)

and MrMorden (21.87 silver)

If you haven't already, please email me your shipping info. Use this address:

tfmetalsreport at gmail dot com

wouldyoubelieve...'s picture

1st?

top of the world ma! top of the world!

beinki's picture

strange anomaly

Sandiaman's picture

Third

No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner,nor in time of war, but in a manner to be prescribed by law.

Silver Spurs's picture

Maybe first?

Could it be?

Silver Spurs's picture

A dead even tie

at 1:48pm

TomMack's picture

6th

prob get 50HT's just for this

edit> for final count

StevenBHorse's picture

The Great Baton Pass

On a rare Sunday where all the ponies are napping and the Sire is running the stable.  I have some time to share some thoughts.

The Great Baton Pass

Is what JS has been alluding to over the past few months.  When he traded gold in the 1970's the banks where positioned the same way, until the final run when they went net long on the backs of the spec's and funds.  We are there today.  Does that mean that we are in for an immediate rally?  Of course not.  The question remains, how much net longer can the banks be before they are ready to let the price move to the upside.  They have done this many times before, most recently in the CDS on MBS market in 2005.  If you haven't read the Big Short by Michael Lewis, then I would recommend it.  There are striking similarities between gold now and CDS on MBS back in 2006-7 right after the housing market began to show its first cracks.  Default data on homes rose, housing prices fell, and yet despite this backdrop MBS prices remained elevated.  Only later did we learn that the market was held in check because the banks were getting short the housing market to protect their own books.  Only when they were ready did the prices of the CDS start their epic run.

Tiny philly started crying......so incomplete post.  But you get the point. 

Great Post Turd. 

The GBP is almost complete.  Be right and sit tight.

Neigh.

sengfarmer's picture

top ten!!

I'm in.

Icarus's picture

Brilliant Insight

I'm not sure if the Turd came up with this thesis on his own or was inspired somewhere else, but this piece is nothing short of brilliant.  It sure does explain a lot of  the 'noise' that has been going on in the gold and silver markets lately (in particular the recent strange GLD and SLV withdrawals).  Makes a lot of sense for this 'economically challenged' individual.  I think you are on to something Turd...........Double hat tip. 

I lost another of my big clients this week.  It looks like I'm going to have to shut down my business in the next few months.  I can't turn a decent profit without him.  I guess you can't get it so wrong, for so long, and expect others to keep the faith.  Since Sept 2011 the S&P is up 40%.  The GDX is down 53%.  Silver is down 47%.  Gold is down 24%.  Needless to say I have grossly under performed the markets for TWO YEARS running now. (We did fantastically well from 07 to 11, but that's ancient history.) I'm actually surprised the clients stayed as long as they did.  Who would have thought that with two of the most powerful gold positive items to hit the market in years (the downgrade of  U.S. treasuries and multiple QE's announced worldwide) that metals would be down so much for so long?  The pain of this correction is not the percentage decline, it's the length of time it's been in effect!

JPM won this battle and will get those little guys (my former clients) to sell to the cartel at the bottom.  Mission Accomplished.  They won this battle, and I suffered a fatal injury.  I'm just one of the casualties left dying along the side of the road now.  The war however is still ongoing for the rest of you soldiers.  Keep stacking.  Gobble up the Phyz at these levels and win this war.  Do it for yourselves, do it for your brothers in arms who are no longer capable of fighting. 

Moving On,

Icarus

waxybilldupp's picture

Feeling like Mongo ...

I've been trying to make sense out of the never-ending PM beat-downs.  Wheels turning in my little noggin all weekend, while gardening and fishing.  Trying to be optimistic.

I feel like we're being nibbled to death by ducks.  It's not just the PM beat-downs that are wearing.  It's a focal point because I have a horse in that race (didn't know horses don't like canoe rides).  It's lots of stuff.  The MSM B as in "B", S as in "S" is just incessant.  Doesn't matter where you turn.  Local news, national news, newspapers, cable TV (Bloomberg, CNBS).  Except for the occasional dustup in places like Syria, "life is pretty good".  "Things are getting better.  Consumer sentiment is up.  Stock market waaayyy up.  175000 more jobs last month.  Inflation is low."  What could be wrong? 

Just don't pull back the curtain.  I know I'm preaching to the choir here.  Will this all end badly? Yeah, pretty much.  What I've been trying to sort out is timing (aren't we all?)  Since there are many opinions here in Turdville, I'll share mine.

I see a slow motion train wreck.  I know Mr. Fix (and a few others) have been very clear that they see the big crunch as imminent.  I'm not so sure.  System degradation ... check ... every day.  However, this is one seriously massive piece of machinery, whether you just look at the US of whether you take a global view.  It's going to take a lot to grind it down.  How many years have doomers been saying, "Next week.  For sure, next week"?  Inertia is a bitch.

The groups of players also tell me that collapse (whatever that means to the reader) will take longer that one might think possible.

First, there is Joe and Jane Sheeple.  A wide ranging demographic in this herd, to be sure.  Anywhere from homeless living under a bridge to those who would be considered to be quite wealthy.  The free-shit army is a large part of this group.  What sets them apart is that they are unwitting and unaware.  The poor have little to lose.  The wealthy, but uninformed, with their financial advisors, accountants and quest to be visible, are every bit as vulnerable, they just don't know it.  Jim Cramer gives them investing advice.  The reset will leave them to fend for themselves.  They have no say in what is coming and won't know what hit them.

Then, there are the  financial and political "leaders".  They have some semblance of power, probably much less than they believe.  The critical point here, is that they do have some influence on how long the story plays out.  Guys like Ben Bernanke, OBAMA!, Jamie Dimon, a bunch of French guys, to name just a few, have a gigantic vested interest in keeping the merry-go-round turning and will do absolutely everything to keep the music playing.  So far, the empirical evidence suggests they are successful.  They may be "useful idiots" for the next group, but they do have influence and power.

The third group has the real power and are rarely in the spotlight.  When is the last time you have seen a member of the club meeting in Europe this weekend testify before congress?  These folks have a long view.  They want to preserve the power they have, they want to add to it and they want to pass in on to family.  They seem  to be quite satisfied if things take time.  When you have been working a plan for over 100 years, and in some families multiple centuries, what's the rush?  How can a global financial collapse be a benefit?  Of course, I'm sure preparations have been made for the possibility, but how could that scenario be better than today.  World domination takes time.

Is it possible that some will not follow the rules?  Of course.  A nuclear winter could seriously screw things up, even for the Pope.  Short of that, the Keymasters will simply adapt, make more money and consolidate more power as the sheeple are culled and brought in for another shearing.

This is going to take more time.  A hiccup like the Comex closing shop, a MENA blowup, Japan collapse or Euro failure would make life difficult for many and terminal for some.  TEOTWAWKI ... probably not.  Stay tuned here, reading the Turdistan Daily News and you will be the first to know exciting developments that might affect you.  Meanwhile, prepare as you can but take time to live life.  I have left sleepless nights behind me. 

Turd, I can't thank you enough for creating this forum, so full of information, insight and hope.

Eyes open; no fear ... wax off

Dagney Taggart's picture

Ready

Abandon that 13xx bastard child.

Turd Ferguson's picture

Thank you

MODERATOR

I'm glad you like it. Just something that has been rolling around in my head the past 24 hours. Seeing JPM net long gold brings the whole thing together.

Response to: Brilliant Insight
Bugzy's picture

Canadian Banks or all banks too

Found this little nugget whilst perusing as to the reason that the bank of Canada stopped spending money into the economy and started borrowing it at interest in 1974.

Hence how the Canadian debt has gone to over $600 billion. This lady has done a fine job.

http://404systemerror.com/404-voices-the-bank-of-canada-creation-of-money-and-theft-by-deficit/

Lots of info here.

Suitable for those who want to know why they work a third of the year for the BIS/ IMF overlords. Not applicable to Canadian/British female Pirates who chose to home school bairns. Ok, enough of my excessive niceness. Folk will start to think I am quite unwell.

SRSrocco's picture

BREAKING: Rand Paul Says He May Sue Over NSA Program

Looks like Rand Paul just might sue the GOVT over NSA Program.   You have to give Rand credit when credit is due.  The guy has a set on him alright.

Your Insights From Around the World (6/09/13)

I started the weekly post because I received some very interesting comments from precious metal buyers in Asia.  I am trying to get interesting insights from all markets such as India, Europe, Russia, Asia, U.S and etc and etc.

ctob's picture

CBs and April

Do you believe that the Central Banks were part of the smashdown in April as many speculated?

If you do, why would they want JPM to pull the trigger on the long build up and have price rise?

Howard Roark's picture

@Fallen solders and getting ready

Salut to all that are hurt in this false market.

There is so much to say about the way TPTB screw this market. And the silence regarding this is the exact proof of something wrong, awfully wrong.

I hope that the ideas that Turd posted are right, but we still have the summer. Slow market. But maybe that´s the point in Turd´s ideas: there are some signs that show differences. 

Beyond that: we are right. 

HR

(edit): besides the numbers from BLSBS are "good news" so the QE should continue, right? So isn´t that a sign up to PM´s? 

Patriot Family's picture

RE: Feeling Like Mongo

Couldn't agree with you more.  The "rapid systemic collapse" scenario is highly unlikely, and there is little chance of it happening anytime soon.  I like to describe it as going over many small cliffs over a period of years or even decades, and there are plenty of ropes and parachutes available to soften the blow of each landing.

I speak to people overseas almost daily as part of my job.  They reside in a few countries in Europe, a few in Asia/Pac, India, South America.  Depending on their political system, their outlooks vary from "We're experiencing some economic difficulty and some high unemployment" to "things are good and we're stable".   But nobody is screaming about a collapse, and these are fairly smart people.  Even if PM prices were to surge or completely collapse, that is a drop in the bucket compared to the tides of currencies in global commerce.  The rest of the world is complacent, but they still see opportunity.

Regarding currency collapse, I am not convinced PMs can be counted on as the canary in the coal mine as much as they were in the past.  There are too many other places for smart money across the globe to run in case of rapid and significant currency devaluation.  In the end, though, PMs are still in the top 1o when it comes to protecting wealth.  Things can change awfully quickly though.  That's why we all stack, that's why we prepare by slowly building up a supply of items that hold alternative currency value, just in case.  

Maximillion's picture

So how does this fit in?

So how does this bit fit into the jigsaw puzzle, hot on the heels of India and france news, and bearing in mind the Bilderburg conference did not seem to include many if any eastern attendees.

http://www.breakingnews.com/
32mins ago
Turkish PM Erdogan says Turkish financial markets are under attack by speculators - @Reuters

IMO tonight will be interesting not least for all of the recent speculation that China was in fact recently leading the paper short selling, with their $ surplus funds, in order to further their aim of acquiring more physical. If this supposition is true then the 3 day China holiday would provide the western cartel the ideal opportunity to reverse the down trend channel in the most cost effective way (ie an immediate higher price and/or the chinese shorts must supply the physical back to western buyers).

Mr. Fix's picture

I don't think we are at the bottom yet:

CARTEL SETTING UP EPIC METALS RAID AS CHINESE MARKETS CLOSED MON-WED?

 

cartel taken to knees

  • Friday’s  non-farm payroll data – and the paper bullion smash
  • The Doc recaps wholesale physical market trends as seen by SD Bullion and the massive demand surge as silver broke below $22 Friday
  • Cartel finally busts $22 silver;  cartel may attempt to smash gold & silver below April lows of $1320 & $20 overnight Sun and into Monday as Chinese financial markets will be closed Monday through Wednesday
  • India freaks-out – but gold quotas on imports & tax hikes will fail
  • France attempting to block postal shipments of bullion & cash
  • Are capital controls coming to a neighborhood near you?

Download the podcast or click play below, you won’t want to miss this week’s SD Weekly Metals & Markets! [Read more...]

We will know shortly after 6 PM Eastern standard Time, but I suspect there is a another slim down in the works. People with brains are bailing out of paper in droves, this will continue downward pressure on the price.

Keep stacking. 

wouldyoubelieve...'s picture

no need to hunt for the NSA leak

SilverSurfers's picture

Bet

Kirby is just so glad them dark clouds have a gold lining.

"I'm glad you like it. Just something that has been rolling around in my head the past 24 hours. Seeing JPM net long gold brings the whole thing together."

Lets all first note, the time stamps

USA Strike on the Evil Empire

elpicador's picture

Anybody knows...

what is going to happen with the silver price at Goldmoney if the forces of  Darkness will hammer the paper price to $15 or lower? 

Bugzy's picture

@elpi

Is that a trick question?

SilverSurfers's picture

Just

another duck, in the row.

Hey, did you guys know that russian animals actually speak in russian.

No, really, they do. Its true. I have heard them. Really.

Ducks say Krack Krack Krack

Dogs say Garf Garf Garf

Pigs say kalou kalou Kalou

etc, I cant understand them though, my russian aint that good.

RuNuts's picture

Heavy buying...

Heavy buying may not occur until China comes back into the market later this week.

elpicador's picture

@Bugzy

No, it's quite serious actually. If the price go to $1o will they sell for that much?

opticsguy's picture

The merry go round will spin until it can't

After the Yuan becomes gold-backed, maybe the Chinese will announce that anyone who shows up at a China consulate with 100 oz of gold will get paid in yuan and given Chinese citizenship.

APPL, Facebook stock, GE, what are they worth?  The whole reason for saving money is to beat inflation.  The stock market was supposedly a way to do that after the Fed was established, but 1.5% of inflation, averaged over 100 years, is not much return for all that risk.  Under the gold standard, if you saved 5% of you wages and got 5% interest on it, you had a pretty good nest egg at 65 (if you lived that long).

I knew this years ago, because we sold the lenses to the USPS, but every letter is photographed and stored.  All your payments to Provident, APMEX, etc., are on a server somewhere, waiting to be data mined.

Howard Roark's picture

@elpicador

Any reason Goldmoney should act differently than any other operator?

HR

The Watchman's picture

Great Chart-Chinese Physical Gold Vs CRIMEX Paper Crap

Physical Delivery From Vault: SGE vs COMEX

The above graph of monthly gold delivery from vault demonstrates very clearly what many have expressed repeatedly on sites such as KingWorldNews -- the COMEX is a paper gold market while the SGE is quite clearly a world class market for physical gold.

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