A Pattern Emerges

Because I'm still adjusting to the time change coming off of my vacation, I found myself tossing and turning last night when I suddenly came to this realization. Though not on the level of Dr. Emmett Brown after hitting his head on his bathroom sink, I think you'll find this interesting, nonetheless.

As you know, The Bullion Banks have engaged in a relentless campaign to lessen their exposure and potential liability in paper precious metal. Since the announcement of QE∞ last September, price has counter-intuitively fallen by over a third from near $1800 to below $1200. All the while, The Bullion Banks have decreased their total net short position in paper gold from 737 metric tonnes to less than 70 metric tonnes (from the CoT survey of 7/2/13). From a chart perspective, it looks like this:

Now, look closely. See anything? No? Look again, even closer. Do you see anything now? Do you see any type of pattern?? I must admit that, prior to last evening, I hadn't seen it, either. But it's there, waiting for you to discover it.

OK. What if now I gave you this? Take a look at the chart below with some notes made upon it. Now what do you think?

Hmmm. Well that's interesting, isn't it? Yes, price is down by over 30% from last September. However, almost all of the decline has taken place during the five calendar months of October, December, February, April and June. In fact, as you'll see below, the vast majority of the decline has occurred during the middle of those months. Hmmm. That's interesting, too.

Now before we dig further, what if I gave you these two charts?

So, now, let's go back to the current decline. What is so special about the months of October, December, February, April and June? I'll give you a few moments to think about that before we continue...

.....

.....

If you guessed, "They're Comex delivery months, Turd!", then you win today's prize! Yes! Those months are, in fact, "delivery" months for The Comex. Recall that the active futures contract is always the front month for delivery. Currently, this is the August13 contract. As of Monday, it had a total open interest of 206,000 contracts and it will stop trading and have it's First Notice Day on July 31. Anyone holding a contract after that date must show their intent for delivery by providing 100% margin in their account. Deliveries to eligible contract holders will then take place through the month of August.

Still with me? Good.

This same process occurred back in September for the October12 contract. First Notice Day was at the end of September and deliveries took place through October. The price of gold peaked at $1796 on October 5 but managed to hang in there for another week or so. But then look what happened and note the exact date:

DATE                   PRICE                 GLD TONNAGE           

10/12/12                 $1773                           1,340.52

10/24/12                $1699                           1,336.90

10/30/12                                                      1,336.30

So, what do we see here? Near the middle of the delivery month, price began to drop rather steeply and a little bit of gold was shaken out of the GLD "inventory". Then, after a decent rally in November, price began to decline again once we flipped the calendar to the delivery month of December. Look what happened and, again, note the date:

DATE                   PRICE                 GLD TONNAGE

12/12/12                  $1723                          1,351.42

12/20/12                 $1635                          1,350.52

12/28/12                                                      1,350.82

And now you're thinking, "OK, Turd. What's the deal?". Well, let's continue, shall we? Again, please note the date:

DATE                   PRICE                 GLD TONNAGE

2/11/13                    $1669                          1,326.89

2/21/13                    $1555                          1,290.31

2/25/13                                                         1,272.85

Well, that's interesting. This time, the mid-delivery-month decline shook out over 50 tonnes of gold from the GLD. "Hmmmm. I wonder what would happen if we tried that again?"

DATE                   PRICE                 GLD TONNAGE

4/12/13                    $1564                         1,158.56

4/16/13                    $1321                          1,145.92

4/29/13                                                        1,080.64

"Wow. This is awesome!", the Evil Ones said. "We hit price in February and shook out 50 tonnes. Then, even while price was stable from 2/21 - 4/12, we were able to grab 114 more. Finally, by breaking price down through the floor at $1525, we got 75 tonnes in April! What a deal!!"

Once again, price was relatively stable mid-April to mid-June, while no Comex deliveries were taking place. Then look what happened, again paying special attention to the date:

DATE                   PRICE                 GLD TONNAGE

6/12/13                   $1394                          1,009.85

6/28/13                   $1181                            969.50

7/9/13                                                            939.75

So, what is the lesson here?

  • The Bullion Banks have utilized the manufactured price drop to lessen their exposure and potential liability in paper gold by over 90%.
  • This resulting "discount" in paper price has led to a surge in global physical demand. For example, see here: http://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=197040&sn=Detail
  • However, Registered and Eligible Comex inventories are dangerously low. As of yesterday, The Comex showed 224 tonnes of Eligible and just 35 tonnes of Registered (ready for delivery).

What to do, what to do? The plan is clear! Raid price during the delivery month!! Create the selling and panic necessary to shake loose tonnage from the GLD. Use this gold to settle delivery obligations, not only in New York but London, too. Once the current delivery "crisis" has passed, leave gold alone to wallow and flounder, only acting to cap price whenever necessary to keep the downtrend in place. Once the next delivery month arrives: Wash, rinse and repeat.

Going forward, this likely means that we're "safe" for about another month. Besides, it's summer and we're in the middle of vacation season. Aside from the occasional short squeeze or price plunge, the pattern suggests that gold will be stable between $1250 and $1350 until early August. But then....watch out!

Forewarned is forearmed.

TF

229 Comments

DeaconBenjamin's picture

Interview with Axel Merk

twippers's picture

Santa

Big day here in Vancouver.  Santa is coming.  Who wouldn't be excited!!

OC15's picture

Thurd!

YEs!

treefrog's picture

furth!

  further?

Mantis's picture

Got 5th!

Hey treefrog we both tried to reserve fourth place with a '.'

cheeky

Think we're on the same wavelength

Dam you won though (in the fourth place battle), ah well got 5th spot, not too shabby.

Anyway.. now to read the article...

p.s sorry for all the people who hate the tradition of racing to comment first. Hehe not really devil

dgstage's picture

Some Anti Gold Person

sent me this today.

http://usat.ly/12jkR3Q

Then this was interesting. This is also what I sent this person back.

http://countdowntozerotime.com/2013/07/09/warning-ignore-the-gold-at-your-own-risk/

And forewarned is good

 
 
DeaconBenjamin's picture

Shortage of gold hits Indian diamond and jewellery units

 
 

A number of units and workers have been idled due to the severe shortage of in the wake of several restrictions on the yellow metal’s .

Imports in April and May together were a little over 300 tonnes. This fell to 38 tonnes in June. Excess imports in May gave some initial relief but that cushion is long gone.

“Several jewellery units and artisans are idle. Demand has also fallen. This is true not only for gold jewellery but also diamond jewellery and cutting and polishing units,” said Haresh Soni, chairman of the All India and Jewellery Trade Federation (GJF). “Business has halved in the past few weeks.”

The jewellery industry’s size is estimated at $45 billion (Rs 2.7 lakh crore), involving 600,000 units and employing a little over 10 million people.

http://www.business-standard.com/article/markets/shortage-of-gold-hits-diamond-and-jewellery-units-113071000351_1.html

DirkDirkler's picture

Anyone know about this?

Anyone know about this?

Btw congrats to the lurkers.

Charles S. Hamlin's picture

Thanks for the update Turd

Did we find anyone that could investigate in Hong Kong?

ctob's picture

Yep

I had noticed this after february and is why I anticipated the April smash but I was just using static timing.  Your explanation makes more sense and fits this June/July thing better than my hypothesis.  I should probably do my buy now rather than waiting anymore.  Still gonna wait on FOMC though.  

edit: Or I guess I should wait a bit longer.  pattern has been stays sideways until smahsdown.

The thing is I don't think this pattern can last much longer.  The negative GOFO is a big thing and basically the chaos has started, the positive feedback loops are starting to feed into themselves and control is being lost.  There might be one or two more iterations but its risky to no buy on each smashdown at this point.  IMO.

DeaconBenjamin's picture

Failed Banking System Prompts Iraqis to Hoard Gold

RTR2ZBBG.jpg?t=thumbnail_578

There is an old Arabic saying that "gold is both for decoration and storing." Currently, Iraqis, particularly residents of the Kurdistan Region of Iraq, are taking these words to heart. In the absence of a trustworthy banking system, they are converting their money into gold and stashing it in their homes. The Department of Standards and Quality Control for Gold and Minerals in the Kurdistan Region acknowledges that, indeed, large quantities of gold are being imported and distributed.

Bakr Aziz, the director of quality control for gold in the Kurdistan Regional Government's Ministry of Planning, revealed to Al-Monitor, "During the past six months, 49.4 [metric] tons of gold have been imported into Iraq through the Erbil and Sulaimaniyah airports." By comparison, according to Aziz, during the first seven months of 2012, some 34 tons of gold were imported.

He further explained, "Amounts of gold are brought in according to the needs of the Iraqi market. These quantities are brought in through the Erbil and Sulaimaniyah airports and distributed to all of Iraq." These two airports have surplanted Baghdad's airport as shipment points for gold due to the deteriorating security situation in central and southern Iraq and the lack of security in the airports there. By contrast, there is a "high level of organization in the Kurdistan Region's airports." Aziz reiterated, "[These airports] are secure, making it easier to bring gold into Iraq via the Kurdistan Region."

http://www.al-monitor.com/pulse/originals/2013/07/iraq-banking-sector-concerns-currency-gold.html

Mantis's picture

Pattern

Can't believe that hasnt been notice before! There it is in plain sight.

Maybe now the cats out the bag. Will they have to change their gameplan?

SRSrocco's picture

ANOTHER INTERESTING PATTERN IN SILVER WAREHOUSE STOCKS

I noticed that the Shanghai Silver Stocks continue to decline since April 12th in a big way, but the Comex Silver inventories have been about the same level, 165 million since the end of March.

Shanghai Silver Stocks Fall Nearly 50% Since April

department of truth's picture

Paul Craig Roberts on US efforts to prop up the dollar

Paul Craig Roberts discusses the trade pacts with Europe and Asia, which are designed to support the dollar.  Roberts says that if the US is successful in this endeavor, it may be able to postpone the collapse that he and many others forsee . . 

treefrog's picture

sprott shaving head?

sounds healthier than eating plastic foam!  here's hoping it happens before the weather turns cold.  i wouldn't want sprott to catch a chill.

Corto's picture

Pattern question

Turd, all:

I usually just lurk in the background, but reading your pattern entry, you are saying during delivery months, we get hit, and during non delivery months we wallow.

Seems not a place I want to be in!  What breaks this pattern, then?

Thanks,

Corto

RationalMind's picture

Motivation for price smashes during Comex delivery month

Turd,

Great insight. However, I thought that motivation for the price smash during Comex delivery months was to deter the long contracts from taking physical delivery (and not to shake GLD). After all, if you have a long contract, and prices are dropping during delivery month, won't you jrather roll over the contract and not take delivery?

Safety Dan's picture

Outstanding TA Turd, Thank You!

Turd, I have followed your TA for sometime. No one is perfect, (except me - if you ask Mrs Safety Dan), but its the ones who look at the big picture and wonder why, then find the WHY, like you have, that impress. Great analysis, thank you for your intuitive work.

Makes me smile when someone figures out the (almost TBTF)fractional gold system and can anticipate their coming moves.... No wonder Comex is on the ropes, now the Turdites can float like a butterfly and sting like a bee.. (thanks Ali)

Go ahead Bullion Bank Punk traders, make my day!

Attention Kmart Shoppers; A Blue Light Special on Au & Ag coming in late August thru Sept..... Prepare accordingly!!

Safety Dan's picture

Outstanding TA Turd, Thank You!

Turd, I have followed your TA for sometime. No one is perfect, (except me - if you ask Mrs Safety Dan), but its the ones who look at the big picture and wonder why, then find the WHY, like you have, that impress. Great analysis, thank you for your intuitive work.

Makes me smile when someone figures out the (almost TBTF)fractional gold system and can anticipate their coming moves.... No wonder Comex is on the ropes, now the Turdites can float like a butterfly and sting like a bee.. (thanks Ali)

Go ahead Bullion Bank Punk traders, make my day!

Attention Kmart Shoppers; A Blue Light Special on Au & Ag coming in late August thru Sept..... Prepare accordingly!!

argentus maximus's picture

Re: Pattern Question

What breaks this pattern is a hit, and the holders refuse to sell at a ridiculously low price.

Price rejection causes the price to instantly rise back to where it was before the dump. Think of the instant rebound after a flash crash. All we need is the holders to be strong enough to have the balls to know it's is going up, not down from where it is at. They're coming, but they don't buy it too high, not those holders.

When price rejection at a low occurs, it won't need to happen a second time. All the professionals will observe what is there.

jezfry's picture

Break the pattern

My guess would be that now the cartel is almost net long things will change. Hitting the paper price to coerce holders of physical to sell will now have the unwelcome byproduct of causing them a paper loss . I expect we will see prices rise in these months from now on. In fact - more accurately - they will probably rise in every month from now on.

Turd Ferguson's picture

Well, sure, that too

MODERATOR

No question that the coercion against those standing for delivery is a motivation. It always has been.

I just thought I'd add the GLD info today for some extra spice.

Fr. Bill's picture

So, does this mean that ...

... I should accumulate my dry powder until August?

I've got some now, but I'll have more in a month.

Outfitter's picture

Turd question

great work but what about the bar size difference?

GLD uses 400 oz and Comex uses 100 oz. Are you saying they are recasting the GLD bars into Comex 100 oz bars to settle?

Galearis's picture

EXCELLENT

Now THAT was great interpretive work...Meaning watch the levels drop on GLD for a timeline....

Very impressive!

G.

Turd Ferguson's picture

IF this is true...

MODERATOR

Since late last week, debka has been asserting that the financial muscle behind the Egyptian Army takeover was Saudi and Kuwaiti in nature. Here's the latest: http://www.debka.com/article/23107/Egyptian-army’s-financial-coup-12-billion-petrodollars-from-Saudi-UAE-Kuwaiti-fans

IF THIS IS ACCURATE...The stage is being set for religious/civil/sectarian WAR in the Middle East. The Islamist Brotherhood and their splinter groups were already opposed to and working against the ruling powers of Saudi, Kuwait and the UAE. They will not take this laying down! Expect a considerable UPtick in violence and "terrorism" in those countries as The Brothers act to restore their power and vision. They will soon attempt a counter-overthrow of those countries' leaders.

Perhaps this is why crude keeps moving UP. How many times have you heard me mention that "crude is your tell" and "don't be alarmed until crude is back above $100, even $105". Well here we are at $106. Is it a false breakout? Could crude quickly retreat from these levels like it did in early 2012? Maybe. But watch this very closely. Should crude move through $110 and beyond, be nervous. Be very, very nervous. 

tyberious's picture

Not bad

for a dope with a MacBook!smiley

Turd Ferguson's picture

Metal is metal and the same

MODERATOR

Metal is metal and the same banks that run The Comex make up the LBMA. If having GLD bars available for London delivery frees up NY supply to settle Comex delivery, so be it. Remember, Comex settles 20-40 tonnes per delivery month. London does that much in 2-3 days.

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