Again, This Isn't Complicated

Frustrating? Yes. Complicated? Nope.

Well, it's good to be back though the timing of my spring break turned out to be challenging for it seemingly could not have come at a worse time. More on that below but, for now, rest assured that Turd is back on the watchtower and ready to fight.

Let's start again today with where we left off Friday. In that podcast thread, I implored you to go back and review this post from 3/1/14. Even if you did so then, you should do so again today because it's extremely important that we get on the same page:

http://www.tfmetalsreport.com/blog/5530/negative-gofo-and-rising-gold-prices

To summarize, here are a few of the salient paragraphs:

"The days of Central Bank gold leasing are almost over. Whether the CBs are "out" of gold or simply unwilling to lease what they have left for fear of not getting it back (from China), the CBs are not playing the gold leasing game like they have for the past 45 years. Again, for the past 24 years, GOFO rates were negative just 7 out of 5,000 days. Since July 8, 2013, GOFO rates have been negative for 98 out of 164 days or roughly 60% of the time.

Put another way, positive GOFO means "business as usual". Central Banks are willing to lease gold to the Bullion Banks. The BBs take this gold and dump it onto the futures market, using this scheme to contain, manage and suppress price. This worked perfectly until 2003 when demand and fundamentals overwhelmed this scheme for the next nine years and price rallied from $300 to $1900. Leased gold was continually dumped from October 2012 until late June 2013 and the resulting decline took gold back from $1800 to less than $1200.

But, now, negative GOFO is the new norm. Why? Because the CBs no longer have the gold to lease to the BBs. Without this readily available physical supply, the BBs are unable to aggressively manage price on a day-to-day basis and they are forced to stand down. Instead of daily 7:00 am London time price raids, we only get one per week. Instead of "waterfall" declines on the Comex, we get gradual and steady price increases."

And I concluded that post with this:

"This leaves us with this conclusion for traders and stackers everywhere:

Buy when GOFO is negative. Be cautious, sell or hold off on new purchases, when GOFO is positive.

Could it be as simple as that? Yes! It may very well be, at least for now."

Allow me to put this another way for you...

When GOFO is negative, physical supply is scarce. Because of this, The Cartel Banks have no gold to dump into the market to raid and jam price lower. Their only option is to be on the offer. All they can do is stand ready to absorb as much of the speculative buying pressure as they can each day, hoping to contain price and manage rallies.

Once GOFO flips back to the positive, this indicates that The Banks again have the ability to freely lease gold en masse. They then can utilize this gold to aggressively raid and sell in their attempts to paint the charts and force the spec money back out. Into this spec selling, the banks can buy back and cover many of the shorts employed earlier to contain price.

The two charts below illustrate this point. First, check this daily chart of the past two months of action. Just as the pattern has been, once Comex February deliveries began in earnest, GOFO turned negative again on 2/4/14. From there, gold went on a tear. It was UP 13 of 15 days with most days seeing an unusual lack of even London Monkey attacks. GOFO "peaked" negative on 2/21/14 and began to drift back toward positive as the February delivery month concluded, turning slightly positive again on 3/6/14. However, GOFO didn't immediately jump higher. Instead, it languished near flat for over a week as tensions in Ukraine/Crimea heated up and more speculators rushed into the paper market. As of 3/14/14, GOFO was still just slightly positive at +0.0075%.

Conveniently, we had a CoT survey taken on 2/4/14 as well. That evening, The Cartel Banks (gold commercials) were NET SHORT a total of 65,782 contracts. Left with no gold to raid price, all they could do was absorb spec bids through February and into March and by the CoT of 3/18/14, The Cartel Bank NET SHORT position had grown to 145,934 contracts. It was "mission accomplished" though because they had managed to contain the price rise to just $100. Can you even imagine how price would risen without The Banks covering each bid??

But, as you now know, GOFO did turn positive last week and each day since has seen rates move even deeper into positive territory. Again, this means that leasable gold is now readily available again for The Banks to borrow and dump into the market. GOFO moved from +0.016% to +0.038% last Monday. Can there be any surprise, in retrospect, that after price jumped $10 higher last Sunday evening it was immediately raided back down and then $20 lower later that day? As GOFO spiked toward a Friday high of +0.102%, are you surprised that price is now another $60 lower?

Anyway, the good news in all of this is that we are clearly onto them. The game is ending, as witnessed by the now-persistent negative GOFO and, with April Comex deliveries set to commence in a week, rates will undoubtedly slip negative again soon. In the meantime, we must expect even lower prices as a desperate Cartel attempts to paint the charts as negatively as possible while they can, hoping to avoid another spec rush in April.

In gold, this means at least a drop to the lower end of the 2014 channel, currently near $1305. However, I doubt that price will stop there. The Cartel goal almost has to be to break the 2014 channel. Why would they want to leave that channel and bull trend intact for when GOFO slips negative again next month? No, they'll almost certainly keep raiding until that channel is broken. Also, if they can break price down and out of the channel, they'll also try to knock price back below the 50-day and 200-day moving averages, currently near $1302. In the end, absent any geo-political dramatics over the next 5-10 days, I think price is headed to $1280 or so and the 100-day MA. Yes, that stinks but it is what it is.

And silver, now that it's convincingly back below $20.60 and all of its moving averages, is likely headed to at least $19.50. I'd love to see a third "higher low" by having it stop there but we can't rule out $19, either. Yes, that sucks. But, again, recognize it for what it is and prepare to take advantage of this current dip.

I have a lot more to say but I'd better get this posted. I'll try to cover this and other topics in more detail in today's podcast so please be sure to check back later.

Again, hang in there. Recognize what is going on and use this knowledge to your advantage.

TF

109 Comments

4 oz's picture

ah!

It is what it is...a fine time to be adding....

twippers's picture

Thanks turd

Cheers for the wisdom turd

Turd Ferguson's picture

And remember, we discussed

MODERATOR

And remember, we discussed palladium back on Friday. Here's an updated chart with an overlay of gold. Again, have the geopolitical fundamentals changed or has GOFO allowed The Banks to raid gold?

http://www.sovereignman.com/trends/guess-which-precious-metal-is-controlled-by-the-russians-13997/

silver66's picture

fffourth again :-)

Now I shall read and get back to work

Silver66

metalsbyamile's picture

Fifth for the 5th time

Asleep at the switch or watching the switch, take yer pick.

Now for the read.

Urban Roman's picture

Worth mentioning,

Guess Which Precious Metal Is Controlled By The Russians

Tyler Durden's picture

Submitted by Tyler Durden on 03/24/2014 10:43 -0400

I think Dagney mentioned this metal a while back. Well, it looks like it's gonna break out now.

jezfry's picture

Clear signals

The cartel always raids when prices have risen so they have plenty of room to drop - thus maximizing the profit from their crime. Any recent rally that coincides with GOFO going positive is a clear signal to expect the monkeys...

arch stanton's picture

welcome back

turd hope you enjoyed time with mrs t and the LTs

metalsbyamile's picture

My thoughts as well Turd

Turd:In the end, absent any geo-political dramatics over the next 5-10 days, I think price is headed to $1280 or so and the 100-day MA. Yes, that stinks but it is what it is.

Just this morning i stated we probably see $1290! $1280 scares me should that give way. Time will tell ,we must remain vigilante with a cautious eye.

metalsbyamile's picture

Fantastic admonition Turd

"Recognize what is going on and use this knowledge to your advantage."

No need to add to that.

wildstylechef's picture

Guess Which Precious Metal Is Controlled By The Russians

ubmitted by Tim Staermose of Sovereign Man blog,

Palladium is like the Rodney Dangerfield of precious metals. It never gets any respect.

If you ask someone about precious metals, in fact, just about everyone has heard of gold and silver. And occasionally platinum.

But palladium is one of those obscure precious metals that few people think about, or even know about.

Aside from actually having its own currency code (XPD), palladium is widely used in a variety of industrial applications, from spark plugs to catalytic converters to hydrocarbon ‘cracking’ to electronic components.

And here’s something most people don’t know: most of the world’s palladium is mined in Russia.

Since October 2013, Palladium prices have had a moderate boost—about a 5.3% increase in five months.

But given what’s happening in Russia, prices could soar. In fact, with trade sanctions looming, palladium could be taken off the world market indefinitely.

As the following chart shows, palladium has just broken out to a new 52-week high and is showing strong upward momentum.

1 year palladium Guess which precious metal is controlled by the Russians...

Moreover, if you look at the 5-year chart, it could be about to break out to even longer-term highs.

5 year palladium Guess which precious metal is controlled by the Russians...

I would consider buying palladium today, with a stop-loss order to protect your capital, at $759. That means if the market should prove this thesis wrong, the loss would be limited to just 4%.

I think the near-term upside target is the 5-year high of $855. That’s about an 8% gain from where we are today.

An upside of 8% versus a downside of 4% makes palladium a good risk/reward trade, given that the odds of the higher-price outcome are much better than the odds of the lower-price outcome.

But if tensions between the West and Russia escalate and trade sanctions stay in place for a prolonged period, $855 could be a very conservative upside target for palladium.

The last time Russia withheld palladium supplies from world markets back in 2000, the price rose 151% from a low of $433 in January 2000 to over $1,090 an ounce by January 2001.

In a scenario like that, palladium would be an incredibly profitable trade.

One easy way to take a position in palladium is via the ETFS Physical Palladium Shares (PALL on the New York Stock Exchange).

A new physical palladium ETF sponsored by Standard Bank has also just launched in South Africa.

And Absa Bank, which already sponsors the world’s largest platinum-backed ETF, has also announced it will launch a palladium ETF called NewPalladium. It will list on the Johannesburg Stock Exchange on March 27th.

These new palladium ETF launches, coming at a time of tightening supply due to Russian sanctions, could easily add more upward momentum to palladium prices, as they will withdraw supply from the market to physically back their shares.

However, if you want to avoid the possibility of any counterparty risk, there’s no substitute for owning the physical metal yourself.

The Royal Canadian Mint has in the past minted palladium versions of its very popular and instantly recognizable Maple Leaf bullion coins.

You can also buy 1 troy ounce palladium bars from most major dealers.

Average:

3.666665

Your rating: None Average: 3.7 (6 votes)

wildstylechef's picture

Russia Returns Favor, Sees Chinese Yuan As World Reserve Currenc

Following China's unwillingness to vote against Russia at the UN and yesterday's news that China will sue Ukraine for $3bn loan repayment, it seems Russia is returning the favor. Speaking at the Chinese Economic Development Forum, ITAR-TASS reports, the Chief Economist of Russia's largest bank stated that "China's Yuan may become the third reserve currency in the in the future."

Managing Director and Chief Economist of investment company Sberbank Yevgeny Gavrilenkov said at the 15th governmental Chinese economic development forum in the Chinese capital on Sunday (via ITAR-TASS):

"China’s yuan (renminbi) may become a third reserve currency in the world in the future"

"This forecast can be made on figures of domestic economic growth. Probably the country will keep high GDP growth rate and the GDP volume will increase to around 14-16 trillion U.S. dollars for a brief period of time, the indicators comparable to the European Union and the United States.

Meanwhile, Chinese securities are more attractive for the countries that have a surplus in economy, particularly the Middle East states; and China will obviously follow the path of securing the country’s assets,"

The forum which opened in the Chinese capital on March 22 discusses a broad range of issues of economic reforms and China’s stronger role as the second largest world economy. First Deputy Prime Minister of the Chinese State Council Zhang Gaoli, Managing Director of the International Monetary Fund Christine Lagarde and top managers of major world corporations participate in the forum as honorary guests.

Of course, as we noted previously, nothing lasts forever...

20120103_JPM_reserve_0.png [12]

and with Friday's "Petrodollar Alert" perhaps things are moving faster than many assumed.

wildstylechef's picture

Petrodollar Alert: Putin Prepares To Announce "Holy Grail" Gas D

If it was the intent of the West to bring Russia and China together - one a natural resource (if "somewhat" corrupt) superpower and the other a fixed capital / labor output (if "somewhat" capital misallocating and credit bubbleicious) powerhouse - in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely "going according to plan."

For now there have been no major developments as a result of the shift in the geopolitical axis that has seen global US influence, away from the Group of 7 (most insolvent nations) of course, decline precipitously in the aftermath of the bungled Syrian intervention attempt and the bloodless Russian annexation of Crimea, but that will soon change. Because while the west is focused on day to day developments in Ukraine, and how to halt Russian expansion through appeasement (hardly a winning tactic as events in the 1930s demonstrated), Russia is once again thinking 3 steps ahead... and quite a few steps east.

While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.

Here is what will likely happen next, as explained by Reuters:

Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow's seizure of the Black Sea peninsula from Ukraine would be counter-productive.

The underlying message from the head of Russia's biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances. 

The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.

More details on the revelation of said "Holy Grail":

State-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China from 2018 via the first pipeline between the world's largest producer of conventional gas to the largest consumer.

"May is in our plans," a Gazprom spokesman said, when asked about the timing of an agreement. A company source said: "It would be logical to expect the deal during Putin's visit to China."

Summarizing what should be and is painfully obvious to all, but apparently to the White House, which keeps prodding at Russia, is the following:

"The worse Russia's relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you're isolated," said Vasily Kashin, a China expert at the Analysis of Strategies and Technologies (CAST) think thank.

Bingo. And now add bilateral trade denominated in either Rubles or Renminbi (or gold), add Iran, Iraq, India, and soon the Saudis (China's largest foreign source of crude, whose crown prince also happened to meet president Xi Jinping last week to expand trade further) and wave goodbye to the petrodollar.

As reported previoisly, China has already implicitly backed Putin without risking it relations with the West. "Last Saturday China abstained in a U.N. Security Council vote on a draft resolution declaring invalid the referendum in which Crimea went on to back union with Russia. Although China is nervous about referendums in restive regions of other countries which might serve as a precedent for Tibet and Taiwan, it has refused to criticize Moscow. The support of Beijing is vital for Putin. Not only is China a fellow permanent member of the U.N. Security Council with whom Russia thinks alike, it is also the world's second biggest economy and it opposes the spread of Western-style democracy."

This culminated yesterday, when as we reported last night, Putin thanked China for its "understanding over Ukraine." China hasn't exactly kept its feelings about closer relations with Russia under wraps either:

Chinese President Xi Jinping showed how much he values ties with Moscow, and Putin in particular, by making Russia his first foreign visit as China's leader last year and attending the opening of the Winter Olympics in Sochi last month.

Many Western leaders did not go to the Games after criticism of Russia's record on human rights. By contrast, when Putin and Xi discussed Ukraine by telephone on March 4, the Kremlin said their positions were "close".

The punchline: "A strong alliance would suit both countries as a counterbalance to the United States." An alliance that would merely be an extension of current trends in close bilateral relations, including not only infrastructure investment but also military supplies:

However, China overtook Germany as Russia's biggest buyer of crude oil this year thanks to Rosneft securing deals to boost eastward oil supplies via the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.

If Russia is isolated by a new round of Western sanctions - those so far affect only a few officials' assets abroad and have not been aimed at companies - Russia and China could also step up cooperation in areas apart from energy. CAST's Kashin said the prospects of Russia delivering Sukhoi SU-35 fighter jets to China, which has been under discussion since 2010, would grow.

China is very interested in investing in infrastructure, energy and commodities in Russia, and a decline in business with the West could force Moscow to drop some of its reservations about Chinese investment in strategic industries. "With Western sanctions, the atmosphere could change quickly in favor of China," said Brian Zimbler Managing Partner of Morgan Lewis international law firm's Moscow office. 

Russia-China trade turnover grew by 8.2 percent in 2013 to $8.1 billion but Russia was still only China's seventh largest export partner in 2013, and was not in the top 10 countries for imported goods. The EU is Russia's biggest trade partner, accounting for almost half of all its trade turnover.

And as if pushing Russia into the warm embrace of the world's most populous nation was not enough, there is also the second most populated country in the world, India.

Putin did take time, however, to thank one other country apart from China for its understanding over Ukraine and Crimea - saying India had shown "restraint and objectivity".

He also called Indian Prime Minister Manmohan Singh to discuss the crisis on Tuesday, suggesting there is room for Russia's ties with traditionally non-aligned India to flourish.

Although India has become the largest export market for U.S. arms, Russia remains a key defense supplier and relations are friendly, even if lacking a strong business and trade dimension, due to a strategic partnership dating to the Soviet era.

Putin's moves to assert Russian control over Crimea were seen very favorably in the Indian establishment, N. Ram, publisher of The Hindu newspaper, told Reuters. "Russia has legitimate interests," he added.

To summarize: while the biggest geopolitical tectonic shift since the cold war accelerates with the inevitable firming of the "Asian axis", the west monetizes its debt, revels in the paper wealth created from an all time high manipulated stock market while at the same time trying to explain why 6.5% unemployment is really indicative of a weak economy, blames the weather for every disappointing economic data point, and every single person is transfixed with finding a missing airplane.

metalsbyamile's picture

We just blew thru $1310

Bounced above it slightly. We need to hold it but i do not think we will at close.

Turd Ferguson's picture

Ridiculous

MODERATOR

LOL: US CFTC SAYS MORGAN STANLEY CAPITAL GROUP INC TO PAY $200,000 PENALTY FOR VIOLATING SOYBEAN MEAL FUTURES SPECULATIVE POSITION LIMITS

— zerohedge (@zerohedge) March 24, 2014

Maestro's picture

F*$(! Monkeys!

images?q=tbn:ANd9GcQfNXueu9jDULexSqazbrW

metalsbyamile's picture

MS fine

Some one will miss their morning coffee and croissantsurprise

kardnul's picture

COMEX/LBMA default?

If the Comex or LBMA ever defaults on gold or silver, JPM at al. will see it coming and will do everything in their power to drive prices as low as they possibly can to cash out of the remaining contracts.   JMHO, of course.

Is that time about here?

Recent price action sure looks like it...simple reasoning says the Asians must be getting close to hoovering up all non-deep storage gold on the planet....

This year should be much tougher for them to acquire anything close to what they did last year...This year, will another 1000 mt be able to be removed from gold phyz ETF's?...Will another 1300 mt be taken from BOE vaults?...Will another 116 mt be removed from Comex inventory?

Turd Ferguson's picture

And this is excellent from

MODERATOR

And this is excellent from DenverDave. I plan to discuss this later, too, in the context of the CoT and BPR.

http://investmentresearchdynamics.com/zerohedge-is-wrong/

Sound Money Minnow's picture

I saw that article too Turd

Qualifying as the novice I am, DenverDave's analysis made much more sense to me than the Zerohedge article.  It is often the case that the simplest common sense explanation is the most accurate.

Like a country hell bent on deflating their currency thinks that it isn't a positive for gold valuation relative to the deflating currency. My simpleton mind says that can't last forever, anymore than I can run huge deficits in my house and never pay the bills. This insanity has to have a short shelf life, even with consideration of our military strength.

It isn't a surprise to me that the rest of the world is sick of this crap.

metalsbyamile's picture

The Battle Rages On

$1310 is the line in the sand -for now. Being defended and being pounded. Who will win?

Golfer44's picture

We're at pefect Fib 38.2% pull back

On daily chart:

12/30/2013 ------ low 1182

3/16/2014 ------- high 1388.5

3/24/2014 ------- Pull back to 1310

This is a nearly perfect 38.2% pull back.  If this holds this indicates that chart is strong and should advance equal to leg up.

Leg up (1388.5 - 1182 = 206.5)  

Projected next leg if 1310 holds is 1310 + 206.5 or 1516.5.  

1516.5 would be the 1:1 Fib expansion projection before next strong pull back.

Lets see if 1310 holds.

metalsbyamile's picture

Is a F.I.B as good as a

S.I.C.K. lycal ? lol

We shall see , I suspect the bounce comes in the summer but what the hdik?

It is all smoke and mirrors.

metalsbyamile's picture

Damn $1310 up again

Glta , keep some dry.

Dr Jerome's picture

Golden cross

Perhaps the timing of this vicious beat down is to keep the golden cross from being completed. The 50 day still appears to be just below the 200 day.

Kansascrude's picture

The LYING OBFUSCATING FED!

We may cut back QE but we are printing $$$ like MOFO's......

http://www.cnbc.com/id/101497635

March 16th

"ALL the sound and the FURY about tightening monetary policy in the United States, the Federal Reserve slipped by the "napping" market vigilantes one of its largest expansions of its balance sheet on record.

In the course of February, the Fed"s monetary base expanded by $104.8 BILLION, the third largest monthly increase in its asset purchases.  This month looks like it could be more of the same.  During the Reserves reporting period between Feb  15 th and March 5 th, the high powered money soared by  nearly $30 Billion bringing the year-over-year increase to an incredible 36%.

THIS IS NOTHING BUT BLATANT LYING AND MISDIRECTION BY THE FED.  WE ARE BEING SCREWED AND STOLEN FROM BY TPTB.

MAY THEY ROT IN HELL!

metalsbyamile's picture

Dr Jerome

Quite possible, we have seen it before , the Golden X false flag if you will.

What do you think of the cyclical charts Dr.

Mickey's picture

golden cross

last was Sept 2012--just before election and when gold was in a big run-up from 1550 to 1800.

stopped at 1800 by the great jobs report on Oct 5, 2012 in time to re elect Obama.

Good tech formations in PM  are problems. Good fundamentals are problems.

cover your heads--this coming overall  disaster is going to be  a doozie.

Dr Jerome's picture

Cyclical charts

metals,

I am not familiar with the cyclical charts. Can you post one?

I typically just draw trendlines, resistance & support and occasionally look at fibs. This beatdown caught me flatfooted ad helpless Sunday night.  My broker advised me to stay in, so I did since my weakness as a trader is to take small gains too quickly, or bail out with a minor pullback. Good thing my trading account is small--it keeps me interested and watching, but I fear it is about blown out today. I'll hang on to my near worthless options just in case metals have a big rally before April 25.

CPE's picture

Please take the time to read this, perfect for blue pill takers!

Please read this!!!  The Truth is Out: Money is just an IOU, and the Banks are Rolling in it

The link above is THE most important concept regarding ANYTHING economic that one could ever understand about our current monetary system.  Understanding this key, puts everything else in perspective.  The only thing I would add to the author’s explanation is that since the principal of loans is created out of nothing by the banks then the ONLY thing that matters to the bank is the stream of interest.  The interest must flow and compound to enrich the banking class.  Nothing else matters to them, all else economic revolves around this central fact.  This is why deflation (falling prices) is demonized, because it destroys debt and therefore the interest stops and no longer compounds to the banker’s benefit.

Gentlemen!  I too have been a close observer of the doings of the Bank of the United States.  I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.  When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.  You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families.  That may be true, gentlemen, but that is your sin!  Should I let you go on, you will ruin fifty thousand families, and that would be my sin!  You are a den of vipers and thieves.  I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!

- Andrew Jackson – President of the United States and a man of a quality that is apparently much more rare today…

The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.

- John Emerich Edward Dalberg-Acton

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