Please Read This Extremely Important Post

I hope you're ready. Everything that has transpired since May in silver and September in gold has led us to this moment. The next five to seven trading days will tell us everything. Either the metals will win their individual Battles Royale or they won't. If they win, price will accelerate to the upside. If they fail, the metals will likely settle into another sideways consolidation that lasts well into spring. I, for one, can't wait to find out!

So, let's get started. First, in case you missed it, here's a re-print of a comment I posted yesterday afternoon about the continuing increase of open interest in the metals:

"For yesterday, gold rose $15 and the April12 contract rose by 6,500 contracts to 264,250. Here's something interesting: The June12 OI fell by 1800 to 62,263. Hmmm. Total OI rose by over 4000 to 470,255.

You'll recall that yesterday was a big day for silver and also the day that the March options expired. First day notice is just 4 days away but March12 OI fell by just 3,600 contracts to 21,393. The May12 picked up a lot of rollovers and new money and grew by nearly 8,000 contracts to 49,471, a 20% increase in one day! Total silver OI is now 115,874 and that level is the highest its been since August of last year."

A short time later, I posted this comment, right after this week's CoT was released:

"Remember that massive OI jump during the rally on Tuesday? It was +17,000 contracts Tuesday alone and for the reporting period, the total OI rose a massive 25,000.

Well, we just found out how. Total spec long grew by 14,000 but the Cartel net short grew by 20,000! They are about to drop the hammer or get their nuts squeezed off.

Considering that OI has expanded by over 14,000 contracts in the two sessions since, you can imagine that the spec net long has continued to increase while The Cartel net short has done the same.

Silver, too. OI rose by 6000 contracts as the EE net short rose by 1900 and spec longs rose by 2100.

At first glance, this all just confirms that the stage for The Battle Royale has been set. We are up against it technically and the CoT shows that The Cartels are getting up against it from a net short perspective. Next week promises to be wild. Get ready."

Before we get to the charts and discuss the technical importance of this upcoming week, let's dive into that CoT a bit and look at some history for perspective. First, gold.

The CoT does indeed show a massive expansion of spec longs. 14,000 contracts! That's a lot of new money. It also shows that The Cartel supplied the new paper to those spec longs as The Cartel added 20,000 new shorts. The question is, as always, why do The Forces of Darkness do this? Are they:

  1. Flooding the market with fresh, unbacked paper gold because they are trying to cap price, suck in weak-handed longs and preparing for a massive raid through which they will profit?   OR
  2. Is the bullion bank cartel simply performing their duty as a market maker? The specs demanded 14,000 contracts this week. Without a brand new, unbacked Cartel short on the other side of the trade, price would have had to have risen to the point where a current long was ready to sell. What would that price have be to in order to pair 14,000 contracts?

Have the bullion banks profited for years by naked shorting the PM "markets" and then initiating waterfall declines into which they can cover and profit. ABSOLUTELY! Is that what they're doing here? I don't think so. As I've repeatedly stated, I believe that The Cartels were completely freaked out and frightened by the events of 2011 and they have spent the last 10 months manipulating PM prices in an attempt to minimize and/or extricate themselves from their perennial short positions. What they didn't expect was $2T in fresh global liquidity in the past 90 days. As I laid out yesterday, everything is going higher, just like during overt QE2. Throw $2T around and it spills everywhere. Crude, gold, beans, cattle, copper...everywhere! The race higher is unfolding so quickly that The Cartels have been left with no other choice but to maintain their roles as market maker. Like the Specialists of old on the NYSE, The Cartels must take the "offer" side of the trade when things get disorderly to the upside, just like they must supply a bid when things are disorderly to the downside. (Though, during coordinated raids, The Cartels have obviously been reluctant to aggressively supply that bid.)

So, here we are. $2T with more to come are flooding the markets with liquidity and The Cartels are getting painted into the same corner they found themselves in last year. What will they do? Attack, of course! That's what they have always done and so you can imagine that an attack will be their first course of action here, too. But can they? Seriously...can they? Take a moment and consider the global investment landscape at this exact moment. Even if you had unlimited funds, would you want to continue building a huge net short position in the metals right now? I don't think so. And you'd have to greatly increase your short position to initiate an attack. No...I don't think they're going to attack, at least not in the massive, coordinated style to which we've grown accustomed.

Their only real option is to attempt to continue "managing" the demand. This means they will continue to create paper when demand is heavy and they will attempt to cover some shorts on every selloff. In an environment like that, you'd expect a steady, increasing, predictable price channel where demand remains constant and forces price higher within a channel of higher highs (demand surges) and higher lows (Cartel covering into selloffs). Hmmm. Do you think the environment I just described would look anything like these charts once you plotted all of the price action graphically?

paper_2-25goldd1.jpgpaper_2-25silvd.jpg

So, how long can these price trends continue? As discussed in yesterday's post, from a fundamental standpoint the firehose of liquidity that is currently flooding the global markets shows no sign of slowing. The question then becomes, how long can The Gold and Silver Bullion Banking Cartels continue to provide the unbacked paper metal necessary to manage the ascent of price? Are they already stretched to the limit like they were last April in silver and last September in gold? If so, we can expect imminent attacks and margin hikes. For answers, let's consult some past CoT reports to see if we can gain some perspective. (For simplicity's sake, I'll start with the gross numbers.)

SPEC LONG                 2/22/11        4/5/11         8/2/11       9/6/11        10/4/11           2/21/12                     

Silver                                50,937          48,890        38,265      37,185        23,859            34,819

Gold                                 246,967       259,792       291,974     248,457     180,635          214,343

As you can plainly see, spec long positions in both gold and silver are still well below their peak levels in April and September, respectively. Additionally, though up considerably from the lows of Q4 2011, these markets are not yet "overbought", at least terms of market participation and liquidity. Now, let's look at The Cartel shorts.

BANK SHORT              2/22/11       4/5/11        8/2/11        9/6/11        10/4/11           2/21/12

Silver                                 89,728         89,827        75,029      77,869         58,807            70,923

Gold                                  389,757        415,992     442,648     401,815       345,040         375,306

Just as plainly, from a gross perspective, Cartel shorts are nowhere near the levels they were when silver and gold were making their respective highs last year. To me, this indicates that The Cartels have plenty of "ammo" still available from a paper supply standpoint. But, we have to look at the net numbers, too:

BANK NET (short-long)   2/22/11       4/5/11       8/2/11        9/6/11        10/4/11            2/21/12

Silver                                       57,793         56,414      44,588       47,216         18,923               39,188

Gold                                        234,804      258,665    287,634     227,714      164,751             229,302

As you probably expected, the net short position also shows that The Cartels have plenty of room to grow here as they are nowhere near the extreme levels attained at the price peaks last year. Other things to note from this data:

  1. From 2/22/11 to 4/5/11, silver rose from roughly $33 to $40 but the large spec long and Cartel net short positions barely budged. Why? The small specs drove the market as their net long position rose from 18,000 to 54,000. That's a triple of the small spec net long in 6 weeks.
  2. But it wasn't the specs that caused the panic, it was the EE. From 4/5/11 to 4/26/11, price rose from $40 to $48 but the large and small spec net position were both declining. However, over those three weeks, the EE net short position contracted by an amazing 14,000 contracts! The EE panicked, pure and simple.
  3. At that point, The CME stepped in and raised margins 5 times in 9 days.
  4. From 8/2/11 to 9/6/11, gold rose from roughly $1650 to $1900. Though the media and the know-nothing paid disinformation agents of The Cartel would have you believe that this was a speculative "bubble", the numbers tell a much different story. Over this time period, the large spec net long position declined by almost 25% from 247,175 to 184,371 and the small spec net long only increased by an insignificant 3,000 contracts, rising from 40,459 to 43,343.
  5. Again, this "panic" was caused by a cartel, The Gold Cartel. From 8/2/11 to 9/6/11, price rose $250 as the net short position of The Gold Cartel declined by a whopping 60,000 contracts, falling from 287,634 to 227,714. What happened to instigate this panic? The S&P downgrade of U.S. debt on 8/5/11.
  6. At that point, central bank intervention drove gold lower in the wee hours of 9/6/11 and the raid was on. The CME also conspired to raise margins in gold, too, thereby increasing the selling pressure.

All that history notwithstanding, it's clear to me that we are still in the early stages of this rally. With this history as our guide, PM prices will continue to ascend in two legs. This first leg is the ongoing expansion of large and small spec net long positions. These numbers will probably continue to grow until they begin to reach the levels attained in April and September of last year. The second leg will be another Cartel panic leg where prices rapidly surge to the upside. Since I think we are still in the middle stages of Leg #1 and, since global liquidity should only continue to surge, I just don't see a huge risk of a coordinated C/C/C smashdown at the current time.

That said, we can't be complacent, either. The charts are at a very significant juncture and silver lease rates are scary-low so a raid, particularly in silver, cannot be ruled out. Ignore the silver lease rate chart below at your peril. I don't think it's a direct indicator of an impending raid but even Stevie Wonder can see the obvious correlation between the last two forays into deeply negative territory and steep price selloffs.

paper_2-25lease.jpg

And now here are your charts. As you can see, we are now at the Battle Royale...the points at which gold and silver will either be forced to reverse or they will overcome this last line of resistance and charge higher. My point in dissecting all of the CoT data was to help you see why I feel that the Battles Royale are going to be won not lost and that, after a likely period of serious volatility over the next 5-7 trading days, gold and silver will begin accelerating higher. First, here are your gold charts showing the same view but from different angles.

paper_2-25goldd1_0.jpgpaper_2-25goldd2.jpg

paper_2-25goldw.jpg

And here are your silver charts. Note that silver is fighting two technical battles. There is the horizontal resistance from the recovery highs of late October (35.50) and there is also diagonal resistance from the down-sloping trendline connecting the highs of April and September (about $36). When silver is able to move through and close above both of these two lines, it will be off to the races for a while as there won't be much resistance until price reaches $40.

paper_2-25silvd_0.jpgpaper_2-25silvdw1.jpg

paper_2-25silvdw2.jpgpaper_2-25silvd2.jpg

In closing, let me just say that I sincerely hope you enjoyed reading this as much as I did writing it. It's not exactly how I intended to blow my Saturday but I felt it was imperative to get this information to you today so that you could study it before Monday. The next 5-7 trading days are very, very important and if you don't approach them with a plan, you will instead be prone to acting on your emotions and, as we all should know by now, letting your emotions get the best of you is about the only way you will lose fiat money trading gold and silver in this remarkable, continuing bull market.

Keep the faith. Be patient. Have courage. Believe in yourself. Prepare accordingly.

TF

403 Comments

SaratogaPrepper's picture

Gas Tax

Living in NY sux for so many reasons.

 
lairdwd's picture

my take

* The "dollar cartel" is going to make sure a DXY reversal is in the cards. Look for talks about inflation and higher gas prices as the tell. When the evening news is leading off with gasoline prices, you can bet that the dollar cartel will realize that they've pushed it too far to the downside trying to goose equity markets.  I fully expect it to go back to the 1.3 to 1.31 area. That where there was good "balance".

* Politically inspired margin hikes are in the cards, maybe not this week - as they have just started blaming they evil speculators

* Specs look like they are fully levered up for now and are keeping their powder dry. Clearly, with the light volume on Friday - and the EUR/USD a full 120 pips higher - PM's were doing nothing. Let's see how the specs react on a selloff. Do they come in closer to 1765 or 1750? How does silver react? 

babodonk's picture

LTRO

2nd LTRO comes out this week on wednesday so watch for the reaction. 1st LTRO caused a rally in EURUSD, DAX, and S&P. Expecting an uptake of 1 trillion. Gold price may briefly rally with some new buyers, but watch for the fakeout take-down. No need to trade the news. Position accordingly.

Mudsharkbytes's picture

I don't thank enough

I'm not the most 'thank you' kind of guy and generally I consider posts thanking "Turd" for the latest post to be nothing more than fluff or filler since they don't really bring anything to the table.

However I have to say the post at the top of this thread and the last several threads is and has been impressive, not only in content but in the sheer amount of time it must have taken to put them together.

Whoever "Turd" really is, he could easily be spending his time with his family or out having a good time or just kicking back instead of sharing his insights here with a bunch of online kling-ons (no disrespect intended).

So I just wanted to take the time to issue a rare, for me, thanks!

And a political cartoon just for the hell of it.

Mquz3.jpg

donnojackshit's picture

GSR Forum

Started a GSR thread in the "Everything Else" Forum.

For those wishing to add to the discussion on how to make profit on the arbitrage between Gold and silver, please add your comments.

Turd Ferguson's picture

If you get nervous this week,

MODERATOR

just remember this chart.

shapeimage_22.jpg

GoldMania3000's picture

Silver Doc Update on Raid on Friday

*Update: Please understand that in order to observe this blatant manipulation attempt on your own trading platform, you need to be using a 1 minute chart, showing volume as well as price candlesticks, not just a simple price chart like kitco. (For those wishing for an explanation of candlestick charts, BrotherJohn did an excellent job last night here discussing the cartel epic fail)
The reason this 102.5 million ounce paper raid will not appear on a simple price chart is the fact that the raid failed!  Someone (likely Asians) had a paper buy algo IN POSITION FOR THIS RAID, and instantly took the other side of the cartel's massive paper dump, preventing a waterfall sell-off and causing violent and unprecedented inter-minute price swings as the battle took place.  After the cartel had expended 102.5 million paper ounces of silver unsuccessfully, the large buyer then bid silver back up to near the day's highs as the paper selling onslaught subsided. 
Rather than debating whether or not this event actually occurred (it did), you should be focusing on WHO was the other party that prevented this raid from collapsing the price of silver, and WHY they were ready and willing to take the other side of a cartel dump of paper silver equal to the volume of 15% of annual world supply, or 3 years of US annual supply over the span of 7 minutes!

Big Rocks's picture

Great and timely post

Great post and many thanks for saving my Sunday.
Ihad plannned on spending my Sunday researching past open interest levels to see where we stood on that and here is Turd's post right on the money. I think we have a ways to run and the ee will test the longs resolve.
Been following harveys feb ag oi and the steady increase In the OI for the Feb. delivery is another tell that there are strong longs and strong physical demand. If that holds in the march del. We should be Looking good for breaking out to 40.

Nice post by goldmetalmania above.thanks

recaptureamerica's picture

I just was in montauk pt. L.I

I just was in montauk pt. L.I ny... Gas is 4.56 for regular. Hello bicycle!

cpnscarlet's picture

Very Sad

I am so disappointed with some of you on this thread who claim to be so savvy about TPTB and their ability to manipulate the masses. But then you fall right in line talking about "that kooky Santorum" and his views on birth control. You are parroting EXACTLY what the MSM wants you to - "Santorum = Conservative = Enemy of "freedom" = NUT. Every conservative is attacked eventually by the MSM. Every Obama flaw is covered up. The truth about Obama's ideology is whitewashed while the "less-than-mainstream" views of any Republican is over-amplified (and therefore, distorted). Goodgarden - you're somewhat new and maybe deserve a pass. Zilver - I have no desire to give you one.

Maybe this is one of the few times I feel like yelling "Troll!"

I don't see Santorum as a great friend of true Patriots, but he's no great enemy either like Mitt IMHO. At least he's a man of character, which is more than we can say about the incumbent at the very least. Maybe we should all remember with the Founders said about morality and character when it came to which men to have in Federal offices and how the Federal government would operate well.

/<rant off?/

Justin's picture

Thank you

for the time and effort put into this post, Turd.  Definitely one of the best I've read here recently since thinking about getting back into the metals trading now that my stacking quota is filled for a while. Definitely ready to see what this week holds regardless of which direction the metals drift. 

@ Dr. G, thoughts are with you and your little one. Hopefully she makes a full and speedy recovery.  

Alex's picture

@GoldMania3000

That Silver Doc story was discounted in this and prior threads.  Didn't happen.

Mudsharkbytes's picture

Vote for Santorum, Romney, Gingrich or Obama…

…and nothing, and I mean NOTHING will change.

If the last 30 years have proven anything, they prove that it doesn't matter who is elected president or who controls the house or the senate - it is, and will always be, business as usual with these clowns that pin "D" or "R" next to their name, and that business is never slanted towards protecting the rights of the average Joe, unless the you're talking about the average Joe banker.

It doesn't matter one fart what these guys say they're going to do before elected, once elected they continue to build on what the last president did.  Obama is a textbook example of a 180 president, but he is hardly unique.

I have a theory, which I promulgated about a month ago, that these guys once elected into the oval office are very quickly introduced to the REAL PTB, and basically given their orders, told what they're expected to do if they don't want a "Kennedy" on them and their family.

There has to be some sort of explanation for the dreary 'sameness' of the last several presidents.

cpnscarlet's picture

@Alex - And I made the

@Alex - And I made the point on Page 2 that to dismiss it totally at this point is also dangerous. I see TWO sets of data being presented - one is a data anomaly and the other is a plausible event. Again, the week's action (and or revelations) may help us discern the truth.

redwood's picture

Goldmania3000

The previous thread, esp. atlee's post as well as this link might help to explain why it can't happen.

http://www.wealthdaily.com/articles/silver-headed-to-50-an-ounce-in-2011/2989

cpnscarlet's picture

@Mudshark-  Call me crazy,

@Mudshark-  Call me crazy, but I actually think that under Newt, things could get worse. He is a great conservative "intellectual" which is similar IMHO to the way Wilson was a great "progressive" intellectual. With no good grasp on "boots on the ground" reality, intellectuals of any ilk can screw up royally. At least Obama had face time on the streets in Chicago for a little while. Not that that excuses his communist sympathies and collectivist ideology. 

zilverreiger's picture

santorum is a fucking cook

santorum is a fucking cook who doesnt realize yet hes being milked by his own party and the media.

the only right position is women should decide themselves what they want in their wombs.

ranger7's picture

Goodgarden, please read for comprehension

In your post this morning, you personalized the "Catholic contraception" fracas by writing "If I go to a hospital ...".  Apparently you don't understand the subject was the Catholic hospital's employee insurance plans.  It doesn't have anything to do with you or any other patient at that hospital. 

kaiserwongze's picture

Message to Turd

Hey Turd, 

Do you subscribe to Andrew Maguire's trading service?  If not, many of your questions about the silver lease rates and all the OI declines can be answered.

Since the whole MF global thing, funds who would normally go through the COMEX to purchase bullion and take delivery are no longer allowed to trade on the COMEX.  Instead they are now going to the spot market.

RuNuts's picture

Atlee's post of

Atlee's post of ezplanation.

http://www.tfmetalsreport.com/comment/134091#comment-134091

atlee wrote:
It distresses me greatly that we have not got the majority of viewers, public, players etc past the knowledge that intervention occurs in futures markets not the spot. Net fucking dania is spot and it is a free service. They even tell you themselves their volume numbers are not accurate or representative of what is really happening.

To entertain the idea that 100 million ozs were dropped in the spot (cash) market ( that is real silver) by the borg in a market were a big portion of our bullish argument is tight supplies, is childish and mind boggling. It only serves to prove that people will believe what they want to be true regardless of the evidence. They would use those supplies to deliver against futures if they had them to lose in an explosive mkt not waste them in the spot to curb a price rise. Man it is truly laughable and embarrassing.

You must also know that whatever happens in the cash market is arbitraged against futures or vise versa. So if one moves out of line with the other, it presents a low risk trade to push it back by taking opposite sides in each mkt. Maybe you should google arbitrage if you don't understand. So it would not happen in one and not the other.

Santa&#039;s Elf's picture

Call me cynical....

You can call me cynical, but I struggle to find any merit in actually debating/discussing political candidates and their views on birth control, etc.  Truth is, if the economy is at the forefront of everyone's mind, political posturing should be the last thing worth discussing.  Hence, the cynic in me rears its ugly head....With exception of maybe Ron Paul, it's not going to make the least bit of difference who's in the White House come November.  I appreciate the fact that Ron Paul is proclaiming one of the few messages worth hearing amidst all of this noise, but I think it's likely he has no shot at the Republican nomination.  Truth is, I'm not even sure he could fix the economy at this point--it's simply too damaged to be restored IMHO.  Once our economy fails, and it will, all topics relating to birth control and the like will be rendered supremely irrelevant.  Not to sound overly dramatic, but at that point, the only thing that will matter is simply finding a way to survive and adapt to a forever changed world.

Edit: @ mudsharkbytes...had I read your post before writing my own, I might have saved myself the time.  Well said.

Xeno's picture

Gas Tax

Wow, that gas price and gas tax graphic from Be Prepared was astounding. Kind of makes you want to redefine what a "Red" and a "Blue" State is.

http://www.tfmetalsreport.com/comment/134122#comment-134122

cpnscarlet's picture

@zilverreiger- I believe the

@zilverreiger- I believe the word is "kook" since no one really cares about his culinary capabilities.

Surprised you'd make that mistake since I am under the distinct impression that you're somewhat intimate with that territory. BAHD-A-BING...FAHGETABOUTIT!

atlee's picture

goldmania3000

I hate to tell you this but net dania chart is the cash market. There is no paper traded in the cash market. It is the real deal man. real troy ozs of real silver. No leverage. It says right in the upper left hand side of the chart, SPOT SILVER. 

SPOT EQUALS CASH MARKET. NO PAPER.

You can't fix stupid and Brother John and Silver doctors are glaring examples of that IMO.

I bet they do not even know how many grams are in a troy oz.

Magpie's picture

It's amusing

any of you think elections even matter.

http://www.blackboxvoting.org/

cpnscarlet's picture

@atlee - so are you willing

@atlee - so are you willing to say that the event in the spot market was "real", but not related to an attempt to naked short?

redwood's picture

magpie

I think you might have meant to say that others even think elections matter....not this crowd.smiley

Xeno's picture

Up Or Down Week?

First, thanks to "H" for the post.

We might not know if the metals will move up or down this week but we can see who is rooting for which direction. Maybe there will be some correlation?

From the Jan. 31 thread, this post by H;

http://www.tfmetalsreport.com/comment/123359#comment-123359 

Leads to the sheet here;

https://docs.google.com/spreadsheet/ccc?key=0AkbhQfELraBedEphbGVKS2xGVm1IbWVLaGlkRzRqanc

A Battle Royal to be sure.

GLTA

cpnscarlet's picture

Oh get this!

At Jesse's cafe - Buffet gets punk'd (by his own people?) -

http://jessescrossroadscafe.blogspot.com/

zilverreiger's picture

@cpnscarlet

be glad I even address you in subhuman language, feeling superior already?

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