Turditulation
Hey, no one can accuse me of going down without a fight.
I know that there are people out there that think that all "paper" is going to zero. Maybe it is. What the heck do I know? However, can we all agree that, for gold and silver to go to zero, demand for the physical metal has to go to zero, as well? As gold drops through round-number levels, the price-to-zero argument implies that demand must also be dropping because, as well all learned in Econ 101, price is a simple function of supply vs demand. In the end for price to continue declining, demand must remain low or fall even further until it reaches a point where buyers outnumber sellers and price rebounds.
I mention this for two reasons:
- If you truly believe that gold is headed to 1400 or 1200 or 900, then you must also believe that there will not be much demand for physical metal at 1500 or 1300 or 1000. Only an absence of demand can drive price that low.
- If, instead, you believe that global demand for physical metal continues, regardless of price, then you must believe (as do I) that physical demand will, eventually, drive the paper price back higher.
There still seem to be quite a few folks who question and/or don't understand the "massive physical orders below $1600" stuff. Let me state this again for clarity: We're not talking about the Comex here. The "massive physical orders" are in London and are getting filled there, not New York. This is how it has always been and this is how it remains. That the price of paper gold in NY affects the purchase price of physical metal in London is the "futures tail wagging the spot dog" that Ned Naylor-Leyland described last summer.
And herein lies the conundrum for The Bullion Banking Cartel. On the Comex, new spec and managed money is emerging daily to short the gold and silver markets. This money is primarily run by HFT WOPRs which are keying off the lousy charts and other technicals. You must also remember that, post-MFG, there 's virtually no one left in the pit to take the other side of the trade so, when the self-fulfilling short algos pile in, the fall in paper price accelerates. Again, though, Econ 101 teaches us that a falling price almost always leads to greater demand and, in this case, it almost certainly is true.
So, paper price is being driven lower by the spec shorts in New York while Cartel metal inventories are being drained by physical orders in London.
If paper price continues lower, the physical depletion in London accelerates and never forget that every ounce taken out of "the system" decreases the "leveragability" of The Cartel by 100 ounces.
Not only MUST the Cartel adjust their net short position to stem the paper drop, the depletion in physical will greatly impact their ability to add shorts back in when the inevitable rebound occurs. What we are left with is this: The Cartels MUST continue to cover shorts and add longs here in order to halt the price trend which is undoubtedly draining their vaults. Additionally, I suspect that they are losing so much physical metal out the back door that their days of outright manipulation and control of price are ending.
And this short covering and long addition is EXACTLY what we are seeing in the CoT. The latest report, basis last Tuesday, was incredibly bullish and keep in mind...it was dated LAST TUESDAY! Since then, price has fallen another $40 in gold and $1.10 in silver (if you include this morning), so we can safely assume that the CoT structure has only improved. For perspective, consider these stats:
CoT Date Cartel gold net short ratio Cartel total gold longs EE silver net short ratio EE total silver longs
5/8/12 1.94:1 161,037 1.39:1 45,482
2/28/12 2.69:1 145,061 2.32:1 33,802
12/27/11 1.97:1 162,522 1.34:1 41,224
8/30/11 2.23:1 176476 2.41:1 31,944
4/5/11 2.64:1 157327 2.69:1 33,413
Frankly, there's so much information in the little table above that I don't know where to start. Let's simply point out this: For silver, since the EE peak and near signal failure of April 2011, the net short ratio has fallen from 2.69:1 to 1.39:1. This is remarkable and clearly indicative of the trend by the EE to exit their long-held net short position. Ultimately the question is, will they add shorts again on the next rebound, similar to the period of 12/27/11 to 2/28/12? Who knows but with ongoing investigations, lawsuits, trading losses and physical depletion, it would certainly seem to behoove JPM et al to NOT try it again.
Just a little more CoT perspective, from Unlce Ted. The cumulative gold net short position is just 151,400 contracts a/o last Tuesday. This is the lowest since early 2009 when gold was near $900. In silver, the EE net short position is just 17,900 contracts. The only time in the past decade when the EE net short position was at this bullish of an extreme was on the 12/27/11 reporting date noted above. A few more nuggets for Uncle Ted:
- In gold, the 4 main bullion banks covered 12,000 contracts last week alone and their net short position is now just barely above 100,000 contracts. This is the lowest it has been since 2007 and sub-$700 gold.
- Since the latest top on 2/28/12, the Cartel has bought back 100,000 net contracts or 10,000,000 ounces in notional terms. That's $16B in gold!!
- JPM's net silver short position is now around 12,000 contracts and likely lower, given the action of late last week. This means they've essentially cut their own net short position in half since late February.
- The EE having returned their net short position to 12/27 levels means that they sold the equivalent of 150,000,000 ounces on the way up between 12/27 and 2/28 and now they have bought back the entire 150,000,000 ounces on the way down.
So, anyway, what's the point? It's this: Yes, the "price" of gold and silver might go lower still. However, stable/increasing demand at these lower prices is serving to drain the vaults of The Cartels. They are rapidly covering shorts and adding longs in an attempt to stem this tide of declining price and inventory. Eventually, a massive short squeeze will happen. The bottom will be in and price will stabilize at a level higher than where we are currently. The key will then be: What happens next?
- The Cartels resume shorting into the rally and begin to rebuild a massive net short position.
- The Gold Cartel decreases or even abandons their price-capping efforts permanently. In silver, The EE may even go flat or net long. Ted's "raptors" are already net long 16,800 contracts, by the way.
From where will this bottom materialize. Of course, it's impossible to say for sure but I believe we are very, very close. In the end, though, it hardly matters. Just keep stacking. The next phase of this bull market in metal is going to be breathtaking. Be ready.
Have a great day! TF
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Comments
By the way-the next move up
If you want to discuss truly discuss paper then our currency here in the US is truly paper.. Its a FRN, right--not even backed by the full faith credit of the US (which has as much full faith and credit as Calif or IL). Its a FRN--you know, an orgaanization outside the US Govt that has a wonderful balance sheet full of---tata--Toxic securities.
The least of our problems is going to be the value of our PM.
Think personal safety when a huge part of population cannot get food, water or energy as they have for decades. think about everything in a world gone crazy. I am hoping my silver will be barterable.
Jim Bianco
Wish I'd been able to explain it so well yesterday to my father. I was trying to explain the part about the Fed getting banks to buy the short-term while they buy the long-term and don't reflect an increase in their balance sheet. Thanks TF!
@mje173 ... Would you like a nice game of chess ?
I saw a well known commodity trader talking about silver. They said they tried over two hundred algos to trade silver. The ONLY one that worked (at that time) was to just hold it. Not sure if that strategy still works today.
He needn't have bothered ... WOPR came to the same conclusion some 30 years ago.
Lets clear up a few things...
There is way too much speculation going on. How about a bit of certainty?
Why is this certainty kcap? And how do you know?
Because having studied logic for many years, connecting the dots is kind of a hobby of mine.
Here goes:
JPM is toast. They know it, we intrinsically know it. The world will soon know it.
Now... time to back into that.
JPM announced the derivative bust. Yes. Check. We know that recently JPM has announced through a "read in between the lines" statement that the days of making money in the metals markets are all but evaporated. This is because their 100:1 ratio of leverage has blown up due to severe physical metal drain. Oh well. Don't shed any tears. They made billions. But...their recent announcement says this:
They are done manipulating the metals. Their derivatives will soon blow up completely. They are neutralizing their position now and no matter how low metals go right now in the next month or two, WHO CARES! Take a leave of absence from the metals markets. The day this turns, or closely thereafter, a $10++ day will happen in silver and then voila....with hindsight, it will all make sense. So, try and make sense of it now. The metals will drift lower. The paper games from the JPM standpoint are over, as is their derivatives business. The Spec Longs are who are taking this market lower now. When they are either 1) completely fleeced or 2) wake up to the game, the ride down is over. This day is right around the corner in the grand scheme of things. 1 month, 2 months....so what! $20 silver....who cares? Ask yourself this.....if you never got involved with metals and found yourself just now watching this sentiment and were worried about the market, would you be buying right now??? The honest answer is NO WAY. Who buys a sharply downward trend with negative morale and sentiment everywhere you look coming into a new market? Almost no one. So, therefore, you wouldn't catch on to the metals to go long right now until AFTER the 1-2 day explosive reversal that is coming.
Kcap...how can you be so sure of an explosive reversal?
Because of the physical drain. Once the turn happens, there is NO selling pressure anywhere to be found. Sinclair's vacuum will be proven and in my opinion, will be epic. It will blaze forward perhaps by as much as $20. Therefore, your buy might not have happened until after a lock limit offerless UP move putting silver near $45 or $50. So, if you were one of the lucky ones to buy silver when it was $40, $38, $36, etc, then you bought when sentiment was still good, manipulation wasn't in full force and your understanding of the situation was just beginning....which brings you to now. And "now", after riding this manipulated beast, you now have an edge up on 99.9% of people who are about to enter this market unbeknownst to them at this time. And you will have every advantage of this experience to guide you going forward. Such as selling near $82, re-buying near $55/$56 and then doing it all over again at $123 or so...
So....good for you. You've already won. You just won't know it until hindsight proves you correct. But guess what? Kcap is here to tell you early......you are correct.
Best,
Kcap
VtC thnx for the chart
tx
Alf Field
Where does Alf Field stand now with gold? Last I heard (end of April) he was still expecting 1612 to be the low.
Now at 1555 how does that change his predictions? anybody know or heard?
ELECTION RESULTS IN NOVEMBER
There is an insightful quote in Jesse's site today: "We are a people in need of moral giants but served, alas, by what we have deserved".
"Are we there YET"
The year was 2005 and each day I started by going to "Kitco" and asking "is today the day" and I would answer and say "no, Jim not today". In 2005 I went in 100%. In 2008 I went in and mortgaged my house and went in 100% more. Both were very good for me. But sometimes you go to sites and they "offer you the moon --silver gold to the moon." For those sites I have had to turn them off and just wait. I would tell everyone to buy and then silver and gold would fizzle.
So, now I shut up when someone needs information on investments. I tell them if they know what I am doing, to DYODD . No more advice, I want no one to know I even have silver. The days are wicked and someday, like your child in the backseat of the car crying " Are WE THERE YET"
Yes, someday we will be there. It won't be because of a graph did it or fundamentals won out, it will be because "WE ARE THERE" we will have made it.
PS. Hopefully in my lifetime. And that's my two cents for today.
Re: Heads up Asses
TF, I think it is invaluable to see and hear contrarian opinions. Seeing these things first hand not only gives us a glimpse at how others think, it constantly reinforces our own positions (or may, in very rare instances, wind up actually broadening our horizons to things we hadn’t considered before).
I would imagine some folks in Turdville might find watching these things tedious and too unpleasant to suffer through, but as probably one of the less-informed Turdites around, I need all the exposure I can get both to the good and the bad. Having a very clear understanding of how the opposing side thinks is the only way I feel I can make informed, correct decisions. It's easy to sit back and digest things you agree with; how you handle contrarian viewpoints is what truly defines a person and the strength of his convictions.
The video you posted above and the one from the Fair and Balanced thread were both eye-opening. When you come across this stuff, I, for one, hope you will continue to share it. Most of the MSM and contrarian exposure I am exposed to (and then often vomit from) is written; I find seeing this kind of thing via video - seeing others in action - adds a whole new dimension. Thanks for sharing.
chart
Since the chart covers only up to Dec 29, 2011, I should add that today, the lower blue line is at $1519 (2006 like correction) and the lower light blue line at $1358 (still broken in a 2008 like correction).
Victor
@Turd, Bianco wishes we had more debt growth in the U.S.
Loved his lamenting, at 3:19 of the second video, that we can't get any "debt growth". How deep into the finance world's echo chamber do you have to be to actually lament that the U.S. isn't creating more debt?!?
I wish he could be surrounded by recent college graduates all armed with baseball bats.
OPen Interest
Its really simple interpreting OI:
http://www.investopedia.com/articles/technical/02/110602.asp#axzz1utJXjsNi
Since OI has been rising on down days new shorts are entering and pounding the market lower.
Obama: jpmorgan is one of the best managed banks
http://abcnews.go.com/blogs/politics/2012/05/obama-jpmorgan-is-one-of-th...
Ok..so we're now comparing levels of corruption..nice!
3rd person
I love listening to people speak of themselves in the 3rd person. It's oddly fascinating for some reason.
I hope Kcap is right and all of us are awake when silver initially screams into the $40's in London one of these days.
NOISE
All this chat about price is NOISE.
We all know silver will get to 500$/oz. and more, which is its price in 1980 inflated dollars (Shadowstats).
We all know gold will get to 10 000$/oz.
Everything else is noise.
If you are trying to time the market, you are playing with fire.
Buy gold and silver not to get rich, but as an insurance against whatever can go wrong.
Each day the "price" is going down, just say "Amen" and enjoy another normal day of your normal life.
@Victor re Weak Paper Longs
Every point made may well be true, but each point is also equally true of weak shorts...hence the expectation of capitulation by them at some stage, aka a short squeeze. With the added bonus of stress inducing a demand for conversion of unallocated to allocated accounts. Ouch. I plan to be long then, that is why I am averaging down.
Nice long term chart, it appears to me to support the view that over time the weak hands are the shorts. Perhaps the experience of 2008 will be repeated, which appeared to be capitulation first by paper longs, but may have been bullion banks selling excessive paper, (I am going to have to track down the CFTC testimony etc, not enough time in each day), and then a short squeeze as the paper sellers capitulated.
I think TF's expectations are reasonable, especially given the providers of unallocated accounts are short physical gold.
Bets?
Obama - “This is the best, or one of the best-managed banks. You could have a bank that isn’t as strong, isn’t as profitable making those same bets and we might have had to step in,”
Surely he meant "hedges", not "bets"
First Class action related to JPM CIO
http://shareholdersfoundation.com/case/jpmorgan-chase-co-nysejpm-investo...
London Calling
I had always liked that song, but until I really read the lyrics just now, I had never known what a perfect prepping song that is.
Someone is Getting Cheap Silver!
And it got worse...
This afternoon, especially with Victor back in, all opinions are now on "12".
@Grigio
Grigio said ... Surely he meant "hedges", not "bets"
GREAT catch there, sir !!!
... I hadn't noticed Obama showing his Freudian Slip it until you pointed it out ... and stop calling me Shirley. 
To Battle Beagle
And guess what?
If you really look at that chart, price has always PRECEDED the accumulation. So, if that's the case, wouldn't price need to be $5-10 OVER the $45-50 price you speak of in order to be a leading indicator to the accum/dist line?
I believe strongly so.
Therefore, it is just one more very strong argument to the vacuum that is building. For those who deny, that's fine. Sit back and watch. No one....and believe me when I say no one at this point due to the sentiment of the sector, is forcing you to buy.
When does she pop? Well, that's the big question. Some of you won't like this because of the wait, but I say August, but it could be as early as early July....not sooner due to the timeline for the derivatives implosion. By this time, base metals and precious metals stocks will be drained, siphoned off to our Eastern friends.
Kcap
Gold Sales by European countries in financial trouble
I heard a commentator on Kudlow tonight say gold price pressure was in part due to European countries in financial trouble selling their gold reserves. This would seem logical but for Turd, how much do they have for sell and with their increase in supply of physical for sale, could this be a reason for price falling to the mid $1500 where there is supposed to be serious buy orders?
NOT TRUE !
Anybody who bought over $40 Silver, will never touch it again!
************
I bought at $40, paid a $5 premium, plus another $1 for air-tites. Total $46 per oz. I bought a lot of it.
I first started buying at $10.70 and have been purchasing all the way up and down. I've had 1/3 of my silver stolen by folks who I thought were my friends. They found my stash and hauled it away.
I am not going to give up!!!!!
Unfortunately, right now all my money is going into alfalfa that is not GMO. With Round Up Ready Alfalfa about to hit the market, I can not take the chance. I've got to stack tons and tons of alfalfa.
Bummer for me. I really would love to be buying right now!
Unwinnowed truth
Truths that should not be winnowed by the grinder:
You must either agree or disagree that all legitimate interests are in harmony.
If you agree, you believe progress lies in freedom.
If you disagree, you believe progress lies in coercion.
If you disagree, you are evil.
If you agree, you are good.
Don't push the button in the Keynesian Experiment. Don't be evil.
My thanks to Turd, IS7, Pining, and Bastiat (c1850), that it might be succinctly put.
My opinion on how things are shaking out here...
Since the silver smackdown in May 2011 and later in the year having gold succumb to the same treatment, I started to get the feeling that the metals have simply attracted enough attention and that the forces fighting for control said, "Enough is enough."
Any entity that has the capability to enforce zero interest rates through the never-ending purchase of treasuries of all kinds has the ability to suppress paper prices indefinitely -- that is, until the entire charade is over.
When that happens, we won't have any idea what the "paper price" of metal is, in my opinion. The paper price is a fiction. It also doesn't matter how low the metal goes. I personally view the price of the metal as the number of fiat dollars in existence divided by the sovereign store of metal at a point in time (a "monetizing the metal" view). Now, I personally don't believe the number of ounces reported by the government and I actually believe that number to be far less than reported -- which only makes the price of metal that much greater.
Therefore, if paper price is what we have to go on, metal is cheap regardless of what "they" wind up doing. Accumulation at these prices (and lower) is wise, but with one important caveat: The problem is that we need to eat... and for that, we need fiat. Therefore, going all-in on metal a few months/years ago simply isn't very wise, as you would -- at some point -- have to liquidate a portion of it for fiat in order to eat (perhaps at a loss).
Thus, this preparation we all talk about here needs to be undertaken with EVEN GREATER CARE. I'm thinking they'll keep this entire thing suppressed right until the very end. Yes, people are waking up, but I suspect that they managed to cover the problem up quickly enough before enough people really caught wind of what is going on. Sure, some folks know and have awakened from their slumber, but the vast majority haven't.
Thus, the fiction continues... the charade resumes... the metals get pummelled back to where TPTB believe they belong, which may indeed be much lower than it is at this time.
That is, until nobody believes the charade any longer, of course. It all works... until it DOESN'T.
Thanks for reading. Thoughts -- even contrary ones -- are welcome. This is how I learn.
RE: Anybody who bought over $40 Silver
Anybody who bought over $40 Silver, will never touch it again!
I bought 100 ounces at $44. I bought almost all the way up, and I've bought all the way down to where we are today. The only reason I've stopped buying silver in the last month is storage and transportation concerns, which is why I've now switched exclusively to gold.
You need to understand what "strong hands" really means.
All signs point to silver going lower...
and I'll be buying 5 to 10 oz a week the whole way down. There is nothing to do at this point other than stack. Who knows where the bottom is, but I bet it is gonna be soon. I'm not a weak hand that can be muscled out. I have .900 that I've paid face value for. I could take a nice tidy profit right now, but I believe in the fundamentals. What other commodity do know that is trading at below its 1980's high? The major industrial use for silver at that time was for film too! Needless to say I think there is a lot more industrial use and investment demand in the present time. I'm in the camp that silver is going to $125 and oz @ the very least. I have the fortitude and strength of will to hold out because it's not a matter of if but when.
I have to say that SLW is looking very attractive @ $24. The one thing that I regret not buying because I bought a 10 oz bar instead is the UVYX ETF. It was @ $12.50 about 10 days ago and is now at $16.56. I'm definitely going to buy some because in 2008 it hit around $250. I think its going to head much higher and I think there will be a lot more volatility because of Europe and other weak western economies.
Getting back to the main point of my rant what do you think the Chinese are doing? The Chinese and other eastern countries are buying more gold and silver than ever. Buy when every one is selling and sell when everyone is buying. Its that simple.
Last thing that I got to say in my rant is that like my role model, the good Dr. Paul, I am going to refocus my strategy and probably double down. Dr. Paul is going to save money on Ads in primary states and focus his resources on obtaining delegates and state leadership positions which he has had success. I will not try to make a quick buck right now on options and I will focus on stacking physical. The media and establishment are going to have a rude awakening come the RNC in August.
"I hope all supporters of Liberty will remain deeply involved - become delegates, win office, and take leadership positions. I will be right there with you. In the coming days, my campaign leadership will lay out to you our delegate strategy and what you can do to help, so please stay tuned."
Ron Paul
VERY long article
But well worth your time to read and consider.
http://www.zerohedge.com/news/must-read-another-perspective