Buy The Dip & Buy The Rally

Though Wednesday's are typically down days, the charts suggest that you should keep an eye on things.

In the larger picture, nothing much has changed. The pullback, that began on 10/4 with the BLSBS report for September, concluded with the spec washout lows of 11/2, following the release of the October BLSBS. Both gold and silver retraced roughly 50% of their moves from mid-August and have rebalanced some of the spec long vs Cartel short positions.

So, where do we go from here? Both metals could simply continue to trade sideways for a while, in a tight range between 1705 and 1730 in gold and 31.60 and 32.60 in silver. Maybe they will? There is still hope, however, for a breakout. Though there are clearly well-defined caps on the charts, pressure continues to mount for the UPside breakout I've been expecting/hoping to see. My London contacts continue to report "robust" physical demand at each and every fix. Let's see if this doesn't soon bleed over into the paper markets.

The main fundamental story I'd like to emphasize today is this: http://www.zerohedge.com/news/2012-11-13/us-budget-deficit-soars-october-government-spends-over-300-billion-one-month. And here are the two charts that accompanied the story at ZH:

As Egon Spengler would say, "this is extraordinarily bad". The first chart shows total U.S. government spending for each October since the turn of the century. Note that the total spending outlay for 10/12 was nearly as high as the disastrous level seen during The Great Financial Crisis in 2008.

Next, look at the chart on the right. This chart shows the total monthly deficit for each October since 2000. Of course, deficit equals spending minus tax revenues. At $120,000,000,000, the shortfall/deficit for October 2012 is a remarkable 22% higher than October 2011. Since October is the first month of fiscal 2013 for the U.S. government, it is safe to assume that the total deficit for the fiscal year will greatly exceed the deficit for 2011, likely coming in somewhere between 1.3 and 1.5 TRILLION DOLLARS.

Again, let me ask you, from where will the funding of this shortfall come? The republocrats would have you believe that we are borrowing it from China. That's sounds cute and handy and it has an easy-to-understand, populist tone. The problem is, like most republocrat statements, it's not true. ( http://www.bloomberg.com/news/2012-09-11/china-s-u-s-debt-holdings-aren-t-threat-pentagon-says.html)

So, again, I ask you, from where will this money come? If you answered "QE∞", you're finally beginning to catch on. All of the nonsense, the SPIN and the BS that makes QE∞ out to be some type of "economic stimulus" program must be ignored. Quantitative Easing is simply a backdoor system by which The Fed directly funds the over-spending of the U.S. government. The Fed buys crapola off of the balance sheets of the Primary Dealers and these same dealers turn around and use these funds to support/buy treasuries at auction. The bond market continues to magically levitate, interest rates stay low and the U.S. government continues along its merry, Keynesian path.

Eventually, this will all come crashing down in an extraordinarily painful, inflationary collapse. Until then, because each new dollar printed is so destructive to the value of each and every existing dollar, you must continue to accumulate physical precious metal. Consistently exchanging your devaluing fiat for tangible, real assets is the only personal financial protection that you have against this madness.

Buy some more today.

TF

212 Comments

Motley Fool's picture

@Xty

I have migrated this discussion to your suggested forum. 

Unholy Dalliance's picture

Silver lease rates

Here is a great article which explains in very simple language why negative lease rates are fraudulent.

http://beforeitsnews.com/gold-and-precious-metals/2012/09/the-fraud-of-negative-goldsilver-lease-rates-2450288.html

It seems the person posting here calling him/herself S Roche is attempting, allegedly to mislead by confusing the daily fixes (whereby members of LBMA 'fix' the price of silver by matching buyers with sellers). This is not the same as the forward lease rates which are the rates at which owners of metal will lease (rent) that metal out for purposes of COLLATERAL. That was the original purpose of lease rates. Armed with your leased collateral you could then go to the Discount Houses and use said COLLATERAL against an existing loan or a future loan. It was a bit like 'borrowing' insurance upon the debt. The lease rate would be a fraction of the interest rate on the loan and would be similar to an insurance premium to indemnify the borrower.

It is interesting that the author of the article above states that negative lease rates are indicative (indicate) the presence of manipulation in the market where they occur i.e. SILVER. Silver is not available for buy orders in size. There is very limited supply so negative lease rates do not make any sense.

Why is S. Roche pretending there is no problem? Why don't you ask him all this, rather than hat-tip him. Troll.

SIlverbee's picture

Will there be a

1% cap?

The Watchman's picture

Blythe is NOT HAPPY

Happy_Monkey.jpg

Live New York Silver Chart [ Kitco Inc. ]

babaganoush2307's picture

These monkey pictures everyone has been posting...

...have been crackin my ass up yes

robov's picture

Correction Re Sprott PSLV

Yesterday Nick Laird had indicated that Sprotts website indicated that he had had delivery of a good chuck of the silver, That was corrected today on Ed Steers daily to read.

Bron Suchecki over at The Perth Mint sent me an e-mail regarding the quick deposits of silver into Sprott's Physical Silver Trust...PSLV...that I mentioned in this space yesterday.  This is what he had to say...

"Hi Ed, I noted your comment in today's piece that the Sprott deliveries were fast. FYI, the reported figures reflect when Sprott bought the metal and not when it was delivered.

The reasoning is that for the fund to accurately calculate its daily Net Asset Value, so investors know what its fair value is, it has to show its true financial position. The figure are therefore reported on an accrual accounting basis, not a cash (or metal) flow basis."  Regards - Bron [That sounds entirely plausible to me. - Ed]

So one would think as he goes looking for that actual physical in the market it should help the upside price of silver.

vonburpenstein's picture

Wha, wha happened?

crazylookingmonkey.jpg

tmosley's picture

Let's say the normal amount

Let's say the normal amount of the deficit as a proportion of GDP is represented by this twinkie.  If this trend continues, by the end of fiscal year 2013, it will be a twinkie 35 feet long weighing approximately 600 pounds.

You ain't seen nothin' yet.  FY 2014:

tobydaniel's picture

@Cleburne61

Yeah, not going to happen with my pastor. He already thinks Im nuts for thinking critically. Its a very GMO friendly and Dave Ramsey loving church. Not too much critical thinking goes on there. But then again, where would I go to church that is any different? San Diego has a ton of churches but I have found only one that at least teaches contextually. However, it would be nice to find some fellowship with people who are awake. It gets a bit depressing when all I hear about is sports and tasty GMO restaurants and nothing about things that take critical thinking. 

Thats why I started my blog: www.faithfinancefitness.com

I just launched it yesterday but I hope to inform the masses with this.

S Roche's picture

@Unholy Dalliance

Once more for....

Cessation of SIFO 11:00 Means with effect from 5th November 2012

Following consultation with the LBMA forward Market Makers, and more generally with other market participants, the LBMA Management Committee has agreed that after 2nd November 2012, the forward Market Makers will cease making contributions of their mid-price silver forward rates to allow the calculation of the SIFO means on the Reuters system each day. The reason for the withdrawal of the dataset was that unlike GOFO these rates were indicative rates only and therefore not dealable rates between forward Market Makers. In addition, since January 2011, the LBMA forward Market Makers have jointly contributed essentially the same data (but covering an extended range of maturities – from spot to 3 years) to the LBMA’s daily forward curve for silver. This forward curve can be obtained from a variety of data vendors (Thomson Reuters, Bloomberg and others). If you are interested in receiving this dataset please refer to the Silver Forward curve page on the LBMA website for further details.

http://www.lbma.org.uk/pages/index.cfm?page_id=46&title=current_statistics

If you go to the linked page go half-way down to where the above quote starts...LBMA have stopped issuing SIFO and Kitco, being Kitco, have not bothered to obtain the Lease Rates (LIBOR minus SIFO) from the other commercial data suppliers (Thompson Reuters or Bloomberg etc)

Now, if you think the above makes me a Troll you are going to love this...Jeff Nielson is completely wrong in that article you linked and I have addressed that before here at length...for now here is a quick link to someone who does understand Lease Rates: http://goldchat.blogspot.com.au/2010/07/understanding-negative-lease-rates.html

Maybe with this assistance we are now good.

silverwood's picture

Silver is just

a lump of metal. It is the effin algo managers that are the crack heads!

satchelcharge's picture

Fairly new to stacking

I've been stacking since August. I have recently ramped up my purchases a bit. Yesterday I saw that massive dive and climb and somehow thought "this is gonna be good, I gotta go buy some silver". I was excited I got some around the lows last week. At the LCS yesterday an guy in front of me was buying about 6 lbs of silver. I bought my modest amount and left. Had some cool synchronicity numbers in the process. My purchase was $111.14, then when I got into my car to leave it was 4:44. Nothing like receiving instant reassurance of doing the right thing.

I was going to pay my taxes early this year but I thought, "Well, Uncle Sam's just going to mismanage my money anyways, and they'll get enough fake money from the Fed to fead them for years with Qeternity. I'll just wait until the last minute, keep that money as physical silver, and hopefully I'll magically have enough cash to send them instead." Keep stackin, I am.

babaganoush2307's picture

Up further, bleed out, or waterfall? Hmmmm......

Turd Ferguson's picture

I'm with Roche on this one

MODERATOR

I'm not sure anymore if lease rates mean much of anything. They're partly based on LIBOR, which is bullshit anyway.

Spikes in lease rates in the past can be correlated to periods of extreme physical tightness...Brown's Bottom back in 1999 for example. Drops in lease rates can somewhat seem to be related to speculative paper buying peaks but that connection seems tenuous at best.

This is something that has been one my mind quite a bit but I simply can't seem to come to any conclusions on way or the other. What is clear, though, is that negative lease rates, when considered independently and away from all other factors, don't really mean much at all.

Response to: @Unholy Dalliance
Turd Ferguson's picture

And here you go...

MODERATOR

And here you go...

http://www.zerohedge.com/news/2012-11-14/complication-pro-us-egypt-gets-involved-says-will-no-longer-tolerate-israels-gaza-at

Is this dead guy, Al-Jaabari, your 21st century Arch Duke Ferdinand???

Turd Ferguson's picture

Did someone say Franz Ferdinand?

MODERATOR
القراع عصفور's picture

ty XTY, good riddance

i was getting bored slaying the little pissant trolls.  we are getting some big trolls now. 

i say, bring it Blythe.  doo da, doo da.

Colonel Angus's picture

Oh shit, Turd.

21st Century Archduke Franz Ferdinand. I pray that isn't the case. The fifth little Angus is on the way, and I'd much rather have peace and harmony than having to unload the ARs and the AKs often. We're all stacked up, prepped, have sources of renewable food and water, but I'd rather be able to watch the NFL and the US men's national team soccer matches without having to worry about rationing and the zombie apocalypse.

Plus, I don't want to think about the huge orgasm that Krugman is having right about now.

babaganoush2307's picture

@ Dryocopus P.

Da doo da day! devil

القراع عصفور's picture

suck on that Blythe

i ain't scared no more.

Turd Ferguson's picture

Watch it.

MODERATOR

Be polite to Xty. She's been here since the beginning. You've been here one week.

Turd Ferguson's picture

Must. Hold. 1730.

MODERATOR

Must.

Protect.

Stops.

babaganoush2307's picture

Over the years,

I have grown very cautious of security on days like these...waiting for a fallout.  Thank god for stacking

Turd Ferguson's picture

Must. Hold. Silver. Back.

MODERATOR

Cannot.

Allow.

It.

Any.

Higher.

Revelation's picture

How About a Fort Knox of Your Own?

GOLD-articleLarge.jpg

THE last time the world as we knew it seemed likely to end, Dan Tapiero thought about buying gold.
He didn’t tell his wife; they didn’t talk about things like that. In fact he didn’t tell anyone for a while. He just tried to figure out how he was going to buy physical gold as the financial markets collapsed at the end of 2008.
 
Mining stocks were not for him, and neither was buying gold on the futures exchange. That was financial gold, meaning it existed on account statements but was not tangible. He wanted the real thing, gold in the form of bullion that he could hold in his palms, smudge with his thumbs.
 
But Mr. Tapiero, a portfolio manager at several hedge funds over the last two decades, realized quite quickly that it was harder to fulfill his desire than he had thought. When he called up one bank he patronized in his day job, he learned it had a minimum purchase amount of $20 million worth of physical gold. Even at that amount, he could not have access to it; it would have to stay at the bank.
 
He didn’t want to buy that much, but he wanted to buy more than a bag of gold coins, or a bar or two. Most of all, he wanted to know that it would be stored someplace safe where he could get to it even if all of the banks suddenly closed for a while. “There was concern at that time that the system was frozen and you didn’t really know whether you were going to be able to have access to your money or to your assets,” Mr. Tapiero said. “And I started thinking, O.K., well, I’d like to own something that isn’t a number on a flashing screen.”
 
Investing in physical gold has had an image problem of late. After the financial crisis, it was seen by many mainstream advisers as something that crackpots coveted. They would buy it, store in their basements and know that their wealth was secure if the world — or at least the prevailing financial and political systems — ended.
 
This was easy to mock, and many people did. What, after all, would you buy with your gold if the world came to an end?
 
Then there was the group that saw gold as a speculative bet, as something that would rise in value as fear about the global economy sunk in. That was less of a crackpot idea: the price of gold went from around $700 an ounce when Mr. Tapiero began buying it in the fall of 2008 to more than $1,900 an ounce last summer. It is now trading around $1,700 an ounce.
 
Mr. Tapiero did not buy his bullion because he thought the world was ending. “And if it did end,” he said, “I don’t know that gold would be that important — it might be radioactive.”
 
He also made clear that he does not keep it at his home in Greenwich, Conn. “It might not be safe,” he said, “if someone holds you at gunpoint and they say, ‘Show me your safe’ and you open it up and all your gold is there.”
 
Instead, his gold — now about 25 percent of his net worth, he said, declining to quantify it further — is kept in various professionally managed vaults. We met at one in Midtown Manhattan.
 
The vault was in an unassuming, brick office building with a completely plain, even dingy lobby. The offices of the vaulting company, which asked not to be named as a condition for granting me entry, had rows of nondescript cubicles that gave no sign beyond the company logo of what might be going on there.
 
As for the vault itself, it looked secure from the outside. But once past the thick door, it felt completely utilitarian, even a bit grim, particularly for what it held for its undisclosed number of clients.
 
Mr. Tapiero eyed the rows of 100-ounce bars — each about the size of an iPhone and worth about $170,000 — and estimated there was $4 billion worth of gold at current prices stacked on metal shelves that looked as if they were built in the 1970s. That amount of gold would fit in the back of any sport utility vehicle.
 
The vault company did not share the identities of other customers. But suspicion that there was interest in owning this kind of physical gold led Mr. Tapiero and a friend, Steven Feldman, to form a company, Gold Bullion International, in 2009. It allows people to buy bullion but also to have access to it and, if they want, have it delivered to their home or anywhere else. Their customers range from chief executives and entrepreneurs to housewives and grandparents buying for their grandchildren.
 
Mr. Tapiero described their challenge as, “How do we start a company that can provide physical gold — have it delivered, but also have it stored outside the banking system — to the retail customer?”
 
His theory was that gold had been misunderstood in the United States in a way that it had not been in the rest of the world. He attributed this to the inability of individuals to own gold for some 40 years, after President Franklin D. Roosevelt in 1933 ordered any American holding more than $100 worth of gold to exchange if for $20.67 an ounce. He did this to prevent individuals from hoarding gold during the Great Depression, and the restriction wasn’t lifted until the 1970s.
 
Another reason Mr. Tapiero thinks people came to misjudge gold was the bull market in stocks from 1982 to 2007, which made owning an asset that just sits there, like gold, unattractive.
 
Mr. Tapiero said that today gold was a legitimate investment that should be part of any diversified portfolio, because it is a hedge against a global economic slowdown and the inflation that many believe will occur when economies pick up.
 
But like many investments, the likelihood that gold will continue to increase in value rests on the rise of India and China. There, gold is being increasingly bought as a way to demonstrate success in addition to as an investment.
 
If you don’t need to be able to put your hands on your gold to sleep at night, the World Gold Council sponsors an exchange-traded fund, which trades under the ticker GLD. It allows people to buy and sell shares in a fund that owns gold, much as they would with a mutual fund that owns stocks.
 
Jason Toussaint, managing director of the World Gold Council, said that like Mr. Tapiero, his group wanted people to see gold as something that they should always own and not something they buy only as a safe haven.
 
“It implies people run to it and then when the storm has passed they go back to risky assets,” he said. “We think the time is right to look for a new paradigm.”
 
More traditional advisers see a place for gold in some portfolios, though they put it in the same group as other alternative assets. They also advise keeping the allocation relatively low, 3 to 5 percent of a total portfolio.
 
“Most assets like equities or bonds can be valued because they throw off some income over time,” said Lisa Shalett, chief investment officer and head of investment management and guidance for Merrill Lynch Wealth Management. “We talk about gold not as an investing asset but purely as a hedging asset.”
 
Mr. Tapiero said that the idea of making gold a permanent part of a portfolio was part of a broader argument about the future of the global economy, one epitomized in the professional investing world by two very different managers.
 
There is Warren Buffett, who made his fortune buying stocks in companies he understands and who does not see much use in owning gold. Then there is Ray Dalio, who runs Bridgewater Associates, the world’s largest hedge fund, who has put 10 percent of his firm’s money into gold.
 
Mr. Tapiero says he believes gold will continue to be a store of value, and he dismisses the end-of-the-world crowd — though, he said, his company is happy to sell them gold and store it for them.
 
“Gold will do very well, and it will be good to have physical gold if everything happens except the end of the world,” Mr. Tapiero said. “If the end of the world is zero, and we get to 10, from 100, it’s going to be the thing that performs well.”
The Watchman's picture

Texas Wants OUT

Looks like the Obama administration may have to respond to a petition seeking the green light for Texas to secede from the United States—one of 20 such requests filed on the official White House website since Election Day.

At the time of the writing of this post, the Texas secession petition had garnered 25,318 signatures—above the White House's self-imposed rules for requiring a reply.

The White House may opt out of replying. Under its own rules, "To avoid the appearance of improper influence, the White House may decline to address certain procurement, law enforcement, adjudicatory, or similar matters properly within the jurisdiction of federal departments or agencies, federal courts, or state and local government in its response to a petition."

Other secession petitions include requests for Arkansas, South Carolina, Georgia, Missouri, Tennessee, Michigan, Colorado, Oregon, New Jersey, North Dakota, Montana, Indiana, Mississippi, Kentucky, North Carolina, Alabama and New York. (Spoiler alert: No, the White House won't approve secession.)

Here's the text of the Texas petition:

The U.S. continues to suffer economic difficulties stemming from the federal government's neglect to reform domestic and foreign spending. The citizens of the U.S. suffer from blatant abuses of their rights such as the NDAA, the TSA, etc. Given that the state of Texas maintains a balanced budget and is the 15th largest economy in the world, it is practically feasible for Texas to withdraw from the union, and to do so would protect its citizens' standard of living and re-secure their rights and liberties in accordance with the original ideas and beliefs of our founding fathers which are no longer being reflected by the federal government.

Turd Ferguson's picture

The final moments...

MODERATOR

...before the "virgin de-flowering" begins...

القراع عصفور's picture

TF

lease rates are fog - just like Libor is.  you are correct, sir!  they do use them to send smoke signals, however.  don't fear the end.  its just perspective.  the beginning is the positive way of saying the same thing:-) 

Nigel Black's picture

state seccession

According to this website (as of 12:30pm Eastern Time today), Texas has over 97,000 signatures on the petition (the site might be slow to load - be patient):

http://rtr.org/pages/Tracking-Secession

I also noticed that 7 state petitions in total have over 25,000 signatures.  From what I understand, once you have over 25,000 signatures, Nobama has to respond.

Should be very, very interesting.

القراع عصفور's picture

damn it

i want Wisco to secede too.  we should steal back the UP of Michigan at the same time:-)

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