Getting It Wrong

Wow, there's certainly a lot of bad metals analysis out there this weekend. I might as well throw my big ol' hat in the ring, too.

Before we get started, a disclaimer for me and everyone else who thinks they can accurately predict the future: It's not possible. What am I, a weatherman? You're asking me to tell you, days in advance, how the precious metals are going to respond to completely unpredictable variables like geopolitics, currency wars and monkey sell programs. That said, I still believe that I have a far better handle on this than most and I'll be happy to point out to you some of the errors that others are making as well as put my neck on the line going forward.

Here are just a few of the things that are bothering me:

  • Lots of folks are worked up because Soros has allegedly sold almost half of his holdings in the GLD, nearly 18 mts. However, year-to-date the GLD has seen a net withdrawal of 27 mts. Any chance old George simply redeemed took delivery? That guy didn't get where he is by being stupid and you can bet your batooty that, if there is an unallocated/rehypothecated/leveraged gold scandal brewing, he'd be first in line to get his hands on his metal.
  • The $100/month subscription guys are telling their suckers clients to dump everything and move into...what, exactly, I have no idea. But apparently a couple of downticks is enough to push these guys over the edge, regardless of the underlying fundos.
  • And I don't understand much of the silver CoT analysis that I've read. Everyone is running off in all sorts of different directions but seeming to miss what is directly in front of their faces.

In gold, the CoT is easy to interpret. All the way down from $1800, the specs have been liquidating and The Gold Cartel has bought into this selling and covered shorts. This is how it has always worked and, not surprisingly, it has worked again. The gold CoT is now, at worst, neutral with several internal components back to the bullish category.

Again, though, it's the silver CoT that is so interesting. If you haven't yet, please read through these posts. Read them very carefully, taking the time to compare the CoT structures from various points in the past two years.

http://www.tfmetalsreport.com/blog/4492/strange-days-indeed

http://www.tfmetalsreport.com/blog/4505/still-struggling-silver-open-interest

Everything I've read focuses on the spec long position, as if it's still somehow out of whack. Look at the number yourself, though. As a percentage of open interest and as a ratio of net longedness, there's nothing to strongly suggest that a major spec washout is coming or required. On 9/11/12, with price near $34 the Large Specs were long 41,371 of a total OI of 121,050 (34.18%). As of last Tuesday with price near $31, they are long 40,205 of 152,817 (26.31%).

The only thing that stands out and the one thing that nobody is discussing is the Commercial Long position. It is extraordinarily high. Easily 60-70% higher than you would expect it to be, based upon history. And because it is so high, the Two Big Bad Guys have been unable to cover shorts in silver as they have in gold. I cannot stress enough how odd this is but don't take my word for it, go back and look for yourself. By this time in the price cycle, the Comm Long position would/should have "normally" contracted to 30,000-35,000. Instead, it's 52,182, UP nearly 6,000 contracts just last week! All of this commercial buying prohibited JPM from covering and, instead of a gross short position in the 70,000 range, The Silver Cartel is buried under 98,979 shorts, also UP last week.

On the surface this is extremely bullish and is most likely indicative of a "civil war" in the silver pit. One thing we must be wary of, though...What if JPM is clandestinely building a massive spread position, like they often do in gold and, just as they manipulate gold, they plan to begin creating air pockets in silver by legging out? Since we have no way of knowing, we must be aware of this possibility. Again, though, much more likely is the idea of "civil war", where JPM is trapped as the only remaining firm providing naked paper. The other commercials are buying it all up and forcing the noose ever tighter. This is akin to what happened to Bruno Iksil, their "London Whale". Once word got out that he had built an untenable position, the smaller "sharks" circled in for the kill. We'll see where we go from here but it certainly looks like this coming Friday's CoT will show a continuation or even exacerbation of this trend. Strange days. indeed....

So here are your charts as we enter a new week. I have done my level best to show you exactly where I think we are and where I think we're going. In gold, note first that the daily RSI has now fallen all of the way to 30. Though some spillover selling is possible early week, far more likely is a snapback rally to alleviate this highly oversold position. I'm still looking/hoping for one quick spike to $1580 or so but, regardless, I think we are just about done with the carnage.

And here is the key chart formation that we are going to be watching going forward, again something that I haven't seen anyone else mention. I've drawn the bottom of the pennant from the 7/1/11 price levels that preceded the huge rally in gold that followed and I've drawn the top of the pennant off of those early September 2011 highs. These are very important charts so print them off and keep them closeby in the days ahead.

In silver, the daily RSI is still above 30 but an early week drop toward major support near $29.20 would certainly take care of that. Not that a drop to $29.20 will happen, but it might. Soon, though, I expect a very sharp, short-covering rebound, UP toward $31 and change. The key pennant here suggests some further consolidation but not much longer. As an aside, it seems that many folks (Your Turd included) are expecting big things from both metals, and particularly silver, in March. These charts certainly seem to confirm that timing. By my count, the week that concludes on Friday, March 22 looks to close the pennant. Maybe you should mark that date on your calendar. (Ides+7)

Lastly, in case you didn't know it, tomorrow is a U.S. holiday so all U.S. markets will be closed. The metals will trade on the Globex, though, so you'll still see prices changing during the day. The real action won't begin again until Monday at 6:00 pm EST, though. Additionally, I'm not going to be around much the next few days so look for some guest posts and open threads. If things get really crazy, I will, of course chime in but, for the most part, I'm going to be out of action. Hang in there, keep the faith and expect more volatility. Savor the discount and btfd. You won't be sorry that you did.

TF

336 Comments

Bollocks's picture

Just look at Platinum

Gold has some major catching up to do.

Platinum being rarer than gold is irrelevant. When did you last hear of a major bank being a buyer of platinum? Or any news-worthy PM buyer buying platinum in quantity?

Well?

Gold HAS to leap. It's got it's face in the mud.

Coming up for air very soon wink.

Northern Border's picture

Kitco down tonight ?

Maybe the fireworks are starting tonight. 

Stay frosty friends.

NB

Northern Border's picture

Kitco down tonight ?

Maybe the fireworks are starting tonight. 

Stay frosty friends.

NB

Pegasus's picture

It's Alive!

Puck T. Smith's picture

I keep telling myself don't do it...

...but I think I'm going to end up watching the charts all night.  Can't.Look.Away.

SteveW's picture

@The Green Manalishi: Oz

"Lots of Gold titles and bits and we know what the original story was about - just for fun!"

Hardly just for fun. The wizard of oz (ounces) was written, in 1900, as a parable about the Eastern (Wall Street) banking interests and their manipulation of gold based money. Monetary reform at that time demanded silver coinage, at a fixed ratio to gold. In the 1939 movie the slippers that Judy Garland wore were changed from the original silver to ruby which obfuscates the original story.

For a useful interpretation see:

http://prosperityuk.com/2001/01/a-wonderful-wizard-of-oz-a-monetary-reform-parable/

Adolf_Hitler's picture

Backwardation isn't important

It's not important whether gold is in contango or backwardation. Back in May 2011, silver was in backwardation. In theory, it meant the physical market was tight but silver still crashed.  I don't trust the futures curve very much. Except for the most active month, the trading was illiquid and the settlement prices could be simply based on quotes. Too much manipulation can be done.

I doubt JPM is creating a spread position. If you look at the latest Bank Participation Report, US banks added more shorts while their long positions remained stable. By and by, the CFTC re-defined non-US banks in Oct 2012 so it's difficult to make historical comparision. Of course, one possibility is that JPM is creating a spread position by adding long through legally non-bank entities. 

Planters's picture

India and the Gold

These guys get it, kinda explains why its molested here by the Crips and Bloods

http://money.cnn.com/video/news/2013/02/14/n-india-gold-gluttons.cnnmoney/index.html?iid=HP_LN

Pegasus's picture

Silver is becoming scarce and producers are hoarding the metal.

Good article: http://www.silverdoctors.com/harvey-organ-banksters-having-extreme-troubles-removing-their-huge-shorts/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Silverdoctors+%28SilverDoctors%29

From Harvey Organ @ Silver Doctors

In silver strangely the CME reported a gain of 1417 contracts up to 154,364.  We are now at a two year record high in silver OI with a lower price in silver ($29.86 today vs $49.00 in April 2011).

The problem this time for the bankers is that the silver OI is ramping higher while the OI in gold is being crushed.  Why? it seems that physical silver is becoming scarce and producers are hoarding the metal.  The bankers do not like what they see with silver as every raid at these low prices brings on more longs and they seem to represent strong hands. 

 If the OI on Monday is again higher, our banker friends might as well throw in the towel as nothing can help them.  The massive not for profit selling of non backed silver paper at lower prices is futile.  The bankers are having trouble removing their huge shorts in silver  as our resolute silver holders, instead of pitching their contracts with the onset of a raid, buy more.”

Robespierre's picture

Oz Trailer.....

If you get my drift....
 

Outline Masonic S&C

Nick Elway's picture

Major Banks buying Platinum.. 2011

Mad5Hatter's picture

Pucky Pucky Pucky ....

lol .... just be glad, charts arnt "dispensed" or ya be hooked on hopium ..... from the dark purple pusher man 

Silver OI may be high, but that aint it.

OI breaking high after high, is,

rsi in habitual perpetual over bought,

backasswardation up the yang yang

FOR OVER A FREAKIN YEAR,

When the squeeze is really on, bulwarks can fall to irrelevance,

as the price advances,

with each 100% (30$) rise, poop pooped by the bears, screeching OVER-BOUGHT!!

tyberious's picture

Gold & Silver

Gold & Silver – An Authoritative Special Report

Silver 1874-1899

Much of the stories on the web about silver and gold tend to reflect the official prices rather than the free market prices. There is ALWAYS a free market even during periods of fixed exchange rates. During Bretton Woods, there was currency trading in Hong King where the yen fell to nearly 500 to the dollar despite the “official” exchange rate being 360.

Bryan-CrossOfGold

The same problem exists with the precious metals. At our Princeton Conference March 18-19, we will be paying close attention to the metals since there is serious need for a honest authoritative review where there is nobody trying to sell you bullion and coins. The so called Crime of 1873 when the USA demonetized silver, there was an uproar that lasted into the end of the century culminating in the famous speech of William Jennings Bryan that thou shalt not crucify mankind on a cross of gold.

SV-PUCK

The data used by most people is simply the official standard of silver to gold used by the US government during the 19th century. The Long Depression of the period was created by the flood of silver that was grossly overvalued. For you see, the source of the Crime of 1873 did NOT lie in the USA. Once again you had to look to Europe. If you do not conduct GLOBAL correlations, you will be forever lost in the wanderings of a domestic mind. It was the FrancoPrussian War of 1870 (July 19, 1870 –  May 10, 1871) that set the silver crisis in motion. Inflation had soared, but the disparity between gold and silver widened. Germany ceased to coin silver thalers for the people simply devalued them. Once Germany stopped minting silver coins, the price of silver collapsed. The USA was forced to demonetize silver due to the free market. The political pressure to subsidize the silver miners who otherwise would have lost their shirt and pants, led to 26 years of economic decline not much different than Japan. Pictured here is a British Magazine Puck making a joke of how the Americans were drowning in overvalued silver dollars.

Pressure mounted and Congress passed the Bland–Allison Act of 1878 requiring the U.S. Treasury to buy $2 million a month and put it into circulation as silver dollars. Though the bill was vetoed by President Rutherford B. Hayes, the Congress overrode Hayes’ veto on February 28, 1878 to enact the law. This unsound finance drove the silver to gold ratio during this period from 16-to-1 in 1873 to nearly 30-to-1 by 1893. It would soar to over 100-to-1 during the 20th century.

So for all those people touting $150 silver is around the corner, and others promising the collapse of the dollar and $30,000 gold, we will be issuing a very important forecasting report for the metals – (gold, silver, platinum, palladium, copper). This will be included in seat prices for the Princeton World Economic Conference. We will include for the first time a silver-gold ratio chart back to 600BC.

http://armstrongeconomics.com/2013/02/17/gold-silver-an-authoritative-special-report/

Singularity's picture

Coin Show

Coin shows are all about collectable/numismatic coins, not bullion commodity coins. A bullion coin has zero numismatic value. If you are not already an experienced collector, then you would certainly be better off just sticking to bullion. I have a number of gold coins worth a lot more than their gold content...like an 1852 $20 gold liberty MS63 (basically a 1 oz gold coin that is 160 years old and looks great)...and worth a whole lot more than a gold eagle.  Just a way to own gold and a little history. Holding a coin that may have been in the pocket of a civil war soldier is something that I appreciate......not everybody does though.

Chevy Thunder's picture

Please explain something to me

Hello everyone.

I have noticed at this website that a lot of emphasis has been placed on the COT report, the OI, commercial long positions and whether or not JPM added or subtracted from their short positions when comparing one week from a prior week.

I don't understand any of this.  I mean, I understand the data on a the most superficial level possible, but how am I to interpret the data and then use it to my advantage?  Even Turd, himself, admits that he doesn't understand it:

And I don't understand much of the silver CoT analysis that I've read.....

The readers here in the forum routinely say that they don't understand the significance of it, either.  Other blogers also say that the COT information is of little value to retail coin/bullion investors.....

So.... all that being said, why does it seem to be the crux of so many articles here?  What am I suppose to be looking for and how do I use it for my advantage?

Thanks in advance and God bless.                                                                                                                                                                               

Nick Elway's picture

Coin shows in my area have plenty of buy/sell near melt

@Singularity

Sure there's plenty of numismatic and paper  action at the coin shows I've been to, but I've found many of the tables with junk silver and 1/10 ounce gold rounds at less premium than online.  My favorite acquaintance/table dealer often buys junk or state quarter silver proofs for a few per cent under spot from people that visit his table and sells to me at near spot. 

I recommend turdites walk through their local coin show and see what they see.

Colonel Angus's picture

Local gun show

We had a local gun show this weekend. I got to stand in line for an hour to get in with a bunch of others. It's amazing that there are a lot of people at these shows but not always a lot of teeth, if you get my drift. Some of the nicest people you'll ever meet, though. Real salt of the earth type that talked to us and taught my son, Little Angus, a few things. (Some of them he shall not repeat to his mother. And some of the words spoken shall not come out of his mouth.)

Anyway, everything was overpriced. Well, almost everything. The prices were higher than you find on auction sites. People wanted $1 per .223 round. (L.A. found the four boxes that were 50 cents per, and we took them.) We bought an old 12 gauge and a nice Remington youth model, but we left everything tactical or with large clips. And don't even ask about the prices on 22LR.

So why do I mention this? Well, can we get the executive branch to hold a presser on why we need to have laws limiting the quantities of silver we can buy? Really, now, does anyone need 20 ounces of silver at a time? We ought to limit the purchases to half rolls of ASEs. Those monster boxes are just going to get someone hurt. I know those silverfish and goldbugs have some mental deficiencies, they have watched too many movies depicting the buying of PMs, and we just need to ban their purchases. No more large magazines of 500 ounces at a time. And Joe Biden will be leading this task force.

We can hope, can't we?

S Roche's picture

CoT Relevance and The Weight of Money...

The Comex is not the only market in the world, therefore CoT can be misleading. I take it as given that what can be misleading, is.

Anyhoo, the weight of money in the Comex futures market measured by Bell Curve Trading says that if $1640ish is not beaten and held then $1530 beckons for gold, and if $31+ish in silver does not hold then $25 beckons...

Bell Curve Trading do interviews Turd, why not talk to them? Their system is based on CME MarketProfile data, it measures where the money is in the paper/futures market, seems a much smarter measure that CoT...and lately it (alone!) has been accurate. Long term, at $900 gold they called $1700-$1900 so they have a track record...they ignore fundamentals, concentrating only on price/volume and time.

For anyone interested: http://www.cmegroup.com/education/interactive/marketprofile/handbook.pdf and Steidlmayer's book is available in pdf if you Google for it. Or, you can Google the Bell Curve Trading guys themselves and pay them.

I'm playing a broken record here, (with no apparent traction), but I am sticking with what is working for me with trading...doing more of what works and less of what doesn't...

GLTA

Edit: Another spooky thing is that MarketProfile matches Median Line/Andrew's Pitchforks quite often too...

Mickey's picture

Just thinking

Has anybody challenged Kotlikoffs 220 trillion in unfunded present value entitlements?

perhaps they just do not want to open a can of worms.

let's say its less than the 222 tril but more than the 88 tril the govt has said it is. Who would want to get involved in that loser discussion. Ie, how much more can we be broke?

ClinkinKY's picture

Tried to post on last thread (so as not to intrude on new) but..

...the only button showing is "alert moderator". No "reply" button. No "posting  box". (?)

So, apparently love conquers allsad

By the way kingboo, that's some funny sh*t. Back when SNL was funny:)

...sorry for carrying over but this is an indication of how far "over the rainbow" we've gone.

--------------------------

watch this and tell me we haven't gone too P.C.

 
---------------------------------------------------------------

P.C.? How about full on bat shit crazy?

WTF?

------------------------------------

Woman in Argentina marries twin sister's convicted killer

This was a Valentine's Day wedding that the bride's family wanted no part of: An Argentine woman married the man convicted of killing her twin sister.

Neighbors were against it as well. A mob gathered outside the civil registry office where Thursday's wedding took place, throwing stones and eggs.

-----------------------------
Boswell's picture

Woman in Argentina...

Hopefully she is carrying out some evil "Hitchcockian" revenge plan???

He'll be "sorry"!

ClinkinKY's picture

@ Boswell

Maybe a Lorena Bobbitting:)

tyberious's picture

Ron Paul On NPR’s: Smiley &

Ron Paul On NPR’s: Smiley & West

[Ed. Note: 'Ron Paul's America' is coming soon! Daily commentary from a truly good man. Can't wait!]

from RonPaulCC2012 :

http://www.youtube.com/watch?feature=player_embedded&v=aRrD42AAaEo

Texas Sandman's picture

Pretty much as expected

Moved quickly  back into the trading range which is where SI has stayed with no real bias.  Just bouncing around in the range.

This is all pretty much as expected for a holiday after moving down strongly into rather strong support.

Question is when the trap door will open again...

Keg's picture

Sign of the times

Went to a local gun show yesterday.  Huge crowd as expected.  The number of tables selling survival food and silver continues to grow.  4-5 years ago there was no one selling survival food (unless you count beef jerky) and only a few silver dealers.  Noticeably absent was the largest ammo dealer that always is at this show.  I assume their online sales have depleted their inventory so there is no need to spend money attending.

Bollocks's picture

ClinkinKY

"Tried to post on last thread"

It's closed as submissions to the hat contest have been closed.

opticsguy's picture

at least I won't lose money on the miners today

since the market is closed.  :}

Edit:  Stacey makes the case that the gold standard is the friend of the middle class, as financialization has stripped all the productivity gains of the workers since 1971 (which I had been claiming for years).  I wish Ron Paul could have made the clase so clearly.

can't post the link, but episode E407 of the Keiser Report,

achmachat's picture

what's Presidents' day good for?

I thought the guys in London would take advantage of today and move the metals a bit.

They might have taken the day off as well!

Hammer's picture

(No subject)

Just a thought but, seeing as how Reuters had been reported as saying Iran was about to be offered an easing up of restrictions on its gold etc trading in exchange for movement towards shutting down Fordow and seeing as how their a spokesman for the Iranian Foreign Ministry was reported today as suggesting the reported offer was unacceptable, might that not motivate moves towards hitting the metals lower to punish and squeeze Iran further (reserves are in these materials) ?

Last week Reuters reported world powers were planning to offer to ease sanctions barring trade in gold and other precious metals with Iran in return for steps to shut down Fordow.
On Monday Ramin Mehmanparast, spokesman for Iran's foreign ministry, suggested the reported offer was unacceptable.

"Lately they have said 'Shut down Fordow, stop (uranium) enrichment, we will allow gold transactions'," Mehmanparast said, according to the Mehr news agency. "They want to take away the rights of a nation in exchange for allowing trade in gold."

Western officials said last week the offer to ease sanctions barring gold and other precious metals trade with Iran would be presented at talks between Iran and world powers in Almaty, Kazakhstan, on February 26.

They acknowledged it represented a relatively modest update to proposals that the six major powers made in talks last year.

http://www.reuters.com/article/2013/02/18/us-iran-nuclear-idUSBRE91H09Z20130218

There is probably nothing in this but just chucking it out there on a slow day. I'm sure the hedge funds and algos etc etc don't give two monkeys about Iran although I am sure many wouldn't mind picking up Iranian phyzz at a discount ;) if it happened to be that way.

Byzantium's picture

@ Hammer

I think that the cartel's imperatives for the gold market are aimed at much higher purposes than that of messing Iran around. There are other ways to harass Iran.

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