Watching The Flows

So here we are. It's September 10 and things sure don't look any better than they did at the end of May. For that matter, things don't look much better than they did at the end of December, either. What's left? Is there any remaining hope for a rally into year end? Can the metals at least eek out a positive return for 2014?

As you know, I've been out the past two days. It was great to look away for a while but, unfortunately, I made the mistake of not completely looking away. What did I see whenever I checked? Just more of the same. With the overnight selloff back on 9/1, The Cartel Monkeys managed to break the 200-day moving average in gold and all we've seen since is Spec selling of longs and adding of shorts. Of course, The Cartel Banks have been using all of this Spec selling to cover their own naked shorts. As you know, that's by design. The Banks now thoroughly dominate these paper markets and it appears that they will continue to do so for at least the foreseeable future.

Think back to how this has all played out in 2014. Twice, Spec interest has flown into the long side of gold (and silver) and twice The Cartel Banks have acted dramatically to first cap price and then smash it back down.

First, after beginning the year at $1200, gold rallied smartly through January and February. It finally broke through and above it's primary long-term trendline on March 14 when it closed at $1382. It opened higher still on Sunday the 16th and traded as high as $1392 before the Cartel offensive began. Price was routed over the next two weeks as it fell by over $110. The Spec shorting/selling and Cartel covering/buying then continued all the way to a bottom in late may at $1240.

Then, price reversed with another rally through the primary trendline, all the way to a high of $1345 on July 10 and July 11. Another Cartel offensive was then put into effect, just as in March. Price broke on Monday, July 14 and the Spec shorting/selling combined with Cartel covering/buying has trimmed price nearly $100 since.

Allow me lay the relative position changes for you so that you can see it in action...

12/31/13

Spec Long              137,182                            Commercial Long            182,101

Spec Short             104,959                           Commercial Short            215,122

NET                          32,223                            NET                                    33,021

3/18/14   

Spec Long              183,324                            Commercial Long            164,293

Spec Short              46,510                             Commercial Short            310,227

NET                        136,814                            NET                                     145,934

6/3/14

Spec Long              157,322                            Commercial Long            159,545

Spec Short              98,181                             Commercial Short            222,989

NET                          59,151                             NET                                      63,444

7/8/14

Spec Long              203,464                            Commercial Long            135,998

Spec Short              53,443                              Commercial Short            302,201

NET                         150,021                            NET                                     166,003

9/2/14

Spec Long              172,522                            Commercial Long              134,701

Spec Short             75,643                              Commercial Short             238,408

NET                         96,879                             NET                                       103,707

Obviously, it doesn't take a degree in economics or mathematics to see what is going on here. As I've discussed ad nauseam, the global price of gold is "set" by a small group of about 60 "Large Spec" (hedge fund) traders on one side and 6-8 "Commercial" (Bullion Bank) traders on the other.

  • Price rallies as funds flow to the long side. The Specs buy and buy while The Cartel caps and caps by liquidating longs and adding fresh paper shorts.
  • Eventually, the Cartel capping exhausts the buying momentum and stalls the rally. Once The Cartel gives things a downward shove, the funds begin to sell and sell while The Cartel buys and covers the very same naked shorts they had just recently added.
  • In each case, the rallies were forcibly turned once the naked gross short position of The Banks exceeded 300,000 contracts.

And look at the effort put forth by The Banks to contain these two rallies:

  • Over a period of 10 weeks to begin the year, The Cartel was able to limit the rally to only 15% by supplying the "market" with 95,000 brand new naked short contracts. That's 9.5MM ounces of make-believe paper gold or about 295 metric tonnes!
  • Over a period of just 5 weeks in June and July, The Cartel was able to limit the rally to only 7% by supplying the "market" with 79,000 brand new naked short contracts. That's 7.9MM ounces of make-believe paper gold or about 246 metric tonnes!

Finally, note that the bottom and turn in early June "coincided" with a Cartel naked short position falling back to 222,989 or almost exactly the level of naked shorts seen at the bottom of 12/31/13. What was The Cartel naked short position as of last Tuesday, 9/2? Look back up at the data above and you'll see that it was 238,408.

So, can we assume that all we need for another bottom and turn is an additional 20,000 or so of short covering by The Banks? Maybe...and we have to be awfully close. Since the last CoT survey, total open interest in gold has risen by over 12,000 contracts while price has fallen by $11. Without question, this rising OI/falling price signals fresh Large Spec momo shorting and, into this shorting, The Banks are continuing to buy and cover. The latest CoT survey was taken yesterday and the results will be released as usual on Friday. Will The Cartel gross, naked short position be back down to near 220,000? Almost certainly.

"So, what's the point of all this, Turd??" Since we've been using bullets this entire post, we might as well close with some more...

  • It's obvious that The Banks are desperate to contain price in 2014. Otherwise, why would they issue nearly 100,000 contracts of naked shorts in two such relatively short periods of time?
  • I'll tell you why...Because if they hadn't, the rallies would have extend far beyond $1392 in March and $1345 in July.
  • And if those rallies had instead reached $1500 or $1600, the virtuous cycle of TA would have invited in even more Spec buying and driven price even higher. Analysts and the media would have been forced to admit that the "bear market in metals" was over and that simply DOES NOT fit the narrative that The Fed and the other central banks want to push.

Finally, none of this is intended as sour grapes or excuse-making. Obviously if anyone knows and appreciates the extent to which The Banks control the metals, it's me. However, as we began 2014, I expected the metals to resume their bull markets and tack on fresh gains of around 25%. Though there's still over 100 days left in the year, my goals are looking increasingly unlikely and, absent some fresh catalyst to drive fund flows back into the long side of gold (and silver), it looks like I'm going to fall short.

With such staunch and desperate capping likely to impede the next rally too, what we really need is a huge jump in Comex open interest. Back in 2010, total OI was regularly 600,000+ contracts. Total OI has spent the majority of 2014 under 400,000 contracts, even reaching a multi-year low of 360,000 contracts on a couple of occasions. It seems that only by painting The Banks into a sustained retreat by driving open interest back to 500,000+ can we get price to rally toward $1500 and beyond. This will be a key metric in the weeks and months ahead. What would drive open interest higher? That's hard to predict. Far easier to predict is that the paper markets for gold (and silver) are likely to stay rangebound between $1200 and $1320 until it does.

I'll have more later today with a full podcast. We'll go over these numbers again just so that I can be confident that everyone understands the point I'm trying to make. Until then, hang in there and keep the faith. Remain patient and diligent. Recognize the "the metals markets" are farce/joke/sham that are not even remotely indicative of the true supply/demand picture for actual, physical metal and please continue to prepare accordingly.

TF

67 Comments

goldcom's picture

I hear you SIM

but did everyone watch Harvey Organs interview with USA Watchdog/Greg Hunter. I have read Harvey's reports but usually skim through them because I've read what he reports on. I had no idea Harvey had been keeping track of this stuff since 1999. I don't know if the prices of PM's will change this soon as Harvey feels or when China is going to come clean on what they have, but I have always thought that when they do come out of the closet, with their actual holdings and as Harvey indicates their demand for their silver, it will be the most significant effect on PM's since, well I'm not sure, it just may be the most significant if it goes down as Harvey explains.

With the new physical markets about to open it seems like the corruption of the Crimex must be exposed to commence with the new gold market. Allowing the Shanghai silver market to operate while the London Fix most of the period and the Comex since its beginning to present was always questionable to me. Perhaps it is just compiling more evidence of the corruption of the western PM markets. I do hope something gives soon with the bizarre state the market is in.

Here is the link if you haven't seen it

http://usawatchdog.com/manipulation-of-gold-and-silver-definitely-ends-this-year-harvey-organ/

silverflower's picture

Yes, I agree, I am really surprised

about Harvey's bold predictions in his Hunter interview. Think about it: Was happens to his credibility if all that is not going to happen: Surging precious metals prcies over night because of delivery problems at Shanghai exchange. So I am really amazed about Mr. Organ's conviction. I still do have Rob Kirby's words in mind when he responded to the question from Greg Hunter when he sees the metals price suppression failing. It'll break down if/when a physical delivery tightness does occur, Mr Kirby did respond, and he expects that to happen in fall 2014. Because he allegedly "knew" of some hige physical orders being thrown onm the market.

However, all that is hard to believe after experiencing the cartel having so huge control over the metal market in recent years. But I' ve decided to play this thing until it's bitter end. I do not see any mentionable alternative other then putting my savings into hard assets like phyz. gold and silver.

Regards from Merkel country

Whitecastle123's picture

If Harvey's correct

I'm going to Disney World,  if it's still there.  No, make that Ambergris Caye if I can get out of the country.  

Like SIM said,   Everything feels pretty weird right now.  

Levon's picture

Organ

Sounds pretty far fetched. Does anyone have any thoughts on his track record?

Mickey's picture

Harvey organ

if I recall correctly, he had a problem with storage of gold at Scottia Mocatta maybe 5-6 years ago. I think he was storing it in unallocated. Just do not recall the complete details but Organ accused  the bank not having his gold. or not being able to give it to him.

I have been in that vault and Sprott and the CEF/GTU group store product there. What I think the problem was was the unallocated vs allocated. But again not certain--I think some time after that Harvey O started his blog which is really a bunch of summaries from other websites and a few summations.

I do not read him much due to its just  all summations and I get it during the day rather than waiting as a bunch  of us do here.

When reading here you really should start at the beginning so as to get things in sequence.

Makes more sense and then everything additive is better quality.

BTW--the folks at Scottia Mocatta made an offer to me--if I could hold 2 1000 oz silver bars in my hands with arms stretched out for I think 5 minutes, they were mine. They sized me up as not being an athlete so it was ez for them. I did not even bother-62 pounds in each hand-outstretched-right.

Complete And Utter Bollocks's picture

So some bloke on the internet

says gold and silver will explode by the end of the year.

Must be true then. 

infometron's picture

In defense of Harvey

I'm not saying his predictions are going to "pan" out, but I will say this, there are few amongst us that has a more diligent ear to the ground than he...

All of us here know that something has got to give in this grand financial charade at some point (just imagine a friggin' false world where the S&P is up on a day like this). Looking at the rate that physical silver inventories are falling on the Shanghai Futures Exchange, more physical is going to have to come from somewhere to meet growing demand (see http://thewealthwatchman.com/ on the silver noose tightening), and soon. Where is it going to come from? Naked shorts? Rehypothecation? Yah, right!

Craig is consistent, reasonable and level-headed, and thank goodness for that, I for one will certainly take Au@1500 and Ag@25. I can also say this, Harvey's got the guts to put his mouth where his convictions are! Au@10000? Ag@200? Whoa, I'd take that as well, and would be quite happy with anything in between. The only road I can see that will lead us back to financial sanity is via free market values. I don't think the world as we know it has to collapse for that to happen, but it may.

Danforth Coxwell's picture

Re: Harvey Organ..

Would it be possible to have Mr. Organ as a guest on A2A.? If you could include Dr. Jim Willie in the broadcast, I would be in heaven!!!!

SilverX3's picture

Harvey Organ is ballsy to say the least

He won't be the first or last person to make such a claim about gold & silver exploding in price or the terminal state of the current financial system. It's been a long time coming for PM stackers. We thought in 2008 this was it. Now things are so bearish and bleak, that we're to the point where we don't believe it's ever going to end. Well my friends - the revaluation won't be happening in paper gold - but the true, physical form. If you've been stacking all this time, why worry then?

Ned Braden's picture

Meanwhile, life goes on, expenses go on

all payable in FRNs. This really s**ks

nadgeskaul's picture

Re: Organ

Come on everyone...just another charlatan.

Stop following the lemmings and falling off the cliff.  The fact of the matter is NO ONE knows what will transpire and when.  

Being an analyst these days is extraordinarily difficult due to the complete control central planners have over asset prices. This is no longer a free market driven by natural market participants and fundamentals. Trying to forecast is a waste of time due to lack of precedence.

infometron's picture

@nadgeskaul

Troll or no troll, I find your relentless defeatism quite tiresome...

"The fact of the matter is NO ONE knows what will transpire and when."

Of course, no one knows anything with certainty, except maybe 1+1=2.

Not knowing is not a license to stop thinking or anticipating.

If one is walking blindfolded toward a cliff...

NO ONE 'knows'... ?

Whatever.

Bohemian's picture

Chinese UnionPay Credit Card in Europe

ZeroHedge today --

Russian authorities wanted to decrease the financial market’s dependence on SWIFT since the introduction of the first U.S. sanctions, when international payment systems Visa and MasterCard denied services to some Russian banks owned by blacklisted individuals.

According to Shuvalov, Russia has been also discussing establishment of an independent ratings agency with China. Concrete proposals will be made by the end of 2014, he said.

As regards China’s payment system UnionPay cooperation with the yet-to-be-established Russian national payment system, Shuvalov said that UnionPay is ready for a full-scale collaboration and will provide all infrastructural capacities for that.

From Prague, today --

http://www.novinky.cz/ekonomika/347332-cina-chce-zaplavit-stredni-a-vychodni-evropu-svoji-platebni-kartou-zacala-v-cesku.html

China wants to flood Eastern Europe with its credit card. Its exclusive UnionPay card is used by 2.5 billion people. Expansion into Central and Eastern Europe started TODAY, in the middle of Prague, with the participation of Chinese bankers and the Chinese ambassador first launched acceptance of UnionPay credit cards. Hungary, Slovakia and Romania will follow soon.
 

november4's picture

Harvey's prediction

If there is actually so little silver left in the COMEX, why then does not a hedge fund (or, for that matter, anyone with a spare half billion $$$) purchase contracts for somewhat around that amount and demand delivery? That would force default. Isn't that, in effect, what the Hunt Brothers tried in 1980, failing because the US had a huge supply of stored silver, now absent? Doesn't make sense.

Keg's picture

For SIM

I feel like I've been living in it for 3 years.

Levon's picture

Exactly

That is what I keep asking... if gold and silver physical stocks are so low why doesnt someone like Eric Sprot who certainly has the means and the motivation step in, buy it all and demand delivery. Why? If the chinese had double the gold they say they do and they plan on some grand unveiling this year do you think a hand full of Asian politicians could keep that secret from the world and NOT tell every relative and friend they have to buy as much gold as possible? Come on folks....

Mickey's picture

congressional budget office

with revised long term forecast--=its bottom line:

Us is on an unsustainable debt deficit situation unless we see economic policy change.

It points to Medicare, Medicaid Social Security and Interest all taking higher amounts of GDP into the future hence rate of increase of deficits increases. Basically thats all the report today said which is what was said a month ago which was said a year ago etc and the debt committees said it 4 years ago--

so one day the system breaks.

rl999's picture

why not break the comex?

IIRC Sprott specifically said something to the effect of not wanting to wind up dead - worrying about starting his car or something.

(Implying a larger than usual gasoline ignition incident.)

Besides the fact - you wouldn't be allowed to break it. They changed the rules when the Hunt brothers did. Today you would be labeled a trrrrrst, have everything stolen from you, and then get killed. If you tried to break up the deliveries amongst a group they would probably be able to use RICO or conspiracy or some other bs against you. Even if they did deliver some the process of getting the phyz is (from what I have read) so onerous that it is almost impossible. TF has had a guest that did take physical delivery and it took (IIRC) more than 6 months and constant follow up.

eta: I think you also have to me an approved or accredited member, somewhat like taking delivery from the GLD.

infometron's picture

@Levon Re: That is what I keep asking...

Are you assuming a fair market world? If some average joe blow billionaire tried to pull the rug out from under tptb, do you think that would be free of consequences for said joe blow (even one of the stature of the Admiral)?

Are you assuming that the majority of people actually think for themselves? If this were so, no amount of paper manipulation and media misinformation would suffice to stem demand... Alas, people in general only see value if and when everyone else does.

rl999's picture

china's gold stash

Reading a report today suggesting that the chinese golad hoard is ~ 4k tons by the end of the year. (I personally think it is 10-20k tons). However if the alternative media consensus is that it is smaller than the 8k tons supposedly held by the u.s. I have to wonder why they would disclose it?

My thinking is that I (if I were the chinese .gov) would not want to make an announcement that I have gone from 6th place to 2nd in gold holdings. What good does that really do? (Not a rhetorical question - I am interested in other's thoughts.)

Wouldn't it make more sense to wait until they have 8.2k tons of kilo bars to show the world? Become the undisputed gold heavyweight champion of the world - have the trump card of "well, we showed you ours, now show us yours". Maybe that is to "in your face" for world politics?

AlienEyes's picture

There is hope....

If Harvey O. is right, the gold / silver ratio will be about 50 : 1 (it is now about 66 : 1). In my view, any major upside move by PM's would include some movement towards the historical 16 : 1 ratio of gold and silver. That's not to say we will ever see 16 : 1 again. We won't.

.

Disclaimer :

Please note that every time the commander & chump or one of his professional lying ass-hats says something insufferably stupid, I am inclined to throw back a few shots of tequila to mitigate my pain which causes “my view” to be subject to occasional blurriness.

Lamenting Laverne's picture

How about showing a little respect?

Harvey Organ is not just "some bloke on the internet" and he is certainly not a "charlatan"!

He has been recording the "handywork" of criminals for years and years - daily, diligently and meticulously - and he has been presenting his results at no cost for our free evaluation.

He has compiled enough evidence over time to get him and Adrian Douglas an invitation to testify at the CFTC - again on behalf of all us suckers, who can otherwise do little to help ourselves.

The testimony was taped and spread wide and far - and even if it was a bit forced in delivery due to little time allocated to bring the message across - it still helped boosting morale among all those investors, who felt like no-one ever got though to the regulators and who felt no-one gave a damn about the corruption. It is not Harvey Organ's fault that the CFTC turned out to be just as corrupt as the people, they are supposed to police.

He has talked about / predicted a Comex default before, if I remember correctly, so I am not saying his bold prediction will come to pass this time. What I do know is that times sure are tense right now, and we see some confirmation of previous predictions by Jim Willie and others on an almost daily basis, so Organ's sentiments of sudden changes in the nearer future may not be all that crazy after all.

In any case - all I am saying is that I think his diligent work at the possible benefit to all of us demands a bit more respect.

Complete And Utter Bollocks's picture

Lamenting_Laver...

Ok, fair enough. But those predictions are seriously extreme.

If gold gets to $10,000 and silver to $200 in the next 3 1/2 months I'll eat my hat. And shoes. And pretty-much everything else within reach.

I'll even throw the goldfish down my gob. Mmmm.

I'll need to buy a hat first, but I should just about be able to afford one then cheeky.

Lamenting Laverne's picture

I agree they are quite extraordinary

and I am not sure of the wisdom in making such predictions anyway - thanks for taking the message in the spirit it was intended. 

But please don't eat your goldfish - if Harvey is right. My goldfish is right this very minute sitting at the bottom of a quarantine tank - motionless and not eating - and I am writing tonight partially to not think about the very real possibility that he will be gone tomorrow. One Goldfish death this half-year should be quite enough.....

However, should he be right - I will look forward to watching the video of you eating hat, shoes and pretty much everything within reach - sans Goldfish - with relish ;-))  

Complete And Utter Bollocks's picture

Lamenting_Laver...

video on youtube 31st december.

will post up a link.

smiley

silver66's picture

Lamenting_L

All I know about gold fish is "belly up is bad"

Hope your guy is mobile come morning

Silver66

imfd's picture

Eating goldfish

I knew a dyslexic bloke once who ate a goldfish, he said it tasted like carp.

Lamenting Laverne's picture

Thanks Silver

The last time I moved them, I lost another one (the first one). This time, I have been trying very hard not to stress them. Cover up, when people were messing around in the room. When I drove off with them it was slower than a hearst.

He seemed to be doing fine the first while, but then yesterday he was just lying on the bottom most of the time, and today when I nudged him out of his hiding place - the big one (Koi) started stalking him/nibbling at him right away, which is a sure sign he is about to check out.

So I separated them, so he at least could die in peace, I have given him fresh water (treated against the chlorine), his own oxygen pump and made the water ever so slightly saline - but I think it is stress and possibly old age. It looks as if he has been stunted before I got him, so he would probably never grow to full age potential.

I feel absolutely ridiculous with all the evil going on in the world - and here I am obsessing about a Goldfish. But I really find it difficult to just see him waste away - and there is nothing I can do about it.

.... 

Just went to check on him again, and he was on his side - a few twitches - up to the surface one more time - back on the side almost upside down. Sat with him for a while. He is gone now. 

@imfd: That is not so weird - a goldfish is a member of the carp family - so it makes a lot of sense it should taste like carp. I have long wished to build an aquaponics system, considering grass carps, because it is so neat they are vegetarians, but I read somewhere that they are absolutely impossible to de-bone, so Tilapia is probably a better bet. Haven't got the space for that yet though, but a girl is allowed to dream ay? 

Good night Y'all.

imfd's picture

Lamenting..goldfish

That was my little joke, dyslexic, carp/crap, or is that a double bluff you are pulling on me ! doh !

Dyna mo hum's picture

8:48 pm

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