In The Woods

Thu, Sep 8, 2011 - 9:25am

The overnight action is the PMs is certainly encouraging and it would seem as though the half-life of central bank gold intervention is now about as long as central bank currency intervention. We all know, however, that it is still too soon to let our guards down. The quick recovery in price may only serve to embolden our increasingly desperate adversary, so, much caution is still warranted.

That said, I do not want to minimize the importance of the overnight reaction in price. The SNB attack of early yesterday sent the metals markets reeling. The attacks were timed to have a spillover effect onto the Comex and December gold traded as low as $1794 by mid-morning. In the old days, this would have sent gold into a tailspin as weak-handed longs began to race each other for the exits. They knew they were no match for the central banks and The Cartel.

Note, though, how yesterday was different. Once the Comex was closed, things began to improve almost immediately. Baby steps at first but then a full-blown rally overnight in Asia. Our longs are no longer weak-handed. They are resolute. They are buyers of size and they seem to pounce on discounted prices. This must be very discouraging to The Cartel. They are trapped in an untenable short position and they are being forced to cover at increasingly higher prices. HAHAHA!

To that end, I feel I must state this again. Please be sure you are making note of which "analysts" and "traders" are calling a "bubble". One only needs a cursory understanding of the Commitment of Traders data to deduce that there is no such thing as the CoT data since early August has clearly shown that the primary driver of price to this level has been Cartel short-covering. A bubble presumes retail buying. Average, everyday investors rushing in to buy something. The greater fool theory in action. Think dot com. Think Las Vegas real estate. Cartel short-covering does not create a bubble. As stated ad nauseam, the weekly CoT report is a very important, fundamental statistic. Any serious metals analyst knows this. Accordingly, any serious metals analyst knows that gold is not a bubble. The boneheads calling gold a bubble are, therefore, not serious analysts and should be ignored. Do not forget them, though, as they will most assuredly resurface in the future to once again proclaim an end to the gold bull. Remember who they are so that you can ignore them in the future, too.

The next question we need to ask is: Why are the banks so desperate to cover? Ponder that one for a while. I've got my thoughts on the subject. I'd be curious to hear yours.

Here are your charts for this morning. I see they are already becoming outdated as the metals have continued to rally while I type.

Remember today that my warning of yesterday was not to sell, it was not to buy. I stand by that. With the active central bank intervention of earlier this week, it is still too dangerous to be boldly buying with confidence. For now, I am simply holding my positions. The only trades I made yesterday were to re-cover my October gold calls. You may recall, I have been long October calls but, from time to time, I've been selling some calls against them (creating a spread) whenever I felt that risk was high. I've been taking the "short" side off and "opening up" my calls when I feel that risk is minimal. My current trading portfolio is as follows:

Long Oct 1900 gold calls vs short Oct 2000 gold calls

Long Dec 1900 gold calls vs short Dec 2200 gold calls

Long Dec 50 silver calls vs short Dec 60 silver calls

About 25% cash. Patiently waiting.

Lastly, I would be remiss if I didn't print the chart below. Several Turdites have sent it to me looking for my opinion and I feel it deserves your full consideration.

About the quickest way to go broke trading futures is to go around declaring that "this time is different". However, in this case, I feel this time truly is different.

This chart covers the previous 32 years of Keynesian central banker-dominated thinking. We are at the end of the Great Keynesian Experiment. The current system will not be continuing much longer. A new paradigm will soon be emerging. Therefore, while price will still correct from time to time, historical correlations such as this one are of minimal significance.

I've got lasts of 1862 and 42.42. It will be a very interesting day so try to keep an eye on things. More later. TF

About the Author

turd [at] tfmetalsreport [dot] com ()


Sep 8, 2011 - 9:50am

Please excuse me

Please excuse me if this post is out of line. I don't intend it to be but as I made
a similar post at the tail of the last thread, it appears it may not be seen very
much. So I am asking again here. This may even be a more appropriate location as
Turd makes extensive mention here of Central Bank intervention, Comex,
opening and closing times, COT report, spillover effect, etc..

I have some weird and possibly naive questions about the putative 7000 contracts
offered by the SNB some 20 or so hours ago.

Please bear with me as I am no expert but woke up this morning wondering about this.
So here goes:

Being offered after hours, were these 7000 contracts compliant with the Comex
"standard" or are they something else? Since it is believed that the "seller"
was the SNB, does anyone know, or have a guess, who the buyers might have been?
Who would have been around at that time to even absorb that much?

That said (asked), will this activity or open interest now show up in the COT
reports or is it something else even flimsier than, say, "real paper". Is it
likely, or even possible that the "buyers" of this stuff could stand for
delivery? If so, when and where?

Finally, if this stuff doesn't show up in any actual statistics, where will it have gone? Does it have to come back into the market as long interest? Could it
be that a "left hand" may have sold something to a "right hand" and that
these hands might later "shake hands" so that in the end everything disappears
except the damage?

As I said, I am no expert and it would be interesting to see some others, better informed than I,chewing on this cud.

Travis Bickle Tesla
Sep 8, 2011 - 9:50am

Why are the banks so desperate to cover?

This is the exact reason in my opinion, there are now no other safe havens left in the world where money of size can hide, so the metals will absorb all the money looking for a safe home. The banks have to know this.

Sep 8, 2011 - 9:50am


The term "correct" with "manipulated down".

Thanks for your work Turd!

Sep 8, 2011 - 9:51am

Margin Increase

If I were the EE and wanted to create maximum fear and confusion, I'd pull a margin increase out of my hat about now - just when everyone is full of hope that the worst is over.

Maybe I'm jumping at shadows, but (a) It would be a masterstroke from their perspective and (b) I'm amazed that they haven't done it already given the massive volatility this week.

Dr G
Sep 8, 2011 - 9:52am

For your consideration:

For your consideration: Obama's speech tonight will unveil a job "plan" that will cost over $400 billion. Now, tax receipts aren't flowing in, and people are pissed. Where do think that additional $400 billion will come from? Why not just tack it on to whatever Ben is printing later this month?

argent rampant
Sep 8, 2011 - 9:52am

Thanks, Turd.

Can't say it enough. Sooooooo glad I found this site!

There are five categories of wealth: Spiritual, Physical, Intellectual, Relationships, and Financial. Pay attention to them all!
Sep 8, 2011 - 9:53am

would'nt the difference be

that they capped the swiss franc?

Dr G
Sep 8, 2011 - 9:54am


I have no data for this, but just a hunch that it whoever dropped that massive amounts of contracts on the market could be the same parties that bought them back. I mean, why not? Dropping those lowers the price drastically (especially when stops are busted up) and gives you a chance to buy back in at bargain prices.

Sep 8, 2011 - 9:55am

Modern Day RoofTops...

Turd you keep getting better, appreciate the work you put into your posts, as I know how long it can take to put together a worthwhile piece, let alone with the consistency that you do!

What makes you that much better is that you adapt to what you become aware of, instead of staying the course with one perspective in which only gets at parts of the truth instead of the whole truth.

You are the modern day "shouting from the roof tops."

Video unavailable

Yet -- Being mad is only the first step... then we must understand one another in order to create a new reality, as anger is not a basis for cooperation.

The 7,000,000,000th human being will be born in 2011, each on his/her own individual cycle of life, with our own unique circumstances in which manifests our reality. For there is no inherit difference between any single human being on this planet, no matter how such an argument else-wise may be justified. Statistically there is no root difference between any man, woman, or child of any heritage, as each of us are a culmination of circumstances in which we cannot consciously decide. While we may differ in skin colors, languages, ethics, habits, beliefs, cultures, countries of origin, sufferings, injustices, struggles, luxuries, and overall environment, we all as individuals share a root common ancestry in which ties the human race together, better known as history.

Children of the world are taught by those who are older and have more experience under the pretext that age brings wisdom. In this paradigm, the elders are the trustworthy holders of the future. Yet the reality of the situation is far from this fading illusion. For age and experience can be deceiving, as all individuals are all susceptible to being young or foolish to the greater perspective of history.

Video unavailable

And the words of the prophets are written on subway walls, and tenement halls.

Tom L
Sep 8, 2011 - 9:55am

The Chart Above

This time it's different iff the Swiss Intervention is the inflection point in the currency markets, ie. a return to gold as the safe haven play. In the past the Swissie was backed by gold, this time it's run to that line w/ no gold backing, b/c the Swiss sold it to get into the IMF. So, it's safe haven status is mostly, in The Bernank's words, 'tradition.'

Now the Swissie is just another crappy fiat PoS. Pigitha's better-looking sister. But, it's still a P.I.G. pig.

So, yes, this time it should freaking be different.


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