In The Woods

312
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

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turd [at] tfmetalsreport [dot] com ()

  312 Comments

BillAuAg
Sep 8, 2011 - 5:23pm

POx - What Now?

If you read charts, there is a message here

sevin
Sep 8, 2011 - 5:25pm
2turdledoves
Sep 8, 2011 - 5:25pm

71% clicked Other!!

Back to the poll, If you click on results 71% clicked "OTHER"!

edit--the poll was from Feb

On the other hand the Yahoo Poll which showed Ron Paul as winning was taken down.

cpnscarlet
Sep 8, 2011 - 5:28pm

USNews Poll - Lame Stream Media

Doesn't it just burn you up? If you have an engaged brain...if you can rub at least three neurons together...the poll is an insult, no matter what your political leanings are. How do these (USNews editors) people sleep at night and then look themselves in the mirror in the morning???

serf86
Sep 8, 2011 - 5:28pm

why bankers are desperate to cover shorts

They wanted low prices so they could accumulate physical. However, when so many others realized that fiat is dying, their added demand overwhelmed the bankers' ability/appetite to play the paper game against the physical.

If I am correct, it was a great game while it lasted. However, enough people figured it out. This game is over.

Without a doubt they will try to invent a new game to prevent others from accumulating physical gold. For now the bright light of truth is causing the cockroaches to scurry into the dark corners to hide their faces. But, as soon as we become complacent, they will bring forth a new scheme. Man the watch towers and do not fall asleep.

sevin
Sep 8, 2011 - 5:30pm

@2turdledoves

Nice poll! and in the comment section everyone asks about Ron Paul. This poll might beat the poll from earlier showing Paul was tied with Perry on the bar graph when Paul had over 40% of the vote and Perry had 22%. (I think it was Perry).

margaritatime
Sep 8, 2011 - 5:38pm

@rear flank

My opinion on plat, I could be wrong, but this is my reasoning;

The fact it has not been used as a currency doesn't bother me. I do not think Ag / Au will be used as a currency going forward [per se]. I am using currency loosely, because both are a monetary device. As far as an exit strategy, I cannot conceive in the near term any type of exit from physical PMs [that is just my take]. I think the sooner you can buy, and the longer you can hold, the better off you will be. As long as fiat currency means anything, PMs will have a trading value. Beyond that, it is "we will see when we cross that bridge".

In some ways Pt has a dual use as a commodity like that of silver, but with much different fundos behind it. Pt is a very rare metal in comparison to that of other metals. It's industrial use is trivial though... Like silver, if there is a rapid decline in it's industrial use [auto manufacturing, or a new technology for catalyst] it's hard to say where the price point will end up. The same argument could be made for silver in it's industrial applications [if photo, bio, solar, electronics] demand decreases reason would say an excess supply would develop on the market.

With that said though, I do not think a reduction in it's industrial demand [of either metal] will have anything to do with it's monetary value.. I realize that goes against wisdom, but the demand will always be there. I certainly would not hold Pt before gold - but it would be speculation on my part to hold it as a possible future trade for Au if the ratio were to really get out of hand (right now Au and Pt are roughly 1:1 - historically that has not been the case, anymore than Ag being 40:1 to Au as it currently averages).

I just thought it might be interesting to hold a bit of Pt and see where it goes. It could be a nice trade for some Au in the future.

@RaRa - nice looking coin!

@Cpn - I think if I decide to do it I will use gainsville, have always had good transactions with them.

madcow Jive Dadson
Sep 8, 2011 - 5:53pm

Whipped this thingy up in

Whipped this thingy up in like 2 seconds. Wanted a better western/texas font tho:

Dakini Jake
Sep 8, 2011 - 6:34pm

@ Jake ~ Missing Dubya ~

Stephen Colbert's fantabulous roast of Dubya at the White House Press Correspondent's Dinner

Video unavailable
SteveW trinistand
Sep 8, 2011 - 7:54pm

@trinistand Novagold down over 10% today

There is an updated preliminary assessment for the Donlin Creek project in Alaska, 50% jointly owned with Barrick that was released yesterday.

"In connection with this update, Donlin Gold LLC, owned equally by wholly owned subsidiaries of NovaGold Resources Inc. ("NovaGold") and Barrick Gold Corporation ("Barrick"), has provided its owners with preliminary capital cost estimates of approximately US$6billion for the Project with an additional approximately US$1 billion for the natural gas pipeline. The previous capital cost estimate for the Project released in April 2009 was US$4.5 billion and did not include a natural gas pipeline. NovaGold was advised by Barrick that it will also discuss these preliminary capital costs estimates for the Donlin Gold Project at its Investor Day taking place today in Toronto, Canada."

https://www.theglobeandmail.com/globe-investor/news-sources/?date=+20110907&archive=ccnm&slug=201109070726055001

Mine development doesn't come cheaply these days but Nova has a partner with deep pockets.

Sorry if this has already been posted.

alpha monkey
Sep 8, 2011 - 8:00pm

I I don't know about all that...

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!

OH NO!! The TBTFs have to take more free fake money from the fed to buy real assets... Somehow, I don't think they are discouraged from anything. What does it cost them? Asking the fed for another billion or so, that's all.

T FFF
Sep 9, 2011 - 12:37am

@ FFF regarding SVM

Interesting question now that eyes are on SVM and their drama playing out. I own a large core of SVM at 6 from last year. I would add more long at 7-750 area, but not above 8. and I would continue to buy boatload below 7. If market crashes,like 2008, and SVM goes way down, it would remain an essential core that I buy more at ....?? 3?4?5?

but right now, the buy zone for me is 7- 7.25-7.50 area

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