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

Shill
Sep 8, 2011 - 10:22am
ScottJ
Sep 8, 2011 - 10:25am

Establishment vs Freedom

Rick Perry (Bilderberg "EE" Pick) vs Ron Paul (Message of Freedom)**

Note the hand on Ron's arm and the domineering mannerisms Rick Perry displays. Body language that suggests domineering over one another, instead of cooperation.

And a bonus, here are the few questions the MSM asked Ron Paul last night (yet they were framed and avoiding him the whole night).

Truth is Treason in the Empire of Lies.....

Ron Paul Highlights in 9/7/2011 Presidential Debate
Scrylla
Sep 8, 2011 - 10:28am

TF's Options

Turd,

Just out of curiosity, do you have a default way to open up a spread position like that? is it equal dollar values or each, equal # of contracts, or do you just tailor the position depending on how you see the momentum moving?

Just wondering as calls that OTM must rise pretty significantly in price (relative to how quick the 50 calls would rise) if the underlying goes on a tear, wouldn't it get pretty expensive to close the short side of the trade? Aren't you kinda stuck just holding till expiry?

Shill
Sep 8, 2011 - 10:30am
agNau
Sep 8, 2011 - 10:31am

Bubble?

These same commentators will be screaming "buy" while I am selling.A Contrary indicator. Meanwhile, back at the farm......I am buying shares. The HUI is a real trooper. I am still looking for 800+ this move. MANY will be surprised with the speed of the rise. As I have stated before we have now moved into the phase of the metals bull where more participants enter. We will see leadership move from metals to miners, and then back to metals. This has happened before. Watch, and position yourself accordingly.

WYO Silver
Sep 8, 2011 - 10:32am

Fed's Financial Repression of Investors

Interesting new video from BrotherJohnF concerning the Fed's Financial Repression of investors.

Solution? Physical gold and, especially, physical silver. Keep stacking, Turdites.

(The topic of Financial Repression begins at about the 10:00 mark in the video.)

https://www.youtube.com/user/BrotherJohnF#p/u

Bay of Pigs
Sep 8, 2011 - 10:32am

John Ing on BNN

He just said, "The pool of gold is limited, the pool of debt is unlimited".

Kind of sums up the situation today. Competitive currency debasement and the Race to the Bottom does make it different this time around.

Austerity is just a buzz word being thrown around by bankers and politicians who have no intention of cutting anything. Not in a meaningful way anyhow.

I look forward to watching gold clear $2000 and silver taking out $50. Then the fun really starts as the public starts to pile into this sector in a big way while MOPE goes down the drain. It's going make our heads spin.

Thanks Turd. Great post.

Tom L
Sep 8, 2011 - 10:32am

@shill

Can't build a 4th Reich without OPM now can you?

Ta,

NW VIEW
Sep 8, 2011 - 10:33am

SOUTH AFRICA & Lessons to learn

A friend in RSA sent me this article this morning and it shows the future.

https://www.leader.co.za/article.aspx?s=23&f=1&a=2571

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8/21 10:00 ET Existing home sales
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