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

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Shill
Sep 8, 2011 - 3:00pm

As I noted the witching hour

As I noted the witching hour something will give, and it has...to the upside.

Go Get'em folks. A nice vertical climb into the close will give us a nice going into the weekend long parting gift lol

¤
Sep 8, 2011 - 2:57pm

The Blue Pill

You never disappoint.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

More Bernank and the moment thoughts...

Maybe the Bernank was just "off' today and not feeling great. He's human (maybe) lol

What I think I saw, was a man who is under enormous pressure for "the answer" and it's getting to him. And he has none.

What I think I saw, was man who has come to grips with the future and he's read the writing on the wall and accepted it. He knows where this is headed and how close it is and how it unfolds.

If we see the same type of performance at the next meeting on Sept. 21/22 from him body language and speech/voice inflection wise, then it's confirmed imo.

We'll know if he is going through the motions because he'll telegraph it loud and clear. He appears to be a man who has come to grips with reality and his place in it. The pressure must be enormous. How could it not be?

That's what I think I saw in the man today.

Jake
Sep 8, 2011 - 2:55pm

BREAKING NEWS: THE MANCHILD MAY HAVE TO POSTPONE HIS SPEECH

He Wrote his plan on a napkin from the clubhouse and it blew onto the green at the 18th hole: He's Got 4 Hours to Find it!

Tesla
Sep 8, 2011 - 2:54pm

@California Lawyer

I agree 100%

stoneeh
Sep 8, 2011 - 2:52pm

Now would you look at that

Now would you look at that POS fly!

exiledbear
Sep 8, 2011 - 2:52pm

Heh

The Gold OI decreased almost the same amount as that 7000 short position. That's what I figured, they can take the price down in the short run, but the market is now big enough to absorb shenanigans like that. I suspect (I don't know, but I suspect) that whoever holds those swiss gold contracts will want to take delivery. And whoever it is will walk away and not come back either, I imagine too.

Years ago, 7000 contracts would've destroyed the gold market. Now it's just a temporary setback.

murphy
Sep 8, 2011 - 2:51pm

Tom, Vet and Mikey

Thanks for all the input. I may post it all on Terri's option thread, it may help newbs like me. Thx again

jlee2027
Sep 8, 2011 - 2:51pm

Yahoo takes down Ron Paul debate poll winning

This article included a debate poll to vote for Last Night's GOP winner. Ron Paul was clearly ahead and Yahoo has now, apparently, removed the poll!!!

https://news.yahoo.com/now-know-perry-doesnt-debate-reason-143833846.html

Ah, a refresh and it's back up? Never mind...

Lord Koos
Sep 8, 2011 - 2:47pm

"German Politicians Want

"German Politicians Want Italy And Spain To Sell Their Gold"

Well that would work out really well for the EE as it would hammer down gold prices, hard. Hopefully these sovereign nations will not buckle under the pressure from their partners. Of course the USA would love to see them sell the gold as well.

margaritatime
Sep 8, 2011 - 2:46pm

Eco Disaster

Sorry, I disagree... That statement is parable to saying China has no gold reserves. Perhaps you should look in to Canada's philosophy of holding 'ore in the back' with it's principles in mining. [Federal Government Land acquisitions and Sensitive Lands reclamation projects that coincidentally included over 30 inactive Gold & Silver mines.] Canada has been amassing large amounts of gold reserves - albeit quietly. Don't believe everything you hear from the muppets.

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