There He Goes Again

485
Mon, Oct 24, 2011 - 7:55pm

At some point, I guess I've got to stop and decide whether or not it's just wishful thinking.

About two weeks ago, I gave you this:

https://www.tfmetalsreport.com/blog/2658/rally-cometh

I'd been itching for a gold rally but, until now, it hasn't developed. In the post above, I called for a rally in the HUI to 560-580 and it made it to 560 before falling back to 500 last week. A sharp rally has it back to 538 tonight and it still looks like 580-600 is in the cards. That would be about a 10% rally from here.

But what's got me really worked up is the latest CoT survey. Remember how I always say that the only consistent way to make money trading the metals is to sell when all looks rosy and buy when all looks dreary? The tough part is to get yourself to actually follow that discipline as it goes against basic human nature. Put a different way, history has shown that you want to buy with the banks when the specs are selling. Additionally, you should sell when the specs are strongly buying. Now, back to that CoT survey. Note these week-over-week changes:

Large Specs long: -3901 contracts

Large Specs short: +3623 contracts

Small Specs short: +1878 contracts

The speculators (those consistently wrong) continue to rotate away from long to short.

Commercials (banks) long: +2592 contracts

Commercials short: -6733 contracts

The commercials (those consistently right) are covering shorts to and some are even going long.

Now, chew on this for a moment. The dreaded and evil BoA puts out a report that warns of further U.S. credit downgrades before year-end.

https://latimesblogs.latimes.com/money_co/2011/10/us-credit-rating-debt-downgrade-warning-merrill-sp-moodys-fitch.html

Hmmm. Do you recall what happened from 8/7 to 9/6? How about a $250 gold rally, primarily caused by massive bank short-covering, all of it following the initial U.S. downgrade from S&P. Think of that CoT survey again. Could the banks be trying to front-run the next downgrade?

So, let's just go ahead and put it on the record: I'm expecting a 10% rally in gold before 12/1/11. This gives us a minimum target area of 1780-1840. Let's split the difference and call it 1810 or about 10% UP from where we stand this evening. That type of rally corresponds with where we are on the charts, too:

Soon, we will burst through the tough resistance around 1700 and begin mounting this assault on the backs of continued bank buying as well as the short-covering of the misguided specs. If December plays out similar to Decembers past, gold will then finish the year somewhere between 1750 and 1800, continuing the trend of 20-25% annual returns.

I wish I could be as enthusiastic about silver but I'm not. Though I still expect a stellar 2012, the remainder of 2011 will find silver continuing to struggle with high margins and a pit bully named JPM that doesn't appear ready to begin covering its massive short position just yet.

So, there you go. Once gold closes above 1705, my confidence in this forecast will grow considerably. At that point, I'll look to buy some Dec11 calls. Maybe buy some outright or spread some 1700s vs some 1800s. We'll see. I'll keep you posted.

TF

9:50 am EDT UPDATE:

WOPR is in charge this morning as the PMs are being sold because of this headline:

https://www.zerohedge.com/news/ecofin-meeting-cancelled

Down goes euro. Up goes dollar. WOPR sees dollar up. WOPR sells gold and silver. Yawn.

Perhaps some human buying will emerge soon. At around 1630-35, the hourly chart holds the promise of a little reverse H&S bottom of off last week's test of support near 1600.

Hang in there and enjoy the ride. More later. TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  485 Comments

Shill
Oct 24, 2011 - 8:23pm

10% Move sounds good here

10% Move sounds good here Turd, think I'll grab a few GDX calls. Dec and Out. But I am holding my Puts as well, even though they are hemorrhaging.

As we all have learned nothing goes up in a strait line forever.

Bstone
Oct 24, 2011 - 8:25pm

@Doc

That was my first time seeing your first post saying someone was first, being another first....So that's another first.

Sorry, got a little humor out of that, how long could this go for, haha.

Tesla
Oct 24, 2011 - 8:37pm

Doc - Resistance overcome and then

tested without a breakdown then becomes support!

Heres an in depth explanation of the whole concept brother:

https://stockcharts.com/help/doku.php?id=chart_school:chart_analysis:support_and_resistan

TheGoodDoctor
Oct 24, 2011 - 8:48pm

James Turk Report - Why Gold

James Turk Report - Why Gold Will Go Above $11,000

https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/10/24_...$11,000.html

With continued uncertainty surround the gold and silver markets, James Turk, Founder & Chairman of GoldMoney put together the following piece exclusively for King World News. One of the primary reasons why Turk wanted to release this to the KWN readers globally is because he is often asked what is his basis for predicting $10,000 gold and higher in his King World News interviews. The following extraordinary piece is what resulted...

This made me laugh at the the thread the other day calling out Turk and the other "cheerleaders" on KWN. This piece makes it almost seem as if Mr. Turk were reading the blog here. Or perhaps just a rebuttal to the naysayers. Hmmmmm.

Economical Disaster
Oct 24, 2011 - 8:50pm

The making of computers,

The making of computers, electrical equipment, machinery, autos and other goods may shift back to the US from China..

Only if we all are under communist rule, making $1 an hr, free housing with military checkpoints on the street..or FEMA CAMPS.

That's where we are heading. Yup I can see it.

¤
Oct 24, 2011 - 8:53pm

World power swings back to America

World power swings back to America

The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.

The making of computers, electrical equipment, machinery, autos and other goods may shift back to the US from China. Photo: AP By Ambrose Evans-Pritchard, International Business Editor

5:53PM BST 23 Oct 2011

Assumptions that the Great Republic must inevitably spiral into economic and strategic decline - so like the chatter of the late 1980s, when Japan was in vogue - will seem wildly off the mark by then.

Telegraph

readers already know about the "shale gas revolution" that has turned America into the world’s number one producer of natural gas, ahead of Russia.

Less known is that the technology of hydraulic fracturing - breaking rocks with jets of water - will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford in Texas, and other reserves across the Mid-West.

"The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d)," said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.

Total US shale output is "set to expand dramatically" as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009...

https://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/88446...

¤
Oct 24, 2011 - 8:58pm

Angela, Nicholas and the dancing circus monkey

European Circus

Miguel Villalba Sánchez (Elchicotriste)

24 Oct 2011

The quote of discredit that Berlusconi and his administration has reached in the E.U. is over the top. Italy is paying for the shameful activities of that political disgrace. I wish the magnificent italian people will be able to get rid of that dictator as soon as possible. Had to draw something about this issue.

Brotha Bob
Oct 24, 2011 - 9:00pm

Turds Rally

Thanks TF. Much rather you give us a rally, then show us your bottom. (yes, more bottom jokes, could not resist). Things are starting to improve. A rally as predicted would be a welcomed sign, especially for my ETF calls. The charts are looking better. But, this market will be driven by news from Big Ben's Printing Press, French Banks, Greek Haircuts, and German Refusal to Fund. Things that no chart can show you. I sitting on the sidelines, until some real news happens I don't care if it rains or shines as long as I got my stack of silver dimes.

¤
Oct 24, 2011 - 9:09pm

Click the numbers in chronological order

https://www.fsmitha.com/h2/map23eu.html

(go to the website if this site doesn't allow the interactive part)

Europe and the Middle East, 1939 to 1942

(the dotted red line represents the boundary of the Soviet Union, June 1941)

¤
Oct 24, 2011 - 9:11pm

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