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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  485 Comments

Tom L
Oct 25, 2011 - 10:39am

Trader Dan's Post

This morning's action in WTIC vs. the S&P now makes Dan look a little foolish, not b/c he is (Dan's excellent), but b/c the S&P is down while WTIC has continued to rally.

Gold and Bonds and Oil up? Sounds like war or sovereign debt implosion to me.

Ta,

Hammer
Oct 25, 2011 - 10:41am

There has been another major

There has been another major hiccup in the eurozone's plans to announce a final rescue deal in Brussels to try to end the turmoil in the euro area.

The Polish presidency of the EU has confirmed to the BBC that key meetings have been postponed.

The EU's 27 finance ministers and the 17-nation Eurogroup will not now meet on Wednesday, although a full emergency heads-of-government summit will happen.

This could mean a delay to final announcements on solutions

seems to be the cause

https://www.bbc.co.uk/news/business-15451328

pforth
Oct 25, 2011 - 10:43am

Of course gold is up today...

Gartmann recently flipped to long on gold and everyone knows that he has a perfect gold trade record ;)

LaMachinna Tesla
Oct 25, 2011 - 10:43am

Tesla/Victor

Thanks! Sick, sick, sick of all this kwap! Feel better now that I barfed it out - Thanks again.

Have a good, screamin' eagle day comrades

LaMachinna ivars
Oct 25, 2011 - 10:46am

whad up, Ivars

pls do be a good turdite and share........

¤
Oct 25, 2011 - 10:48am
Tyler
Oct 25, 2011 - 10:50am

keep the posts coming

so much info to keep track of and find. great to have a lot of it here

Shill
Oct 25, 2011 - 10:50am

Just too touch a little on

Just too touch a little on the Case Shiller BS

Here is an article showing just how underwater average American households are and which states are experiencing the most severe problems:

https://viableopposition.blogspot.com/2011/06/how-underwater-are-america...

If households can't afford to spend, America's GDP growth, which relies largely on increases in consumer spending, will ultimately begin to shrink.

Bstone
Oct 25, 2011 - 10:51am

Gold and Silver Rocket!!

One thing that makes my day is seeing Gold go straight up, hopefully that rocket has enough fuel to reach the moon.

Looner
Oct 25, 2011 - 10:54am

Didn't we have a huge boost last tuesday?

Right about this same time?

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