There He Goes Again

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:

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.

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.


9:50 am EDT UPDATE:

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

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

turd [at] tfmetalsreport [dot] com ()


Bay of Pigs
Oct 25, 2011 - 3:41pm

silver price

London closing prices.

9/21 $40.25

9/22 $37.85

9/23 $32.90

9/26 $28.16

So why is $35 a significant number? Will silver go straight back up to $40? Let's wait and see.

Oct 25, 2011 - 3:41pm


Gold Equities are all UP!!!

Oct 25, 2011 - 3:40pm

Howdy turdites

First post, quick question- So I finally got back to even or close to on several miners in au and ag. I put a trailling stop on a several for half my shares. Reason is The last few weeks sucked watching and being out of powder. I like my plan, just worried about another raid overnight and sucked out before the open. I have been reading TF for over four months and seeing his video a couple of weeks ago made me say why not join, first blog for me to BTW. Wish I would of found y'all a couple years ago. It's lonely on your own and everyone looks at you like you're one of "those". I love the one stop shop for the info and leads and my wife now thinks I have obsessive compulsive disorder. H/T to y'all. I feel like riding the swell up, they want more skin in the game, and then another beat down to lower their shorts and yada yada. 1580...? Just wanting to capture what I can then pull back for a lower price point. Thoughts... Thanks

Oct 25, 2011 - 3:40pm

"The idea that you need all the extra crap from mercury to..."

Roger that. Imo Vaccines = stealth WMD, with plausible deniability built in to boot!

Oct 25, 2011 - 3:39pm

Absolutely incredible

Even rapid declines of the EURUSD or E-mini have no influence on the PMs. Like someone turned a switch today.

If the buyers were normal, profit oriented long buyers, they would come and go with the fluctuating of the market, especially with the price of the USD. You don't buy at every price and you also don't buy, if the Dollar gains strenght. Normally you see with a rising Dollar the buyers becoming less and the price gets under pressure. That's normal.

But today someone buys like crazy Au & Ag futures at the Ask-price, like there would be no tomorrow.

They don't even wait for the Ask to come down, they inject their bids above the Bid and buy the Asks immediately. The buyers today do not seem to want to buy cheap...

And thanks to Tesla, we also know, that todays OI did rise. This shows me, this behaviour is not short covering.

I'm very interested what the behaviour overnight and tomorrow will be. I would be not surprised to see this strange climbing up vanish within hours of activity.

Oct 25, 2011 - 3:35pm

Cut $1 trillion, lose 1

Cut $1 trillion, lose 1 million jobs, defense industry warns

More than 1 million U.S. jobs could be decimated by cuts to the defense budget if the congressional “supercommittee” can’t agree to its deficit-reduction target, a defense-industry-backed analysis found Tuesday.

The 12-member supercommittee has until Nov. 23 to find cuts of at least $1.2 trillion, or automatic cuts kick in. Half those automatic cuts, plus another $500 billion, would come from defense, for a total of about $1 trillion.


Oct 25, 2011 - 3:35pm

Ben Davies' speech at GATA's Gold Rush 2011

Monkey Business – Reality, Illusion or Delusion

It is an honour and great pleasure to be here before you all today. For those who have the good fortune of not knowing me, my name is Ben Davies. I am the co-founder and CEO of Hinde Capital, a UK investment management company. I want to offer you what I believe to be a truism. A golden truism:

"The Desire of gold is not for gold. It is for the means of freedom and knowledge."

Oooh, good one Ben!

Oct 25, 2011 - 3:35pm


To bad that most schools now require that children have the entire gamut of vaccines. Some of them are sound and good others are little more then speculative profit generators for pharma.

Oct 25, 2011 - 3:33pm

Careful with the shiny, This

Careful with the shiny, This is not the break you are looking for.

Oct 25, 2011 - 3:30pm

Just saying now would be a

Just saying now would be a good time to panic if your long here ( Equities ). If there is a 3:30 dump, the bulls might panic and we could see an additional 200 pt loss... take it from me it will be a rush to the exit.

Just saying, but what do I know. This Market was pumped for a reason, as I noted yesterday so the shadows already know the plan. 10,700 is the goal, and then we start all over again. If they would have dumped earlier we would have been hovering in the 8000 too 9000 area...We won't have any of that now will we.

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