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 ()


Turdle GG
Oct 24, 2011 - 11:21pm

Copper on the way up again

Up nearly 2%, all of the move in the last 30 minutes

Oct 24, 2011 - 11:30pm

Europe makes our leaders look competent in comparison

Is europe trying to destroy confidence in their system? Do they really hate their feet so much, they'd shoot them off intentionally?

At this point, I get it - they're a bunch of spineless idiot wankers who can't make a decision to save their own asses.

All I really want to know at this point - is when do things start blowing up in their faces due to inaction? There are hard deadlines in amongst the muck - bond coupons have to be honored, for instance or bad things happen, right? Anyone have any clue as to when the hard deadlines are, where things start going BOOM because of a missed payment?

Oct 24, 2011 - 11:35pm

As far as bottom calling goes

It's still not obvious we've hit bottom. It is encouraging that each test made (and I count three of them) since that hammer candle - made higher lows.

Higher highs + higher lows = bull market

And combine that with the CoT data and the OI data, and I agree - I think it's reasonable the chance we're past the bottom is - maybe not high, but significant.

Breaking through that 1680 resistance will be the key though. Gotta punch through 1680 to get a new first down to use a football analogy :)

Oct 24, 2011 - 11:46pm

@The Vet

I was going to say basically the same thing. Turd is looking at trading charts - that's like the part of the iceberg that floats above water. If the physical market for 100oz silver bars is any indication, supplies are getting scarce.

Two Gun Tobin
Oct 25, 2011 - 12:09am

The Big Yellow Hat looks for Gold!

Here's a modern day prospector working a placer claim in the Sierra Nevada mountains outside of Placerville Ca.

He's got all the right gear, his pan, metal detector, and A BIG YELLOW HAT.. Thanks TF, its one hardworking hat.

donnojackshit The Vet
Oct 25, 2011 - 12:13am

@The Vet

The unaccountability of Government leads to tyranny! Government motherfuckers will perpetuate any sort of crime in the service of their job so that they don't affect the perks of their job-compartmentalising the morality of their actions much like the 300 steps completed by 300 workers performed by the nazis to murder people in the ovens- "I only extracted the gold from his teeth fillings". The Government employees should be accountable in a court of law (unfortunately the separation of the Judiciary from the Government has long since died), but more importantly the ethos should be to atone for their fuck ups. An experience like your family member suffered is so wrong - the media should be shaming the TSA. Of course this will never happen. The World is so fucked up and I blame mindless Government bureaucrats for most of it.

Oct 25, 2011 - 12:21am

Way, way off topic...but has

Way, way off topic...but has anyone been watching Netflix stock? It just got completely obliterated in after hours trading (down like 30%) If it stays in freefall mode I may just pick up a few shares for the hell of it.

Oct 25, 2011 - 12:23am


Not much sympathy for the Mints from me Turdle. Look at the year on year growth of the bullion business for the last 10 years and match your production accordingly would not be too demanding a task. Safely assume that the trend is going to continue for the next 10 years at least, or do they know something we don't, like "Oh I dunno, maybe future nationalisation, so we better not invest too much in production capability?!" Let's see, what else? Are they running shifts around the clock? Why not? Do they build inventory to cater for the cycles? Why not? Blatant gouging on buy/sell spreads? Why?

Oct 25, 2011 - 12:26am



They have all gone freakin' nuts and evil..... (I mean, I know they're evil, but it gets worse???)

Machinna stepping of her freakin' barfin soapbox...

Subscribe or login to read all comments.


Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Key Economic Events Week of 8/5

8/5 9:45 ET Markit services PMI
8/5 10:00 ET ISM services PMI
8/6 10:00 ET Job Openings
8/8 10:00 ET Wholesale Inventories
8/9 8:30 ET Producer Price Index

Key Economic Events Week of 7/29

7/30 8:30 ET Personal Inc/Spending & Core Inflation
7/30 10:00 ET Consumer Confidence
7/31 8:15 ET ADP employment
7/31 2:00 pm ET FOMC Fedlines
7/31 2:30 pm ET CGP presser
8/1 9:45 ET Markit Manu PMI
8/1 10:00 ET ISM Manu PMI
8/2 8:30 ET BLSBS
8/2 10:00 ET Factory Orders

Key Economic Events Week of 7/22

7/23 10:00 ET Existing home sales
7/23 10:00 ET Richmond Fed Manu Idx
7/24 9:45 ET flash Markit PMIs
7/25 8:00 ET Count Draghi/ECB policy meeting
7/25 8:30 ET Durable Goods
7/25 8:30 ET Wholesale Inventories
7/26 8:30 ET Q2 GDP first guess

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs