Stand Back

204
Mon, Dec 12, 2011 - 9:23am

I trust that today's action doesn't come as a surprise to anyone. If you are still trying to trade this "market", I hope you are short.

Rather than regurgitate all that we've discussed since last Wednesday, let's just sum up:

1) Central banks are lending gold to the bullion banks at a negative rate of over -0.5%. This means that the EE can borrow gold and sell it on the Comex or LBMA and actually get paid interest to do it! The last time we saw lease rates this low was back in September and we all remember what happened then.

2) EE selling has now turned the charts decidedly negative. WOPR is using this information to accelerate that downward pressure by mindlessly spitting out sell orders.

3) Actual human beings are selling Comex paper because they are finally learning via the MFG-HSBC lawsuit mess that trusting your broker to hold and/or deliver your precious metal is a fool's errand.

That's a lot of combined selling pressure. Regardless of the fundamentals, paper metal is going down. How far? Well that's the question, now isn't it?

It may be foolish to try to find support and a bottom by looking at the charts. What do I know? I'm just a Turd. However, there will be a point where investors and traders will halt the paper carnage, if anything because the paper system still exists and there will be an arbitrage opportunity with physical. So, what do the charts show? I'll let you draw your own conclusions but I think you can plainly see where ultimate support will lie. I wouldn't buy any futures, options, etfs or miners until we get close to these levels.

Lastly, just another word about the discussion I had over the weekend where "bulk" metal prices were mentioned. Please use your brains on this. Of course anyone can log onto Apmex and buy a couple of AGEs for 5% over spot. That's not what I'm talking about. I'm talking about big money. Big money. If you've got 20, 30 or 50 million dollars you're looking to move into gold and/or silver....and you want it in your hands and out of JPM or HSBC or Scotia...you are going to pay a very hefty premium. It appears to be something like $200 over spot in gold and $7-8 over spot in silver. Non-cartel metal in bulk size is very hard to come by. One only needs to review the MFG-HSBC lawsuit documents to get a feel for why.

I've got a last of 1666 in gold and 31.07 in silver. If you're trading, I sincerely hope that you heeded my advice back on Wednesday and Thursday and used the strength of Friday to liquidate some longs. If not, be prepared for at least another $100 on the downside. Paper is de-coupling from physical and the process is going to be ugly and bizarre. We are sailing into uncharted waters where anything is possible.

Be cautious. Do not use margin or leverage. Buy physical only. Prepare accordingly. TF

About the Author

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  204 Comments

Dec 12, 2011 - 9:30am

But I should add

None of this changes my outlook for 2012. In fact, it only enhances my confidence.

Gold and silver are going to dramatically appreciate against every fiat currency next year.

jmmergott
Dec 12, 2011 - 9:30am

watch the 150 day MA

So far it hasn't failed on a closing basis in about 3 years. just saying, although i am cautious too.

-J

ps first?

OC15
Dec 12, 2011 - 9:31am

Furst!

By physical only folks.

OC15
Dec 12, 2011 - 9:32am

Paper gold and silver?

Or real gold and silver Turd?

Violent Rhetoric
Dec 12, 2011 - 9:37am

Looking at the 5 year

Looking at the 5 year charts I fear we may see a 24 handle on silver before this is over and low 1500's on gold.

GoldMania3000
Dec 12, 2011 - 9:41am

Year is almost over

Maybe ill get a coma induced and i can wake up around march:)

GoldMania3000
Dec 12, 2011 - 9:41am

Year is almost over

Maybe ill get a coma induced and i can wake up around march:)

boatman
Dec 12, 2011 - 9:41am

sheep shearing

before BEN mentions the "Q" word tomorrow????

you don't think they're all back slappin buddies do you?.......nah........you think?

TheSilverJournal.com
Dec 12, 2011 - 9:42am

FOMC

Tomorrow's another FOMC meeting. It seems like few are expecting Bernanke to announce another buying program, but he has to do so soon.

Air Garcia
Dec 12, 2011 - 9:43am

@OC15: Real, bro, real. physical

the paper markets are getting "found out" in other words ... i don't know what your history is on this, but the paper gold is "sold" 100x for every 1 oz of real. in both silver and gold. it's supposed to be a 1-1 ration, but it's a 100-1 ratio which is kinda bunk.

Go buy physical ... now looks like a great opp to buy and hold phusical - in your hands.

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