No Charts Today (updated with a chart!)

258
Wed, Dec 28, 2011 - 10:20am

Because it's all just nonsense. The euro just dropped for no real reason. The incumbent rise in the dollar caused the metals to take the elevator down about 5 floors. Silver has broken through 28 and looks now to be headed toward 26. Maybe by next week we can begin to assess the damage The Cartel is inflicting. Until then, all we can do is watch.

Here's your euro headline, from ZH:

https://www.zerohedge.com/news/eur-plunges-thin-market-below-13000

I found this next article on Harvey's site last night. It was also highlighted on ZH yesterday. You absolutely must take time to read it today if you haven't already. It's a challenging read in that there's a lot of economic stuff that, if you're not patient with it, can glaze you over real fast. My advice is: be patient with it. Take your time and read it carefully.

https://www.zerohedge.com/news/why-ecbs-ltro-wont-stop-collateral-contagion

Just a few more words about OI and the gradual demise of the Comex. First, another link. This one is from JS Kim. He covers many of the things we began discussing here about three weeks ago. It's a good summary, though, and worthy of your time:

https://www.zerohedge.com/contributed/did-bankers-deliberately-crash-mf-global-crash-gold-and-silver-prices-0

As we speculated earlier this month, total OI in the metals continues to decline. Gold looks like it may soon fall under 400,000 contracts. Again, what I believe we are seeing is a trend of investors and traders simply walking away from the Comex. After MFGRAP, why would anyone in their right mind buy and hold gold and/or silver through that system? The drop in OI will be gradual but over time, as participation wanes, the Comex will simply become less and less significant in setting the physical price of the PMs.

We all have high hopes that PAGE will accelerate this demise. News yesterday caused great concern that the opening of the PAGE may be delayed or canceled.

https://www.bullionstreet.com/news/chinas-pan-asian-gold-exchange-in-trouble/683

I've tried to get some additional information on this but I'm not making much progress. It seems to me that this is a crackdown, by the Chinese government, on non-governmental exchanges and PAGE is, of course, a government-sponsored entity. Let's hope that all remains on track for a Q1 opening. I will, of course, pass along any additional information that I am able to gather.

As I close, gold is at 1575 and silver is at 27.67. Yikes! I fear that there is more of this to come as The Cartel is clearly in charge this week. There simply aren't enough buyers to counter all of the Cartel selling pressure and, once stops get triggered below previous lows, prices can fall pretty fast. Silver made a low last January around 26.50. That would seem to be where it's headed now. I'm still hoping that 1550-1560 will hold as a bottom for gold. We'll see.

Hang in there. Keep the faith. TF

12:30 EST UPDATE:

OK, I lied. I can't help myself. Here's a chart. Actually, it's a repost of a chart from last week.

What I was trying to demonstrate here was that history shows us how gold responds when it hits the main trendline. It has never sharply rebounded. Often, as denoted by the arrows, it skips along the line for 2-4 weeks before moving higher and away from the line. We are seeing the same thing play out today.

Of course this comes with a caveat. The MFGRAP may be changing the rules on this thing. IF gold drops convincingly through 1550 and heads toward 1500, all bets are off. IF, however, this primary trendline continues to support gold (as I think it will), then gold should stop somewhere between 1550 and 1560 before finally rebounding sometime in the next 2 weeks.

Obviously, we are at a critical moment in determining the future trend of paper gold. Watch things closely. TF

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  258 Comments

Endzeit abguy4
Dec 28, 2011 - 9:46pm

Re: abguy4

I just checked over @ APMEX. ASE's @ $31.58 = 26.99+4.59

That's a 15.3% Premium. Here's my analysis;

Paper and physical price have now actually parted company - most likely forever.

Nope. They can't sell at the current price, since they have bought it at higher prices. And it's the same reason, if sellers are "sold out" at too low spot-prices. They simply wait until prices recover or if their averaging down allows them to sell again.

Do not believe everything PM-pushers tell you.

Be Prepared
Dec 28, 2011 - 10:00pm

The Strength of Job

What we see is hard to fathom?

What we feel is hard to swallow?

What we hear is the quickening heart beat of our confidence shaking?

We are all human and the conviction of our beliefs and the understanding of the world is hard to hold when the rumbles of a powerful storm rattle our resolve, but, remember, this is by design. If committing oneself to the road less travelled was easy, then we would be crowded with confirmation and confidence and it wouldn't be the road less travelled.

What We know is that the world is in serious motion and TPTB want to cloud your conviction and re-establish the illusion of their dominance. This illusion has been crafted to make you feel powerless against the tide of their supposed strength and to resign yourself to your serfdom. Freedom is a hard place to stand and the Founders of our Nation knew that this country must always revolve around the sound money of silver and gold. The Sound Money you now hold is the bridge through the valley of their destruction and what you hold now is your committment to make it through to the other side with some semblance of the sum total of your life's labor.

Though your emotions swirl around you and the temptation to abdicate what you saw so clear only moments ago, you must be resolute.....your understanding your armor........your belief in the truth your guiding light. If you are looking for all those around you to agree and for everything you want to come without pain, then this road and this path may not be for you.

This path is one of common sense and durability. If you don't have a plan, make one and a detailed one. I have often gone back to mine to gain a steady head when my focus strayed from my chosen trail. Don't convert more FRNs than you can such that you risk your plan. If you want to be rich, then go be rich....but PMs by themselves will not get you there. PMs, as part of a bigger picture of wealth preservation, serve their purpose to hold the line of your hard work...... that's all..... that's it. Buy when you can.... Sell when you must, but always work your plan. Know each step against each day towards the conclusion of each week as they fold into each month and as they progress into years. Patience and Planning. Belief and Fortitude. These are your call signs that you must whisper to yourself when the winds, like today, try to blow you from your roots.

Be Prepared

Stratajema
Dec 28, 2011 - 10:25pm

Never forget...

When gold passed $1,200 and silver passed $21, you (and I) became speculators. Before that point we were investors. That is a big difference in perspective.

2012 will be the year that the paper price separates from the physical price because of reduced supply. Although at the moment, unlike 2008, there is no shortage of gold or silver at the dealers at these prices.

TheObsoleteMan
Dec 28, 2011 - 11:07pm

RE:JIMMYTHEHAND

Yes, tightening credit back to pre bubble years is a good thing, but it is like shutting the barn door after all of the horses are out, and running off of the farm. I will always believe Greenspan knew what he was doing, how could he not? The bubble was blown on purpose; liar loans, falsifying loan docs, fake appraisals, loans to illegal aliens, collusion with the rating agencies, etc. The system was showing signs of distress even then, which is why he did what he did-INFLATE. As for banks can't be forced to loan out money, I'm not so sure about that anymore. BAC didn't want to buy Countrywide, but it was forced down Lewis' throat by Hank Paulson and Ben Bernanke. We have been in unchartered territory for some time now, I don't know what is normal practice in the financial system anymore, IT HAS GONE ROUGE. It is doing whatever it pleases now to survive, just like a wounded animal.

Pearl Kaptur
Dec 29, 2011 - 12:14am

Come on!!! Cheer up guys!!!

@ Tylerlem,

If it makes you feel any better i bought 10000 ounces of Silver and my average cost is 43 dollars. i invested 430,000.00, plus 130K of my retirement in the precious metals!! That is about 95 percent of my net worth! Think of it this way, what if you would have bought a property and it went down and it's still is going down? What if you would have invested your 200K in the stock market and lost most of it? Silver in the next few months will be in the 20's but it will go back up. Its gonna take a while but it will go back up!!! I have a gut feeling about this and believe me my gut feeling is usually RIGHT!!!

Terabyte
Dec 29, 2011 - 12:26am

# Endzeit

Likewise I just checked APMEX. Depends on what year your are buying as to the premium. Most appear to be about the same as when I bought there several months ago.

Interestingly, their looking at at least two weeks delivery on some of the Monster boxes. That's new since I bought. I think there is a bit of optimism in the thought that silver prices have diverted.

Endzeit Terabyte
Dec 29, 2011 - 1:16am

@KsTwister

What i described is not related to Apmex, it is valid for every PM-reseller.

Pearl Kaptur
Dec 29, 2011 - 1:59am
Mickey
Dec 29, 2011 - 6:33am

It is their bat and ball

Ifit was not for a mother load of what was then far OTM puts I bought months ago I would really be aggravated. Now have to figure out how much further this has to go, or if we see the huge bounce after some announcement where we see a 10 to 15 percent bounce in minutes like 2008.

Stormdancer
Dec 29, 2011 - 9:40am

SRSrocco

I can't wait to see your upcoming essays :). I came at this whole PM thing from a decidedly fundamental perspective from the very beginning. It's not a perspective that has received much attention in recent months, but it is that very perspective that has kept my hands rock steady. SRS you probably already know this so I'm really just riffing off your recent posts...not addressing you specifically as if this were anything new to you :).

Spot price is so "in your face" it truly is hard to keep heart from sinking as it plummets for many. For the well informed fundamentalist...not so much.

Though I know of no smoking gun, the vast preponderance of evidence indicates that silver is more rare on a per capita basis than it has ever been in human history. By a wide margin.

It is also more necessary for industry than at any time in human history...and growing rapidly. It has monetary characteristics second only to gold, and third place is so far below silver (probably copper) it's hardly a contender.

So what fundamental threats to silver's purchasing power exist? There are some, but one of the biggest is self-limiting.

My view of monetary demand is that it will rise until governments balance their budgets and quit borrowing to live (ie. never, under the current financial system), so I'm not even going to address that one.

So what about industrial demand?

Some facts (source: The Silver Institute):

1. Supply-Mine Production 2010 = 735.9 million troy ounces, divided by 32,150 = 22,989.58 tonnes

22,989.58 tonnes of silver were added to global supplies in 2010

1. Industrial demand = 487.4 million troy ounces, divided by 32,150 = 15,160.19 tonnes

15,160.19 tonnes of silver were consumed by industry in 2010

Ergo: Industry consumed approximately 66% of all the newly mined silver in 2010.

__________________________________________________________________________________

That looks pretty rough on the face of it. If we get a serious economic downturn and collapse of international trade for a season. that would undoubtedly start cutting into the amount of silver industry takes off the market each year.

But, that's not the whole story.

There is a unique factor in silver mining that mitigates the problem. In spite of the recent increases in production by primary silver miners, a full 70% of newly mined silver still comes from base metal mines. Primarily zinc, lead and copper, with a tiny fraction coming from gold or other mines.

What happens to zinc, lead and copper mining in a severe economic downturn? It falls. In direct proportion to the severity of the downturn. 70% of the world's silver output will fall with it.

Point? The point is that as economic distress reduces demand for industrial silver, the amount of silver available will also fall in proportion.

As demand falls, so does supply, which is price supportive.

I'm going to stop here to avoid writing a book, but there are many more facts and figures that support this thesis for those who wish to dig a bit and truly establish themselves in a sound knowledge of the fundamentals of silver.

And this is only one tiny aspect of one thesis (out of many) that argues for silver gaining in purchasing power for a long time to come.

Summary: As industrial demand for silver declines, so does silver production. Even if we get a severe drop in industrial demand, it is unlikely to affect the supply/demand curve dramatically. If this occurs in a climate of dramatically increasing monetary/investment demand, it won't even be noticed.

Fundamentally, silver is the closest thing to a sure bet investors have seen in our lifetime. And it's on sale :)

Get you some :).

We've already seen this same dynamic playing out over the past twenty years with reference to photographic silver, the biggest red-herring out there.

But, that's another book.....

Animal Sacrifice
Dec 29, 2011 - 10:19am

@Save America 1st GSR

If you are considering a GSR play, you may wish to wait; I expect the ratio to widen. Also, based on the ratios between Gold, Silver, Platinum, & Palladiun, Platinum is currently the cheapest precious metal & I switched 100% of my paper gold & silver to PPLT. My family has been stacking gold since the 1930s & silver since 1964 & as another poster aptly posted if I said how many physical ounces of each I own you would call me a liar. But I own no physical platinum so am doing that in my IRAs. I don't bother switching between my gold & silver because it would create huge taxible events if I did it in the USA & there is no really good economical way to do it here. I love gold the most & have 10x the ounces in physical gold as ounces in silver & am just leaving it that way (YMMV IMO etc.) Directed to another poster who suggested that metals might follow their pattern from 1980 & post (i.e. crash down & flat for decades) that is certainly possible. I lived through & stacked on both sides of the Hunt brother debachle. I can easily see silver dropping below $15/oz. Just because this site's motto is "The end of the great Keynsian experiment" does not mean that it is truely ending & does not give licence to flame those who point out this fact. Reading only gold & silver bug & economic catastrophy blogs gives the reader a right good blind spot. I am not in metals to make fiat, I do not hold then as insurance thinking the System is going to collapse. I am in metals because I love to see their gleam & feel them on my skin (esecially gold and palladium.) Ibú Ayé fun o mi opolopo owo

Brimstone
Dec 29, 2011 - 11:05am

Inflation/Deflation

Happy holidays all!

Now please allow me to beat a dead horse;

I have been thinking about the whole deflation/inflation issue lately. Short of a spectacular bout of hyperinflation, i am not sure how deflation is avoided given the fact that our current fiat is "debt money" and that the debts in the fiat system are so large (hundreds of trillions) that they can never be repaid let alone serviced.

Such a bout of hyperinflation is not currently a likely outcome as i see it, because it would promptly cause widespread revolutions removing the current powers that be, and they have no intention of leaving any time soon.


I can see a sort of Bi-flation occuring where fiat becomes essentially worthless in short order despite government decrees (inflation), while the real price of goods in non-fiat currencies (gold silver ammo, sea shells, oil etc) drops rapidly(deflation) effectivly generating BI-FLATION.

I just am not seeing how a "traditional" inflationary event can occur with the massive debts that are unpayable and will be defaulted on, which is the destruction of large amounts of fiat currency given the debt money character of modern fiat.

The BI-FLATION mode makes more sense to me because it is a much more transparent event to the sheep. The sheep will still moan and knash their teeth but are much less likely to break out into revolt. It is a much more controllable event (in relative terms) for the current powers then a singular event of inflation OR deflation.

Any thoughts?

TechTrade Bay of Pigs
Dec 29, 2011 - 12:36pm

Silver & Natural Gas @Bay of Pigs

I am only comparing the silver market chart and technical indicators to that of natural gas, nothing to do with the fundamentals. Yes, there is plenty of supply in NG. Fundamentally, long term, silver SHOULD be much in demand. But right now, for all the various reasons discussed, it's not, at least not paper contracts, and not the miners. Something will have to change fundamentally in people's perceptions to make them want to be buying this stuff again, other than the gold bugs. As long as there's risk aversion and the dollar remains strong, it's hard to see any big rallies in gold and silver, unless something really fundamental happens to awake interest in it, and turn the charts around. Once downtrends are established on longer term charts, they tend to go through the full cycle.

TechTrade Vince
Dec 29, 2011 - 12:44pm

Re: Condolences by Vince

RE: Condolences?

Submitted by Vince on December 28, 2011 - 9:07pm.

Such a great post, Vince.

Patrancus
Dec 29, 2011 - 1:37pm

can you wait just a wee bit longer?

at these bargin prices can you wait a wee bit longer for the global elite to finish filling the bunkers to the brim with physical?

Classic Movie Line #51
Vagabond
Dec 29, 2011 - 9:16pm

Silver Poised to explode?

Guys, I'm no doctor, but I think I see a pattern.

Confidence is incredibly low. There is a near perfect double bottom. And look what happened last time we saw this pattern.

vamoose1 pforth
Dec 30, 2011 - 4:02am

@ pforth

Such a great post. I am with you on the other side of the mast This is one tough game even when untrammelled by straightforward criminality, and when i saw those 5 margin increases in 8 days in May following the Sunday night access massacre, jesus christ, i have or was in this business from age 16 as a summer student until 56, thats 40 years. Plus another ten as a trader. .

I saw a few things in 50 years but that turned me white, that was brazen. , transparently brazen. You have me thinking. Then to have motherF....MF Global walk casually off with a billion two in seg client money...no wonder there is no buy side, but let me try and dredge up some positives. For the hell of it

Well. hmmm. so you sell, now you have their rotten fiat, and we know that this is worthless many times over. So, any improvement might be frying pan to fire stuff. I prefer phys..

You didnt mention this naked shorting which has massacred the stocks, and a regulatory regime that is paid off and just chuckles.

Im a metal head mostly the fizz, i am presently buying the stocks with my d...in my hand scared chipless into the tax loss selling which is now over.How do we put a stop to this naked shorting , when they kiss zero? I have a few not far off, and I have no answer. It occurs to me to consider how far down can they compress them, until they get caught by takeover bids...its probably close. A couple of those will cool their jets.

It can be fairly stated that JPM is FRANTICALLY reducing that short position, (at least the published one) what happens when they get flat, then whats the incentive, they are only jerking off and trading with themselves anyway, as you said, it looks like MFGlobal was engineered to forestall a Comex default by preventing longs from standing for fizz delivery. Thats raw desperation, desperate naked criminality, and i choose to read it bullish, it simply reconfirms the obvious, THERE IS NO PHYSICAL SILVER IN SIZE, and i want to buy that, not sell it. They are telegraphing weakness.Excellent.

Hmmm, who is left to terrorize? Nobody, they have been gone since the May Massacre, , followed by two rinse and repeat raids such as right now now for pricing yearend bonus purposes.

How high is high, how low is low, how over red rover is oversold?? This looks pretty oversold to these rheumy old peepers.

Silver traded at 50 in 1980, 31 years ago, granted it was a cooked number, probably about as cooked as 27 in the other direction in 2012 dollars. 50 dollar 1980 silver is give or take 390 in 2012 dollars, which is a long way from 27.

Expressed inversely, 27 dollar silver in 2012 dollars, is about 3 dollars per ounce in real money, in 1980 dollars and even 1980 dollars were no trip to Hollywood, we were even then ten years into the fiat mission that commenced in 71, 27 is a bloody gift in real terms.

China has a corner in rare earth minerals, and this holiday week, they just tightened the export screws tighter. I wonder how good the sixth fleet is rowing Silver is a RARE EARTH METAL!!

China has 3.2 trillion in US reserves, and they would be delighted to put that number to zero. Are we just going to give silver to them for a song? Should we really be worried about the buy side for silver with 1.2 billion covetous chinese buyers who could take the entire silver market a thousand times over?

One last one, in 1980, in the middle of the Hunt corner, there were 11 billion ounces of above ground silver gathering dust in every central bank in the world. They now have none, none. its in landfills and unrecoverable economically until its about 1000 an ounce.

We are told we still have a billion ounces above ground. Ya rite. Horseshit. In other words its down 92 percent since 1980, and the ostensible production deficit is about 400 million ounces annually Thats panic stations at Apple and Microsoft and Boeing and 50 thousand manufacturing facilities of every imaginable description around the world, it could crystallize in panic buying tonite.

Clutch that sturdy mast mr. forth . You are going to be very very rich, starting right fucking now. .

Monedas
Dec 30, 2011 - 6:53am

Market Sell Off Is A Cheap Paris Hotel !

Remember Europe on $5 a day back in the 1960s ? Those charming flea bag hotels with the bidet (a kind of liquid panty liner) and washing your stinky nylon (I'm talking men's socks !) socks in the wash basin/urinal ? You wrang them out as completely as you could then hung them on the window latch ! I even used the torniquet method of looping them over the nozzle and twisting ! You wanted to get all the loose water out so they would dry over night ! A "Smack Down" is the same.....they want to wring out every last drop of loose silver from weak, undeserving hands ! Man up, stop whining, put on a fresh panty liner and go out and resume stacking ! Monedas 2011 Comedy Jihad My Hemingway Years !

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