As we begin what will surely be another crazy and wild week, let's spend a little time with the basics, just to be sure we've got our heads screwed on straight.
Let's start with gold. First of all, the OI and the CoT. As you'll recall, total open interest collapsed last week as the April contract expired yet there wasn't a full rollover of OI into June. This, in itself, is strange. That total gold OI is now back to levels last seen in September of 2009 (when price was near $1100) is even more strange. As of last Thursday, total gold OI was just 406,388. This is down an extraordinary 72,656 (-15.17%) since the price and OI peak on 2/28/12. Breathtaking and amazing. As will be continued to be mentioned here to the point of exhaustion: The only entities left trading gold on the Comex are Cartel monkeys and HFT-Algo WOPRS. The monkeys can paint the tape and the charts to trigger either buying or selling from the brainless WOPRs and profit in both directions. That this is currently the accepted mechanism for "pricing" the only true and historic measure of money and wealth in the world is literally astounding and, frankly, criminal.
Remember that the CoT report is issued on Friday afternoons but the data is compiled on Tuesdays. Therefore, the information is always dated and often subject to conjecture and interpretation. Case in point this week. On the surface, the gold CoT was not very bullish. Large specs (HFR-algo WOPRs) increased their net long position by over 16,000 contracts while The Cartel increased their net short position 19,000 contracts. (The other 3,000 net long addition coming from the small specs.) But remember, this is only through last Tuesday and what happened on Wednesday and Thursday? The total OI dropped by 11,000 contracts to its current 406,388 level. With price falling $34 over those two days, it's safe to conclude that much of the 16,000 spec long net increase in the CoT has already been drained back out. Therefore, the CoT is really neither bullish nor bearish and it's my belief that the true structure is nearer to the bullish levels of the previous CoT report of 3/23/12.
The gold charts continue to be neither bullish nor bearish, too, but with an obvious bullish theme. To note, on the 8-hour chart below, you'll see that every attempt to take gold down below $1650 recently has been met with significant buying. This support seems stout and points us to a very logical buying area for trading. On the weekly chart, note that the long-term trendline from 2008 is now above $1600.
One last thing about these gold charts. It always amazes me how certain levels continue to hold long-term significance. Notice that I've drawn the 1665 level onto these charts. An autographed Turd hat will go out to the first Turdite to correctly identify and describe, in the comments section below, the history and significance of the particular number.
OK, onto silver. The silver CoT on Friday was very bullish and, after the action of late last week, is still valid and perhaps has even improved. On the report, the large specs decreased their net long position by 2,500 contracts while the EE decreased their net short position by roughly the same amount. The EE net short ratio is now back to just 1.77:1, which is a level last seen on the CoT of 1/24/12 when price $32.03. All in all, signs point to a bottom here and we should be confident that a resumption of the 2012 rally is right around the corner.
One quick group of headlines before I go. The metals came under a little pressure earlier this morning when these headline suddenly crept up:
*FED'S FISHER SAYS U.S. ECONOMY IS IMPROVING
*FED'S FISHER SAYS U.S. ECONOMY IS IMPROVING
*FED'S FISHER SAYS LATE 2014 INTEREST RATE PLEDGE WILL NEED TO BE ADJUSTED
*FISHER SAYS FED SHOULD `SIT, WAIT AND WATCH' ON POLICY
*FISHER SEES TIME OF `SURVIVAL OF THE FATTEST' NOT FITTEST
And finally: *FISHER SAYS FED HAS `DONE ENOUGH' IN EASING
I certainly hope that none of this nonsense caught you by surprise as we predicted all of it last week when The Bernank gave his "dovish" speech. I "missed" by two days because Fisher was probably too busy golfing or surfing porn on the internet to be dragged out into the public for a speech.
"Look, there will always be "hawkish" and "dovish" statements by The Bernank and the assorted Fed governors. No doubt, after this speech by The Bernank today, later this week we'll get Fisher or KosherDakota rolled out to try to proclaim a counter message. All of this is simply MOPE and SPIN and means absolutely nothing long term."
OK, that's all for now.I hope that everyone has a terrific and glorious Monday. It's going to be a great week!