No Time For Victory Laps

Thu, May 17, 2012 - 5:31pm

Yes, it feels good to finally get the short squeeze I've been calling for. No, it's not time for dancing in the streets. At least, not yet.

It's been a frightfully long day and it's going to be a long evening, as well, so I have to keep this somewhat brief. Yes, today, we finally had our short squeeze. Note that, once again, the move was "contained" at the 2% level. No matter. It's just good to be off the floor. The hints for today were actually placed yesterday. If you've been following my almost-daily analysis of the open interest, you'll recall that this recent, 3-week down move has been primarily driven by new spec shorts being added to the market on nearly every down move in both gold and silver. Yesterday, we had a near washout in terms of price as both metals bottomed near (hoped for) long-term support of 1525ish and 26.50ish. The "tell" for today may have been in the OI numbers from yesterday as, instead of a continuance of the trend of new shorting (adding OI) driving down price, we saw OI decline yesterday. What does this mean? It means that yesterday was a washout. It was a day when some wary gold and silver longs finally waved the white flag and simply gave up. Capitulation. Not a massive, blood-in-the-streets, obvious capitulation but a capitulation, nonetheless.

When we get today's numbers tomorrow, let's look for a flat to down OI change. Yes, a few new longs were probably added today but they were likely more than countered by the closing out of short positions (the squeeze). I'll continue to monitor the total OI very closely for clues in the days ahead.

On that subject, we'll get another very interesting CoT on Friday, too. For the reporting week of 5-9/5-15, gold price fell about $48 while total OI rose by about 4300 contracts. For silver, price fell by $1.38 and total OI rose by about 650. Again, I am quite certain that the new shorts that were driving down price and raising OI were algo spec and managed money chasing downward momentum. Why? Because The Cartels are losing so much metal at these prices it would be utterly foolish for them to help drive prices even lower by adding shorts. Nope, these new shorts were almost all spec and this is why you are seeing them squeezed. Remember what we discussed earlier this week and last week...The Cartel needs to manipulate price higher in order to lighten demand for physical (they hope) and, as the "long" on the other side of all the new spec shorts, they can profit by squeezing them, as well. ( )

So, the big question is: WHAT HAPPENS NEXT?

First, let's look at some history. Recall that prices made similar and almost identical bottoms in late December of last year. What did the charts look like then? Here's a 1/3/12 gold and a 1/5/12 silver. Look closely and take a mental picture of the trading pattern off of the lows made about a week earlier. Let's hope we see similar action in the days ahead.

You might go back and review this post from 1/3/12, too:

And here are your current charts. First an hourly, a daily and a weekly gold.

And here are hourly, daily and weekly silver charts.

Lastly, there's something that I need to reiterate. Unless you are of the belief that this is it, the final and complete deflationary collapse of global liquidation and panic (which I'm not), there is absolutely no way that gold and silver are going to trade much lower than where they bottomed yesterday. The demands through London for physical supply are too great and the bullion banks are being looted for metal at these prices. As an example, just yesterday I know of a massive order of an equivalence of 2,000 Comex contracts being filled for physical silver when price tripped below $27. This type of physical demand is sucking the life blood from the current LBMA/Comex system. As price rallies back, demand may not abate but that is the chance that the banks are going to have to take. For now, they simply cannot allow paper price to continue lower. As such, today was the first day of the rebound.

Members of this site are very wise and learned but I can assure you that no one here has the contacts and information that I have when I make these assertions. And let me assure you of this: Silver, in particular, is going higher. Much higher. There are things going on behind the scenes that are not readily apparent to the average investor. Besides the ongoing backwardation ( ) and tight supplies, do not forget the ongoing CFTC investigation and potential for positions limits, the class-action lawsuits and the new, physical exchange set to open next month in China. I will continue to use any and all weakness to add to my physical stack. Will you?

Have a great overnight and I'll be back with you again tomorrow. TF

About the Author

turd [at] tfmetalsreport [dot] com ()


The Springbok
May 17, 2012 - 5:32pm



May 17, 2012 - 5:35pm

great work

Thanks TF for this update. Please keep up the great work.

Sorry but the people who rush to comment first are fuckin stupid.

May 17, 2012 - 5:36pm

Third for the third time

in three days.

May 17, 2012 - 5:36pm

Keep stacking

I stopped by my local LCS and picked up a few oz of AG yesterday. Made me feel good!

May 17, 2012 - 5:40pm

Just stack...

...and don't look back

Thanks for the update TF.

Those grandfathered position limits being changed would be a big game changer along with all those other things you mentioned.

R man J
May 17, 2012 - 5:43pm

Congrats to thos who stacked yesterday

I had a vision of a $100 gunny-sack of Walking Liberty Halves on sale at Gainsville for $2005.00 as it hit $26.97...but I would have had to use credit. Still I was gunna...but no! After reading Louise Yamada's possible $20 call I will wait until the big event...

That's what I get for using up all dry powder...learning a lot though. Enough to know I'll sell everything else before the stack is touched.

May 17, 2012 - 5:45pm



Nevermind! Besides, I just did it to annoy the nose pickers who get annoyed by posters posting the first post.

Second edit: Actually, those posters would be the posters posting the first "first" post. Every so often, the first poster has something to say and is not just posting "first" to celebrate the pure joy of being first to post a post on the newest thread. The annoyed posters would be the "holier-than-thou" posters who can't seem to find a reason to smile and applaud the first "first" posters and judge first posters as being unworthy of being allowed to raise their hands to the sky and say, "Huzzaaa!, Look at me! What a great day this is!"


wax off

The Death Ceiling
May 17, 2012 - 5:50pm

Great Site

I've just discovered a great site for judging the mood of the MSM from a global perspective, you can select newspaper front pages from around the world, very interesting.

Must admit it is nice to have a decent up day, but we're just one day closer to such tragedy.

May 17, 2012 - 6:00pm

Top 10.........again

poet and didnt know it

May 17, 2012 - 6:02pm

Just in case...

you missed it...

What are Hedge Funds Doing With Gold?

More than two years ago, George Soros, one of the most famous hedge fund mangers, warned at the World Economic Forum that gold was in a bubble. He claimed, “When interest rates are low we have conditions for asset bubbles to develop and they are developing at the moment. The ultimate asset bubble is gold.” Apparently, Soros had a change of heart. His management firm nearly quadrupled its exposure to the SPDR Gold Trust from 85,450 shares in the fourth-quarter to 319,550 shares in the first-quarter. Soros Fund Management also opened a new position through call options in Newmont Mining, one of the world’s largest gold producers.

Earlier this month, Greenlight Capital’s David Einhorn wrote a piece criticizing the Federal Reserve’s monetary policy and related it to force-feeding someone too many jelly donuts in hopes of a sugar rush. With the Fed maintaining record low interest rates, Einhorn explains, “As a result, I will keep a substantial long exposure to gold, which serves as a jelly donut antidote for my portfolio. While I’d love for our leaders to adopt sensible policies that would reduce the tail risks so that I could sell our gold, one nice thing about gold is that it doesn’t even have quarterly conference calls.” While Einhorn likely keeps his substantial long exposure in the form of physical gold bullion and off the records of the 13-F filings, he does have positions in some miners. He kept his position in the Market Vectors Gold Miners ETF unchanged at 7.2 million shares in the first-quarter, but reduced his exposure to the Market Vectors Jr. Gold Miners ETF and Barrick Gold to 1.2 million shares and 1 million shares, respectively.

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