Desperation Is a Tender Trap

269
Thu, May 31, 2012 - 12:25pm

It gets you every time. And desperation is what we are seeing in the paper precious metal "markets".

Today was just another example. No doubt you noticed the shockwave that was sent into the gold pit, beginning at 9:47 EDT today. In stages, a bullion bank (which one doesn't matter) dumped over 7,000 contracts in 10 minutes. The resultant decline was about $18. This brought a further wave of selling about 10 minutes later which clipped an additional $6 from price.

Now, don't go deluding yourself into thinking this was somehow legitimate selling. The only headline that occurred near the same time was extremely gold-positive. ( https://www.zerohedge.com/news/chicago-pmi-plunges-527-lowest-print-september-2009) No, this plan was coordinated and executed for one simple reason...to lessen a bank's short position. How does that work, you ask?

Let's say that the bank in question began the day with a net short position of 10,000 contracts. The bank takes a look at the order book and concludes that there are a multitude of sellstops in a certain area. If the bank can exert enough pressure (in this case, dump 7000 contracts), they can buy back their 7000 new shorts plus a couple thousand more by the end of the day. Price recovers as this happens and, presto magico, the net result on Comex price is negligible.

So, in the end, The Bank In Question deliberately manipulated the price lower. They then utilized the triggered stops to cover and they used the attendant weakness to cover even more. About an hour later, The Bank has a net short position of just 8,000 contracts and all is well, as if nothing even happened. Of course, if you were one of the unfortunate longs who got your stop "gunned"...well, sorry. That's what you get for playing in The Crooked Casino. For the rest of us, The Bank In Question is now a couple thousand contracts closer to a net neutral position. This (net neutral or even net long) is their ultimate goal. It has been their goal since 8/5/11 and everything that has happened since (The Labor Day Beatdown, The December Liquidation, The Leap Day Disaster) has been a part of this process.

One more thing, DO NOT FORGET that tomorrow is BLSBS day. Again, because of the archaic manner in which the "unemployment rate" is calculated, expect a headline number that looks good for the O'Bottom Regime. The devil will, once again, be in the details. After an initial decline (stop-harvesting again?), I expect a decent rally.

Here are your latest charts. Note that both gold and silver are still rangebound but are forming pennants within the range. Let's see if they can both break higher and toward the tops of the ranges tomorrow.

In other news, here's something interesting. Jim Comiskey has a client who, in reading over some BIS documents, found the following. Not sure yet how significant this is but I'm going to send it off to Bill and Chris at GATA to get their thoughts. First, there's this line:

3. Foreign exchange risk
718(xxx). This section sets out a minimum capital standard to cover the risk of holding or taking positions in foreign currencies, including gold.136
718(xxxi). Two processes are needed to calculate the capital requirement for foreign exchange risk. The first is to measure the exposure in a single currency position. The second is to measure the risks inherent in a bank’s mix of long and short positions in different currencies.

And then, here is footnote #136, as mentioned above:

(136) Gold is to be dealt with as a foreign exchange position rather than a commodity because its volatility is more in line with foreign currencies and banks manage it in a similar manner to foreign currencies.

Hmmm. Again, this is from an official BIS document. Is this an admission of bank gold manipulation (management of price)? I'm looking forward to hearing what Bill and Chris have to say on the matter.

Finally, below is hands-down the single most important item of the day. Some of you may recall that I alluded to "big things behind the scenes" a few days ago. This is one of those things. Please watch this interview of Hugo Salinas-Price. As you know, the Greek people are about to suffer incredible adversity and hyperinflation as they attempt to regain sovereignty over their currency. This idea of a new national currency that has a direct silver backing would be exactly the type of measure needed to save that country. If anyone reading this has the ability to contact Mr. Tsipras and bring this to his attention, please let me know. I can very quickly put him in touch with Mr. Salinas-Price and, perhaps, we can save the Greek people from this impending disaster brought about by central bankers and unlimited fiat currency.

Hang in there and have a great day. Tomorrow should be quite interesting! TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  269 Comments

Dr G
May 31, 2012 - 12:29pm

Blatant repost from the last

Blatant repost from the last thread. And good catch by Comiskey on gold manipulation. Of course it's manipulated. Just like a currency :)

Such great comments today! I really appreciate the educational discussion instead of everybody slinging terms like "troll" around!

Here is a summation of my thoughts:

  • QE will come before the election.
  • The best dates for it to be announced and take hold prior to election run-up would be the FOMC meeting in June (3 weeks from now) or late July/August (roughly 8 weeks from now).
  • All this action (or just talk?) about Greece and Spain has given flight from the Euro and it seems investors have piled into the USD.
  • The USD is up over 83 on this latest round of "news" out of Europe.
  • If this "news" continues then it seems investors would continue to enter the USD. That will send it higher. As Turd said, possibly over 84 or even up to 88 range.
  • Metals have responded with a down move as the USD has risen. On days they haven't moved down they have largely moved sideways. Some days have nice gains but place the spot price still lower than it was earlier in the week.
  • Silver has gone from $49 to $26 in the past year. It is currently sub-28. 27 has held rather well recently, but we all thought 45 would hold, then 40, then 35, then 30, and look at us now.
  • That seems like there isn't much strength in silver (probably due to lack of investor interest in the Crimex). I feel minimal strength in gold until it clears a hurdle (1600?) that gets investors interested again.
  • I wouldn't be surprised to see silver and gold continue to fall as the USD continues to rise. That is usually how it works. Decoupling is always possible and has happened before but it never seems to really take hold.
  • Maybe Europe doesn't implode and the Euro is fine. I don't know. All I know is that this latest round of PM downdraft is based on "news" from Europe. So the "news" does affect the spot price.
  • I'm bearish until something changes with the USD. In my mind that is the inevitable QE that is coming very soon. Medium term and long term I'm as bullish as can be. Therefore, I'm thankful that the price is down now. Makes me very happy.
alphamorph
May 31, 2012 - 12:30pm

why the miners????

I'm surprised by the spread between silver price and that of most mines. Anyone with suggestions?

Big L
May 31, 2012 - 12:33pm

Thurd

Alllmoosttt.....

Edit: I was 'this' close..... and Thanks Turd!

I'm still reeling from that Jim Willie podcast.

Haven't quite got my pins underneath me yet.

boil_in_the_bag_rice
May 31, 2012 - 12:33pm

Hemmingway

“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”

Ernest Hemingway

Fired
May 31, 2012 - 12:33pm

You are getting as good as

You are getting as good as Santa in keeping my spirits up Turd. Thank you so much for your efforts!

Big Buffalo
May 31, 2012 - 12:34pm

Got it

I may not have won a yellow hat yesterday, but at least a first as a consolation prize will heal my achy breaky heart.

Got me some dry powder for tomorrow's flash decline a la Turd.

Turd: Why is there defense at $1570?

The Green Manalishi
May 31, 2012 - 12:34pm

Alexis Tsipras Contact Details

Alexis TSIPRAS

.

e-mail: tsipras syn gr
Office: Pl.Eleftherias 1, 10553 Athens
tel 2103378633-634
fax. 2103219614

.

Patrancus
May 31, 2012 - 12:39pm
pickaxe
May 31, 2012 - 12:43pm

What To Do When Your Dry Powder Is Gone

Is Your Dry Powder Gone?

Just join me sitting on my hands watching the fireworks!

Don't play into the manipulators hands: the urge to do something... anything when chaos erupts must be fought.

Now, if I can only follow my own advice...

~pickaxe

lostinspace
May 31, 2012 - 12:49pm

Tenth!!!!!!!!

Tenth!!!!!!!!

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