Wed, Jun 20, 2012 - 10:37am

While we all wring our hands at gold being back under $1600, there may be reason to be joyous, instead.

Before we begin, please keep in mind that I have no idea what The Bernank and his minions will conclude his afternoon. How would I know? How would anyone outside of the Fed (and a few of their pals) know? So this is all guesswork, speculation and intuition.

Of course, we all can easily remember that virtually every time The Bernank has opened his mouth in 2012, the metals have been crushed. Regardless of what he says or doesn't say, down go the metals. Therefore, what you're seeing today is one of two things:

  1. The spec short algos are attempting to front-run The Bernank. They expect similar action today and are trying to sell ahead of the news. This is akin to the old equity dictum, "buy the rumor, sell the news". Fundamentally, by selling before The Bernank, much of the selling "dry powder" gets exhausted. When the actual news hits, there are very few sellers left and, when you have less sellers than buyers, prices rise.
  2. The Gold Cartel is gaming stops and jamming price lower, tricking HFT algos into selling even further. The Cartel then takes advantage of these lower prices to cover some shorts ahead of the news. (Remember, when an HFT algo sells, The Cartel is one the other side of the trade, buying.) Once the news hits, the metals rocket higher as shorts are squeezed and buy stops are triggered. This pre-news selling has the further effect of lowering the launching pad, too. Where yesterday a 2% rally in gold would have taken it to 1665, now a 2% rally only takes it back to 1630.

Either way, DOWN action this morning ahead of the 12:30 EDT FOMC headlines is a likely harbinger of much higher prices this afternoon.

Now, maybe you're saying to yourself: This Turd guy is full of crap. Well, OK, maybe I am. However, one of the events that began this amazing adventure for me took place on 11/3/2010. Do you recall what happened that day? That was also the day of some Fed announcements. The "markets" were waiting to find out IF QE2 was going to be initiated and for HOW MUCH? That morning, gold and silver were savagely beaten. On ZeroHedge, there was much hand-wringing and grinding of teeth. Into this mess strode The Turd with this:

by Turd Ferguson
on Wed, 11/03/2010 - 10:43

Obviously, Blythe decided to act early. The question is, what does this mean?
To me, the only reason for smashing gold now is this: The EE either knows or suspects that the QE2 announcement is going to be larger than anticipated and, therefore, PMs are going to rally sharply. So, crush the PMs now in order to cover shorts at lower prices before the blastoff.
Again, if anyone doubt the existence of the EE and their influence on today's action, simply look at a one-minute chart of todays' action. Violent one-minute downdrafts galore. Only the EE has the power to overwhelm the bid like that. They are clearly trying and succeeding in dropping price before the announcement. Again, why before? They are clearly afraid of getting their collective nuts and ovaries in a vise this afternoon.
I am very confident of a big price move UP later today.
Later that morning, I had the following exchange with a guy named "Harry Wanger", who old-time ZHers will recall was a real deltabravo.
by HarryWanger
on Wed, 11/03/2010 - 11:24

You think gold is getting hit now, just wait until 2:30. I hold lots of precious metals long term but am expecting a big sell off.

by Turd Ferguson
on Wed, 11/03/2010 - 11:28

Yes, Harry, but you may have already seen the majority of it. Don't look for gold to drop much below 1325 before the usual buyer(s) of size step in.
If Blythe had allowed gold to rally this morning up to 1385-90, I would be extremely nervous about what lies in store for us this afternoon. The fact that she chose to crush it before the announcement clearly means that the QE will be more significant than expected and that the PMs are going much higher.
So, here we are, in roughly the same position today. Because it's an election year, most everyone feels that the time is running short for The Fed to announce some kind of overt, new QE program. "If they don't announce it today, additional QE is OFF until after the election". Well, maybe. Again, what do I know?
What I DO KNOW is this: Having the metals under pressure before the Fedlines is likely a GOOD THING. We shall see.
More later today, of that you can be certain.

12:50 pm EDT UPDATE

Well, clearly, the market did not get an announcement of imminent, overt QE. This is not surprising. Again, it's an election year and The Fed is reluctant to make itself into political fodder.

After an initial plunge that was clearly timed to trip stops and create a cascade, the metals have rebounded. Gold continues to find buyers under $1600 and silver has buyers at $28 and below. Let's see how the rest of the afternoon treats us. As stated above in point #1, perhaps all those who were going to sell have now sold. In an environment where there are less sellers than buyers, prices rise. Maybe a couple of sweet-looking FUBMs on the way? We'll see...

About the Author

turd [at] tfmetalsreport [dot] com ()


Jun 20, 2012 - 10:39am
Jun 20, 2012 - 10:42am

BoE Headline

News Headline Summary


BoE's Broadbent says case for more monetary stimulus has increased

Jun 20, 2012 - 10:45am

Metals not savagely beaten

The pop in metals is coming because there is no way the microwave of radioactive market manipulation can persist unendingly, but the M.O. of these markets is to have a ubiquitous "nothing to see here folks" market - goal? avoid all noise and keep the market steady. But, of course, silver beats paper.

Jun 20, 2012 - 10:51am

Thanks Turd

Loved the look back too. Just what I was thinking would prove support to your theory, a look back at when it happened last. Then sure enough you provide that as well.

edit - 4th!

Had to just to get some more ignores.

Desert Fox
Jun 20, 2012 - 10:52am

Come on Benny,,,

bring it back just a little bit more,,,,,,

Jun 20, 2012 - 10:55am


...for the update.

We'll have to see what Ben has to say today. A curve ball and a little chin music maybe?

Pretty sure Big Ben helped write the lyrics...

Elton John - Bennie and the Jets **with lyrics**
Jun 20, 2012 - 10:55am

Turd, Thx.

I woke up thinking roughly the same thing today. They may be jamming prices down before a run up. I believe you have taught this man how to fish. I will buy some metal now. If it goes down, I'll buy a little more.

Off topic: Anyone else notice 9mm ammo at Wal-Mart is becoming rarer and rarer? I used to buy the 100 round boxes, but they seem to be out of stock more often than not at BOTH of their stores located near me.

Jun 20, 2012 - 10:56am

QE Roadmap

I believe the CBs are buying bonds behind the scenes to keep the system afloat under the pretense of an improving economy. I don't believe they will come out with stated QE until the markets really need to be goosed (Dow and bank stocked crushed). Why destroy the system quickly when you can milk it slowly with just a few lies? Eventually, the money printing will catch up to them, but currency destruction is a psychological phenomenon caused by a lack of trust. By jaw boning up the economy and downplaying the need for QE, the Bernank will keep the masses believing in the system and on we'll march.

Dr G
Jun 20, 2012 - 11:00am

Of course there is reason to

Of course there is reason to be Eagles for $40 less than they were at this time yesterday!

Count me in for some!

I agree that having the metals taken down before Bernanke is on front and center would seem to be a good thing, however this wasn't much of a take down in my mind, so that does worry me a bit.

I still think the Fed disappoints.

  • Seems the S&P is way too high for further easing (although oil is certainly where they would want it for easing).
  • Also, do they REALLY think that further easing will improve the unemployment status in the US? They can't believe that anymore.
  • And finally, easing in the amount of $700 billion just won't do much for the markets. Shocking, but it is true. They'd have to go over $1 trillion to get a response.

But what do I know?

Dr G
Jun 20, 2012 - 11:01am

@humble, Winchester brand,

@humble, Winchester brand, I'm assuming? My Walmarts (there are literally 10 within 15 miles) have the normal amount in stock. Some days it is full, others it has been picked over.

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