Come Tuesday

454
Sun, Sep 2, 2012 - 12:52pm

Summer's almost over. I hope you're enjoying your weekend but get ready. Come Tuesday, it's game on.

Jimmy Buffett "Come Monday/Changes In Latitudes/Why Don't We Get Drunk" Live

We stand at the edge. Prices have broken out but Cartel resistance is steep. The latest CoT shows their malicious intent. In gold, The Cartel net short position grew by over 32,000 contracts last week with the gross short position growing by over 10%! A huge, desperate move which has brought The Cartel net short position to its "worst" level since 2/28/12. Yikes! In fact, over the 8/14/12 - 8/28/12 time period, the price of paper gold rallied $68 and the total Gold Cartel net short position grew by 59,000 contracts. It looks like someone would very much prefer that gold not rise much further.

Though the Cartel selling in silver is just as prevalent, it is of a different stripe. For the reporting week, to supply the paper necessary to keep price in check, instead of adding shorts The Silver Cartel dumped longs. Of course the question is: Why? Are they selling into strength and booking profits? I suppose. But are they also remiss to add new shorts? Of course, it's impossible to say. What is possible to say though is that the CoT situation has only "deteriorated" in the days since, particularly Friday.

Finally, it is curious to see so much of the fresh shorting and selling that is coming from the smaller banks. Uncle Ted calls these banks the "raptors". The raptors treat the paper markets as their virtual jungle where they prey upon the specs by collusively following the moves of the bigger banks. In gold, the selling last week was almost evenly split between the big banks and the smaller banks. In silver, though, 90% of the selling came from the smaller banks, not JPM. Again, why? Is this just a one-week trend?

So next week is set up for some significant volatility.

  • All market participants are back from holiday.
  • The charts are undeniably bullish, meaning spec money should continue to roll in.
  • Prices are reaching into areas where I would expect some major Cartel short selling/resistance, i.e. $1725 and $33
  • After a week of rising prices, we get the August BLSBS on Friday. It's hard to imagine anything but a negative print being met with a major attempt to rig prices lower.

For now, here's where we sit.

And do you recall this chart from last week? Notice that gold spent 17 weeks above the range in 2011 and now it has completed 17 weeks below the range in 2012. Next week, does gold finally move back within the range?

Silver is at a similar crossroads.

So, get ready for a crazy and wild week. Though I certainly wouldn't fault a trader for booking a few profits, everyone else just needs to prepare for some volatility. Prices are truly headed much, much higher but not without the usual shenanigans.

See you Tuesday.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  454 Comments

Mr. FixFerd Torgerson
Sep 2, 2012 - 11:06pm

@ Ferd Torgerson

Happy Birthday!

PS:

I'm still first today.

¤
Sep 2, 2012 - 11:11pm

Taiwan Signs Yuan Clearing Deal With China

Taiwan Signs Yuan Clearing Deal With China, Creates New Rate

By Andrea Wong and Argin Chang - Aug 31, 2012 4:59 AM ET

The central banks of Taiwan andChina signed a yuan clearing agreement as Asia’s biggest economy pushes the use of its currency in international trade.

Taiwan will allow interbank trading of the yuan, creating a new exchange rate for the currency, Governor Perng Fai-nan said today. The two monetary authorities are also negotiating a currency swap deal that would allow Taiwan to hold yuan assets in its foreign-exchange reserves.

“The deal will help Taiwanese companies move their yuan assets back to the mainland and lessen their exchange risks,”Perng said in Taipei. “Taiwan will have its own yuan spot rate called `CNT,’ as opposed to `CNH’ in Hong Kong.”

China has been expanding its currency relations with trade partners to promote greater use of the yuan in global trade and investment. Nations including Singapore, Japan, and Thailand have signed similar deals with the world’s second-biggest economy as part of their efforts to reduce reliance on the dollar. Exports account for more than two-thirds of Taiwan’s economy and some 30 percent of shipments are bound for China.

“It’s a good development as there’s huge demand for yuan in Taiwan,” said Penny Chen, who helps oversee $160 million in yuan assets as a fund manager at Manulife Asset Management Co. in Taipei. “Taiwan’s exporters and small-to-medium enterprises will be able to reduce transaction costs.”

Taiwan has the world’s biggest trade surplus with China and foreign direct investment by the island’s companies rose 11 percent to $13 billion in 2011, according to official data...

https://www.bloomberg.com/news/2012-08-31/taiwan-signs-yuan-clearing-dea...

Louie
Sep 2, 2012 - 11:14pm
¤
Sep 2, 2012 - 11:24pm

One for the road...

PINK FLOYD - The Dark Side Of The Moon - Live In London 1974

Video unavailable
SRSrocco
Sep 2, 2012 - 11:34pm

PROBLEMS BREWING IN THE KING BASE METAL....

GLOBAL COPPER INVENTORIES TO DECLINE SUBSTANTIALLY THIS YEAR - PAT MOHR

Capital cost escalation in an uncertain economic environment has triggered delays in new mine development, setting the stage for a tighter mid-decade supply, predicts Scotiabank economist Patricia Mohr.

Author: Dorothy Kosich
Posted: Friday , 31 Aug 2012
RENO (MINEWEB) -

Substantial production losses and outages at existing copper mines will cause global copper inventories this year to fall to 47 days of consumption from 52 last year, Scotiabank economist Patricia Mohr has forecast.

While refined copper stocks average 61.1 days of consumption from 2000-2009, "LME inventories have actually declined in 2012 and overall global inventories are expected to fall to 47 days of consumption from 52 last year, despite the recent increase in bonded warehouse stocks in China," said Mohr. "This reflects substantial production losses & outages at existing mines this year-Escondida (Chile -75,000 tonnes), Collahuasi (Chile), Los Bronces (Chile -60,000 tonnes), Grasberg (Indonesia -100,000 tonnes) and Lumwana (Zambia -60,000 tonnes)."

--------------------------------

Folks... just look at amount of production losses at the big copper mines. This is nearly 300,000 metric tonnes. Freeport's Grasberg mine was down 45% the first six months of 2012 compared to last year. The largest percentage of the copper declines came from Chile. As I mentioned in my previous article.... Chile is going to face serious energy shortages unless there is Billions of dollars invested in electric generating plants and infrastructure.

If overall copper production declines in 2012, it will also impact silver production as well. We may see another percent decline in by-product silver from copper mining in 2012.

Here is another part of the article:

"Major Canadian gold miners are also examining project expansion more critically, in part due to high capital cost inflation," she added.

Recent announcements by BHP Billiton of project delays, "reflect concern over capital-cost escalation in the face of more subdued metals prices," Mohr advised. "In copper, capital cost inflation (which normally lags metals prices) has averaged 22% per annum from 2002-2011 and is projected to increase by 15-20% this year."

-----------------------

Costs are increasing faster than the price of commodities are rising. Even though some copper miners are making decent profits, it is not enough to supply all the FUTURE CAPEX spending that these companies have in their pipelines. We must remember, the so-called forecasted increase of global silver production is based on these scheduled base metal mines becoming commercial.

UPCOMING POST ON SILVER ORE GRADES

I had a spirited debate on silver ore grades with Eric Original and Coach427. They both mentioned that silver miners were utilizing lower grade ores and waste rock to maximize profits as the price of silver increased. This is an excellent way for miners to increase profits and to mill ore that wasn't cost effective with the price of silver lower.

I have to say.... anything that makes silver miners more profitable and successful is good in my book. That being said, it still does not change the overall fact that silver ore grades are falling greater than 5% a year on average.

This chart of the silver ore grades at SilverCorp will be included in my next article-post to describe this ongoing phenomenon:

If we consider that SilverCorps overall ore grade was 456 g/t in 2007 and is estimated (by their quarterly report) to average 245 g/t in Fiscal 2013, this turns out to be a 8% annual decline rate for the 6 years.

I will provide additional data to prove that Silvercorp has a LOM PRODUCTION PLAN until 2019 showing a continually declining average ore grade. This is not because they are mining waste rock or selecting lower grade ores... its because of its planned declining ore reserve.

Again... we must remember the KISS --- KEEP IT SIMPLE STUPID understanding of my concerns. The lower the ore grade... the more energy is needed to produce the same or less silver.

achmachat
Sep 3, 2012 - 12:04am

CHINA. boots on the ground report...

This month I had to pass through some of the major Chinese cities (in Beijing right now) and, boy, would most of you guys have a field day! I have never seen this much gold! Huge fancy shop after shop after shop selling 999 gold either as intricate jewelry or bars etc. for the daily per gramme price which isn't too far from spot price. How sadly ironic that in western countries the population is giving away their gold to cash-for-gold places while here everybody who has any amount of savings converts it to gold! Yes, these shops are full of customers, even if some can only afford 1gramme earrings, the convert-your-money-into-something-real sentiment is very present!

Strongsidejedi
Sep 3, 2012 - 12:07am

who's running this market anyway?

Are we running this market or are we continuing to let some committee decide what the definition of money is?

Its up to us anyway people!

The more gold and silver coins there are in circulation, the more the monetary value of the coinage increases.

Monedas
Sep 3, 2012 - 12:07am

Mr. Fix !

"I like the cut of your jib ! Wouldest thou like to hook up ?"....Gay Pilgrim Cod Fisherman "Pick Up Line" cerca 1626 Just kidding ! I see Bluesman145 has made his debut at TFMR ! I think he's the guy that got me banned for life at Kitco Forums for my corny, faux racist humour .... such as: "I think all inner city children should be sent to North Korea for two years of extreme potty training .... a Potty Corp, if you will ?" Monedas 1929 Comedy Jihad Help I Think I'm Being Stalked

Strongsidejediachmachat
Sep 3, 2012 - 12:09am

question for @achmachat

I've wondered what the average gold store in China sells.

Do they sell Pandas? US Buffalo / Eagle? Canadian maple leaf?

Swiss gold bars?

What's the gold like that they are selling?

Mr. Fix
Sep 3, 2012 - 12:13am

Monedas !

Just wanted to say HI!

on ZH this aftrenoon.

I enjoy the good humor.

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