Storm Flags Flying

252
Wed, Sep 5, 2012 - 5:08pm

Here in the U.S., we have a government agency that creates the official weather forecast. When severe weather threatens, the National Weather Service issues two types of alerts: A "watch" or a "warning". In this theme, I hereby issue a Cartel Raid Watch, effective through next Friday, September 14.

Astute weather observers will recognize that there is a difference between a "watch" and a "warning". Per the National Weather Service, a "watch" is issued when conditions are favorable for severe conditions to develop. A "warning" is then issued when the storm has materialized and hazardous conditions are imminent. Since I don't yet perceive that hazardous conditions are imminent, this advisory is simply a Cartel Raid Watch. Stay tuned for further updates and possible warnings.

My primary concern here is the continued deterioration in the Comex open interest numbers. You'll recall that the last two weeks of CoTs have been lousy as specs are buying and The Cartels are rapidly creating paper gold and dumping silver longs in order to satisfy the spec demand. I believe that this trend has continued this week and we'll likely see confirmation on Friday.

For this latest reporting week, gold was up $26 and total gold open interest rose another 18,000 contracts. As of yesterday, the total OI in gold stood at 444,849, which is the highest level since 3/2/12. (Does that date set you on edge? It should as it is just three days past this year's peak OI on 2/28/12 at 479,000. Recall that price also peaked that date at $1790.) Undoubtedly, the current trend in the CoTs is continuing and this week's report will show an 18,000 contract rise in the spec net long position and a similar 18,000 contract rise in the Gold Cartel net short position. If that is accurate, look what happens to the all-important net ratios:

Projected 9/4 CoT for gold:

Cartel short 361,ooo and long 139,000 for a net short ratio of 2.48:1.

Total large and small spec long 281,000 and short 59,000 for a net long ratio of 4.45:1.

On 2/28/12, The Gold Cartel net short ratio was 2.69:1 and the spec net long ratio was 5.37:1.

Conclusion: One more stout push higher in price will draw in enough new spec money that the ratios will likely reach the levels last seen on 2/28/12...and we all know what happened next. The price of gold fell $77 on 2/29/12 and it kept falling, reaching a bottom of $1614 five weeks later and $1528 five weeks after that.

For silver, things aren't quite as straightforward. Last week, instead of issuing fresh paper shorts, spec demand for paper was met by Cartel long liquidation. This has had the impact of minimizing open interest growth while still causing higher prices. Yesterday, the trend continued. For the latest reporting week, silver was up a whopping $1.45 but total open interest fell by over 2,200 contracts. And since the August 21st CoT cutoff, silver has rallied $2.90 (+10%) while total open interest has fallen by 8,200 contracts. (-6.5%).

Projected 9/4 CoT for silver:

Cartel short 76,600 and long 35,800 for a net short ratio of 2.14:1.

Total large and small spec long 63,700 and short 23,000 for a net long ratio of 2.77:1.

On 2/28/12, The Silver Cartel net short ratio was 2.32:1 and the spec net long ratio was 3.64:1.

Conclusion: Just like gold, a few dollars higher in price will likely bring the ratios into the danger zone last seen in late February of this year before silver fell from $37 to $26 in a matter of weeks.

NOW, LET ME MAKE A FEW THINGS COMPLETELY CLEAR:

  • Though the CoTs suggest that a raid may be coming, any raid that materializes does not necessarily foreshadow another 100-day correction.
  • London demand for physical metal remains robust and unceasing, even at these price levels, and this physical demand makes it very challenging for The Cartels to rig consistently lower prices.
  • It is widely acknowledged that further Fed "actions" including "renewed asset purchases" are right around the corner, if not prior to the U.S. election, then shortly thereafter. In late February, this wasn't the case.
  • I am still 100% confident of imminent changes to the "fundamental structure" of the metals price discovery scheme. Though I was nearly certain that these "changes" would take place before the end of climatological summer, the ultimate timing of these events is out of my hands. Historic vindication is most certainly coming, though. It's simply a matter of when.
  • Any raid may be significant in the very short term but it will only serve to be an opportunity for you to participate and position yourself for the days ahead. At this point, I'd expect a Cartel Raid to briefly drive metal prices back to their 200-day moving averages. In gold, this would be around $1650 or slightly below. Maybe even the top of the old range near $1635. In silver, we're talking about $30.45 or so with a possible dip all the way to near $30.

So, let's summarize. This is a "watch" not a "warning". If, next week, gold rallies toward 1750 and above while silver pushes through $33 and toward $35, I may be forced to issue a full-scale warning. Even then, the warning will simply be to alert traders to lighten positions and hedge for imminent weakness. Long-term stackers should still use any and all dips to add to their positions in preparation for much higher prices in the weeks and months to come.

TF

About the Author

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

  252 Comments

ancientmoney
Sep 5, 2012 - 5:10pm

BTFD

Anywhere and everywhere.

Anonymous
Sep 5, 2012 - 5:12pm

Removed comment

Removed comment.

ancientmoney
Sep 5, 2012 - 5:14pm

Turd, remember . . .

For the PMs to blast off and ultimately for there to be a gold standard of SOME sort,as you have stated is a given on numerouis occasions, paper trading must end. Meaning paper gold/silver must approach zero. Then silver and gold will be in free markets again.

Istack
Sep 5, 2012 - 5:15pm

It does feel calm

too calm

and keep stacking

Hanuman
Sep 5, 2012 - 5:25pm

Structural Changes to Price Discovery

What "changes to the 'fundamental structure' of the metals price discovery scheme" are you expecting?

sdstacker
Sep 5, 2012 - 5:41pm

Cumulative Gold

This is in response to SRSRocco in the last thread:

SRS, first I want to say that I love the work that you do, and us Turds are very thankful. However, I just want to play devils advocate here and perhaps inspire more discussion. There is talk in the conspiracy world about gold not being as rare as it is thought to be. Specifically there is talk about hidden caches of gold, as much as 10 times as what's believed to already exist above ground. These caches include Yamashita's gold, Nazi gold, Vatican gold, and even undeveloped deposits conveniently kept as a national secrets, hiding out in national parks. Why would someone want to understate the amount of gold by up to 10x? That's easy. It makes the gold you do currently own worth up to 10x more. Basic supply and demand. I'm pretty sure that Jim Willie mentioned that a lot of the gold came from Rome.

Even if you think these secret caches are impossible, here is what we do know: the ancient Egyptians loved gold. They also built the pyramids. According to many, building these pyramids was an impossible task with the technology that the ancients had available. Who is to say that they couldn't have mined way more gold than we could ever know about by using the same technology that was used to build the pyramids? How about the possibly that over a few thousand years, much of that ancient gold has made its way to the Vatican? My point is, we don't know. But it does make things more interesting to watch. It also makes a more bullish case for silver.

SilverTree
Sep 5, 2012 - 5:50pm

I am tempted to cash-in a bit

I am tempted to cash-in a bit of my PM's to buy a Geo Metro.

Should I? Would you?

Thanks

foggyroad
Sep 5, 2012 - 5:51pm

Thanks TF

I like the new warning system. :0)

El Gordo
Sep 5, 2012 - 5:53pm

This must be serious stuff...

No one even claimed first. What's this blog coming to?

snoochieboochies
Sep 5, 2012 - 5:54pm

  Jim Comiskey Turd Today!

Jim Comiskey Turd Today!

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