The Week That Was

420
Sat, Sep 15, 2012 - 12:03pm

I tried to warn you that this week was going to be wild. I expected the pressure and intensity to ramp up with each successive day and it most certainly did. By Friday, everyone was ready for the weekend. That's fine but, come Monday, you'd better be ready.

What a fantastic week we had. Made even more special by the fact that we were set up for a disaster. Recall that I had been warning you for about 10 days that a Cartel Raid seemed on the horizon. They looked like they were once again setting everyone up for a massive beatdown. By the looks of the CoT yesterday, I was exactly right.

The situation, as it turned out, was eerily similar. Let's take a look:

December 2011: The price of gold bottomed late in December 2011 at $1525. The CoT also "bottomed" at a total gross Cartel short position of 325,960 and a net short ratio (gross shorts divided by gross longs) of 1.98:1. The price of silver bottomed at $26.40. The silver CoT bottomed with 55,356 gross shorts and a net short ratio of 1.34:1.

Jan-Feb 2012: The metals then took off on a two month rally, peaking on Tuesday, February 28. Gold reached $1790 (+17%) and silver made it to $37.50 (+34%). The CoT taken that afternoon showed a complete reversal from December. Now the total gross short position in gold was 390,412 with a net short ratio of 2.69:1. The total gross short position in silver had reached 78,395 and a net short ratio of 2.32:1.

And what happened the next day, 2/29/12? Using The Bernank's Capitol Hill testimony as cover, the bid side of the metals was overwhelmed by Cartel manipulation and a 3-month, short-covering beatdown ensued. https://www.tfmetalsreport.com/blog/3465/csi-comex-gold-and-silver-massacre

Gold bottomed again almost exactly three months later on Wednesday, May 30, 2012 at $1537. Two days later, the employment report for May was released and QE has been on everyone's lips since. On Tuesday, May 29, the CoT once again looked like this:

May 2012: On 5/29/12, the total gross short position of The Gold Cartel stood at 300,917 and the net short ratio had fallen all the way to 1.77:1. In silver, the gross short position was back to 60,151 and the net short ratio had fallen back to 1.31:1.

It had all been a set-up. From the lows in December, spec money flowed into the metals and The Cartels welcomed every dollar. At the peak, The Bernank was rolled out in front of the cameras to put off QE and The Cartels attacked. Over the next 90 days, they covered all of their fresh shorts and then waited all summer to play the game again.

August-September 2011: The final bottom for gold occurred on June 28 at $1552 and silver reached $26.21. The CoT on June 26 was once again at a "bottom", too. On Tuesday, July 10, the total gross short position of The Gold Cartel was 316,165 and the net short ratio was 1.93:1. The total gross silver short position was 62,478 and the ratio was 1.29:1.

As of this past Tuesday, September 11, look how things had changed again. Prices had risen considerably. Gold closed on Tuesday at $1735 (+12%) and silver closed at $33.56 (+28%). The total Gold Cartel gross short position was once again 380,239 and the net short ratio was 2.66:1. The total Cartel gross silver short position was 79,478 and the net short ratio was 2.47:1.

The Cartels had set us up again. The point is this: If the Fed had "disappointed, if The Bernank had put off all new QE until after the election, there can be zero doubt that we would have, once again, seen a massive, manipulative raid on gold and silver.

In hindsight, do you recall the very sharp and brief spike down that occurred about 10 minutes before the Fedlines were released on Thursday? This was almost certainly someone or something with foreknowledge of the raid, attempting to front-run The Cartels. By now, we all know what happened, instead. Rather than being "saved" by The Bernank and using "no QE" as cover to screw everyone once more, QE~ was announced and now The Cartels are trapped!

We'll use the days ahead to go into greater detail on the implications of this but rest assured for today that sharply higher prices are coming. QE~ only serves to increase the global demand for physical metal. This demand will underpin any attempts by The Cartels to start a selloff. Over time, they will be forced to cover at an accelerating pace, similar to April 2011 in silver and August 2011 in gold. There will be panics and you can count on every dirty trick imaginable being thrown at the "markets". This time, however, it's not going to work. With QE~ as a backdrop, every dip will be bought, each successive low will be higher. The overconfident and greedy fools could/should have used this time to draw flat and perhaps even go net long. Instead they arrogantly chose to play their games one more time. This time, however, they will lose. The game is over and the fireworks have begun, even if the players seemingly haven't yet heard the final whistle.

Only one reading assignment this weekend and it's this piece from Brandon Smith at Alt-Market. This is one that you need to read carefully and then print it off and keep for posterity.

https://www.alt-market.com/articles/1034-get-ready-for-an-epic-fiat-currency-avalanche

Lastly, once again I beg everyone to recognize that this main thread is for the discussion of precious metals and issues affecting such. It is OK to reference events in the MENA as the current situation there clearly has an impact on the global economy, the price of oil and the equity markets. It is not OK to get into pissing matches regarding "radical Islam", "Zionism", "American Imperialism" and the like. There are forums for that and I've even gone to the trouble of setting one up for you: https://www.tfmetalsreport.com/forum/4188/radical-islam. Going forward, I am simply going to delete and remove comments from this main thread that I feel are set to hijack the discussion and turn people away from the education that this site provides. No exceptions. Got it?

OK, with that, I wish everyone a fantastic and restful weekend. Come back on Monday prepared for another wild and crazy week.

TF

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  420 Comments

Dagney Taggart
Sep 15, 2012 - 4:28pm

@Jager

Hope you have a comfy chair and a bunch of popcorn.

Matt McLennan: Gold is nature's money:

https://www.bloomberg.com/video/mclennan-gold-should-drift-higher-supply...

Karankawa
Sep 15, 2012 - 4:31pm

@Big Dutch and ETF's and time decay issues ...

I've wondered if it wouldn't be better to sell short the inverse ETF.

In the case of TBT, wouldn't it be better to sell short TLT and therefore have the time decay working in your favor?

Just musings ...

Karankawa

muscratthisismynewname
Sep 15, 2012 - 4:31pm

Re: Question for the Pro Options traders

(Not a pro) I would not have long positions in SLV nor AGQ because:
- SLV likely does not have the amount of silver they say they do. If that becomes news, expect a disorderly drop in SLV and a rise in silver miners. This news could be sudden.

- AGQ sort of seems like a derivative of derivatives. If silver futures get a bit disorderly, I assume AGQ will fail sooner rather than later.

Some stocks to consider researching: SLW, AG, FNV. However, I don't necessarily expect stocks to remain a relativity safe place to park money since gov's might try to steal them. There will likely be some notice, and that time is a ways away.

The Green Manalishi
Sep 15, 2012 - 4:35pm

JPMorgan faces money

JPMorgan faces money laundering probe: source

(Reuters) - JPMorgan Chase & Co's compliance with U.S. anti-money laundering laws is being reviewed by a banking regulator, a source said, making the largest U.S. bank the latest target of a wide investigation of how banks prevent transactions involving drug money and sanctioned countries.

The Office of the Comptroller of the Currency, an independent branch within the Treasury Department, is examining JPMorgan's systems that are designed to monitor and filter such transactions, said the source, who is familiar with the situation.

The exact scope of the inquiry and the size of potential liabilities for the bank could not be learned.

more: https://www.reuters.com/article/2012/09/15/us-jpm-probe-idUSBRE88E0G220120915

Magpie
Sep 15, 2012 - 4:38pm
Dagney Taggart
Sep 15, 2012 - 4:39pm

@peckerwood

Just because some of us don't live here all week like some third-rate basement rats doesn't mean we're trolls or bots or we shouldn't be allowed to shoot-the-breeze on the weekends on MS.

Why don't you ignore us.

Sep 15, 2012 - 4:40pm

Not so fast:

Germany says further steps needed before banks tap ESM

Sat Sep 15, 2012 10:13am EDT

By John O'Donnell and Annika Breidthardt

NICOSIA (Reuters) - Handing bank oversight to the European Central Bank is not in itself sufficient to allow the euro zone's rescue fund to directly assist banks, Germany's Finance Minister said, warning he expected no such deal on supervision in 2012.

Wolfgang Schaeuble made the comments after talks between EU finance ministers on Saturday exposed deep divisions about a proposed banking union. That may disappoint investors who had been pinning hopes on a pledge by euro zone leaders to agree sweeping new powers for the ECB in 2012.

This in turn had been expected to unlock the possibility of direct aid to banks from the euro zone's rescue fund, the European Stability Mechanism (ESM), for countries such as Spain or Ireland.

"We have the declaration of the heads of governments of the euro zone that European banking supervision is a necessary but not sufficient prerequisite," Schaeuble told reporters after the ministers' meeting in Cyprus. "The rules of the ESM remain."

...

https://ca.reuters.com/article/businessNews/idCABRE88E05320120915

¤
Sep 15, 2012 - 4:41pm
Dagney Taggart
Sep 15, 2012 - 4:42pm

@Karankawa

Short leveraged ETF's. Because of the decay, you can't lose.

The Green Manalishi
Sep 15, 2012 - 4:42pm

I see Mark Knopfler's house has just gone on the market

Not far from me, beautiful house - just need that Hot, Explosive and Historic move then it's mine ;)

Wonder if he is leaving the country?

https://www.rightmove.co.uk/property-for-sale/property-35780758.html

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