Patiently Waiting

Wed, Nov 21, 2012 - 10:27am

I'm expecting a big December and an historic 2013. First things first, though, as we wait out December option expiration and the concurrent "Iron Dome" capping.

So, we sit. And wait. And wait some more. Who knows, maybe your Local Coin Shop will offer some Black Friday premium discounts? If so, take him up on it. Keep stacking and accumulating as much, much fun lies ahead.

For now, it's all about capping and controlling price through December option expiration day next Tuesday. Here are the two, major forces in play:

  1. Open interest in the Dec12 call options is enormous. As "StevenBHorse" kindly pointed out for us yesterday, there are currently 61,523 open contracts between 1735 and 1800. As Ruprecht would say: That's a lot. Of particular interest to The Gold Cartel is the startling 32,537 calls at the $1800 level. I would venture a guess that most of these positions were opened back in late September as nearly everyone (including yours truly) felt assured that, with the onset of QE∞, gold would be somewhere north of $1800 by Thanksgiving. Considering that every dollar above $1800 means $3,250,000 in option payout, the October beatdown from $1795 to $1690 seems rather predictable in hindsight.
  2. Both gold and silver are currently trading above every single one of their moving averages except one...the critical 50-day. The 5-day and 10-day are important, don't get me wrong. And the 200-day will almost always provide predictable support or resistance. The 50-day, however, is the biggie. Having price above or below the 50-day is one of the major determining factors as to whether or not the momo-chasing, HFT algos will be in buy mode or sell mode. At this juncture, a move UP and through the 50-day MAs will provide the final impetus for rallies back to $35-36 in silver and $1800 in gold. As I type, the 50-day MA in the Dec12 gold contract is at $1743.30 and the 50-day in the Dec12 silver is at $33.24.

So, what happens the rest of today and Friday? Probably not much. Just more of the same. HFTs are trolling for stops to harvest on either side so we'll likely continue to see trading in a very tight range.

The only possibility for "fun" might come early next week. Recall how those who are short calls or puts are often manipulated and gamed ahead of option expiry. For next week, the most likely possibility would be a squeeze of those who are short the $1750 calls...if there are a significant amount...and it's impossible to tell. If this happens, though, we'd see a quick spike toward $1750, followed by a further rally through $1750 as those who are short the 1750 calls panic and are forced to buy a futures contract in order to hedge. After a move to $1755 or so, gold would then revert back toward $1740-45 with the sheep having been successfully shorn. The open interest at 1750 may not be sufficient enough for this happen but we'll see. Keep an eye out, anyway.

Here are two current charts. Outside of another "Swiss Stair" accumulation pattern in silver, there's not a lot going on. That will soon change.

And, finally, it's the day before the Thanksgiving holiday here in the U.S. This means it is once again time to reprint one of my favorite posts, "Absolute Advice For Relatives". I wrote this two years ago, right after the onset of QE2. Though we've yet to see the extreme price inflation I was expecting, there can be no argument that the advice is still solid. (I mean, seriously, have you done your Thanksgiving grocery shopping yet? Sheesh!!)

Happy Thanksgiving, everyone. Be sure to check back later today for a very important guest post update.


Absolute Advice For Relatives
If you're like The Turd, you will most likely get peppered tomorrow with questions from pseudo-intellectual relatives regarding the current world/market environment. Your over-educated yet under-informed cousin or brother-in-law will seek out your current "wisdom" on investing, politics, etc. He or she will then feign interest while you speak but you will feel certain that, in the end, they just don't "get it" as your absolute conviction overwhelms their status quo mindset. You could probably talk for hours about the failure of Keynesianism, Quantitative Easing, the criminal political class, the fallacy of TBTF, POMO and the PDs, the infallibility of gold, etc...but why even try? Your cousin's husband doesn't understand any of this anyway and your show of intellect will only make him feel threatened. He'll quickly tune you out and run off to the family room to watch the Cowboys.

So what do you talk about tomorrow when someone asks? What kind of simple advice can give someone to prepare them for what is certain to be a very challenging year ahead? I plan to dial it back a bit and talk about one thing...inflation. And not just any old, run-of-the mill 3% inflation but serious inflation. I'm talking 20-30% inflation. Milk to $5/gallon kind of stuff. That is what's coming and its a topic most folks can actually get their arms around. Even the fuzzy-headed new boyfriend of your divorcee sister understands inflation and he might even be able to understand why its coming if you explain it well. (This is a chance for you to show off some of your worldly knowledge, too.)

Most folks with a high school-level understanding of economics (this includes your Fed governors) only understand and recognize demand-pull inflation. This is the classic demand side, Phillips Curve inflation that says rising wages, employment and wealth cause economic expansion which leads to more money chasing a static amount of goods. New, excess demand "pulls" prices up and the result is price inflation. Pretty simple stuff. What is coming in 2011, however, is the forgotten beast of cost-push inflation. This type of price inflation is caused by producers and merchants being forced to pass along through higher prices the rising cost of inputs to their products. Consumers, particularly the lower-and-middle income, bear the brunt of the pain. Your income isn't rising to keep pace with rising expenses and you get squeezed. Hard. And its not luxury items that are going up in price, its the staples. Bread, milk, gasoline, clothes, eggs, meat...the basics that no one can realistically live without. It's going to hurt and 2011 is going to be a mean year.

Why will input costs go up? Simple, they are all dollar-dominated and with our Fed now engaging in their final policy option, "QE to Infinity", all dollar-dominated assets are going up in price. Significantly. Your crazy uncle Henry may never take your advice to sell his stocks and buy precious metals but he just might take your advice to stock up now on essentials, before the prices skyrocket. Tell him that if he's going out to buy a new pair of pants, he should buy two. Tell your sister that instead of just buying her kids' winter coats for this year, she should buy coats for next year, too. Tell your cousin that instead of buying groceries every week to, instead, buy a whole dressed-out cow and put it in the freezer along with all the other dried and canned goods she can store.

Still, most crazy relatives won't listen but at least, come next Thanksgiving, they'll remember that you were right. One down side, however. Because you'll end up being the only member of the family that will have prepared and, most likely, the only one with affordable food to eat, you'll probably have to host everyone at your house next Thanksgiving. Oh well, there's a cure for that, too. Wine. Lots and lots of wine. Keep a couple of good Pinots on reserve and you'll be able to handle just about anybody.

About the Author

turd [at] tfmetalsreport [dot] com ()


Nov 21, 2012 - 10:28am

Industrial silver demand down in China

Anyone care to comment on this?

These appear to be physical-backed contracts and demand is down 30% in a year. There may be a focus on industrial demand rather than investment here, but even so...

Nov 21, 2012 - 10:29am

Just in time to miss out

now I'll go back and read it

Nov 21, 2012 - 10:32am

Removed comment

Removed comment.

Nov 21, 2012 - 10:33am

Waiting For Those Who Pull The Strings Not To Be Able To Do It

anymore. It truly is a us vs. them.........

Nov 21, 2012 - 10:36am

Forgot to include this

Did this "interview" last night with The Doc and Ranting Andy. Nothing too earth-shattering but fun nonetheless.

Video unavailable
Nov 21, 2012 - 10:38am

Photography and solar are the

Photography and solar are the big users there. Photography is disappearing, and solar just got a big tariff applied by the US (IIRC). Understandable that their demand would be down.

But then, maybe it is down because users are sourcing straight from miners, who don't want to sell at repressed spot prices on the exchange.

Who knows?

Nov 21, 2012 - 10:40am

Have some...

Video unavailable


B. Bernanke: "QE is necessary....the benefits outweigh the costs." Jackson Hole ~ 8/31/12

Nov 21, 2012 - 10:41am

Don't Forget

Lots and lots of:

Toilet paper or baby wipes.

Pads and tampons


And above all, a good water filter and protection.

Nov 21, 2012 - 10:49am
ACM Nana
Nov 21, 2012 - 10:49am

Good Lord Nana!

If it's that bad I'd stay home for Thanksgiving. LOL!

Nov 21, 2012 - 10:50am


is a Gilbert & Sullivan operetta.


Grasshoppers of Zurich Supporters Club

Nov 21, 2012 - 10:52am


So a few weeks ago I bought a gun before Obummer puts all sorts of silly regulations on them. I was at a friend’s house and asked him if he wanted to come to the range with me to shoot targets. He instantly freaked out, said I was crazy and didn’t need a gun because I live in a real nice area. I explained to him why I bought it. I bought it because I wanted to have it available should I ever need it. I hope that I never have to use it in a serious situation but at least I have access to it if need be. Yada, yada, yada he agreed with my logic and eventually came to the range with me. During the time when he was freaking out about my gun purchase, I was thinking in my head that it is really ironic that my 350 lbs friend was suddenly terrified of little 150 lb me. Had I been born to be evil, I could have whipped it out and taken anything of his that I wanted no question asked. In other words, I had POWER over him.

This led me to go on this week long analysis of what exactly put nations (and individuals) in POWER among others and came up with three different factors. Power levels of nations (and individuals) are determined by the amount of MONEY, MILITARY, and RESORUCES they posses. Those who have more of these three things will ALWAYS maintain more POWER than those who have less. Let’s observe.

As we all know, paper is not money. The USD is not money. I like how another turdite referred to it as “Accepted credit”. Money is defined by 4 things. 1) A Unit of account 2.) A store of wealth 3.) Medium of exchange and 4.) measure of value. So if I take a $20 Bill and rip it in half, is it still a store of wealth? Would you accept it? Maybe you would figuring you could tape it back together. But what if I burned it? Would you accept it then? Would a pile of paper ash suffice in your eyes as a acceptable unit of trade and store of wealth for your goods or services? Chances are you would not accept a pile of ash and therefore logic tells you that the USD is not money. Again, as we all know Gold and Silver are indeed money as they meet all of the required criteria. Remember that old saying “He who has the gold makes the rules” or in other words POWER. The more gold (and silver) you have in your hands, the more POWER you retain over others. Especially over those who are holding paper when the last card falls. Conclusion, the more PMs the more POWER.

Now back to my earlier example of my 350 lb friend who was terrified of 150 lb me because I had a gun. This brings up the second trait of powerful nations (or individuals), Military. Let’s say my 350 lb friend was born evil and decided to come into my house and rob me. Being 350 lbs, this dude could literally break my neck in a heartbeat. With no gun, he could come into my house, beat the shit out of me, tie me up and take whatever he wanted, no problem. But, add a gun to this same scenario and it changes who is in power completely. Put yourself in my imaginary 350 lb evil robbers body. You break into my house hoping to tie me up and take some shit. Are you going to continue with this plan after a shotgun is put in your face or I just took out a kneecap with my 9mm? My bet would be no. So the fact that I now have a gun takes the POWER away from the robbers and places it into my hand. Conclusion, guns are good and the more of them you can provide to your family the more POWER you have.

Lastly, resources. To me, it is not unbearably hard to pick up a few gardening books, a rain barrel, some seeds to put in the freezer, and starting to compost my yard scraps. Unfortunately, most westerners have become accustom to being able to get their resources from a local store. Hate to be the bearer of bad news, but there have been many many many times in history when this lifestyle was destroyed. We have just seen a recent example of this with Superstorm Sandy. What happened? Resources ran out.

Another more extreme example is with Zimbabwe and the farm land confiscation of Mugabe. This along with the country’s hyperinflation cause a severe lack of resources for a very long time. People suffered and starved. There is still tons of hardships and the nation is just barely on the road to recovery. Yes, to most westerners “this could never happen.” But when it happened during Sandy or Katrina, who would have the resources? Me or the typical westerner? Who gets to eat and drink? Who has gas? Lights? Logic would tell you that it would be me. Not only do I have the RESOURCES, but I also have the MILITARY to defend them and the MONEY to buy other things I may need. Conclusion, the more resources you posses the more POWER you have.

The point that I wanted to make with this ~rant~ of sorts is this. As turdite preppers, we are very very very POWERFUL individuals. It is this community that will remain in power after a collapse. It is this community that has the money, the military, and the resources to make it through almost any scenario with far less hardships then others. Every single reader on this site should be very proud of themselves for taking the POWER into their own hands. Don’t stress every single day over whether the market went up or down 2%, at the end of the day the fact that you have PMs and a gun in your safe with a garden in your backyard makes you more powerful than 98% of other Westerners. Money, military and resources have been the determining factors for world power for as long as civilized society has existed. A bunch of worthless paper and a Bentley are not going to mean much when you have no food or gas.

A big thanks to Turd for sharing his thoughts with us every day! Another big thanks to the community for the support and knowledge we all share with each other! I may not be living in a 5 million dollar upper east side apartment right now, but I know that I will be just fine in any “Shits real” situation and I have TFMR and all of you to thank for that! Best wishes to all, stay powerful!

Nov 21, 2012 - 10:57am
Nov 21, 2012 - 10:58am

Regarding SRSrocco's Guest Column-Energy Cost

I assume many of you heard the talk about John Paulson bailing on Anglo Ashanti and Gold Fields. Rumor is that costs of extraction will require nearly $3,000 per ounce price to make it practical under these conditions and costs.

I'm thinking the bird in the hand above ground will have fewer and fewer new companions coming from below ground. BWDIK? I do know I'm going to stack 'til I drop.

Nov 21, 2012 - 11:01am


your monday post: "London physical demand remains robust"

Is there actually a way to check the physical demand from an official source or is it just possible to verify with inside knowledge like yours from a trusted trader involved?

Nov 21, 2012 - 11:04am

Only slightly bullish. I

Only slightly bullish. I think we drift upwards for several more months yet. The uptrends from mid May looking good.

Nov 21, 2012 - 11:11am


Nicely off 33

Multiple touches

Nov 21, 2012 - 11:11am

Ho Hum

Same old, same old. One day closer.

Any change? As Turd says, "probably not."

Price chop sideways. Have a safe and happy thanks giving.

See you all next week.

The Green Manalishi
Nov 21, 2012 - 11:15am

Not being American.....

I will be keeping the advice for relatives script ready for Christmas. They won't listen though.

Nov 21, 2012 - 11:16am

Turd. You hit it right on the nail.

I sent over to one of my best friends, what I thought was a very carefully crafted summary as to why to buy PM's. and a list of PM boards. Of course, it was rather long, but nothing one with a College Degree in Lab Sciences couldn't or shouldn't be able to handle.

His response was that it was all "babble".

I responded that I wouldn't attempt to influence him anymore with my "Tower of Babble" and just stick with sports.

When all you hear from the sheep is "bah, bah, babble", you know that the "normalcy bias" is still fully intact.

My suggestion to all here. Don't even talk about the PM's at your Thanksgiving gatherings. Don't try to influence anyone, unless they ask first. Everyone is too involved with their own debt concerns and their job status to really give a damn in the first place. Children, I mean little children as in how cute, local weather, not climate change, and sports are the only subjects that won't get you into trouble. Any other topic will only backfire on you, that is, if you read this board.

The sheep can "bah, bah, babble" their way into insolvency as much as they want. They'll just blame you when it happens, if you open you mouth.

Happy Thanksgiving.

Mr. Fix
Nov 21, 2012 - 11:17am

Have lease rates ended?

Only kidding, Kitco's lease charts broke again.....

Nov 21, 2012 - 11:23am


Happy thanksgiving to all 'yall in the states.

I remember that thanksgiving post, must have been a turdite for longer than i realise!

Nov 21, 2012 - 11:23am
Nov 21, 2012 - 11:24am

Unfortunately, after expressing Turds advice 2 years ago...

My extended family thinks I am even more of a loon than before due to failure of all predictions not only collapsing in 2011 but 2012 as well. They think I am a loon candidate for those idiots on dumbsday preppers. Also my cousins holding Apple from 2 years ago vs Silver and Gold are also laughing like I am the village idiot. The "its coming" advice is dead on arrival until 8t happens. The last 2 years of dollar strength has made me the family idiot

The Watchman
Nov 21, 2012 - 11:26am
Nov 21, 2012 - 11:27am


Dollar strength vs. What???

Nov 21, 2012 - 11:32am

You don't know which horse will drink

Out of my family members, my mother decided to go for £5k worth of sovs. She is the one seeing her savings ZIRPED to death and was around when there was a gold standard and there was silver in the coinage. My siblings are more into property, have incomes and know no other than fiat.

I think conversations around the subject are best, and only respond if there is a nibble of interest. Otherwise it's like trying to convince a meat eater to go vegggie. Just gonna make them fry up the biggest steak they can find.

Nov 21, 2012 - 11:33am

six years

After spending a little more than six years trying to wake up friends and family members. I have come to the conclusion that just as with the rest of the country. 99.925% of them firmly have their normalcy bias in place and defense shields up and prepared to defend it. Last year I learned that I was able to get through to only a couple of people. One of them is all in and well informed and only 19 years old (Very Proud of Her)After all of that effort and explaining. I now just try to avoid even bringing it up and just enjoy the company of my friends and family while things are somewhat normal on the surface. With joking and good natured ribbing and lots of laughter. If the subject comes up of the economy, I just lay back on it and let others share what they know or think they know. when asked a direct question, I give as short and concise an answer as possible in the most basic terms.

much less frustration at the end of the day and honestly if one chooses to stay asleep to be happy in these troubling times. Who am I to interfere with the way they choose to be happy.

Nov 21, 2012 - 11:38am

Sitting back

and listening definitely helps you understand where you may be able to make a small point that will help people along too...

Nick Elway ballyale
Nov 21, 2012 - 11:39am

@ballyale Please say something..maybe nickels..


Some of those around the table may be willing to talk seriously but also be intimidated by the expected blah, blah, babble response.

I've found the "I've been saving nickels" approach helps identify like-minded people (potential allies) and plant a seed in the mind of those that would shut down if you mentioned gold or silver and economic collapse.

The case is simple, each nickel contains copper and nickel, about 5 cents worth. If there is deflation, it is still 5 cents. If there is inflation they'll quit making them and they'll trade for their metal content. If they doubt that, tell them of the eBay auction of $100 face value pre-1982 copper pennies that sold for $185 PLUS shipping, or the pre-1965 dimes trading for $2.30 each.

Having nickels won't make you a target for looters at the table (stealing nickels? really?), but you might identify producers or get non-thinkers asking questions.

People learn more by asking questions than by receiving lectures. Let them ask, give them short answers that encourage them to ask more questions.

It works for me, Nick Elway


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