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 - 4:44pm

Here we go again

Looks like we are getting the calls for a break out. Brother John is calling for a big break out as well. I don't know anymore, not sure what-who to belive. But my feeling is if we don't get it over the next month or two we will have to go about our lives and stop listening to everyone banter about the next big leg up. Now I can't worry about when or if, it will be just about going about my life and stop thinking about it. Life is precious-buy your stack and just live your life and let's forgot already about the big moves.

Will see, this next two months for me will say a lot. I've been listening and most have been wrongs with their calls. When is a hard one to call but will see. Im not saying it will or wont'. but will be watching closely. I may just buy a couple of more oz on Friday just in case

Nov 21, 2012 - 4:45pm

Okay time to get outta here!

Go home and get ready to feel like this:

Maybe on friday I will have a miracle and get me one of these

Nov 21, 2012 - 4:53pm


The problem is, and a lot of people have this problem, they want things fast and now! I would be disingenuous if I said that I didnt want my savings account, read physical PM's, to grow. But, unfortunately we are all at the mercy of paper traders and somewhat by the physical traders and until the whole shit storm comes, we all will have to be patient! But rest assured that the shit storm will come and and you will be on the correct side of history and have protected you and yours!

Happy Thanksgiving All!

Nov 21, 2012 - 4:55pm


Video unavailable
Nov 21, 2012 - 5:03pm

Re.: It pretty hard to try.

<<I figure when gold reaches the $5k level he'll start thinking seriously about doing it. Then he still won't.>>

That's when he'll finally become convinced. And that's when you will know to sell you phyzz. The question is for what? What's the purchasing power of fiat when gold goes to $5K?

I guess small sales to cover everyday expenses is one way to go, esp. if you don't get raises commensurate with the rising price of essential goods.

Nov 21, 2012 - 5:04pm

Greg's latest charts seem to agree with those...

who have posted charts here in the last day or so...

Video unavailable
Darth Smoker
Nov 21, 2012 - 5:16pm

How to explain stacking

I carry two 1/2 dollars, one 1964 and the other fiat.

What is the values of these two coins?

This 1/2 dollar would have bought 3 gal on gas in 1964 and the same 1/2 dollar will still be able to buy 3 gal of gas today. Inflation is not the price of goods going up it's actually the purchasing value of our currency going down. This is the true definition of inflation.

Do you think gasoline will continue to go up? Buying Gold/Silver NOW will be just like buying gasoline now to use in the future. Describe the high correlation between Gold and Crude Oil since 1950

Nov 21, 2012 - 5:22pm

Not ready to invest in PMs?

Well, this is just for you. Got a missive from my insurance agent today. "Invest" $100,000 for a "guaranteed" return of ....... ready for this? ...........0.70% annually. WTF?

My logic chip fries just thinking about the possibility that some bleating sheeple would actually bite on that.

I guess they are out there.

wax off

Nov 21, 2012 - 5:35pm

Erik Swarts & Denial

His charts last year were based on the Nasdaq before and after the crash, and looked painfully realistic.

However, look at his general thesis. There should have been a 'public mania' in gold and silver, from which we are now descending.

Now look at all the comments on this thread about the difficulty everyone is having about getting their relatives, neighbours and work colleagues remotely interested in the PMs.

Does this sound remotely like we have had a public mania in PMs similar to the bubble?

Have a great Thanksgiving, American folks.

Nov 21, 2012 - 5:50pm

Ways to save the economy.

1. The first and most important is to rescind the fraudulent "mark to fantasy" law that allows bank to say that there mortgage assets exactly the same as when they bought them, the mortgage market in many areas of the country have declined enormously.

This fraud by the Gov't. has simply given time for these fraudulent Banks to unload as much as possible of their toxic mortgage waste as possible onto the "the Fed", which is nothing more that a front for the Banks to steal as much taxpayer money as possible.

2. I guess the idea/game plan is that if the actual rather nominal BK banks can offload as much of their non performing loans as possible onto the Fed and thus the US taxpayer, they might just survive with the remaining performing loans.

3. The real reason for the ZIRP or zero % interest is not to grow the economy. It is to once again offload as much of the toxic mortgage loans as possible. This "stimulus" QE forever package had nothing to do with stimulating the economy. It had everything to do with bailing out the banks. Remember, the Fed is a private company, conceived only for the benefit of the largest banks in the US. It's power is derived from the power that our Gov't gave to them to print Dollars as the realm of the "coin".

4. The Fed. has gone ROUGE on behalf of the Banks' greed and fraud. The Fed has lost all credibility to manage the money supply of the US. Their own self interests have superseded those of the interests of the US and it's citizens.

5. Therefore, the US should immediately or as soon as possible abolish the ability of the Fed. to print fiat paper on behalf of the good faith and assurance of the US Gov't. and establish one of its own. Of course, the US would have to convert the existing Fed Fiat, but at what price?

6. Of course, this would create a global financial turmoil for awhile.

7. This could be overcome by a true accounting the Big Banks and the acknowledgement that they are technically in BK. This would lead to BK court and a dismemberment of those banks. This would lead to a huge lessening of their political power as they wouldn't have the fraudulent money to support it anymore.

8. Once the US should abolish the Fed and it's fraudulent money printing, if done above board, then a new era of open government might be the result, other than Nazi policies that have been put in place to protect the fraudulently rich.

Conclusion: Get rid of the FED. Breakup the Banks into non politically influential entities. The result would be less military spending and CIA dark ops in the Middle East. We have already spent all the US good will over the past 50 years plus in expensive and fruitless wars for no apparent reason. The dead soldiers died for no reason. The BS reason that the died for democracy for others is so obviously and demonstrably denied by the lessening of Democracy, right here in America.

Get rid of these bribed Nazi Congress people and Senators by depriving them of the Bankers money for a start.

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