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 22, 2012 - 9:59pm

The title might well suit us

Grateful Dead - Ship of Fools
maravich44 George Clooney
Nov 22, 2012 - 10:31pm
Nov 22, 2012 - 10:43pm

Surfin' through.....

...and had to say 'Hi' to my favorite pirate lady.

I'm using today's turkey 'tryp' as an excuse to be a couch potato all night.

Nov 22, 2012 - 10:48pm

From the Beginning...

Video unavailable
Peter Frampton Do You Feel Like We Do Midnight Special 1975 FULL
Nov 22, 2012 - 11:02pm

Speaking of the Grateful Dead...

Q: Why couldn't the Dead-Head get his Volkswagen bus started?

A: Because he didn't have enough acid to fill the battery.

Nov 22, 2012 - 11:07pm

obscure information re ships, Xty, and possibly tits

Hey DPH, and a happy turkey day to you too.

Just being random, but here is another boat I have been on, the Erin Go Bragh (Kiss me, I'm Irish?):

which starred, very briefly, in this movie, which starred Jane Seymour. The captain was much enamoured of her, and had enjoyed filming the sinking of his ship, as he got to crawl around on his hands and knees, while admiring Ms Seymour and her attributes:

It is one of the world's worst movies, having been based on one of the world's worst books.

maravich44 Mammoth
Nov 22, 2012 - 11:15pm


jerry slipped me this acidheart Elvis

maravich44 George Clooney
Nov 22, 2012 - 11:25pm
Nov 22, 2012 - 11:28pm


i thought he had plenty of acid but took it all! i hope it wasn't the brown acid.

remember also keep the acid away from your stack.

Nov 22, 2012 - 11:45pm

and one last indulgence

here is my daughter, sailing the Erin Go Bragh, when life was both simpler and more complicated:

Smooth sailing ...

Nov 22, 2012 - 11:53pm
maravich44 George Clooney
Nov 23, 2012 - 12:08am


simpler and more complicated. I am over at my sis's place and her oldest is 16. I'm sure i sound really old to her but I just mentioned that i thought when we got older that things came into focus and life made more sense. Anyway, that ain't the case and sorry about the worlds longest sentence.

Mr. Fix
Nov 23, 2012 - 12:45am

Hi folks...

I drove to Rhode Island for Thanksgiving.

I am now stuffed.

No net, but I 've got my trusty I-Pad.

Glad to see the world didn't end today.

A little light reading, (here in Turdville)

Than off to dreamland.

Be back home tomorrow night.

Happy Thanksgiving to all of you.

Good night.

Nov 23, 2012 - 12:55am


Are you in harm's way?

Nov 23, 2012 - 1:28am

There have been others ;) but these were the most memorable

Landing Ship, Tank (LST) across the Pacific and the Molokai Channel from San Francisco to Pearl Harbor

Matson's SS Lurline from the Aloha Tower to San Francisco

Just a day cruise in the SF bay

A cruise through the southern Caribbean on the Sea Breeze

and the Papagallo II, where we got married, anchored at Angel Island:

Nigel Black
Nov 23, 2012 - 1:35am

Happy Turkey Day

... and someone sent this to me. I laughed and laughed and laughed (and cried too... ):

Bullhorning Shoppers Lined Up For Thanksgiving Sales 2012
Nigel Black
Nov 23, 2012 - 1:36am

Happy Turkey Day

duplicate post - sorry

Nov 23, 2012 - 2:07am

GSR stayed flat in good

GSR stayed flat in good place , the volume was too small though to make any movements, but it did not go UP.

So, journey to 51 should continue today, in my opinion. EUR moving up quite relentlessly, for more than a week, with EU 2014-2020 budget in sight soon, I see 1,300 EUR/USD easily. So, silver moving up today.

May be Saturday, but budget will be approved. That gives some sense of stability to EURozone as well, does it not? Should help EUR, USDx may dip a bit (its Yen that is keeping it up).

Nov 23, 2012 - 2:48am

I do not think gold market

I do not think gold market will be BLOWN sky up any time soon. If it reaches 2000 by the end of the year, will be phenomenal. Without any scandals, just managed ascent.

And, if it blows, it will blow below 2300 this year, and below 2800 next year. Which is not bad either.

This sensationalist approach is defocusing people from what truly happens. Since 2001 nothing has been blown, just the USG debt is adding to money supply in USD and gold is moving accordingly up. Linear relation - so and so USD/oz per every trillion of debt added.

Of course, fairy tales are needed, but do not let them guide Your investment decisions. Gold will blow only if USG debt blows, and that is more predictable, will not happen overnight. Nothing else can blow it. However, if the USG debt signals increase and gold starts to form a bubble, such tales may move it into overbought territory, and someone will make a lot of money by selling at peak, while many will get stuck by buying on superexponential ascent.

Just like with silver in April 2011. One has to wait until the overbought situation passes, than continue stacking. Lower average price is a result, more piece of mind.

Just keep cool head. Until end of 2015 , that is, then reassess:)

Nov 23, 2012 - 2:51am

Willie's latest

Willie writes what many of us suspect. Nothing new really but a summary in Jim's linguistic style. The lies, fraud and manipulation could blow the gold market sky high. HEH, HEH, HEH -The battle is on for delivery and verification for official gold accounts -Evidence grows that much of it is gone, and when demanded, replaced with urgency -It is soon to transform into a global gold war -The German Govt gold demand to the London and NY City bankers represents a big escalation in the gold war -The central bank coordinated QE to Infinity has brought questions of gold account location and integrity -The Allocated Gold Account scandal is a natural event to follow the LIBOR banker scandal -QE3 will assure a gold rise past the $2000 mark, but the new scandal will take the gold price to $5000 -The powerful gold factors are aligned and in place, led by permanent ZIRP and unlimited QE

Nov 23, 2012 - 3:12am

Cool Head

Ivars, My head is cool alright. Downright chilly. That is why I do not discount the possibility of something happening which is not based on past trends, but a game changer. Like a miner who comes across a high grade seam. Like a major default. Like a major war etc. No speculative bets on unpredictable outcomes though, but positioned just in case.

As a stacker I just watch and wait. I think in the next 12 months some big events will make big ripples. Possibly a tsunami or two. But maybe they won't. One thing is clear, you and I do not know. But keep polishing your mathematical crystal ball, it's fascinating.

Nov 23, 2012 - 4:48am


Agree 100%. I'm just hoping for $34 before next weeks attempt at smashdown.

As for money supply in the US, it has been flat recently (check a chart - I can't embed because I'm technically challenged). Operation 'Twist' doesn't increase the money supply - only full-blown QE3 will do that, and it hasn't properly got going yet.

Historically, PMs rise to the end of November, fall in the first half of December, and then rise again from mid-December through January. Is that how you see things this year?

Thanks for your prognostications! They are always fascinating. smiley

Nov 23, 2012 - 6:18am

Ivars are you giving up on

Ivars are you giving up on your gold prediction? According to your chart we should have a full blow out right about now and see prices of almost 4k next year. Well I'm not giving up on your predictions. You have been more right than anyone I know last year or so. A bit off time wise but just move your charts 3 months or so and it's very close to what's happened. Also you've been calling the GSR. 

I believe in you Ivars! :)

Nov 23, 2012 - 6:31am

(No subject)

A shoe!
Nov 23, 2012 - 7:24am


"Are you in harm's way?"

What do you mean?

Nov 23, 2012 - 7:28am


Currently floating down the Great Western Canal with your wifi laptop? surprise

Nov 23, 2012 - 7:50am

Good Morning - I have a personal axe to grind re this:

Alcatel-Lucent in financing talks with Goldman Sachs: report

Summary: After an abysmal quarter, posting a loss and warning that the telecoms equipment maker may have to sell off assets, the firm is reportedly in financing talks with Goldman Sachs.

Alcatel-Lucent is in talks with Goldman Sachs in a bid to secure a loan deal to stave off further unprofitability, Bloomberg reports, citing a number of people familiar with the discussions.

According to the report, the New York-based investment bank would finance the ailing telecoms giant in return for offering some of its assets as collateral. The deal is yet to be finalized, however. 

Earlier this month when the Paris-based firm announced its third quarter results, Alcatel-Lucent's chief financial officer warned that it may have to sell off assets to strengthen its finances, along with cutting 5,500 jobs worldwide. The firm's cash balance stood at €4.7 billion ($6.05bn) after burning through €1.03 billion ($1.33bn) in the first nine months up to the end of September. 

The firm is exploring the possibility of selling off certain assets, such as the fiber-optic cable manufacturing division and the firm's enterprise unit, which offers telecoms equipment to businesses. Alcatel-Lucent already supplies technology to a range of cellular networks, including AT&T, Verizon, and France Telecom. ...

I mention this because one) the giants are falling. Alcatel-Lucent has been a bane of our lives to some extent, eating up smaller companies but suffering from horrible management spread over continents, and being far too large to address any issues correctly. Those who remind the Apple investors to check a chart of Nortel are quite right. The huge corporation will die away. And two) there is something horribly Faustian about this. Goldman Sachs rescuing Alcatel-Lucent is like a great white shark rescuing a hammerhead. Someone is going to get eaten, and it isn't Goldman Sachs. And for once I am on team Goldman. Eat those bastards. They already ate my lunch (well we stuffed a few acorns in our pockets first) but I have actually thought of writing a book called Escape from Alcatel. We could star in it, paddling away on a raft made of debris, as a monster ghost ship slowly sinks behind us.

Nov 23, 2012 - 8:12am

The decrease in margins puzzles me as I have said..

Why would they do it now when it appears we are heading into the strongest season for the metals??? 

they want the prices to go sky hi? Or do they have some Evil plan to attack at some point they have figured out?

Also we have expirations on Tuesday so how many think there will be a mini smash coming? 

Plus the amount is a lot! $2k on gold and $5k on silver lower.

Nov 23, 2012 - 8:29am

Alcatel and Nortel

There are a dozen buildings in Richardson, TX, a couple million square feet, that were all occupied by Nortel back in the late 90's. The traffic was so bad they added an extra off-ramp on I-75. Alcatel still has a presence down the street, but it is a tenth of what it once was. The ex-Nortel buildings are all empty.

I had friends with English Lit degrees pulling six-figure salaries selling telecom equipment back then. All bubbles feel the same, don't they?

Nov 23, 2012 - 8:44am

Nortel's Ottawa Campus:

Nortel's former "campus" in Ottawa. Now owned by ... the Department of National Defence!

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