Saturday Stuff

Sat, Feb 23, 2013 - 12:28pm

Just a quick wrap up of some assorted stuff as we prepare for what will be an eventful week ahead.

First of all, the big news from late yesterday...Moody's downgraded Her Majesty's debt. Though this is once again a fundamentally gold-positive event, I wouldn't expect an immediate jump in price because of it. Remember that in the fiat world, Pound weakness inversely means Pig strength.

In the absence of a podcast here at TFMR, please take the time to listen through all three segments of Andy's visit with Eric King yesterday (once they're finally posted). When we spoke yesterday, Andy told me not to expect anything too earth-shattering but I'm confident that it's worth your time, nonetheless. He and I plan hope to record something either Monday or Tuesday so look for that early next week. In the meantime, here are the KWN links:

If you haven't already, you're going to be reading a lot this weekend about yesterday's Commitment of Traders report. As you know, I like to review it right when it comes out and then post a sort of "instant analysis". Here's a c&p of my thoughts from yesterday, in case you missed them:

GOLD: For the week, price fell about $45. While this was taking place, the LargeSpecs added 1900 longs and a jaw-dropping 25,000 shorts! The LS net long ratio falls to an very bullish 2.12:1. The SmallSpecs got in on the act, too. They dumped 400 longs and added nearly 5,000 new shorts. This is an extremely bullish, contrary signal.
But the real action was by The Cartel. They added 4,300 new longs and covered an incredible 24,200 shorts. Again, who was buying while the specs were busy shorting? And who do you think will, ultimately, profit??
The Cartel net short ratio now stands at an extremely bullish 1.83:1.

SILVER: Almost identical to gold. Simply astounding, amazing and incredible.
For the reporting week, the price of silver fell about $1.60. Look what was happening internally:
The LargeSpecs dumped 1,150 longs and added 4,450 shorts. After reaching an unheard of extreme of 6.5:1 just two week ago, the LSpec net long ratio is all the way back to a mildly bullish 3.1:1
The SmallSpecs added 500 longs and 3700 shorts. Again, as in gold, the specs are racing to get short.
The "commercials"...pretty much all big firms except JPM and their con-conspirators...added another 2,026 longs, bringing their total gross long position to a never-before-seen 54,208. Simply incredible! They've continued to add longs all the way down. What do they know? What are they expecting??
The Silver Cartel...namely JPM and their two or three pals...were finally able to cover 6,800 of their disgustingly large short position. It's still disturbingly high at 92,164 but the total commercial net short ratio, which last peaked in September of last year at 2.6:1 has now declined to a quite bullish 1.7:1 Nearly every drop in The Cartel net short ratio to near 1.5:1 has preceded a substantial rally. We are very close!
All in all, both CoTs are extraordinarily bullish and indicative of a bottom very soon. Hang in there, now. Your patience will soon be rewarded!

Now, let me just add a couple of things:

  1. Getting the Gold Cartel net short ratio all the way down to 1.83:1 is a very good sign. For perspective, at the lows of late December 2011 and summer 2012, the Cartel net short ratios were 1.98:1 and 2.01:1, respectively. And this week's data was surveyed on Tuesday, before the big drop on Wednesday. All in all, the gold CoT is very bullish.
  2. Please also consider the net short ratio of The Silver Cartel. After the last four price washouts, here are your net short ratios at the bottom: On 8/14/12 it was 1.49:1. On 12/27/11 it was 1.34:1. On 10/4/11 it was 1.48:1 and on 6/28/11 it was 1.79:1. As of last Tuesday, it had fallen 1.7:1.
  3. And, finally, this theory....note the emphasis on theory. Regular readers know how perplexed I am by the silver OI situation. The primary outlier is the Commercial Long position. It "should be" somewhere near 30,000-35,000 contracts by this point in the price cycle. Instead, it grew again last week to 54,208. Chew on this: What if the 20,000 contract difference is, in fact, JPM trying to square away their naked short position that Uncle Ted estimates to be around 30,000. Now, stick with me on this... They tried to lessen it by covering back in April 2011 and the result was a near-cataclysmic event for them that was only rectified by the Sunday Night Massacre and the collusive CME margin hikes. Since then, they've maintained their position as The Big Short but, beginning late last summer, they began to build an equally-large long position. Again, stay with me here... They've added shorts through the fall to keep a lid on prices until they're ready to let it go, either voluntarily or involuntarily. If this is the case...and that's a very big IF...JPM could be approaching the point where they would be short 25,000-30,000 contracts AND long 25,000-30,000 contracts. At that point, if forced to exit the shorts, they'd be fully hedged and even profiting on the UPside.

Anyway, just chew on the 3rd point over the weekend. The more I think about it, the more it explains the "commercial long anomaly" and it provides JPM an exit strategy should the toothless CFTC ever choose to call them out.

Here are your updated charts. Given the CoT structure, I feel very comfortable declaring that a bottom is near. (And obviously hope that, by doing so, my Google ad revenue will increase.)

And just a couple of other items that have found their way into my inbox. First, this interview from last fall that details the whys and hows of gold manipulation:

Gold Market Manipulation Explained

This fun article discusses the effects of the gold repatriation movement:

If you haven't read up on this subject yet, I strongly urge you to do so. Just like the German gold repatriation, we may look back on these events and recall them as clear warning signs of imminent events:

And our friends at Gold Bullion International do some excellent analytical work. Their latest was posted to ZH and you should definitely take the time to read it:

Speaking of GBI, for now they are still the only bullion and storage affiliation that this site has. Many of you have purchased from them and I am very grateful for their support. If you are buying coins and bullion, please be sure to check them out. You can link to them trough the ad on the right side of the page. I'll soon be adding affiliations with GoldMoney, SilverDoctors, Provident and JMBullion, too, so please be sure to always consider them when looking the BTFD. (Which I would strongly encourage you to consider doing this weekend.)

OK, I think I'll stop there. I hope that you have a safe and relaxing weekend. You certainly deserve some serenity after the madness of the past two weeks. But keep the faith as this, too, shall pass. The metals have simply been forced back to the bottom of their 18-month price ranges and will soon begin to rebound as physical demand and the glaringly obvious fundamentals begin to take over.


p.s. You've got to check this out. The trollololo song is going mainstream!! I sure hope that the dead Russian guy's estate is getting a little skin out of it...(Thanks to my pal, DocD, for passing it along!)

Video unavailable

About the Author

turd [at] tfmetalsreport [dot] com ()


Torpedo Fish
Feb 23, 2013 - 3:50pm
Feb 23, 2013 - 3:52pm

I've not listened to it yet

But it often works like this:

  1. BIS loans gold to BBs
  2. BBs sell leased gold into the market
  3. This selling paints a bearish technical picture
  4. The weak-handed specs short based off of the painted technicals
Feb 23, 2013 - 4:03pm

Something to warm your cockles

Six year old girl shows off her silver stack

and thank for the margin call link

Feb 23, 2013 - 4:04pm

tried link and got...

ISP has received an order from the Courts requiring us to prevent access to this site in order to help protect against copyright infringement.

Feb 23, 2013 - 4:20pm

Answer: Because They Aren't In Freefall

I'm not sure what the rest of the ZH article says beyond the title and the first few sentences because I've given this meme' some thought previously and I've seen the comparisons before whispered in the internet news alleys regarding China teetering and on the brink etc. It's a common and fair question because Egypt and other countries/regions have had their springs/revolutions but there is one huge difference between them and China. Upside.

The reason I think China's 'spring' hasn't happened yet, and may not for quite some time, is that much of China is on the rise overall and their standard of living and earning capacity in the cities and 'burbs is growing because China has been on the ascent for alot longer and to a higher degree I think then most of us realize. China can rapidly modernize and expand in every direction as fast as it can because there is so much room for growth of all types in many area's of the country. If China jut concentrated on their own infrastructure and highway/railway system and interconnected the entire country like the US did early it would have enough work and jobs for anyone who wanted one for a very, very long time.

(I'll flatly state right here that if the US economy/fiscal condition completely tanks that China, EU etc. tank right along with it and they'll all have their springs/revolutions eventually because of it. We're still wayyy too big at this point and we still consume so much that others export to us that they depend on us for our markets and their existence. Bottomline is that if the US submarines everyone goes along for the ride in some drastic manner during 'the event' and thereafter.)

The trick for China imho, is that because it's so vast, and that so many of it's people live in extremely remote or almost primitive conditions that the threat to China and their version of a "spring" lie within that segment of the population because they are not feeling or seeing China's growth on a global level. On a personal standard of living level they're almost destitute and living a very simple arduous existence. I'm willing to bet that simple life (that many of us hopr for on some level) isn't a very happy or comfortable one.

With an average wage in China of approx. $2 a day the room for growth from within is enormous once the poor people who have almost nothing start to acquire more goods because their income levels looks like it can only go up from here. To that extent if I were China I would distribute some of those trillions in excess foreign reserves within their own country and boost the income level (minimum wage that isn't a joke) of those who have almost nothing so that they could have a larger than meager existence in a bid to make them more of a consume and to placate them at the same time.

The other obvious and easy solution to boosting everyone in Chinas wealth effect is to go back to silver and gold as a true currency and revalue it much, much higher in price. That would immediately make anyone in China (100's upon 100's of millions) who own either silver or gold much wealthier and likely to consume more goods. You can visualize the snowball effect it would have on that segment of the population that has almost nothing that their meager silver or gold holdings they might have would make them relatively wealthy and make them more of a consumer of everything.

The entire point being this....the reason there is no 'spring' in China for the foreseeable future is because they aren't in freefall and instead are on the ascent with much to look forward to and a big fat foreign reserve surplus. It's not like they are the debt laden West at this point and looking at the rearview mirror and seeing that their headed down hill and possibly their best days behind them. Big difference. China is headed towards a sunny summer for the foreseeable future if they can just even the playing field within their own vast borders.

A country with the vast majority of undeveloped gold and silver resources that might just use gold/silver as a currency in the future seems poised to create a wealth effect like the world has ever known within their own borders and even outside of it.

I hope everyone of us get to experience it ourselves.

Why Wasn’t There A Chinese Spring?

Submitted by Tyler Durden on 02/23/2013 - 11:57

It has now been two years since the self-immolation of the Tunisian street vendor, Mohamed Bouazizi, provided the spark that set the Arab world aflame. A wave of protests spread throughout the region in quick succession and led to the overthrow of long ruling autocrats in Egypt, Tunisia, Yemen, Libya, and possibly Syria. The collapse of regimes like Hosni Mubarak’s in Egypt, which many considered "an exemplar of... durable authoritarianism" was a salient reminder to many that such revolutions are "inherently unpredictable." Before long some began to speculate that the protest movements might spread to authoritarian states outside the Arab world, including China. Although sharing many of the same problems as Arab societies, the Arab Spring never arrived in Beijing. Why?

Feb 23, 2013 - 4:22pm

Is silver set to rise next week?

Maybe, but then again maybe not much if at all.

1. Monday is options expiration.

2. Tuesday and Wednesday Bernanke testifies to Congress.

3. Thursday is FND (first day notice).

4. The Mar13 OI is still high at 34,587 or over 170 million oz and the bankers will want to get this down.

So I expect the usual 8 am EST raid to go on all week. If silver doesn't get over $29 before Friday I will not be surprised. Following Wednesday's crash silver has traded between $28.20 and $29, so a $29 cap could well be in place. Of course OI also plays into this and the data is always 24 hours delayed. Then we look and hope for a significant rise back toward the $34 of late November?

Feb 23, 2013 - 4:26pm

A different sort of collection...

a somewhat older variety

Video unavailable
Feb 23, 2013 - 4:30pm

Gold Bullion & The BIS

I'm going to start looking for more info on this. I came across this and although it's 3 months old (early Dec.12) it does provide a window in what was in motion back then that might help decipher what just took place.

BIS Gold Report Hints at Repatriation by Central Banks

By Robert Lambourne via GoldSeek

I have been checking on the changes that have taken place to the gold banking business carried out by the Bank for International Settlements since March 2009 and the bank’s use of gold derivatives (essentially all are gold swaps), which have grown from zero as of March 31, 2009. All the data in the table below is sourced from BIS annual reports and from the bank’s 2012 interim report published in early November. Here is a link to it:

In March 2009 the BIS held gold sight accounts — unallocated gold — with a number of major central banks, presumably those based in traditional gold-trading markets. Apart from the bank’s own gold, the source of the gold sight accounts arose from gold that was deposited in sight accounts with the BIS with all or most of it deposited with the BIS by other central banks. Historically and especially during World War II central banks used the BIS to act as an intermediary in the gold market to protect against their gold sight accounts being confiscated or blocked by the bank holding the gold deposit. So, as an example, during World War II the German central bank held gold in a BIS sight account that was in turn deposited by the BIS in London, and consequently this gold was not confiscated or blocked by the United Kingdom government in the war.

Since March 2009 there has been a marked change in the source of the gold deposited by the BIS with central banks in gold sight accounts. It has fallen from 1,197.45 tonnes as of March 31, 2009, to 509.43 tonnes as of September 30, 2012. By March 2010 the BIS had sourced 346 tonnes of gold in the form of gold swaps — something that had not been done for many years previously or at least not disclosed.

Yet in an article published in the Financial Times on July 29, 2010, Jaime Caruana, head of the BIS, said the swaps were “regular commercial activities” for the bank. As can be seen from the table below, gold derivatives, essentially all being gold swaps, have become a regular source of gold for the BIS to deposit in gold sight accounts since this interview was given.

The decline in the amount of gold deposited with the BIS in gold sight accounts by central banks accords with the often-claimed desire of many gold owners either to take physical possession of their gold or at least to move it into an allocated form of gold account such as a BIS gold-earmarked account, which is excluded from the BIS’s own balance sheet.

Also, by their nature the gold swaps entered by the BIS provide the counterparty with a higher level of comfort. The counterparties for the BIS gold swap can presumably account for the gold as an owned asset, since the explanation of the gold swap in the BIS annual reports is very specific and says, “The Bank has an obligation to return the gold at the end of the contract.” (So it would appear to meet the definition of allocated gold.)

Hence, if the BIS could not get returned to it all the gold it has deposited in sight accounts as of September 30, 2012, then it would run the risk of having to obtain up to 393 tonnes of gold on the open market to return to the gold swap counterparties. This risk is not specifically considered in the BIS’s own commentary on the risks it faces.

In isolation this change in the mix of the sources of the BIS gold used in its gold banking business cannot be said to prove anything. But the reduction in the amount of gold deposited with the BIS in sight accounts is consistent with a desire by owners to exert greater control over their gold. Further, one could reasonably speculate whether gold swaps (and their increased proportion as a source of gold for the BIS gold banking business) have been used by the BIS to supply gold to avoid a default by a central bank when being asked to return the unallocated gold held in a sight account deposited with the BIS as the BIS has faced a reduction in that source of unallocated gold itself.

Whatever the truth may be, the changes in the table below are consistent with there being a tight physical market for gold where certain central banks are taking action to get a firmer grip on their metal.

* * *

Gold banking business of the Bank for International Settlements March 31, 2009, to 30th September 2012. Excludes BIS-owned gold.
Totals in millions of Special Drawing Rights.

…………………………… 3/2009 ….. 3/2010 …… 3/2011 ……. 3/2012 ……. 9/2012

Third-party gold
deposited by BIS
in gold sight
…………….. 23,039.1 … 40,219.9 … 33,177.8 …. 31,881.7 … 33,565.6

Gold deposited
in BIS gold sight
…………….. 23,039.1 … 32,057 ….. 21,264.3 …. 19,617.6 … 18,948.3

…………….. 0 ……….. 8,162.9 ….. 11,913.5 …. 12,264.1 … 14,617.3

Total gold
deposited in gold
sight accounts
and derivatives
……. 23,039.1 … 40,219.9 .. 33,177.8 … 31,881.7 … 33,565.6

gold deposited
by BIS in gold
sight accounts
……… 1,197.45 …… 1,704.8 ….. 1,139 ……….. 923 ……. 902.43

Gold deposited
in BIS gold sight
……………… 1,197.45 …… 1,358.8 ……… 730 ……….. 568 ……. 509.43

Gold derivatives ……….. 0 ……………. 346 ………… 409 ………. 355 …….. 393

Total third-party
gold deposited by
BIS in gold sight
accounts and gold
…………… 1,197.45 …… 1,704.8 …… 1,139 ……. 923 …… 902.43

Gold earmarked accounts
…………………………………. 212 …………. 212 ………. 297 …….. 323 …….. N/A

Feb 23, 2013 - 4:31pm

Posted This On Another Forum....

but we have to many naysayers looking the other way still, several (big-players) are still calling for gold to low $1,500

Now if I was a bankster how would I think. Well first thing I'd want to do is create doubt and confusion amongst the public first and then focus on trying my damnedest to confuse those pesky gold bugs. How would I do that?
1)Have the Fed print and give billion of dollars to the banksters at zero interest rates, thereby allowing those banksters to artificially inflate the broad markets and force/sucker managed money into said market chasing momentum and looking for some kind of decent ROI, when fundamentally there is no logical reason for said market to be rising given the current economics. ✔ Check

2) Attack the only sound and save sector. PM's and especially the mining sector and get as much managed money out of this sector, while at the same time decimating most retail investors forcing them to puke up and capitulate their long positions in disgust. ✔ Check

3) Flood the MSM with lies and deception about the true state of the economy and how we are nicely in recovery by pumping out BLS BS, manipulating the employment numbers, housing figures, etc, etc, while at the same time pumping out PM negative propaganda. How PM's are in a bubble and the bubble is about to pop. See, look at how the price of gold and silver are dropping through all the MA's and wow now we have the dreaded death cross and support levels are failing blah, blah, blah. Of course they conveniently don't report the record demand by central banks, China, India, Russia and every other Eastern nation, as well as the ever growing public investment demand from the mint at record levels and decreasing supply levels in both gold and silver blah, blah, blah. ✔ Check

4)When all these pieces are in place and you have suckered every last long into the broad markets and forced every last long to puke their mining shares you flip the switch, short the broad market and once again rape the public of what remaining wealth they have left while at the same time going long the only thing of real value, gold, silver, platinum, palladium and those mining companies that produce said product. Yet To Be Confirmed

Anyone sitting on the sidelines right now with cash on hand is looking to get in as low as they can, its just the way of the markets, .. the other many that got in at much higher levels have been rattled with fear and are more then ready to see convincing, sustainable progress, ... either way, ... we have more upside ahead then down!

Anyone sitting on the sidelines with cash on hand looking for a bottomor the low will be the ones that miss the train and by the time they realize what is going on they will have missed the biggest chunk of the move, and will start chasing creating a strong momentum move higher causing shorts to panic as key levels are breached on the way up creating even more upside momentum making even more money for the smart ones that averaged in on the way down to the bottom or held fast to their mining share as Santa has been telling us to do.

Call me a nut, a conspiratist, whatever, I could be totally out to lunch. But does anything else make any sense right now? The plan is perfect and is being played out meticulously.

Torpedo Fish
Feb 23, 2013 - 4:35pm

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Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
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Key Economic Events Week of 9/3

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