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!)

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About the Author

turd [at] tfmetalsreport [dot] com ()


Feb 24, 2013 - 5:52pm

The End of the Great Keynesian Experiment?

A couple of signs to watch for:

* We Buy Gold/We Buy Silver stores are long gone. They have been replaced by "We Buy Tungsten" stores.

* Counterfeit tungsten bars show up on ebay. Same size as tungsten bars, but made of zinc, plugged with lead.

* US coinage, 5 cent thru $5, is made from aluminum. Aluminum shortages follow.

I'm sure there will be other clues.

wax off

Feb 24, 2013 - 6:06pm

"Goldman Sachs - Power and Peril"

John Corzine: "Goldman Sachs is very very good at what they do".

Can't argue with that. A successful pickpocket has to be too.

Feb 24, 2013 - 6:18pm


"Counterfeit tungsten bars show up on ebay. Same size as tungsten bars, but made of zinc, plugged with lead."


It should be:

"Counterfeit tungsten bars show up on ebay. Same size as tungsten bars, but made of gold."


Gold is a barbarous relic, on it's way to zero. Zinc and lead are too expensive.

Makes sense to me.

Feb 24, 2013 - 7:08pm

Is the QE Party Over?

This article via ZH from Detlev is pretty much what I was getting at several posts ago with expectations of ZIRP going on forever. If we've seen anything it's a desire by the Fed to surprise the market at times for maximum effect. Raising rates or just hinting at it to steer sentiment and fear would be their style and one their hinting at for a serious reason that everyone is trying to read into at this point. You have last weeks market action to use as guidance how powerful the Pavlovian FOMC moments can get and obviously the Fed can't be underestimated or not taken seriously at this point especially.

If for no other reason the Fed might just want to give the new incoming Fed Chairwoman some interest rate breathing room to work with or to set the stage for that person to run rates (and the Fed speak) back down but at least they'd have some room to maneuver with rates and policy.

Right now it's possible they might run rates back down in a range to approx. 1.60 for the 10 year UST but I think they set the bottom for the foreseeable future back in late July 2012 with a 1.38. Right now they're struggling keeping it at 2.00 or lower so the way I see it rates are already on the way up.

Look at this chart ( U.S. 10yr )and go back in time and July 2012 was the bottom as many of us on here were talking about the extremely low rates back then as it was underway. It wasn't until (you guessed it) some Fed minutes or FOMC etc in mid July that turned the markets in another direction thereafter until the beginning of October 2012 on yet again some other Fed language or insinuation.

The free words they speak are literally worth trillions upon trillions of dollars potentially depending on what they say and when they do so and for how long they keep mostly silent in-between.

Expect the unexpected regarding rates at some point but from the looks of it they've already been on their way up for approx. 7 months.

Can Endless Quantitative Easing Ever End?

Submitted by Tyler Durden on 02/24/2013 - 18:06

The publication, earlier this week, of the FOMC minutes seemed to have a similar effect on equity markets as a call from room service to a Las Vegas hotel suite, informing the partying high-rollers that the hotel might be running out of Cristal Champagne. Around the world, stocks sold off, and so did gold. The whole idea that a bunch of bureaucrats in Washington scans lots of data plus some anecdotal ‘evidence’ every month (with the help of 200 or so economists) and then ‘sets’ interest rates, astutely manipulates bank refunding rates and cleverly guides various market prices so that the overall economy comes out creating more new jobs while the debasement of money unfolds at the officially sanctioned but allegedly harmless pace of 2 percent, must appear entirely preposterous to any student of capitalism. There should be no monetary policy in a free market just as there should be no policy of setting food prices, or wage rates, or of centrally adjusting the number of hours in a day. But the question here is not what we would like to happen but what is most likely to happen. There is no doubt that we should see an end to ‘quantitative easing’ but will we see it anytime soon? Has the Fed finally – after creating $1.9 trillion in new ‘reserves’ since Lehman went bust – seen the light? Do they finally get some sense? Maybe, but we still doubt it. In financial markets the press, the degrees of freedom that central bank officials enjoy are vastly overestimated. In the meantime, the debasement of paper money continues.

Feb 24, 2013 - 7:34pm

ND Sunday Night Open

Big volume on the first two ticks in silver (9,000 then 15,000 trades) swallowed up any price increase we might have had on the open.

Good thing it's Zombie night on AMC. Also ladies curling finals are on tv for anyone who would witness such a bizarre thing.


Feb 24, 2013 - 7:36pm

8:00 pm might suck

Hopefully not.

A nice boomerang would be preferrable.

Feb 24, 2013 - 7:44pm
El Gordo
Feb 24, 2013 - 8:05pm

Green Lantern

I'm generally happier when PM prices rise, but I don't know why - I suppose I can then pat myself on the back for being such an astute investor. But the real deal for me as a stacker is not to consider this stack an investment expected to produce a yield. No, it is insurance against catastrophic economic events that could render fiat worthless overnight. I never buy expecting to sell at a profit (as measured in dollars). I buy to hold and use for staples and essentials should confidence in the dollar cause it to become useless as a currency. That's why I want prices, as measured in dollars, to remain relatively low. I figure that the bigger my stack is at the time of the collapse, the longer I can survive in the economic wilderness. Regardless of what happens to the value of the dollar, my stack will weigh the same. The more paper I can trade for PM, especially when PM is on sale, the better. I cannot imagine a scenario when I would be able to say "OK, my stack is big enough now." So guess I'll just be a simple, boring stacker for the rest of my days.

Feb 24, 2013 - 8:05pm

Silver Rush

Premiering as I write this on Discovery

Feb 24, 2013 - 8:10pm

Russia's Angry

Special Report: Russia's Angry - Iran Threatens - Israel Deploys Troops

Russia condemns Israeli attacks - Iran threatens retaliation - Hizbollah condemns Israel - Israel deploys troops to Syrian border - Russian Mig 31 fly into Sinai towards Israel.

Special Report: Russia's Angry - Iran Threatens - Israel Deploys Troops

Feb 24, 2013 - 8:12pm



Green Lantern
Feb 24, 2013 - 8:38pm

@GL: "Hoping to add 5 or 6

@GL: "Hoping to add 5 or 6 more coins to your stack and wishing for lower prices is telling me you ain't thinking about all the other ways, you could levarage a bull market and also add to your collection when things get moving again."

For those of us unable or unwilling to trade in a corrupt market what do you recommend? All of us are not market warriors nor do we want to be. My priority has never been making money. I'm forced to think about it now because our wise rulers seem bound and determined to reduce us to serfdom.

This isn't what life is supposed to be like unless it is the life you choose. I don't like having that choice made for me.

Music and Life - Alan Watts
Green Lantern
Feb 24, 2013 - 8:41pm

@El Gordo

By definition, gold is an investment. You buy it with the prospect in the future that it will either be profitable or useful. You invest your time, and labor for it. You have an expectation of both utility, value and growth. You can ignore the profitable part if you want. Insurance is a contractual guarantee that in the event of damage or loss, you will get compensated for the value of thing that is lost. You really want that? I don't want insurance for damaged fiat. I want reward for an investment that has multiple purposes, value as money, preserved my work efforts and will continue to grow in it's value (demand) despite the value of the currency.

If gold is really money (I believe that to be true), than I want to use it as money as well. I want to preserve a portion for utility and a portion for growth. I choose not to pigeon hole it into one thing. I prefer to use it for all that it is good for. Most importantly, if gold really goes to 5,000, or 10,000 or whatever, it might be the last great bull market in our motal lifes. If that is the case, than I want to ride that bull for ALL that it's worth and not just for an insurance policy. Because the more valuable gold becomes, the less available will be jobs to create money. And in that scenario, I want to use it as levarage to create more value and in the end more utility. You can make two gold coins into 4 gold coins much easier if the price is rising. But not so easy, if the price dicks around at these prices waiting for your bonus check to buy two more coins. Just my opinion.

Feb 24, 2013 - 8:45pm

Ni Hao Hong Kong

Looks like Hong Kong has opened... and not that the trading price of Silver and Gold have turned around and slope is up. Feb 24 shows up slope at open in Hong Kong.

Feb 24, 2013 - 8:52pm

U.K. ratings downgrade weighs on pound

Feb. 23, 2013, 2:44 p.m. EST

U.K. ratings downgrade weighs on pound

Sterling falls below $1.515 following loss of Moody’s triple-A rating

By wwitkowski[at]marketwatch[dot]com (Wallace Witkowski), MarketWatch

SAN FRANCISCO (MarketWatch) — The British pound will face continued pressure in the coming weeks as confidence erodes in the United Kingdom’s recovery efforts following the loss of the country’s triple-A rating, according to analysts.

The British pound /quotes/zigman/4867886/sampled GBPUSD +0.38% fell sharply to below $1.517 from around $1.525 late Friday following Moody’s U.K. ratings downgrade to Aa1 from Aaa. The pound had surged briefly past the $1.53 mark before the announcement on Friday from $1.515 on Thursday after touching an intraday high of $1.55 on Tuesday

In its rationale for the downgrade, Moody’s said U.K. economic growth will remain “sluggish” over the next few years compared with past recoveries in the 70s, 80s, and 90s.

“The sluggish growth environment in turn poses an increasing challenge to the government’s fiscal consolidation efforts, which represents the second driver informing Moody’s one-notch downgrade of the U.K.’s sovereign rating,” Moody’s said in its note.

Expect the pound to trade in the $1.40 to $1.50 range over the next couple of months as the U.K.’s medium-term growth outlook remains weak, said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS Macro Research, in a note.

“We think the pound is undergoing a similar devaluation to what the yen has experienced over the last few months,” Mohi-uddin said.

HSBC retained its 2013 year-end forecast of $1.48 for the pound. The British middle-ground plan of “[b]orrow initially to stimulate U.K. growth, providing the platform for the austerity programme thereafter” appears not to be working as the Moody’s downgrade suggests, HSBC said in a note.

“The markets will not enjoy the kind of clarity and comfort that policy provided in the past,” HSBC said. “Indeed, the proposed path of year after year of a sizeable fiscal drag, unprecedented in U.K. modern economic times, always looked challenging.”

.K. Chancellor of the Exchequer George Osborne said the Moody’s downgrade will not deter the country’s current economic strategy as he faced criticism that he fell short of his 2010 vow to retain the country’s AAA rating. Read more on Osborne reaction to downgrade.

The Federation of European Employers was quick to point out that Osborne could have avoided the downgrade had he focused more on growing the economy by cutting corporate taxes to stimulate manufacturing.

“The downgrading of the U.K.’s credit status is a blow for the U.K. as a leading financial centre and the U.K. balance of payments is so reliant on its financial services that even a small loss in trading income could affect the value of Sterling and have a major impact on GDP,” said FedEE Secretary-General Robin Chater in a statement.

“Regaining international confidence by further government spending cuts is going to take far too long to affect the economic fundamentals and could harm public confidence if it reduced the quality of public services,” he said.

The pound also fell against other currencies. Against the euro /quotes/zigman/5248856/sampled GBPEUR +0.61% , the pound was down to €1.147, compared with being just above €1.156 before the downgrade.

Against the yen /quotes/zigman/5029853/sampled GBPJPY -0.16% , the pound traded at ¥141.66 compared with ¥142.48 before the downgrade.

El Gordo Green Lantern
Feb 24, 2013 - 8:52pm


I guess that's why God made some of us dumbasses (like me) who can only count to ten and then have to start a new stack versus those who can strategize, plan and execute complex trading scenarios. Keeps the world in balance somehow I guess.

Feb 24, 2013 - 9:12pm

In hindsight....(remember this)

Silver was allowed to freely run to $50 to make the massive 30 yr cup. We are in the handle....handles of this magnitude are not clear cut but when they break out (and they always do), one of this size, leads to runs of gargantuan proportions. So, just as silver was freely released in 2011 (halted May 1), it will be allowed to run again. When controlled manipulation is abated, price goes wildly higher.

Its coming.

(yeah, yeah.....everyone says its coming, i know....)

but it is....


Feb 24, 2013 - 9:25pm

Dollar's value

I was in Paraguay in October, 2012, and exchanged U.S. Dollars for Paraguayan currency (Guaraní's) at a rate of 4,450 per dollar. I traveled elsewhere for three months and now I'm back in Paraguay.

Today, the posted exchange rate is 3,840 per dollar.

That's a 13% change in Dollar/Guaraní value in 4 months. Did the Dollar go down or did the Guaraní go up? No matter how it is looked at, that's a hellova big change in a short period of time.

I can't interpret the significance of this shift, but I suspect it is part of something big.

Feb 24, 2013 - 9:28pm


You looking at land there? Business?

Wondering what the climate toward Americans ex-patriating or owning real estate there?


Feb 24, 2013 - 9:29pm

@ Mr. Fix

Did you ever hear back from your Chilean website you inquired about land at?

If so, I never heard....can you update us?


Feb 24, 2013 - 10:00pm

Silver shortage?

There is no meaningful shortage of silver on a global basis. And none projected. If this supply/demand "fundamental" is part of your approach to either stacking or working the paper game you are badly informed.

Feb 24, 2013 - 10:04pm

Please enlighten us, happynow.

What will drive price then?


HappyNow Kcap
Feb 24, 2013 - 10:09pm

Good question Kcap

That is exactly why I am reminding the community.

Demand and Supply will not drive the price except at the micro level (eg a given finished form of silver may be low or out of stock due to production cycles).

Mr. Fix
Feb 24, 2013 - 10:12pm

@ Kcap

No :(

No reply at all.

Feb 24, 2013 - 10:12pm

Happy Now no silver shortage?

Please elaborate. Just listened to a long interview with Sprott. He seems to think that there is at least a scarcity of silver. If I look at only the empirical evidence, I can't disagree with you, but if I listen to the "experts," many are beyond positive that there is a severe shortage. I don't know what to think anymore.

Feb 24, 2013 - 10:18pm

happy now

interesting: Sprott thinks shortage yet you know better. Please explain how you know Sprott is wrong

Edit, you got there before me Lurker :-)

Feb 24, 2013 - 10:37pm

OK this is controversial

Sprott has made noise many times over the past couple of years that there is not enough silver to go around.

Yet he keeps adding to his silver funds and the silver never runs out. If there was a shortage how could he get silver for a fund and only pay the paper price?

Perhaps there is a scarcity of refined bars sitting around ready to build megaton funds. It doesn't take long to either mine or refine more though, and without inflating the price.

What exactly is it that Sprott is hinting at? Be aware of the wording. Is it silver bars? Is it silver ore? Is it silver mines? Which one of those really represents a global shortage and which of those represent a bottleneck that can be relieved within a short time?

My conclusion that there is no global shortage of silver uses precisely Sprott's actions together with the market pricing.

If you want to have an educational discussion then please go and find out how many tonnes Sprott has added to his funds each year since 2010 and let us all know. Knowing when could be educational too, we can watch how the market reacted to the sudden surprise demand in the face of "scarcity".

Occasnltrvlr FleetFeet
Feb 24, 2013 - 10:44pm

I'm glad I bought my Paraguayan...

...CD in Guarani and not USD ;-) !

Feb 24, 2013 - 10:45pm
Ned Nederlander
Feb 24, 2013 - 10:46pm

Getting My Peeping Tom on...

I have been lurking daily for months now and finally pulled the trigger on registering. Thanks to TF for all the dedication

along with the priceless comments and links provided by the community!!! Just got an order from Provident and eagerly awaiting delivery. Hopefully it won't take a month like last time. Bastards!!! I live in CA so a LCS charges the old 7.75% tax. So that is not a viable option. Anybody know a quicker online site to order from? JM Bullion took around the same time. Plus, all they have are Buffaloes. I am truly sick of that design.


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Key Economic Events Week of 4/15

4/16 9:15 ET Cap Util and Ind Prod
4/17 8:30 ET Trade Deficit (Feb)
4/17 10:00 ET Wholesale Inventories
4/18 8:30 ET Retail Sales (March)
4/18 8:30 ET Philly Fed
4/18 10:00 ET Business Inventories (Feb)
4/19 8:30 ET Housing Starts and Building Permits

Key Economic Events Week of 4/1

4/1 8:30 ET Retail Sales (Feb)
4/1 9:45 ET Markit & ISM Manu PMIs
4/1 10:00 ET Construction Spending (Feb)
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4/5 8:30 ET BLSBS

Key Economic Events Week of 3/25

3/26 8:30 ET Housing Starts (Feb)
3/27 8:30 ET Trade Deficit (Jan)
3/28 8:30 ET Q4 GDP final guess
3/28 10:00 ET Pending Home Sales (Feb)
3/29 8:30 ET Personal Income (Feb)
3/29 8:30 ET Consumer Spending and Core Infl. (Jan)
3/29 9:45 ET Chicago PMI
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