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 ()


Feb 23, 2013 - 7:04pm

@ tpbeta

The current Open interest anomaly of increasing longs seems to have commenced with QE 3 (I only record Commercials so don't have the historic data on spec positions).

With regards to arbitrage, you may well be onto something. Every open interest represents an equal position (ie a buyer and a seller balancing each other out). Bearing in mind that 99.5% of all trading is now electronic rather than in the pits, and that the algos work in millisecond dealing times, JPM with its high power servers and primary dealer position, would be ideally positioned to siphon off new sell orders, whether they be naked or not, and take them on as new longs, thereby hiding the build up of their true position, as Turd describes. Brilliant tactic if you think about it, as us little guys have no way of knowing for definite before they're ready to move, price stays capped, and the only anomaly is an increase in the open interest. It would be great if Turd's got it right as he's worked hard enough trying to figure out what the hell's been going on for the last 18 months.

Ilya Repin
Feb 23, 2013 - 7:17pm


What's with the sensitivity? geeez PM community is getting all sketchy attacking one another. I am not an enemy.

I was just pointing out valid information regarding the correlation between GBP and USD cross' as i feel you had obviously missed this very clear fact and so i disagreed with your comment, not the post in general, your COT analysis is interesting.

i thought this was meant to be a forum where we share information. my information regarding GBP USD correlation is accurate as shown in the charts. that's a fact. I thought it may be use full to others.

i was watching the close... what happened.. EUR moved up.. DXY flat printing a doji and the GBPUSD bombed. USD had time to launch. it didn't. why not?

DXY remained flat as the GBP cross' i mentioned are effecting the USD and bringing it down, not up. I think its important that readers are made aware of this. They can read your view and mine, whats the problem?

And on the 3:10 comment i made, you seem to have interpreted it wrongly. What i said, i do believe, was 3:10 post at TF metals were very informative and made up for the fact that the rest we not so valuable in terms of relevant information. I never stated whether i was in agreement or not.

In fact i thought my previous post was broadly supportive of you and unbiased.

I am confused by the confrontational nature here in regards to me pointing very relevant fact based analysis that differed from yours. This is not how its supposed to be.

I enjoy reading here and also enjoy the comments, the disagreements and the observations of others.

It would be sad world if all agreed.

(when i get home tomo i will have to post a chart to show you all what the reality is of the GBP USD and no it is nothing to do with Churchill, but very much to do with the term "anglo american establishment"


Feb 23, 2013 - 7:33pm

Can't remember...

Was she talking about coins? Guess I'll need to watch them again and pay closer attention.

Feb 23, 2013 - 7:36pm

You USA and Canada - types

probably wouldn't have heard of him, but he was a great inspiration to Terry Gilliam (Monty Python illustrator / animator) and I personally really liked his characters and unique animation style.

A great quote of his:

"You can always spot the ones with real talent. They don't listen to you."


Bob Godfrey, Roobarb animator, dies aged 91

The animator of much-loved cartoons Roobarb and Henry's Cat has died aged 91, his family has confirmed.

Bob Godfrey won an Oscar for his short film Great, a biography of the engineer Isambard Kingdom Brunel, but remains best known for his TV work.


...he was at his happiest when he was pushing the boundaries of conventional animation, working alongside avant-garde stars such as Spike Milligan and Michael Bentine, hob-nobbing with the Beatles and, later, becoming an inspiration for a young Terry Gilliam.

A 30-sec clip is here:

Feb 23, 2013 - 7:49pm

GBP/DXY Divergence

If you go to the link below and then add DXY as an overlay to the GBP chart and go back 6 months you'll clearly see a divergence with minimal shadowing of each other.

The GBP drops and the DXY strengthens at this point but possibly not as a specific reaction off each other but with other circumstances in play at the same time (Yen and Euro turbulence ).

Having said that, has anyone given any thought to how the markets might open up tomorrow night after the UK was downgraded on a Friday afternoon after the markets closed?

Could it be that gold started to rise after 12:30 on Friday after the news was leaked early and that the steady rise of gold into the globex had something to do with the UK downgrade? I think it's possible and I wouldn't consider it impossible for the markets to react a bit with that downgrade now in play on Sunday night.

The UK and BOE losing the AAA has meaning I would think. Does it have anything to do with the massive GLD drawdowns lately? Maybe imho, but it would make sense in some part if the news was leaked way ahead of time like I believe happens all the time in these situations.

Feb 23, 2013 - 8:05pm

Me and My Flying Monkeys

In honor of all those hard working monkeys everywhere...

Me and My Flying Monkeys/Wizard of Oz

Feb 23, 2013 - 8:33pm

AR-15 prices

Colonel Angus your right and wrong on AR-15 prices as it depends on where you live and where you are buying as far as Wal-Mart's that sell guns go they have not raised their price nor some of my local gun/sport store. Of course wouldn't attempt to buy one at a gun show.

In a way it is like silver and gold prices it depends on where you buy, but as for my experience here in the Pensacola area our coin stores sure are not the place to buy or sell to. Yes we have a bullion store which price wise is quite fair, but does charge a 3%. Due to Florida laws when it comes to purchases of non US minted coins under 500 dollars it is better to purchase them out of state.

To be honest most of the information and all is over my head and being a retired person with somewhat limited spare funds, I normally can only buy a few silver rounds most of the time. I was able to purchase 40 oz of silver rounds Friday at spot price, but many of the BTFD periods I just do not have the funds.

Ilya Repin ¤
Feb 23, 2013 - 8:34pm

Yes Gold and Silver were @DPH

Yes Gold and Silver were moving higher for this reason, i believe so. Silver 1.15% off its intraday low.

Yes, as i said i think we go up next week.

UK is a big deal, priced in somewhat but still a big deal. The UK and US are joined at the hip finance wise. They have a very strong relationship in politics, militarily and economics. I could actually argue that sophisticated UK (and European to a lesser degree) finance oligarchs actually run the US from abroad. and are currently looting it (the tax payers and assets) like an old colony.. anyway, another matter entirely.

So again.. the facts.

DXY sank into the close it printed a doji candle at resistance.

It did not react to the plunging GBPUSD and actually softened a bit.


DXY had time to react positively, why didnt it?

Gold and Silver moved up into the close. Why?

Stocks ripped into the close. Why?

now, im not saying the USD will get smoked along with the pound, although it may. What i am saying though is it will weigh negatively on the USD via many currency correlations.

I will post a chart tomorrow to show you what the dynamic is. GBP down = USD down. this is not my opinion it is the reality.

i mentioned CHF SEK NOK NZD AUD SGD CNY everyone should go check, don't take my word for it.

Also, the implications for the UK Gilt market could be far reaching and we have already seen continued weakness in UK Gov securities. This may indeed spread to the US.. it may already have happened.

Fun week perhaps

Feb 23, 2013 - 8:41pm

Chew on this

I think that you might be on to something Turd. A lot of people just look at that big short position (knowing it's JPM) so by increasing the long side of their hedge book, JPM is able to better disguise their positioning. How much of their short position is actual producer hedges? Perhaps after the specs got suckered into taking it down big on Wednesday purely based on negative price momentum, JPM is close to net long. If so, the upward price swing is going to shock the bears who have no idea what's going on. With price free to soar without taking down JPM, I could see higher prices into the sequester and the narrative being: "Look at those higher precious metals prices, investors are worried about the economy so we need to spend more money!"

Feb 23, 2013 - 8:46pm

Magnetic Personality

Not quite, and as much as you might despise the current JHPM namesake you have to admit one friggin' rich and powerful were Morgan and a circle of 6-8 others that they were able to bailout and finance and then takeover the banking system of this country? Wow!

Anyway, here's a Morgan classic and a few other Puck cartoons of that era circa 1900.

Many more at this link...

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