Saturday Gold and Silver

341
Sat, Mar 2, 2013 - 12:47pm

It looks more and more like the next two weeks or so are going to be significant.

So, where do we start on this fine Saturday? How about with something from Friday? I posted these two charts into the comments section of yesterday's post. They show a classic short/theft tactic. Someone, either an HFT or a Cartel monkey, pulled the trigger on a sell order in silver at the very thin trading hour of 4:00 a.m., New York time. Since silver was sitting right on top of the previous week's lows, the effect was predictable. A host of sell-stops were "harvested" as price quickly fell about 50¢. Note then that price quickly recovered as liquidity returned with the opening of the Comex session.

Why did I start there today, you ask?

  1. Because now $28.40 is a very important level to watch early next week in silver, and,
  2. It is becoming increasingly likely that the same trick is going to get played out on a much larger scale in both gold and silver before a final bottom is put in and price permanently reverses.

Let's next visit our three friends...Crude, DrC and Sylvia. Do they have any clues for us? Why, yes, they do as a matter of fact. All three have come down dramatically and all three give the appearance of having a bit further to go. And if "commodities in general" show additional weakness over the next 7-10 days, you can probably imagine that selling pressure compounding our problems in gold and silver.

So let's start with silver. Running the stops yesterday has fortunately provided us with a very clear level to watch at $28.40. If silver slips below there again early next week, it would be a near certainty that we are going to take at least one trip down below $28. There has consistently been a lot of support there so taking it much lower is going to be a task for The Bad Guys.

That said, I'm beginning to sense that the ultimate goal of this entire event is to harvest the stops below $26. IF this happens...and currently I'd put the odds at about 25%...a quick drop to $25ish would be your final bottom. Price would quickly recover back above $26 and this deliberate beatdown would be over. How can I say that? More on that in a few minutes. First, two more charts:

And gold could very easily suffer the same fate. If The Cartel can engender enough additional spec selling, a veritable cornucopia of sell stops lay waiting for them sub-1530. And you can just imagine the reaction in the media: "GOLD IN BEAR MARKET!!" will be screamed as loudly as possible in the hopes of inspiring even more selling. Like silver, I only give this about 1 chance in 4 of happening but we must be on the lookout and prepare mentally. IF this occurs, you must be strong and BUY, not sell. The spike low will be The Bottom.

Now lets get back to why I am so confident that the selling has already been stretched to unsustainable levels and why, IF a spike low occurs, the metals would quickly recover. It's all in the CoT.

Yes I know that Santa claimed this week that the CoT is fudged and unreliable and yes I know that Santa has forgotten more about the metals markets that I know.....but....Unlce Ted believes in this stuff and so do I. Here's what Ted said in his mid-week newsletter:

"One of the reasons I think the data in the COT are accurate is that every contract has a long and short side. Therefore, to lie in the large trader reporting system that underlies the compilation of the COT, would require two lies; one by the big commercial lying and another by the counterparty holding the opposite side of the contract. I can see JPMorgan wanting to lie on its COMEX holdings, but I can’t see why a counterparty tech fund or speculator would assist in that lie. Please remember that lying on a large trader report is illegal and will be prosecuted by the CFTC (one of the few things they do well)."

With this in mind, here's a c&p of my CoT comments from yesterday:

For the Wed-Tue reporting week, gold was up $10 but total OI fell by 13,432. Silver fell by 17¢ and OI fell by 9,728.
The only interesting thing in the gold CoT was the divergence between LargeSpecs and SmallSpecs. The LargeSpecs went net long 13,000 contracts while the small specs went net short 7,400. This, my friends, is called leading the HFTs by their collective noses. On the bounce, the LargeSpecs covered shorts and went long to the tune of 13,000 contracts. Once fleeced, the "market" rolled back over and now all of those new longs (at 1600+) are under water.
Once again, the real interesting stuff is in silver. Both the Large and Small specs were adding to their shorts. The Large Specs sold a net 4,700 contracts and the Smalls sold a net 2,300. The commercials also sold 1,700 longs, dropping their gross long position back to a still-whopping 52,509. All of this selling allowed the naked short Cartel members to cover a massive 8,769 shorts or about 9% of their total gross short position! Now at 83,395, The Silver Cartel has been able to trim their short position by over 15,500 contracts, from 98,979 just two weeks ago. That's a drop of 16% in two weeks while price fell $2 from $31 to $29. I'm sure that's just good timing and good fortune...at least that's what Cueball and Thunderlips think.

On the bright side...

  • The total "commercial" long position in silver is actually up over the past two weeks while JPM et al have been covering. On 2/12/13, the gross comm long position was 52,182. As stated above, as of 2/26, it was still 52,509.
  • The Large Specs are racing to get short. On 2/5/13, the Large Specs were only short a record low 6,588 contracts. Three short weeks later, they're short a total 16,016, an increase of 143%!
  • The Large Specs are also feverishly dumping longs. Three weeks ago they were gross long 42,449. As f last Tuesday, that position had been whittled down to 37,753. That's a drop of 11%.
  • And the Large Spec net long ratio, which just 3 weeks ago was totally out of whack at 6.44:1, has fallen all the way back to 2.38:1. Remember, as a general rule, anything under 3 is somewhat bullish and anything over 4 is somewhat bearish. Anything under 2:1 is extremely bullish. For examples, see here: https://www.tfmetalsreport.com/blog/4492/strange-days-indeed
  • Also, all that Cartel short covering has further dropped the Cartel net short ratio. Last week it was 1.70:1 and this week it is 1.59:1. Again, historically, anything approaching 3:1 is very bad. Anything near 1.5:1 is very good.

I don't know if I can pound the table much harder. Could price be forced even lower, taking out $28 and heading toward $26? Yes, of course it can. But, if it does, the silver market will reach and surpass the exact same extremes that indicated bottoms in October of 2011, December of 2011 and August of 2012.

Again, please go back and looks at the "Strange Days Indeed" post from three weeks ago. ( https://www.tfmetalsreport.com/blog/4492/strange-days-indeed) The data is compelling and telling. Both metals, when measured by The Cartel net short ratio, have reached very bullish levels and stop-running spike lows would make them more extremely bullish than any other time that I can recall. Simply put, with CoT history as a guide, there is NO WAY that gold is going to $1200 and silver to $18 or even $22. Not from this CoT structure!

Moving on...Speaking of the CoT, one of your fellow Turdites has constructed a site to help everyone read and interpret the data. It can be found here: https://goldsilvercot.com/charts/cot/index.php

As you know, Santa's company TRX is an advertiser on this site. Someday soon, the miners will turn and I have great faith in Santa and his company for the long term. Last week, they held their annual shareholder meeting and the entire thing was recorded and posted. Here's a link. I think you'll enjoy watching it: https://standrewsclubav.ca/webcast/client_tanzanian/20130228/

And you've probably noticed that we've had to add a captcha to the registration and login process here. Sorry but it was necessary. If you've never run a site before, you simply wouldn't believe the amount and intensity of the spamming effort out there. They really slow site performance so it is hoped that the captcha will help us all in enjoying and learning from the site.

OK, that's it for now. Enjoy your weekend but please be aware of continued volatility next week and do not allow yourself to get all freaked out by the temporary price action. Keep your wits about you and remember the fundamentals. Stay strong and keep the faith. Continue to prepare accordingly.

TF

p.s. Adding these ZH links which were posted Saturday afternoon. Don't want you to miss this: https://www.zerohedge.com/news/2013-03-02/hedging-funds-and-physical-vs-paper-gold. AND YOU MUST READ THIS: https://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-vault-largest-world-located-next-new-york-fed

About the Author

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  341 Comments

Bsquash
Mar 3, 2013 - 9:16am

Precious Metals House (Toronto) - bankrupt

I have not seen any mention of this here.

Precious Metals House, an online bullion dealer in Toronto has gone bankrupt leaving many orders unfulfilled.

There is a forum that has been started for customers that have been burned to discuss strategies for the upcoming "first meeting of creditors" and any possible legal action. This group is badly needing legal advice.

If you are a customer of PMH or a Canadian lawyer who would be willing to help PM me and I will give you the website. I would post it here but I don't want that forum to get too crowded with rubberneckers.

There is much speculation that this company and it's owner (David Cresne) were not holding much inventory and were using customers money to play the casino hoping to buy cheaper than they were selling. They shut down their website when prices dropped on Feb 15 but had unfilled orders going back well into January.

i got burned on a somewhat small order of gold maples. In future I will make my purchases in person at the LCS.

Most of us are expecting to get .25 on the dollar at best.

Buyers beware...

ltcolkilgore
Mar 3, 2013 - 10:06am
RaRaRasputin snick
Mar 3, 2013 - 10:16am

Nice catch Snick!  I don't

Nice catch Snick! I don't like to wish time away but I am really looking forward to the week of the 22nd - 29th March :)

Also me and the kids have just finished planting tomato, cucumber and lettuce seeds to start the Spring growing season. Gotta be prepared on all fronts ;)

Edited to add: I see you're in Stuttgart. Was really saddened to see the news yesterday that they have started to demolish some of the Berlin Wall East Side Gallery to make way for luxury apartments I never thought that that would be allowed as it is a beautiful reminder of Germany's history and I was lucky enough to see it in it's complete form last Summer. Nice to see protestors out in full force and the destruction being halted.

Hundreds of protesters halt demolition of Berlin Wall, scuffle with police

https://rt.com/news/berlin-wall-protest-demolition-695/

s1lverbullet
Mar 3, 2013 - 10:17am

Turd

I feel like the forces of darkness read your blog as well as many others, and they play their cards specifically to make all of you look wrong and like a bunch of fools. I do think you guys are brilliant, but I think the whole "takeoff" will happen when no one expects it just because they are ass holes like that. Not getting my hopes up for the Ides+7, but it would be nice.

¤
Mar 3, 2013 - 10:18am

Thick As A BRIC: Ides +7

Turdite @snick (4 posts above)

Keep this image and story in mind when the end of March rolls around. Note the date.

BRICS Aim High

By Rajeev Sharma

March 29, 2012

EBG6NYSM4VCJ

Thursday’s daylong BRICS summit, hosted for the first time by India, made the right noises on contentious issues like Iran and Syria.

The five leaders – Presidents Dilma Rousseff (Brazil), Dmitry Medvedev (Russia), Hu Jintao (China) and Jacob Zuma (South Africa) and Indian Prime Minister Manmohan Singh – unanimously supported Iran’s right to peaceful uses of nuclear energy. Singh cautioned against rocking Iran’s boat too hard through “political disruptions” that would inevitably trigger volatility in global energy markets.

The leaders also came up with a unanimous position on Syria, advising the international community to deal with the crisis peacefully, but in a way that ensures the legitimate aspirations of all sections of Syrian society are taken into account while respecting the country’s sovereignty.

Economically speaking, the grouping signed two pacts to boost intra-BRICS trade in their local currencies by: (i) extending credit facilities in the local currency and (ii) confirming the BRICS multilateral letter of credit confirmation facility. Once the two pacts are implemented in letter and spirit, intra-BRICS trade, which currently stands at less than $230 billion, is expected to climb to $500 billion by 2015.

BRICS leaders also gave a green light to a joint working group to set up a development bank that will integrate their economies more closely. The proposed bank would fund infrastructure and sustainable development projects not only in BRICS countries, but also in other developing nations.

But things could get tricky. The United States is likely uneasy that two members – China and Russia – are blatantly anti-U.S. Given the uni-polar structure of today’s world, such a forum can’t dictate terms in international politics, but it can still offer significant nuisance value. In addition, there’s also some internal discord – China has consistently operated below the radar to block India’s candidature for permanent membership of the U.N. Security Council.

The BRICS bank that the forum wants to set up to challenge the supremacy of the World Bank and International Monetary Fund also remains a tricky issue, especially as no one knows when it will become a reality (if it ever does).

BRICS would do wise to avoid embarking on too ambitious a roadmap without arriving at a general consensus on some key issues. For a start, members should settle some of their respective bilateral disputes first before they start dreaming of developing a common BRICS currency or operating a BRICS bank. If they don’t, these summits will end up being just another talking shop and photo opportunity.

https://thediplomat.com/indian-decade/2012/03/29/brics-aim-high/

(DPH: I'm pretty sure for the last year I've been reading a steady stream of trade pacts and cooperative initiatives between the BRIC's to the point where most of their bumpy road has been smoothed enough for them to travel down it. A BRIC bank of the scope they have been planning on would be a significant and bold development.)

Jethro Tull - Thick as a Brick full

And finally just for the hell of it, for anyone interested here's what the newspaper on the cover says :


THICK AS A BRICK

JUDGES DISQUALIFY "LITTLE MILTON" IN LAST MINUTE RUMPUS
THE SOCIETY FOR LITERARY ADVANCEMENT AND GESTATION (SLAG), announced their decision late last night to disqualify eight year old prizewinner Gerald (Little Milton) Bostock following the hundreds of protests and threats received after the reading of his epic poem "Thick as a Brick" on B.B.C. Television last Monday night.
A hastily reconvened panel of Judges accepted the decision by four leading child psychiatrists that the boy's mind was seriously unbalanced and that his work was a product of an "extremely unwholesome attitude towards life, his God and Country". Bostock was recommended for psychiatric treatment following examination "without delay".

Prize Fighter
Mar 3, 2013 - 10:18am

The BRIC meet makes this

The BRIC meet makes this interesting:

https://www.france24.com/en/20130302-china-fully-prepared-currency-war-banker-0

02 March 2013 - 09H50

China "fully prepared" for currency war: banker

AFP - A top Chinese banker said Beijing is "fully prepared" for a currency war as he urged the world to abide by a consensus reached by the G20 to avert confrontation, state media reported on Saturday.

Yi Gang, deputy governor of China's central bank, issued the call after G20 finance ministers last month moved to calm fears of a looming war on the currency markets at a meeting in Moscow.

Those fears have largely been fuelled by the recent steep decline in the Japanese yen, which critics have accused Tokyo of manipulating to give its manufacturers a competitive edge in key export markets over Asian rivals.

Yi said a currency war could be avoided if major countries observed the G20 consensus that monetary policy should primarily serve as a tool for domestic economy, the Xinhua report said.

But China "is fully prepared", he added.

"In terms of both monetary policies and other mechanism arrangement, China will take into full account the quantitative easing policies implemented by central banks of foreign countries."

South Korea's incoming president Park Geun-Hye has also signalled her willingness to step in to stabilise the won and protect exporters battling a stronger Korean currency and a weaker yen.

Gold Dog
Mar 3, 2013 - 10:23am

The Tunnels

Where do I sign up to become one of the "Mole People", (Morloks?), when Fukushima finally blows?

Albino Dog

Terp
Mar 3, 2013 - 10:28am

March 27

For the superstitious types:

Full Moon

treefrog
Mar 3, 2013 - 10:29am

blonde joke

A young golden haired blonde was pulled over for speeding. As the motorcycle officer walked to her car window and flipped opens his ticket book, she said, "I bet you are going to sell me a ticket to the Highway Patrolmen's Ball." He replied, "Highway patrolmen don't have balls." There was a moment of silence while she smiled, and he realized what he'd just said. He then closed his book, got back on his motorcycle and left. She was laughing too hard to start her car for several minutes.

AlexCojones
Mar 3, 2013 - 10:38am

You Capchad some good stuff Turd

7+3 =? Please give us humans a hint.... What Bo Derek was in that movie?

Also you wrote: "I don't know if I can pound the table much harder. Could price be forced even lower, taking out $28 and heading toward $26? Yes, of course it can. But, if it does, the silver market will reach and surpass the exact same extremes ..."

and then we're back to 2008. No available silver

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