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

shothat
Mar 2, 2013 - 2:10pm

Not that I'm Paranoid...

...but maybe I am. I've been buying PMs since 2006 and never bought online. ALWAYS-ALWAYS-ALWAYS paid currency at my LCS and LPS. I don't want any data warehouse, credit card database, or other e-record of my right to own PMs. I worked for the guberment for many years in IT Security, and know first hand that privacy and protection of personally identifiable information is an illusion at best.

Don't buy what I'm selling? Consider this. Overall, federal guberment IT systems are more secure than systems used by the banking industry. Guberment systems are required to comply with policies and standards mandated by the Federal Information Security Management Act (FISMA). https://csrc.nist.gov/groups/SMA/fisma/index.html

On the other hand, banks and financial institutions are not required to follow any federally regulated IT security standards. Many do follow the International Standardization on Security (ISO). https://www.27000.org/ However, there are no standards for compliance assurance, therefore, there's no assurance that banks adequately applied security controls.

To help substantiate my claim, a colleague who's very familiar with FISMA compliance now owns a company that performs penetration testing for banks. He told me once that if I knew how "open" some of these banks were, I'd keep my money under my mattress. As a side note, I now keep my fiat and PMs at the bottom of a lake.

So...am I paranoid or enlightened? DYODD

-------------------------------------------------------------------

NOTE: Copied from yesterday's post to get on today's radar.

LouieDoctor J
Mar 2, 2013 - 2:31pm

Continuing Dr. J

Congress is inept. Worse yet, they may be outright corrupt

All congressmen should be limited to 2 terms.

One in Congress, and one in jail.

Loud Noises
Mar 2, 2013 - 2:34pm

Dr Jerome

Well stated. I do the same thing... when I doubt the wisdom of converting fiat to metal at any given time, I usually invest it in preps instead. Real preps that I know I will use in the future... food, water, lead, other consumables and tangibles. The Alpha Strategy was a book that shaped my early thoughts on investment.

Swineflogger
Mar 2, 2013 - 2:47pm

Off Topic (again) - Life in Oregon

A friend's cousin just sent this picture out. In Oregon cougars are allowed to proliferate almost unchecked. The result is a tragic overkill of elk and deer and cattle and goats and llamas and the occasional attack on humans. This well-engineered killing machine weighed in at 190lbs.

Mar 2, 2013 - 2:47pm

Dr J - "So I stack. And

when I doubt the wisdom of adding more metal, I prep. I do not intend to get caught with my pants down, unprepared, ignorant, confused and wondering ...

Don't forget the TP. It stacks well, and prevents that terrible feeling ...

Louie
Mar 2, 2013 - 2:49pm

Our Congressmen

I lost all faith in Congress when Duke Cunningham pled guilty (2005). When the evidence came out about him faxing the required bribes to secure military contracts on his own congressional stationary, I knew that flat out bribery must be rampant in Congress.

Speaking of incompetence in government, Maxine Waters? J. Jackson Jr.?

Surely somebody posted Michael Bloomberg's comment about infinite money? If we had an educated population they would immediately demand his resignation for being too stupid to hold office. I would like to interview Bloomberg and ask him why we are printing $85b per month if people are willing to lend us an infinite amount of money.

Dr. J is right- none of our elected leaders are up to the task of leading us out of this crisis. It will end, and end badly.

Be Prepared
Mar 2, 2013 - 2:49pm

March 1st - Ranting Andy Article....

HOW CHINA DESTROYS AMERICA.....

The Yuan – or Renminbi – is the national currency of China. Few understand its inner workings, as – like most Chinese financial data – transparency is limited; particularly regarding the currency; which has been “pegged” to the world’s major currencies for two decades…

The Forgotten Peg: Chinese Yuan and U.S. Dollar

Per the chart below, the Yuan/Dollar exchange rate was UNCHANGED from 1993-2005; and since then, has been allowed to gradually decline within a prescribed range dictated by a basket of global currencies – dominated by the U.S. dollar…

This “forgotten peg” is by far the most LETHAL weapon in the global CURRENCY WARS; as it has enabled China to acquire MASSIVE global manufacturing share…

…which is EXACTLY what Japan and the rest of the world’s CURRENCY WAR participants are targeting – at the expense of each other

Could Abe’s Devaluation of Japanese Yen Spur a Currency War?

Yet, the Yuan peg gets little attention because China has become TPTC, or “Too Powerful to Challenge. From time to time, American politicians bluster about China de-pegging the Yuan; but mostly, such rhetoric simply targets votes from the uninformed public. The fact remains that China is the U.S.’s LARGEST CREDITOR…

…and without the cheap industrial production the peg enables, Americans would immediately experience MASSIVE price inflation…

With a drop in demand for the dollar, import prices will rise. As the US is now an import-dependent country, from that day on, Americans who walk into Wal-Mart will think they have walked into Neiman Marcus.

-“

GERALD CELENTE, PATRIOT

To maintain the peg, the Bank of China does what all Central banks due amidst CURRENCY WARS; PRINT MONEY in unlimited quantities – just as the supposedly “conservative” Swiss National Bank has done since pegging the Franc to the Euro in September 2011…

In China’s case, it must print Yuan “unit for unit” with production of currencies from the aforementioned global “basket”…

<See the Rest of the Article>

Be Prepared
Mar 2, 2013 - 3:00pm
Be Prepared
Mar 2, 2013 - 3:01pm
Louie
Mar 2, 2013 - 3:03pm

Silver Shortage

For those who doubt that silver supplies are tightening, have you seen premiums this weekend?

Provident- Last week OPM rounds were available in any quantity for 0.69 over spot, now if you buy fewer than 20, $1.29 per round premium. (You can still get them for $0.69 over spot if you buy 500).

90%- Is going for nearly $2.00 over spot per $1 face.

Tulving is BUYING 90% for $0.40/ounce. BUYING junk silver for over spot! It used to sell retail for under spot because nobody wanted it!

Silver dollars? If you are a stacker, time to sell those silver dollars, and trade them for 1 ounce .999 rounds.

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