History In The Making

804
Mon, Apr 15, 2013 - 11:48am

I know that it's hard to watch your fiat-conversion price fluctuate so wildly but it's clear that we are on the verge of something major. There are two ways that this could go and, regardless of which outcome materializes, you're going to be glad you have physical metal in hand (or under water).

SCENARIO #1

This is what I've been warning was possible for about the past six weeks. Since the banks were seemingly caught flat-footed at the initiation of QE∞, the entire move from October to today has been contrived to extricate the banks from their naked short positions. Having succeeded in flipping the specs from long to short (The LargeSpecShorts in silver recently leapt from 6,500 contracts to 30,000 contracts in eight weeks!), why would The Cartels stop and let the metals bottom at the low end of their 18-month ranges? Why stop there when it was obvious to everyone that a plethora/cornucopia/boatload of sell-stops could easily be triggered if price could be hammered through. On Friday we saw this event take place and it was neatly chronicled by Ross Norman here: https://news.sharpspixley.com/article/ross-norman-gold-crushed-by-400-tonnes-or-usd20-billion-of-selling-on-comex/159239/

My expectations were this to happen was that we would likely see a very sharp, 2-4 day, 10% or so selloff. And where are we this instant? $1370 and $23.23.

$1525 - 10% = $1372.50

$26 -10% = $23.30

These numbers are not and cannot be absolutes. They are a guideline. We could, of course, go lower but this is what I thought was possible IF support was broken.

There's a lot of talk about $22 in silver and you may be wondering why. This chart shows you why:

But, I've got to tell you, I look at this chart and think: It's meaningless. Seriously. Do you really think price will bottom at the peak of price from back in March of 2008? Seriously? Look, if prices don't reverse in the next day or two, silver is more likely to fall to $18 than it is $22. I hope you're ready for that. (Regardless, if Scenario #2 is playing out, paper price is about to be insignificant anyway. More on that in a moment.)

Gold could fall farther, too. Maybe $1300-1310. (Did I really just type that? Whoa!). But, be on the lookout for a very sharp reversal.

And you know that, for quite some time, I've been telling you how awful the miners look. In the darkest recesses of my Turd-brain, I'd been thinking that maybe-just-maybe the HUI could fall to 250-300. And maybe-just-maybe, if it did, the miners would finally bottom. Well, here you go. FWIW...

So, anyway, as we wrap up Scenario #1...IF this scenario is correct, then you have an historic opportunity in both physical AND paper metal. In gold as of this moment, The Cartel is far less net short than they have ever been. Ever. And in silver, also as of this moment, the Specs are net short to an almost inconceivable level and The Commercials are likely net LONG. Nearly all of the risk of being short in the face of unlimited and infinite quantitative easing has now been transferred from the banks to the specs. Sort of like the end result of The Great Finanical Crisis of 2008, the risk willingly taken on by the banks has now been transferred to the public. As agents of the central banks and Western governments, why should this come as a surprise?

SCENARIO #2

This is the end of the fractional reserve bullion banking system. Consider this extraordinary decline, not from the perspective of technicals , quantitative easing or fundamentals. Consider these factors, instead:

  • Extraordinary physical deliveries, not just through London but also every other major global center including Shanghai.
  • The record Q1 depletion of Comex gold reserves.
  • The nearly 200 metric tonnes removed YTD from the GLD.
  • The record pace of demand for metal from the U.S. Mint.
  • The record premiums for bullion, even "junk" silver.
  • The "official' reported Chinese importation of 90 metric tonnes in February alone.
  • The destruction of the Kennecott mine in Utah, which in 2012, produced 25% of the U.S.'s copper, 5,000,000 ounces of silver and 500,000 ounces of gold.
  • And perhaps most significantly for this discussion: The DEFAULT of ABN Amro two weeks ago.

I call the ABN Amro move a DEFAULT because that's what it was, regardless of the SPIN. When a bullion bank declares that they cannot and will not deliver metal to clients who thought they held it in the bank's vaults, this is a DEFAULT. This is exactly what ABN did.

So given all of the physical fundamentals listed above AND the recent DEFAULT of a bullion bank, are we seeing the end of the fractional reserve bullion banking system? (And here I want to credit Bill Holter of MilesFranklin for connecting the dots in an email I received earlier today.) I have long suspected that the end of the silver manipulation would come as a Comex default, similar to the "Maine Potato Default" of the late 1970s. To avoid physical settlement (because there isn't any), the Comex simply halts paper metal trading and cash settles at some arbitary, closing price. To that end and to "save" as much money as possible, the days leading up to a default might actually be sharp DOWN days, as price is jammed lower, regardless of the fundamentals. Having achieved an "affordable" paper price, the markets are then closed and cash-settled.

The next day, physical trading resumes at a multiples-higher price level. Those with paper metal are left holding the bag and some paper money. Those who have been acquiring physical metal will finally see the value of that metal approach a measure of fair, supply/demand valuation.

This will happen eventually. It's ultimately what I've been expecting in some form as we end the Great Keynesian Experiment. What is important today, though, is that you comprehend the very real possibility that this is happening right now, in real time.

As I go to close, I see that gold is off almost exactly $100 at $1377. Silver is hanging in there, if you can say that, at $23.50. We are living through history. You should be proud and happy that you are at least alert and aware as this is happening. You have a ringside seat with an excellent view of The Fight. Have fun and enjoy. Most of all, do not be concerned about the short-term fluctuation of your fiat-conversion price. As I see it, only one of the two scenarios laid out in this post are possible and both scenarios point to a massive, history-making price appreciation in the days and weeks ahead.

Stay calm and be at peace. And, please, try to be a part of the solution, not part of the problem.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  804 Comments

Apr 15, 2013 - 11:51am
dgstage
Apr 15, 2013 - 11:51am

Internet

It is very slow today, anyone else have this issue?

Just A Regular Guy
Apr 15, 2013 - 11:54am

Great write-up Turd

Kudos!

*cough* BTFD!

The Hat Tip
Apr 15, 2013 - 11:54am

Buy and forget about it

This is the time to buy gold and/or silver and forget about it.

Just put some more to your stack and come back later in two, three years time.

Road_Scholar
Apr 15, 2013 - 11:55am

What would Ian Astbury do?

This "market" is pure BS and anyone who is on this site knows it; we're all part of "THE CULT". Sit tight or buy more when you can before it's ALL gone...

Argent
Apr 15, 2013 - 11:56am

laid bare

Is this how desperate they are,

5p ET Friday, April 12, 2013 Dear Friend of GATA and Gold: Former Assistant Treasury Secretary Paul Craig Roberts tells King World News today that the smashing of gold and silver prices is a Federal Reserve campaign to defend the U.S. dollar against a hyperinflationary scenario. "The exchange value of the dollar is threatened," Roberts says, "and if that collapses the Fed loses control over interest rates. Then the bond market blows up, the stock market blows up, and the banks that are too big to fail, fail. So it's an act of desperation because they've got to establish in people's minds that the dollar is the only safe place, it is the only safe haven, not gold, not silver, and not other currencies." An excerpt from the interview is posted at the King World News blog here: https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/12_Fo... CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


billhilly
Apr 15, 2013 - 11:56am

Dear Bart,

Sorry to bother you at work again but Jamie just dropped by with another envelope for you...boy, this one sure is thick. Anyway, I'll just put it in the desk drawer of your old room and you can get it when you come for your next visit. He sure is a sweet boy, and he really seemed happy today, even gave me a kiss on the cheek. Ok, Love you, MOM ps. Don't forget to get that haircut you promised me.

luv2stak
Apr 15, 2013 - 11:56am

6

perhaps, on a Historic (negative) day...

For The Record: gold down 100.10 to 1376.80

Silver down 2.41 to 23.44

painful

The Hat Tip
Apr 15, 2013 - 11:56am

Or maybe just 2-3 weeks or even 2-3 days

But your point is well taken.

achmachat
Apr 15, 2013 - 11:57am

ha!

we really need vindication or we will all sleep in the car... or the couch if the spouse feels sorry for us...

Turd,

you have to admit that scenario 2 would mean the end of much more for those in control... they'd rather divert to scenario 1 with all their might than let scenario 2 happen.

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