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

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  804 Comments

victori
Apr 15, 2013 - 3:15pm

The Volumes, The COTs etc.

I don't get it why anybody has any faith in those things. It's completely beyond me.

ancientmoneyJ Y
Apr 15, 2013 - 3:15pm

@JY896 re: highest volumes in 5 years. . .

Sort of amazing and breathtaking, no?

Out of the blue.

Amidst silver shortages, gold in bulk leaving western shores, mint sales exploding, junk silver premiums rising, QE worldwide blooming like a rose, COTs looking bullish, etc., etc.

Yes sir, the world is back on track to normalcy--should be there in a few days or at most a week according to the PTB actions.

"Happy Days are (soon!) here again (to lively music)!"

SilverSurfers
Apr 15, 2013 - 3:19pm

Ag to 0

not buying it. JMP would have no toys, and the regular coffer building flushes of hedgies would be game over, more expectantly, a COT flip, and the moon shot, way way before dollar reset and rebalancing. I just knew AlexCojones would ditch the birdies, and go back to same old same old, the chicks. Thanks Alex.

¤
Apr 15, 2013 - 3:19pm

cake eaters > JPM

Regarding JPM.

There is no doubt in my mind they're at the center of most of this (with GS) and having their cake and eating it also. No question.

At some point when this spins in the other direction it will befuddle most because it will not seem like it could be possible. Once you accept the fact (which I believe) that what seems wrong or not possible is actually very possible and business as usual by them for decades then it starts to make sense.

There's a reason why the shadow banking system has been mentioned and acknowledged for a long time. Just think of it as a set of invisible ledgers or system none of us should know about...or even imagine.

My outlook is simply this....imagine it and know it exists on many levels. That's when it makes sense and when the improbable becomes likely.

Think about it and get ready for the unexpected. I'm not jaded by possibly accepting that the cronyism is that deep and old even if I find it "unacceptable". When has our acceptability ever mattered? There's a reason their grandfathered position limits are limitless.

Think along those lines moving forward and the view becomes different. The rule of law for the common man is not the one they do business by.

Get ready for something shocking due to it's improbabilty....a.k.a. business as usual.

Apr 15, 2013 - 3:20pm

Any Turdites in/near Boston right now?

From/via ZH:

https://www.zerohedge.com/news/2013-04-15/large-explosion-reported-boston-marathon-coply-square

Local public radio comments not very promising:

"BOSTON — There have been explosions near Boston Marathon’s finish line, near the Lenox Hotel. There are reports of people being wheeled out with missing limbs. Boston Police, Fire, and EMS are on the scene."

@citizentvkenya @KTNKenya @K24Tv Boston Marathon Explosion near finish line- lots of peopel down. #bostonmarathon pic.twitter.com/sxr6G4WruR"

7:07 PM - 15 Apr 13

mid-explosion photo RT @907RAVFM Explosion at the Boston Marathon. #bostonmarathon Media locked down at nearby hotel. pic.twitter.com/ytTkPIhYpW

7:04 PM - 15 Apr 13
J.P. Cubish
Apr 15, 2013 - 3:21pm

Winds of shit

A little humour to lighten the mood, strangely appropriate. We will all be ok. Stay down and keep stacking.

https://www.youtube.com/watch?feature=player_detailpage&v=q4iDurCE3Yk

hai
Apr 15, 2013 - 3:23pm

Market Wrap: Gold Has Biggest Decline Ever Amid Mass Panic

Market Wrap: Gold Has Biggest Decline Ever Amid Mass Panic; Oil & Copper Plummet After Dismal China Data

https://www.hardassetsinvestor.com/market-monitor-archive/4703-market-wr...

psi
Apr 15, 2013 - 3:23pm

scenario 1.5

I would vote for scenario 1.5 After all, hasn't this washout been anticipated by some member on this board (not me). May be not this magnitude. After all, isn't 1500 an enticing target. I would say, there would be a big relief rally and it would be business as usual. But JPM would not necessarily go long.

Green Lantern
Apr 15, 2013 - 3:23pm

@jy, That's one of my best

@jy,

That's one of my best friends buildings next to the Garden. Trying to get him on the phone

foggyroad
Apr 15, 2013 - 3:24pm

posted without comment

Headline Of The Day

Submitted by Tyler Durden on 04/15/2013 - 13:49

Oh Hell, I can't post this without comment, the only reason any law has to be so complex, as to require fifteen hundred pages, is that it is so full of crap that the authors don't want anyone to actually read it!

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