Looking Back and Looking Ahead

582
Fri, May 3, 2013 - 4:38pm

As we wrap this week and prepare for the next, let's review the charts and the CoT.

First, the Commitment of Traders report. It just came out ten minutes ago and here are my initial thoughts. Keep in mind a couple of things:

  1. For the reporting week, gold was UP $62 and its OI was also higher by 6,000 contracts
  2. Silver was also UP. It rose $1.36 but its OI fell by 15,500 or nearly 10%
  3. The silver OI drop was almost entirely due to May contract expiration and First Notice Day, which happened at the exact same time as the CoT survey, at the Comex close back on Tuesday
  4. After the survey, open interest rebounded on Wednesday and Thursday. Gold was down a 2-day total of $4.50 yet its OI rose by 8,000 contracts and silver 35¢ on an OI rise of 1,400.

GOLD

Continuing the trend, The Specs sold and The Cartel bought. For the week, the Large Specs dumped 3,900 longs and added 3,300 new shorts and the Small Specs are now NET SHORT by nearly 1,500 contracts after they dumped 2,400 longs while covering 800 shorts. Think about that for a moment....the most out-of-touch, ultimate-outsider group the Small Specs, are now NET SHORT. At $1450. For perspective, near the price peak on 8/16/11 the Small Specs were long 70,510 and short 21,749 for a net long ratio of 3.24:1. As of three days ago, they were long just 37,451 and short 38,940 for a net long ratio of 0.96:1. (As an aside, you should really go back and look at that entire CoT report from Harvey's archives. Marvel at the difference in positioning between then and now. https://harveyorgan.blogspot.com/2011_08_14_archive.html

To no surprise, The Gold Cartel utilized all of this Spec selling to reduce their net short position by 8,800 contracts. Last week, though they added 5,255 new shorts, they also added 14,080 longs. This brings their net short ratio all the way down to just 1.56:1. Again, for the sake of comparison, look at that CoT from 8/16/11. At $1900 gold, The Cartel was long just 160,562 and short 409,409 for a net short ratio of 2.55:1.

Digging deeper, what's the big difference between then and now? On 8/16/11, The Gold Cartel was long 160,562. Back on Tuesday, they were long 170,211. However, back in August of 2011 they were short 409,409 and as of last Tuesday they were short just 265,774. Instead of letting gold get away from them when it suddenly became the only currency alternative to fiat, The Cartel moved to aggressively smash price, an operation that continues to this day. In doing so, they've been able to reduce their net short position by 153,284 contracts or 61.6%! Or looked at another way, they've been able to reduce their paper-physical liability by 15,328,400 ounces or 477 metric tonnes!

SILVER

Again, May13 contract expiration has distorted this report, regardless it's still quite interesting. Last week, the Large Specs dumped another 3,100 longs while covering just 300 shorts. This brings their net long ratio back down to just 1.52:1. The silver Small Specs were net neutral for the week are are still just barely net long.

The commercials in silver who have been taking on JPM in The Civil War actually dumped some longs last week into expiration. Their gross long position fell by 2,573 to 65,685. JPM et al seized upon the Large Spec and Comm selling and covered 5,507 shorts, down to 79,915. This lowers The Silver Cartel net short ratio all the way down to an incredible 1.22:1.

For perspective, let's once again review the CoT from 8/16/11, when silver was trading near $41.

  • Large Spec longs 8/16/11 = 32,697. Last Tuesday = 35,720
  • Large Spec shorts 8/16/11 = 10,769. Last Tuesday = 23,530
  • Large Spec net long ratio 8/16/11 = 3.06:1. Last Tuesday 1.52.1.
  • Comm Longs 8/16/11 = 34,555. Last Tuesday = 65,685
  • Comm Shorts 8/16/11 = 75,236. Last Tuesday = 79,915
  • Cartel net short ratio 8/16/11 = 2.18:1. Last Tuesday = 1.22:1.

Well, what stands out at you? Note that the Large Spec long and Cartel short positions are nearly unchanged over 20 months and a $17 drop in price. Then note the HUGE change in the Large Spec short and Commercial long positions. Also notice the difference between the commercial silver activity and the commercial gold activity. In gold over the exact same time period, the Comm long position is nearly unchanged. However, the silver Comm long position has nearly doubled!

Now I suppose we could really drill down into this and try to discern, by firm, how positions have changed. That's a topic for another day. For today, just think of this:

I laid out for you yesterday all of the many events that have occurred while gold has declined by $500. In summary, I concluded that late August of 2011 was a seminal period of time for the Forces of Darkness. They saw the collapse of confidence in every single fiat currency and the decision was made to attack gold and silver as they had become the only, true alternative to paper. This plan of action continues to this day. By containing gold and silver for the past 20 months, The Cartels have:

  • Reduced their net short position in gold by 153,284 contracts. This equates to 15,328,400 troy ounces of gold or roughly 477 metric tonnes.
  • Reduced their net short exposure in silver by 26,449 contracts or 132,245,000 ounces of silver or 4,113 metric tonnes.

As we head into next week, we should all feel pretty good about surviving this past one. Things looked pretty lousy back on Wednesday but we've since recovered and the charts don't look too bad. Now if we can just get a shove...and burst through resistance at $1485 and $24.80, we could quickly move right back to $1525 and $26 and be poised for an epic battle, fighting to move back into the 1525-1800 and 26-36 price ranges that had contained the metals since the August 2011 attack plan began.

OK, time to call it a week. Ole Turd's got a frosty beer waiting for him and I'm not sure if I can wait much longer. If I wrap up now, I might also be able to catch the Kentucky Oaks. By the way, I haven't studied the form yet but, from what I've seen, I like Normandy Invasion in The Derby tomorrow.

Have a great weekend!

TF

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  582 Comments

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Gold Dog
May 6, 2013 - 9:56am

Any ornothologists out there?

We have a finch sized bird, mostly grey and black. Black head with white "cheeks" that has been pounding on our windows the last ten days.

It even attacks the Webber.

As near as we can guess is that it's a male protecting it's territory and is have a major war with it's own reflection. It flies into the windows on the back of the house hundreds of times a day. Pretty hilarious actually.

Thanks in advance for your help

"A Perfect Year" Dog

EDIT- It feeds from the Finch feeder and the big one too. Just another clue.
luv2stak
May 6, 2013 - 9:54am

Dr. Jerome -- Underestimation of TRUE Silver 'Junque' Premiums?

You wrote:

https://www.tfmetalsreport.com/comment/195265#comment-195265

<< The average price of US half dollar sales yesterday on ebay from a random sample is $7 over spot. That is a 22% premium. Provident's price for "our choice" half dollar coins is $8.10 over spot. >>

Correct me if I'm wrong, but aren't pre-1965 half-dollars only 90% silver, and post-1964 half-dollars only 40%?

That should give an even higher true 'premium.'

Kerbouchard
May 6, 2013 - 9:52am

@Kerbouchard

This suggestion was emailed to me over the weekend:

I recommend
Hopefully this follower will make the plunge and buy some physical.
May 6, 2013 - 9:42am

Just to wade in where I (a fool) should fear to tread

TF:

Submitted by Turd Ferguson on May 6, 2013 - 8:25am.MODERATOR They'll likely be coming with at least a mini-raid sometime soon.

I think technical analysis works in the very short term and the very long term ... but not so much in between. It is possible that we are just throwing a narrative on random facts, as so much of the time we tend to do, trying to make sense of things ... but those facts are not necessarily random and pattern seeking is the way to determine trend, one hopes.

Gold Dog
May 6, 2013 - 9:40am

Wilshire Coins

Are the guys that own Goldencents. I have friends in Santa Monica and used to eat breakfast just down the road from that joint. Never went inside.

There must be some pretty good money in the PM business....I wonder how much capital you would need to buy APMEX next time they go tapioca.

Dog

Kcap
May 6, 2013 - 9:36am

Physical Pricing Mechanism

Why doesn't Sprott get off his ass to introduce a physical pricing mechanism?

Because he's too much of a gentleman to interfere with the PTB? Good grief.

Kcap

Kcap
May 6, 2013 - 9:27am

@johnnydow

Sadly, you will probably end up being right.

Kcap

vonburpenstein
May 6, 2013 - 9:25am

down payment time...

...waited long as I could...100 ASE @2800 and 100 SM @2700 avail to my friends here...I'm east of Atl, Ga and don't wanna drive..PM me

edit- Wish I was rich like dog, what a good f@*#er he is...oh, and you can wait for the morning drop too...

Gold Dog
May 6, 2013 - 9:10am

Hai

YES!

Gold Dog
May 6, 2013 - 9:09am

The Leafs?

Don't we burn those before they reach their first birthday?

Here come the Hawks, the Mightie Blaaaack Hawks........(You will have to provide the music in your head.)

The "Square Heads" cost me some folding money yesterday, I DO NOT take kindly to that!

PO'd Dog

PS- I was going to use the money to support the AG market too!

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