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

  Refresh
old tradesman
May 3, 2013 - 7:52pm

tried to help a friend

has a 401k. Told him to get his stocks out of street name! The cost of the certificate is more than the stock itself. Anyone know that this was a true statement from the 401k adviser? Quote for certificate was 175$ stocks were 90-120 apiece..

dgstage
May 3, 2013 - 7:45pm

Thanks Rl999

Tried that with no avail.

Magpie
May 3, 2013 - 7:42pm

I'd be willing

to pre-pay for my Turd silver, after seeing the final design, but before the minting. If we all did that, Turd wouldn't have to come up with the money up front, and he'd have a better idea of how large the order should be.

rl999
May 3, 2013 - 7:42pm

@dgstage

call the mint. It worked for me, and from the ssg site I can say it worked for others.

When you have a problem with an appliance do you call the engineer that designed it, or the people that will actually fix it?

old tradesman
May 3, 2013 - 7:40pm

lcs report

if the spot price is 24.13 why is the lcs paying 28.63. disconnect?

Magpie
May 3, 2013 - 7:38pm
Nick ElwayTF
May 3, 2013 - 7:30pm
Spartacus Rex
May 3, 2013 - 7:27pm

The Silver Turd

My vote would definitely be for a 1oz. Round- Silver Turd Such would at long last finally prove whereby One actually could “pick up a turd by the clean end” Either Silvertowne Mint or Sunshine Mint would be good choices to make them @ https://www.silvertownemint.com/ or https://www.sunshinemint.com/

So It Goes
May 3, 2013 - 7:25pm

@ Kill the Rooster - Re: Tulving

From the previous thread:

I'm sorry if I my tone came off snotty from my previous post. I will to answer a couple of your concerns - hopefully this will come off as educational.

1. You must know your metals dealer. I am well aware that Tulving went bankrupt in 1991 and settled an advertisement claim from the Feds in 1992. Since then - 20+ years, he has a totally clean business bill of health. This record may be better than many of the dealers out there.

2. He is not for "everybody". His business model is to keep margins as low as possible so he can offer THE BEST PRICES. As such he will sell only larger amounts of metals. 10 oz is the minimum for some gold (its usually 20 oz). 500 0z is the minimum for silver. Also he keeps overhead as low as possible. He does not have that many employees. He even personally answers the phone during the off hours.

3. He is BUSY. The volume of his sales is enormous. He does no advertising other than a few youtube clips. He will not take the time to educate you. He will not suffer folks who try to change price in a falling market. He will get to your order when he can. His personality is his personality - and he is the boss.

Here's the take away point. If the best price is not your major criterion - you need your metal right away, you only want or can afford small lots, or the personality of the proprietor is important - then Tulving may not be for you.

However, my 0.02 - Tulving remains a valuable resource for the stacking community. He and his staff are scrupulously honest. To suggest otherwise is to diminish the community. Try to understand the business model he uses and to appreciate what he has to offer. After all, trading fiat currency for precious metals could save your life.

Keep stacking.

So it goes.

Gold Dog
May 3, 2013 - 7:22pm

Jake

Thanks for the video....a preview of next week?

YF,

D

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