Getting Ready

340
Sun, Jun 9, 2013 - 1:42pm

I suspect we are about to have a rather consequential week, therefore, here's a Sunday post to get you started.

There's certainly a lot of disgust and angst out there at the price action from Friday. Put me in that category, too. The U.S. unemployment rate rises from 7.5% to 7.6% and it's used as a rationale for a 2.5% selloff in the price of gold? Uhhhmm...yah...that makes a lot of sense. I guess what doesn't make sense is going over it all again as I made my frustration pretty clear in the previous post. In the end, the desperate scheme of The Bullion Banks to transfer as much short obligation onto the backs of the Specs continues unabated.

This week's CoT report showed next-to-nothing in terms of weekly changes to net bullishness or bearishness. The real action, though, sprang forth from the monthly Bank Participation Report. Again, it is this report that many analysts use to calculate the net long or short positions of the individual Bullion Banks...and this month's report is a doozy!

The report shows that not only are the major Bullion Banks no longer net short, they are actually NET LONG gold futures. I've seen one report that suggests this is the first time the Bullion Banks have been NET LONG since 2001. I've also seen a report suggesting that JPM itself is now net long as many as 50,000 contracts! IF this is true, and it's simply a matter of correctly interpreting the data (of course the DATA ITSELF has to be accurate), then there can be NO DOUBT that the precious metals are on the verge of a MAJOR BOTTOM followed by a ferocious rally.

The only thing I'd like to add to the discussion is the rationale for JPM's move into NET LONG territory. The shortages in their gold vaults has been well-documented and clearly this has much to do with it. But there seems to be a lot of curiosity this weekend as to how JPM can be net long so many gold contracts yet still be net short so many silver contracts. The answer likely lies in offshore and OTC positioning, but as this relates directly to The Comex, I think that part of the JPM gold position is actually a hedge against their remaining silver position. Huh? Let me explain.

As you know, I watch the OI and CoT levels pretty closely and I've been banging the drum pretty hard for months about the unusual and exceptionally large Comex Commercial GROSS LONG position. This gross level of Commercial long contracts has historically and consistently fluctuated between 30,000 and 45,000 for the past several years. At price peaks, the gross level would be close to 30,000 and, at price bottoms, the number would rise to somewhere near 45,000. Essentially, these "other commercials" added contracts at lows and then closed them out at highs, making a tidy profit from anticipating how JPM was going to once again fleece the Spec Sheep.

Well, something flipped with this last price cycle. At the lows of last August, the Commercials had again built up a large gross long base (47,797) and, by the time price was capped at the announcement of QE∞ in mid-September, this position had been trimmed back (32,206). During this entire Cartel operation in the nine months since, you would have expected that the Commercial gross long position would have grown again. But, would you have expected this?

DATE PRICE GROSS COMM LONGS

8/14/12 $27.78 47,797

9/11/12 33.46 32,206

10/23/12 31.66 35,786

11/27/12 34.03 42,525

12/31/12 30.29 45,415

2/5/13 31.79 46,293

3/12/13 29.13 51,929

4/9/13 27.97 61,060

5/7/13 23.94 65,703

6/4/13 22.52 66,857

OK, so what the heck does all this mean? I'll try to bring it all together in some sort of coherent form:

  • Caught flatfooted and enormously short paper metal at the initiation of QE∞, a deliberate and calculated plan has been orchestrated by the major Bullion Banks, in particular JPMorgan.
  • By driving price the price of gold almost $400 lower, The Gold Cartel has been able to reduce their general liability by nearly 80% (https://www.tfmetalsreport.com/blog/4750/speechless-turd) and, by virtue of the latest Bank Participation Report, some Bullion Banks have been able to move NET LONG for the first time in over a decade.
  • If reports are correct the JPM has flipped from 50,000 net short to 50,000 net long, we must conclude that the operation to smash gold is close to complete.
  • However, even though silver has been smashed a greater price percentage than gold, JPM has been been blunted in their attempts to completely cover their net short silver position as the "other commercials" (who at least on the surface don't appear to be JPM itself) have added at least 20,000 more longs than they have historically ever carried.
  • And notice that the gross long position shown above has continued to rise, even in the face of sharply lower prices over the past eight weeks. These are some very deep pockets that, clearly, are not being shaken out. Instead of selling on further weakness, they continue to add.
  • JPM could attempt to jam silver prices even lower in an increasingly desperate attempt to frighten these longs but at what cost? By doing so they lose big on their gold position and further exacerbate their already tenuous physical/deliverable gold position.
  • And it is this "juggling act" that leads me to think that this entire operation, which began a brutally-long nine months ago, is nearly finished.

You see, by moving so deeply long in gold futures, JPM has effectively hedged much of the remaining silver short position that they've been unable to cover. At its most basic level...if they are forced to cover silver into a rising price, the potential losses they'd incur will be more than equaled by the gains they'd show in gold. (Just for fun...If you're long 50,000 contracts and price rises $500 back to the August 2011 highs, you make $2.5B!)

Now, all of this is well and good and NO DOUBT foreshadows much higher prices for both metals in the weeks ahead. However, none of this is going to matter much to the Spec HFTs which are expected to pounce on the metals this evening, particularly in silver. The fact that China is "closed" through mid-week will only serve to exacerbate the paper price volatility. However, IF I'm right about the ideas laid out above, price should show surprising resilience this week. Gold has been very well bought each and every time that attempts have been made to drive it down through $1350. Let's see if this continues. Silver, too, has hung tough around $22 and has bounced back twice from "shock lows" near $21.

So, I'll close this post the way I began. This is going to be a very consequential week for the metals...one that will tell us a lot about the short-term and intermediate trend for price as we head into summer. Nearly every indicator that I've traditionally followed is indicating that a bottom is near and trend change is coming. Let's see where we go from here.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  340 Comments

Jun 9, 2013 - 1:43pm

Contest winners

In case you missed it in the previous thread comments, the winners of the latest Hat Contest are:

BongoJim (1378.67 gold)

Chi-Town Deadhead (21.49 silver)

and MrMorden (21.87 silver)

If you haven't already, please email me your shipping info. Use this address:

tfmetalsreport at gmail dot com

beinki
Jun 9, 2013 - 1:48pm
Silver Spurs
Jun 9, 2013 - 1:48pm

Maybe first?

Could it be?

wouldyoubelieve...
Jun 9, 2013 - 1:48pm

1st?

top of the world ma! top of the world!

Silver Spurs
Jun 9, 2013 - 1:50pm
Sandiaman
Jun 9, 2013 - 1:51pm

Third

No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner,nor in time of war, but in a manner to be prescribed by law.

StevenBHorse
Jun 9, 2013 - 1:59pm

The Great Baton Pass

On a rare Sunday where all the ponies are napping and the Sire is running the stable. I have some time to share some thoughts.

The Great Baton Pass

Is what JS has been alluding to over the past few months. When he traded gold in the 1970's the banks where positioned the same way, until the final run when they went net long on the backs of the spec's and funds. We are there today. Does that mean that we are in for an immediate rally? Of course not. The question remains, how much net longer can the banks be before they are ready to let the price move to the upside. They have done this many times before, most recently in the CDS on MBS market in 2005. If you haven't read the Big Short by Michael Lewis, then I would recommend it. There are striking similarities between gold now and CDS on MBS back in 2006-7 right after the housing market began to show its first cracks. Default data on homes rose, housing prices fell, and yet despite this backdrop MBS prices remained elevated. Only later did we learn that the market was held in check because the banks were getting short the housing market to protect their own books. Only when they were ready did the prices of the CDS start their epic run.

Tiny philly started crying......so incomplete post. But you get the point.

Great Post Turd.

The GBP is almost complete. Be right and sit tight.

Neigh.

sengfarmer
Jun 9, 2013 - 2:17pm

top ten!!

I'm in.

TomMack
Jun 9, 2013 - 2:39pm

6th

prob get 50HT's just for this

edit> for final count

waxybilldupp
Jun 9, 2013 - 2:56pm

Feeling like Mongo ...

I've been trying to make sense out of the never-ending PM beat-downs. Wheels turning in my little noggin all weekend, while gardening and fishing. Trying to be optimistic.

I feel like we're being nibbled to death by ducks. It's not just the PM beat-downs that are wearing. It's a focal point because I have a horse in that race (didn't know horses don't like canoe rides). It's lots of stuff. The MSM B as in "B", S as in "S" is just incessant. Doesn't matter where you turn. Local news, national news, newspapers, cable TV (Bloomberg, CNBS). Except for the occasional dustup in places like Syria, "life is pretty good". "Things are getting better. Consumer sentiment is up. Stock market waaayyy up. 175000 more jobs last month. Inflation is low." What could be wrong?

Just don't pull back the curtain. I know I'm preaching to the choir here. Will this all end badly? Yeah, pretty much. What I've been trying to sort out is timing (aren't we all?) Since there are many opinions here in Turdville, I'll share mine.

I see a slow motion train wreck. I know Mr. Fix (and a few others) have been very clear that they see the big crunch as imminent. I'm not so sure. System degradation ... check ... every day. However, this is one seriously massive piece of machinery, whether you just look at the US of whether you take a global view. It's going to take a lot to grind it down. How many years have doomers been saying, "Next week. For sure, next week"? Inertia is a bitch.

The groups of players also tell me that collapse (whatever that means to the reader) will take longer that one might think possible.

First, there is Joe and Jane Sheeple. A wide ranging demographic in this herd, to be sure. Anywhere from homeless living under a bridge to those who would be considered to be quite wealthy. The free-shit army is a large part of this group. What sets them apart is that they are unwitting and unaware. The poor have little to lose. The wealthy, but uninformed, with their financial advisors, accountants and quest to be visible, are every bit as vulnerable, they just don't know it. Jim Cramer gives them investing advice. The reset will leave them to fend for themselves. They have no say in what is coming and won't know what hit them.

Then, there are the financial and political "leaders". They have some semblance of power, probably much less than they believe. The critical point here, is that they do have some influence on how long the story plays out. Guys like Ben Bernanke, OBAMA!, Jamie Dimon, a bunch of French guys, to name just a few, have a gigantic vested interest in keeping the merry-go-round turning and will do absolutely everything to keep the music playing. So far, the empirical evidence suggests they are successful. They may be "useful idiots" for the next group, but they do have influence and power.

The third group has the real power and are rarely in the spotlight. When is the last time you have seen a member of the club meeting in Europe this weekend testify before congress? These folks have a long view. They want to preserve the power they have, they want to add to it and they want to pass in on to family. They seem to be quite satisfied if things take time. When you have been working a plan for over 100 years, and in some families multiple centuries, what's the rush? How can a global financial collapse be a benefit? Of course, I'm sure preparations have been made for the possibility, but how could that scenario be better than today. World domination takes time.

Is it possible that some will not follow the rules? Of course. A nuclear winter could seriously screw things up, even for the Pope. Short of that, the Keymasters will simply adapt, make more money and consolidate more power as the sheeple are culled and brought in for another shearing.

Mongo only pawn in game of life

This is going to take more time. A hiccup like the Comex closing shop, a MENA blowup, Japan collapse or Euro failure would make life difficult for many and terminal for some. TEOTWAWKI ... probably not. Stay tuned here, reading the Turdistan Daily News and you will be the first to know exciting developments that might affect you. Meanwhile, prepare as you can but take time to live life. I have left sleepless nights behind me.

Turd, I can't thank you enough for creating this forum, so full of information, insight and hope.

Eyes open; no fear ... wax off

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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