A Pattern Emerges

229
Wed, Jul 10, 2013 - 12:14pm

Because I'm still adjusting to the time change coming off of my vacation, I found myself tossing and turning last night when I suddenly came to this realization. Though not on the level of Dr. Emmett Brown after hitting his head on his bathroom sink, I think you'll find this interesting, nonetheless.

As you know, The Bullion Banks have engaged in a relentless campaign to lessen their exposure and potential liability in paper precious metal. Since the announcement of QE∞ last September, price has counter-intuitively fallen by over a third from near $1800 to below $1200. All the while, The Bullion Banks have decreased their total net short position in paper gold from 737 metric tonnes to less than 70 metric tonnes (from the CoT survey of 7/2/13). From a chart perspective, it looks like this:

Now, look closely. See anything? No? Look again, even closer. Do you see anything now? Do you see any type of pattern?? I must admit that, prior to last evening, I hadn't seen it, either. But it's there, waiting for you to discover it.

OK. What if now I gave you this? Take a look at the chart below with some notes made upon it. Now what do you think?

Hmmm. Well that's interesting, isn't it? Yes, price is down by over 30% from last September. However, almost all of the decline has taken place during the five calendar months of October, December, February, April and June. In fact, as you'll see below, the vast majority of the decline has occurred during the middle of those months. Hmmm. That's interesting, too.

Now before we dig further, what if I gave you these two charts?

So, now, let's go back to the current decline. What is so special about the months of October, December, February, April and June? I'll give you a few moments to think about that before we continue...

.....

.....

If you guessed, "They're Comex delivery months, Turd!", then you win today's prize! Yes! Those months are, in fact, "delivery" months for The Comex. Recall that the active futures contract is always the front month for delivery. Currently, this is the August13 contract. As of Monday, it had a total open interest of 206,000 contracts and it will stop trading and have it's First Notice Day on July 31. Anyone holding a contract after that date must show their intent for delivery by providing 100% margin in their account. Deliveries to eligible contract holders will then take place through the month of August.

Still with me? Good.

This same process occurred back in September for the October12 contract. First Notice Day was at the end of September and deliveries took place through October. The price of gold peaked at $1796 on October 5 but managed to hang in there for another week or so. But then look what happened and note the exact date:

DATE PRICE GLD TONNAGE

10/12/12 $1773 1,340.52

10/24/12 $1699 1,336.90

10/30/12 1,336.30

So, what do we see here? Near the middle of the delivery month, price began to drop rather steeply and a little bit of gold was shaken out of the GLD "inventory". Then, after a decent rally in November, price began to decline again once we flipped the calendar to the delivery month of December. Look what happened and, again, note the date:

DATE PRICE GLD TONNAGE

12/12/12 $1723 1,351.42

12/20/12 $1635 1,350.52

12/28/12 1,350.82

And now you're thinking, "OK, Turd. What's the deal?". Well, let's continue, shall we? Again, please note the date:

DATE PRICE GLD TONNAGE

2/11/13 $1669 1,326.89

2/21/13 $1555 1,290.31

2/25/13 1,272.85

Well, that's interesting. This time, the mid-delivery-month decline shook out over 50 tonnes of gold from the GLD. "Hmmmm. I wonder what would happen if we tried that again?"

DATE PRICE GLD TONNAGE

4/12/13 $1564 1,158.56

4/16/13 $1321 1,145.92

4/29/13 1,080.64

"Wow. This is awesome!", the Evil Ones said. "We hit price in February and shook out 50 tonnes. Then, even while price was stable from 2/21 - 4/12, we were able to grab 114 more. Finally, by breaking price down through the floor at $1525, we got 75 tonnes in April! What a deal!!"

Once again, price was relatively stable mid-April to mid-June, while no Comex deliveries were taking place. Then look what happened, again paying special attention to the date:

DATE PRICE GLD TONNAGE

6/12/13 $1394 1,009.85

6/28/13 $1181 969.50

7/9/13 939.75

So, what is the lesson here?

  • The Bullion Banks have utilized the manufactured price drop to lessen their exposure and potential liability in paper gold by over 90%.
  • This resulting "discount" in paper price has led to a surge in global physical demand. For example, see here: https://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=197040&sn=Detail
  • However, Registered and Eligible Comex inventories are dangerously low. As of yesterday, The Comex showed 224 tonnes of Eligible and just 35 tonnes of Registered (ready for delivery).

What to do, what to do? The plan is clear! Raid price during the delivery month!! Create the selling and panic necessary to shake loose tonnage from the GLD. Use this gold to settle delivery obligations, not only in New York but London, too. Once the current delivery "crisis" has passed, leave gold alone to wallow and flounder, only acting to cap price whenever necessary to keep the downtrend in place. Once the next delivery month arrives: Wash, rinse and repeat.

Going forward, this likely means that we're "safe" for about another month. Besides, it's summer and we're in the middle of vacation season. Aside from the occasional short squeeze or price plunge, the pattern suggests that gold will be stable between $1250 and $1350 until early August. But then....watch out!

Forewarned is forearmed.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  229 Comments

DeaconBenjamin
Jul 10, 2013 - 12:16pm

Interview with Axel Merk

Gold Update with Axel Merk: I Like My Gold and Buying More
twippers
Jul 10, 2013 - 12:17pm

Santa

Big day here in Vancouver. Santa is coming. Who wouldn't be excited!!

OC15
Jul 10, 2013 - 12:17pm

Thurd!

YEs!

DeaconBenjamin
Jul 10, 2013 - 12:21pm

Shortage of gold hits Indian diamond and jewellery units

A number of units and workers have been idled due to the severe shortage of in the wake of several restrictions on the yellow metal’s .

Imports in April and May together were a little over 300 tonnes. This fell to 38 tonnes in June. Excess imports in May gave some initial relief but that cushion is long gone.

“Several jewellery units and artisans are idle. Demand has also fallen. This is true not only for gold jewellery but also diamond jewellery and cutting and polishing units,” said Haresh Soni, chairman of the All India and Jewellery Trade Federation (GJF). “Business has halved in the past few weeks.”

The jewellery industry’s size is estimated at $45 billion (Rs 2.7 lakh crore), involving 600,000 units and employing a little over 10 million people.

https://www.business-standard.com/article/markets/shortage-of-gold-hits-...

treefrog
Jul 10, 2013 - 12:22pm

furth!

further?

DirkDirkler
Jul 10, 2013 - 12:22pm

Anyone know about this?

Sprott Gold Analyst Shaves Head "Eric Sprott will shave head if Gold hits $2000"

Anyone know about this?

Btw congrats to the lurkers.

Charles S. Hamlin
Jul 10, 2013 - 12:22pm

Thanks for the update Turd

Did we find anyone that could investigate in Hong Kong?

Mantis
Jul 10, 2013 - 12:26pm

Got 5th!

Hey treefrog we both tried to reserve fourth place with a '.'

Think we're on the same wavelength

Dam you won though (in the fourth place battle), ah well got 5th spot, not too shabby.

Anyway.. now to read the article...

p.s sorry for all the people who hate the tradition of racing to comment first. Hehe not really

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

DeaconBenjamin
Jul 10, 2013 - 12:26pm

Failed Banking System Prompts Iraqis to Hoard Gold

There is an old Arabic saying that "gold is both for decoration and storing." Currently, Iraqis, particularly residents of the Kurdistan Region of Iraq, are taking these words to heart. In the absence of a trustworthy banking system, they are converting their money into gold and stashing it in their homes. The Department of Standards and Quality Control for Gold and Minerals in the Kurdistan Region acknowledges that, indeed, large quantities of gold are being imported and distributed.

Bakr Aziz, the director of quality control for gold in the Kurdistan Regional Government's Ministry of Planning, revealed to Al-Monitor, "During the past six months, 49.4 [metric] tons of gold have been imported into Iraq through the Erbil and Sulaimaniyah airports." By comparison, according to Aziz, during the first seven months of 2012, some 34 tons of gold were imported.

He further explained, "Amounts of gold are brought in according to the needs of the Iraqi market. These quantities are brought in through the Erbil and Sulaimaniyah airports and distributed to all of Iraq." These two airports have surplanted Baghdad's airport as shipment points for gold due to the deteriorating security situation in central and southern Iraq and the lack of security in the airports there. By contrast, there is a "high level of organization in the Kurdistan Region's airports." Aziz reiterated, "[These airports] are secure, making it easier to bring gold into Iraq via the Kurdistan Region."

https://www.al-monitor.com/pulse/originals/2013/07/iraq-banking-sector-c...

ctob
Jul 10, 2013 - 12:28pm

Yep

I had noticed this after february and is why I anticipated the April smash but I was just using static timing. Your explanation makes more sense and fits this June/July thing better than my hypothesis. I should probably do my buy now rather than waiting anymore. Still gonna wait on FOMC though.

edit: Or I guess I should wait a bit longer. pattern has been stays sideways until smahsdown.

The thing is I don't think this pattern can last much longer. The negative GOFO is a big thing and basically the chaos has started, the positive feedback loops are starting to feed into themselves and control is being lost. There might be one or two more iterations but its risky to no buy on each smashdown at this point. IMO.

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