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

SRSrocco
Jul 10, 2013 - 2:51pm

REPLY @ FIRST MAJESTIC & ENDEAVOUR...

ChicagoMark... part of the deal with making CASH FLOW with really low silver prices is to increase ones ore grade to produce more silver and less cost. This is called high-grading and even though miners can do it for a while, it is not something that can be done for years.... maybe a few quarters.

That being said, any miner that high-grades for an extended period to deal with much lower prices of metal, cuts off their nose to despite their face in the future. When they high-grade their mines now, they lower their overall average grade to a great degree going forward.

Even though the news results for First Majestic & Endeavour sounds great, let's put it into perspective:

FIRST MAJESTIC:

First Majestic produced nearly 2.5 million oz of pure silver (not equivalent) during Q1 2013. In Q2 2013 they have increased this about 300,000 oz, partly due to bringing on their new Del Toro Mine.

First Majestic plans on making some pretty good cuts during the year so they can keep their cash. They can do this, because they are probably one of the most profitable miners in the my top 12 primary silver miners.

ENDEAVOUR:

While Endeavour did increase its production substantially since Q2 2012, it only improved it a tad when we compare it to Q1 2013.

Q1 2013 = 1,489,746 oz silver production

Q2 2013 = 1,535,873 oz silver production

So, quarter over quarter, Endeavour increased its production 3%. Now, what I find interesting is their huge increase of 57% in revenue compared to last year. We have to take a look and see that Endeavour only sold a little more than 1 million oz of silver in Q2 2012, but sold 1.7 million in Q2 2013. Thats a lot more silver. They also sold 20,000 oz more gold.. as they only sold 5,000+ oz during Q2 2012.

Endeavour is a good company, and yes they are doing whatever they can to keep cash flow, but they sold 240,000 more oz of silver than they produced, and 6,000 more oz of gold than they produced. I hardly doubt they can do that the next quarter.

Regardless, First Majestic and Endeavour are in the top 4 of my top 12 primary silver miners in profitability. They will withstand lower prices much better than the others.

I am really worried about COEUR, PAN AMERICAN SILVER, ALEXCO, U.S. SILVER, GREAT PANTHER, AND SILVER STANDARD. These companies will suffer much more as their break-even is much higher than First Majestic & Endeavour.

steve

Fulgurite
Jul 10, 2013 - 2:55pm

Simplistic?

Well, call me simplistic, but the only pattern I see is pretty simple:

Stocks down ==> Gold (read: precious metals in general) hammered down

Stocks up ==> Gold stable(ish) or crawling slightly up.

Since everybody and their mother is saying that the stock market is still overvalued, I still don't think that the bottom in Gold is reached and every excuse (tapering rumours, bad earnings, sovereign debt crisis etc) will be used to drive prices down further.

ChicagoMark SRSrocco
Jul 10, 2013 - 3:06pm

@SRSrocco

Thanks Steve. Appreciate all the work you do go get us this kind of info. I've been a silver bull for a decade, but never spent the time to really understand mining production costs. Hence, I only rarely ever bought shares in miners. I just figured that mining is a very expensive and energy demanding business and in the era of peak oil might not be a good investment. However, the metal itself would only become more valuable.

JailBank
Jul 10, 2013 - 3:18pm

Silver Inventory

For anyone that would like to chime in. I am a heavy investor in First Majestic Silver (AG) and reading from their latest press release they are mining a crap ton of silver out of Mexico and have lots of unsold inventory (700,000 oz) they believe will be sold in Q3. Just for my knowledge as I am no metals trader, more a stacker, can anyone tell me some good reasons why at these levels First Majestic would be sitting on so much leftover inventory? I know they mined a record amount, but if PMs are in such high demand that scared me a little.

Not trolling, just looking for answers, and I am not 100% on how contracts/delivery/futures work in the real world. Shit I am an IT guy from Nebraska!

daveyboy
Jul 10, 2013 - 3:18pm

Debka are there to create

Debka are there to create disinfo, confusion and lies, they are there as a propaganda arm, the truth....that is secondary, if the stories convey some truth in them then it's just a byproduct.

UAE and co are supporting those monsters in Syria, Morsi himself revealed that he wanted to wage a holy war in Syria to topple any notion of secularism there.

They seem pretty much in cahoots to me, why was Morsi toppled? how about the fact that the army was scared stiff that the people low on sustenance, low on patience, but brimming with determination and anger could topple their corrupt asses too?

How about the IMF granting loans on condition that people who barely have enough to live see subsidies for necessities slashed?

Don't expect Debka to report on that and as for Debka.....every bullshit line they spin....sinks down the memory hole as new ones replace.

Swift Boat Vet Safety Dan
Jul 10, 2013 - 3:23pm

TURD !! and Safety Dan ---- If we don't get -----

If we don't get that late August thru Sept price drop, do you think that all PM lows are in and the B.B.s figure they've gotten all they can screw the 'muppets' out of on the down side? If not the coming delivery month, the failure of this pattern would more than likely signal the end of the downside manipulation then?

What's the consensus all?

Swifty

AGAU treefrog
Jul 10, 2013 - 3:26pm

Any more hints of

Any more hints of "stockpiling " by you mining chappies and I will send in the EPA and shut ya'll asses down

Jamie D

OC15
Jul 10, 2013 - 3:26pm

Great Panther

has their silver priced at $31/oz on their online store. Who's buying that?

S Roche
Jul 10, 2013 - 3:27pm

GOFO Mofos...

Very interesting catch on price action in delivery months Turd, thanks.

1M tighter but 2M-6M slightly easier but all still negative, 3 days of negative GOFO

https://www.lbma.org.uk/pages/index.cfm?page_id=55&title=gold_forwards&show=2013

I think 3 days now is equal to the record. Remember the caveat, low rates might make this time different but...

For anyone who wants to go down the GOFO rabbit hole, and note the links underneath relating to gold's role in financial markets as collateral, this is a fascinating read:

https://ftalphaville.ft.com/2013/07/10/1561322/the-hand-of-gofo-strikes-again/

h/t to Kid Dynamite on picking up that article

tyberious
Jul 10, 2013 - 3:27pm

Fraudulent Fiat Money,

Fraudulent Fiat Money, Currency Wars and Gold

Current Episode Direct Audio Links:

Hour 1 Hour 2

James Rickards and Andy Hoffman (AKA Ranting Andy) visit the radio program for the first time to talk about fraudulent fiat money, currency wars and gold.

James Rickards talks about how adversary nations outside of the Anglo-American Empire can and are using currency wars as a means of self defense against American expansionism. Rickards, who has helped the Pentagon understand the role of finance in the overall quest for power by the leading players on the world's stage, talks about some of the unintended consequences of current western policy.

Andy Hoffman talks about how the current economic and monetary policies of the U.S. are leading inexorably toward an eventual plunge in the U.S. dollar confidence and what that will mean for honest money-gold and silver.

Also on the show for the first time, Greg Johnson, Pres. and CEO of Prophecy Platinum, visits to talk about that company's world-class platinum group metals project and its prospects for investors who buy at current low share prices.

PS. Rickards, indicates that the FED may devalue the dollar, with gold at 7K!!

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

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

Key Economic Events Week of 8/5

8/5 9:45 ET Markit services PMI
8/5 10:00 ET ISM services PMI
8/6 10:00 ET Job Openings
8/8 10:00 ET Wholesale Inventories
8/9 8:30 ET Producer Price Index

Key Economic Events Week of 7/29

7/30 8:30 ET Personal Inc/Spending & Core Inflation
7/30 10:00 ET Consumer Confidence
7/31 8:15 ET ADP employment
7/31 2:00 pm ET FOMC Fedlines
7/31 2:30 pm ET CGP presser
8/1 9:45 ET Markit Manu PMI
8/1 10:00 ET ISM Manu PMI
8/2 8:30 ET BLSBS
8/2 10:00 ET Factory Orders

Key Economic Events Week of 7/22

7/23 10:00 ET Existing home sales
7/23 10:00 ET Richmond Fed Manu Idx
7/24 9:45 ET flash Markit PMIs
7/25 8:00 ET Count Draghi/ECB policy meeting
7/25 8:30 ET Durable Goods
7/25 8:30 ET Wholesale Inventories
7/26 8:30 ET Q2 GDP first guess

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs

Recent Comments

by boomer sooner, 1 hour 17 min ago
by Winder, Aug 22, 2019 - 11:27pm
by Marcus, Aug 22, 2019 - 11:27pm
by boomer sooner, Aug 22, 2019 - 11:06pm

Forum Discussion

by NW VIEW, Aug 22, 2019 - 4:28pm
by sierra skier, Aug 22, 2019 - 10:10am
by NW VIEW, Aug 22, 2019 - 9:09am
by Porros, Aug 21, 2019 - 5:00am
by sierra skier, Aug 20, 2019 - 5:12pm
randomness