Context

78
Wed, Apr 16, 2014 - 11:46am

Having 24 hours to consider yesterday's price smash, I feel compelled to share with you some of the conclusions I've drawn.

Remember there are two axioms in this "market witch" business:

  1. Only rarely do you use date and price in the same sentence. "$1600 by June" or "$44 by Labor Day" come to mind.
  2. Don't go around predicting the end of the world because you'll only be right once.

That said...and I say this with all sincerity...the desperation of The Bullion Bank Cartel seems palpable. I think the clue lies in that Bloomberg video I re-posted the other. In case you missed it, here it is again. All of the important information comes in the first 45 seconds or so and, remember, this guy Hoffman is a serious dude with serious, mainstream connections. Again, listen to what he says here: https://www.bloomberg.com/video/what-s-happening-to-all-the-gold-d33u1c2...

"If there ever is interest in gold again...and I'm not saying there is or isn't...that gold is just not there anymore."

And therein lies the crux of the matter.

The Bullion Banks and, by extension, their Central Bank Masters, are in a serious, irreversible jam. The gold is gone and the vaults are nearly empty. As the London vaults were depleted, it must have become evident that another source of gold was needed. Thus, the price raid of one year ago was ordered for two reasons:

  • First and foremost, to squash Western investment demand
  • Provide cover to drain the GLD to the tune of over 550 metric tonnes of gold.
  • IF THIS IS, IN FACT, THE CASE...and I believe it is...then we must expect The Bullion Bank Cartel to continue to apply as much pressure to price as they can for, as Ken Hoffman stated above, "If there ever is interest in gold again...and I'm not saying there is or isn't...that gold is just not there anymore."

    Look at the price action of just the past few months. As price rallied from The Double Bottom of 12/31/13, The Banks stood ready to cover each bid but, without readily-leasable gold to leverage into paper, they could not hold price down. Price rallied into mid-March however and, just when it seemed ready to break out and re-start "investment demand", it was crushed back lower by over $100. It rallied again this month and, just after Comex open interest finally jumped higher Monday, it was beaten lower again.

    Not surprisingly, the GLD, which began the year with an "inventory" of just 798.22 mts, saw it's "investment demand" increase, too. The Banks were able to come up with a little over 20 metric tonnes to add in early 2014 and "inventory" peaked at 821.47 mts on 3/24/14. In the days since, with the assistance of falling price, "investment demand" has waned again and "inventory" has plummeted back to 806.82 mts, now up just 8.60 metric tonnes YTD even though price is up over $100 or 8.5%.

    So here's what I'm driving at...

    IF I'M CORRECT about all of this...and everything from the anecdotal stories of "empty vaults" to the persistently negative GOFO rates tell me that I am...then we must expect The Bullion Bank Cartel to continue to wage war upon price for, as Ken Hoffman explained in December: "If there ever is interest in gold again...and I'm not saying there is or isn't...that gold is just not there anymore."

    The Banks simply MUST keep price in check for fear of renewed investment demand.

    Renewed Western investment demand will finally kill the LBMA/Comex, fractional reserve system. It will:

    • Break The Banks as unallocated accounts are shown to be empty shells. Failure to deliver will destroy confidence.
    • Perhaps more importantly, shine the light of truth upon the central bankers and politicians who have shamefully participated in and stood watch over the depletion of Western gold reserves.

    Therefore, we must expect more and more days like yesterday as the increasingly desperate Banks fight to preserve their system. So long as you continue to stack and prepare, it will make for great theater. If you attempt to profit from this through the use of leverage, I'll try to help you along the way but you must be prepared for extreme and unexpected volatility, like we saw yesterday.

    We are witnesses to the end of an era and a global financial paradigm shift. Be grateful that you have been blessed with eyes that see and ears that hear. Understand what is happening and trust your instincts. There is still time left to prepare accordingly. Use it wisely.

    TF

    About the Author

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    turd [at] tfmetalsreport [dot] com ()

      78 Comments

    Apr 16, 2014 - 11:59am

    More later

    I've read and re-read this post and I feel like it doesn't quite articulate the point I'm trying to make. Look for more in the podcast later today.

    Apr 16, 2014 - 12:00pm

    And read this

    Today's commentary from Bill Holter at Miles Franklin. It fits right in with the theme of this thread:

    Live Spot Gold
    SPOT MARKET IS OPEN
    closes in 6 hrs. 39 mins.
    Apr 10, 2014 10:36 NY Time
    Bid/Ask 1320.30/1321.30
    Low/High 1314.50 / 1325.90
    Change +8.00 +0.61%
    30daychg -19.20 -1.43%
    1yearchg -262.00 -16.56%

    ==============================================================

    closes in 8 hrs. 15 mins.
    Apr 15, 2014 09:00 NY Time
    Bid/Ask 1294.60/1295.60
    Low/High 1288.70 / 1322.40
    Change -32.00 -2.41%
    30daychg -87.40 -6.32%
    1yearchg -58.00 -4.29%
    ==============================================================

    I pulled the two above graphics off of Kitco's homepage. I copied the first one last Thursday in anticipation of today. First let me explain what they are and secondly I will explain why it will be a problem. If you recall, it was one year ago that all of a sudden Gold dropped from the $1,600's into the high $1,200's over 3 days...for no apparent reason. I say "no apparent reason" because the "excuse" given was that the Fed would maybe taper later in the year which was supposed to be bearish for gold and silver...even though the latest QE was not "bullish" to begin with. Don't get me wrong, "QE" was and is bullish for gold but... the metal was capped with the sale of naked futures to "show you" that it wasn't. In any case, let me wish you all a "Happy Anniversary" tongue in cheek.
    Please study the above graphic closely (and sorry it is not formatted better but I am a computer dinosaur). Focus especially on the "1yr change". You will notice that as of last Thursday, the number was a -$262. as of today (after the $30 "forced" smash) that number is only -$58. Without hitting the price today we would be looking at -$28. Do you see where I am going with this? Markets are now all about "momentum". They always have been but they are more so now and with the use of futures and derivatives...the "momentum" can be created, aided or halted to paint a picture that "proves" the(ir) case. Never mind earnings, supply and demand or any other fundamentals...they can be masked or hidden and then you are told ..."see? look with your own eyes". It doesn't matter how obvious it is that "counterintuitive" explains everything.
    So gold is now down year over year $58 today vs. $262 just 3 trading days ago, all this means is that gold was down a couple hundred bucks in 3 days last year, right? Well yes it was but now the problems begin because "year over year" comparisons will again start to stick out in the public's eye. For 12 years straight, gold rose and in many of those years was THE best performing asset on the planet. I believe that the decision was made that gold (and silver) had to be smashed to break the "momentum". By breaking momentum..."sentiment" would also get dented which was important because the bottom of the barrel was coming into view.
    But...here we are now and the "year over year's" are going to turn "up". They are going to turn up at a time where stockpiles have been depleted AND mining supply has shrunk because of price. Price (low) has also enticed demand from all over the world. If you recall the exponential gold and silver price rises of the late 70's, it was U.S. centric...now it is global. It is global and there is now wealth all over world as opposed to being concentrated in the U.S. ...which is a very big problem for the money printers. The more that they print...the more they are putting ammunition in the hands of potential buyers... all 7 billion of them!
    In my opinion, what we have been through over the last year to 2 years should be equated to one last "haymaker" thrown by a tired and aging "ex champ". Supply and demand does not lie. We know (and have known for 15 years per Frank Veneroso and others) that demand was far outstripping supply. We also logically know that the supply to meet the demand had to come from somewhere. That "somewhere" could only logically have been from Western central bank holdings. We also know that this supply by definition is "finite" and will one day run out. Smashing prices one year ago did only one thing, it bought some time. So far this "time" has equaled 1 year in duration.
    So how much time is left? I nor anyone else knows, what I do know is that the "sting" a year later doesn't hurt so much anymore and we are entering a point where if you bought a year ago, you are a "winner" (you really shouldn't think this way but everyone does). Here is my point, we have seen demand increase dramatically because value buyers stepped up to the suddenly much lower prices...now (soon) I suspect we will see the "momentum" buyers again step up to the plate.
    Did the big drop hurt sentiment? Of course it did. Did it kill sentiment dead? No it did not because just like the Spring season when plants start to grow again, so again will sentiment. The only way to retard sentiment and keep it from growing from this point forward is to keep knocking the price down...year after year after year. This cannot be done as the mine supply will not come forward if prices drop further and further below the cost of production. "They" shot themselves in the foot by smashing price because it created the unintended consequence of pulling value investors off of the sidelines in huge fashion. Now they have the loaded gun of manipulation pointed at their other foot, they can fire it again but either way they will create more demand. They can allow prices to move higher from here and invite the "MoMo's" to hop on board or they can retard prices further and create more value buyers to step on board.
    Since we are now very close to the year over year price turning upwards, they will soon need to figure out which "foot" to aim at. Regards, Bill Holter

    CPE
    Apr 16, 2014 - 12:05pm

    1st

    I helped fund Blythe's unemployment check yesterday! Congratz to me and all the other debt serfs!

    Gamble
    Apr 16, 2014 - 12:07pm

    I'm nervous

    Have to say I'm worried

    silver66
    Apr 16, 2014 - 12:08pm

    Third

    had to do it

    Silver66

    nadgeskaul
    Apr 16, 2014 - 12:09pm

    But Turd, why...?

    Why would western central/bullion banks allow physical to disappear? What is up their sleeve as an alternative? Are they duping the Chinese and have some elaborate plan with another form of reserve, therin by crushing gold in the end?...The very gold they care not to hoard any longer?

    My greatest concern.

    Gamble
    Apr 16, 2014 - 12:09pm

    The mini dump yesterday

    The mini dump yesterday reminds me of the mini dump last year rite before the two day smash.

    Apr 16, 2014 - 12:19pm
    nadgeskaul
    Apr 16, 2014 - 12:24pm

    Because they don't value gold

    They never have valued gold. In fact, the HATE gold. That's why Ferdinand Lips' book is called "GOLD WARS".

    The banks have fought against gold for decades. If it's gone, they don't care. They simply want to promote and maintain their current fiat system. They have no idea that they are undermining themselves. It's like all the podcast talks I've had about Woody, Cameron et al foolishly thinking they hold all the cards. THEY DON'T.

    The fear they have is not that the gold is gone per se, it's that the promises they've made regarding gold will be broken. This opens them up to HUGE losses and bankruptcies. This also further compromises confidence in their system and their ability to maintain the status quo.

    Gamble
    Apr 16, 2014 - 12:26pm

    Maybe

    But, last year's $1525 is this year's $1180 and we are still a great distance above that level. Gold needs to first drop 10% before the major stops could be run again, therefore, I don't think that yesterday was a precursor of something larger. Just a reset to tamp down demand again.

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