Watching The Flows

67
Wed, Sep 10, 2014 - 11:47am

So here we are. It's September 10 and things sure don't look any better than they did at the end of May. For that matter, things don't look much better than they did at the end of December, either. What's left? Is there any remaining hope for a rally into year end? Can the metals at least eek out a positive return for 2014?

As you know, I've been out the past two days. It was great to look away for a while but, unfortunately, I made the mistake of not completely looking away. What did I see whenever I checked? Just more of the same. With the overnight selloff back on 9/1, The Cartel Monkeys managed to break the 200-day moving average in gold and all we've seen since is Spec selling of longs and adding of shorts. Of course, The Cartel Banks have been using all of this Spec selling to cover their own naked shorts. As you know, that's by design. The Banks now thoroughly dominate these paper markets and it appears that they will continue to do so for at least the foreseeable future.

Think back to how this has all played out in 2014. Twice, Spec interest has flown into the long side of gold (and silver) and twice The Cartel Banks have acted dramatically to first cap price and then smash it back down.

First, after beginning the year at $1200, gold rallied smartly through January and February. It finally broke through and above it's primary long-term trendline on March 14 when it closed at $1382. It opened higher still on Sunday the 16th and traded as high as $1392 before the Cartel offensive began. Price was routed over the next two weeks as it fell by over $110. The Spec shorting/selling and Cartel covering/buying then continued all the way to a bottom in late may at $1240.

Then, price reversed with another rally through the primary trendline, all the way to a high of $1345 on July 10 and July 11. Another Cartel offensive was then put into effect, just as in March. Price broke on Monday, July 14 and the Spec shorting/selling combined with Cartel covering/buying has trimmed price nearly $100 since.

Allow me lay the relative position changes for you so that you can see it in action...

12/31/13

Spec Long 137,182 Commercial Long 182,101

Spec Short 104,959 Commercial Short 215,122

NET 32,223 NET 33,021

3/18/14

Spec Long 183,324 Commercial Long 164,293

Spec Short 46,510 Commercial Short 310,227

NET 136,814 NET 145,934

6/3/14

Spec Long 157,322 Commercial Long 159,545

Spec Short 98,181 Commercial Short 222,989

NET 59,151 NET 63,444

7/8/14

Spec Long 203,464 Commercial Long 135,998

Spec Short 53,443 Commercial Short 302,201

NET 150,021 NET 166,003

9/2/14

Spec Long 172,522 Commercial Long 134,701

Spec Short 75,643 Commercial Short 238,408

NET 96,879 NET 103,707

Obviously, it doesn't take a degree in economics or mathematics to see what is going on here. As I've discussed ad nauseam, the global price of gold is "set" by a small group of about 60 "Large Spec" (hedge fund) traders on one side and 6-8 "Commercial" (Bullion Bank) traders on the other.

  • Price rallies as funds flow to the long side. The Specs buy and buy while The Cartel caps and caps by liquidating longs and adding fresh paper shorts.
  • Eventually, the Cartel capping exhausts the buying momentum and stalls the rally. Once The Cartel gives things a downward shove, the funds begin to sell and sell while The Cartel buys and covers the very same naked shorts they had just recently added.
  • In each case, the rallies were forcibly turned once the naked gross short position of The Banks exceeded 300,000 contracts.

And look at the effort put forth by The Banks to contain these two rallies:

  • Over a period of 10 weeks to begin the year, The Cartel was able to limit the rally to only 15% by supplying the "market" with 95,000 brand new naked short contracts. That's 9.5MM ounces of make-believe paper gold or about 295 metric tonnes!
  • Over a period of just 5 weeks in June and July, The Cartel was able to limit the rally to only 7% by supplying the "market" with 79,000 brand new naked short contracts. That's 7.9MM ounces of make-believe paper gold or about 246 metric tonnes!

Finally, note that the bottom and turn in early June "coincided" with a Cartel naked short position falling back to 222,989 or almost exactly the level of naked shorts seen at the bottom of 12/31/13. What was The Cartel naked short position as of last Tuesday, 9/2? Look back up at the data above and you'll see that it was 238,408.

So, can we assume that all we need for another bottom and turn is an additional 20,000 or so of short covering by The Banks? Maybe...and we have to be awfully close. Since the last CoT survey, total open interest in gold has risen by over 12,000 contracts while price has fallen by $11. Without question, this rising OI/falling price signals fresh Large Spec momo shorting and, into this shorting, The Banks are continuing to buy and cover. The latest CoT survey was taken yesterday and the results will be released as usual on Friday. Will The Cartel gross, naked short position be back down to near 220,000? Almost certainly.

"So, what's the point of all this, Turd??" Since we've been using bullets this entire post, we might as well close with some more...

  • It's obvious that The Banks are desperate to contain price in 2014. Otherwise, why would they issue nearly 100,000 contracts of naked shorts in two such relatively short periods of time?
  • I'll tell you why...Because if they hadn't, the rallies would have extend far beyond $1392 in March and $1345 in July.
  • And if those rallies had instead reached $1500 or $1600, the virtuous cycle of TA would have invited in even more Spec buying and driven price even higher. Analysts and the media would have been forced to admit that the "bear market in metals" was over and that simply DOES NOT fit the narrative that The Fed and the other central banks want to push.

Finally, none of this is intended as sour grapes or excuse-making. Obviously if anyone knows and appreciates the extent to which The Banks control the metals, it's me. However, as we began 2014, I expected the metals to resume their bull markets and tack on fresh gains of around 25%. Though there's still over 100 days left in the year, my goals are looking increasingly unlikely and, absent some fresh catalyst to drive fund flows back into the long side of gold (and silver), it looks like I'm going to fall short.

With such staunch and desperate capping likely to impede the next rally too, what we really need is a huge jump in Comex open interest. Back in 2010, total OI was regularly 600,000+ contracts. Total OI has spent the majority of 2014 under 400,000 contracts, even reaching a multi-year low of 360,000 contracts on a couple of occasions. It seems that only by painting The Banks into a sustained retreat by driving open interest back to 500,000+ can we get price to rally toward $1500 and beyond. This will be a key metric in the weeks and months ahead. What would drive open interest higher? That's hard to predict. Far easier to predict is that the paper markets for gold (and silver) are likely to stay rangebound between $1200 and $1320 until it does.

I'll have more later today with a full podcast. We'll go over these numbers again just so that I can be confident that everyone understands the point I'm trying to make. Until then, hang in there and keep the faith. Remain patient and diligent. Recognize the "the metals markets" are farce/joke/sham that are not even remotely indicative of the true supply/demand picture for actual, physical metal and please continue to prepare accordingly.

TF

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Lamenting Laverne
Sep 10, 2014 - 9:31pm

Thanks Silver

The last time I moved them, I lost another one (the first one). This time, I have been trying very hard not to stress them. Cover up, when people were messing around in the room. When I drove off with them it was slower than a hearst.

He seemed to be doing fine the first while, but then yesterday he was just lying on the bottom most of the time, and today when I nudged him out of his hiding place - the big one (Koi) started stalking him/nibbling at him right away, which is a sure sign he is about to check out.

So I separated them, so he at least could die in peace, I have given him fresh water (treated against the chlorine), his own oxygen pump and made the water ever so slightly saline - but I think it is stress and possibly old age. It looks as if he has been stunted before I got him, so he would probably never grow to full age potential.

I feel absolutely ridiculous with all the evil going on in the world - and here I am obsessing about a Goldfish. But I really find it difficult to just see him waste away - and there is nothing I can do about it.

....

Just went to check on him again, and he was on his side - a few twitches - up to the surface one more time - back on the side almost upside down. Sat with him for a while. He is gone now.

@imfd: That is not so weird - a goldfish is a member of the carp family - so it makes a lot of sense it should taste like carp. I have long wished to build an aquaponics system, considering grass carps, because it is so neat they are vegetarians, but I read somewhere that they are absolutely impossible to de-bone, so Tilapia is probably a better bet. Haven't got the space for that yet though, but a girl is allowed to dream ay?

Good night Y'all.

imfd
Sep 10, 2014 - 8:37pm

Eating goldfish

I knew a dyslexic bloke once who ate a goldfish, he said it tasted like carp.

silver66
Sep 10, 2014 - 7:51pm

Lamenting_L

All I know about gold fish is "belly up is bad"

Hope your guy is mobile come morning

Silver66

Bollocks
Sep 10, 2014 - 7:45pm

Lamenting_Laver...

video on youtube 31st december.

will post up a link.

Lamenting Laverne
Sep 10, 2014 - 7:30pm

I agree they are quite extraordinary

and I am not sure of the wisdom in making such predictions anyway - thanks for taking the message in the spirit it was intended.

But please don't eat your goldfish - if Harvey is right. My goldfish is right this very minute sitting at the bottom of a quarantine tank - motionless and not eating - and I am writing tonight partially to not think about the very real possibility that he will be gone tomorrow. One Goldfish death this half-year should be quite enough.....

However, should he be right - I will look forward to watching the video of you eating hat, shoes and pretty much everything within reach - sans Goldfish - with relish ;-))

Bollocks
Sep 10, 2014 - 7:08pm

Lamenting_Laver...

Ok, fair enough. But those predictions are seriously extreme.

If gold gets to $10,000 and silver to $200 in the next 3 1/2 months I'll eat my hat. And shoes. And pretty-much everything else within reach.

I'll even throw the goldfish down my gob. Mmmm.

I'll need to buy a hat first, but I should just about be able to afford one then .

Key Economic Events Week of 5/3

5/3 9:45 ET Markit manu PMI
5/3 10:00 ET ISM manu PMI
5/3 10:00 ET Construction Spending
5/3 2:20 ET Chief Goon Powell
5/4 8:30 ET US Trade Deficit
5/4 8:30 ET Factory Orders
5/4 1:00 ET Goons Daly and Kashnkari
5/5 8:15 ET ADP jobs report
5/5 9:45 ET Markit service PMI
5/5 10:00 ET ISM service PMI
5/5 12:00 ET Goon Mester
5/6 8:30 ET Productivity and Labor Costs
5/6 10:00 ET Goon Kaplan
5/7 8:30 ET BLSBS

Lamenting Laverne
Sep 10, 2014 - 6:55pm

How about showing a little respect?

Harvey Organ is not just "some bloke on the internet" and he is certainly not a "charlatan"!

He has been recording the "handywork" of criminals for years and years - daily, diligently and meticulously - and he has been presenting his results at no cost for our free evaluation.

He has compiled enough evidence over time to get him and Adrian Douglas an invitation to testify at the CFTC - again on behalf of all us suckers, who can otherwise do little to help ourselves.

The testimony was taped and spread wide and far - and even if it was a bit forced in delivery due to little time allocated to bring the message across - it still helped boosting morale among all those investors, who felt like no-one ever got though to the regulators and who felt no-one gave a damn about the corruption. It is not Harvey Organ's fault that the CFTC turned out to be just as corrupt as the people, they are supposed to police.

He has talked about / predicted a Comex default before, if I remember correctly, so I am not saying his bold prediction will come to pass this time. What I do know is that times sure are tense right now, and we see some confirmation of previous predictions by Jim Willie and others on an almost daily basis, so Organ's sentiments of sudden changes in the nearer future may not be all that crazy after all.

In any case - all I am saying is that I think his diligent work at the possible benefit to all of us demands a bit more respect.

AlienEyesMarchas45
Sep 10, 2014 - 6:03pm

There is hope....

If Harvey O. is right, the gold / silver ratio will be about 50 : 1 (it is now about 66 : 1). In my view, any major upside move by PM's would include some movement towards the historical 16 : 1 ratio of gold and silver. That's not to say we will ever see 16 : 1 again. We won't.

.

Disclaimer :

Please note that every time the commander & chump or one of his professional lying ass-hats says something insufferably stupid, I am inclined to throw back a few shots of tequila to mitigate my pain which causes “my view” to be subject to occasional blurriness.

rl999
Sep 10, 2014 - 5:37pm

china's gold stash

Reading a report today suggesting that the chinese golad hoard is ~ 4k tons by the end of the year. (I personally think it is 10-20k tons). However if the alternative media consensus is that it is smaller than the 8k tons supposedly held by the u.s. I have to wonder why they would disclose it?

My thinking is that I (if I were the chinese .gov) would not want to make an announcement that I have gone from 6th place to 2nd in gold holdings. What good does that really do? (Not a rhetorical question - I am interested in other's thoughts.)

Wouldn't it make more sense to wait until they have 8.2k tons of kilo bars to show the world? Become the undisputed gold heavyweight champion of the world - have the trump card of "well, we showed you ours, now show us yours". Maybe that is to "in your face" for world politics?

rl999
Sep 10, 2014 - 5:32pm

why not break the comex?

IIRC Sprott specifically said something to the effect of not wanting to wind up dead - worrying about starting his car or something.

(Implying a larger than usual gasoline ignition incident.)

Besides the fact - you wouldn't be allowed to break it. They changed the rules when the Hunt brothers did. Today you would be labeled a trrrrrst, have everything stolen from you, and then get killed. If you tried to break up the deliveries amongst a group they would probably be able to use RICO or conspiracy or some other bs against you. Even if they did deliver some the process of getting the phyz is (from what I have read) so onerous that it is almost impossible. TF has had a guest that did take physical delivery and it took (IIRC) more than 6 months and constant follow up.

eta: I think you also have to me an approved or accredited member, somewhat like taking delivery from the GLD.

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Key Economic Events Week of 5/3

5/3 9:45 ET Markit manu PMI
5/3 10:00 ET ISM manu PMI
5/3 10:00 ET Construction Spending
5/3 2:20 ET Chief Goon Powell
5/4 8:30 ET US Trade Deficit
5/4 8:30 ET Factory Orders
5/4 1:00 ET Goons Daly and Kashnkari
5/5 8:15 ET ADP jobs report
5/5 9:45 ET Markit service PMI
5/5 10:00 ET ISM service PMI
5/5 12:00 ET Goon Mester
5/6 8:30 ET Productivity and Labor Costs
5/6 10:00 ET Goon Kaplan
5/7 8:30 ET BLSBS

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