Crude and Rude

Mon, Dec 8, 2014 - 10:48am

Considering that crude oil has continued to wash out today and is nearing last Monday's lows, the fact that gold and silver are both nearly unchanged is actually quite remarkable.

Recall that crude oil was a major topic for discussion during Friday's podcast. After bouncing Monday, crude fell back all week and the trend has continued today. As I type, I have a last of $64.29 in the Jan15 contract. This is just a few pennies off of the day's lows and is within sight of last Monday's "panic" low of $63.72. Breaking last Monday's low seems like an eventuality at this point and, when this happens, there's really no reason not to expect crude to fall toward $60, perhaps even a few dollars lower.

What's remarkable, frankly, is that crude could be this weak and yet gold is hanging in there, especially in light of the still-falling yen and "normalized" GOFO.

And the GOFO thing really is quite telling. Recall that on Friday the 29th into the early trading of last Sunday, The Forces of Darkness and the momo-chasing specs tried really hard to jam price down and re-align it with the yen. They failed spectacularly and the resulting ORD candle caught the attention of many an "analyst". Prices looked almost certain to have found a floor and seemed poised to <GASP> rebound into year-end and 2015. So what happened next? Suddenly and mysteriously, gold appears. Just a little at first but now, in just five short days, GOFO has completely flipped from historically negative back to just plain old "normal". Note last Monday in the red box and today in the blue box.

Rather incredibly, there are still those shills and apologists out there who claim that fluctuations in the GOFO rates are entirely due to changes in the underlying LIEBOR rates. Uh-huh. Has LIEBOR moved 65 basis points in the past week? No? I didn't think so. Instead, what I see is a panicked London and Bullion Banking Establishment which just stared down a physical default abyss and somehow managed to procure some metal from somewhere to put out the fire. Good for them. Nice job. Let's see what happens next time.

And again, as discussed in Friday's podcast, we almost HAVE TO expect more paper selling this week...which is why today's relative strength is so surprising and even encouraging. We'll have to see what tomorrow brings but having gold hang in near $1195 and silver near $16.25 is far better that what I would have expected.

Referring to the charts above, you can clearly see the downtrend that has developed in gold ever since GOFO flipped last Tuesday. The key level will again be $1180. If, God forbid, a rally can develop instead, crawling back above $1206 would be nice and then, if it were to really get going, our main target remains a close back above $1220. Without question, if $1180 is broken, the key level to watch will be $1135-$1150.

In silver, price remains above and out of the main channel from July (marked in blue) but it continues to be contained by the upper and lower bands marked in red. IF A RALLY CAN DEVELOP, the area around $16.65 is still key resistance. Watch that level closely as a close above there would lead me to believe that $17.50 is next.

Finally, just a few items that I want to make you've seen as we begin the week. First, this little beauty that I found through ZH. The author picks at the BLSBS and notices even more statistical "issues":

We've spent quite a bit of time lately discussing a pending/possible "daisy chain" derivative collapse. If you're worried about this too, you might want to read this:

The great Dr. Ron Paul has an excellent piece where he's "caught" his former co-workers inching us even closer to WWIII:

And more on NIRP in the USA, from the WSJ via ZH:

As I close, I see that crude is now under $64 at $63.94 and just pennies away from last week's low. Regardless, gold and silver remain UP at $1195 and $16.30. Again, let's see what the rest of the day brings...


About the Author

turd [at] tfmetalsreport [dot] com ()


Dec 8, 2014 - 10:52am


now to read and then back to work (whatever that is)


Dec 8, 2014 - 10:52am

Black Gold

QE4 rereleased to theatres soon!

Dec 8, 2014 - 10:54am

Third and

24 days left for $26 silver.

Dec 8, 2014 - 10:59am

24 days left?!

I'm so glad that the whining will end in 24 days! Going to open up a bottle of something nice, thanks!

Dr. P. Metals
Dec 8, 2014 - 11:06am


By the time the reverse split date arrives, said split may "only" take it back up to $10! And tax loss selling is imminent still.

Dec 8, 2014 - 11:08am

To go along w/ Ron Paul's article...

You can get a .pdf of the bill that went through the house that Ron Paul is talking about here;

Santa had this on his site yesterday.

Mr. Fix
Dec 8, 2014 - 11:15am

7th Heaven...

Time to go fill up my Cadillac with gas…cheeky

Dec 8, 2014 - 11:18am

Parabolic Rallies Vs Sustainable Slow Marches Up

So call me a homer but i think we are all well aware of how past rallies ex: Dec 2013 rally rose quite quickly only to lose steam to cartel capping. I keep getting the feeling that this rally is different from a sustainable perspective. If the cartel was going to let price rise in an orderly fashion for once and for all I think they would simply allow price to rise then bring each price rise back to the point where it appears we are on the verge of collapsing back. I think in the next few days its crucial if the theory is correct the cartel would more than likely allow price to break 1220 up to 1240-1250 only to let price once again fall back below 1220 making people belive the rally was once again failing.

This rise is still on track but is at a much slower pace than the parabolic rallies we experienced before that always ended in tears. Im hoping the next couple days lets us know if its more of the same or perhaps we have something going here... On the flip side if the COT shows the Cartel back to net short 150-200 i think we know we are the victim of another capped rally. If the cartel which im hoping keeps their net short position below 100k each time by allow price to fall back each time that is sustainable and i think the rally we need for a healthy multi year rise...

Dec 8, 2014 - 11:32am

JNUG and Deflation

I have been adding to my JNUG position at these low prices, but it seems wise to close out on any bounce before the split and sit tight until the end of year selling passes.

Why don't I trust that stock splits (or reverses) are in my favor?

Also, from what I read, cheap oil may be here a while.

Dec 8, 2014 - 11:40am


Dr. J., I hope you have really done your research on leveraged ETF's in that you seem to be holding them for fairly long periods of time.

Leveraged ETF's can have extremely large tracking errors, particularly when volatility is high. The compounding can work for you if the market is going your direction consistently, but the math is basically a you against the house setup.

I'm not trying to tell you what to do, but a JNUG split is very much immaterial in comparison with the tracking error problems. I believe the reason we are seeing the massive market on close volume in GDX and GDXJ is due to these ETF's closing out the tracking for the day. Since they only promise tracking for the day, the compounding of the daily moves can lead to tremendous distortions.

Just my 2 cents...for the record, I hope you're right and that this didn't sound like some lecture :)

Dec 8, 2014 - 11:43am

The NIRP article ...

The ZH NIRP article might explain what happened when I stopped at my local bank Saturday morning.

I have used this bank for over 20 years. I make a Saturday transaction at the drive-up window at least 2-3 times a month. Every time for the last 20 years, those transactions were handled no differently than if I had stopped on a Tuesday or any weekday. Last Saturday, however, the cute young thing at the window said, "I'm sorry. I won't be able to give you a receipt for your deposit. All of our systems are down for an upgrade. I just need to remind you that Saturday is not an official banking day. I can give you a handwritten receipt. Is that OK?" I took my handwritten receipt and my cash and left wondering ...WTF that was all about. Every system upgrade they have ever done before was done Sat. evening thru Sun. evening when they really were closed. And why the comment about Saturday not being a real "banking day"? I drove away wondering what surprises might be in store.

Now, I'm not such a huge customer that they are ever going to say, "Mr. Dupp, you have too much money here and need to take some home and put it under your mattress." Absolutely no risk of that. However, I am now very curious to see how "new banking rules" effective Jan. 1 are going to affect us peasants. Hmmmm ? Have to believe this was somehow related.

wax off

Dec 8, 2014 - 11:46am

@ Dr Jerome

I agree with 100% with CPE that the 3x leveraged ETFs don't perform as advertised in volatile markets. However, I still own them in spite of their well documented shortcomings with the assumption that they will easily outperform GDX/GDXJ

Dec 8, 2014 - 11:50am

Re: The NIRP article

For anyone that has to hold large dollar accounts, I think the solution is

You can sweep funds in and out of treasurydirect back and forth to your bank account with overnight ACH.

Since the Treasury is then your custodian you are upstream from bail-in or NIRP.

I'm certainly no dollar advocate, but lawyers still have to escrow, larger businesses still have to have legal tender laying around, long term money should be real money, but for FRN liquidity the route is a much better option.

late update: there's also the option of hoarding linen in a mattress or vault, but outside of spending said linen directly just try taking $300,000.00 in Fellen-Bucks to your friendly bank and FINCEN sending the black helicopters for you to serve and protect you in a taxpayer funded cage.

Dr. P. Metals
Dec 8, 2014 - 11:52am

Re banks and rule changes

re :"Have to believe this was somehow related"

Most likely, and also any and every change they make, 100% of them, will not benefit you, no matter how much you try to think that.

A week in the Rica jungle has left me on return with an eye to see ALL the crap words being spread about by tptb, bankers, and even posters here!! Just repeating words....many without even knowing they are doing it!

Think people! words matter, and we've been brainwashed into believing crap for far too long. You can see them everyday everywhere if you look. "Securities" are used as a name for equities. No one even blinks and even repeats it themselves.

Long ago, broke guys and gals needed money, so they created a "stock" which was so risky as to be staggering, so they all huddled together and came up with a name for this unbelievably risky "asset": let's call it a "security"! Brilliant!

Repeated each day millions of times now, reinforcing this false illusion all the time.

Dec 8, 2014 - 11:54am


Good advice, makes me wonder if NIRP is intended to indirectly force people to buy US Treasuries? Dunno

Dec 8, 2014 - 11:54am

longer term

Looking at the longer term chart of crude, who's to say it cannot dip below 40? It did so before, so why not again? And never mind 120, how about a 150 Yen? How would gold and silver fare in such a bloodbath? None too well, I think. Paper silver was pushed down to 14.25 only a week ago, so perhaps that price level is a harbinger of what is to come as the deflationary mantra gains traction. I understand I'm not going to make a lot of friends with this "negative Nellie" post, but this is what I see. It's just an opinion, not a fact.

PS. The wildcard in all of this, however, appears to be the fact that the paper/physical linkage in gold is under incredible strain near 1140 or so (as identified by Turd). That is something worth watching.

James Crighton
Dec 8, 2014 - 11:56am

Effect of rising dollar on gold?

Does anyone here have a view on the effect that a strengthening dollar (above 90 DXY and rising) will have on gold? I really would appreciate your opinions.

Many thanks


Dec 8, 2014 - 11:59am

mine own two eyes an ears

So....I could care less for charts predictions, BUT, I will offer this story from my own experience, like first hand with mine own two eyes an ears.

Back in 2005 I was at a family Xmas party , and my nephew was there, in town for the Holidaze, back from Moscow. He was a hi-flyin MBA/Finance type hired by that big ass Deutsche Bank, to be their oil business attache in Russia. After a few drinks I was able to corner him and tried to ask a few questions. The first I asked was; --- "What is the absolute, all-in, dead ass cost of production figure that you use for Russian oil?" He just stared down at me like I was a bug on the floor. ( the little bastard stands 6'4"). Finally he spit out an answer. "$55." Then he walked away like as if he had given me some exclusive insider info that a little piss-ant like me did not deserve, and wouldn't know what to do with anyways. He was a Great kid before he went to Wall St, but that's another story.

OK, so I guess that figure for oil is $60 , maybe $65 now. What I see is that TPTB have driven Au and Ag down to their ADACoP, absolute dead ass cost of production, (let's not argue, OK?), and now they have driven oil down to its ADACoP, and they might drop it a touch more just to cause cardiac arrest in a few dozen CEO's - just as they did with PM's.

Why are they doing this??? Just to put the fear of god into everyone that thought they were immune, like thinking they were sitting on the proverbial Gold Mine (HaHa~!)?

I'm no Psychopath, and I can't begin to imagine the how's and why's of these soulless alien reptoids.

I throw the floor open to suggestions..............................................

Grey Mare
Dec 8, 2014 - 12:02pm

Marcus - no worries

that is what many of us are waiting for. It is the quite possibly the falling oil price that is the key to unwinding the derivatives mess. And it is this unwinding that is may upset the PM applecart, rather than any changes in the PM markets themselves. The control over the PM markets seems intact, although the recovery from negative GOFO rates is taking longer and longer. It is likely the collapse of other markets, and associated carry trades, that will destroy the paper control of physical gold. The bottom in paper price for gold and silver might be spectacular; the question is, what will you actually be able to buy at, or close to, that price? If you like to gamble, it will be a good time to look at miners that might survive.


Dec 8, 2014 - 12:06pm

@ Effect of rising dollar on gold?

probably not going to be a positive for gold in the short term IMO but a lot depends on whether we see GOFO go negative quickly again or not. I also think we need to keep a real close eye on the gold stocks and see how they react to a possible new low in gold, since they led us lower I would expect for them to 'dig in' relative to the gold price and eventually lead us higher

Dec 8, 2014 - 12:08pm

So, has Silver

Decoupled from Crude?

Dec 8, 2014 - 12:09pm

HR 758

I like the conclusion:

"calls for the reestablishment of a close and cooperative relationship between the people of the United States and the Russian people based on the shared pursuit of democracy, human rights, and peace among all nations."

Dec 8, 2014 - 12:10pm

Bill Holter

has an interesting perspective:

Dec 8, 2014 - 12:10pm

@ Mattheim

I have no doubt that it is, but my thought on is that when T-bills die the linen dies too. The point of is to remove all counterparty risk between the issuer, the custodian and the holder of dollars.

Dollar/t-bill risk can only be mitigated by going into another asset that has less counterparty risk. That asset is gold. Until the linen has died, there remains a need to hold some dollars as that is what the system runs on. Until the next system is forced upon us by the peasant blood drinkers.

Dec 8, 2014 - 12:11pm

@ Grey Mare

Agree that crude is telling us in no uncertain terms that all is not well in the world economy and that the stock market rolling over (not if but WHEN) may be a game changer for gold and silver...lot's of moving parts to keep an eye on

Chuck Diesel
Dec 8, 2014 - 12:21pm

Market dump

Anybody know why the market just puked?

Dec 8, 2014 - 12:24pm

@Chuck Diesel

someone with a large fund just saw this chart?

Deposits vs Reserves vs Derivs_0 #2

Just my best guess cheeky

Grey Mare
Dec 8, 2014 - 12:25pm

maybe I'm just getting bored

and desperately looking for something, anything, to happen in the PM markets. But the collapsing oil price is epic and I can't help but think that it is going to trigger market chaos if it lasts much longer. So, yes, mattheim, I find it interesting to watch those moving parts. And thanks, G-Rod, for mentioning the oil-silver de-coupling. I've been hinting that TF might address this one for a while...


Dec 8, 2014 - 12:30pm

NIRP Joke of The

NIRP Joke of The Day:


SilverIsKing's picture

the next time I'm in a bank, I will shout, "this is a stick up!" and I will then throw my money on the floor and run out of the bank.

Chuck Diesel
Dec 8, 2014 - 12:31pm

Amazing Chart from ZH

Just posted, check out this correlation between the energy sector and the S&P 500. As Scooby would say, "Ruh Roh."

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