Gird Your Loins

Wed, Mar 11, 2015 - 12:38pm

Frankly, I have no idea what that means. I suppose I could have typed "batten down the hatches", instead. Either way, now's the time to gird/batten. I fear that your faith in gold and silver is about to severely shaken.

Why would I say that?

As we've documented for months (and before everyone else in the blogosphere, I might add), "sell gold" and "sell yen" have become inexorably linked in the HFT algo-dominated world. What began as a slight correlation 10 years ago morphed into a closer relationship after 2008. It then evolved into an almost straight 1:1 correlation in 2013. See this chart below of the yen in candlesticks and gold in bars:

And here's why you need to gird your loins and batten down your hatches. Check this six-month chart of the same yen-gold plot:

I know that chart is messy and noisy but please be patient with me. Here's what you need to notice:

  • Through early November of last year, the 1:1 correlation.
  • This correlation suddenly broke in early November. Why? Because the physical market nearly "broke" under the stress of trying to provide physical metal at the algo-derived price.
  • How do we know this? Because beginning on November 5, London GOFO rates plummeted to historically negative levels.
  • During the time GOFO was steeply negative, the yen-gold correlation stopped. See the crossing red and black arrows.
  • However, within days of GOFO returning to positive...demonstrating an easing of the physical stress...the correlation resumed. See the blue arrows.
  • Though a significant "gap" had opened between gold and yen by mid-January, that gap has now been closed.
  • And the yen-gold correlation is once again in place, courtesy of the HFT algos. See below for a chart of just the past 5 days:

And why is this important and, potentially, quite devastating for paper gold? Because, just as the euro has completely done a swan dive over the past week after breaking support at 1.110.....

....the yen looks like it's about to do the shown in the inverse as USDJPY:

Shown below as JPYUSD:

IF THE YEN BREAKS SUPPORT AT THE LOWS OF THREE MONTHS AGO AND BEGINS TO COLLAPSE SIMILAR TO THE EURO, IT IS GOING TO TAKE PAPER GOLD DOWN WITH IT. The only thing that can prevent/halt this would be the re-emergence of a physical supply crisis in London and there are two problems with that:

  1. How will we be able to tell if this occurs? The freaking LBMA conveniently stopped publishing GOFO six weeks ago.
  2. The Banks have had four months to procure new supply. The overnight news about BoA and CS "negotiating" with Venezuela to steal their gold is just one example of their efforts:

So, anyway, all I can say is that you need to prepare to have your faith shaken. Personally, all of this matters little. I know why I own physical gold and silver and I'm confident that the events for which I'm preparing are still, most certainly, coming. You, however, may not share this faith and confidence. You may read the shrill writings of the AGAs and the Apologists and find yourself falling back into their paperbug traps. I hope not and I promise will remain here as a consistent source of reassurance.

Recall that back on Friday I urged you to consider some hedging...maybe buy some puts or other form of "insurance" against short-term paper valuation declines. If the coming volatility concerns or even frightens you, please give these options your full consideration. If, instead, you're like me and you remain confident in the long-term rationale for owning precious metal, just get ready for another "sale" by raising cash and crafting an action plan for further accumulation.

These are incredible times. Nothing about this is "normal" or sustaining and no one ever said that The End of The Great Keynesian Experiment would be an orderly, rational process. Your role in this is to remain clear-headed and focused, protecting your family while alerting others to what lays ahead. Keep the faith, remain situationally aware and prepare accordingly.


About the Author

turd [at] tfmetalsreport [dot] com ()
Does Feb19 Comex gold close above $1250 on Friday?
Total votes: 183


Teach · Mar 11, 2015 - 12:42pm

I am with you Turd.

Fuck em. I know why I own metals, and they make me feel way more secure about the future than my paper LIRA. Not selling nothing.

wildstylechef · Mar 11, 2015 - 12:46pm



· Mar 11, 2015 - 12:46pm


Gird your loins ... Hmmm... Since having a hernia in my loin region, I have a new appreciation for that phrase. Until repaired, I had to wear a "girdle" to hold everything in if I had to do anything strenuous at all. I suppose it also means to put on some protection in case you get kicked in your tender regions--like is about to happen in metals.

You are tempting me to refund my trading account before the next Fedlines day.

Marchas45 · Mar 11, 2015 - 12:50pm

Interesting Week

Keep Stacking

boomstick · Mar 11, 2015 - 12:53pm

I'm pretty sure ...

... that Danforth would recommend washing your hands after you gird your loins.

amarula4 · Mar 11, 2015 - 12:58pm

'Gird up your loins' refers to

the loose robes worn by all and sundry in bible times -- so you would gird the lower clothes up into your belt area (loins) to get ready for action: fishing, farming, fighting...

Barfly · Mar 11, 2015 - 12:59pm

That term "Gird your loins..."

From wikipedia: Here;

"The term "gird one's loins" was used in the Roman Era meaning to pull up and tie one's lower garments between one's legs to increase one's mobility in battle. In the modern age, it has become an idiom meaning to prepare oneself for action."

So basically, the Roman legionaries would tie their skirts between their legs before battle.

These days, men are typically girded.

AgAuMan · Mar 11, 2015 - 1:03pm

Oil Price Manipulation?

I just saw this on Zero Hedg I cant help but think this is the way that the OPPT (Oil Plunge Protection Team) is rigging the wti/brent oil prices. Put what could be perceived as supply shortages to come in front of the muppets. Now that should spike the price a bit.... NOT... LOL

SS121 · Mar 11, 2015 - 1:04pm

Gird up loins = "get ready to do battle" (mentally)

Just as you said TF, get ready to do battle. ...not be shaken out of PMs

Gird Up Your Loins 2

pbreed · Mar 11, 2015 - 1:13pm
perdman · Mar 11, 2015 - 1:14pm

Dollar At 13 Year Highs...

Which was about 2002 which i believe was close to the last point the metals had a major bottom and went on a decade plus run...

· Mar 11, 2015 - 1:17pm

A brief quiz

What does this story...:

...have to do with this chart?

Barfly · Mar 11, 2015 - 1:18pm

On that Venezuela Thing

Just more anti gold propaganda. The article says they are "in talks" to create swap agreements to monetize their gold. That doesn't mean they actually are liquidating anything. But, it's a nice rationalization story as prices are manipulated down today. Just like Russia was "liquidating their gold" when the rubble went down, but the next month the Russian Central Bank's balance sheet was +120 Tons. Don't believe what the shills from Tungstenman Sachs tell you. They are just setting up for another muppet slaughter.

madams777 · Mar 11, 2015 - 1:18pm

*Dollar Shortage* Reposted at Turd's request

So, there is a lack of dollars - unfortunately [fortunately?] for our cause.

There are currently over $9 trillion dollars of offshore USD-denominated debt. That debt must be serviced by trade-dollars or the local currency of the issuer's home country. To service the debt, in any currency, requires conversion of the local currency into USD to make payment. That conversion is dollar-seeking.

Put another way, anyone who borrows in dollars is short the dollar. No biggie if you are US-based and predominately produce income in dollars. If you are a Chinese company and are selling to Europe - you receive payment in Euros which you exhange for dollars (or to yuan and then to dollars) which you then use to service your debt. This has been a popular trade 2009-2014 due to the abundance of cheap dollars.

Well that party is over [until QE4] and that creates a tremendous dollar-seek as anyone repaying dollar-debt in local currency must "find" dollars to convert. This is done generally by exchanging at the central bank level. Which leaves a hole in dollar reserves at the federal [foreign] level, which forces them to buy dollars which, TADA, creates the demand for the dollar.

I literally just finished dinner with a guy I'll call WASP who is a Major bond trader (50+billion fund). We discussed this in depth. Our mutual conclusion was that, though being long the dollar is THE MOST CROWDED HEDGE FUND TRADE - typically a great contrarian indicator, the OPPOSITE side of the trade is the $9T of offshore dollar-debt. Even if the net position of the most-crowded long-dollar trade is $1 trillion (it's not that big), the *corresponding short position* dwarfs it by an order of magnitude.

Basically, there IS a dollar shortage - whether it is spread out over a 10 year term or not, it is still a large shortage. All geopolitical issues aside (and I belive those to be generally dollar bullish) there is still unmet demand for dollar-seekers. This [unfortunately] creates pressure on dollar-denominated gold. FORTUNATELY we'll have time to accumulate until this massive demand is met. The fact that we are not lower in gold - just based on the dollar shortage - is very bullish. Remember, gold is -2.5% 2015 in dollars, but +10% in Euros.

Hope this helps.

Safety Dan · Mar 11, 2015 - 1:22pm

Gold Is $1150...

Is tomorrow a temporary bottom? I hope so. The date is right for a short term change. Let's see.. 

· Mar 11, 2015 - 1:25pm

Just to be clear...

This story was tweeted last evening and discussed in the previous thread.

Is it simply a coincidence of timing that:

  1. The Banks need physical gold to deliver
  2. Some banks are attempting to convince Venezuela to lease the gold they just repatriated two years ago
  3. Woody declares Venezuela a "national security threat" earlier this week:
cashonly · Mar 11, 2015 - 1:34pm

do you know how many ...

Do you know how many truck tankers and trains are hauling full loads of nasty chemicals all around this country? These tankers and haulers have to meet strict regulations such as double hulls to avoid such catastrophes as seen in Detroit. I would assume since many of these chemicals are derived from petroleum that crude oil haulers are probably under the same HAZMAT rules. These tankers can take one helluva pounding and not leak. How many gas haulers are out there refueling all the gas stations? Under these statistics we have seen recently a gas tanker a week should be going up in flames.

Just seems a bit odd that there is a run on petroleum hauler accidents lately. One would presume if the price of oil increased that wouldn't be a bad thing? (especially if 300 billion in junk bonds depended on it?)

Swineflogger · Mar 11, 2015 - 1:40pm

Good Morning Turdites

I am clear about the proscription relating to platering "cut and pastes" directly from Zerohedge, since we all read it anyway, but this one is too beautiful to resist:

To summarize: Greek pensioners are now paying the IMF, which is paying Kiev, which is paying Gazprom, which is paying Putin.


EDIT: Thanks ss121 for teaching an old dog a new trick. I always wondered WTF "girding my loins" really entailed . . . . 

imfd · Mar 11, 2015 - 1:45pm

I think I`ll grid my lions instead...

that just sounds tougher, thanks for the warning and everything else you do TF, cheers !

nadgeskaul · Mar 11, 2015 - 1:51pm


100 POSX imminent.

4 oz · Mar 11, 2015 - 1:51pm

When Is a Spank not a Spank?

When you are laying in the weeds wanting to add!

Video unavailable
SilverX3 · Mar 11, 2015 - 1:52pm

Is it too early to look at

Is it too early to look at options expiry sweet spot for Gold? $1,200 looks like a good place for price to close by Mar 25.

Levon · Mar 11, 2015 - 1:53pm

Turd - targets?

Turd - do you have any downside targets and timeframes in mind? I take is the double bottom is off the table at this point.

srj19 · Mar 11, 2015 - 1:58pm

Turd says Gird

Turd, WHY the correlation between Yen and Gold?

Why not Euro and Gold?

On the topic of options, I'd definately like to learn more.

I've seen puts (that I didn't own) gain in value 300% in 2 days during periods of predicted smackdowns.

mel · Mar 11, 2015 - 1:59pm

Bottom in?

First good sign in quite a while that the bottom, for now anyhow, might be in..

Libertybella · Mar 11, 2015 - 2:01pm

News Sources

Wondering what news sources Turdites recommend for keeping up with latest national and global matters that impact PMs..

I go to:

Zero Hedge, SGTReport, WhatReallyHappened, Drudge, WolfStreet, WallSt for Main St., Golden Jackass, and of course TFMetals. 

Are there any other recommended sites?

Thanks to all


R man J · Mar 11, 2015 - 2:06pm

Less than 195 days

I have kept this quote near my desk. 

"As the date time frame of 2015.75 (last wk of Sept. 2015) approaches the delusion to stay in equities and the delusion to stay away from precious metals will grow stronger by the day."

Marshall Swing 9/22/14

Almost 6 months later, this still holds true. 

jcm · Mar 11, 2015 - 2:06pm

Fed surprise?

I think the Fed will surprise the market with a dovish statement to achieve two objectives: weaken the dollar and prop up the stock market. The Fed knows the extent of the damage done to the US economy as a result of the recent strength of the dollar (even though it would never admit it) and stocks have recently turned over due to the expectation of a rate hike this summer. A dovish statement will immediately weaken the dollar and maybe halt some of the damage done to the US economy in their eyes.

This will obviously be bullish for gold, and bullish enough to overcome the usual Fedlines smackdown bs. I think gold continues to fall this week and into next, only to start its next leg up on Wednesday.

lakedweller2 · Mar 11, 2015 - 2:08pm

Louise Yamada - Chris Waltzek

Good interview with Louise Yamada, recognized for technical analysis. Says toward the end that even the professionals are confused by these markets.

perdman · Mar 11, 2015 - 2:09pm

Miners ORD??

Looking possible....

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