Gird Your Loins

89
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 same....here 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: https://www.reuters.com/article/2015/03/10/us-venezuela-gold-idUSKBN0M62...

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.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  89 Comments

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

turd

ya

Mar 11, 2015 - 12:46pm

Hedging

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; https://en.wikipedia.org/wiki/Gird_your_loins

"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 https://www.zerohedge.com/news/2015-03-11/massive-explosion-fire-after-yet-another-crude-tanker-crashes-detroit-live-feed 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

pbreed
Mar 11, 2015 - 1:13pm

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Exclusive discount for silver purchases, and a private iTunes feed for TF Metals Report podcasts!

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

Key Economic Events Week of 6/10

6/11 8:30 ET Producer Price Index
6/12 8:30 ET Consumer Price Index
6/13 8:30 ET Import Price Index
6/14 8:30 ET Retail Sales
6/14 9:15 ET Cap Ute and Ind Prod
6/14 10:00 ET Business Inventories

Key Economic Events Week of 6/3

6/4 All day Fed conference in Chicago
6/4 10:00 ET Factory Order
6/5 9:45 ET Markit Services PMI
6/5 10:00 ET ISM Services PMI
6/6 8:30 ET US Trace Deficit
6/7 8:30 ET BLSBS
6/7 10:00 ET Wholesale Inventories

Key Economic Events Week of 5/28

5/28 10:00 ET Consumer Confidence
5/30 8:30 ET Q1 GDP 2nd guess
5/31 8:30 ET Personal Income and Consumer Spending
5/31 8:30 ET Core Inflation
5/31 9:45 ET Chicago PMI

Key Economic Events Week of 5/20

5/20 7:00 pm ET CGP speech
5/21 10:00 ET Existing Home Sales
5/22 2:00 ET FOMC minutes
5/23 9:45 ET Markit PMIs
5/24 8:30 ET Durable Goods

Key Economic Events Week of 5/13

TWELVE Goon speeches through the week
5/14 8:30 ET Import Price Index
5/15 8:30 ET Retail Sales and Empire State Manu. Idx.
5/15 9:15 ET Cap. Ute. and Ind. Prod.
5/15 10:00 ET Business Inventories
5/16 10:00 ET Housing Starts and Philly Fed
5/17 10:00 ET Consumer Sentiment

Forum Discussion

by zman, 23 min 29 sec ago
by Green Lantern, 2 hours 2 min ago
by kenmasters675, 2 hours 46 min ago
by Green Lantern, 3 hours 24 min ago
by Solsson, 3 hours 45 min ago
by zman, 4 hours 12 min ago
randomness