There are times when all of the fundamentals, technicals and CoT structure simply don't matter. Unfortunately, we seem to be entering another one of those periods.
As we discussed just yesterday, the performance of metals in the face of steeply falling copper, crude and other "commodities" was almost sort of impressive. Today, however, the pressure became too much to bear for gold and silver. On the bright side, gold is still holding above the $1150 "physical floor" area that we first identified back in November of 2014. However, silver has crashed through $15.50 and is currently trading in the 14s. As a reminder, silver actually made an intraday low near $14 back on November 30 so it's not making "new lows" just yet. But...
Again, this is all very disappointing and if you haven't perused all of the comments from yesterday's podcast thread, please let me just say this again...I'm very frustrated and sorry that this current episode has turned out the way it has. By every traditional measure, silver and gold are deeply oversold and positioned for a steep rally, not a steep decline. That they are, in fact, declining should tell you a lot about the state of the "markets", the global economy and global liquidity/risk. Perhaps, if we are to continue this endeavor, ole Turd needs to re-learn and adapt to a whole new paradigm. We keep repeating the mantra "there are no markets, just interventions" and, if that's the case, maybe all of my old tried-and-true methods are now obsolete. More on that in the days ahead, I suppose.
For today, let's start with gold. As I type, the August gold is down $13 or 1.1% at $1154. IT IS SIGNIFICANT that gold has yet to plummet through the $1150 floor. IT IS ALSO SIGNIFICANT that the old lows are $1142 on March 17 and $1130 back on November 7. Until and unless price closes below that 11/7/14 low, all is not lost. In fact, you should really consider for a moment that, as dark as this looks and feels, price was lower back in March than it is this morning. Of course, no one can be certain of what will happen tomorrow but perhaps some perspective needs to be maintained.
Again, we identified what looked to be a clear physical floor to the paper market near $1150 last November. Unless something has dramatically changed and The Bullion Banks have suddenly found a new source of readily-deliverable gold, price won't be going much lower from here. That doesn't mean it can't...BUT...I firmly believe that this is the reason gold is holding above $1150 even this morning.
And though silver has decisively broken through the $15.50 area that we thought was its physical floor, it's still important to note that the actual lows of this latest period were made in the overnight hours of November 30 when price actually tapped $14.10. Regardless, the damage this morning is significant and silver will need to close back above $15.50 by Friday to mitigate it. Can that be accomplished? Of course! Keep in mind that this is only Tuesday.
And since this is a Tuesday, the CoT report generated from this afternoon's survey should be quite interesting when it's finally released on Friday. The lowest NET LONG position I've ever seen the silver Large Specs hold was just 800 contracts back in late June of 2013, when silver was making what was, at the time, a washout low near $18.20. From there, price rallied to $24+ over the next 60 days. Just keep that in mind, for what it's worth.
Again, though, all of this today is clearly related to a near complete washout in almost every asset class. There's a real "flight to fiat safety" and liquidation going on and the only things rising are US bonds and the US Pig. As mentioned above, the carnage actually began yesterday and, with the continued selling in China overnight, it has accelerated today. As I type, the two crucial commodity indicators for silver...copper and crude..are both getting smoked. Copper is 3¢ off its lows but still down 4.25%. Crude is $1.65 off its lows but still down 1.5%. When these two were at their lows earlier was when silver git completely run and washed out. If these two can continue to recover, silver will bounce back, too. However, and this is important, if copper is only seeing a Calvin Bounce and is instead headed below $2.40, then look out below. There's not much chart support until the 2008 lows near $1.40! And, as you might imagine, IF copper heads that low, it's dragging silver down with it.
It's critically important, however, that you keep in mind a few very important points:
- The supply/demand picture for physical silver is quite different from 2008. For price to go back to $12 or $8, physical deliveries must be made at those prices. I'd suggest to you that making those deliveries in 2015 is an entirely different animal than it was in 2008. http://srsroccoreport.com/has-the-global-run-on-silver-begun-shortages-on-the-horizon/has-the-global-run-on-silver-begun-shortages-on-the-horizon/
- Copper, crude, the Chinese stock market, the BDI and other indeces are signalling a collapsing global economy. Not only does this indefinitely postpone/cancel all of the nonsense about a US rate hike, it actually ensures more money-printing, debt and QE.
- In the end, IF YOU STILL BELIEVE THAT THE ENTIRE GLOBAL MARKET STRUCTURE IS A FRAUD WITH LIMITED LIFESPAN, then the ability to convert fiat and stack physical metal at these depressed paper prices is a gift, not a disaster. On the way back from the DMV this morning, even LT#2 was reminding me that I should be excited that prices are so low. At $15, I can buy three times the amount of silver for the same amount of fiat as I could four years ago. "From the mouths of babes..."
So, hang in there. As I go to hit send, I see that the recovery from the earlier washout continues. Gold is back to $1556 and silver is back above $15. Maybe all is not lost. Yet. Let's see what the rest of the day and week brings us.
More later with a full podcast summary and review.