Commodity Collapse

86
Tue, Jul 7, 2015 - 12:21pm

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 .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 .10. Regardless, the damage this morning is significant and silver will need to close back above .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 .20. From there, price rallied to + 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 .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 .40, then look out below. There's not much chart support until the 2008 lows near .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:

  1. 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. https://srsroccoreport.com/has-the-global-run-on-silver-begun-shortages-...
  2. 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.
  3. 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.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  86 Comments

ArtL
Jul 7, 2015 - 12:24pm

Uno!

time to load up?

just for fun I bought some USLV this morning.

Maestro
Jul 7, 2015 - 12:29pm

Rarely

achieve 2nd!

silverflower
Jul 7, 2015 - 12:29pm

Turd,

we never should forget that something VERY BIG is going on: The implosion of the world monetary system as we have known it for a long time. So if we see huge developments in that regard we should expect the same for precious metals. Yes, we need to re-think old (trading) patterns with regard to the metals. Nothing seems to follow any logic anymore. At least until a new financial system is launched.

TF Metals fan
Jul 7, 2015 - 12:30pm

and second?

Any good news is appreciated today; OK a third spot is great news as well.

Doople
Jul 7, 2015 - 12:34pm

You can bet....

That the commercials are covering shorts and buying long positions today.

cashonly
Jul 7, 2015 - 12:36pm

commodities?

I have never seen GOLD as a commodity, nor with Silver. They are money, the only real money on planet earth. Everything else is just DEBT.

Wall St. and its banking minions have relegate real money to the commodity bin but I think very soon they will take their rightful spot on the throne once again.

Owtovit
Jul 7, 2015 - 12:37pm

WOOHOO!!!

Bought the f*cking Dip!

Got into work, opened the charts...blow me its smash down time, I'll have some of that $14.83 silver thanks very much, with premium got it for $17.59 from HAA

One monster box on the way into the kiddo's college fund

Thanks very much Bwanksters!

Maestro
Jul 7, 2015 - 12:41pm

Time for a Vote?

A billion dollar flush into the open this morning can be only one of three things in my mind. I've listed them and would be interested in Turdvilles best thoughts / choice.

1) lack of concern in achieving appropriate "best price" discovery leads me to believe in cartel smash.

2) bank derivative explosion with forced immediate liquidation

3) continued economic war specifically against China....hit them when they're down. Any thoughts of backing a currency with pm becomes more difficult if it is ultra volatile.

4) theory of my own.....please detail.

Mr. Fix
Jul 7, 2015 - 12:41pm

Normally I would take the fifth,

But in this case, I respectfully assert my opinion that the floor for paper silver and gold is zero.

These markets are never coming back, and all paper promises will be null and void.

The only viable strategy is to keep stacking all the way down, and then prepare to defend your position with your life.

This is going to get nasty.

Mickey
Jul 7, 2015 - 12:42pm

citicorps increase in position

how do we know if its long or short?

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Key Economic Events Week of 1/27

1/28 8:30 ET Durable Goods
1/28 10:00 ET Consumer Confidence
1/29 10:00 ET Pending Home Sales
1/29 2:00 pm ET FOMC Fedlines
1/29 2:30 pm ET Powell presser
1/30 8:30 ET Q4 GDP first guess
1/31 8:30 ET Pers Inc and Spending
1/31 9:45 ET Chicago PMI
2/2 10:00 pm ET Chiefs win SB LIV

Key Economic Events Week of 1/13

1/14 8:30 ET CPI
1/14 9:00 ET Goon Williams
1/15 8:30 ET PPI and Empire Fed
1/16 8:30 ET Retail Sales and Philly Fed
1/17 8:30 ET Housing Starts
1/17 9:15 Et Cap Ute and Ind Prod

Key Economic Events Week of 1/6

1/7 8:30 ET US trade deficit
1/7 10:00 ET ISM Services PMI
1/7 10:00 ET Factory Orders
1/8 8:15 ET ADP employment
1/9 8:00 ET Goon Chlamydia speech
1/9 1:20 ET Goon Evans 2:00 ET Goon Bullard
1/10 8:30 ET BLSBS
1/10 10:00 ET Wholesale Inventories

Key Economic Events Week of 12/16

12/16 8:30 ET Empire State Manu Idx
12/16 9:45 ET Markit flash PMIs Dec
12/17 8:30 ET Housing Starts and Bldg Perms
12/17 9:15 ET Cap Ute and Ind Prod
12/19 8:30 ET Philly Fed
12/20 8:30 ET Final guess Q3 GDP
12/20 10:00 ET Pers Inc and Spending
12/20 10:00 ET Core Inflation

Key Economic Events Week of 12/9

12/10 8:30 ET Productivity and Unit Labor Costs
12/11 8:30 ET CPI
12/11 2:00 pm ET FOMC fedlines
12/11 2:30 pm ET CGP presser
12/12 8:30 ET PPI
12/13 8:30 ET Retail Sales
12/13 10:00 ET Business Inventories
12/13 11:00 ET Goon Williams speech

Key Economic Events Week of 12/2

12/2 9:45 ET Markit Manu PMI
12/2 10:00 ET ISM Manu PMI
12/2 10:00 ET Construction Spending
12/4 9:45 ET Markit Services PMI
12/4 10:00 ET ISM Services PMI
12/5 8:30 ET Trade Deficit
12/5 10:00 ET Factory Orders
12/6 8:30 ET BLSBS
12/6 10:00 ET Wholesale Inventories

Key Economic Events Week of 11/25

11/25 8:30 ET Chicago Fed Nat'l Idx
11/25 7:00 pm ET CGP speech
11/26 8:30 ET Advance Trade
11/26 9:00 ET Case-Shiller home prices
11/26 10:00 ET New home sales
11/26 10:00 ET Consumer Confidence
11/27 8:30 ET Q3 GDP 2nd guess
11/27 8:30 ET Durable Goods
11/27 9:45 ET Chicago PMI
11/27 10:00 ET Pers Inc & Cons Spndg
11/27 10:00 ET Core inflation
11/27 2:00 pm ET Beige Book

Key Economic Events Week of 11/18

11/19 8:30 ET Housing Starts & Bldg Perms
11/20 2:00 ET October FOMC minutes
11/21 8:30 ET Philly Fed
11/21 10:00 ET Existing Home Sales
11/22 9:45 ET Markit November Flash PMIs

Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

Key Economic Events Week of 11/4

11/4 10:00 ET Factory Orders
11/5 9:45 ET Markit Services PMI
11/5 10:00 ET ISM Services PMI
11/6 8:30 ET Productivity & Labor Costs
11/6 Speeches by Goons Williams, Harker and Evans
11/8 10:00 ET Consumer Sentiment
11/8 10:00 ET Wholesale Inventories

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