What Hath Mother Wrought?

Thu, Dec 17, 2015 - 10:52am

Keynes, himself, is credited with line line "the market can stay irrational longer than you can stay solvent". Boy, isn't that the case today as the metals react as if yesterday's Fed rate hike was somehow surprising or unexpected.

We led off yesterday's podcast note by admitting that we had no idea of what to expect today...and we certainly didn't expect this!

Ridiculous! Again, it's as if no one saw this coming! Hasn't the Fed been telegraphing this since October 28? Wasn't the certainty of this rate hike the reason gold was smashed from 80 to 50 in the five weeks that followed? Didn't all of the Spec selling and shorting already drive the gold CoT structure to historic levels? And yet, here we are...gold is down as I type at 48. Well, whatever. Not much I can do about it except try to remain rational...if not solvent.

Here's a chart that I first published two weeks ago when gold last sunk to these levels. Are we finally seeing the washout that drops price to that 1035-1045 level? I guess we are, though we still haven't made a new low below what was seen on Dec 3 at 45.40.

All I know is that it's a shame there isn't a CoT survey today as I would love to have seen the results if there was. The amount of old Spec long liquidation and new Spec shorting has to be overwhelming. How else could price be down 3%? Are we back to where we were on Dec 2, when we speculated that the CoT actually went Commercial net long? Probably! Perhaps even more so. (Is that the foot long? And then some!)

<...Sorry. Gotta throw those references in there to help me keep my sanity...>

Does it matter that The Specs are likely NET SHORT and The Commercials are NET LONG as I type? I think so. Does it matter that price is near what we anticipated as a bottom and have discussed for weeks? I think so? Does it matter that sentiment is terrible and now virtually everyone thinks that gold is going lower, lower, lower? I think so. And, so, I still expect a gradual rally into year end, an extended rally in January and a positive year in 2016 that breaks the 3-year losing streak.

In the end...since my stack of gold and silver is just as shiny as yesterday...my only frustration today is that I haven't gotten the hoped for opportunity to short the S&P. It hasn't been up so far today and it certainly hasn't approached the 2090 level where I would look to get short. So, I have nothing. And the S&P is down 12 points as I type at 2061. Nuts.

The miners are getting the snot kicked out of them today but, so far, the HUI remains above that critical 105 level.

The long end of the yield curve is rallying with the 10-yr down 3 bps to 2.26% and the 30-yr down 4 to 2.97%. With Mother's 2-yr at straight up 1.00%, this further flattens the 2-10 yield curve to just 1.26% or 126 basis points. And the "economic news"...which obviously doesn't make the slightest bit of difference to anyone...continues to be all bad.

Some analysis of yesterday's "news" from Denver Dave and his pal PCR:

And besides the metals, crude is smashing toward new lows, too. Again, if we see $33-34, I might consider taking a grab at "the knife". I'll let you know.

So, that's all I have for now. I still own my UGL calls which expire in four weeks and I still own my Feb16 gold call which expires at the end of January...though all of them are worth considerably less than yesterday. Let's just see how the "market" reacts once today is over and we head into year end with all of the trade loaded onto the short side of the boat. For now, just try to keep your sanity while staying focused upon why you hold precious metal in the first place.


About the Author

turd [at] tfmetalsreport [dot] com ()


Dec 17, 2015 - 10:54am



Dec 17, 2015 - 10:54am
Dec 17, 2015 - 10:55am

More so than gold and silver,

More so than gold and silver, it's the stock market that's pissing me off today as I never got the chance to get short and now the S&P is down 20 points.

Dec 17, 2015 - 11:04am


Hey Turd, are you dumping your miners yet?

Welcome to the bloodbath. Nice and warm, ain't it?

Dec 17, 2015 - 11:04am

@Turd Re: Shorting the S&P

There is still a mighty long way for it to (potentially) drop...

Mr. Fix
Dec 17, 2015 - 11:11am

Same as it ever was

There sure is a lot going on behind the scenes, but on the surface, it's all more of the same.

The manipulation hasn't ended, but the damage it's causing has increased.

The death of the dollar is accelerating.

As we say, keep stacking.

I'm taking a ride to my local coin shop, it looks like a good day to stack.

freemarkettrader TF
Dec 17, 2015 - 11:15am

@TF - History of gold and silver in this bear market

I think you are spot on saying that the COT/sentiment/fundamentals (not that they matter) all point to a sizeable rally in the metals and miners. That being said, if you look at what gold and silver have done every December since the concerted effort in fall of 2011 was put on to smash the metals they have not really put on a good rally until after the new year started. 2013 was a minor exception, but one can definitely say that December sees a seasonal bottom.

I think we see $1035 (maybe even slightly lower to freak everyone out), and perhaps the last week or so of December we get a rally up to $1060, but I think that the cartel wants to have gold be down double digits this year so that everyone at the end of the year says, stocks were up slightly and gold was down double digits. Just like last year, when gold was capped despite good COTs and terrible sentiment so that the pundits could say gold was down on the year.

Dec 17, 2015 - 11:21am

Don' even think abaou tit...


catching the falling knife, that is... imho

I think there's a lot more pain to come... kinda like when Au broke $1500, eh?

Dec 17, 2015 - 11:22am

The Cartel's first job is to paint the charts...

....making money is secondary.

I don't think they want a rally until the calendar flips.

Dec 17, 2015 - 11:22am

@Keg...I think so

The purpose of this smash is to keep gold and silver down for the year-end.

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