The Madness Continues

258
Tue, Aug 9, 2011 - 10:28am

After a wild night that saw crude drop all the way to $76, the S&P has now rallied about 50 points and brought everything along with it except, of course, the PMs.

Before we get started, a caveat. If you come to this site expecting me to tell you exactly what is going to happen in the short-term metals trade, I suggest you leave now. NO ONE can do that in these unprecedented times. I'm trying my best but, with no history upon which to base opinion, the job is nearly impossible. Knowing that, I built this site so that a visitor can easily glean knowledge from the experience documented within. Check the forums. Visit the chatroom. You will find all kinds of diverse and wise opinions there. You can measure the potential "worthiness" of the opinion by the cumulative number of "hat tips" the poster has received over the past two months. As I stated Sunday, no one can predict 24-48 hour moves in the PMs at this point. What I do know, however, is that the metals will be higher a month from now, three months from now and six months from now. Trade if you must but your best strategy is still, and will always be, to buy physical and take delivery.

Onto the trade. After reaching 1782.50 overnight, gold has come off by about $50. Holy cow! That's enough to keep your stools loose! Santa has told you to expect unprecedented volatility and you are seeing some of that. For today, do not be surprised if gold goes even lower. I could see it reaching all the way down to 1720 or so but, obviously, none of the fundamentals have changed, so it could rally back just as fast. There is, however, one thing you need to keep in mind. All of this volatility almost begs the criminal CME to raise margins. Do not be surprised if it happens. As we all know from recent experience, the CME doesn't necessarily stop with one margin hike, either. IF it happens, we'll have to re-assess. Do you recall the first time the criminal C/C/C raised margins on silver back in November of last year? Silver dropped 15% in a week but the price still went on to double over the next six months and is still 30% higher even today. My point is, one margin hike is not the end of the world. Five? Well, that's another story.

paper_8-9amgold.jpg

With that as a segue...doesn't silver just piss you off? Not the metal so much but the The Forces of Darkness that control it. Helped along by the dopey hedgies and their WOPR machines, The Evil Empire just stands back and laughs while all of us pull our collective hair out. Market bad = silver down. Market good = silver down. You can't win. Well, we'll see about that. To me (again read the caveat that began this note), silver is poised to explode. The drop in total open interest is fantastically bullish. As of Friday night, OI was back to late May levels. This tells you two things:

1) The shakeout from $42 to here blew out all of the new longs that came into the market in July.

2) Those who are going to sell have now sold. The remaining longs will likely be resolute. Declines from here will have the effect of pressing on a spring.

I expect silver to hold the lows of last week near 37.50. If it doesn't, there should be strong support near 37. I'm a buyer. The Wicked Witch may be able to suppress price for another day, another week or another month. I don't know how long she can last and I don't really care. The fundos are overwhelmingly positive and will, eventually, win the day. Of that, you can be certain.

paper_8-9amsilv.jpg

That's all for now. Today should be particularly exciting so hang in there and try not to let your emotions get the better of you. TF

1:00 EDT UPDATE:

Gold found a bottom this morning right about where I'd hoped it would. You can see it on the chart below. Gold bounced twice at 1722.50. Very nice. From here, watch this current range very closely. A move up through 1750 would signal a move back toward the overnight highs. A move down through 1735 will signal a retest of 1720. Silver continues to struggle from a lack of buyers. It just sucks. A move back up through 38.60 may lead to some short-covering, however, and that may be enough to generate come excitement and drive it back toward 39.50.

paper_8-9amgold15.jpgpaper_8-9amsilv15.jpg

More later, after we hear from The Bernank and his minions. TF

p.s. I should add that I no longer have any spreads on. I am open-ended and long Sept $42 silver calls, Oct $1800 gold calls and Dec $1800 gold calls. I expect that either outcome from The Bernank is gold bullish. Fed announces some QE: gold goes up. Fed announces nothing unusual: market goes down, gold goes up.

About the Author

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

  258 Comments

reefman · Aug 9, 2011 - 2:12pm

Does anyone have a live

Does anyone have a live web-cast link to the Ben Bernanke announcement at 2:15pm?

FogHorn LegHorn ginger · Aug 9, 2011 - 2:12pm

@ ginger lol

Gotta good chuckle! :) luv to laf!!! ps. edited last post@ ginger added. Takes Me so long to type I always a page behind:( pss. Nothin more scary than a pj wearin woman with a gun, eegadds!!! :-O

Dr G reefman · Aug 9, 2011 - 2:15pm

@reefman, I use

@reefman, I use www.live-news-stream.com, and then click on CNBC. It usually works very well. You can also get CNN and Fox and others through that link.

Dr G · Aug 9, 2011 - 2:17pm

I also agree with Rain--no QE

I also agree with Rain--no QE will be alluded to and we will see a sell-off. Gold goes back up to Phase 3 area, silver continues to slide lower.

Dr Durden · Aug 9, 2011 - 2:18pm

Is the FOMC issuing a minutes

Is the FOMC issuing a minutes release after a behind closed doors meeting, or is Benflation speaking live?

It's 2:20 EST.

ewc58 · Aug 9, 2011 - 2:18pm

Good day to buy phyzz

Because, as usual, Turd will be rigtht about 42 shortly.

[Most Recent Quotes from www.kitco.com]

brad_pitts_betterlooking_brother reefman · Aug 9, 2011 - 2:18pm

re: Does anyone have a live

he isn't speaking from what i understand.

just sending out a statement 

Dr G · Aug 9, 2011 - 2:19pm

Breaking: From FED: no change

Breaking: From FED: no change in interest rates. Shocking.

ewc58 · Aug 9, 2011 - 2:20pm

No change from FMOC

'bout what we expected. 3 dissenters this time though

jlee2027 · Aug 9, 2011 - 2:20pm
Dr Durden · Aug 9, 2011 - 2:21pm

How are you following, Dr G??

How are you following, Dr G??

Dr Durden · Aug 9, 2011 - 2:22pm

Bah, ZH is acting like a

Bah, ZH is acting like a bitch again!

H - original · Aug 9, 2011 - 2:23pm

FRIDAY CLOSE CONTEST SPREADSHEET

Sorry it took me a while to put this together folks... but here it is.

https://spreadsheets.google.com/spreadsheet/ccc?key=0AkbhQfELraBedFo4a1lZMzk1OWZ5SnB6S2FrTGNuZXc&hl=en_US

Total Number of Guesses: 229

Average: 1737.49

Good luck to all

H

sevin · Aug 9, 2011 - 2:24pm

Bernank just erased the days

Bernank just erased the days gains in an instant

question · Aug 9, 2011 - 2:24pm

exceptionally low levels for the federal funds rate at least thr

"exceptionally low levels for the federal funds rate at least through mid-2013"

From FOMC minutes.

Wow, good to know these guys are so forward looking; nothing can surprise us now. Clear sailing into the future, eh?

Economical Disaster · Aug 9, 2011 - 2:24pm

The DOW just turned..DOWN

Just like I stated, its going to get punished again

Economical Disaster · Aug 9, 2011 - 2:25pm

The DOW just turned..DOWN

Just like I stated, its going to get punished again..

DOUBLE POST? HOW?

Bay of Pigs · Aug 9, 2011 - 2:26pm

@Hard Rain

Mama's Fish House is considered to be the best in Maui, but you'll need a half an ounce of gold for a dinner for 4, lol. That said, I'm a Happy Hour guy with cheap pupu's and a $2 pint of beer.

I talked to Kumanari yesterday on the phone, as he lives here too. He's a great guy, and we are going to try to hang out sometime soon.

This site is great and filled with wonderful people.

Thanks again Turd. 

Mudsharkbytes kenklave · Aug 9, 2011 - 2:28pm

@kenklave

So, in other words, if you're in physical silver and disappointed at how shitty it's performed during this gold run up, just STFU because your posts are annoying, have I got that right? Jeez - how 'bout appreciating how cathartic it can be to blow off some steam. Folks interested in silver, regardless of whether it's physical or paper, have every right to be both disappointed and concerned. Silver lagging about prone like a worn out hooker while gold behaves like Priapus wasn't really expected and regardless of what the future holds - being unhappy about it is normal and members ought to be able to come here, of all places, to express their concern!

Insight · Aug 9, 2011 - 2:28pm

Correction to earlier Ross Clark post...

Sorry, I mixed things up....

here is the pdf from his Aug. 2 cycle discussion...

https://talkdigitalnetwork.com/files/2011/08/Howestreet-080211.pdf

ginger · Aug 9, 2011 - 2:29pm

Maryann, my teenager says

Maryann, my teenager says that ruining her life is my gift. indecision lol.

.....Ditto here on the young and cute wish. cheeky ..But I say we get better with age. ..(Yeah.. I had to come back to edit in that part for us ;)

;)

Edit to add ...question, those were the days for sure. for sure.

Edited to add more ...FogHorn, lol.... ..I love your posts. Always make me smile and I learn from you too. ...Thank you friend.. smiley

Violent Rhetoric · Aug 9, 2011 - 2:29pm

recession

FOMC statement looks like recession to me.

reefman · Aug 9, 2011 - 2:32pm
50Jim · Aug 9, 2011 - 2:32pm

Ebay Secret: Win / Win situation

Ebay has a policy that you can return gold / silver up to 45 days after purchasing it with a full refund including shipping. So, you could buy say "10" 1 oz. Gold Eagles at current price and if it goes down within 45 days, you write to the seller and tell him or her you were dissattified with the sale ....and they have to refund your money in full. 

I sold silver on Ebay when it hit $42 at the end of July. The customer wrote me last night and said he was not happy with the transaction. (actually he has buyers remorse because silver has dropped in price) . I spent 45 mins. on the phone with Ebay expaining that my return policy was, if there was a problem with the auction to report it immediately after receipt of the silver. They told me that the buyer has the right to change his mind up to 45 days from the sale. I went over the senario above and said " what if I purchase 10 gold eagles and the market dropped to $1200 per oz. , would the seller have to refund me 45 days later. She replied that they would freeze the buyers bank account for the funds and I would get my full refund."

So, purchase you gold and silver , if the price drops ask for a refund. I don't see it dropping, but if you want guarantees in life, here is one. 

START BUYING

Tesla · Aug 9, 2011 - 2:35pm

@H Thanks !!!

You ROCK - Thank You =]

Terabyte · Aug 9, 2011 - 2:35pm

H - original

See there are four of us grouped around 1780, two right on. You have my permission to move me a $ either way. Your call. Thanks for all the work.

tallydynasty · Aug 9, 2011 - 2:35pm

50Jim , That's no secret tip.

50Jim ,

That's no secret tip. That's unethical.

I hope that our members have more class than that. What goes around comes around.

Violent Rhetoric · Aug 9, 2011 - 2:36pm

FOMC statement

Federal Open Market Committee Aug. 9 Statement: Full Text Aug. 9 (Bloomberg) -- The following is a reformatted version of the full text of the statement released today by the Federal Reserve in Washington: Information received since the Federal Open Market Committee in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However. the Committee will continue to pay close attention to the evolution of inflation and inflation expectations. To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L Yellen. Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.
Silver bear of very little brain Economical Disaster · Aug 9, 2011 - 2:37pm

Double post how did that happen

Old. trembling paws. Happens all the time to mmme

H - original · Aug 9, 2011 - 2:38pm

@KsTwister

I moved you up $1 smiley

Become a gold member and subscribe to Turd's Vault

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 12/10

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

Key Economic Events week of 11/26

11/27 9:00 ET Case-Schiller home prices
11/27 10:00 ET Consumer Confidence
11/28 8:30 ET Q3 GDP 2nd guess
11/28 10:00 ET New home sales
11/29 8:30 ET Personal Income and Spending
11/29 10:00 ET Pending home sales
11/29 2:00 ET November FOMC minutes

Key Economic Events week of 11/19

11/20 8:30 ET Housing Starts
11/21 8:30 ET Durable Goods
11/21 10:00 ET UMich Sentiment
11/21 10:00 ET LEIII
11/21 10:00 ET Existing Home Sales

randomness