Saturday Gold and Silver

341
Sat, Mar 2, 2013 - 12:47pm

It looks more and more like the next two weeks or so are going to be significant.

So, where do we start on this fine Saturday? How about with something from Friday? I posted these two charts into the comments section of yesterday's post. They show a classic short/theft tactic. Someone, either an HFT or a Cartel monkey, pulled the trigger on a sell order in silver at the very thin trading hour of 4:00 a.m., New York time. Since silver was sitting right on top of the previous week's lows, the effect was predictable. A host of sell-stops were "harvested" as price quickly fell about 50¢. Note then that price quickly recovered as liquidity returned with the opening of the Comex session.

Why did I start there today, you ask?

  1. Because now $28.40 is a very important level to watch early next week in silver, and,
  2. It is becoming increasingly likely that the same trick is going to get played out on a much larger scale in both gold and silver before a final bottom is put in and price permanently reverses.

Let's next visit our three friends...Crude, DrC and Sylvia. Do they have any clues for us? Why, yes, they do as a matter of fact. All three have come down dramatically and all three give the appearance of having a bit further to go. And if "commodities in general" show additional weakness over the next 7-10 days, you can probably imagine that selling pressure compounding our problems in gold and silver.

So let's start with silver. Running the stops yesterday has fortunately provided us with a very clear level to watch at $28.40. If silver slips below there again early next week, it would be a near certainty that we are going to take at least one trip down below $28. There has consistently been a lot of support there so taking it much lower is going to be a task for The Bad Guys.

That said, I'm beginning to sense that the ultimate goal of this entire event is to harvest the stops below $26. IF this happens...and currently I'd put the odds at about 25%...a quick drop to $25ish would be your final bottom. Price would quickly recover back above $26 and this deliberate beatdown would be over. How can I say that? More on that in a few minutes. First, two more charts:

And gold could very easily suffer the same fate. If The Cartel can engender enough additional spec selling, a veritable cornucopia of sell stops lay waiting for them sub-1530. And you can just imagine the reaction in the media: "GOLD IN BEAR MARKET!!" will be screamed as loudly as possible in the hopes of inspiring even more selling. Like silver, I only give this about 1 chance in 4 of happening but we must be on the lookout and prepare mentally. IF this occurs, you must be strong and BUY, not sell. The spike low will be The Bottom.

Now lets get back to why I am so confident that the selling has already been stretched to unsustainable levels and why, IF a spike low occurs, the metals would quickly recover. It's all in the CoT.

Yes I know that Santa claimed this week that the CoT is fudged and unreliable and yes I know that Santa has forgotten more about the metals markets that I know.....but....Unlce Ted believes in this stuff and so do I. Here's what Ted said in his mid-week newsletter:

"One of the reasons I think the data in the COT are accurate is that every contract has a long and short side. Therefore, to lie in the large trader reporting system that underlies the compilation of the COT, would require two lies; one by the big commercial lying and another by the counterparty holding the opposite side of the contract. I can see JPMorgan wanting to lie on its COMEX holdings, but I can’t see why a counterparty tech fund or speculator would assist in that lie. Please remember that lying on a large trader report is illegal and will be prosecuted by the CFTC (one of the few things they do well)."

With this in mind, here's a c&p of my CoT comments from yesterday:

For the Wed-Tue reporting week, gold was up $10 but total OI fell by 13,432. Silver fell by 17¢ and OI fell by 9,728.
The only interesting thing in the gold CoT was the divergence between LargeSpecs and SmallSpecs. The LargeSpecs went net long 13,000 contracts while the small specs went net short 7,400. This, my friends, is called leading the HFTs by their collective noses. On the bounce, the LargeSpecs covered shorts and went long to the tune of 13,000 contracts. Once fleeced, the "market" rolled back over and now all of those new longs (at 1600+) are under water.
Once again, the real interesting stuff is in silver. Both the Large and Small specs were adding to their shorts. The Large Specs sold a net 4,700 contracts and the Smalls sold a net 2,300. The commercials also sold 1,700 longs, dropping their gross long position back to a still-whopping 52,509. All of this selling allowed the naked short Cartel members to cover a massive 8,769 shorts or about 9% of their total gross short position! Now at 83,395, The Silver Cartel has been able to trim their short position by over 15,500 contracts, from 98,979 just two weeks ago. That's a drop of 16% in two weeks while price fell $2 from $31 to $29. I'm sure that's just good timing and good fortune...at least that's what Cueball and Thunderlips think.

On the bright side...

  • The total "commercial" long position in silver is actually up over the past two weeks while JPM et al have been covering. On 2/12/13, the gross comm long position was 52,182. As stated above, as of 2/26, it was still 52,509.
  • The Large Specs are racing to get short. On 2/5/13, the Large Specs were only short a record low 6,588 contracts. Three short weeks later, they're short a total 16,016, an increase of 143%!
  • The Large Specs are also feverishly dumping longs. Three weeks ago they were gross long 42,449. As f last Tuesday, that position had been whittled down to 37,753. That's a drop of 11%.
  • And the Large Spec net long ratio, which just 3 weeks ago was totally out of whack at 6.44:1, has fallen all the way back to 2.38:1. Remember, as a general rule, anything under 3 is somewhat bullish and anything over 4 is somewhat bearish. Anything under 2:1 is extremely bullish. For examples, see here: https://www.tfmetalsreport.com/blog/4492/strange-days-indeed
  • Also, all that Cartel short covering has further dropped the Cartel net short ratio. Last week it was 1.70:1 and this week it is 1.59:1. Again, historically, anything approaching 3:1 is very bad. Anything near 1.5:1 is very good.

I don't know if I can pound the table much harder. Could price be forced even lower, taking out $28 and heading toward $26? Yes, of course it can. But, if it does, the silver market will reach and surpass the exact same extremes that indicated bottoms in October of 2011, December of 2011 and August of 2012.

Again, please go back and looks at the "Strange Days Indeed" post from three weeks ago. ( https://www.tfmetalsreport.com/blog/4492/strange-days-indeed) The data is compelling and telling. Both metals, when measured by The Cartel net short ratio, have reached very bullish levels and stop-running spike lows would make them more extremely bullish than any other time that I can recall. Simply put, with CoT history as a guide, there is NO WAY that gold is going to $1200 and silver to $18 or even $22. Not from this CoT structure!

Moving on...Speaking of the CoT, one of your fellow Turdites has constructed a site to help everyone read and interpret the data. It can be found here: https://goldsilvercot.com/charts/cot/index.php

As you know, Santa's company TRX is an advertiser on this site. Someday soon, the miners will turn and I have great faith in Santa and his company for the long term. Last week, they held their annual shareholder meeting and the entire thing was recorded and posted. Here's a link. I think you'll enjoy watching it: https://standrewsclubav.ca/webcast/client_tanzanian/20130228/

And you've probably noticed that we've had to add a captcha to the registration and login process here. Sorry but it was necessary. If you've never run a site before, you simply wouldn't believe the amount and intensity of the spamming effort out there. They really slow site performance so it is hoped that the captcha will help us all in enjoying and learning from the site.

OK, that's it for now. Enjoy your weekend but please be aware of continued volatility next week and do not allow yourself to get all freaked out by the temporary price action. Keep your wits about you and remember the fundamentals. Stay strong and keep the faith. Continue to prepare accordingly.

TF

p.s. Adding these ZH links which were posted Saturday afternoon. Don't want you to miss this: https://www.zerohedge.com/news/2013-03-02/hedging-funds-and-physical-vs-paper-gold. AND YOU MUST READ THIS: https://www.zerohedge.com/news/2013-03-02/why-jpmorgans-gold-vault-largest-world-located-next-new-york-fed

About the Author

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  341 Comments

القراع عصفور · Mar 3, 2013 - 2:26pm

btw - FOFOA has his own website

but since it's Sunday and TFMR is slow, i will waste a little of Turd's bandwidth...

platinum and palladium are purely industrial metals, and both are priced higher than silver. one must consider metal supply and demand - all demand, not just monetary!

there are 100 other ways to shred the FOFOA delusion, but one irrefutable fact is all that's necessary necessary to prove a fallacy. there is a forum for those who want to review the other 100.

that will be my final word on this subject. this topic has been beaten to death here already.

Motley Fool · Mar 3, 2013 - 2:27pm

@ancientmoney

Let's agree to disagree. We each have to make up our own minds.

Motley Fool · Mar 3, 2013 - 2:27pm

double

trouble

Motley Fool · Mar 3, 2013 - 2:28pm

triple

....nah, I got nothing. 

· Mar 3, 2013 - 2:29pm

I wonder why all those vaults

have to be licensed to hold gold, silver, platinum and palladium? Could it be that not just gold is valuable?

القراع عصفور · Mar 3, 2013 - 2:30pm

i want to buy you a new mouse!

your avatar also gives me the creeps. where do i send the money? :-)

¤ · Mar 3, 2013 - 2:32pm

$55,000 gold and $1,000 silver

If that ever happened this site would be hysterical on a level that would crash the servers and probably render many of us incapable of posting anything except WOW, WTF, There it goes or FUBM etc.

I can hardly wait!

Tabberto · Mar 3, 2013 - 2:37pm

Xty - naughty naughty

don't encourage him!!

Motley is determined to resurrect the FreeGold zombie, a thoroughly boring discussion, safe to say Gold AND Silver are BOTH better than fiat and a nice spread of each will cover your ass...(cue some dubious images?)

FWIW Silver is the same character/word as 'Ledger movement' in Chinese and the whole of Asia will buy more and more of the stuff as the price goes higher and higher, a delicious cultural peculiarity....damn I'm such a hypocrite, telling Xty off and then rising myself like a young salmon at a waterfall....

R man J · Mar 3, 2013 - 3:02pm

The necessity if freegold

I can see the necessity of freegold to provide a monetary valuation against extremely rare and important elements such as silver, platinum and rare earths. The gold-silver ratio may not be on everyone's mind now, but in the future it will be everyday life.

Swineflogger · Mar 3, 2013 - 3:03pm

@Katie Rose - A Goat Tale

At 63 years old you would think I have learned a few things. Not necessarily so. We have a few goats two of which are Nubians, both female. Well the other morning I had just finished slinging hay and our auburn colored Nubian named Ruby walked up to me to say good morning. I had a momentary lapse of IQ and bent over to give her a pat and a kiss. She interpreted this as a desire to "play goat" with me and reared up on her hinnies and clocked me full-on on the forehead with her very best head butt. Well, the lights went out for the old swineflogger and when I came back up for air she was standing next to me looking down and I know she was thinking "he's not very good at this is he"? In the future I'll try and remember who is the goat and who is just the old goat . . . . enlightened

Motley Fool · Mar 3, 2013 - 3:07pm

@Tabberto

"safe to say Gold AND Silver are BOTH better than fiat"

Yup. Though I might argue the matter of degree in that I don't think they are 1-1. Anyways, refer to my comment to ancientmoney above. 

ag1969 · Mar 3, 2013 - 3:18pm

Swineflogger

When I was in college I worked summers on a golf course. One of the superintendents called in one morning to tell me his horse kicked him in the nuts. He spent a week in the hospital and missed a month of work. So be happy you only got kicked in the forehead. Poor guy was never the same after that.

I Run Bartertown · Mar 3, 2013 - 3:20pm

Top Secret Clown Business

Vulgarity warning...but clowns are like that wink

https://youtu.be/3Cad67ZfRWw

Eric_2 · Mar 3, 2013 - 3:23pm

Maund's latest

Hello all,

I know good old Clive Maund gets a lot of flak, and while not a subscriber of his I do read his free updates when he posts them.

His gold & silver updates echo Turd's sentiments quite well and with quite a few technical reasons backing his view that we are at the low.

I am curious what TF and the rest of the community thinks about this.

Links below for the gold & silver updates from ole Clive.

https://www.clivemaund.com/article.php?art_id=68

https://www.clivemaund.com/article.php?art_id=67

Eric_2

Mickey · Mar 3, 2013 - 3:24pm

55k gold

Wonder how bad society would be at 55k gold?

We should get a good run in PM just together to a true real price, and passing that, we get a run when the world learns about real supply demand issue on physical and paper PM means squat.

i thing we need Econ collapse to see 55k.

Ten_of_Swords · Mar 3, 2013 - 3:24pm

And you thought I was kidding...

About the student loan backed securities? From ZH:

This may be about to change. As WSJ reports, SecondMarket Holdings, the private-market securities trading firm best known for allowing numerous overzealous fans to buy FaceBook at moronic valuations, on Monday "will roll out a platform allowing lenders to issue securities backed by student loans directly to investors."
Send in the clowns...
Louie · Mar 3, 2013 - 3:24pm

Solving the Sequester problem

Sequester = $85 Billion

Monthly QE - $85 Billion. 

All we have to do is print next months money one month early, then we don't have to cut the budget! Next month (April), we can print May's money one month early, and so on, and so on, forever!

Louie saves the WORLD!!!!!

Swineflogger · Mar 3, 2013 - 3:31pm

@Bartertown

Dude!

Check your meds.

The Watchman · Mar 3, 2013 - 3:47pm
Cry Me A River · Mar 3, 2013 - 3:50pm

COT

I must admit that I could be just as skeptical about the COT DATA as it is information originating from questionable bankster sources.

But let's look at this data not so much as a collection of absolute numbers, but as data that represent relative levels this week as opposed to any given time in the past. The important point when interpreting the COT data is the the relative trend and the ability to guess where the current trend might change. No one can predict exact trend change inflection points. However, as the trend materializes and extends toward important past points of known inflection, guesses about the probability of a trend change can be made with greater certainty.

Please understand, I do this for entertainment as the thought of actually trading paper would never enter my mind. My mindset has always been and will always be about holding silver to preserve purchasing power for the goods and services I'll need in the future. Additionally, I hold silver because it locks in the cost of producing those needed goods and services now. Also, the price of silver, (because it is money), can not be accurately priced in currency but can only be priced in the amount of exchangeable goods and services it will purchase.

RETURNING TO THE COT DATA

So, let's speculate that the COT data may be a lot like data you see on your monthly water bill. Let's assume that your water company is as corrupt as we all know the banksters to be. How would your water company scam you out of extra currency?

Well---they could report the use of 10,000 gallons in any given month as 12,000 gallons on your bill. However, the meter would then be wrong. Subsequent fudging by the water company would result in completely different meter readings when compared to your bill. You may not catch them as you are paying for relative readings that could be interpreted as "acceptable" month-to-month, but a simple check of your meter would reveal their shenanigans.

The same scenario goes for the COT data. If they fudged these data week to week, the absolute data would eventually be completely off. A simple check of past absolute contract levels would reveal discrepancies. The only way to hide the discrepancies would be to compensate each week for previous fudging. I just don't think they care to add this kind of variable to their normal raids and scamming as it just doesn't seem to me as being very effective over a longer term basis. Besides, they have the luxury of not reporting the data from Tuesday's until Friday.

Thus, I believe the RELATIVE CHANGES IN THE COT data to be accurate. also believe that they believe that hardly anyone knows how to interpret this data to accurately estimate trends and inflection points anyway.

So---Let me see if I can help with this: BTW, I Only Care About The Silver COT. Additionally, I Only Believe The Commercial Data To Be Worth Tracking.

I believe the COT data must be tied to the physical COMEX silver inventories. Daily Comex Inventories Can Be Found Here: https://www.cmegroup.com/trading/energy/files/Silver_Stocks.xls

I also believe that the banksters will never be anything except NET SHORT and that the net short totals should be calculated by subtracting the commercial longs from commercial shorts. A reading of 60,000 short minus 30,000 long is still just as short as 99,000 short minus 69,000 long. Using divsion reveals the wrong result as 60,000/30,000=2:1 vs 1.43 when dividing 99,000 by 69,000.

Subtracting these two figures vs. dividing them not only maintains the correct math, but removes the bias one may have in interpreting that commercials are EXTREMELY short solely because they report a level of 99,000 short.

Since the trend and subsequent inflection point interpretations are really the only key results anyone wants from the COT data, I constructed a chart that looks at the relative trend of the commercial net short position as a percentage of the total comex silver inventory. I also placed some envelopes around the data to show extremes:

As of Friday, 3-1-2013, you can see that the Commercial net short position as a percentage of Comex inventory has dropped from a level of over 200% to under 100% in the last few weeks. Silver prices have also dropped as the commercials have covered shorts into the price drop.

The way to interpret this chart is to recognize that the trend of commercial short covering is still intact and most likely will continue until a real bottoming pattern develops. A "real bottoming pattern" doesn't usually develop until a higher low in the red line, (the net shorts as a percentage of comex inventory), shows. This means that the commercials must test the strength of the trend by raiding the price in order to further cover more shorts into price drops.

Eventually, these raids have diminishing effects where they recognize that the trend is exhausted and will probably turn. This causes an inflection point, but does not yet indicate a change in trend or a rise in silver prices until they increase their net short positions, retest the by covering but extend the trend only so much as to result in a net short position that clearly shows a higher low.

Once this "higher low" occurs, the commercials will then begin their next cycle of increasing their net shorts into rising silver prices until that trend exhausts as well.

This is called NORMAL MANIPULATION and Will Continue Forever Or Until There Is No More Physical Silver Left In The Comex Or Until Enough Traders Stand For Delivery To Overcome The Amount Of Silver Left To Fill Their Delivery Requests.

Looking At The Commercial Net Short Positions As A Percentage Of Registered Comex Inventories, The Picture Is Very Similar:

COT Interpretation Conclusion:

The commercials will continue to drive silver prices down in order to cover more shorts. This trend will continue until they see that they can not produce effective results with subsequent raids. The silver price downtrend will change only after they attempt re-tests such that a higher low in the net shorts as a percentage of comex inventory develops.

Luckily, The magnitude of the commercial net shorts is much lower and is approaching previous lows established when silver prices were very close to where they are now ($28-$26). Thus, we can at least, guess, that we're closer to a bottoming pattern in the price of silver than we have been since the last low made in July 2012.

القراع عصفور · Mar 3, 2013 - 3:53pm

at 55K gold

every deep mine in Afrika would be super profitable, along with so many other marginal properties that aren't even being mined yet.

gold would be supplied, and the price would want to drop. would the PTB attempt to manipulate gold higher at this point to keep the peg?

i don't discount freegold completely - just that there are no absolute answers - well there are, but no one knows which ones are correct. so i stack gold, silver, platinum, palladium, copper, nickel, and of course brass, lead and iron. those are only the metals i stack. i also stack some basic necessities. but the most important thing is to learn some basic survival skills, and have a good network. oh, and learn yourself spiritually too. 

my favorite saying lately is if you are worried about doomsday, marry an Indian. there isn't much more prepping left to do after that. another quote i heard is "if you are going to fall out a window, it's best to fall out on the first floor." what that means is simplify your life!

nice to see you Tabberto. what's your take on the economy in the UK? some of the other Brits here are seeing increasing hardship.

i wish we had some posters from Spain, Italy, and Greece. my info comes from Germany so it's not first hand. but what i hear is that things are getting pretty miserable in the Mediterranean countries. the hungrier people get, the worse the rioting. none of this is discussed in the MSM news in the USA.

i am rambling. it's cabin fever. but the big orange ball did come out today and lighten up the house. (it's still a little too cold to do much outside.)

Rui · Mar 3, 2013 - 3:57pm

Argentina shows gold revaluation is NO fix

Argentina had several PESO meltdown in the last several decades. Each time they ran sth like a 100,000 to 1 reverse split to create a new PESO to reset the system. What happened next? Well after about 10-20 years the PESO collapsed again so they reverse-split it once more to kick off a new round of it until the next crash.

Granted, it's not exactly "gold revaluation" but it's the same mechanism nonetheless. Rather than fixing it, Argentina has back to back currency meltdown in late 1980s, early 2000s and right now. Wash, rinse, repeat. 

Right there it pretty much kills the theory that one-time revaluation could solve the debt crisis. See the root cause of the debt crisis is that irresponsible people (bankers and politicians) are abusing the monetary system on uneconomic agendas. Taking that privilege away is the first step towards fixing it. You don't do that you ain't fix nothing.

If you have a group of managers running a company down to the ground, you fix it up by firing the board and re-structuring its business to restart it fresh. That's how you do it. Fixing a monetary system is no different.

These gold revaluation people (especially the FG camp) are yet to show how to keep bankers in check, and I don't expect many of them to. Many of their ideas come from bankers themselves that boil down to sth like "well let us play this fractional reserve lending game differently and trust us this time we will get it right". Sorry no sale.

SilverSurfers · Mar 3, 2013 - 3:58pm

55K$ O.O

not sure how 55K/Au was arrived at, or that relative piss poor silver price of 1000, as history says, the ratio goes down to 15ish, in the pure bullion play, and I think we dont get there 55K, before the monetary reboot. Outstanding debt, divide by bullion in reserves, was est at 20K something, but for inflation expectations, not well anchor here, it seem like 35K$ and 3K$, when fiat collapses. But yeah, this place would make the bullion pits, in relative terms, a boys choir. 

2 Choir Boys Sing The Meow Song

while TURDVILLE, just goes off,

Video unavailable
Byzantium · Mar 3, 2013 - 4:00pm

@ Rui

Bingo.

If there was a debt jubilee today, all the same suspects would immediately be building debts again, as none of them can balance a budget. And then we can overlay the usual banker fractional reserve games on top of that.

BIGNASTY · Mar 3, 2013 - 4:16pm

Corzine

Now we know what it cost to get a "pass" from US regulators and prosecutors. It appears the honorable Mr Corzine bundled a measly $500,000 + for the great one in his 2012 election victory.

With the MSM blackout and apparent lack of interest by all regulatory agencies I guess it's safe now the be recognized for his contributions to the deconstruction of our once great economy. Thanks John!!

https://www.obamabiden.com/volunteer-fundraisers-q4.html

SilverRunNW · Mar 3, 2013 - 4:17pm

PAGE is Dead. New Allocated Silver Exchange in the Making

This article is from 3 March 2012. ??Happy Anniversary??

https://politicalmetals.com/2012/03/03/page-is-dead-new-allocated-silver-exchange-in-the-making/

So exactly where are we on this mythical "New Allocated Silver Exchange" or NASE?? It's probably a good time to have Ned Naylor-Leyland give us an update if he could be so kind. Many have asked this question here in Turdland, but crickets have been the only thing heard so far.

One can still hope/dream for a new physical metals market.

Bollocks · Mar 3, 2013 - 4:48pm

Hiding your PM's

I've had loads of boating accidents and have hidden pm's in a hollow tree-trunk, but never thought I could do both at the same time ... surprise

القراع عصفور Bollocks · Mar 3, 2013 - 5:01pm

Bollocks

were you operating while intoxicated? 

i read the Clive Maund links. for now, i am again a fan of Clive. i bought EXK on Thursday of last week. figure i'd put up, or shut up.

When you have to shoot...Shoot! Don't talk
Bollocks · Mar 3, 2013 - 5:12pm

Dryocopus pileatus

Are you suggesting THIS?



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