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

achmachat · Mar 4, 2013 - 4:21am

Asia is different today

somebody over there seems to know something.

There's 10 minutes of trading left and the usual slope down has been turned into stronger buying.

Change is good!

Bollocks · Mar 4, 2013 - 5:16am

"lost" means "stolen"

NatWest bank loses 'irreplaceable' family heirlooms

NatWest bank has lost a pensioner's safety deposit box which she said contained heirlooms worth £20,000.

Hayat Panwar, 69, deposited the antique jewellery at the Solihull branch of the bank in February 2009.

When she arrived at the branch in November 2012 and requested access to it, staff admitted they could not find the box or its contents.

NatWest has apologised to Ms Panwar and offered to discuss compensation.

She said the box contained antique jewellery and other items passed down through her family, which she said were irreplaceable.

Ms Panwar said the items included her wedding and engagement rings, along with her father's watch and jewellery she inherited from her parents and grandparents, all of whom are no longer alive.

"It's affected my life and I don't know what to do."

---------

"I just want my gold back; I don't feel myself and I don't think I'd feel the same even if I got the money," she said.

https://www.bbc.co.uk/news/uk-england-birmingham-21638048

philipat · Mar 4, 2013 - 5:29am

@achmachat

It's Pig related. Pig up, GBP dead cat bounce and AUD down on China property-related news. After which Pig now retreating again, hence PM's reversal.

johnnydow · Mar 4, 2013 - 6:20am

@johnnydow: iamrawdoglet.

"Guys check out iamrawdoglet yt video silver and gold dont be the sucker." 

Already did. Would you take your advice from this guy?

· Mar 4, 2013 - 6:42am

re would I talk advice from this guy

Yes, if I was looking for some really unusual drugs.

I look at johnnydow as an ass, and therefore a true bottom indicator. A number of my favourite posters have finally blurted out that they own no silver, which at least makes their desire that I should also own none somewhat understandable, although I tend to doubt their altruism. But to both own it and think it is worthless, or going to become so, is extra special.

Oh, and my stack is bigger than your stack ... now where I have heard something like that before when men argue? Protestest too much, oh tiny stack?

Motley Fool · Mar 4, 2013 - 6:47am

@ivars

English does not seem to be your mother tongue, perhaps it would have been more digestible in russian? , perhaps you know some linguists who have a very good handle on the english tongue and is willing to translate for you. I know someone is working on chinese translations, and I believe there are some dutch translations and someone working on japanese too.

I am not going to lie and say the subject matter is easy. For deep understanding it is not.

For practical living though it can be said simply, just spend what currency you get paid in to live your life and buy gold with the excess you intend to save. 

Motley Fool · Mar 4, 2013 - 6:50am

double

Poor rawdog. He never really understood the reasons for holding precious metals, and now is being shaken out by the markets. I kinda feel bad for him climbing off at this point.

We each have to make our own choices. I hope he can live with his. 

· Mar 4, 2013 - 6:52am

not a translation problem

It is not your excellent command of language that is the problem, Ivars, it is your logical mind. "Ununderstandable" - you have come away with a correct understanding.

Texas Sandman · Mar 4, 2013 - 6:54am

I filter them out

It's really easy to identify & ignore posts meant to incite strong passions without a shred of evidence to back them up. Don't even need to use the ignore switch for those.

Bullish is ok. Bearish is ok. But either one without any reasoning is the equivalent of spam in my scheme of things. And this "my stack is bigger than yours"... Are we still in 6th grade?

Motley Fool · Mar 4, 2013 - 6:55am

Xty

"Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity." --- Martin Luther King Jr.

· Mar 4, 2013 - 7:18am

let's discuss irony

Irony is a frequently misunderstood word, and bandied about to mean poetic justice, for example. But true dramatic irony occurs when there is a double meaning, often an opposite meaning, hidden in the words - and this second meaning is understood by the audience, not the characters in the play.

Now it is not as if I had written MF's lines for him, but had I, it would have been a neat rhetorical trick.

achmachat · Mar 4, 2013 - 7:18am

Motley Crue

What if you knew... from a VERY reliable source, that silver, along with gold WILL take its rightful place as money again. And that the ratio between the worth of those two will go close to the historical 15?

What you are saying, spending in local currency and saving in gold would then only be half right for this specific time, because as of now, silver is ridiculously cheap compared to gold. 

I don't need to tell you why I know this to be 100% fact; but at least understand why there's always the possibility that you don't know all the facts of the story.

Basically, you are not wrong in saving in gold. This has never been wrong throughout history and will never be wrong. But don't dismiss silver that easily because of the machinations of a few during this last (and failing) currency cycle.

ivars · Mar 4, 2013 - 7:43am

@Xty

Thanks, but is it possible to tangle something in a way that seems logical but is illogical, and spend 15 years on that. Again, I have read Another and FOA, they were somewhat readable and interesting...I intend to return to them when I have better understanding of monetary / geopolitical things...but not to FOFOA . He makes it all incomprehensible.

@Motley- I am glad that You think that language may solve the problem. I do not think so, though. It is in my head. May be You could make a bullet point version of what its all about- say 10 bullet points as You seem to understand it well. Premises, conclusions in 10 bullet points.

E.g. right now I am reading modern monetary theory, and its interesting as its exactly telling how money is functioning in fiat floating exchange system, what ever their suggestions ( basically, war time deficit as in 40-ties that saved the USA economy- except that today there are no chances to cancel trade deficit- so that must be overcome with more deficit spending)- leading to inflation obviously, but I am not sure if to hyperinflation. That is a thing that has to be figured out as in the end USG will spend fiscally, and inflation will be controllable , but how much? According to projections of 3500 gold, in some time before reset investors will feel that inflation can reach 218%, according to 10000 USD gold, Investors will feel at some time that inflation can reach 650%. It is not necessary that such inflation will be reached, its a projection based on combination of potential inflation and USG potential for default.

OK, so they list their premises in more or less 7 points ( or a bit more if one goes deeper into foundations they put under money as state monopoly item). But all very clear and consistent within their model. I guess as FOFOA's theory has been developed since 1997, it would have reached the same state of maturity and clarity.

https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

AgAuthaChristie · Mar 4, 2013 - 7:47am

@ TY Re: Irony

Your definition is too strict. It doesn't allow me the grim satisfaction of quietly enduring the "irony" that there isn't a single instance of irony in that song "Isn't It Ironic". Rain on your wedding day may suck but it ain't ironic. Ditto winning the lottery and then dying.

Of course maybe she is fully aware of this and it is a deadpan exercise in meta irony.

ag1969 · Mar 4, 2013 - 7:48am

The poisoners are at it again

Aspartame In Milk: Dairy Industry Seeks Approval To Drop Label For Artificial Sweeteners

The Huffington Post | By Bonnie Kavoussi Posted: 02/26/2013 12:00 pm EST | Updated: 02/28/2013 12:01 pm EST

Share on Google+ Aspartame Milk

Got diet milk? The dairy industry for the past three years has been hoping to sell you some under the guise of just plain "milk," so that chocolate and strawberry varieties that contain artificial sweeteners would no longer need to carry a special label.

Last week, the Food and Drug Administration (FDA) acknowledged a 2009 petition from the International Dairy Foods Association (IDFA) and the National Milk Producers Federation that seeks to drop the FDA requirement to label milk and other dairy products as "artificially sweetened" when they contain sweeteners such as aspartame.

The FDA asked the public to submit data, information and comments related to aspartame and other artificial sweeteners in milk last week.

The agency currently lets the dairy industry use the unmodified "milk" label for unsweetened milk or milk that contains sweeteners with calories, like sugar and high-fructose corn syrup.

Aspartame is used in a range of products, including diet soda and yogurt, and is sold to consumers under the brand-name Equal (which also includes some other ingredients). Some researchers have found that artificial sweeteners alter people's brain chemistry, making them crave higher-calorie foods, which in turn makes them more prone to obesity and diabetes.

The dairy lobby argues the opposite, claiming that allowing aspartame in milk would make it a healthier product and reduce childhood obesity by offering milk with fewer calories.

The move comes as milk's popularity is in serious decline and other beverages, including soy and rice milk, take on more market share.

If history is any indication, the dairy lobby may get its way; it's a powerful force on Capitol Hill, according to Mother Jones.

CORRECTION: This post initially reported that the dairy industry was asking the FDA for permission to include artificial sweeteners in milk. The article has been updated to reflect that aspartame and other artificial sweeteners already are allowed in milk. The FDA simply requires the front of the label to note that the milk is artificially sweetened.

Stack'em High · Mar 4, 2013 - 7:56am

Ivars, you hit the nail on the head...

"Logical but is illogical"

They have a good understanding of economics (that's the logical part), however, their theory's of how it will all play out shows a lack of critical thinking skills (that's the illogical part).

Groaner · Mar 4, 2013 - 8:03am

maund seems bullish, but could take a bit more time

to work out. 

The sentiment reading alone in the metals cant get much worse can it?

The weak hands have left the game? Now the big boys come in and clean up.. typical wall street action..

Yellen just posted Fed backs maintaining easing policy. that should boost the market.. what a joke.. MOPE>

metals should bounce today on that

Katie Rose · Mar 4, 2013 - 8:18am

Aspartame In Milk

I tried to post this article the other day. When I hit SAVE, I found that TF Metals was down once again. sad

I find it hard to wrap my head around the fact that commercial hemp grown throughout the industrialized world and raw milk are illegal, yet the FDA is seriously considering allowing the dairy industry to add aspartame to milk without requiring a label.

For those of us old enough to remember The Twilight Zone television program, we are living it now.

For those of you with children, do your own research on Aspartame. I can guarantee that you will not want your children consuming it.

Hammer · Mar 4, 2013 - 8:20am

Secret footage of the latest

Secret footage of the latest CFTC meeting

2 Hamsters 1 Wheel
¤ · Mar 4, 2013 - 8:25am

Extremely Bullish Thought / Chart

Heck, all they have to do at some point is insinuate they'll be big buyers going forward and that alone would greatly effect the price. Buying just 5-10 % would be huge.

Announcing their intentions before they're ready is not their style nor good business and more then likely they'll act unilaterally when they think or know they're ready to press forward with whatever currency valuation changes they have in mind.

Chart Of The Day: China’s $3.3 Trillion FX Reserves Could Buy All World’s Gold Twice

Submitted by Tyler Durden on 03/04/2013 - 07:52

China’s foreign currency reserves have surged more than 700% since 2004 and are now enough to buy every central bank’s official gold supply -- twice. The Bloomberg CHART OF THE DAY shows how China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to $3.3 trillion at the end of 2012. The price of gold has failed to keep pace with the surge in the value of Chinese and global foreign exchange holdings. Gold has increased just 263% from 2004 through to February 28, with the registered volume little changed, according to data based on International Monetary Fund and World Gold Council figures. By comparison, China’s reserves rose 721% through 2012, while the combined total among Brazil, Russia and India rose about 400% to $1.1 trillion.

https://www.zerohedge.com/news/2013-03-04/chart-day-china%E2%80%99s-33-t...

koan · Mar 4, 2013 - 8:26am

ivars re: freegold

like you I've tried but I get that eye-glaze-over thing reading his epitomes trying to digest the nuances - so I'll go to the other end of the spectrum and attempt the most concise definition of what I understand it to be:

freegold = gold now - futures exchanges

Anyone beat that? If I'm wrong and any feel the need to chip in then please, please, please keep the explanation to 50 words or less...

Zero Fiat · Mar 4, 2013 - 8:36am

Free Gold $55,000 per oz.

Dam would I love to trade that ratio, Gold $55,000 per oz, silver $15 to $20 per oz. Think about it.....?

Stack'em High · Mar 4, 2013 - 8:36am

DHP, JS and FOFOA...

A few months ago a reader sent in a question that included a reference to FOFOA. JS asked the reader, in his response, if FOFOA was similar to (I don't remember the acronym he used) but it implied he knew of FOFOA and thought FOFOA was not relevant.

I will try to find the exchange...

Stack'em High · Mar 4, 2013 - 8:41am

Motley Fool...

We can agree to disagree, but can we agree to do it from afar? I'm sure your community would find it disrespectful if turdites showed up over there, not for the purpose of learning with an open mind, but instead with the sole intent of "proving" your theories on silver, freegold, ANOTHER and FOA to be wrong, just to be a contrarian. Isn't that what your doing here? If you insist on staying here, then please start a thread in the gold forum and kindly refrain from peddling unicorns on Main Street. After all, this is the tfmetalsreport.com, in case you missed it, the word metals is plural, not singular. Thank You!

achmachat · Mar 4, 2013 - 8:43am

SIlverbee

there's a part of what Motley wrote that's important, in any possible case, and I am paraphrasing here:

buy gold (SILVER!) with what you don't need to pay your bills.

everything else is a timeframe gamble and you have to live with it; I know that I do.

Groaner · Mar 4, 2013 - 8:44am

metals barely holding on..

something has to give. 

Texas Sandman · Mar 4, 2013 - 8:45am

SIverbee

Gold has been money for 5000 years. It still is.

No fiat money has ever survived. Not one.

I mean, I can even come up with an example of a benign communist state that actually worked until it was destroyed by external forces (the Incas destroyed by the conquistadores). But I can't come up with a fiat currency that's made it long-term.

And regarding Ben Bernanke's opinion of gold as money, you need to consider the source.

"There is no housing bubble."

"There is no problem in mortgage lending."

"OK, there's a problem in subprime mortgage lending, but prime mortgages are solid."

"OK, there's a problem in prime mortgage lending, but this will never affect the real economy."

I mean, if the man said the sky is blue, I'd immediately run outside to see if it had turned green.

¤ · Mar 4, 2013 - 8:45am

JS and another

Just read the entire JS post and he seems to be talking about Armstrong this time around although he has mentioned FOFOA previously.

Also...Motley Fool...what would make anyone logically think that $15-20 silver is possible while gold is $55,000? I realize your baiting a bit but c'mon.

Gold at mostly a $1600 average lately has shown silver to be at approx $30 or more on average this whole time. Gold at $55K and silver at $15-20 isn't a serious or realistic number to even consider. 

I picked silver at $1,000 yesterday because we're currently at approx. a 55-1 GSR. The GSR that China eventually starts using will render the possibility of silver at $15-20 nearly impossible unless a paper market crash happens and it briefly ranges all over the place and through those numbers to Zero.

I'll be a huge buyer at Zero when that happens ;-)

Groaner · Mar 4, 2013 - 8:53am

seasonal charts on the metals

how much do they come into play into todays world?

march looks iffy too. end of march there is a nice pop up.. 

https://www.321gold.com/charts/seasonal_gold.html

OK no slam at 8am,, no huge volume down at comex open so when?? or they are laying off today for a change, doubt it.

SIlverbee achmachat · Mar 4, 2013 - 8:53am

@achmachat

If you have this info and conviction about the PM's having a future as money, great. However, the issue for some here is timing. If it was the 27th of March fantastic, but if it is 20 years from now most of us who have lives would have had to move on and move out of (to a certain extent) our positions in the PM's. We all probably believe PM's have a place as money but few if any can categorically claim it will happen. Do you have a timeframe. Because if you don't then FACT can become fiction. 

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