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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turd [at] tfmetalsreport [dot] com ()
Does Feb19 Comex gold close above $1250 on Friday?
YES
76%
NO
24%
Total votes: 194

  341 Comments

jolidacrown Groaner · Mar 4, 2013 - 8:55am

how much do they come into play into todays world?

They don’t - same credence as COT.

Groaner · Mar 4, 2013 - 8:57am
ancientmoney · Mar 4, 2013 - 9:02am

@ivars re: FOFOA . . .

Boiled down, his theory is not difficult to understand. First, gold would become free. Right now, receipts (paper) or other claims on gold overwhelms physical. Some estimate that 100 to 150 times the actual gold is showing up as somebody's perceived gold as a paper represention. That is what freegold means--it is allowed to go to its logical value level by the destruction of the paper markets that disallow gold to naturally rise above fiat.

The current value of all paper and physical will be compressed, essentially, into physical only. So, physical would rise by 100 to 150 times as the paper melts away.

Then, governments or their central banks would announce they are buying gold. They will bid it up, and it is expected that the price will rise enough to counterbalance, or soak up, if you will, the sovereign and CB bank debt of the world.

The gold would become an asset they own, and dollars, euros, yen, yuan, etc. would all be highly devalued against gold. Gold would be the extinguisher of debt. 

Since gold is the asset held by banks and governments, it makes sense for gold to be the chosen monetary asset. FOFOA feels silver will not experience the one-time rise as does gold for this reason.

I disagree; I think silver has been held back even moreso than gold, and is now in much more severe shortage. Supply and demand will still work after freegold, and silver will be set free as well. In fact, the silver shortage could usher freegold in sooner than actually desired.

¤ · Mar 4, 2013 - 9:02am

Old/New Buzzword

In December it was Fiscal Cliff.

For two months it's been about Sequestration.

This month it'll be Govt. Shutdown.

What buzzword will April/May bring? 

Temporary debt ceiling, again?

achmachat · Mar 4, 2013 - 9:04am

2013 ASE

here in Europe, we usually don't buy American Silver Eagles in large numbers the way we buy Philharmonics, Silver Maples or Noah's Arks; the premium is just too high compared to other bullion.

Nevertheless, I just added 1 (one) 2013 ASE to this week's order (no extra shipping, and for ASE my dealer allows quantities that are not multiples of rolls ;-)) to check out by spectral analysis if they still use blanks with the same purity as the previous years because a lot of you guys were worried.

SIlverbee · Mar 4, 2013 - 9:05am

Yes I know PMs have been money and are a store of wealth

But they are not money in the form of currency now. Yes, Fiat does not last but that is because in part the fact that it is abused by the PTB. It is not the medium that is at fault rather than the potential for abuse. Shells were used in history as money but they were also counterfeited too. It is the scarcity element that makes good money. A substance that has no other use other than to serve as money would be the best.

I still say timing is relevant to the level of exposure a stacker/investor might have. For instance if Gold went to 55K and Silver to 2K. I dare say I will sell some for other assets like a house and keep the rest therefore changing my exposure which might be heavier at the moment for obvious reasons.

ag1969 · Mar 4, 2013 - 9:05am

What is going on with Provident Metals?

So I posted the other day that Provident is now selling Zimbabwe Paper Money. Well today I logged into find out if some Wood Bisons I have on order that were supposed to ship on or before 3/1 had shipped yet, (they have not) and what do I find? They have some 2013 eagles that are only $53.65 per ounce (low serial number monster box). At a low $25 per coin premium, I can't believe they still have them!

Stack'em High · Mar 4, 2013 - 9:09am

Jim's Mailbox... FOFOA.

Jim, How would you answer FOFOA and his followers, who say silver is going to crash? CIGA Bill D Bill, Why answer them? What is FOFOA? Is that something like FUBAR? Yesterday I asked cooperation in the work I am doing regarding emails. My interest in what others think is limited to our crowd. Apparently you missed it, or do not read JSMineset often. Silver will trade at $50 minimum. In the meantime it will drive you nuts. Respectfully yours, Jim https://www.jsmineset.com/2012/11/02/jims-mailbox-1085/

Mickey · Mar 4, 2013 - 9:10am

Yellens statement

if a fed gov says thinking about cutting QE we know the EE will sell paper metals on the news, actually flood the futures market with offers. Who is flooding the buy side with paper contracts on Yellins obvious comments?

SilverSurfers · Mar 4, 2013 - 9:12am

ITS MONDAY FOLKS!!!!

And THE WEEK of weeks, in the pits, its do or die ... harikari swords drawn at the ready. let the ride begin, on the wild side.

Mötley Crüe - Wild Side (Official Music Video)

28.60 HOLDING!!!! DONT YOU EYEBALL ME MAYO

"long lost is the wishing well" BS!!!! guys never been to turdville, i guess.

Orange · Mar 4, 2013 - 9:13am

Ted Butler

https://goldsilverworlds.com/gold-silver-experts/ted-butler-highest-conc...

We were granted permission from Ted Butler to make the following excerpt public.

I would estimate JPMorgan’s concentrated short position to be 27,500 contracts as of the cut-off. I had expected JPMorgan to have covered more in this report and the raptors not to have bought as much as they did. JPM may have set a record of sorts in that it holds nearly 90% of the total commercial short position of 30,900 contracts. In other words, without JPMorgan, there would be a total commercial net short position in COMEX silver of less than 3500 contracts and no one could begin to allege price manipulation. Instead, I don’t believe there has ever been such a large concentrated position in history in which one trader held virtually the entire net position of all the other commercials. In a very real sense, it is JPMorgan against the world of silver.

Needless to say, there is a stark contrast between the raptors’ near record long position and JPMorgan’s record short concentration relative to the total commercial net short position. It seems clear to me that this juxtaposition and its resolution is at the heart of how silver will behave price-wise from here. Since the tech funds have continued to plow onto the short side, we should be approaching the maximum number of how many tech fund shorts can be created from here along with further speculative long liquidation. If the raptors continue to buy on lower prices (which appears likely considering how aggressive they have been so far), the question becomes how will JPMorgan cover the bulk of their short position?

koan · Mar 4, 2013 - 9:16am

'Silver will trade at $50

'Silver will trade at $50 minimum. In the meantime it will drive you nuts.'

Santa is a legend

treefrog · Mar 4, 2013 - 9:28am

santa's comment

"Silver will trade at $50 minimum. In the meantime it will drive you nuts.

Respectfully yours, Jim" should have limited impact here. after all, most of us already are nuts.
Keg · Mar 4, 2013 - 9:30am

Scary stuff

I remember when I used to think the police were here to protect us. Now they scare the crap out me. And what happened to the "sequester" and all the stuff they could not fund but they can buy domestic tanks?

Obama DHS Purchases 2,700 Light-Armored Tanks to Go With Their 1.6 Billion Bullet Stockpile

https://www.thegatewaypundit.com/2013/03/obama-dhs-purchases-2700-light-armored-tanks-to-go-with-their-1-6-billion-bullet-stockpile/

SilverSurfers · Mar 4, 2013 - 9:41am

Harry Dent

Wife got an unsolicited email from a guy named Harry Dent. It sounded familiar, as a regular on goldseekradio with ChrisWatzak .... The guy said

that their is no inflation, government pays back debt, wages are strong and not collapsing, ladi dila .....

I went through it with her, explaining the fallacies contained there in.

She sent back an email, it started out with, YOU ARE A CHARLATAN ......

atta girl ....

https://radio.goldseek.com/nuggets.php

Motley Fool · Mar 4, 2013 - 9:54am

hmmm

Preamble : I intended to respond to admiral ag bar, simply because he thought there may be some merit in my opinion, and I thought there was very little merit in his allocation. Unfortunately I have a habit of answering comments directed at me....and since my commentary is not the usual fare here, I tend to get a lot of that...which ends in me overstaying my welcome.

@achamat

We must each make up ourt own minds. Your knowledge of an anonymous very reliably source's opinion does nothing to sway mine. Opinions are like assholes, everyone has them. How do you judge reliability in this regard? Does it conform to my own judgment? Is it something that is knowable? Allow me to dismiss silver after studying hundreds of years of history. As you say, I should be ok. You do what you like too. :P

@ivars

No. With that attitude I have no interest in even attempting to assist you.

@DPH

Yeah I know, crazy right. Only a fool would suggest such. Do you take me to be a fool? :P 

Still I note you simply sidestepped my fictitious and crazy and in no way what I ever would expect example, and did not answer. Oh well.

@koan

I will nominate this tweet by FOFOA as the shortest problem statement I have seen : "Debt = Savings/Reserves today. #Thatsthewholeproblem #Inanutshell" . As you must know, in the statement of a problem the solution resides. So I think this suffices.

@Stack em high

Please refer to my preamble.

@silverbee

It is good that you are able to distinguish between stores of wealth and currency. For the rah rah gold should be (is) money crowd that tends to be a tad hard. 

"It is not the medium that is at fault rather than the potential for abuse." The interesting part is who did the abusing. The tweet above sheds some light. Contrary to strong opinions here, the answer in retrospect is quite ironic.

Motley Fool · Mar 4, 2013 - 9:55am

hmmm

double

MrGuboci · Mar 4, 2013 - 9:57am

28.4

It seems the cartel is collecting all new buy stops on the way to 28.4 atm ... will they decide to attack it and push it below 28.4 and cause waterfall ? I think yes :-)

Stack'em High · Mar 4, 2013 - 9:59am

Now that you have admitted...

To overstaying your welcome...

will you be leaving?

moondog Keg · Mar 4, 2013 - 10:00am

Mine Resistant Armor Protected Vehicles

KEG -->I guess the US citizens are now more dangerous than AL-CIA-DA.

The DHS expects mines in US neighborhoods and 50 cals on rooftops.

Strange days we live in

usk · Mar 4, 2013 - 10:03am

the fed is probably fighting against the fund that is still long

in silver.

Majopr attack this morning on several miners. Force margin calls and reduce long positions in Silver.

I am wondering if this is not a MAJOR attack against sprott funds.

Rui · Mar 4, 2013 - 10:10am

@ivars - Freegold is hard to understand b/c it makes no sense

You are right that we are in fact in freegold right now as gold price is floating already. Instead of producing some sorta stability as freegold promises, we are right square in one of the greatest economic meltdown ever. Freegold does not work.

Many FGers argue the current system is not freegold as this gold price is not a real physical price but a manipulated one. To me, they are oblivious to the fact that manipulation is the only game in town once you let elites control the system. "When it becomes serious, you have to lie". That's elites showing their hand. Manipulate they will when the truth becomes inconvenient to them. They are manipulating LIBOR, employment #, stress tests, GDP and so on. Anyone thinking they'd leave gold alone is either gullible or intending to sell public this snake oil.

SilverSurfers usk · Mar 4, 2013 - 10:11am

not so crazy

The PRE-TEST web attack was most noticeable on Watchdog, with Sprout, and no comments, except mine pending.

billwilson · Mar 4, 2013 - 10:13am

Based on the miners

gold looks to be going back under $1,000. This kind of stuff is plain nuts ... but I remain convinced the turn comes only after the broader market turns over. The cash has to go somewhere and unlike 2008 there is no liquidity issue now, and the market does look "heavy".

UraniumSprings · Mar 4, 2013 - 10:24am
Texas Sandman · Mar 4, 2013 - 10:27am

Don't think so.

>It seems the cartel is collecting all new buy stops on the way to 28.4 atm ... will they decide to attack it and push it below 28.4 and cause waterfall ? I think yes :-) <

Don't think so. My read is a bit different. This is all part of a bottoming process and I personally am within an inch of taking on paper longs here, carrying them overnight & limiting my daytrading to longs around that going forward. Close will tell.

Bottoms are always messy affairs. All those people (including frankly turd & santa both), who figured we'd just go bounding higher after getting whacked down into the 7th level of hell were completely full of it. Markets don't work that way. They work about like we've seen. Now turd is saying we have an appreciable chance of going to 25. I'm on the cusp of ruling that one out. At 30 he was bullish. I was still bearish.

Motley Fool · Mar 4, 2013 - 10:27am

Stack em high

If should probably have expanded on that statement....overstayed my welcome according to this most pigheaded, narrowminded and angry commenters at the time.

Regardless, yes, I aim to leave as soon as possible. I am yet again sorry to have ventured in. I gain nothing by doing so except contempt from unthinking brutes. Not exactly something to strive towards. hahaha

Motley Fool · Mar 4, 2013 - 10:28am

Stack em high

double

achmachat · Mar 4, 2013 - 10:31am

confused

I didn't get the memo... do we have to end all of our posts with another post saying "double" now?

kind of like "over" while on the radio?

achmachat · Mar 4, 2013 - 10:32am

confused

double

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