A Pattern Emerges

229
Wed, Jul 10, 2013 - 12:14pm

Because I'm still adjusting to the time change coming off of my vacation, I found myself tossing and turning last night when I suddenly came to this realization. Though not on the level of Dr. Emmett Brown after hitting his head on his bathroom sink, I think you'll find this interesting, nonetheless.

As you know, The Bullion Banks have engaged in a relentless campaign to lessen their exposure and potential liability in paper precious metal. Since the announcement of QE∞ last September, price has counter-intuitively fallen by over a third from near $1800 to below $1200. All the while, The Bullion Banks have decreased their total net short position in paper gold from 737 metric tonnes to less than 70 metric tonnes (from the CoT survey of 7/2/13). From a chart perspective, it looks like this:

Now, look closely. See anything? No? Look again, even closer. Do you see anything now? Do you see any type of pattern?? I must admit that, prior to last evening, I hadn't seen it, either. But it's there, waiting for you to discover it.

OK. What if now I gave you this? Take a look at the chart below with some notes made upon it. Now what do you think?

Hmmm. Well that's interesting, isn't it? Yes, price is down by over 30% from last September. However, almost all of the decline has taken place during the five calendar months of October, December, February, April and June. In fact, as you'll see below, the vast majority of the decline has occurred during the middle of those months. Hmmm. That's interesting, too.

Now before we dig further, what if I gave you these two charts?

So, now, let's go back to the current decline. What is so special about the months of October, December, February, April and June? I'll give you a few moments to think about that before we continue...

.....

.....

If you guessed, "They're Comex delivery months, Turd!", then you win today's prize! Yes! Those months are, in fact, "delivery" months for The Comex. Recall that the active futures contract is always the front month for delivery. Currently, this is the August13 contract. As of Monday, it had a total open interest of 206,000 contracts and it will stop trading and have it's First Notice Day on July 31. Anyone holding a contract after that date must show their intent for delivery by providing 100% margin in their account. Deliveries to eligible contract holders will then take place through the month of August.

Still with me? Good.

This same process occurred back in September for the October12 contract. First Notice Day was at the end of September and deliveries took place through October. The price of gold peaked at $1796 on October 5 but managed to hang in there for another week or so. But then look what happened and note the exact date:

DATE PRICE GLD TONNAGE

10/12/12 $1773 1,340.52

10/24/12 $1699 1,336.90

10/30/12 1,336.30

So, what do we see here? Near the middle of the delivery month, price began to drop rather steeply and a little bit of gold was shaken out of the GLD "inventory". Then, after a decent rally in November, price began to decline again once we flipped the calendar to the delivery month of December. Look what happened and, again, note the date:

DATE PRICE GLD TONNAGE

12/12/12 $1723 1,351.42

12/20/12 $1635 1,350.52

12/28/12 1,350.82

And now you're thinking, "OK, Turd. What's the deal?". Well, let's continue, shall we? Again, please note the date:

DATE PRICE GLD TONNAGE

2/11/13 $1669 1,326.89

2/21/13 $1555 1,290.31

2/25/13 1,272.85

Well, that's interesting. This time, the mid-delivery-month decline shook out over 50 tonnes of gold from the GLD. "Hmmmm. I wonder what would happen if we tried that again?"

DATE PRICE GLD TONNAGE

4/12/13 $1564 1,158.56

4/16/13 $1321 1,145.92

4/29/13 1,080.64

"Wow. This is awesome!", the Evil Ones said. "We hit price in February and shook out 50 tonnes. Then, even while price was stable from 2/21 - 4/12, we were able to grab 114 more. Finally, by breaking price down through the floor at $1525, we got 75 tonnes in April! What a deal!!"

Once again, price was relatively stable mid-April to mid-June, while no Comex deliveries were taking place. Then look what happened, again paying special attention to the date:

DATE PRICE GLD TONNAGE

6/12/13 $1394 1,009.85

6/28/13 $1181 969.50

7/9/13 939.75

So, what is the lesson here?

  • The Bullion Banks have utilized the manufactured price drop to lessen their exposure and potential liability in paper gold by over 90%.
  • This resulting "discount" in paper price has led to a surge in global physical demand. For example, see here: https://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=197040&sn=Detail
  • However, Registered and Eligible Comex inventories are dangerously low. As of yesterday, The Comex showed 224 tonnes of Eligible and just 35 tonnes of Registered (ready for delivery).

What to do, what to do? The plan is clear! Raid price during the delivery month!! Create the selling and panic necessary to shake loose tonnage from the GLD. Use this gold to settle delivery obligations, not only in New York but London, too. Once the current delivery "crisis" has passed, leave gold alone to wallow and flounder, only acting to cap price whenever necessary to keep the downtrend in place. Once the next delivery month arrives: Wash, rinse and repeat.

Going forward, this likely means that we're "safe" for about another month. Besides, it's summer and we're in the middle of vacation season. Aside from the occasional short squeeze or price plunge, the pattern suggests that gold will be stable between $1250 and $1350 until early August. But then....watch out!

Forewarned is forearmed.

TF

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  229 Comments

tyberious · Jul 10, 2013 - 1:43pm

Thank you.

Thank you.

· Jul 10, 2013 - 1:47pm

And if you're wondering why I

And if you're wondering why I didn't bother to mention the FOMC minutes (which will be released shortly), it's because I don't care. It's all bullshit MOPE and SPIN. Nothing more and of ZERO long-term consequence.

Willy · Jul 10, 2013 - 1:48pm

Miners

Being sold off quickly now. A prelude to the 2pm fed minutes and Bernanke's speech around 4:30pm? If so what a scam.

Hunt brother · Jul 10, 2013 - 1:49pm

Endeavor Silver EXK is ridicously cheap...

EXK at $3 is extreeeeeeeeeemly cheap. An excellent company and a leveraged play on higher silver prices. Open pit mines in Mexico.

rtabit · Jul 10, 2013 - 1:56pm

Pattern

This guys seasonal trends in gold stocks going back to 1988 matches your pattern pretty good, interesting catch by you.

Summary

So history suggests the following scenario:

-The long national nightmare in gold stocks may not be quite over yet and those jumping into the most recent bounce may have to ride out another decline during the seasonally unfavorable July period;

-From there a meaningful bottom and bounce could be in store between late July and the end of September;

-Things could get ugly again as the month of October dawns.

Of course, as always the caveat when it comes to seasonal trends is that there is no guarantee that any particular trend will “work” this time around. So it is possible that none of the above scenarios will actually play out this time around.

Still, when it comes to something as volatile as gold stocks – not to mention falling safes and moths near flames – it might make sense to pay some heed to the “road signs.”

As always, time will tell.

https://www.optionetics.com/marketdata/article.aspx?aid=24675&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+optionetics+%28Optionetics+Articles%29

· Jul 10, 2013 - 1:57pm

And let me make this perfecty clear

IF there is any "taper" of QE∞ sometime in the future, it will only come from the MBS-purchase side of the $85B/month.

Maybe, for the sake of appearances, trim the $40B/month back to $30B or even $20B. They might even drop MBS to $20B and increase treasuries to $55B and call it a total drop to $75B/month.

All just a big charade.

agNau · Jul 10, 2013 - 2:01pm

This observation may merit more digging....

just compared the delivery months data to same time frames in S&P and note fall mid month (each time)in that index as well. Just a "rough" quick look mind you....but similar NTL. This is quickly working into the apex. Time and a relief rally will return interest to the GLD....but the phyzz demand is still an issue. That demand is coming from too many areas now for there to be replenishment of actual reserves w/out driving phyzz price substantially higher. Wonder how much gold Syria has? Wonder as well just what method they will use to shake more out? Any % price appreciation will feed demand, not reduce demand at this extreme undervaluation. I think Ben has put himself into another corner...quite firmly. Like squeezing a mustard bottle with little left inside....shaking....squeezing.... Each squeeze produces less mustard. Ben will herd the sheep around again to get the last drops out. *Nice catch Turd.

ChicagoMark · Jul 10, 2013 - 2:16pm

@SRSrocco

With all the research you have done on the cost of production, I'd be interested in your thoughts on these two articles. Looks like both First Majestic and Endeavor killed it in Q2 when it came to production. They don't seem to have any interest in curtailing production at these low prices. What are we missing here?

Also, what is the difference between equivalent ounces of silver and pure ounces? 

Thanks.

https://www.kitco.com/news/2013-07-10/KitcoNews20130710AL_Is-It-Sustaina...

https://www.kitco.com/news/2013-07-10/KitcoNews20130710_kitco-mining-min...

SRSrocco · Jul 10, 2013 - 2:18pm

IT'S JUST FRICKEN APPALLING WHAT IS BEING DONE TO THE MINERS

I have been doing some research on gold and silver mining in the 1930's compared to today, and I have to tell you, silver was priced much better as it pertains to oil and gold's revaluation made the gold mining stocks the best things to own in the depression.

What is being done to the precious metals and the gold and silver miners is appalling. At some point in time this whole paper charade will implode and you are going to see a huge move into the physical assets.... and YES, EVEN WITH ALL THE NEGATIVE THINGS THAT JIM WILLIE SAYS ABOUT THE MINERS.

I am putting together a longer post to show just what a SHAM has taken place since Nov 2012. I make some comparisons to the 1930's in price and production.

The world doesn't realize it, but they will find out what the word MONEY really means.... probably sooner than later.

s1lverbullet · Jul 10, 2013 - 2:18pm

This is all so counterintuitive.

FED says they may taper or end QE and gold and silver take off. Does that make any sense to anyone? How the hell are you suppose to allocate capital effectively and make smart investment decisions when all moves are different than they should be?

Howard Roark · Jul 10, 2013 - 2:21pm

Spike

Well gold spiked some $10 in a few minutes and what a line up it shows...

It´s all so strange. The new pattern? 

Salut,

HR

achmachat · Jul 10, 2013 - 2:21pm

s1lverbullet

that's because technically, the metals didn't take off.

you are witnessing foreign exchange at work. The USD took a dive and it looks as though the metals are up.

in EUR, silver spot is still at around 15€ per ounce.

treefrog Norm · Jul 10, 2013 - 2:25pm

argentus maximus,

your "rejection" of low silver prices may have begun. first majestic (ag) recently announced that they were suspending silver sales until price improves. they are stockpiling product, and while all silver miners got hit today, ag held better than most. they are presently rebounding nicely.

if we see more of this, it is bullish for silver prices. if gold sellers are watching and can understand what's happening, it's bullish for gold prices.

monkry achmachat · Jul 10, 2013 - 2:27pm

Agreed-fx

Yup, gold right now is CAD 1$ less than before the minutes due to USD index/ CAD fx.

s1lverbullet achmachat · Jul 10, 2013 - 2:27pm

@ Achamat

I didn't mean a technical breakout, but rather just the first knee jerk reaction to the minutes. These HFTs are totally distorting and cluster fucking these markets 

ChicagoMark · Jul 10, 2013 - 2:30pm

@treefrog

Where did you read that First Majestic was suspending silver sales? That would be an encouraging sign. Are the miners fighting back? They haven't before. Perhaps they are tired of getting stepped on.

zman · Jul 10, 2013 - 2:32pm

WTI oil at $106,  reports are

WTI oil at $106, reports are that inventories are very low, I thought production was strong, so demand must be very strong, if the economy is weak, why is oil demand so strong?

Gold Dog · Jul 10, 2013 - 2:44pm

Santa

Hi Gang!

I have been working my tail off. I couldn't make Santa in Chicago on Monday but sent my secretary with her steno book. I have just finished perusing her write up and here are the few major takeaways---The ones we all are not aware of now.

1- If the DX hits the mid to upper 90's, she's gonna blow!

2- Not all of his "Pillars of Gold" have been hit yet. (Reference to his 2006 book that I have not read.....anybody?)

3- Barrick Gold is for sale, they even approached him....it's toast.

4- The juniors with easily mined reserves of 3+ million ounces are a strong buy. He indicates a list is available from him.

5- If you demand direct registration of your securities you can call CEDE and get them re-registered back in 24 hours if you want to sell. Don't listen to your broker's BS, it's $50 each way. If you run into roadblocks get a new broker!

6- He says there will not be a new gold backed fiat. "China will wear their gold like a necklace which will make their fiat seem safer." 

7- He indicated that we made a mistake throwing Iran out of the SWIFT system, it just showed the rest of the world that we would. They were pretty much on a COD basis anyway.

She said it was an interesting crowd. The demo was 99% white and dressed either for an audience with the Queen or dressed to do some yard work. Guys in ties left early.

She thought it quite interesting that many of the questions from the scruffiest looking had to do with holding kilo bars verses 400 ounce bars. To wit- A "regular dockers and tee shirt guy" said he was flying to NYC to visit his gold in three different vaults. <- Sorry if you are that guy, I am just quoting here.

Her shorthand is a bit rusty and much information was traded fast and furious. If anyone has additional questions I can make her tease them out of her notes.

Your friend,

Dog

EDIT- Sorry, one other thing. The safest currencies to hold are the Yuan, they shoot people who mess up their banking system, and the Indian Rupee, they haven't had the time to screw themselves up yet.

EDIT- Missed maybe the most important one. The US Dollar remains the world reserve currency for the foreseeable future. China and Russia don't have the horsepower to replace it. All of the deals we read about are small and background noise.

rtabit · Jul 10, 2013 - 2:44pm

@achmachat

that's because technically, the metals didn't take off.

you are witnessing foreign exchange at work. The USD took a dive and it looks as though the metals are up.

in EUR, silver spot is still at around 15€ per ounce.

Good point. Looks like we're getting a decent bounce off upper parallel line of red fork for DX now though.

treefrog ChicagoMark · Jul 10, 2013 - 2:48pm

chicago mark

i read it a day or two ago. now i can't find the link. i guess it will have to be an"unconfirmed report" until and unless somebody can verify it. i hope it's true, but i can't back it up

sorry.

SRSrocco · Jul 10, 2013 - 2:51pm

REPLY @ FIRST MAJESTIC & ENDEAVOUR...

ChicagoMark... part of the deal with making CASH FLOW with really low silver prices is to increase ones ore grade to produce more silver and less cost. This is called high-grading and even though miners can do it for a while, it is not something that can be done for years.... maybe a few quarters.

That being said, any miner that high-grades for an extended period to deal with much lower prices of metal, cuts off their nose to despite their face in the future. When they high-grade their mines now, they lower their overall average grade to a great degree going forward.

Even though the news results for First Majestic & Endeavour sounds great, let's put it into perspective:

FIRST MAJESTIC:

First Majestic produced nearly 2.5 million oz of pure silver (not equivalent) during Q1 2013. In Q2 2013 they have increased this about 300,000 oz, partly due to bringing on their new Del Toro Mine.

First Majestic plans on making some pretty good cuts during the year so they can keep their cash. They can do this, because they are probably one of the most profitable miners in the my top 12 primary silver miners.

ENDEAVOUR:

While Endeavour did increase its production substantially since Q2 2012, it only improved it a tad when we compare it to Q1 2013.

Q1 2013 = 1,489,746 oz silver production

Q2 2013 = 1,535,873 oz silver production

So, quarter over quarter, Endeavour increased its production 3%. Now, what I find interesting is their huge increase of 57% in revenue compared to last year. We have to take a look and see that Endeavour only sold a little more than 1 million oz of silver in Q2 2012, but sold 1.7 million in Q2 2013. Thats a lot more silver. They also sold 20,000 oz more gold.. as they only sold 5,000+ oz during Q2 2012.

Endeavour is a good company, and yes they are doing whatever they can to keep cash flow, but they sold 240,000 more oz of silver than they produced, and 6,000 more oz of gold than they produced. I hardly doubt they can do that the next quarter.

Regardless, First Majestic and Endeavour are in the top 4 of my top 12 primary silver miners in profitability. They will withstand lower prices much better than the others.

I am really worried about COEUR, PAN AMERICAN SILVER, ALEXCO, U.S. SILVER, GREAT PANTHER, AND SILVER STANDARD. These companies will suffer much more as their break-even is much higher than First Majestic & Endeavour.

steve

Fulgurite · Jul 10, 2013 - 2:55pm

Simplistic?

Well, call me simplistic, but the only pattern I see is pretty simple:

Stocks down ==> Gold (read: precious metals in general) hammered down

Stocks up ==> Gold stable(ish) or crawling slightly up.

Since everybody and their mother is saying that the stock market is still overvalued, I still don't think that the bottom in Gold is reached and every excuse (tapering rumours, bad earnings, sovereign debt crisis etc) will be used to drive prices down further.

ChicagoMark SRSrocco · Jul 10, 2013 - 3:06pm

@SRSrocco

Thanks Steve. Appreciate all the work you do go get us this kind of info. I've been a silver bull for a decade, but never spent the time to really understand mining production costs. Hence, I only rarely ever bought shares in miners. I just figured that mining is a very expensive and energy demanding business and in the era of peak oil might not be a good investment. However, the metal itself would only become more valuable.

JailBank · Jul 10, 2013 - 3:18pm

Silver Inventory

For anyone that would like to chime in. I am a heavy investor in First Majestic Silver (AG) and reading from their latest press release they are mining a crap ton of silver out of Mexico and have lots of unsold inventory (700,000 oz) they believe will be sold in Q3. Just for my knowledge as I am no metals trader, more a stacker, can anyone tell me some good reasons why at these levels First Majestic would be sitting on so much leftover inventory? I know they mined a record amount, but if PMs are in such high demand that scared me a little.

Not trolling, just looking for answers, and I am not 100% on how contracts/delivery/futures work in the real world. Shit I am an IT guy from Nebraska!

daveyboy · Jul 10, 2013 - 3:18pm

Debka are there to create

Debka are there to create disinfo, confusion and lies, they are there as a propaganda arm, the truth....that is secondary, if the stories convey some truth in them then it's just a byproduct.

UAE and co are supporting those monsters in Syria, Morsi himself revealed that he wanted to wage a holy war in Syria to topple any notion of secularism there.

They seem pretty much in cahoots to me, why was Morsi toppled? how about the fact that the army was scared stiff that the people low on sustenance, low on patience, but brimming with determination and anger could topple their corrupt asses too?

How about the IMF granting loans on condition that people who barely have enough to live see subsidies for necessities slashed?

Don't expect Debka to report on that and as for Debka.....every bullshit line they spin....sinks down the memory hole as new ones replace.

Swift Boat Vet Safety Dan · Jul 10, 2013 - 3:23pm

TURD !! and Safety Dan ---- If we don't get -----

If we don't get that late August thru Sept price drop, do you think that all PM lows are in and the B.B.s figure they've gotten all they can screw the 'muppets' out of on the down side? If not the coming delivery month, the failure of this pattern would more than likely signal the end of the downside manipulation then?

What's the consensus all?

Swifty

AGAU treefrog · Jul 10, 2013 - 3:26pm

Any more hints of

Any more hints of "stockpiling " by you mining chappies and I will send in the EPA and shut ya'll asses down

Jamie D

OC15 · Jul 10, 2013 - 3:26pm

Great Panther

has their silver priced at $31/oz on their online store. Who's buying that?

S Roche · Jul 10, 2013 - 3:27pm

GOFO Mofos...

Very interesting catch on price action in delivery months Turd, thanks.

1M tighter but 2M-6M slightly easier but all still negative, 3 days of negative GOFO

https://www.lbma.org.uk/pages/index.cfm?page_id=55&title=gold_forwards&show=2013

I think 3 days now is equal to the record. Remember the caveat, low rates might make this time different but...

For anyone who wants to go down the GOFO rabbit hole, and note the links underneath relating to gold's role in financial markets as collateral, this is a fascinating read:

https://ftalphaville.ft.com/2013/07/10/1561322/the-hand-of-gofo-strikes-again/

h/t to Kid Dynamite on picking up that article

tyberious · Jul 10, 2013 - 3:27pm

Fraudulent Fiat Money,

Fraudulent Fiat Money, Currency Wars and Gold

 

Jay Radio Header

Current Episode Direct Audio Links:

Hour 1 Hour 2

James Rickards and Andy Hoffman (AKA Ranting Andy) visit the radio program for the first time to talk about fraudulent fiat money, currency wars and gold.

James Rickards talks about how adversary nations outside of the Anglo-American Empire can and are using currency wars as a means of self defense against American expansionism. Rickards, who has helped the Pentagon understand the role of finance in the overall quest for power by the leading players on the world's stage, talks about some of the unintended consequences of current western policy.

Andy Hoffman talks about how the current economic and monetary policies of the U.S. are leading inexorably toward an eventual plunge in the U.S. dollar confidence and what that will mean for honest money-gold and silver.

Also on the show for the first time, Greg Johnson, Pres. and CEO of Prophecy Platinum, visits to talk about that company's world-class platinum group metals project and its prospects for investors who buy at current low share prices.

PS. Rickards, indicates that the FED may devalue the dollar, with gold at 7K!!

Notice: If you do not see your new comment immediately, do not be alarmed. We are currently refreshing new comments approximately every 2 minutes to better manage performance while working on other issues. Thank you for your patience.

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