In The Woods

312
Thu, Sep 8, 2011 - 9:25am

The overnight action is the PMs is certainly encouraging and it would seem as though the half-life of central bank gold intervention is now about as long as central bank currency intervention. We all know, however, that it is still too soon to let our guards down. The quick recovery in price may only serve to embolden our increasingly desperate adversary, so, much caution is still warranted.

That said, I do not want to minimize the importance of the overnight reaction in price. The SNB attack of early yesterday sent the metals markets reeling. The attacks were timed to have a spillover effect onto the Comex and December gold traded as low as $1794 by mid-morning. In the old days, this would have sent gold into a tailspin as weak-handed longs began to race each other for the exits. They knew they were no match for the central banks and The Cartel.

Note, though, how yesterday was different. Once the Comex was closed, things began to improve almost immediately. Baby steps at first but then a full-blown rally overnight in Asia. Our longs are no longer weak-handed. They are resolute. They are buyers of size and they seem to pounce on discounted prices. This must be very discouraging to The Cartel. They are trapped in an untenable short position and they are being forced to cover at increasingly higher prices. HAHAHA!

To that end, I feel I must state this again. Please be sure you are making note of which "analysts" and "traders" are calling a "bubble". One only needs a cursory understanding of the Commitment of Traders data to deduce that there is no such thing as the CoT data since early August has clearly shown that the primary driver of price to this level has been Cartel short-covering. A bubble presumes retail buying. Average, everyday investors rushing in to buy something. The greater fool theory in action. Think dot com. Think Las Vegas real estate. Cartel short-covering does not create a bubble. As stated ad nauseam, the weekly CoT report is a very important, fundamental statistic. Any serious metals analyst knows this. Accordingly, any serious metals analyst knows that gold is not a bubble. The boneheads calling gold a bubble are, therefore, not serious analysts and should be ignored. Do not forget them, though, as they will most assuredly resurface in the future to once again proclaim an end to the gold bull. Remember who they are so that you can ignore them in the future, too.

The next question we need to ask is: Why are the banks so desperate to cover? Ponder that one for a while. I've got my thoughts on the subject. I'd be curious to hear yours.

Here are your charts for this morning. I see they are already becoming outdated as the metals have continued to rally while I type.

Remember today that my warning of yesterday was not to sell, it was not to buy. I stand by that. With the active central bank intervention of earlier this week, it is still too dangerous to be boldly buying with confidence. For now, I am simply holding my positions. The only trades I made yesterday were to re-cover my October gold calls. You may recall, I have been long October calls but, from time to time, I've been selling some calls against them (creating a spread) whenever I felt that risk was high. I've been taking the "short" side off and "opening up" my calls when I feel that risk is minimal. My current trading portfolio is as follows:

Long Oct 1900 gold calls vs short Oct 2000 gold calls

Long Dec 1900 gold calls vs short Dec 2200 gold calls

Long Dec 50 silver calls vs short Dec 60 silver calls

About 25% cash. Patiently waiting.

Lastly, I would be remiss if I didn't print the chart below. Several Turdites have sent it to me looking for my opinion and I feel it deserves your full consideration.

About the quickest way to go broke trading futures is to go around declaring that "this time is different". However, in this case, I feel this time truly is different.

This chart covers the previous 32 years of Keynesian central banker-dominated thinking. We are at the end of the Great Keynesian Experiment. The current system will not be continuing much longer. A new paradigm will soon be emerging. Therefore, while price will still correct from time to time, historical correlations such as this one are of minimal significance.

I've got lasts of 1862 and 42.42. It will be a very interesting day so try to keep an eye on things. More later. TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  312 Comments

Economical Disaster
Sep 8, 2011 - 1:15pm

Re: Why is SNB selling gold?

Because Switzerland's books are cooked. We all thought the country was the richest and most financed in the world, it's not. Sort of like CANADA, books are cooked, they lie and the entire charade is about to collapse. CANADA has zero GOLD, ( it can fit inside Harpers desk) now neither do the Swiss..Or the U.S.

bensgone
Sep 8, 2011 - 1:17pm

Why PMs absolutely will increase in price !!!

Why PMs absolutely, beyond any conceivable doubt, must continue to increase in price.

1. First we had the announcement from Bernanke that there would be an extension of the present very low interest rates for two years. This is highly inflationary and extremely bullish for PMs.

2. Then we had the the Congress increase the debt limit by more than a trillion dollars. Highly inflationary and extremely bullish for PMs.

3. Then we had the announcement from the Swiss that the franc would be fixed to the Euro. As the Euro inflates so then would the franc. This is highly inflationary and extremely bullish for the PMs.

4. Then the German high court upheld the legality of of the the Greece bailout. This also is highly inflationary and again, very bullish for the PMs.

5. Everything that is done by the European Union to bail out the “Piigs” is highly inflationary and thus very good for the PMs.

6. Later this month there will be a vote to create a massive fund to further bail out the “Piigs”. This is once again very inflationary and extremely good for the PM’s.

7. Also coming up at the end of this month will be an announcement of some form of easing by the FED. This too will be highly inflationary and extremely good for the future prices PMs.

8. We are in the midst of a global competitive currency devaluation among all nations. This is highly inflationary and one more fundamental fact that insures that the price of the PMs will continue to skyrocket.

9. "Obummer" is about to announce another massive spending program to boost the economy. This, if enacted, will add even more inflationary fiat to the already highly soaked economy. Very, very bullish for the price of PMs.

With all of these fundamentals going for the PMs, you would think that there would be a vertical sustained parabolic non-stop rise in the price of gold and silver. But, such is not the case. This alone proves that the only way this is not happening is because there is massive intervention by the central banks of the world. A coordinated, orchestrated, consistent attack 24/7 five days a week. How anyone of reason and experience in these markets “pooh pooh” the fact that there is massive intervention and manipulation in ALL markets, is simply astounding.

Now the above reasons listed are by no means a complete list. There are other fundamental factors which contribute equally to the forces propelling the PM prices higher.

1. Such as, a decrease in mine production over the last ten years.

2. An extreme shortage of silver.

3. Central banks buying as opposed to selling PMs, to name just a few.

Anyone, no matter how many years of experience in the business of analyzing the general economics of the markets, no matter how great the stature and respect they may garner; and who puts down the importance and monetary nature of PMs, are either fools or shills for the “Powers that be”. I suggest that you run as fast as you can from these individuals.

Also, anyone who suggest that the markets are not manipulated is as equally unworthy of your respect and attention. The evidence is simply overwhelming and openly admitted to, by the manipulators themselves. Besides the obvious empirical data readily visible by watching the multitude live charts, you have documented admissions and strategies by the central banks showing exactly how this manipulation and intervention is done. You have admissions by the individual traders who have engaged in this criminal activity. Massive paper leveraging through derivatives were expressly created for this purpose. “High frequency trading” is yet another vehicle used by these crooks.

There can be no excuse, with the most power research tool ever created i.e. the internet, for a person, who does his due diligence, not to be aware of the above facts.

Therefore, keep stacking and never look back, or give second thoughts to your decision to protect and preserve your wealth, by investing your worthless fiat in PMs.

The Vet
Sep 8, 2011 - 1:17pm

Banks and currencies...

We all know that the CBs manipulate and control their currencies. They know that gold is a competing currency so they attempt to control it as well. Their persistent statements that gold is not a currency is completely at odds with their ongoing attempts to control its price and availability using the same tools that they use to manipulate the currency markets; paper....

Dr G OC15
Sep 8, 2011 - 1:18pm

@Oc15--for some reason I

@Oc15--for some reason I thought the date was early October (ie, we are only halfway there). Maybe I'm including trading days only? I could be just very confused and downright wrong.

Mikey 1Dae
Sep 8, 2011 - 1:20pm

@1Dae, Check the interest

@1Dae,

Check the interest rate structure that would go on the lien. Depending on how much your rent payment,sorry, tax payment is you might be facing a hefty interest charge. Also, since we all here believe TSHTF pretty soon do you really want the gov't in control of the house then?

FriedEggs
Sep 8, 2011 - 1:22pm

SNB

Because the SNB is a POS too. No bank, no matter how big - is immune to this when SHTF.

When a country debases there own currency - that can't be a good thing. It sounds like to me they are saying, "Hey, Don't look to us, we aren't that strong either'?

(i know its more complicated then that - but i think that is part of the idea)

Fried(e)

Mikeyk23
Sep 8, 2011 - 1:24pm

pm's and obama

Does anybody have a chart or can comment regarding how the PM's fair the day after Obama speaks?? any correlation here

¤
Sep 8, 2011 - 1:27pm

SLW

What the heck?

Could it be more obvious that it's being worked over? It's obvious to me and probably many of you. There is a very hard cap at $40. The short positions must be enormous.

This can't keep up forever. But then again I've been saying that and hoping that since April/May 11'. Something really changed at that point how they have approached it, and traded that silver vehicle.

Keeping my fingers crossed and digging in, and waiting.

Long John
Sep 8, 2011 - 1:28pm

dollar's goin up....

hit 76.13......strange things afoot!

murphy
Sep 8, 2011 - 1:30pm

@Ewc58 and Tom

What svm options you like the best. I hold shares and a few Jan and Mar options. Just getting my feet wet

BajaBandit
Sep 8, 2011 - 1:30pm

Then they lose

First they ignore you, then they laugh at you, then they fight you, then they lose.
-Gandhi

Tesla
Sep 8, 2011 - 1:31pm
exiledbear
Sep 8, 2011 - 1:34pm

Why the swiss are doing what they're doing?

On the face of it, it appears to be export related. The swiss economy is primarily export based, and an overvalued CHF screws them over.

Of course, they could just as easily slap tariffs on everything coming in and let their currency stand, but I guess the globalization worms have eaten into their brains. I guess they think that all those people who were seeking refuge in the CHF will go back to the home currencies. I don't think so. Basically there's no alternative to the PMs now. Gold and silver are the only safe havens left. The only difference is that some of us know it already and everyone else is still figuring it out.

I think the massive gold short is a short-sighted attempt to persuade the public not to knee-jerk into gold, now that they've turned the CHF into the euro. The key to all of this is that it's all short-term thinking. All they really did was transfer a lot of gold to someone else. Who probably will gladly take it off their hands. I suspect if it isn't the Chinese, the gold bars are only 1 or 2 jumps away from being in the possession of the Chinese.

In the long run, they're pissing into wind and the (trade,debt) imbalances that are in motion will be moving back into balance no matter what they do. Whoever said that in the large time windows, the margin hikes and the massive shorts no longer work is right. In the old days, the price wouldn't have recovered like it has and gold would've started basing with low volatility for the next 9 months at some level south of where we are currently at.

Tesla
Sep 8, 2011 - 1:37pm

Looks like that test was a signal?

The raid is now looking official??

Tom L
Sep 8, 2011 - 1:38pm

@Murphy: SVM

I'm not a big fan of any of them right now b/c implied volatility is so high the premiums are out of sight. I'm not adding to them even though I think the short squeeze is coming. I'm being cautious (and cheap).

But, if I had to look at it w/o that filter I'd say Dec/Jan $12-14 range should be good for a profitable trade. I hold Dec $12 and $14's, but I'm solidly profitable on them having bought them last month.

For the same price as an SVM Dec $13 you can get Oct $15 NGD calls or Nov $15 Calls at the same price as SVM Dec $12's.

I think there's more value in those NGD calls. If they pay out then you can roll the profits into SVM after some of the dust settles.

Ta,

Anonymous Goofy
Sep 8, 2011 - 1:39pm

Removed comment

Removed comment.

Tom L
Sep 8, 2011 - 1:40pm

@LongJohn

The USDEUR cross is below $1.40. That's the main reason. Also the Yen is back up near 78.

The 2 biggest components of the USD are weaker right now.

Ta,

Tom L
Sep 8, 2011 - 1:41pm

@tesla

They really are testing the bulls resolve here aren't they. Multiple attempts to break down $1850 Gold and $42.40 Silver. Lotsa long tails on the 5 minute chart.

Ta,

Tom L
Sep 8, 2011 - 1:43pm

@Murphy: SVM Again

I would do as TheVet has been suggesting and sell puts into the volatility, let it work for you as opposed to against you. I'm not doing that b/c Scottrade sucks, but that would be a good way to play the high premiums if you're bullish.

Ta,

Jake
Sep 8, 2011 - 1:45pm
Tesla
Sep 8, 2011 - 1:45pm

@Tom

I don't usually zoom in that close but cpt scarlet commented prev page and so looking and 1 min and tick by tic - yeah! ...here comes another push...

Long John
Sep 8, 2011 - 1:47pm

@ T L

indeed..... hoping it's a sign for a drop so my 41.50 bids will get filled

murphy
Sep 8, 2011 - 1:47pm

Tom

Tom, as always thanks so much for the education and opinions.

Economical Disaster
Sep 8, 2011 - 1:48pm

Martin Armstrong on Swiss Devaluation

The bottom line – this may be the factor that starts to support gold contrary to currency. It is not exclusively gold for the stocks rose in proportion to the decline of the franc there in Switzerland as well. This is the VIRTUAL INTANGIBLE INTERNATIONAL VALUE of all things that is subject to global arbitrage when capital flows like water to the best deal (Smith’s Invisible Hand). Hence, we were just given an important glimpse at what I have been warning about when capital rushes around the world as if it were a deck of a ship rushing from one side to the other. The British and the Japanese failures at intervention are not a lesson for the Swiss at this time. This is not a domestically driven phenomenon, but internationally driven one. That makes all the difference in addition to the fact that both Britain and Japan were trying to hold up unsustainable asset values whereas the Swiss are trying to suppress them.
As illustrated above, the currencies are being attracted toward 2015.75. We are headed into the eye of the greatest economic storm perhaps in modern history. The Swiss devaluation is a response to the call of the sirens as the central banks and governments are bound to the mast like Ulysses in danger of crashing upon the treacherous rocks that lie ahead because they fail to understand the economy.

https://www.martinarmstrong.org/economic_projections.htm

Tom L
Sep 8, 2011 - 1:51pm

@tesla

Yeah, I don't either, but it's sometimes the only way to see what's really going on at important moments in the day. I was just watching the 30 minute chart on G&S and Oil. But, then 1:15 rolled around.

Ta,

kingboo
Sep 8, 2011 - 1:53pm

At the end of the day

all of the investors will "try" to pile into the metals (or other real assets as a 2nd choice). I have heard some say that "the metals markets aren't large enough to absorb that much capital". Does anyone here think that is going to stop them from trying? It's kinda like when me and my roommates from college used to go to the bar.....We would walk in the door and all 4 of us would see the same gorgeous girl....did we all look at each oher and say "oh well, only 1 of her, and there's 4 of us so lets just forget her"? Hell no! it was a scramble to see who would get to her first! Every man for himself......and that, my turdite friends, is the very definition of free markets! There will be some kind of gold backed paper currency thing going on, ofcourse..........but it wont look anything like the USD of today. To me PM's are the vessel, and eventually we are gonna be crossing water, maybe the boat goes this way, maybe the boat goes that way..i dont know, all that matters is that when the time comes, i'm on it........The masses WILL try to pile onto the boat.

Shill
Sep 8, 2011 - 1:54pm

Looking for a break out here

Looking for a break out here on all this noise...Too the upside.

Miners diverge from the DOW...lets do this!

murphy
Sep 8, 2011 - 1:55pm

Tom

Thanks again, now I have to ask the same question regarding selling puts. How do you tell the best value? I am even more unknowledgeable (if that's possible) about them. I know you posted that option calculator but have no idea how to run it. I should probably just stay quiet, but I am trying to learn. Just ignore me if I get in your way, really. Appreciate all you do here.

Tesla
Sep 8, 2011 - 1:57pm

Agreed Shill!

The volume here is the smart money shaking out the dumb/weak longs and buying them up I think.

dziprick cwavec
Sep 8, 2011 - 2:00pm

The right hand sells while

The right hand sells while the left hand buys at lower and lower prices. 'They' still have the gold, but drive the price down, and take the loss to themselves (therefore no loss, but lower price). Then, as stop losses are triggered the sells cascade a fall in price. 'They' still have their gold, but the drop gains momentum as the weak longs liquidate. At least that is how is used to work, but now all the weak longs are out and the drops are temporary as instead of triggering stop losses, they are triggering buys from strong longs, and 'they' are lossing their gold!! :-)

One way to curb this, and especially HFT, would be to make THEM pay commission on all their trades. We cannot even start to trade like they do as the commissions would bankrupt us little guys in literally minutes.

D

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