Macro

520
Fri, Sep 16, 2011 - 9:46am

Gold is recovering today and is actually green on my screen. Wow! How unusual! Let's see if we can rally today and crawl back above 1800 before we call it a week. There's been some very interesting "news" rolling around for the last 24 hours and I wanted to take a minute to give you my non-educated opinion.

The crux of the matter is summarized quite well below:

https://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/

Between these comments and the wikileaks cables, one can quickly conclude that the Chinese are considering (if not already actively engaging in) further "diversification" of their vast U.S. treasury holdings. In the article above, Mr. Pritchard makes this sound as if there will be some happy and pleasant side effects of these moves. "Don't worry", he seems to say, "those dollars will flow into hard assets like stocks, land and gold". As if it's a zero-sum, no-big-deal event. On this point, he is dreadfully wrong.

As you know, I have long maintained that the real purpose of Quantitative Easing is not to promote economic growth. It is to promote low interest rates. Remember how rates on U.S. treausries are set...through auctions. Simply stated, if you need to borrow $50B and there are no takers at 2%, then you have to try 3%. If no one wants your bonds at 3%, then maybe they'll take them at 4%. Low or no demand means higher interest rates. Period.

With U.S. borrowing needs at all-time high levels, the rest of the world must be induced to buy treasuries. But, rates cannot be allowed to rise. As Mark Steyn points out in his new book, if long-term rates were to return to 5.7% (the average for the period 1990-2010), debt service projections for 2015 would increase from $290B to $850B! Additionally, the only "way out" of our current fiscal disaster is to magically increase tax revenues through economic growth. A return to higher rates would stifle and crush any potential "recovery".

So, what's a Boy Wonder to do? The answer: MORE QE MORE QE MORE QE.

The U.S. has managed to cover its necessary funding needs since June by managing the headlines. Have you noticed that nearly every time a treasury auction arises or the POSX moves down toward critical support, some type of intervention takes place. Whether it's a foreign central bank devaluing their currency or a rash of suddenly scary headlines out of Europe, events seem perfectly timed to keep money flowing into treasuries. This can work in the short-term and it obviously has. The yield on the 10-year note has actually declined since the end of QE2 in June. This won't and can't continue. A recent study from the University of Wisconsin showed that, by 2020, U.S. funding needs will soak up nearly 20% of the total annual global GDP! Do you really think that that is possible? There can be no world GDP when world economic growth is crushed under that type of debt burden.

But, that's in the future. What about the near term? Eventually, rates will rise when buyers (like China) disappear. Faced with an immediate funding crisis, QE will resume with vigor. Left with no other government funding option, the Federal Reserve will be forced into creating trillions of new greenback, simply to keep the social security checks flowing, the doctors paid and the military shooting. The dollar will resume its long-term decline into obscurity.

In the end, all of the central bank intervention in the world will not be able to suppress the global demand for true safe haven financial protection. Gold will rise to heights that even you, my dear reader, may currently think are unattainable. Silver will most certainly come along for the ride. Therefore, do not be fearful. If you use the time left to prepare...mentally, financially and spiritually...you will survive, and even prosper, in the days ahead.

Here are your updated charts. Unfortunately, both have taken on the appearance of range-bound markets. This can be managed as it affords us the clear opportunity to buy at the bottom of the range and sell at the top but it certainly isn't as much fun as runaway efforts to the upside. For today, don't get too excited until/unless either metal is able to firmly trade through the blue trendlines I've drawn inside the ranges.

I'm going to be away and unavailable for most of the day today so, just as John said to Yoko, "looks like you're on your Ono". I will be monitoring things from afar, however, and will attempt to update if conditions warrant. Have a great day and a relaxing weekend! TF

p.s. Another preparatory move for the opening of PAGE:

https://www.reuters.com/article/2011/09/16/cjina-gold-idUSL3E7KG1IG20110916

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  520 Comments

Larry
Sep 16, 2011 - 3:23pm

Depends on what "is" is...

cpnscarlet, yes, nicely put... many sheeple are Proverbian fools. Maybe I should've stopped at 'counting sheeple'.

Brevity being the soul of wit and all.

:)

Tom L
Sep 16, 2011 - 3:24pm

Sheeple

The whole 'sheeple' thing, to me, is very simple. If you wouldn't use it while running for office then you probably shouldn't use it. The point being that when you're running for office (which I've done) you never want to 'talk down' to people you are trying to get a vote and/or money from. It's one thing to dodge an issue but it's another to use a term that is so obviously dismissive (regardless of what it means to you) in a public setting.

The only people I call out directly are those that have proven individually to be advocates of a disgusting policy (progressives and fascists) or willfully unchanging in the face of facts and get nasty with me first. Otherwise it is best to try and have infinite patience b/c, in general, most people are simply unaware of the situation and may be coming to you for answers. It really doesn't matter what you're saying but rather how you're saying it that most people react to. We all do it.

If you are interested in helping people see what you see, you have to develop many methods for communicating with them. In my experience being passionate but fair-minded in your approach will always win over attacking people... and it's especially true if the person is themselves, attacking/dismissive/aggressive.

Ta,

Tom L
Sep 16, 2011 - 3:27pm

@ScottJ

And for those who say their posts are not worthy, please drop the pity. We are all learning here, and if you take the time to write out a thought that has been on your mind, or in response to an ongoing discussion, you are helping not only yourself (which is why I post my thoughts, a therapeutic feeling), but others who may draw value from your perspective. There is no "right" perspective.

Learning to communicate through writing is a learned skill. It requires practice. It is not handed down from on-high as a gift, but, unfortunately, like all things is improved only through repetition, trial-and-error and time.

That's good advice Scott.

Ta,

Tom L
Sep 16, 2011 - 3:29pm

One last sheeple thought

I reject all forms of collectivism and if you want to do so yourself then it's important to stop using collectivist words. Sheeple is no different than any other group word designed to divide people into groups.

Now, I understand the want/need to use short-hand and, of course, y'all are free to do what you want. I'm only saying that you can usually attract more flies with honey than vinegar.

Ta,

Tesla
Sep 16, 2011 - 3:29pm

Gold OI (-8,667 total contracts)

Daily Settlements for Gold Futures (PRELIMINARY)

Trade Date: 09/16/2011

Month

Open

High

Low

Last

Change

Settle

Estimated

Volume

Prior Day

Open Interest

SEP 11

1768.5

1819.1

1768.5

-

+33.6

1812.1

100

191

OCT 11

1787.5

1822.0

1763.2

-

+33.3

1812.5

8,310

31,912

NOV 11

1784.7

1821.0

1764.6

-

+33.3

1813.5

162

120

DEC 11

1790.5

1825.0

1765.4

1814.0

+33.3

1814.7

169,462

323,433

FEB 12

1794.1

1826.4

1767.4

-

+33.2

1816.6

3,292

36,529

APR 12

1784.2

1825.5

1771.7

-

+33.1

1818.3

800

9,298

JUN 12

1797.5

1827.2

1777.9

-

+33.0

1820.2

137

17,415

AUG 12

1798.2

1815.2

1798.2

-

+32.9

1822.2

138

6,787

OCT 12

1776.6

1826.8

1776.6

-

+32.9

1824.1

247

4,404

DEC 12

1802.0

1833.0

1780.0

-

+32.9

1826.3

264

14,634

FEB 13

-

-

-

-

+32.8

1828.4

30

3,366

APR 13

-

-

-

-

+32.8

1830.6

-

330

JUN 13

-

-

-

-

+32.7

1833.2

220

12,632

DEC 13

1807.8

1846.7

1807.8

-

+32.4

1843.4

1,187

13,280

JUN 14

-

-

-

-

+32.3

1856.1

2,200

4,906

DEC 14

-

-

-

-

+32.3

1870.9

1,100

9,592

JUN 15

-

-

-

-

+32.0

1889.9

135

5,395

DEC 15

-

-

-

-

+32.1

1912.5

10

5,531

JUN 16

-

-

-

-

+32.1

1936.7

-

66

DEC 16

-

-

-

-

+32.1

1963.5

-

1,316

JUN 17

-

-

-

-

+32.1

1994.8

-

11

Total

187,794

501,148

Last Updated 09/16/2011 01:32 PM

Tesla
Sep 16, 2011 - 3:30pm

Silver OI (-263 total contracts)

Daily Settlements for Silver Futures (PRELIMINARY)

Trade Date: 09/16/2011

Month

Open

High

Low

Last

Change

Settle

Estimated

Volume

Prior Day

Open Interest

SEP 11

39.475

40.765

39.475

-

+1.328

40.781

46

369

OCT 11

39.795

40.935

39.415

-

+1.328

40.789

463

412

NOV 11

-

-

-

-

+1.329

40.807

-

30

DEC 11

39.945

40.985

39.455

-

+1.330

40.831

30,937

75,053

JAN 12

39.500

40.470

39.500

-

+1.330

40.857

10

155

MAR 12

39.805

40.865

39.525

-

+1.333

40.864

394

8,822

MAY 12

39.800

40.810B

39.555

-

+1.333

40.874

19

2,622

JLY 12

40.100

40.800B

40.100

-

+1.334

40.876

76

2,005

SEP 12

-

-

-

-

+1.334

40.850

24

541

DEC 12

39.830

40.935

39.470

-

+1.339

40.804

154

9,811

JAN 13

-

-

-

-

+1.339

40.777

-

1

MAR 13

-

-

-

-

+1.339

40.724

-

720

MAY 13

-

-

-

-

+1.339

40.664

-

100

JLY 13

-

-

-

-

+1.344

40.607

-

2,208

DEC 13

-

-

-

-

+1.344

40.484

18

7,292

JLY 14

-

-

-

-

+1.344

40.262

-

247

DEC 14

-

-

-

-

+1.344

40.124

-

1,242

JLY 15

-

-

-

-

+1.344

39.858

-

161

DEC 15

-

-

-

-

+1.344

39.643

-

537

JLY 16

-

-

-

-

+1.344

39.418

-

21

Total

32,141

112,349

Last Updated 09/16/2011 01:32 PM

Goofy
Sep 16, 2011 - 3:31pm

Sheeple go with the herd, eat

Sheeple go with the herd, eat what they are feed, and sleep in the middle of the road. Be soft and take care of them, and they provide you shelter from the cold. Be hard and confront them and they run away blind. Lead them out and set them free. Push them gently and guide their way home. Protect them from the circling wolfs and keep them safe. This it the work of the Sheppards among men.

Sorry ScottJ for playing this metaphor, but its kind of telling.

Eric Original
Sep 16, 2011 - 3:32pm

Was thinking about the miners...

and this tune popped into my head.

P!nk - Get The Party Started
Tom L
Sep 16, 2011 - 3:32pm

OI Numbers

501k gold contracts. That's pretty freakin' low.

Do you think that signals a bottom?

Ta,

¤
Sep 16, 2011 - 3:36pm

Reality..

...is in the eye of the beholder. What is reality and who's to say what it is?

We can go on forever about that and no one would be right or wrong. See?

Just depends on the perception and who's doing it and what lens they are viewing through and how that lens was shaped etc... It's not really defineable.

A paranoid schizophrenic has a much different reality, but it's their's and it most definitely exists to them.

Now.........how about that market today and everything falling apart? The PM's held up nicely.

Looks like next week is going to be a MSM frenzy until the Bernank says something....or doesn't.

Deeper
Sep 16, 2011 - 3:39pm

Tom L

It definitely signals that today was a massive short covering rally in gold. Silver had willing longs today, you could tell from the price action, they were leading the charge.

BASEBALL 13 Gold Five
Sep 16, 2011 - 3:39pm

The Money Programme

..didn't know Turbo Tax Timmy could play the piano!

Tesla
Sep 16, 2011 - 3:41pm
Tesla
Sep 16, 2011 - 3:41pm
Tesla
Sep 16, 2011 - 3:42pm

Yes I do !

The lowest I can remember before was 503k in late August (8/24-25 I think)

ewc58
Sep 16, 2011 - 3:45pm

New piece from Jeff Nielson/Bulllion Bulls Canada

Time For Europe’s Bond-Burning Party

"In 1948, with Europe a smoldering and financial ruin, the United States bankrolled the “Marshall Plan” – a comprehensive “reconstruction” plan for Europe. The program was an unequivocal success. After the four-year plan had run its term, the economies of Europe had surpassed their pre-war economic output, and it was the beginning of the greatest economic boom in European history.

In 2011 Europe is once again in financial ruins, however this time the cause is not a war, nor even some form of natural catastrophe. Rather, the architects of this destruction were multinational bankers and the shadowy bond-parasites lurking behind them, holders of $10’s of trillions in sovereign debts. Their tools were fraud and deceit, and their original victims were the corrupt and/or weak-willed “leaders” of Europe who were ensnared by the banksters’ “revolutionary” new ways for these governments to (supposedly) finance their growing debts.

Now the victims of these arch-villains are virtually all the peoples of Europe – either facing their own, imminent bankruptcy, or being strong-armed into squandering their wealth through utterly futile “bail-outs”. I have already chronicled in a multi-part series this mass “economic rape”.

redwood
Sep 16, 2011 - 3:48pm

DPH

Sorry, but the point is that there are approximations to truth, reality. Right or wrong is polarized. The paranoid schizophrenic has his reality, but if they jump over the bridge because the devil is chasing them, their approximation to reality is unfortunately skewed and places them in a dangerous position. Ok. I think I've said enough.


Sep 16, 2011 - 3:49pm

interesting discussion

Just my personal thoughts on the "sheeple" discussion, which has had many interesting, thoughtful contributions.

I am personally tired of the divisiveness in this country. We seem so full of hate lately for people who disagree with us politically. Why do we need to hate another person simply for disagreeing on how best to run things?

When I see people online saying things like "idiot racist teabaggers" I roll my eyes. It totally turns me off. Likewise, terms like "libtard" are also a turn-off. Is that the most intelligent thing you can add to a discussion? (And although we like "turds" here, "libturd" is the other variation that doesn't say much about the writer.)

This type of language shuts off rational discussion and also closes minds and hearts. Ironically, I think the Democratic party in particular is making a huge mistake by bashing the Tea Party so much. They should be listening to their concerns and courting them. Maybe they underestimated the Tea Party numbers, but the Democrats are totally turning off the working class heartland people that they used to represent. I think this is why the Democrats are losing so many elections lately.

So don't be like the Democrats. If you want to wake people up, court them, don't insult them. My 2 cents. :-)

Tesla
Sep 16, 2011 - 3:52pm
Bay of Pigs
Sep 16, 2011 - 3:54pm

@ewc58

Neilson is putting out some really good commentary these days. Sad to see so many not understand what he is saying and the implications of what it means.

Bond holders are going to get slaughtered.

Deeper
Sep 16, 2011 - 3:56pm

Tom L

Turd posted this on Tuesday July 5th, the previous Friday had a modest price rally (the bottom).

""How will we know?, they ask. "When will it be safe to get back in the water?", they want to know. Frankly, the end will start like today. A massive, short-covering spike on no real news that catches everyone off guard.

Could today be the end? I doubt it."

Check out the charts on that day for the price action.

https://www.tfmetalsreport.com/blog/1323/its-tuesday

Here's the Gold & Silver COT for that week (ending July 5), from Harvey Organ:

Gold COT Report - Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
219,889 62,114 27,693 177,118 379,120 424,700 468,927
Change from Prior Reporting Period
-6,093 2,034 2,982 -706 -7,459 -3,817 -2,443
Traders
188 63 77 50 50 268 164
Small Speculators
Long Short Open Interest
65,082 20,855 489,782
-2,162 -3,536 -5,979
non reportable positions Change from the previous reporting period
COT Gold Report - Positions as of Tuesday, July 05, 2011
Silver COT Report - Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
28,131 9,296 22,565 33,548 66,999 84,244 98,860
692 -2,145 -1,168 -3,346 939 -3,822 -2,374
Traders
67 37 46 33 40 128 99
Small Speculators
Long Short Open Interest
27,007 12,391 111,251
743 -705 -3,079
non reportable positions Change from the previous reporting period
COT Silver Report - Positions as of Tuesday, July 05, 2011
johnboatcat
Sep 16, 2011 - 3:56pm

So does that make Bowser

a Sheeple's dog?

Get of my leg you stupid ...................

question
Sep 16, 2011 - 3:59pm

Instead of Sheeple

I submit the term

cognitively challenged

I know I could fall under that definition (sometimes on purpose)

edit Labels are doors that shut out perception

ewc58
Sep 16, 2011 - 3:59pm

DJIA: up every day this week

Yes, I find that completely credible.

Deeper
Sep 16, 2011 - 4:01pm

$HUI

607.57 close. I'll take it.

AlienEyes
Sep 16, 2011 - 4:01pm

Recipe for Southern Fried Geithner....

Got this in an email. It seems that some people are not happy with what "change" turned out to be. :) Fill a 55 gallon barrel 1/2 full with used motor oil. Add two buckets of tar. Bring the oil/tar to a full boil. Add one Geithner. (if unavailable in your area, substitute one insufferably stupid ass-hat failure) Add one bushel of chicken feathers. Place top tightly on barrel and secure with a ring lock retainer. Extinguish cooking fire and go hunting. Return in 24 hours (or more) and take the barrel to a rail yard. Place barrel in the first boxcar headed for Washington, D.C. Enjoy! (the fact that we are finally rid of the s.o.b.)

¤
Sep 16, 2011 - 4:05pm

Agreed

That why we consider majorities and consensus on issue's as important measuring devices. But what if the trustee's become inmates and are running the asylum (global political system)? Bad thought.

The black and white of right and wrong was a poor choice of words on my part.

ScottJ Tesla
Sep 16, 2011 - 4:06pm

Re: Gold and Silver Large Speculators - Net

Very cool graphs. Technically speaking, it looks like the large net speculators have bottomed out in both gold and silver (showing interest is accumulating).

A double bottom in silver around ~20,000 contracts, after the May run-up and takedown. Makes logical sense.

And in gold, a strong base at 154,748, in which is seeing higher highs and higher lows.

Technicals with respect to this information performs more accurately than say price (imo)... as technicals are suppose to represent human behavior. Open interest on the large spec side is more closely related to human behavior than price which is the resultant of many varying factors.

Thanks for sharing Tesla/others who have presented similar information.

redwood
Sep 16, 2011 - 4:09pm

Yes, well that's why this

Yes, well that's why this blog and others exist. Those at the helm are driven by greed and a pervasive demand for power. And those who are not asking questions need to hear and understand.

Keg
Sep 16, 2011 - 4:17pm

@Dr J

Nice. I have found them to be much more accurate than many think. Only issue is that mags are expensive but stock up on them anyway while you can.

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