Courage and Conviction
Longtime Turdites will recall the forecast that set Turd on this path. Issued at a time when nearly everyone thought the PM bull market was dead, "Turd's Bottom" in early 2011 proved to be an important turning point. We are once again at such a crossroads.
First, a history lesson for those new to Turdville....
QE2 had been launched in November of 2010 and the metals subsequently rallied until January 2011, at which point they stalled and corrected. The Bears were out in force. It was over. The metals were dead. Not so, said I. So confident was I that price would turn and head higher that I issued an ultimatum. Either gold would reverse and charge nearly 20% higher over the next four months or I would shut down the blogspot site and disappear back into the ether. You can read all about it here:
Of course, some of the same trolls that plague me to this day claimed that, since gold only rose 19% to a high of $1577 in mid-May, I was a disingenuous liar for not shutting down the site. Two things:
- They could/can all go pound sand. Price rallied $257 instead of $280.
- Regardless...I did stick to my word. I closed the blogspot site on 6/14/11 and opened this one. <At this point, Turd sticks out tongue and blows "raspberry" at ankle-biting critics.>
Anyway, we have reached a similar checkpoint in our journey. Sentiment is terrible, the charts look like garbage and the entire investment chattering class is spewing nonsense against us. Though it's obviously not good for business to put one's neck on the line in such a manner, I think it's important that you fully understand and appreciate the absolute certainty I have in my conviction.
- The Precious Metals Bull Market is not dead.
- The June 2013 lows will hold in the days ahead and be looked back upon as a double bottom with the current prices.
- Prices will rally this month and into January.
- Though there will be setbacks and bouts of resistance, the bull market will resume in 2014.
How can I say this with such certainty?
- Contrary to popular opinion, QE will not be tapered to zero in 2014. Quite the opposite will happen as U.S. government funding needs accelerate in a weakening economy.
- Because of this increased QE, interest rates will not rise as nearly everyone currently forecasts. Instead, the 10-year note will trend back under 2.50% and head toward 2.0%.
- Realization of QE∞ will eventually stem the tide of Spec money into the short side of the metals, reversing the flow of funds and causing a massive unwind and short squeeze.
- Rapid global fiat currency devaluation will lead to an even greater level of physical demand.
- The LAW of supply and demand will re-assert itself after being suspended in 2013.
Finally and most importantly, JPM is NET LONG Comex gold futures to the point of having cornered the paper gold market. Since, for now, paper Comex trading continues to determine global price, nothing could be more important.
As we've documented here since last July, in 2013 JPM has successfully converted what had been a massive NET SHORT Comex gold position into an equally massive NET LONG Comex gold position. This position is likely near 75,000 contracts as you read this. As a percentage of open interest, that is nearly 20% and a clear and undeniable "corner" on the LONG side. Though they have rolled and extended the majority of this position into 2014, they are standing for as many as 7,000-8,000 deliveries in December. Thus far, through just the first four delivery days, the JPM House Account has accounted for (stopped) 1,011 of the total 1,086 deliveries made. That's 93.1%. So, please follow along with me here:
- Comex paper trading sets global price
- JPM is the Big Kahuna in Comex metals trading
- JPM is NET LONG to the point of cornering gold futures
- JPM is taking delivery of 93% of the December contracts
- Unlike the past, it now clearly benefits and profits JPM to see price rise
- And you seriously think gold is headed lower from here?
Therefore, remain patient and diligent. Watch for a turn in price off of the June lows. A December move back above $1250 in gold and $21 in silver will begin the process of Spec unwind and short squeeze, setting up a continued rally in January. By holding physical precious metal, you are protecting and insulating yourself against the certain global economic madness of 2014 and beyond.