Sheesh! After last week, I was really looking forward to some down time and now, all of a sudden, it's Monday. Oh well, not much we can do except deal with it.
Our precious precious metals traded lower overnight in another London goon mugging that began exactly at 3:00 am EST and had, by 4:30, trimmed another $15 off of price. On the bright side, however, gold once again found solid buying support just below 1700 and has now moved back above the important technical level of 1705. This is very encouraging as the more times gold successfully tests 1680+, the more likely that this storm will pass and gold will resume its upward climb.
Silver, too, was driven lower overnight, the decline beginning precisely at 3:00 a.m. Like gold, it then found strong support right where it should, namely $34. It looks pretty good here but, like gold, I must caution you against getting antsy. Cartel history suggests that they wouldn't go to all the trouble of rigging things lower last week to simply walk away this week. We must be on the lookout for further attacks. Therefore, hold your fire for now. I'd buy gold if it gets back above $1730 OR if it dips toward $1680 and then $1650. Similar thing in silver: Not much reason to buy it right here. Let's see if more pressure comes in and we can get it between 33 and 34.
Another factor that may keep the pressure on the PMs is weakness in crude. Though I'm convinced that crude is heading significantly higher from here, the chart below suggests a downward bias for the next few days. Note the peak to $110. The two-day decline to $106 and then the two-day recovery which was immediately pulled back on Friday. This market looks ripe for a $3 selloff from here, down to $103-104. As you might imagine, declining crude will serve to pressure PM prices, too.
Next, I'd just like to wrap up with a bow the giant sack of manure that was last week. First of all, this quote via KWN of Eric Sprott regarding the rationale behind the ongoing manipulation of precious metals:
James Turk always says, ‘It’s a managed retreat here. The price of gold and silver go up every year, but they don’t want it to get out of hand.’ As everyone is aware, on Wednesday, silver was breaking out, gold was approaching $1,800 and I just think it wasn’t allowed to happen because central banks try to keep control over precious metals so people don’t see them as an alternative to paper currencies.
All of this happens on the same day in which the LTRO lent out another $800 billion, which is just ridiculous. These things always seem to happen, sort of counter-trend, that whenever you think something should go up, pretty well every time the price goes down. Because, the authorities don’t want a linkage between monetary irresponsibility and the price of precious metals going up. So they whack it on a day when it obviously should have gone up.”
This is exactly right and you should recall similar market action back in September when the Swiss National Bank devalued the Swissie by 10% yet gold inexplicably tumbled. Furthermore, the media SPIN on the selling of PMs back on Wednesday was that The Bernank had hinted at tightening. First of all, he did no such thing and any rational, objective person knows that he can't and won't "tighten" ever again. Additionally, if The Bernank had, in fact, indicated a change in monetary policy was coming , we would have seen correlated action in other, "liquidity-sensitive trades" such as copper...
Then there was this week's CoT report. I summarized my thoughts in the comments section of the previous post but will re-print them here:
"Just looking over the latest CoT. Brutal! Remember, these numbers are basis Tuesday night, right after the big suck-in day but right before the big beat-down day.
Gold large spec long = 231,050 +16,707 on the week or +7.22%
Gold small spec long = 70,372 +3,949 on the week or +5.61%
Gold Cartel net short = 245,351 +16,049 on the week or +6.54%
Silver large spec long = 38,012 +3,193 on the week or+ 8.40%
Silver small spec long = 24,180 +1,696 on the week or +7.01%
Silver Cartel net short = 44,593 +5,405 on the week or+12.12%(!!!)
It is 100% clear to me that the trap was set on Tuesday. Silver was allowed to escape to the upside in order to entice fresh longs who would be blown out on Wednesday.
I am very much looking forward to next Friday's CoT. If I am correct, then we should expect to see a significant reduction in the Cartel net short position in both silver and gold."
In fact, we already saw a significant reduction in OI on Wednesday and Thursday alone. Gold has already fallen by 22,000 contracts. This trend will no doubt continue today and through tomorrow.
The silver OI merits its own paragraph, though. At the close Monday, total silver OI was 113,306. After price was allowed to rise uncontrollably (up $1.62) on Tuesday in order to suck in a few extra longs before the planned attack on Wednesday, total OI was 115,866. By Thursday night, silver had been forced back down $1.53 and total OI was back to Monday levels at 113,669. As you know, silver was down $1.13 on Friday and we'll get Friday's closing OI numbers at about 2:30 this afternoon. I expect to see a drop in OI back toward 111,000.
Anyway, there is no doubt in my mind that the events of Wednesday were a 100%, coordinated and planned attack on the precious metals, consistent with the U.S. Federal Reserve policy of price suppression through managed ascent. From here, we must be alert for additional, follow-through attacks before we can declare a "bottom" and begin anew to aggressively buy.
Just a couple of housekeeping items before I take my leave. First, our Master of The Photoshop, "Pining", drew up this beauty back on Saturday. I like it so much I thought I should re-print it here. Pretty sure that's me in the middle along with Ned and Andy. Pretty cools stuff.
And our old pal, Jim Comiskey, has landed on his feet and is back up and running at ADM Investor Services in Chicago. He's even restarted his YouTube channel and you can find it here:
Way to go, Jim. Glad to have you back!
OK, that's all for now. Have a great day but stay alert for further Cartel attacks. TF