Just a brief update this morning as I have a very full schedule today. Additionally, The Wicked Witch has a few things that she'd like to share with you and I know she'd like to get that done today, too.
So let's get right to it. Today, of course, is March 27 which is the expiration day for the April12 gold options. This expiration occurs at the Comex close of 1:30 EDT. To understand the significance of this, you must think like The Cartel and the last thing they need right now are inspired longs taking delivery through the Comex. Therefore, The Cartel "checks the books" and determines the price at which the minimum number of option holders will stand "in the money" and, potentially, convert to an April futures contract and take delivery. Sometimes (most of the time), The Cartel is able to manage this effort quite successfully. For this month, I defer to our new friend, "Winston" as he's been right on the money (no pun intended) this past week.
First, price was gunned down last week. Winston told me that the primary reason for this was to squeeze the folks who had sold April puts, a few weeks back, thinking that this was easy money. As price dropped, these option "shorts" were forced to hedge by shorting an actual futures contract. Once these "weak hands" were sucked in and short futures, gold reversed last Thursday and is up nearly $60 since. Mission accomplished for phase #1. Phase #2 is intended to minimize the potential damage described in the paragraph above. In this regard, we also heard last week that The Cartel would attempt to pin gold below $1700 at the close today. So far, mission #2 is looking good, also.
As you can see on the charts below, gold is showing fine strength here and not giving back any of the gains from yesterday. However, you can also see that The Cartel has instituted, at least for today, a hard cap just below $1700. Can this change? Of course it can. There are always headline events that can sway momentum intraday. For now, however, let's just be content today to consolidate yesterday's gains and get ready to fight the remainder of this week. Once gold option expiry is behind us, I expect gold to be cleared to move through $1700 and it will likely drag silver along with it, through $33.
Again, The Wicked Witch has a few things on her mind so please check back later today for a possible visit from The Wicked One and her trusted sidekick, Ruprecht. In the meantime, please click the link below and read the latest missive from Bill Gross. Though I think he's a weasly, little political insider who uses his connections for the profit of his company, this report is helpful simply because he's a weasly, little political insider who uses his connections for the profit of his company. The guy is chairman of the "Good Old Boy Club". If anyone has the ear of The Bernank, it's Billy. Therefore, heed what he says. It cuts through some of the SPIN and the MOPE.
Have a great day! TF