(The reverse psychology test from yesterday is working so well, I thought I'd better keep it going!)
Well, isn't this nice? A genuine, bona fide rally! What's the deal? I imagine that much of this is being driven by new long interest in gold...well, not that new. As we approach June13 contract expiration, we have seen a bunch of contract holders sell but not immediately roll into August. In fact, total open interest in gold fell by 24,000 contracts on Tuesday alone as June contracts were sold and/or covered.
So today, with price rallying, those longs who sold Tuesday or late last week and didn't immediately roll because they had hoped for lower prices before getting back in, are suddenly rushing back in and we're up over $20 as I type. Hey, whatever...we'll take it. So now, what?
Take a look at these charts. On the daily chart, notice the undeniably pretty double bottom at $1350. All along, Andy has been reporting very heavy buying interest and huge pending orders at and below $1350. Well, it certainly looks like he was accurate because every time the paper bears tried to break price down below that level, price almost immediately reversed and moved higher, no doubt on the back of bullion bank buying which hoped to keep those orders from filling. Now, not only does the daily chart look compelling, look at the shorter 4-hour chart, too. We had that spike high of $1413.30 last Wednesday as The Bernank's prepared remarks were released. You'll recall that price then collapsed amidst all the nonsense talk of "tapering". Well, lookyhere. We are right up against that level as I type. A move through and close above would be very bullish and would set the table for a move back toward the early-May highs just below $1500.
To bring all of this in line with yesterday's post...Part of the move today can be traced back to some lousy jobless claims and other data released earlier today. Yesterday's post carried the theme that the data was about to turn worse and all the talk of tapering was going to fade away. What I postulated yesterday was the possibility that price could be shaken out one more time before the BLSBS next Friday. It could still happen but, obviously, today's action makes it less likely.
Turning to silver, it too is rallying today, though not as aggressively as gold. This is also likely due to expiration as silver didn't/doesn't have as much "dry powder" on the sidelines at this moment. Regardless, look at these charts. First, note that $22 silver is very much like $1350 gold...a very solid floor. Outside of the nonsense shenanigans of two Sundays ago, $22 has held very well. Now, can it get up and go to the upside? Well, like gold, let's watch the spike high from last Wednesday for clues. IF silver can move decisively through the $23.30 area, fresh shorts will begin to cover more aggressively and we'll see a quick move toward $24. From there, the next target is the $24.84 high of 4/26.
Getting back to the open interest numbers, tomorrow's CoT is going to be a doozy. Tuesday was CoT survey day but it was also option expiration for the June13 which goes off the board on tomorrow. As mentioned above, almost all of the paper traders are currently liquidating June positions and rolling them into August and beyond. So, for the reporting week, though the price of gold was up a whopping $1.30, the total Comex open interest fell by almost 8% or 35,000 contracts. That's a lot. I'm very much looking forward to seeing who was buying/covering and who was selling. The silver CoT will be fun, too, as price fell by 25¢ but total OI also fell by about 3,500. Again, who was selling/covering/buying? We'll see. Only have to wait another 28 hours. Grrrr...
Finally, LOTS of interesting stuff emanating from the MENA again today. Just a few days ago, Russia pledged to send S-300 anti-aircraft missiles to Syria and, from the looks of things, they're already there: http://www.zerohedge.com/news/2013-05-30/first-shipment-russian-s-300-rockets-arrives-syria  but debka claims that they're not: http://www.debka.com/article/23002/Israeli-intelligence-denies-first-Russian-S-300s-arrive-in-Syria---contrary-to-Assad’s-claim- . Either way, this entire situation is getting stickier by the hour. Now, you may ask what this has to do with a PM-related website but I can assure you, if things get out of control in the MENA, there ain't gonna be any imminent QE tapering, that's for sure. So we're going to continue to watch this closely. One "tell" will be the price of crude. It has magically stayed below the trendline drawn on this chart since the QE∞ announcement last September. If/when is busts through, you'll know something is up, whether or not Syria is "fixed".
And all this talk about World War III has me thinking this morning about a book I read six or seven years ago. It's one of those novels that try to intertwine current events into a fictional format. This one dealt with war in the MENA and looked at it through the prism of The Old Testament prophecies of Ezekiel. Look, it's not for everybody and I certainly don't mean to turn this thread into a religious debate...but I get asked for book recommendations all the time and this is a fun and timely read. You should pick it up before heading out for vacation or to the beach.
OK, that's all for now. As I close I see that the metals are still hanging in there at $1415 and $23. Keep your fingers crossed.