Still Too Much Optimism
We are getting a strong bounce in gold from the $900 level and silver from $12.50 as the equity markets melt under the collective weight of economic doom, hitting new lows a day after China of all places was seen in a moment of panic-enhanced delusion as the savior of the global economy. That idea has quickly been discarded, however, and replaced with the practical if not morose notion that nobody can save themselves, much less anybody else.
Some of the damage to Wall Street’s frail psyche was the result of the auditors over at GM saying the company is uncertain to continue as a going concern. This market reaction is ludicrous considering the auditors appear to be practically the only ones left to doubt GM’s viability. Similarly, it is preposterous that Wall Street would turn more negative on the basis of rating agencies’ much-anticipated downgrades in the financial sector. I’m still trying to understand the idea that any company receiving government bailouts in order to survive should not deserve a junk rating. It should be quite clear that stocks will not reach a final bottom until easily-anticipated bad news no longer shocks.
Be that as it may, gold and silver are now getting boosted by populist and herd-mentality personalities like Jim Cramer. This is only natural considering that most asset classes have already declined so much that the risk of further downside is relatively minor. Unfortunately, the “buy what’s up” strategy is both easy to explain and understand when it comes to the average investor, even though it is one of the best ways to lose money in the long term. Thus, Cramer’s latest recommendation that his throngs should buy silver is sending shivers up my spine. Although such Mad Money advice was probably singlehandedly responsible for the relative strength observed in silver yesterday, my personal hopes for silver’s superior long-term investment status do not rest on people who get their “investment” advice from TV. Either we are very near the end of the world as we know it or this will turn out very bad before the coast is clear.
Importantly, the basis is not telling us that things are very near the end, so today at least I will continue to suspect that the possibility of a near-term disappointment in gold and silver remains greater than the consensus will admit. At the same time, as I’ve noted in replying to some reader questions raised here and at Metal Augmentor, much higher gold and silver prices are virtually assured at some point in the future if and when the whiffs of a confirmed systemic or sovereign default — or alternatively the mature seeds of hyperinflation — are in the winds. Indeed, the fact that the monetary metals would be the best performing assets at either end of the monetary extreme is the quintessential reason to own them. On the other hand, gold and silver may not tolerate in the short term even a temporary de-escalation of the crisis or a semblance of return to normalcy. It turns out there are rest stops even on a one-way road to economic Armageddon.
Getting back to the bounce in gold and silver today, I am tempted to call the price action healthy except that support was found at the exact level I noted a few days ago. What’s the problem with that, you ask? Only that the support was so obvious to market participants that a bounce was almost obligatory. Without assistance from the clobbering on Wall Street today, it would also have been a rather shallow bounce. We need to see some additional market action before conferring a full bill of health on the bounce.
The contango in oil that I mentioned a couple of days ago has shrunk further since then to a level of $8-9 dollars per barrel on an annual basis. My assessment is that oil may still have an optimism premium built into it similar to the hope that is keeping the stock markets from finding a final bottom. It is possible both may evaporate at the same time, forming concurrent bottoms. If so, gold and silver might not be taken down initially because panicked money would likely flow out of general equities into the metal ETFs and the physical market. Instead, the low in oil and stocks may correspond with an interim price peak in gold and perhaps silver. These may or may not be all-time peaks in the case of gold and most likely not in the case of silver.
In any case, I continue to believe that caution is warranted in gold and silver. It is certainly better to buy today than it was near the highs last week but I continue to suggest holding off major purchases, especially the type of “all-in” buying that most so-called “experts” are now advising. At the same time, if you do not have 5-10% of your assets in physical gold and silver already, you need to be buying without concern for the price due to the ever-present risk that “disintegration” might be close at hand. Just please make sure you try to pay the smallest possible premium over spot price. Beyond that it is speculation. If and when the basis and other indicators tell us that the end might truly be close at hand, it will be time for everybody to up that 5-10% allocated and premiums over spot will no longer be very relevant.
1) Jim Cramers cannot be ALWAYS wrong.
2) There is a large wall-of-worry to climb for gold and silver investors. I constantly hear these “huge correction imminent” stories.
3) As long as there are NO lines in front of coin shops, of people to buy the last gold and silver coin, the mania if far far away (remember those pix of people in front of Apple stores? Apple stock tanked few months later).
dieuwer: …”As long as there are NO lines in front of coin shops, of people to buy the last gold and silver coin, the mania if far far away…”
And vice versa, there are no lines of people waiting to SELL
their silver!
Back in 1980, a bit under the peak in Gold and Silver,
I decided to cash some in. It was a Saturday morning.
I went to my coin dealer…there was a line of about
500 people at the shop. Most were carrying junk…plated
silver and such. It took me about three hours to get in the
shop. Soon after that, prices collapsed.
That’s the sign of a pending collapse…when you see the lines
of PM sellers at the local coin shop!
dieuwer:
(1) No, Cramer is not always wrong but he does almost zero thinking or analysis about precious metals and commodities (which is quite clear when you listen to him blather). As such, his particular form of cheerleading is more dangerous when he talks about gold or silver than when he talks about an industrial sector he has closely followed for 20 odd years.
(2) There has been a wall of worry about every asset and investment during the past couple of years and it has meant squat in terms of whether they have gone up or down. Walls of worry are relevant in “normal” bull markets but meaningless in crisis circumstances.
(3) Don’t expect there to be lines in front of coin shops this time around! Today there is ebay and most bullion is sold by mail over the phone or Internet.
JohnST:
This is a dangerous analogy, today there are fewer physical coin shops but more online and phone-based dealers. You have heard the stories about the gold scrap parties, no? And you have noticed that every pawn dealer and jewelry shop is looking to buy gold and silver, no? And you have heard or seen the “Cash4Gold.com” commercials, one of which actually ran during the Super Bowl, no? And you have heard that Indian consumers are sending record scrap to be melted and have reduced their new buying, no? And you have followed the ETFs for both gold and silver, both of which now have among the largest single stockpiles of the metal in the world, no? I’m not saying these are signs of a top, but it does mean we need to widen our perspective about how the top might look this time around as it will certainly not be the same as 1980.
TOM…you might be right about the OVER OPTIMISM….but I have to say DAN NORCINI’s GOLD COMEX BULLISH CHART is worth a look:
http://www.jsmineset.com/wp-content/uploads/2009/03/continous-gold-chart-3-4-2009.pdf
What does the top chart in the pdf file denote?
That chart can be interpreted as bullish, neutral or bearish. I assume the top of the chart is a proprietary momentum indicator that Norcini does not wish to share with the public. In any case, it is clearly a trailing indicator and thus if prices go down, this indicator will go down.
By the way, the “over optimism” title refers to stocks and commodities!
Nadler said yesterday he felt silver behaved better than gold because of its industrial uses and it was supported by rises in base metals. I didn’t know about the Cramer silver recommendation.
Nadler is not looking deep enough. As I’ve noted, speculative longs got trapped in the expiring March COMEX contract and this caused silver prices to drop a lot last week. This week Cramer and others came out with “buy silver” and the COMEX trap was resolved at the same time, causing silver to revert. I had already noted this would happen last week so no surprise there.
I bought a bunch of SLV today. Too bad if I’m stupid
What bothers me however, is the US bond market. I really cannot get a grip on it. One day I think US bonds are still in a bull market, the other day I think they are in a bear market. Anyone want to give their two cents?
Bear or Bull?
*At the moment I have a 10% position in TBT, but not too happy about it*
You are not stupid, at least you didn’t buy at $14.60! Now, just make sure if silver does go to $8 or so that you don’t sell because it is likely to be back at current levels and then some pretty quickly after that. You would, however, be stupid (and I mean that with love) if you don’t have 5-10% of gold and silver in physical form in your own custody.
I have about 10% physical silver and 10% physical gold. SLV is just extra.
Tom, your TA on support levels was spot on..nice! Too bad gold didn’t close over $940 today.
Not too proud of that support considering it was so obvious there were literally tens of thousands of “bargain hunting” bids at that level. Now that many of those have been filled, we will need to see what happens if we get another test.
If you keep it real simple we bottomed at the lower end of a trading channel for gold yesterday at 900 or so. We closed today above a neckline of a reverse head and shoulders bottom which projects a 50% move in most gold and silver stocks. Yesterday Tom suggested to someone that yesterday was a good entry point for a trade with a tight stop. As long as we hold todays midpoint I am leveraged on this run. I rarely use leverage. It is wonderous to see the metal stocks decouple from the liquidation occuring in the general market and if just a few see only green for our sector and act on it technicals won’t mean squat for our thinly capitalized universe. Like chocolate cake with beer. Yeah.
You are fine thinking such as long as you recognize this to be pure speculation and have a plan for limiting losses.
Tom,
I was also a bit worried when I heard that Cramer was recommending silver. But upon viewing the video, he said to buy 25% at 12 dollars, 25% at 11.50, 25% at 11.00 and 25% at 10.50. I felt a whole lot better knowing he wasn’t recommending to buy at the market. Anyone following his rec. may find themselves sitting with their d**k in their hand and watching the market rally. He was suggesting a similar strategy with gold which would have only resulted in getting a 25% position established, and if we may have bottomed they may not get the rest purchased.
Dieuweir,
About the only chance the bonds have for a major rally would be quantitative easing, such as the UK started a couple of days ago. There is an endless supply of fiat money that the Fed could produce to buy treasuries in unlimited quantities, driving down interest rates as is their desire. Desperate times call for desperate measures, and they are desperate.
Tom Z
Tom Z, I did see that about Cramer but the chance his disciples will actually follow an average-down strategy is next to nil. Given a violent-enough decline they are more likely to panic out of the position than add. It’s just the nature of his audience being typical investors with a herd mentality. Agree about your call on Treasuries. At some point we can expect the Fed to aggressively buy Treasuries assuming the downward spiral has become obviously terminal. It may have for many such as Roubini, Mish, etc. but clearly the Fed and Treasury aren’t there yet, or at least they think bluffing will work for a while longer. I would not be short Treasuries just yet.
Did anyone notice the action in copper today? It popped 6%!
Looking at COMEX data, contango in copper is very minimal. Idea to buy calls?
Contango and/or backwardation in COMEX copper is typically not very indicative, rather one needs to look at LME and COMEX copper as that is where the relevant differences lie. I have difficulties with long copper plays (or other base metals) at this point because the buying is primarily coming from China and it is more opportunistic than fundamental. In other words, it could disappear at any moment.
“That chart can be interpreted as bullish, neutral or bearish”.
BS, it’s clearly bullish. You can never admit when your wrong, which is frequently.
Examples….
Your all in call for silver at 16, before it fell to 8. Were you wrong? No, just early, according to you.
Your contention gold had too much optimism built in, because Cramer was bullish. In fact, Cramer is calling for gold to fall to 700, there is a video on Yahoo Finance GLD page. Were you wrong? No,never.
” As I’ve noted, speculative longs got trapped in the expiring March COMEX contract and this caused silver prices to drop a lot last week.”
JPM shorted another 100 million ounces, that is what made prices drop. Were you wrong? Of course you were. Will you admit it? Never. And what do you do when your wrong? Write a lot of words, that say nothing.
Mark — Why are you so bitter, if I am so wrong all the time just please stop reading! Better yet, please come out from behind your cowardly anonymity and give us your own brilliant thoughts. From here all I can see is that you are taking my writing out of context and only have BS of your own to shovel, and it isn’t even original but rather recycled Ted Butler garbage.
As for those “examples” of yours . . . .
The Norcini chart “clearly” shows the possibility of a massive double top in gold. Moreover, the fact that the recent peak did not take out the March 2008 peak isn’t very encouraging, either. His proprietary momentum tool is a lagging indicator and thus about as useful as stochastics, oscillators, etc. are by themselves.
My “all in call” for silver at 16, before it fell to 8, was not an “all in” call, it was my belief that within 3 months silver would be trading higher. I have never recommended that people make huge single purchases but that rather they spread out their buying during opportune periods. I believed such an opportune period was starting on August 8. Well, I was about a week early (silver was under $12 the following week). Those buying after August 8, and assuming they continued to average down during the next few weeks, did much better than those who made the large “all in” purchases that the vast majority of the “experts” were recommending in the prior weeks. I may be wrong, but I was one of a few actually urging caution. Of course those who followed my lead and protected their long silver and gold exposure with copper put options or something similar, actually came out way ahead. I certainly did.
Please learn to read and comprehend. I didn’t say gold has too much optimism because of Cramer, I said that stocks and commodities had too much optimism because they continue to react negatively to easily anticipated bad news. I also never said Cramer was insanely bullish, only that he is telling his followers that they need gold and silver in their portfolios. It’s not about his short-term call on the price or even his suggested strategy to buy as the price declines, which I actually happen to agree with to a large extent. It’s simply that Cramer is talking about everybody needing to have gold and silver in their portfolios that is the contrarian indicator.
Give me a break about JPM shorting “another” 100 million ounces making the price drop!!! If that was the case you would have seen the price dropping as JPM was supposedly adding to its short positions. Where is the proof? In fact, the big price drop occurred on a day when churn was huge in the expiring March futures against the backdrop of weak physical deliveries.
Would you like to see me admit that I am wrong? Easy. I was wrong about the depth to which silver prices would fall. I was wrong to believe inflation would perk up, much less there being a risk of hyperinflation, as early as 6 months after the Fed started to inflate its balance sheet in earnest. I was wrong about plenty of other things as well and if you would like to point out what those were, I’d be happy to discuss them (I’d love to have an opportunity to learn from mistakes I’ve made that others point out to me, assuming the criticism is fair).
16$? 8$? This will just look like noise on the longer range charts in future as all fiat currencies are devaluing circa 18% pa and rising parabolically to monetize irredeemable debts. Once QE is started it is very difficult to stop, politically.
QE is easy to stop in the long term, it is called Presidential election. If it hasn’t worked in 4 years and assuming there is still a U.S., there will be a new president and something else would be tried. In any case we will only know if it worked in retrospect.
I think inflation has perked up, it just hasn’t yet flowed through into the prices of general commodities, presumably due to the excess production e.g. your millions of barrels of stored crude oil. I read another article recently talking of huge stockpiles of base metals.
Does the value of bankers paper not depend on the value of the assets that back it!? Is not gold the standard of measure of that value!?
Monetary inflation is up but price inflation is nonexistent. Today we have serious overcapacity in all industrial inputs including labor so price inflation will have to be commodities driven in the near term and that is not a reliable form.
What I have problem understanding is how an optimistic retail buyer of gold has anything to do with the price of gold…
Isn’t the price set by people who sell i buy big heavy bars, not the little coins here and there? Cramer is bringing people to the retail market that is already hot, which made almost no difference when it comes to setting the price. What difference does it make if they are bullish or not — they don’t have enough to dump on the market to cause a collapse.
“Wolves in sheep skin” dumping their gold, would have to really be “sheep pretending to be wolves in sheep skin”…. Those “weak hands” holding the big bars have to come from somewhere… plus they have to have a place to go to after they leave.
Once again, I am not talking about gold optimism! In any case, the Cramer audience is orders of magnitude larger, but much less disciplined, than the traditional gold bugs. They are mostly buying the GLD and SLV ETFs, not “little coins here and there”. When they sell it is going to look ugly. I plan to come back and admit if I was wrong, but please remind me if I forget.
I understand that, but wasn’t the price of gold and silver going down while ETFs were adding gold and silver?
The ETFs have enough doubts about them floating around, that it is hard to talk about the kind of “strong hands” of GLD or SLV. One big story or a rumor that something is rotten with them and people will be dumping their shares in droves You don’t need Cramer’s crowd for sell-off of the ETF shares! In addition of the possibility of fraud, a simple government change of laws or supervision mechanisms could do. ETFs can fail like everything else…
Speaking about retail silver, I have noticed that dealers have plenty of small bars and coins available. Premiums have come down, but are not “cheap” yet.
PolarBeer: The metal ETFs are simple trust vehicles that store silver and gold in the same London warehouses where literally billions of ounces are stored by other investors. There will be no big rumor or story that is going to scare people away.
dieuwer: Premiums won’t get to historically cheap levels unless and until investors actually start selling back to the dealers. Nobody knows when that will happen but it could be next month, next year or next decade.
TOM,
By the way….I don’t know what OPTIMISM has to do with the price of GOLD or SILVER anyway. LOLOLOL. Only kidding….you don’t need to respond.
Again….I don’t know about short term moves in GOLD or SILVER, but I believe we are in UNCHARTED WATERS. I do think ALF FIELD and JIM SINCLAIR have a good sense of were GOLD is heading long term.
As I said before…..there are no TECHNICALS for a DISINTEGRATION of a COUNTRY such as the USA. It would be interesting to see what happens if JPMORGAN’s stock price follows CITICORPSE….and their LARGE GOLD SHORTS.
JP MORGAN down -27% in 3 DAYS! And they have the largest DERIVATIVE EXPOSURE in the USA….HAHAHAHAHA. As I said before TOM….looks like the SHORT MANIPULATORS OF GOLD and SILVER are getting CRUSHED By SHORTS AS WELL…..TWIST OF FATE???
Jim Sinclair and Alf Field are making forecasts on the basis of monetary disintegration and the price they give you is nominal not real. Gold at $10,000 isn’t that big a deal if the median U.S. house is $1 million.
KARL DENNIGER gives last WARNING for the GREAT DEPRESSION II
check out the video:
http://www.youtube.com/watch?v=eL_45FbBpPE
We need a break from this monotony.
Gold can’t break $1000/oz with the market falling out of bed.
Silver climbed back up the ladder after its seizure last fall, yet it is now looking back over its shoulder.
We’ve made three attempts in the last year to climb the mountain.
We’re still looking up from Mount Washington to Mount AgAu’s electrum heights.
The stock market has hit a bottom, boys. If you’re short, get long.
Watch the PM ETF’s empty the arena. At first no one will believe it; then it’ll be a rush to the exits. I’d sit near the door.
When Cramer weighs in its time to clear out. Surf’s up.
d’Casco
Economics 101. In the above scenerio then the hoarded cash becomes real cash and the velocity of money surges. The fiat price of precious metals and commodities cannot come down again and stay down without the extra dollars being sterilized - fat chance of that politically. Do not forget that the monetary base has exploded since September. Then there is the PM supply demand inbalance, with a gap of about 3%pa…
The main risk I see is a liquidation wave that momentarily takes gold and perhaps silver (less likely) to new lows before a recovery to a mid level perhaps in the $800s. Price inflation is not yet knocking on the door although when it does then Antifiat will be absolutely right.
SRS aptly states:
“As I said before…..there are no TECHNICALS for a DISINTEGRATION of a COUNTRY such as the USA.”
In other words, the so-called experts have no model for the end game. They are thrashing about throwing around mutli-trillions and we are still no better off.
The next thing about to blow are a few major league banks/financials via massive derivative losses. Get ready for a large up-tick in this ongoing fiasco.
I wouldn’t count on it — have you considered that counterparty risk has been socialized via unlimited bailouts and thus derivative exposure has become a zero-sum situation from a systemic standpoint?
SilverX any comment on David Morgan’s interview and analysis of the silver ETF SLV. Basically pointing out it is a paper market for silver. I for one would never recommend investing in the ETF unless you are short term trading or shorting silver. Although I do not agree in shorting physical backed ETF’s, as Morgan explains in his commentary. Because this is allowed, it does put a good deal of downward pressure on silver when we are in a selling mode. Play the cards that are dealt you so to speak. I personlly believe the ETF’s are simply another vehicle, like the comex paper market to hold down silver prices. Since the ETF inception almost three years ago, silver has done nothing in price. While the ETF has supposely taken 160 million ounces of silver off the market. Here is the link to Morgan’s interview, http://www.financialsense.com/fsn/main.html
The SLV alone has taken almost 260 million ounces off the market, not 160 million. Add ZKB and others and the number is closer to 350 million. The ETF acquires physical silver and thus it is a proxy for true demand. The fact it can be shorted is a fairly minor issue, it would be much easier to manipulate the price through incremental buying of the ETF so that it does not generate addition to holdings and then dumping all the shares at once.
Screw it. The differences in opinion in all things financial are at an extreme. Everybody qualifies as a contrarian in this environment. I think Tom is on to something when he speaks of volatility.
Personally, I don’t have enough in cash to take good advantage of a great buying opportunity like last year. The last few times Gold stalled near 1K, there was an ugly reaction in (paper) silver.
I’m going to watch the Asian action tonight and, if its positive, I’m going to place sell/limit on a third of my SLV right under the going price. Call me chicken but I don’t wan’t to repeat the (unrealized) drubbing I took last year with nearly all my chips on the table.
Being confused is always a good reason to get out although I think you sold in the middle of a trading range. The real question is, can you refrain from buying back at much higher price or alternatively will you be able to pull the trigger and buy back if prices go much lower?
Looks like silver just moved into backwardation with spot above $12.90 (3.15p EST).
April: $12.885
May: $12.860
July: $12.850
Illiquid electronic trading makes it a tough call but it certainly did not follow through to the next day.
Silverax (Quote)
JohnST:
“This is a dangerous analogy, today there are fewer physical coin shops but more online and phone-based dealers. You have heard the stories about the gold scrap parties, no? And you have noticed that every pawn dealer and jewelry shop is looking to buy gold and silver, no? And you have heard or seen the “Cash4Gold.com” commercials, one of which actually ran during the Super Bowl, no? And you have heard that Indian consumers are sending record scrap to be melted and have reduced their new buying, no? And you have followed the ETFs for both gold and silver, both of which now have among the largest single stockpiles of the metal in the world, no? I’m not saying these are signs of a top, but it does mean we need to widen our perspective about how the top might look this time around as it will certainly not be the same as 1980.”
Perhaps I might be compared to the General who fights the last
war; ideed, one must recognize that markets are different than
they were in 1980…the internet etc. By the same token, we
have far more information availiable today as a result of the
same internet.
As to the pawn dealers, jewelry shops, tv ads etc… how much are they
taking in? Are there lines of eager sellers willing to part with
grandma’s silver spoon or gold ring? Do the masses even have
the volumes of PM’s they did back in 1980 to shlep down to any
of the numerous buyers eager to take it off thier hands?
As to India; the apparent net “disinvestment”; has India
increased exports of the recyled PM’s, or has this merely
slowed her previous healthy appetite for importing them?
And the ETF’s…there is room for doubt that they actualy have
what they say they do. Where exactly did they get the
massive quantities reported to have been added to their
stockpiles over the past couple years?
I make a habit of checking EBay often…search item
“Silver Bullion” or “Silver Eagle” etc. and note the number
of items offered. That, to me, represents the 2009 version
of the 1980 lines around the coin shop. It’s currently
high (around 16,000 for “silver bullion”) but not extraordinarily
high. In fact, many of the Ebay sellers are dealers, not
the “man on the street”. The “offered” may run as low as
7,000 listings…I’ve watched this number over the past couple years…
7-16,000 is “normal”…we are currently running at the high end
of that normal. If it suddenly jumps to 30 or 40 thousand items,
that might be equivalent of the 1/4 mile long line of sellers around
the little coin shop.
One significant difference between 1980 and now is that in 1980 you didn’t have 8% unemployment. You have to factor in people selling whatever they can to put tonights dinner on the table.
I trade with local dealers in my market and note the activity they conduct while I hang out at the offices. The first impression is that there is no one ever there. When the occasional seller comes in he is in his seventies selling the gold coins he bought at the top in 1980… There is steady phone traffic of people calling to ask about the availability of gold coins and what price and to a lesser extent silver. After being told that they must put 20% or more down to place an order most are never heard from again. I am amazed by the deep pockets of the buyers. They are not oddlots but buying in size. Clearly people who can buy 20 to 100 ounces of gold are wealthy and probably did not get wealthy by accident. When the general public show up they are there to sell small stuff to raise cash to make ends meet. I would suggest that the interest by the general public in precious metals accumulationi is not very apparent at coin stores in the tenth largest city in the US.
JohnST: Some very good points but the short answer is that gold scrap sales and recycling are very strong throughout the world right now, not just in India. It is unclear when this gold will be coming out of the refineries but physical gold demand better be solid at that point. I like your “Ebay indicator” but keep in mind that most of the stuff being sold in 1980 by the people waiting around the block was silver U.S. coin and silverware and what was being bought (by a different group of people obviously) was bullion. This is worryingly the same situation today although the volumes are obviously much smaller.
Mr. Zetetic: July 1980 unemployment rate = 7.8% (admittedly the measurement was different back then)
Peter G: People who were buying silver at $40 an ounce or gold at $800 in 1980 were not “odd lots” either and in fact most of them were wealthy, while the people selling gold and silver were doing so “to raise cash to make ends meet”. We are clearly far from a general public frenzy like the one in 1980 but that assumes we get a repeat similar enough that we can recognize it while it is happening.
Leveraged ultra-short responsible for COMEX short position?
http://www.minyanville.com/articles/gold-rally-GLD-market-etf-statistics/index/a/21496
These supposedly “massive” short positions are actually tiny in comparison to the overall market. Besides, for the COT period ended March 3 when the shorts were supposedly piling on, EVERY category of COMEX trader reduced their gross short positions.
Must see on energy by Lindsey Williams
http://www.youtube.com/watch?v=ZKCyCYz_aHY&feature=related
Fortunately, I took profit on SLV yesterday. Looks like gold and silver are dumped today. Targets: gold ~ $850, silver ~ $11.50.
Gold hasn’t broken down yet but in any case I’m expecting silver to hold up a bit better than that. Of course I’ve been often disappointed so I’m not betting on it.
Who would have thought that in a general equity rally PM mining equities would sell off worse than the PMs themselves? This while other metal stocks followed the general market up. Does this mean the upside in PMs is limited for the next three months or so?
Not a very positive sign but keep in mind the PM stocks are way up from their bottoms so we could have a skew due to profit taking.
Usually when mining stocks start to under-perform, a large correction in PMs is telegraphed. Perhaps we will see the plunge to $700 Tom was musing about.
On the other hand, the put/call ratio of ABX for instance is sky high (1.95) implying that the bear camp is awfully crowded.
Both camps are starting to get pretty crowded and perhaps a bit rowdy.
Something interesting: the spreads on credit-default swaps for U.S. government debt jumped to 97 basis points today.
http://www.marketwatch.com/news/story/Cost-buy-protection-against-US/story.aspx?guid={8A08067B-E9C2-4B7F-A235-DAEFE3EA08C4}
In essence, the spread is equal to the yield of a 2-year treasury (and higher than those of T-bills). What does that mean??
how can anybody backstop a U.S. treas. default? what do you back it with? Who would be crazy enough to buy that?
Actually this is pretty brilliant. The chances that anybody will even be around to collect on a U.S. Treasury CDS is near zero and thus the issuer is basically making pure, risk-free profit. I am very interested in bidding this swap at under 97 basis points in unlimited quantity. Where do I sign up? In other words the CDS swap rate is becoming meaningless.
What upsets me is that you write long articles, explaining why silver prices are depressed, when the fact that JPM is short 350,000,000 ounces is obviously the reason.
You should be doing what Ted Butler is doing, drawing attention to the crime, and encouraging victims to send written complaints the their elected representatives. Instead you ignore the manipulation, and try to create other explanations, which is exactly what you would want someone to do if you were JPM.
ALso this is more BS…..
“I just received a technical update on the oil market from our expert technician at Eidetic Research and the numbers are not looking good — a possible near-term collapse of the oil price under $30 with a probable range between $23.89 and $28.67.”
Why don’t you admit you were wrong?
Mark.
With all respect you do not belong here. Baiting the host is silly.
Sincerely,
Peter G
Surely if JPM is short 350,000,000 ounces, then someone is long the same? Is this not how the futures market works, for a contract to be made someone has to sell and someone has to buy?
As I think I’ve read Tom state before, all it would take is for the longs to take delivery of the ‘real stuff’ and the charade would end. Obviously it is the longs who wish to continue the paper game not the shorts.
As long as the contango remains in the PM futures market the game continues. As I understand Prof. Fekete’s theory, it is the willingness of the longs to play a premium over spot for paper gold that keeps the USD and hence all currencies alive.
This is a free market, for whatever reasons that JPM has that much
money to short so much silver or gold , they have the right to do so…
anyone can buy double JPM position if they have the money and squeeze JPM.. This is just power trading as in FX market and stock index future etc. Anyone has
the most money can crush the market..
Why should I be doing what Butler is doing, he seems quite capable of making wild speculation on his own? JMP is the largest silver (paper) dealer in the world so even if it were “short 350,000,000 ounces” of COMEX (paper) silver, which it is not, there would be no “crime” or “victims”. Your twisted conspiracy logic is so funny: “which is exactly what you would want someone to do if you were JPM”. Thanks for the humor!!! On the oil price, the collapse was based on a technical analysis and I merely pointed out how that could go along with the fundamentals of record storage and falling demand. If this turns out to be wrong, I will admit it. On the other hand, when the commercial position at the COMEX goes net long I bet Butler will still find a conspiracy somewhere.
I wonder if the textbook flag in April Platinum could be the canary in the gold mine? If quadrillion is the new trillion, we’re dealing with some serious paper. My gut is telling me, “Collapse in Q2′09,” though my head says that it can’t be happening. Where have U seen this action before? It reminds me of KC Wheat in Q3′07.
Platinum is a tiny, tiny market, 1/20th the size of gold and even smaller than silver. That makes it more volatile than either monetary metal. A canary dies when there is bad gas–where is the dead canary?
THIS IS A DISINTEGRATION:
There is no way out of this MESS. Even though the nice MARKET RALLY tends to put SMILES on individuals, especially the TALKING HEADS on CNBC for a few days…..THE CANCER IS STILL SPREADING. The GRIM REAPER still wants his POUND OF FLESH.
There has been some talk about getting rid of MARK TO MARKET as well as reinstating the UPTICK RULE. These are last DITCH EFFORTS to keep the PUBLIC asleep while DEAD ZOMBIE BANKS and CORPORATIONS BLEED the SYSTEM DRY. Yes, we may see a JUMP IN THE STOCK MARKET, but don’t let that fool you. Quoting from JIM WILLE’s interview, it is known the instant a MAN DIES, he has a sudden erection. There is a rapid release of blood when the heart stops and it finds the path of least resistance. This is no joke, but a fact of nature. I mentioned this as it will remind you of what is going on with the US DOLLAR and the MARKETS in GENERAL. Even though they are SPIKING HIGHER…they do so in a DEATH TWITCH.
REPEAT…..this is not a 1930’s DEPRESSION. Anyone who REGURGITATES that RUBBISH needs to make an appointment with their local SHRINK. Also an MRI might be advised. Economists who repeat this GARBAGE have not a clue about thinking or living outside the SAND BOX.
There are TWO NASTY EVENTS taking place….DAY in and DAY OUT. The CANCEROUS TUMOR is SPREADING in the ECONOMY and at the same time the DERIVATIVES MONSTER is DEVOURING the FINANCIAL SYSTEM’s FLESH. Both are working at the same time….ONE eating away on the INSIDE, while the other is OVERTLY CONSUMING the PHYSICAL ECONOMY. Each alone is a DEATH SENTENCE….but both together….will prove to be the GREATEST SHOW ON EARTH.
GODZILLA…..EAT YOUR HEART OUT….BABY……
GOLD, SILVER, GUNS, BULK FOOD and a GOOD MATE or PET are the best INVESTMENTS to go LONG. TIME to SHORT BEN BERNANKE, the FED and SPARKY the CLOWN GEITHNER.
If and when you are wrong Steve (and I sincerely hope you are, no offense), will you please make sure to keep posting here as I really enjoy your intensity!
So what exactly was the 1930’s depression?
The 1930’s DEPRESSION….you ask?? A WALK IN THE PARK….A PIECE OF CAKE…..A LIL SLICE OF HEAVEN…compared to the future of the US of A.
I don’t want to be so GLIM……so when you have LEMONS….MAKE LEMONADE…..when you have PEANUTS….make PEANUT BUTTER….when you have US DOLLARS…..make TOILET PAPER.
But…..when you have GOLD and SILVER…..make MILLIONS.
The game of MUSICAL DOLLARS is being played by the US TREASURY, FED and INVESTING PUBLIC. The last one holding DOLLARS loses.
ENEMAS ain’t just for COLONS anymore.
Don’t you mean glib?
As Jim said “for every losing trade there is a winner”. Whoever is holding the Tarp etc. trillions in their accounts will soon find there true worth - zero - if they try to exercise their purchasing power by buying real assets en mass or cornering the market in precious metals. A dilemma from a Greek tragedy or the tale of King Midas. You have the money or the treasury bonds but cannot exchange them as they will be destroyed in the process and valued correctly - a big fat zero as all fiat currencies end up. IMF funds and SDR’s are just a distraction and will suffer the same fate. Only gold and silver are true money as tested over millennia.
HaHaHaHa, our big market rally couldn’t even bust through 7000 on the DJIA.
The joke is on me…but wait…PMs are rising too. Dollar topping?
Getting the IMF to take the heat — and sell its gold?
http://ftalphaville.ft.com/blog/2009/03/12/53518/getting-the-imf-to-take-the-heat-and-sell-its-gold/#comments
1/ China would welcome the Dollar to Gold swap
2/ IMF and Western currencies will be further undermined through lack of convertibility to Gold, ie Gold backing and CONFIDENCE.
3/ Revenues from sale too small relative to OTC derivatives and exchange rate losses, unless Gold is revalued upwards in fiat money terms first.
Nice try.
IMF has nothing to do with OTC derivatives and exchange rate losses, they primarily lend to emerging markets. There is no reason why the IMF should hold gold unless it intends on issuing a reserve currency other than the internal accounting unit called the SDR. If anything, an IMF gold sale would cement the U.S. dollar as the last of the reserve currencies, to be replaced by whatever country is willing to lend its own currency to stabilize emerging countries. What’s that, China is willing to lend its FX reserves to Latvia? Yeah right, Latvia would default in a week and laugh in China’s face with impunity.
Eastern Europe will be the prime beneficiary - these are the OTC derivative and exchange rate losses I refer to. If looks as if the EU (Germany) is not willing or able to assist, and Geitner is calling for a tripling of IMF funds to $500 Billion. G20 leaders are meeting now to discuss it. If IMF funds are tripled then the gold backing should be increased proportionaly as confidence in all fiat money could be undermined - bailouts could easily increase to trillions leading to the global Weimar experience, that is the risk.
Okay, but it seems Western Europe will be the prime beneficiary should they not have to throw good money after bad. My sense is the “fair solution” is to have everyone pony up in proportion to their SDR reserve ratio (44% dollar, 34% Euro, 11% Yen, 11% Pound) or otherwise face “dilution”.
It seems that “ultra-short speculators” are counted as “commercials” in the COT report. According to Lewis, the time is nigh for a short-squeeze. Agree?
http://www.minyanville.com/articles/GLD-etf-trade-dzz-squeeze-comex/index/a/21562
No-DZZ and DGZ have a combined 5 million shares out with a net asset value of around $125 million. At $900 gold and double leverage that is less than 3000 COMEX contracts, or under 1% of open interest. Some short squeeze potential, I can’t wait!!!
Over on the Kitco Gold Forum, Bruce7Trader has been pounding the table that 890 would hold since February 3rd and has slowly turned all doubters into believers, including the incomparable Feral Child. This week, Reich went long at 891 with a stop loss at 889, because “you never know. 890 might be some kind of magic number.”
Bruce is the man. A legend is born. Sometimes, these things take on a life of their own. Throw your hat in the ring with an open order for June at 891.1, what the hell, you might even get filled. We’re backin’ ‘em up.
It’s certainly a good number as any other between $880 and $900 but if gold doesn’t break above $950 soon it is not likely to hold.
Guys,
From all the above discussion, I am no wiser about making money trading gold and silver. All I know is that gold and silver are headed much higher, maybe double the price, within 3 years, with a big risk of going lower. However, buy and hold would work much like insurance. If one were to make money, one would have to trade. One good and sure idea Tom proposes is basis. Any other leads? Another good entry point could be for seasonal weakness, and, extreme bearishness. But where to sell?
I think many people try and trade, and burn their hands. Maybe Mark is so bitter, because he failed to comprehend Tom properly, and followed him recklessly in trading silver. However, this blog should manage to develop some good trading ideas, and, I suggest, we explore the psychological part of bulls and bears, as Nymex trading seems to be having a major impact on prices.