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Turd Ferguson, of the TF Metals Report, does superb work and commentary on
the precious metals markets. His latest analysis on Friday's Commitment of
Traders Report caught my attention for a number of reasons, in addition to it
being so well done. Here it is with his permission to show to you:
Speechless
Turd
Friday, May 31, 2013 at 5:28 PM
We knew that this week's COT was going to be interesting but I didn't
expect it to leave me speechless.
Look, I know I've been banging this drum for months and all the metals
have done is go down. Got it. I read you loud and clear. But we're talking
big picture, positioning stuff here. I am 100% firm in my belief that QE8
caught the bullion banks with their pants down. All of the price action since
9/13/12 has been designed to alleviate the gigantic financial risk and
potential liability of being short paper metal. By smashing price, against
the fundamentals, from $1800 to $1350 and from $35 to $22, The Cartel Banks
have accomplished two things:
- They've been able to
transfer the vast majority of their potential liability from themselves
to the speculator sector (hedge funds, managed money, small investors).
- And now, instead of
being trapped short, they are a in position to profit from the
inevitable explosion in price.
Even though it's blatantly criminal, you almost have to give them credit.
That they've been able to pull this off in broad daylight is simply
astounding. On the level of Oceans 11.
Once again and with meaning: On 9/11/12, two days before the announcement
of QE8 and with gold already at $1800, The Gold Cartel was net short 237,091
Comex contracts. That's 23,709,100 paper troy ounces or about 737 metric
tonnes of gold. As of last Tuesday, they are now net short just 59,221
contracts or about 184 metric tonnes. A reduction of just over 75%! Oh, and
did I mention that, over the same time period, the GLD has been raided for
277 metric tonnes? Just thought I'd throw that in, too. Simply magnificent!
The Crime of The Century! Ah, screw that. That's The Crime of The 20th
Century, too!! Amazing.
So, here are your
numbers. Keep in mind that, for the reporting week, gold was up $1.30
while total open interest fell ahead of June13 expiration by 35,086
contracts. Also keep on mind that for Wednesday and Thursday of this week,
total OI fell another 25,110 contracts. One can only imagine how much more
long-term bullish these levels are as of this weekend.GOLDFor the week, the
Large Specs dumped 16,836 longs and added 6,544 new shorts (quite a few of
which got squeezed yesterday and put back on today). This brings the Large
Spec net long total down to just 56,879 contracts. Do you think that's a lot?
Hmmm. What if I told you that, back on 9/11/12, the Large Specs were net long
182,016? From a different perspective, back on 9/11/12, the Large Spec net
long ratio was 6.62:1. As of last Tuesday, it was down to1.49:1. And here's a
little more perspective for you: At the price lows on 12/27/2011, the Large
Specs were net long 130,788 with a ratio of 4.57:1 and at the price lows of last
August they were net long 114,304 with a ratio of 3.43:1. Again, as of last
Tuesday, the Large Specs were net long just 56,879 contracts and had a net
long ratio of 1.49:1. The Small Specs also reduced their net long position by
a little over 1500 contracts and they are now net long just 2,342 total
contracts. Again, by contrast, back on 9/11/12 the Small Specs were net long
55,075. That's a reduction of nearly 96%!And The Gold Cartel. What did they
accomplish this week? Not much...No, they just reduced their net short
exposure by nearly 25,000 contracts! Again and as stated above, The Gold
Cartel is now net short just 59,221 contracts or 184 metric tonnes of paper
gold. Back on 9/11/12, they were net short 237,091 contracts or 737 metric
tonnes of paper gold. The new Cartel net short ratio is just 1.34:1. This
means that they are now long 3 contracts for every four that they are short.
Incredible!
Once again for perspective, at the most recent price bottoms near $1525 in
Dec of 2011 and August of 2012, The Gold Cartel was still net short 163,932
and 143,940, respectively. Their net short ratios on those occasions were
2.01:1 and 1.98:1. Again, as of last Tuesday, the numbers are 59,221 and
1.34:1.
SILVERWhile interesting, the silver CoT isn't nearly as wild as gold. It's
still crazy, though, as you'll see. For the reporting week, silver was down
about 25� and its OI fell by about 3,300.
The Silver Large Specs dumped another 1,474 contracts this week while
adding another 2,750 longs. That net long reduction leaves them net long just
a little over 4,500 contracts and drops their net long ratio down to an
almost inconceivable 1.16:1. Again, consider these levels and dates for
perspective:
- On 9/11/12, they were
net long 31,482 contracts and had a net long ratio of 4.18:1.
- At the 12/27/11 price
bottom, they were net long 6,855 with a ratio of 1.40:1
- At the 8/14/12 price
bottom, they were net long 15,407 with a ratio of 1.93:1.
The Small Specs in silver had little change and are of little consequence
right now.
The silver commercials
continue to astound. Though the everybody-but-JPM crowd sold 1,326
longs last week, they're still gross long an amazing 66,428 contracts. All of
this commercial and spec selling allowed JPM and The Forces of Darkness to
cover 4,918 shorts, leaving them gross short just 74,762. This commercial
net short reduction of nearly 3,600 contracts leaves them net short just
8,334 contracts and an incredibly, nearly-impossibly low net short ratio of
just 1.13:1. Again, for perspective:
- Caught with their
pants down on 9/11/12, The Forces of Evil were net short 47,272
contracts or 236,360,00 troy ounces of paper silver or about 7,350
metric tonnes. They also had a net short ratio of 2.47:1.
- As of last Tuesday,
The Evil Ones were net short 8,334 contracts or 41,670,000 ounces.
That's 1,297 metric tonnes or a reduction of over 83%!
- At the $26 price low
of 12/27/11, they were net short 14,312 contracts with a net short ratio
of 1.34:1
- And at the price low
of 8/14/12, they were net short 23,402 with a ratio of 1.49:1
- Again, as of last
Tuesday, they are net short just 8,334 contracts with a ratio of 1.13:1
Look, I could probably
keep typing for hours about the significance of all of this but I think I'll
stop here. All you need to know is this: The Bullion Banks have now
reduced their net liability in gold by over 75% and, in silver, by over
83%...all since the game-changing announcement of QE8 last September. Rather
than once again trying to cover into rising prices with disastrous results
(see April of 2011 in silver and August of 2011 in gold), an evil, insidious
and outright criminal plan was made and executed to crush the paper price of
both metals. By flawlessly executing this plan, The Bullion Banks have so
reduced their potential liability that there can be no doubt that prices will
soon be allowed to rise again. When? That's impossible to say, of course.
Maybe not until The BBs are net long both gold and silver. Who's to say for
certain? But I do know that we are very, very close to a price bottom here
when you take this COT situation and the physical market demand into
consideration. Plain and simple.
Finally, we'll have to see how things go once trading resumes Sunday
evening. The action today certainly brings my Wednesday post back into play...the
one where I speculated that one more washout could come before "a
surprisingly disappointing NFP number" on Friday. I guessed that another
test of $1350 was possible with a stop-running drop in silver to $21.50 or
even a double bottom at $21. Again, given today's action and the $10 or so
taken out of gold on the Globex this afternoon, that scenario certainly seems
possible, if not likely. Here are two charts that I printed this morning,
before this afternoon's decline.
 
So, anyway, keep the faith. Next week promises to be volatile but fun
nonetheless. Enjoy your weekend and try to relax a little. Then come back on
Monday with your game face on.
TF
-END-
TF's effort and analysis is well worth highlighting for a number of
reasons.
*First the backdrop. The last QE announcement by the Fed in mid-September
of last year was an impetus for stock and precious metals markets to move
higher. The DOW did just that, dinking up day after day after day. But what
has happened to gold and silver is a completely different story.
The prices of gold and silver did bump up very briefly, into the first
week into October. But since the precious metals live in a Black is White
and White is Black world, that was to be it. The Gold Cartel's stepped-up
war on gold and silver was about to begin . with the price of gold around
$1793 and silver at $35 and change.
An effort to suppress the prices of each would commence in earnest on a
daily basis like I had never seen before. Rarely has a day done gone by in
all this time that The Gold Cartel could not be spotted implementing at least
one of their repetitive selling tactics.
An entire diatribe could be written on why it was done, but simplistically
put, the Fed/US is in a NO SOLUTIONS environment for the financial/economic
predicament it has evolved into. The only way out, as they saw it, was to
print money, etc. The best way to defuse the longer term ramifications of
this action was to SHOOT THE MESSENGER, to disfunctionalize the barometer of
US/world financial market health, that being the price of gold. Sister market
silver was included because of its relationship to gold . a price dichotomy
between the two could not be tolerated.
The escalated war on gold and silver was underway. But this time, The Gold
Cartel included other countries, other bullion banks, various hedge funds,
etc. It led to the unprecedented attacks on them on April 12 and April 15, as
you know all too well. Since then, gold has made some effort to get into
recovery mode, while silver has languished, flopping its way into the bottom
end of its trading range following the historic raid on gold.
*What Turd's work shows is that The Gold Cartel's constant selling has had
the effect of spec longs exiting, replacing them by the commercial crowd. The
entire dynamic most of the way up of spec longs taking on the commercials has
been in a process of reversing, especially since the financial market
terrorist attacks of mid-April.
TF on the latest COT numbers which speak for themselves:
"The Bullion Banks have now reduced their net liability in gold by
over 75% and, in silver, by over 83%...all since the game-changing
announcement of QE8 last September."
This is an extraordinary development over a period of time and is setting
up historic moves higher in the prices of gold and silver, which never should
have been down at these artificially low levels in the first place. However,
there are some caveats which need to be dealt with in the very short term.
-As noted in Friday's commentary, the Gold Cartel was as visible on Friday
as they were 8 months ago. The price plunges on Friday were NOT due to
increased speculative selling, at least IMO. We know this because of the way
gold and silver played out, in a similar manner as they have done for these
debilitating 8 months. Gold failed miserably after breaking out of a 9 time
top. Silver, after acting horribly on Thursday, then goes into new low
closing territory for the entire move. If this were specs, we wouldn't see
the same trading patterns as we have witnessed all the way down.
-The numbers presented by the CFTC can't be totally off, but something
does not seem right to me. The bottom line is my take is that The Gold Cartel
is using offshore, numbered accounts to make them look like spec accounts .
in order to disguise what they are still doing and to create a much more
bullish picture technically than is really the case ... to suck in even more
unsuspectings that a bottom is in.
We know JP Morgan uses offshore accounts. Silver is trading so terribly,
it tells me they are using them to further their agenda to bury the price so
much that the stubborn longs finally capitulate. As demonstrated, while the
gold open interest has collapsed in stunning fashion, the silver open
interest is not far from multi-year highs. This is more than highly unusual
and suggests something is not right with the visible gold/silver open interest
pictures, as portrayed by the COT report.
Nothing that has happened to gold and silver the past many months has been
normal. They have been caught up in a scorched earth Gold Cartel devastation
policy. It is for ALL THE MARBLES, which is why The Gold Cartel recruited so
many allies to assist them in their mission. No ruthless price suppression
tactic would be left in the lurch. That gold gave up all of its breakout
gains of Thursday above $1400, and then some, is a perfect example what the
sordid cartel forces are prepared to do. They made this known to their allies
in advance by crushing silver below key $23 the day before.
Their efforts are as well thought out as they are sinister. We are all
aware of the hundreds of tonnes of outflows from the ETFs on the way down.
Tonnage accumulated all the way up is being disgorged, facilitating other
supply used by The Gold Cartel to meet stellar demand for physical. Much of
the accumulation in the ETFs were by big league money managers in search of
profit and performance for their investors. All was hunky dory with the price
of gold going up every year . with gold yielding returns far higher than
fixed income investments.
But suddenly all that changed with the gold/silver price collapses,
accompanied by the daily relentless move higher of the US stock market. The
Gold Cartel knew that money managers would be compelled to dump
gold/silver ETF holdings because of their affect on relative performance.
IMO, it was one of their reasons for the financial market terrorist attacks.
Those money managers who were holding on just wouldn't be able to take it
anymore . and many have not. This all goes back to how comprehensive this
vast and devious market manipulation scheme really is.
*So, back to what this may be all about, and it is just a maybe. A
colleague of mine and I have gone back and forth for months about what The
Gold Cartel's end game plan is. Much of that has been covered numerous times
in this commentary. But, there could be one more thing, which would be the blockbuster
of blockbusters if the case.
There is a great deal of talk, as per Turd's efforts, among others, about
the commercials getting longer and longer relative to their normal short
positions. There is also talk of The Gold Cartel actually getting long, or at
least exiting their positions, before the historic move up in the precious
metals begins in earnest. This is what the COT numbers have appeared to tell
us over the past many weeks.
But, as already covered, the gold/silver price action doesn't correlate to
the supposed makeup of the open interest numbers. The Gold Cartel appears to
be as aggressive as ever. Gold and silver would not be trading in a similar
manner as they have since the beginning of October if their modus operandi
had changed yet. There is one possibility of what could be going on which
would shake the financial world. A thought.
Many in the GATA camp have long talked about an overnight revaluation of
the price of gold. Pick a number: $3,000, $5,000+, etc. The reasons for such
are for another commentary, but it is a constant theme in our camp. One day
we will wake up on a Monday morning to find out the US and other western
countries have reset the price.
We know the central banks have nowhere near the central gold they say they
have, much of it being leased out. Over the last decade GATA has claimed,
based on the input we have received over the years, they have less than half
the gold they say they say, and that would be the best case. This is one
reason central banks are so secretive about their real gold dealings . the US
being a perfect example.
We know how the bullion banks/Gold Cartel have been so short over the
years. If a decision was made to revalue the price of gold to that degree, a
plan would first need to be implemented so they could cover as many shorts as
possible on the Comex and in other venues. It would have to be one like never
seen before . both vicious and long-lasting. It would also involve disgorging
physical gold and silver positions from the ETFs, badly needed to cover
physical precious metals short positions.
Perhaps one of the most misunderstood notions among uninformed precious
metals reporters, and the likes of a clueless Doug Casey, is their claim The
Gold Cartel has done a lousy job of suppressing the price of gold all these
years as per the 12 year price advances. When I explain to reporters how much
money they have made by fleecing spec longs over the years with raids like
the last one, they go blank. Think how much money JP Morgan has made with
their raids on silver in 2008 and in the past year alone, much less mini
spank jobs in between and all the way up.
There is only ONE way the price of gold can be revalued without the
bullion banks/Gold Cartel getting destroyed, and that is to do it with the
price devastated and many of the bullion bank's shorts covered on the way
down, replaced by unsuspecting spec shorts. As it is now, the specs will
cover their shorts and go long, as they always do, once the technicals turn
positive, moving averages turn, etc. Those longs will need to have
corresponding shorts in the futures market. This means the same drill on the
way up again as The Gold Cartel does what they do and slows price advances
down. To stop a price explosion down the road they will be forced to go back as
short as they ever were.
And that will be the case, UNLESS, there is an overnight price
reevaluation. In that case, instead of shorting gold all the way up, they
would suddenly only need to sell gold at those $3,000 to $5,000 numbers, or
not at all. It would be the perfect exit plan to end their nefarious
activities over the last number of decades. Mission accomplished.
It would also accomplish
something else. An overnight price of that magnitude would bring owners of
gold (silver too, as who knows what that price would soar to) out of the
woodwork, including me. Gold and silver would flood the marketplace at those
dramatically higher prices. This would allow the physical gold and
silver shorts to replenish/reconcile the positions on their books. Yes, those
losses from selling low and buying high would be considerable, but only a
drop in the bucket compared to money made/saved in other financial market
arenas . even compared to the costs of saving the western financial market
system as a whole.
Their physical market lease losses could also be minimized by buying way
out of the money calls on the Comex or on the Over the Counter Market. They
could be purchased with very little impact on the futures price because of
their distance . i.e., there would be very little delta hedge buying of
futures by the writers of the calls.
Should this occur, the effect on the Comex would be devastating. The
number of unsecured deficits would blow the exchange out of the water. How
ironic it would be that such a dramatic move would cause a never expected
Force Majeure . the failure of spec shorts to send sudden losses to the Comex
to meet their unsecured, massive overnight money losses. It is doubtful the
Comex could survive such an event. Maybe that would be just fine with The Gold
Cartel, as they move on.
Whether this sort of clandestine operation is in play or not, we are in
the process of moving to one of three monumental money making opportunities
of all time. They are all WIN WIN.
- We are close to the
time of a short covering squeeze, and the end of the unending Gold
Cartel bombings initiated in early October.
- As is my thinking, we
have more to endure before the price moves of gold and silver really
kick in.
- This blatant,
never-ending assault on gold and silver actually is leading to an
overnight night reevaluation in the months ahead.
They are the three in play, IMO. All of them dictate staying with physical
market gold and silver positions . and building gold/silver share positions
in your firms of choice.
Yes, investing in them, in many cases, has been a disaster for years now.
But, what goes around, comes around. In all of the above cases the odds, at
this point, of them taking off as per what occurred in the internet mania at
the end of the 1990's, is on the increase, with the risk/reward situation way
more than favorable.
To conclude, watching how the gold/silver shares trade in the weeks and
months ahead is likely to take on increasing importance. They led the way
down and are likely to give us an indication of the major turn in the gold
and silver markets. In any of the above scenarios, we need more action in the
PM Shares like we saw on Friday, in which they held up very well considering
what the US stock market and gold/silver markets did . and that is after a
couple of solid up days.
In all of these scenarios The Gold Cartel, and allies, will want to cover
their shorts in the share market ahead of any of the above retreat scenarios.
Can you imagine what the shares would do on an overnight basis on a
revaluation? Sweet dreams on that thought!
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