Tuesday, February 19, 2013

Physical Vs. Paper: Is The Gold/Silver Price Correction Over?

Big movements take time to develop  - Jesse Livermore

Looks like I've got good company:
While the mainstream media continues to spew out bearish news and headlines on precious metals and (especially) mining shares, SAC Capital Partners LP, a $20 billion dollar group of hedge funds founded by Stephen A. Cohen, quietly positioned itself in over $240 million dollars worth of gold, silver, and mining share investments during Q4 2012...Of great interest is the structure of those positions. They are indicating, that the firm is expecting a massive spike in both gold and silver, as well as a staggering move higher in the mining shares.  LINK
It may not seem like the most auspicious day to post commentary outlining why I believe that the correction in the precious metals has just about run its course.  However, considering that all the downward movement this month in gold/silver has occurred exclusively during Comex trading hours, today further bolsters my conviction that this particular moment in the precious metals market is the pinnacle of a "contrarian's" play.

While I happened to have penned my commentary last night, it turns out that Zerohedge posted a piece a few minutes ago that reinforces my claims:
It appears that from the open of US equity trading pre-market to the close of Europe's equity markets (~0730ET to ~1130ET)[Comex trading hours, basically], Silver has been offered non-stop. Outside of that four-hour window, on average, Silver has not moved in the month of February.
Here's the LINK for the whole posting.  As you can see visually from the Zerohedge piece, 100% of the selling in silver (and gold) market has occurred in the paper trading market.  Meanwhile, China and India continue to hoover up physical gold while the Comex crooks sleep off their booze.

I've learned over the past 12 years to never call a definitive bottom to a rigged, corrupt market like the Comex.  However, I am willing to make a "the market is bottoming" prognostication.  I've explained why in this article posted by Seeking Alpha:  Market Is Bottoming

While an entry today is not a risk-free proposition, it is impossible to pick bottoms and those who make the claim that they can are charlatans.  However, buying nasty price corrections during the last 12 years of the precious metals bull has been richly rewarded and I will make the claim that this year will be the 13th.


  1. luck in picking a bottom sometimes works.

    thanks your your views. probably among the best thought out around including the "big guys"

  2. So, it's SAC Capital that bought? Maybe that explains the freefall of recent days. In case you weren't paying attention, the SEC is about to come down hard on SAC Capital, and there is a chance the firm is forced to liquidate. IF that happened (maybe a big IF), then all positions would be unwound, including their PM bets. Someone might be playing the opposite side of SAC's long positions.

    1. Whatever elese is happening at SAC's and with Steven Cohen I doubt yesterday he raised the powder to trade 1.825 billion oz or over to 2 years of annual silver production. Perhaps he got stopped out and new hands stepped in. Whatever the case the game in the COMEX is not being influenced by SAC's if the volume carries on today.

      Harvey Organ "The total silver comex OI rests tonight at multi year highs of 155,204, a rise of 840 contracts from Friday's level of 154,364. The non active front month of February saw it's OI fall by 5 contracts from 79 down to 74. We had 66 delivery notices filed on Friday so again we gained another 61 contracts or 305,000 oz of additional silver standing for February delivery.

      All eyes are now focusing on the upcoming March delivery month. The OI dropped marginally by only 1404 contracts from 51,992 down to 50,588. We have 6 more OI reporting days before first day notice on Thursday February 28. The estimated volume today was also in the stratosphere at 368,039."

    2. Apparently SAC's aren't the reason as SAC took an over $20 million dollar “straddle” position on the SLV ETF, which indicates the firm believes we will see a massive and volatile spike coming in the price of silver—either up or down.

      -The firm took an over $61 million dollar “straddle” position on the GLD, which similar to the SLV position, indicates the firm believes we will see a massive and volatile spike coming in the price of gold—either up or down.

  3. I read an interesting article @ Miles Franklin that was written by Jim Willie. Last year the Chinese spent a week in the U.A.E. and discussed China's role as an additional or replacement as the reserve currency. The C.M.E. has listed the Renminbi under the RMB/CNY call sign. All that being said, these friggin markets are rigged. The hand writing is on the wall. It is no longer a case of if just a case of when. Who cares anymore what the prices are at the "CRIME-X", only thing that matters is how fast I can unload this green toilet paper into real money.

  4. I'm a dip buyer of silver instead of gold. In my humble opinion, silver is the main battleground not gold. The volume and open interest are simply shocking. The more the price goes, the bigger the open interest. It completely defies all the past experience. By the way, one thing is quite puzzling. Although about 11000 notices have been filed so far this month for gold, the registered inventory has barely budged. At the beginning of the month, it was 2,925,052.010 ounces. Now it's 2,702,135.420 ounces. Only a few people moved gold out of the Comex warehouses.

  5. clearly these are just paper games that try to change market sentiment as to get momo traders on the bandwagon. comex expires on the 25th and til yesterday OI in March Silver contracts was still stubbornly above 50k. So the raids intensified as commercials needed to get their contracts back or risk them being taken to delivery which would obviously mean they would have to go out and purchase the real physical metal. We can only wish for strong hands to prevail and give commericals a run for their money, eventually provoke a short squeeze.

  6. Why on earth are prices for precious commodities going down when they are precious little on earth?

    1. The bankers are in control. If they allow PM to rise, people will finally begin to realize that there is an alternative investment available to the elite casino=the stock market. By manipulating prices down, bankers make PMs look unattractive- this forces the customers to stay in the casino and use counterfeit Bernanke bucks.

      The laws of supply and demand do not matter anymore. The FED has created this horrible zombie economy where jobs are not created, taxes are not collected, but the status quo elite who directly own 85% of the stock market- remain happy and enriched.

      They have rigged the game. For now.

  7. The Great Gold Deception and Misdirection

    “Fascism should more properly be called corporatism, because it is the merger of state and corporate power.”

    Benito Mussolini

    It would be fortunate for the western world, particularly the United States, if it were “merely” becoming a neo-fascist dictatorship. But since all life forces evolve, particularly those that are evil, the west is actually experiencing something far more pernicious: namely, a banksterist dictatorship, which is en route to something even worse.

    In Banksterism, the full arsenal of the state is deployed to preserve and protect one thing above all else: the power, wealth, influence and profits of banksters. It is only the crumbs left over after the banksters have gorged themselves at the money trough that are cast upon the dirt for everyone else to scavenge and peck upon. The problem is that history, and particularly recent history shows that banksters can never get enough. They are addicted to lucre, as if it were heroin. So in a banksterist dictatorship, capital is systematically plundered from the overall economy, causing it to weaken, and then die. This is when the covert totalitarianism of banksterism yields to overt, full-blown, state-sponsored military totalitarianism, better known as the Police State. The road to tyranny is paved with banksterism.


  8. Here's the problem with gold. The GLD gave a way for the broad market of investors/traders to play gold, and as long as it worked, they kept with it. Gold worked for 12 straight years partially because it worked. Yes, this circular logic is why gold bugs like Dave remain bullish. He can't fundamentally value gold or silver because there is no fundamental "fair value" for a metal that produces no cash flow. The only reason he can remain bullish is the nonsense that it sure as hell beats fiat currencies that are being debased. The reason this logic is nonsense is that this "truism" could have been stated for gold in the 1970's, 1980's and 1990's and been just as true. Gold did great in the 1970's to the $800 peak in 1980. Then it didn't do so good. Then, interest in it died out through the 1990's. Only in the 2000's did gold wake up and become a "relevant" asset class again. This was amplified by the creation of GLD which enabled the masses of large and small investors to place a gold proxy into their portfolios like a stock.

    Now, guess what? GLD is a two-edged sword. It can be sold and shorted with impunity, and I don't doubt that it is right now. Dave and other zealots who fell in love with this metal will see the downside of overstaying their welcome in this asset class. It's sad, really, because of the cruelty of the story. Just at a time of currency wars would be when these nuts actually thought gold would go to $2,000, then $3,000, $5,000, and even $10,000 an ounce. Instead, the top gets put in 18 months earlier, and the game is over. Listening to Pento and Schiff and Eric King has been a study in strident shrill thinking and denial. Reading Dave has been similar.

    You are about to get your lesson of a lifetime, Dave. I hope you won't need bankruptcy court because of it, and wish you well.

    1. That's what makes markets. I have my money where my mouth is and I'm very long what I believe is a significantly undervalued asset class.

      Do you have your money where your mouth is? If you believe your story, then you need to be very short GLD or Comex gold futures. If you are not, then you are like all the other charlatans out there.

      The funny thing is, I back up all my claims with fundamental data and facts. I see you offer no fundamental details in support of your assertions.

    2. You're long "what you believe" is a significantly undervalued asset class. Then, when asked where prices go (below), you say "I have no idea when this market will ultimately bottom and how high it will go. I stopped putting out price targets a long time ago." Therein lies your problem, Dave. You are faith-based in your investing in this asset class, based on how well it has treated you over the years. You have no fundamental basis for assigning a fair value to the asset, despite your claim that you back your claims with fundamental data and facts. The only fundamentals you and other gold bugs have is the worldwide money printing and global fiat currency system, and you are staking your life's net-worth on this fact? Man, I wish you luck, I really do. That's because you can't use fundamentals that other asset classes have, i.e. cash flow streams that you can discount to a PV number.

      So, you take what amounts to platitudes about the corrupt and manipulated monetary and financial system, and try to devine that this makes gold attractive. You may be proven right if gold performs, but you may be wrong because you don't have a baseline value for the metal since it has minimal cash-flow generation or uses. Other than to hoard. Other than to cherish as your "precious". Golum could have done as good an analysis of the ring he wanted as you can do on the gold you love.

      If it makes you feel better to call me a "charlatan" for talking sense to you, then have at it. I have no stake long or short in gold, but that's because I don't speculate. I invest. Try it sometime.

    3. Are you short gold? Simple question, simple answer. I'm not sure what your point is and why you are posting this absurd diarrhea of the keyboard on my blog. Seriously.

      Here's an idea: Why don't you start your own blog and start posting your own view and trading ideas for the public inspect. My bet is you don't have the balls to do it. You're like all the other chatboard/comment section trolls who spew their mindless crap and don't offer once ounce of data or facts to support their analysis.

      I have 4 years of data and facts to support my 4 years of analysis posted on this blog. You have offered nothing except the your hope that I go bankrupt.

      Unfortunately, bankruptcy is not an outcome for someone who is invested heavily in an asset class that has outperformed every other investment alternative for the last 12 years and will continue to do so this year.

      At least I have satisfaction of converting my years of research and experience into something that hopefully helps a few people survive what's coming in this country. Et tu, Brute? Don't bother answering that rhetorical question because you offer nothing.

    4. "I have no stake long or short in gold, but that's because I don't speculate. I invest."

      What makes you think in today's regulatory environment that you can believe what is reported on corporate balance sheets, especially the financials? Gold is a put option against the corruption and malinvestment in the system. Gold is not about generating cash flows in the system; it enables savers to quit the system.

    5. you sir are an ignoramus-- 2000+ years ago an ounce of gold bought a nice tunic, 100 years ago it bought a nice suit and today an ounce of gold buys a beautiful suit. Can you buy a nice suit for the same amount of fiat as you could 100 yrs ago? I think not. Gold holds real value and cannot be printed to worthlessness like dollars, pounds, yen, etc. Put your faith in fiat and see where it gets you. I'll be able to buy a nice suit with an ounce of gold 20 yrs from now-- whether that suit costs $1,500 or $15,000 in fiat. I might also recommend you argue with facts and not opinions you dolt.
      Justin from Canada

  9. Dave, regarding your short term play on gold posted on seekingalpha. How high do you think Gold or Silver rallies in the short term?

    1. Man, I have no idea when this market will ultimately bottom and how high it will go. I stopped putting out price targets a long time ago. It's too hard to do that in such a manipulated, corrupt market.

      I do think we are carving out long term bottom here and the next move higher is not a short term trade, it's longer term potential game-changer. Like the one from late 2005 to, ultimately, August 2011.

      If you look at the massive bull-pennant/falling wedge formation, the size and length of the move up based on the length of the consolidation period.

      The constant short-selling pressure on this market is analogous to inflating a giant beach ball and trying to keep it shoved below the surface of the water...

  10. Hi Dave, Do you think it that maybe Ben will take QE money and instead of buying Bonds, begin buyiny gold. That to me would allow the Fed to wipe out the debt and reset to the new currency. I believe that something to this effect was done in January of 1934.

    1. The only reason the Fed will buy gold is to cover its short position from leasing and swapping in order to deliver what the Bundesbank has asked for...