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

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.

21 comments:

HalTuesday, 19 February, 2013
luck in picking a bottom sometimes works.

thanks your your views. probably among the best thought out around including the "big guys"
.
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AnonymousTuesday, 19 February, 2013
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.
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AnonymousTuesday, 19 February, 2013
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.
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AnonymousTuesday, 19 February, 2013
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.
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AGWednesday, 20 February, 2013
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.
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AnonymousWednesday, 20 February, 2013
Why on earth are prices for precious commodities going down when they are precious little on earth?
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AnonymousWednesday, 20 February, 2013
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.

http://www.24hgold.com/english/news-gold-silver-the-great-gold-deception-and-misdirection.aspx?

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AnonymousWednesday, 20 February, 2013
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.
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leeWednesday, 20 February, 2013
Dave, regarding your short term play on gold posted on seekingalpha. How high do you think Gold or Silver rallies in the short term?
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leeWednesday, 20 February, 2013
Thanks Sir!
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AnonymousWednesday, 20 February, 2013
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.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.