Tuesday, August 31, 2010

Boom Goes The Dynamite: Metals Explode Higher

After an attempted overnight take-down of gold and silver, aided by the fact that negative import premiums in India indicate that India was not a buyer last night, gold and silver exploded higher ten minutes after the Comex opened.  This is the second time this month this has occurred.  And both times were conspicuously unaccompanied by any apparent news event to trigger the move.  Here's the chart:

(click on chart to enlarge)

Here were my thoughts on this move today that I related to GATA's Bill Murphy (the author of the daily and indispensible Midas report at http://www.lemetropolecafe.com/):
Bill, we've had two significant reversals this month off of attempted overnight hits. This is really bullish, especially since, like the last one, there's not any obvious news that triggered the move. I think one of two things happened, and maybe a bit of both. First, I think the news that the IMF took its $500 billion cap off of its bank rescue facility PLUS established a new facility which will be made available to a broader array of banks is being received for what it is, which is covert printing. Second, I think some large funds like Hinde Capital are taking on the cartel. Ben Davies may well be following in Soros' footsteps (when he took on the Bank of England and broke the pound). Davies seems to be focused on silver and that may be why your Stalker source's new client is going for physical silver now. I've felt for a few weeks that this next move might well be led by the poor man's gold.
I want to add to this observation from Eric King's comment on his King News World blog, another must-read on a daily basis: 
Investors sometimes get caught up in the day to day and week to week movements in gold and silver. Don’t waste your time or energy on that, just accumulate. Standing in front of us is the greatest transfer of wealth in history. When the dust settles, those holding the gold will make the rules.
I recommend reading the comments on fiat currency/gold which accompany Eric King's wisdom.  Here's the link:  Richard Russell on fiat money/gold

It would appear to me that the behind-the-scenes battle going on among elite players, and now some big hedge funds, to accumulate actual physical gold/silver vs. paper promises (GLD, SLV, futures/forwards, etc) seems to be escalating.  In good time more of the public will want in on this action and then the real fireworks begin.


  1. My moribund juniors seem to be sprouting to life lately. But alas, we've been down this familiar road before... LOL.

  2. LOL. Junior are definitely getting a lot more volumn into them

  3. Interesting sell off in the BIG/MED/JR Canadian gold miners as the day wore on. Several hit new highs then sold off.

    Is it just taking profits from the recent run, or is it an indication a downleg is next?

    Regardless a pause may be helpful and strengthen the next up move.

  4. I opened up a paper silver position yesterday lookign for the big breakout. If it tanks you can blame me!

  5. I'm personally waiting for the kind of explosion that occurred in March 2009 when Geithner announced the initial and now puny $200 billion infusion/subsidy of zombie banker toxic asset balance sheets and so called "public /private partnership" BS. Didn't Au spike $60 on that day? Or am I still dreaming? Now I call that an explosion. These incremental $10 and $15 large stair steps are certainly characteristic of the methodical backfilling so characteristic of Au but by no means constitute an explosion. By even a most conservative assessment, given the extraordinary monetization taking place, Au should be just north of $2,000. This latest IMF move is redolent of the '09 Christmas Eve lifting of the $400 billion cap on the already nationalized Fannie Mae and Freddie Mac GSEs. We're talking $trillions and $trillions here and Au just kind of shrugs and moves up a dime. Just saying', makes ya wonder. Remember December 1979? talk about explosion! KABOOM!

  6. LOL. GYC, you doomed us! Maybe if I write a post about the metals pulling back here, and I buy some puts on AEM/GG, it will offset your move - LOL.

  7. Rothbard, I think it might have been some profit-taking and correlation with the sell-off in the Dow/SPX. We had some postion stops triggered and I'm leary about not having reloaded most of them at the close. I had covered our short position in SLW Sept 21 puts we threw on yesterday morning and reloaded most of them down 50 cents. But the stocks mostly bounced again going into the close...we'll see what happens overnight. Auto sales will be dreadful tomorrow.

  8. YF, agree with everything you say. That IMF thing is not being widely reported and it's a HUGE deal. Total "covert" money printing.

  9. http://www.bloomberg.com/news/2010-08-31/jpmorgan-is-said-to-shut-proprietary-trading-to-comply-with-volcker-rule.html

    Thanks be to Jesse

  10. Ill also toss in a buy

    IDX....long...doing real well for me as of late.

  11. Remember Rothbard now is the time to short your favourite junior silver producers just listen to Uncle Bob Hoye.

    Michael: Bob, to summarize there is an opportunity to be short the Government bond market which has run to exhaustion. If your not inclined to short you’d be cautious, raise cash, and you don’t mind having your long term gold position. Have I missed anything?

    Bob: One trade you can is the gold-Silver ratio. If it breaks through 68, it might run to 75. In the crash in ’08 it got out to 84. Also while you can sell some of your gold stocks, we’re always interested in the junior exploration stocks. You can’t move around too quickly so you can hedge yourself with the new junior-gold-stock ETF symbol GDSJ in the states. One of the other ways would be to most certainly sell your silver stocks and also play the short side on silver stocks. It will make you some money and protect your core positions and gold.

    Bob Hoye www.intitutionaladvisers.com.

    And when you have finished shorting the junior silver miners another good move would to be get your kiddies to play chicken with the trucks out on the road.

  12. When Richard Russell is saying, "just accumulate", people better listen.

  13. What is your take, Dave, about JPM shutting down their prop trade in commodities?
    Do they intend to go on with it from Singapore?
    I wonder...

  14. I dunno Fauvi. I don't think it includes gold/silver trading because those were carved out of the "commodities" basket by the Fin Reg bill and allowed to remain at the bank holding company.

    I sent Jesse some info about that - hopefully he's loking into it - if not I will do some research tomorrow if I have time.