Friday, November 26, 2010

Black Friday Shenanigans

Sorry but I've got to keep this brief today. Lots of football to watch.

No one who holds or trades the PMs should be surprised by what is occurring today. To summarize:

1) A billion Chinamen are the first to really feel the squeeze of HellyBenny's printing press. The cost-push inflation is already rearing it's ugly head there as dollar-denominated input costs are soaring. One billion people are hard enough to control when they're content. One billion hungry people are an entirely different matter.

2) The EU continues its death spiral which is leading to dollar strength. As noted in "A Quick Buck" earlier this week, a move through 79.60 on the USDX signaled a move to, perhaps, 81. Well you got it.

3) Blythe and The Flying Monkey Brigade have predictably seized upon these events to drive prices lower on this light volume, holiday Friday. Gold found buyers, however, right where I'd expect, at the 1350 level.

4) One other thing about the Chinese that you must understand. They are desperately trying to exchange their dollars for hard assets and precious metals. Anything they can do to temporarily drive prices lower, they will. Just whom do you think our buyer(s) of size are, anyway? They know that any move to raise rates and/or margin requirements will trip all the mindless, robot algos into sell mode, thereby lowering the prices of the items they wish to accumulate. The long-term trend in gold and silver is undeniably UP. The Chinese know this, too, and they hate to overpay so they will occasionally "manufacture" weakness to help their cause.

The charts below speak for themselves. Next week still promises to be a crazy, volatile and exciting week as $36B in freshly printed greenback flows into the Primary Dealers but let's worry about that then. For now, ignore the markets, kick back, have a few adult beverages and watch some football. That Alabama/Auburn should be a good one.


2:00 EST update: Gee, I wonder who started buying at 1350 and has, in the past three hours, managed to put $15 back into the price of gold? Hmmm, let's see. Who could it be???

28 comments:

  1. OK I partially take back my comment on your previous post. It's highly likely they raised the margins so they could buy on the inevitable dip. But they are still idiots because they're not the only ones buying on dips and their game is only going to cause the prices to explode that much higher going forward. This is an ugly extremely temporary and ill-conceived "fix" for the Chinese government. Nobody can manipulate market forces forever, no matter how ruthless.

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  2. They don't need to manipulate forever, only for just long enough...

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  3. I'd like to ask readers to go back and re-visit this, too.

    http://tfmetalsreport.blogspot.com/2010/11/all-that-glitters.html

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  4. This comment has been removed by the author.

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  5. I was expecting an EE attack given the exceptionally low volume on a day like today and because it would paint the right shoulder and help trick a few TA fools but not the Chinese margin hike. Although it makes sense on their part. They were just trying to maximize the impact and create the best opportunity for themselves that they could. I would say the fact that so much manipulation on a day like today only merits ~1% drop in gold and ~3% in silver is rather comforting.

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  6. So what is their exit strategy, to allow the yuan to appreciate? Gold and silver can be stockpiled and not consumed but everything else has a shelf life and/or has to be replaced. It seems to me that they can get some temporary benefit now but they may be setting themselves up for serious supply problems in the future. If demand isn't shrinking along with price, then price drops result in pulling additional future production off the market. Silver is a perfect example of that.

    Turd, I read that post again and I'm wondering what makes next week's $33B in POMO special vs. POMO a few weeks ago of $31B. Why will next week's make more of an impact?

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  7. Looks like the Chinese know how to play the markets very well for being communists. I wonder what else they know how to do. Looks like Blythe and her flying monkeys ser going to get their fat Christmas bonus after all. I have a feeling we are going to see the Dow up next week Turd, considering the news from Europe, POMO and the spin on Holiday sales.

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  8. Flaunt: You could say the $32B of two weeks ago helped stop the correction at 1330 and, from there, gold rallied $50.
    The huge POMO next week combined with the serious, serious delivery issues of the silver Comex should make for a very interesting week.

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  9. I just received this email from General Jim. If you're not on his distribution list, you should be.

    Dear Comrades In Golden Arms,

    What you are witness to is adults acting like children.

    A currency war solves absolutely nothing whatsoever.
    A currency war puts extreme strains on exports.
    A currency war never establishes a currency's value versus its trading partners than can be maintained for any meaningful period of time.
    A currency war creates currency levels that have nothing to do with reality economically and are unsustainable.
    A currency war is endemic to QE in the entire Western world.
    A currency war is destructive to all.
    A currency war may cause gold to sell off like today in one currency, but it also causes gold to rise in others.
    A currency war in time elects gold as the only viable currency.
    A currency war is exactly what will give you levels of the gold price forecasted by Armstrong and Alf that are well above what we have looked at for over 8 years.
    A currency war is what Merkel declared in her negative speech a few days ago concerning the euro.
    A currency was is what the children running our monetary affairs have entered into.
    A currency war is akin to children on the playground playing Keep Away.
    A currency war's game of Keep Away is to keep away prosperity.

    1. Shut down your quote machine.
    2. Take a brisk walk.
    3. Drink some cold water or whatever.
    4. Review my illustration below and Monty Guild's recent comments.

    Respectfully yours,
    Jim




    It is absurd to believe that the U.S. dollar will be a safe haven over the intermediate term

    An even more absurd belief is the one that puts U.S. dollar and U.S. debt as a safe haven. There is not any convincing economic evidence that the U.S. dollar is well managed, and there is no reason to believe that the dollar will rise in value. In fact, it is the U.S. governments' intention to devalue the dollar and to print money to avoid a deflation in the U.S. Why do some global commentators see the dollar as a safe haven? In our opinion, the only safe haven is precious metals, energy, food and other assets which will hedge against the inevitable inflation that the above policies create.

    We wish everyone an enjoyable holiday.

    Sincerely,

    Guild Investment Management

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  10. Re 2pm update: China?? :)

    They are clearly orchestrating some kind of price dropping scheme. Check out this news release titled "PBOC Researcher Calls on U.S. to Sell Gold Reserves, People's Daily Says."

    http://www.bloomberg.com/news/2010-11-25/pboc-researcher-calls-on-u-s-to-sell-gold-reserves-people-s-daily-says.html

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  11. It appears that China behaves like many zerohedgers or pm holders in general,who welcome and hope for a temporary precious metals take down,hoping to buy or load up on the dip.The difference is China is actively promoting the take down,she is not content with just hoping.
    On another note is it rational to suspect that POMO dollars are used by the EE to supress pm prices?

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  12. Bullion banks are clearly painting a HS-pattern on the gold chart for the uninformed tech fund, hoping to trigger some sell-offs. Looks like this trick is starting to get old and less effective day by day.

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  13. http://www.zerohedge.com/article/surge-after-hours-selling-takes-gold-volatility-index-all-time-low

    Very interesting after hours actions...

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  14. If/when china pegs the yuan to gold it allows many chinese to grow rich with spending power. That will trigger growht and employment for chinese. Its either that or war. I am looking from chinas point of view.Too many single men, too few jobs brews trouble .

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  15. @1meal,
    wich reminds me of how concretically we westeners ( at least our ladies) will be assdrilled, and at the time, I guess, it will be for real goods instead of paper.

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  16. "george said: On another note is it rational to suspect that POMO dollars are used by the EE to supress pm prices? "

    My take on it is yes it gives JPM more ammunition for take downs however a lot of the other banks getting POMO dollars will flood into stocks and commodities with their new found wealth.
    They will probably also pile into the short side when JPM gives the signal ... sort of part time monkeys you could say.

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  17. Overall POMO means explosive upside for gold and silver though.

    http://ftalphaville.ft.com/blog/2010/10/15/371841/the-pomo-effect-charted/

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  18. Why do you write shit by hand?

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  19. Head: If you are referring to Turd's hand written notes, I have to tell you that they are probably one of the best features of this site...they bring much needed humanity to our digital existence.

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  20. His hand written notes are awesome. keep up the good work Turd.

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  21. Steven,nice to read your view.
    But..POMO means explosive upside for Gold and Silver or QElight and especially the promise of QEII was responsible to this explosive growth?If fed pomo dollars are used to uplift the pm prices..it looks to me like the EE is using its own fiat to selfhurt.

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  22. For the record, I am a die-hard goldbug, so please take this comment in the right spirit.

    But if prices will suddenly take a hike, I don't think POMO will have much to do with it. None of POMO is heading for PMs.

    I remember earlier this year, there was a surge of ostensibly impressive and bullish info that ultimately had very little effect on PM prices, other than to put a floor under the new prices. The info included:
    - Andrew Maguire's testimony
    - the near collapse of the Euro, which led to feverish Retail buying
    - Central Banks becoming net buyers again (a seismic event)
    - the mysterious BIS entry of 348 tonnes, implying the bailout of a bullion bank or of the LBMA
    - the already obvious presence of China, Russia, India and others, in the buying arena.

    None of this seemed to carry its implied punch in the market; collectively, they ought to have warranted a gold price of $2000 or more. I share Jim Sinclair's frustrations.

    If we get the next move up before the new year, as hoped for and expected, it will likely have more to do with silver's surge forward, on the back of physical shortages that are finally likely to be laid bare. POMO is just background noise, because it is not more newsworthy than all that earlier stuff.

    It is said that at current prices, Bill Gates could buy the entire silver market; well, a buyer or buyers of such size, if they have finally appeared, seem to be intent to do that. This is likely to propel silver to double or triple in price. If this likelihood materialises, then this may or may not, finally be news that gives the sluggish gold price a kick up the backside. Nothing else is going to do it in the immediate future.

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  23. and on a point of humour, the Royal Mint in Britain seems to be doing everything that it can to deter silver sales.

    Firstly, its best value silver coin is the one ounce britannia, at nearly 100% over spot price at £30.

    Secondly, the current design, must be the ugliest and most puke worthy item that they have ever sold.
    Don't believe me?
    http://www.royalmint.com/store/BritishSilver/BR11AGN.aspx

    In a twisted sort of way, it takes great talent to produce something so ugly.

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  24. I like the handwritten notes. Yes, digital chart drawing exists, but I agree, the ruler lines and print outs give the blog a humanity that makes me smile. I watched the SNL skit to remind me of the name TF. I recently read that a weak mind can't see substance when presentation distracts them. I can't quite tell my wife that I read "Turd", but the content is truly wonderful. I hope the name and the presentation keep the weak minds away. Cheers, and thanks for the blog!

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  25. "Secondly, the current design, must be the ugliest and most puke worthy item that they have ever sold."

    Yes, the Queen is quite ugly and puke worthy...oh, wait, you meant the reverse?

    All kidding aside, I wish somebody would tell those pesky e-bay bidders to stop pushing the price of pandas up so much. I can't even find one for less than $38 nowadays.

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  26. Hi Turd,Goldenballs of Z/H alias Bob.A lot of shit around at the moment so I need a big hat,where did you get yours ?

    Whats the score here Turd.Far as I am concerned this will be paper manipulation in some form.The amount of physical out there is either not for sale,already sold or too valuable to be sold,with paper at 100/1 against physical it seems the market is being taken down,to save the banks from catastrophic losses or imminent very bad news (say Spain and Portugal and maybe Italy) and therefore when Gold and Silver shoots next week it is harder to reach recent record prices.One thing is certain a great dip to buy more physical in.

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  27. Firstly, its best value silver coin is the one ounce britannia, at nearly 100% over spot price at £30.

    Secondly, the current design, toner cartridges must be the ugliest and most puke worthy item that they have ever sold.
    Don't believe me?
    12a
    In a twisted sort of way, it takes great talent to produce something so ugly.

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