Tuesday, January 25, 2011

OK, So Far

Both of our metals are hanging tough this evening. I kind of feel that this is analogous to a sick patient or an accident victim...if they can just make it through the night, they'll have a much better chance of survival...and if they can survive tomorrow, we'll upgrade them from critical to serious.

In reality, this is the case. The more time we can spend trending higher and the farther we can get away from 1321 and 26.54, the higher the likelihood that we have seen the lows. That said, I still place a much higher probability of a double-bottom low than a "V" low so sit tight and let's watch the action overnight and early on the Death Star tomorrow.

Finally tonight, we received some very, very strange Death Star open interest numbers today. Very strange. I'll let Harvey summarize for you: http://harveyorgan.blogspot.com/
Not entirely sure what to make of this yet. Yes, its nice that OI contracted so significantly. Having such dramatically less open contracts is unabashedly bullish. This many, however, doesn't pass the smell test. Reader Cris passed along a link from another blogger. I have no idea who this person is but "she" makes some interesting points. Perhaps Cris can add some input regarding this person in the comments section. At any rate, you can read her thoughts here: http://search.messages.yahoo.com/search?.mbintl=finance&q=wynter_benton&action=Search&r=Huiz75WdCYfD_KCA2Dc-&within=author&within=tm

There's beginning to be so much smoke, there almost has to be a fire somewhere.
1) Ted Butler claims the Chicoms are going to crash the Death Star but only after they drive price down first.
2) The silvergoldsilver guys make this idea the topic of their latest video: http://www.youtube.com/watch?v=AId_UiPtPpQ
3) That crazy email that got passed everywhere that said "Hedge Funds were going to buy as many March silver contracts as possible and demand cash and a premium at settlement" but only after they drive the price down first.
4) Silver begins a 15% correction.
5) Total silver open interest has barely budged during this entire, 3-week decline.

I don't know. I've got to think about this some more. Is it time to load up on out-of-the-money, March and May silver calls? Maybe. I'll of course let you know if I decide to take action.

I did, however, make some changes today. I sold the last of my wheat calls (clearly too early) and swapped into some more March silver and soybean calls (hopefully not too early). We'll see how that goes.

Please also take a few minutes to ponder this gem from ZeroHedge. With all the hubbub today, I nearly overlooked it and you might have, too. Just great stuff! What would we do without "Tyler"?

OK, that's it. See you in the a.m. (U.S.). Turd out.


  1. Turd, as you know from my previous posts... I'm a pretty big buyer of the gray stuff. Figured that I'd let you know I bought some more tonight in a decent size... I don't buy under 100oz anymore!

    I've never been more confident in a physical delivery problem than the last three weeks.

  2. Turd: I read your comments on ZH and followed you here. Thanks for your work. I've been into (physical) PMs for a few years and am always excited when the price goes down. I'm longterm bullish on Ag/Au like you are; I don't understand why you get so upset when there are good buying opportunities like the one we've seen over the past couple days. Is it because dips like this underscore the manipulation? I don't see it as anything but an opportunity. Keep up the good work.

  3. Excellent post Turd.

    I think I'll be making a sizable purchase of Great Panter & First Majestic in a couple of days.

    My physical is much more heavily weighted towards gold, but my mining stocks are much more weighted towards silver.

    I have the sense that the changes in the financial markets are not going to be anything close to being linear in nature. It's going to be about when tipping points are reached & then the changes are going to more rapid than what 98% of people think is possible. Sounds like things might get a little exciting in March.

  4. Obama mentioned those new crazy rules on 1099's for next year as something they could all agree on getting rid of. That's good news for PM investors. Although I know for sure everybody on this board reports all their metal sales whether they get a 1099 or not. And you carefully track your basis and resulting gain or loss too. And I know you pay the 28% rate on it for collectibles, not some lame 15% cap gain rate. Just sayin...

  5. Marc Faber says Gold in a 20% correction. Still bullish, but will be down for a while.

  6. I have yet to know of anyone who is very good at short term predictions regarding PM's. There are just too many variables involved including U.S. political motives & multinational governmental motives. I really like Faber & follow him as much as I can because he's spot on in regards to his longer term outlook. But, I take his short term predictions with a big grain of salt.

  7. I expect y'all here are familiar with FOA etc. Freegold aside, FOA had this to say back in 2001:

    """ So what are we looking for when I watch the paper gold prices and comex? What gets me excited when the market begins a little move? Well, it's not the fact that it's going up, rather we are looking to see if the impact of political change is working the gold derivative's credibility yet? I am looking for some wild spurt of trading that lasts for several days or weeks. Open interest rapidly surging hundreds of thousands of contracts, then just as fast plunging away. A paper gold market, containing tremendous price changes ($100++ or more per day, both up and down) that begin to call into question the ability of Comex to function. Not so much question it's function as an price setting exchange, rather question if it can later function at all in the metal settlement process. """


  8. Eric,

    Word. No one here would EVER be dishonest about their taxes.

    I was watching the President's speech also.

    One thing struck me: can't ALL Americans agree that the best way to retool our economy so that we are once again making things and creating jobs would be to launch a Manhattan or Apollo type project to go green, and embrace renewable energy???

    To me, it's not just a win-win, its a win-win-win-win:
    1. Its a matter of national security -- why send billions of $$ to Arab shieks and despots for oil
    2. Green energy is environmentally conscious
    3, Green energy helps address Peak Oil
    4, Obvious economic benefits

    As for PMs, nothing would be better for PM than an explosion of green energy - EVERY single aspect of green energy REQUIRES use of silver.

  9. SO thanks to the Turd for the shout out, but I really want to get everyone else's opinion.

    What I do know is that just about EVERYTHING I know, ir think I know about silver comes from Ted Butler. And he harps on a couple of points in almost EVERY newsletter, which I strongly recommend to any serious silver investor:

    1. He is almost like a broken record in saying you should sell gold to buy silver. Just smart investing. Silver has WAY more bang for your buck.
    2. Silver is a SMALL market. Small enough that movement of just a few high net worth individuals or entities would shake up the price structure. ALL of the silver in the world (about a billion ozs) is worth $30 billion at today's prices.
    3. At some point in time, delays in delivery will affect industrial users, and this will likely set off a panic in buying as silver is INELASTIC: ie increase in price DOES NOT decrease demand, increase in demand DOES NOT increase supply. Companies WILL NOT let their cars, computer, solar panels, intravenous catheters, etc -- whatever they produce -- WILL NOT allow their production to halt bc of lack of one small, relatively minor but ESSENTIAL component of the product. They will seek that component and hoard it.

    The plot outlined by Lady Wynter, and EVERYONE should take the time to read ALL of those posts at the link Turd posted, incorporates ALL of these factors.

    And to remind Turd, to the best of my knowledge, that crazy email he mentioned in #3 is the first of those posts by Lady Wynter -- they are one and the same.

  10. Cris--

    Maybe I'm just old school or something, but to me Gold is Money, and Silver is a speculation.

    Don't get me wrong. I luv em both. I own em both. But any investor should never forgot why he owns something. It helps me keep my head on straight to keep the above paragraph almost like a daily affirmation or something.

  11. Eric,

    I respect and value the opinion of ANYONE who posts on the Turd's blog.

    But i have to respectfully disagree with your characterization of silver as mere speculation.

    Judas was PAID 30 pieces of silver to betray Jesus in Roman times.

    The Chinese have even until the 20th century valued silver as currency.

    And our own US Constitution DEFINES the value of the dollar in terms of both gold AND silver.

    I will go even further and claim that silver is THE "precious" metal, as it is both monetary AND industrial, being the single best conductor of electricity and heat of ANY metal, amongst other valued properties.

    We will have to agree to disagree on that one, my friend.

  12. I'm no TA expert ( T and A maybe, but not TA), but that USDX chart just looks horrible to me.

    Actually, to be honest, the gold chart looks like crap to me too.

  13. Right on about silver being an awesome conductor. Have you ever stuck a sterling silver spoon into a hot cup of coffee? You'll burn yourself man.

    That just has to be useful in making more efficient, "green" energy tech stuff.

  14. Eric,

    I have similar views, and that's why my physical is in slanted towards gold & that's why my miners are slanted towards silver. I bought most of the physical gold prior to acquiring the miners.

  15. Chris,

    You make very valid points. One of my thoughts was that if *somehow* the money printing stopped or wasn't able to keep up, & there was a big deflationary collapse, silver would get hit much harder than gold.

  16. I love this site. You guys bring a lot of knowledge and common sense to the table. You also inject a lot of humor that keeps us in check. I suppose you could almost chart human relationships much like the stock market. For example, "Oh, I'm hitting resistance with Steve. Maybe I should stop talking to him for a few days." lol. Anyway, keep up the good spirit and meanwhile long live TURD!

    Lol on whoever said that they have their tin foil hat extra duct taped these days. Funny stuff.

    Good night, all...

  17. Gwen of the CFTC, episode 2:

    Gwen tries out for the VIP Silver desk


    Gwen must prove she has the "right stuff" if she is to win a promotion to the VIP Silver desk at the CFTC. Can she do it?

    Episode 1: Gwen joins the CFTC:


  18. Harvey cracks me up (though the implications are sobering), stating matter of factly, "...If this is true, the game is over as there will be a default at the comex which will bring on defaults at the SLV and GLD, and then a default at the Bank of England, and then all the banking system in the USA. I will be watching this closely." No shit.

  19. Yeah, Harvey was over the top tonight that's for sure. Harv, you're scaring me, man.

    OMG, I've been chatty Kathy on this blog all day long. Gotta get some sleep.

  20. Wow, Harvey's comments tonight are crazy! Between that and Marc Faber likening O-blah-blah to a prostitute, what is this world coming to?

    Harvey Organ: "There have been rumours that certain hedge funds and sovereign wealth funds are willing to take possession of all gold and silver. In gold it is the February month and in silver it is March. If this is true, the game is over as there will be a default at the comex which will bring on defaults at the SLV and GLD, and then a default at the Bank of England, and then all the banking system in the USA....If the long holders here are sovereign wealth funds, then they are also in strong hands and quite capable of bringing down the usa financial system."

    Reminds me of that 1981 movie, Rollover (must watch segment if you want to see how the endgame might play out): http://www.youtube.com/watch?v=GPYLJoq_40Y

  21. January 25 - Gold $1332.30 down $12.20 - Silver - $26.81 down 51 cents

    Super Bullish Gold Open Interest Change/Eric Sprott: Silver Investment Of The Decade

    "Don't think there are no crocodiles because the water is calm." … Malayan proverb

    GO GATA!

    Right before I went over to our GATA get-together at the Lion’s Pub in Vancouver, I checked the markets again, only to watch another PLAN C Access Market bombing by The Gold Cartel, one which had the prices of gold and silver reeling on the downside. Their attack has been a relentless one that has been on-going around the clock. The information sent our way from London on January 5 that the French led G-8 was going to bomb the gold and silver markets could not have been more on the money. It has been a one way street since then.

    If the goal of The Gold Cartel was to flush out the gold and silver spec longs so they could cover short positions before the mega moves higher coming this year, it has worked. The following open interest numbers for yesterday are stunning to put it mildly. Never seen anything like it. The gold open interest fell 81,752 contracts to 498,998. The orchestrated cabal takedown has sent a hoard of longs to the sidelines. The silver open interest drop, down 5368 contracts to 128,228 was very large, but nothing like what happened in the gold pit.

    going back to Sept 2008 on a daily basis,

    the largest one-day o/i drop for gold was -28,254 on November 24 2009.


    Such a drop in gold is stunningly bullish for the weeks ahead. The market has been cleaned out. The COT report on Friday ought to be a very interesting and telling one.

    Eric Sprott gave his usual superb presentation at the Vancouver conference and had the standing room only room drooling about silver. The supply/demand situation is so stunningly bullish that Eric has it as the investment of the decade. I could go on and on here, but at minimum he expects the gold/silver ratio to return to its historical norm of 16 to 1. And at some point Eric thought it might possibly overshoot to 10 to 1.

    The technical analyst who Eric respects very highly, and one that Eric brought to the attention of the attendees, is looking for $2100 gold in the late spring. The gold/silver ratio won’t drop to 16 to 1 overnight. However, if silver does what Eric thinks it is going to do in the months ahead, we’d be looking at $130 silver. If the gold/silver ratio dropped to 30 to 1, we are still looking at $70 silver, should gold make a move like his top tech guy is predicting.

    If there ever was a time to pick up silver on the cheap, compared to where it is going to go, this latest drop ranks at the top of that heap.

  22. I agree with your first commenter. I buy 20 to 30 oz at a time and prefer to angle in. Got the bars at .95 over spot.

    I truly think the floor is pretty much in. I've been a little confused myself at all the weird activity lately...

  23. Also:


    I believe that one question has been answered quite emphatically as gold tested $1321 this morning. Forget the stories of Chinese or French manipulation of the gold/silver market. It is business as usual as the cartel seeks a low point tomorrow for the price of gold to coincide with what happens to be a confluence of Feb options expiry and FOMC closing statement time. Indeed as tonight is the STATE OF THE UNION ADDRESS, presumably the "I am right and you are right and all is right as right can be' euphoria is being engineered to create the best possible back drop for all this extended official posturing. I don't know whether the advent of the DAVOS meeting is also regarded as being important. If you do attend DAVOS, I believe the hotel where you are billeted is of immense importance and also you should be able to add adverbial time/geographic phrases to your lunch time conversation -'When I was talking to so and so this morning in London etc '-otherwise how do people know you have a very fast private jet.?

    If we accept the business as usual hypothesis, then one anomaly need NOT be answered and that is the postulation that the Chinese parted with an immense amount of physical silver a few years ago and were sufficiently naive to believe that the physical silver could ever be returned. There have been rumours that contract holders will fully fund the FEB COMEX gold contracts and the MARCH SILVER contracts and demand physical delivery-which would cause default-about time too. If this is the plan, Or perhaps the plan is to accept a cash settlement at a high premium, which will add significantly to the cost of gold price suppression, since the same speculators will have more funds for a quick repeat of the same action on an even bigger scale at the next expiry date when delivery is an option. The knowledge that there is a massive deficit in physical custodial gold holdings and that unallocated physical gold investment accounts are now just ponzi proxies for paper gold is now so widely disseminated ( and never rebutted, just officially ignored) that it seems the final denoument may at last be near.

  24. Get your voice out to Obamaaaa..aaaa


  25. Will the cartel give up now or will they having helped silver and gold down this low go for that extra yard? I hope so.

    Will be actually good to take a bit extra off silver and gold to allow those who missed the boat get on board and those with small resources be able to load up extra at the cheap price before this express train leaves the station.

    I'm really hoping the cartel having got this far really kick the crap out of gold and silver, never fear, they are like corks, the more you push them down in the water the faster they will pop up.

    Marc Faber as noted reckons gold will correct 20% from top to bottom, that would put gold in the 1,250 range.

    Talking about Chinese and silver. My wife (HK Chinese) is 48 this year and she is the year of the rabbit, thus it is 4 cycles of the Chinese lunar calendar for her. Have bought her this lovely set of Rabbit themed silver coins from the Perth Mint to give to her in a few months time.


    Have a look at this 10 kilo lunar rabbit coin being minted by the Perth Mint.

  26. So far so good this morning, holding above 27. Let's see if Blythe returns at 8:25

  27. "Marc Faber as noted reckons gold will correct 20% from top to bottom, that would put gold in the 1,250 range."

    My math says $1430 x 20% = $286

    $1430 - $286 = $1144

  28. noquit: That is great stuff. I suggest that everyone read both entries.

  29. Looks like Blythe really wants to give us our double bottom...

  30. Btw, this is kind of interesting:

  31. Could it be that Lady Wynter is the alter ego of Blythe Masters?

  32. morning smackdown appears to be underway.

    "The beatings will continue until morale improves!"

  33. Here's another interview with Marc Faber. This one appears to be more like the normal line from Marc.


    Regarding that one that was posted on ZH last night, yeah that one was pretty wild. Ole Marc must have had a little schnapps in him for that one.

  34. @Turd

    What do you think about how the last few rallies all came off friday lows?

    Is it likely we see a low this fri and then another during the New Year week, rather than a bottom today?

    I know picking bottoms is for monkeys but buying history suggests that buying on a wed may not be the best of times.

    Thanks :)

  35. huge drop in gold OI confirmed, new OI: + 19940


    still wondering what's going on

  36. qussl: Good points. Maybe the double bottom comes on Friday? I'm just simply looking at numbers and percentages, not necessarily timing and cycles.

  37. My double bottom is getting sore from all this abuse.

  38. PMs have gotten the abused wife syndrome. They keep taking their daily beating without a fight. One of these days they will finally crack and pull out the shotgun and blast the abuser across the room.

  39. Another LOL on the word verification. "unched".

    I'd be happy if the metals can end the day "unched"

  40. @ Eric: this one's for your 'unched' comment

    There once was a shrew named Masters
    Whose meddling created disasters

    She ma-nipulated
    then Comex con-stipated

    And the 'bugs' stuck it to all those bastards

  41. Pining--
    Love limericks.

    Here's one I stole from some guy on ZH:

    My silver is on it's way back
    Despite the Blythe Masters attack
    It sure would be nifty
    If it shot up to fifty
    My wife would stop giving me flack.

  42. a trader once told me, "don't become emotionally attached to your positions, it's the easiest ways to lose money"

  43. There's a new blog entry over at KWN

  44. Eric- Nice! A little gallows humor never hurts when the EE is on a pre-dawn strafing run.

    BTW- anyone else wondering what will happen to the price of oil if Egypt goes into full-blown riot-in-the-streets revolution mode? The Suez canal is the world's biggest choke-point for oil tanker traffic- and if oil roars, the dollar falls, PM's...

  45. It's my conviction that in the long run, fundamentally, higher oil means higher gold. But in the short run, shit, I don't know anything anymore.

  46. Nice pop in the miners today. Hope I didn't just jinx it.

  47. @ Leopard:

    Understood, and it's sound advice. That said, I cannot escape the feeling that the PTB keep trying very hard to bend me over and have their way with me- the quiet confiscation tax of unlimited fiat printing, the market manipulations, etc. I am not going to pretend I'm happpy about it, or that I do not have a dog in this fight.

    Silver breaks 26.50 I'm cooly, rationally closing out my speculative positions until the drop runs its course. That said, at some point the machinations will backfire and I will happily do a dance on JPM's grave, 10 oz bar in one hand, drink in the other.

  48. Powder dry, waiting to see the whites of their eyes.

  49. There's some funny masochism here. Lately I've been doing the same, waiting for the monkeys to beat the hell outta PM and then BTFD with a lots of dry powder.
    Buying today is a no-go due to OpExp and FOMC meeting. If the miners hold ground for the rest of the week and silver doesn't break through 26.40, maybe we bottomed.
    What disturbs me is the equities correction pending, asian liquidity probs and Faber's -20% on gold (though he used the world "could" not "will")

  50. Seriously, to many of you are taking this Faber prediction a little to "exact". I read a lot of the man's work, and respect him highly, but he doesn't have a crystal ball folks. His projections on gold price have been off by more than $100 so many times I can't even count them all. Most of the time he's simply making a broad guess, kind of like thinking out loud, and realizing people are looking at you wierd because you're talking to yourself. We either hold at these levels which are almost exactly a 38% retracement (meaning yesterday's lows) at 1320 gold and 26.50 silver, or we get the 50% retracement around 1292.80. Either way we're right there...

  51. Cris, the reason why an Apollo type effort would not work for "green" energy are multiple:
    1. Any large effort requiring a large outlay of tax payer funds would require a crisis. Remember that the original project was spurred on by the launch of Sputnik. The American public was terrified into spending the money in order to demonstrate, more to ourselves than to anyone else, our technological, therefore moral, superiority. No such main stream crisis exists today. Sure, the greenies tried for decades and have been mostly successful in indoctrination of the population, but have failed to spur us into action, why?
    2. The green movement has always been a political movement. From the earliest pro nuclear power adopters, to the latter watermelons (green on the outside, red on the inside)the green movement is pure politics. The problem is that the watermelons, initially funded by the KGB, are anti capitalist. For them is not about the way to produce clean energy, it has always been about limiting the technological, industrial and financial health of the west. Most Jersey shore watching Amuricans feel that buying some CF light bulbs and recycling their bottles is about the extent of what is needed.
    3. Profit motive is the most powerful incentive. People will risk their lives, sell their bodies and loose their selves just for profit. Until there is profit to be made, there will be no massive sacrifice. Yes, a new form of energy would be the most profitable invention this century and many corporations are experimenting but non is promising enough to trigger the kind of effort that triggered the Apollo program.
    4. Men of vision. The light bulb required an Edison, powered flight required the Wright brothers. Yes, there are many scientists researching alternative energy, but they are not coming at it from the profit motive side. They are doing so from the "religious" save mother Gaia side. Wont work.

    Believe me. I would love nothing more than a revolutionary form of energy that would permit de-centralization of the grid and improved independence. Without energy there is no community. But I'm also a realist.