Tuesday, January 18, 2011

Searching For Clues

I want to buy. I want badly to buy. Greed is currently defeating fear. But I wait...

First, let's sum up what we know:

1) In the face of dollar weakness, the EE manufactured a selloff in the PMs last week. It began early Thursday after March silver traded up to 29.81 and looked a cinch to blow back through 30. It continued on the Globex Thursday afternoon and culminated on Friday at 28.10. All in all, about 6% drained from price in about 30 hours. Pretty impressive, Blythe.


2) After retesting those lows just above 28 yesterday, silver jumped this morning back toward, but not through, 29.
3) Gold is not helping at all. We've grown so accustomed to seeing the dips bought by the BoS et al, its kind of strange to see the opposite but it is clearly evident in today's action.
4) Copper has been providing some stability to our PMs. After selling off to begin the year, it has rebounded to within a few pennies of its 2010, year-end high 449.80. As you can see, however, we've gotten ourselves stuck in a tight, little range. IF we can get copper to move higher, back toward that 449 level, buying will spill over into silver and gold.
So, you're probably asking yourself: What does this mean, my dear Great and Powerful Turd? Frankly, I have no idea. Just kidding.
OK, as you imagine I do have some thoughts:

1) Hold greed in check. It is not safe to buy with impunity just yet.
2) Watch Dr C for clues. A break above 444 that holds for a few hours or a day will inspire confidence.
3) I'd love to see some buyers emerge in gold once it holds 1365. If so, we'll at least head back to 1385.
This overnight period will provide our final clues. I suspect that I will do some call buying tomorrow. It may even be some aggressive buying but I want to wait until I see just a little more evidence.
Of course, I will keep you posted. TF

ps Some nice folks in the UK asked me to post a link to this short, educational video. You might pass it along to any recent or would-be converts: http://www.youtube.com/watch?v=-HaqwFJj4ZY

38 comments:

  1. Just look at the stats for Silver Eagles on the mint website... Over 4.5M at the 3rd week into January which is a new all-time high:

    http://www.usmint.gov/mint_programs/american_eagles/index.cfm?action=sales&year=2011

    This market can't be kept down much longer.

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  2. great point, flaunt.
    Blythe can only do so much.

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  3. Turd, would you rather raise your profit a few points or buy physical while you still can?

    Michael G

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  4. Excellent point, Michael.
    In this instance, I am commenting on short-term trading trends, only.

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  5. Regarding copper, isn't it true that JP Morgue controls 90% of copper? If so, you can bet that nothing will happen with copper unless they want it to happen. Some say that the bank is using copper as a hedge against their silver positions.

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  6. I appreciate the short-term TA Turd, though I may be in the minority on that. Those strictly looking to buy physical right now would do well to add on any weakness since it's not going to matter as much in the long run.

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  7. @flaunt,

    Ounces sold: 4,588,000

    LOL! HOLY CRAP! That's more than a million more than last week when everyone was raging about the sales of silver being at 3.4M.

    The FUN is going to begin. At this rate, I hope they DROP the price more and we can get this SHIT over with already!

    I'm with FOFOA on the "paper price" of gold and silver going to collapse - and the slack being taken up with PREMIUM. Imagine silver at $3 but premium at $900! Nobody, not even John Maynard Keynes can stop the FREE MARKET!

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  8. This comment has been removed by the author.

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  9. Bernanke is not copying Keynes, he is copying Lenin.
    http://www.marxmail.org/debauch.pdf

    "Hundreds of thousands of rouble notes are being issued daily by our treasury. This is done, not in order to fill the coffers of the State with practically worthless paper, but with the deliberate intention of destroying the value of money as a means of payment. There is no justification for the existence of money in the Bolshevik state, where the necessities of life shall be paid for by work alone.

    Experience has taught us it is impossible to root out the evils of capitalism merely by confiscation and expropriation, for however ruthlessly such measures may be applied, astute speculators and obstinate survivors of the capitalist classes will always manage to evade them and continue to corrupt the life of the community. The simplest way to exterminate the very spirit of capitalism is therefore to flood the country with notes of a high face-value without financial guarantees of any sort.

    Already even a hundred-rouble note is almost valueless in Russia. Soon even the simplest peasant will realise that it is only a scrap of paper, not worth
    more than the rags from which it is manufactured. Men will cease to covet and hoard it so soon as they discover it will not buy anything, and the great illusion of the value and power of money, on which the capitalist state is based will have been definitely destroyed.

    This is the real reason why our presses are printing rouble bills day and night, without rest." ~ Vladimir Lenin

    "Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose." ~ John Maynard Keynes

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  10. "Imagine silver at $3 but premium at $900!"

    At what point does the premium become so high that it is considered ridiculous and unbelievable? The premium has been rising and now its somewhere around 11% for an ASE, but the MSM and silver bears don't seem to even notice. If the premium keeps rising to 20%, 30%, 40%....Won't people find it odd that they are paying more for the premium than the coin?

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  11. Maybe I need to read FOFOA more but I find it hard to make it through a single one of his/her extremely lengthy posts. I don't really grasp the scenario where physical price runs away from paper price. Has this ever happened before in any commodity? Paper price has at least some linkage to physical since producers aren't going to be willing to sell forward in the paper markets if paper is very depressed. There would have to be a mass exodus of buyers from the paper markets coupled with a balls-out effort by the likes of JPM for this scenario to play out. Seems unlikely to happen anytime soon especially since China needs to secure as much supply as quickly as possible for future plans to monetize.

    I won't say never but if it does materialize it will have to be part of the apocalyptic future many are predicting.

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  12. reefman -- Chilling quote from Lenin. I always go back to the idea that if people just refused to give a monopoly on money to the state, they wouldn't be capable of destroying free market capitalism, regardless of who is running the scam called government.

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  13. I have been adding to physical positions weekly choosing the standard 15 to one ratio and buying smaller, 5g and 10g gold ...opting for the higher premium for trade-ability and 1099 evasion if I choose to swap some for fiat next year.

    One serious hiccup, bond yield rises, CPI print, man, even the debt ceiling crisis looming large and ultimately extended..we are walking on thin ice. Can't understand your reluctance to pull the trigger on physical.

    Climb that wall of complacency Turd.

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  14. so the turd's on the fence?
    wonder which way it'll plop.?.
    hope its on blythe's side.

    c'mon tf, with the donations here you could become a B.O.S. !! lol

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  15. or does the mere fact that you are in possession of an anaconda automatically make you a B.O.S. with any old purchase?

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  16. In the recent PM run up, when Turd launched the watchtower blog, I couldn’t help but feel uneasy as prices just kept on rising.
    Yeah its awesome to have those big up days but somehow there just weren’t enough down days to maintain the angst that seems to go with ownership.

    Ok, Ive only been buying since January ’08 and my every purchase guaranteed a whopping dip, so I am still suffering a bit of angst ( just seen a years worth of potential pension funding fall off the total ) but I reckon it’s a large part of PM ownership at this stage of the Ponzi collapse.

    So I found myself smiling when the BoS suddenly mutated into SoS (shorters of size ) and the profit takers, blythe monkeys, elliot 4th wavers etc, all showed up just in time for a tumble.

    Hey, they may all be relevant but what seems to be certain is that the subtle effect of ‘socionomics’ is at play. I reckon we had to see a correction of size simply because we were all getting too bullish. All the other stuff kicks in once the downward trend is established.

    So, even with the excellent commentary we get here we still don’t really know when to buy and sell to perfectly time the market. My last sale ( to get out of Bullionvault’s London store and into Zurich ) looked like it was just beyond a big crest and bound to drop further and obviously didn’t drop at all, it just went up ( and up …)

    My conclusions so far -
    The evil empire has to suppress PM prices but they also have to allow them to rise in line with commodities.
    So just BTFD and realise that we can call any moment a dip. If you need some technical assistance, use a 1 minute chart, cos when you get that close to the action it’s easy to find a microdip.

    Anyone brave enough to trade their metal has my total respect.
    I have learned enough here to know that I do not know enough to risk it.

    Or perhaps a daily buy /hold/ sell consensus, like you get on some websites where you can vote for things.
    Might be interesting to see how a consensus of proper metalheads calls it …..

    rbl

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  17. @flaunt,

    Read this article from FOFOA which explains his theory on how the "paper price" can collapse:

    http://fofoa.blogspot.com/2010/09/shoeshine-boy.html

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  18. By the way, flaunt, I do find his articles excessively verbose as well. But.... I read them when I get a chance - usually print them out and read them in my car at lunch time.

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  19. Turd, a question about futures/options since you're up on that -- When I look at my quote screen for futures and options, I find futures contracts available for the month of March, but when I look at the options all I see are Jan, Feb, and Apr. Are my quotes messed up or to March options not exist?

    Thanks.

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  20. @ flaunt

    Physical diverging from paper somewhat happened in 2008 after bankers' massive paper rigging in Fall. I remember silver coins were either all sold out or priced at 9$/Oz + 4$ premium and at least 2 months of wait for delivery. Bullion bars were in backwardation in the physical market while the price was crashing. Many rookie investors were scared while scratching their collective head wondering "WTF is going on".

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  21. Silver through $29. BoS is back!

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  22. Look at it run in Hong Kong! $29.15 and climbing. Hope everyone BTFD.

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  23. D@mn, Hong Kong came online and it looks like it is on like donkey kong!

    Ohhh Blythe, better unleash the flying monkeys of doom or all your hard suppression will go bye bye.

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  24. I firmly believe that we have witnessed the lows. Technicals aside (which I find very bullish), the fundementals of the PM markets command us to commit to our positions now!

    Go long and sleep well.

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  25. Heads up- - 1/26 is gold & silver options expiration day.

    www.cmegroup.com/trading/metals/files/2011_expiration_calendar_metals.pdf

    Unclear how it will figure in this latest BM fest, but we could easily see downward price pressure until late next week.

    Just saying this in support of the idea of a little more wait and see before buying more physical. BM has engineered another fantastic sale on PM, but like you I want to see where this goes before loading up.

    Thanks again Blythe.

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  26. MSM continues its very slow conversion to reality:

    From the FT:

    Brace for a ‘perfect storm’ in gold

    Investment implies moving some part of one’s assets from financial safety to a position of acceptable risk with the hope of increasing wealth over time. What qualifies as “acceptable risk” may thus be seen to be the gating question for the investment criteria of a “prudent man”. This has come to be known as the Prudent Man Rule to guide persons entrusted with the finances of others.

    Although the rule remains a guiding principle in the fund management industry to this day, at least one key element has changed. In 1971, our understanding of ultimate safety was transformed when President Nixon ended the US government’s certification that each dollar in circulation was, in effect, worth exactly 1/35th of an ounce of gold.

    Since all major currencies had been linked to gold via the US dollar since 1945, when the US held the majority of monetary reserves, the announcement provoked a momentous change in the financial culture. Cash no longer meant gold: the amount of dollars the Federal Reserve could print would not be restricted to some degree by a stored metallic tangible asset with a finite supply. In a great leap of faith, paper dollars and traded US federal liabilities became “risk-free” assets while gold, long regarded as money itself, was disdained as a “commodity”, a volatile “risk asset”.

    This historically radical new notion was validated by the arbiters of money themselves. Central bankers dumped gold, driving prices down sharply during the 1990s. They thereby reinforced the MBA textbook perceptions that the dollar and US Treasury bonds were “risk-free” assets and gold a “barbarous relic,” as John Maynard Keynes famously called it.

    Even today, as the gold rally has reached the 10-year mark (following a 20-year bear market), the metal represents a mere 0.6 per cent of total global financial assets (stocks, bonds and cash). This is near the all-time low (0.3 per cent) reached in 2001, and significantly below the 3 per cent it accounted for in 1980 and the 4.8 per cent it was in 1968.

    [will continue in a separate post]

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  27. [continued from above]:

    However, there are changes afoot. After a lengthy absence, some asset managers and central bankers are readmitting gold back into the group of prudent asset classes. Assessing the devastation of financial industry and government balance sheets, fiduciaries have been reminded that one of the principle reasons to hold gold – that it is the only major financial asset that does not represent someone else’s obligation to repay – is not the arcane concept it once appeared.

    I believe the renewed appreciation of risk management is in its infancy and that gold, like stocks and bonds, will recover its relatively small, but significant historical position in the world’s investment funds. Considering the tiny size of the gold market, the implications of a potential return of gold into the world’s largest portfolios are enormous. For, unlike stocks and bonds, whose supply can increase to meet demand, there is not enough gold to go around at today’s prices.

    According to International Strategy and Investment Group (ISI), if gold ownership rose from 0.6 per cent of total financial assets to only 1.2 per cent, still less than half its 1980s level, this would equate to an additional 26,000 tonnes, or 16 per cent of aggregate gold worldwide. This represents 10 years’ worth of current production.

    Is such a momentous development likely? I suggest it is more likely than not, as the metal is set up for a “perfect storm” from a supply/demand standpoint. At a time when mining companies can barely find enough gold to replace their reserves and production growth is anaemic, central banks have not only stopped selling their gold but are now aligning with investors to accumulate it.

    As it dawns on the wider market that the bull market in gold is real, the impact on gold mining equities will probably be dramatic. Until recently, in spite of their theoretical leverage, miners have lagged behind the metal’s performance. This should not be so surprising. As most analysts haven’t changed the long-term pricing of their cash flow models to reflect a sustained bull market in gold, the shares have underperformed amid assumptions that are outmoded.

    This disconnect is similar to the experience of energy equities in the early 2000s. Even as oil surged, it was not until investors accepted that oil might not stay low forever and started to factor in higher prices that the equities were revalued. With the total market capitalisation of all gold mining companies only fractionally higher than that of Apple, any move by investors to capture the inherent leverage of these equities could drive stock prices substantially higher.

    Asset managers and central banks are just beginning to readmit gold back into the select group of prudent asset classes. That this is occurring at a time when what might be seen as the world’s safest financial asset classes may also be its scarcest suggests interesting times ahead for those who own gold.

    Thomas Kaplan is Chairman of Tigris Financial Group

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  28. GG: Many thanks for that great post- how wonderful that people at this site take the time to find and post things like this here. It is greatly appreciated.

    If "our" conventional wisdom start to filter out to the masses through articles like this, then all I can say is you better have physical because the paper vehicles will cartainly be crushed under the weight.

    "The next generation of Astors, Rockefellers, and Morgans will have been built on foundations of silver and gold". -me

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  29. Light sweet crude gapped up over 92 at the open. High is 92.47.

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  30. Just bought 3 grams and a quarter ounce in gold. Felt weird as I'm a silver bug. I'd buy more but limited on paycheck to paycheck.

    Some of my friends think it's weird. But then when I explain a few things they start to understand. Most of them don't realize that the Federal Reserve isn't government. Now I just need to figure out the land part.

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  31. looks like USD is dying, but for how long...

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  32. funny how the FT mis-quotes...

    ".....and gold a “barbarous relic,” as John Maynard Keynes famously called it.

    Keynes called the Gold Standard a “barbarous relic, not Gold itself

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  33. An early promo video showing in detail some of the benefits of physical silver ownership, lots of smooth......metal

    http://www.youtube.com/watch?v=ZLWvuZx5TjA

    njoy

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  34. see if you can spot an early cameo appearance by the "Blythe"

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