Tuesday, January 25, 2011

Buy When There Is Blood In The Streets

After I posted last night, I came across some timely commentary by Clive Maund:

Gold Market Update
By: Clive Maund
We are now seeing a convergence of indications that a reversal in the Precious Metals sector is at hand that will lead to a major uptrend soon.

...the big news at this time is the latest COT figures which show that the Commercials have scaled back their short positions in gold dramatically - and remember that the latest data is only up to date as of last Tuesday and thus does not factor in Thursday's sharp drop, which will have resulted in even lower readings. The COT chart, posted below the 8-month gold chart to enable you to compare readings at gold's peaks and troughs, is startling and a very strong positive indication for bulls as it shows that the Large Specs (dumb) have scaled back their long positions to levels even lower than they were last July, while the Commercials (smart) have scaled back their short positions to levels even lower than they were last July. This - just by itself - is viewed as sufficient evidence that we are close to another big upleg developing in gold. What about the breakdown below $1360 on Thursday that we had earlier rated as technically significant? - the latest indications, especially the COT figures, strongly suggest that this was a "big money" gambit to wrong foot technical traders and they certainly have the clout to do it.

How right you are Clive! Harvey Organ in his Gold & Silver Report shares with us today that the Open Interest in the futures markets over at the CRIMEX today eperienced a "massive" record drop:

I have never witnessed the following:

In the gold comex, the open interest plummeted from 580,750 to 498,998 for a loss of 81,752 contracts. The previous record for a drop in open interest is around 28,000 so this is absolutely enormous. I can understand a drop of stay 10,000 contracts but 81,000? Something is seriously going on behind the scenes. The front options expiry month of January saw its open interest fall from 17 to 9. There were zero deliveries the day before so we mysteriously lost 8 contracts who decided to either settle in cash or pitch their longs.

The all important front delivery month of February saw its open interest drop a huge 36,417 contracts or 44% of the drop in total open interest. The estimated volume today was a rather robust 270,.034. The confirmed volume yesterday was also very high at 256,469.

Thus on an confirmed volume of 256,469 contracts we lost 81,752 contracts. Regardless of how or why it happened, this has to be the most bullish anyone can be in gold today with the revelation of this massive hit in open interest. The open interest has fallen from a high of 611,000 contracts to a low of 498,000 on a drop of gold from 1420 to today's 1332. Thus on a huge open interest contraction we lost only 88 dollars. A lot of work for our bankers with marginal effect!

Let us see if we got the same kind of contraction in open interest in silver:

The total silver comex open interest fell by 5368 contracts to 128,228. We did not see the liquidation of open interest in silver as we did in gold. The front options delivery month of January strangely saw its open interest climb from 76 to 179 for a gain of 103 contracts.

Some silver options holders who exercised surfaced for air today. The front delivery month of March saw no liquidation as the open interest here remained resolute. Today reading is 70,067 vs 70,438 yesterday. The estimated volume today was a rather good at 64,361. The confirmed volume for yesterday was high at 70,438. Thus on a confirmed volume of 70,438 we had a contraction in open interest of 5368 or 7.2%.

He continues with an observation regarding the number of option holders in the month of January standing for Silver to be delivered in March following expiration on the February Silver CRIMEX contract:

Get a load of this next announcement; the comex folk notified us that a huge 126 notices were served upon our longs. The total number of notices served thus far this month total 670 or 3,350,000 oz of silver. To obtain what is left to be served upon, I take the deliveries of today at 126 and subtract that figure from today's open interest in January at 179 leaving me with 53 notices left to be served upon for a total of 265,000 oz of silver.

Thus the total number of silver oz standing in this non delivery month of January is as follows:

3,350,000 oz (already served) + 265,000 oz (to be served) = 3,615,000 oz (yesterday's total 3,100,000)

Please note that in the slowest month of the year for deliveries we have so far got total notices representing 3.615 million oz. I just cannot wait until March and see who will be taking on these crooked bankers. Judging from the March comex figures, the long holder refused to budge like their cousin, gold.

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.

So in the conclusion, we saw a massive contraction in OI with respect to gold, which is in itself extremely bullish as the cartel washed away all of our weakest longs. Those that are now standing after a month of pummelling are in strong hands.

In silver, we saw no liquidation. 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.

Understand, the reason the open interest in the metals markets rises is because the crooked bullion bankers are selling UNBACKED Precious Metals contracts to meet the demand of traders seeking Gold. This is why the open interest in these futures contracts rises as the price of the metal rises. Imagine how quickly the price of Gold and Silver would rise if the CRIMEX bankers had to come up with REAL PHYSICAL metal to sell. Just the other day, contract volume on the CRIMEX...for just that single day...represented 511 MILLION ounces of Silver. THE CRIMEX HAS ONLY ABOUT 50 MILLION OUNCES OF SILVER AVAILABLE. How can they be allowed by the CFTC to trade contracts representing 10 TIMES the amount of Silver available for delivery? This is absolute FRAUD!

In effect, the CRIMEX crooks are "printing Gold and Silver" to meet demand when the price is rising...this is how they control the rise in the price incrementally. This is why position limits are so important. By selling a futures contract that is NOT backed by physical metal, the crooks give the illusion that supply can meet demand. This works great for the crooks if 1% or less of the futures contract holders demand to take delivery of the physical metal promised to the buyer of the futures contract.

Falling open interest then results from the sale of the contracts on the long side of the market because of the "illusion" that supply has swamped demand. As price declines, so then does the open interest. As the longs leave the futures market, the demand for the crooked bankers unbacked paper Gold and Silver wanes, prices in the Precious Metals decline, and the whole crooked procces begins again.

Clearly then, the only way to break the backs of these crooked bankers...essentialy break the back of the entire banking system, is for the holders of the physically "unbacked" paper Gold and Silver contracts, is to DEMAND DELIVERY of the contracted for Precious Metals...and expose the fraud now known as the CRIMEX.

Too much gold paper, not enough metal, Hathaway tells King World News
Submitted by cpowell on Mon, 2011-01-24
Dear Friend of GATA and Gold (and Silver):
Interviewed this weekend by Eric King of King World News, Tocqueville Gold Fund manager John Hathaway remarks that all the fundamentals for gold's rise remain in place, that there is hugely more paper gold than real gold, that only high real interest rates or gold backing for currencies can restore confidence in the financial system, and that any gold backing for currencies likely would put gold's value in four or even five digits. The interview is 13 minutes long and you can listen to it at King World News here:
CHRIS POWELL, Secretary/TreasurerGold Anti-Trust Action Committee Inc.

Great Depression, Debt and Economic Decline: Ireland, Portugal, Greece, US, UK
by Bob Chapman
We have two economic and financial Americas, one of poverty and advancing poverty and one of sumptuous wealth. The top 20% own 93% of financial assets, which could be the seeds of upheaval. The average family is one or two weeks away from starvation and debt collapse. How do you make up the difference working 34.3 hours a week as gasoline rises from $2.50 to $3.50 a gallon and the price of food advances 50%? If you do not own gold and silver related assets to offset these increases you are just plain screwed. If QE2 isn’t translating into recovery then QE3 is fast on the way. It will be kicked off later this year or in 2012. It won’t work either. Throwing money at a problem never has a positive desired result. Even though other nations have problems the dollar will remain under pressure. The gauge should not be the USDX. It should be every currency versus gold and silver, which are the only meaningful yardsticks. For two years gold and silver have been propelled by a flight to quality. A primary fight between gold and the dollar, which obviously gold has won hands down and will continue to do so. Inflation hasn’t even entered the equation yet, but it will this year and next. That will cause gold and silver to roar to the upside along with gold and silver shares. The elitists who control government are about to lose another battle and in the end the war against gold and silver.

U.S. home prices slide into 'double dip'
By Alejandro Lazo, Los Angeles Times
A "double dip" in home prices appears to be underway in the nation's biggest cities, jeopardizing the tepid U.S. economic recovery.

The widely followed Standard & Poor's/Case-Shiller Index, which tracks the real estate market in 20 major U.S. cities, showed that prices dropped 1.6% in November from the same month a year earlier, the second consecutive year-over-year decline. What's more, the index fell 1% in November from October, marking the fourth consecutive monthly decline.

Last year, a recovery in housing prices seemed to be on track. But analysts now say that that improvement was juiced by home-buying tax credits that have now expired. In addition, unemployment has remained stubbornly high and millions of Americans are still at risk of foreclosure.


Bernanke the Alchemist
By Nickolai Hubble • January 22nd, 2011
The modern financial system is based on the idea that central bankers can perform alchemy. More specifically, that American central bankers can do so. That is because the US Dollar is the world's reserve currency. And it can be created out of thin air.

The idea that people are willing to trade real goods and services for a piece of paper because everyone believes that piece of paper is money is, of course, the most important idea in the world fractional reserve banking. Without that idea a lot less global trade and a slot slower or lower global economic growth.

So how did the dollar come to be so central to the global system? Why is its status now in doubt? And if the dollar standard of the last 50 years falls, what will replace it...

Who in the hell is really selling any REAL Gold or Silver?

I looked closer at the chart of the Euro last night and have identified the possibility that the bearish properties identified last evening "may" have been in error. After adding the 20 and 50 day moving averages on the chart, it becomes obvious that today's bullish cross-over in those averages may indicate an explosive move higher in the Euro may be at hand. The two previous bullish cross-overs lead to moves higher of 7 and 8 points in less than five weeks time each. The disconnect between Gold and the Dollar can not last long in the event the Euro should leap higher from here.

The risk here is being out of the Precious Metals Markets. Be Right, and sit tight.

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