Price of Silver & Gold: Mish Shedlock vs Ted Butler
Posted August 28th, 2008 by bobbyw24
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The Great Gold, Silver Conspiracy Explained
Gold and silver prices have crashed. Ted Butler, Rob Kirby, James Conrad and others are all blaming manipulation. Let's take a look at those manipulation theories starting with Ted Butler.
Lessons of a Lifetime
Here are a few excerpts from Ted Butler's Lessons of a Lifetime.
The drastic sell-off in silver (and gold) is further proof of an ongoing manipulation to the downside.
My comment: That is a rather interesting statement. Gold and silver did not act as expected so somehow that constitutes proof in and of itself of an ongoing manipulation. However, Butler offers more proof as follows.
The proof that this sell-off was criminal lies in public data provided in the Commitment of Traders Report (COT) and a basic understanding of how the futures market works. This has been the most extreme sell-off in the recent history of silver and gold. We are farther below the moving averages than at any point since I have been writing about silver. Price movements this severe are likely to be intentional and not accidental.
My Comment: Many stocks are far from moving averages. Nearly the entire financial sector is far from moving averages for example. Furthermore gold and silver have often been far above their moving averages, and not that long ago either. Is it only manipulation when gold and silver are below and not above their moving averages?
Every criminal act must have a motive and an opportunity to commit the crime. By the simple process of elimination, those responsible for this crime are the concentrated commercial shorts on the COMEX. No one else fits the profile. They had the means (through their dominant and monopolistic position), the profit motive and the skill to cause the sell-off.
How is it possible that the commercials could buy back short positions on thousands of contracts at times of steep sell-offs, without triggering a rise in price? There is only one possible and plausible explanation - through discipline and collusion.
My Comment: With futures, for every long there is a short. When a long sells his position, a short automatically covers. This does not take collusion. But to be fair it does not disprove collusion either. This is simply how the futures market works.
If longs are desperate to get out, shorts will automatically cover at increasingly lower prices. Butler asks how it it possible for commercials to close positions during sell-offs without triggering a rise. The answer is that it is impossible for it to be any other way!
All that matters is how desperate longs are to get out. By the way, the exact same things happens on the way up too, except in opposite fashion. Butler somehow sees a rising market as normal action.
Let's continue with more articles on alleged manipulation.
The Smoking Gun
At least 20 people sent me The Smoking Gun by Ted Butler. Let's take a look.
For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold.
My Comment: To be more precise, for years Butler has insisted that the COT reports indication manipulation in gold and silver. Allegations are one thing, proof is another.
The recent widespread shortage of silver for retail purchase coupled with a price collapse appears to have shaken these analysts’ confidence that the COMEX silver market is operating ‘fair and square.’ Well it should, since there is no rational explanation for a significant price decline going hand in hand with product shortages other than collusive manipulation.
My Comment: There is indeed a rational explanation for a decline in the price of gold and silver. The dollar has staged one huge rally, and fundamentals suggested the dollar should rally. This is not hindsight, this was called in advance. I talked about the US dollar many times recently. Here is a list.
August 08 Trichet Puts Spotlight on the Euro, Dollar
August 09 U.S. Dollar Rally Continues
August 11 Currency Intervention And Other Conspiracies
The last one on the above list caused a bit of a controversy . Some irrationally stated that a tiny (relative to the forex markets) intervention sparked a week long dollar rally. Steve Saville voiced an opinion on the dollar rally as noted in Steve Saville On The US Dollar And Gold.
In summary, there is no need to concoct manipulation theories in order to explain the dollar's rebound. A more plausible explanation for the currency market turnaround is that the recent intermediate-term trend reversals in the commodity markets removed the pressure that had previously been preventing the US dollar from moving back towards fair valuation.
We think the dollar's move back towards fair valuation is still in its infancy, but the market looks over-extended in the very short-term so some consolidation is likely over the coming 1-3 weeks.
Shortage Of Silver Eagles
Now let's address the shortage of silver eagles and other retail forms of silver and gold. For that I will refer to a conversation I had with Dave Meger, head metals trader at Alaron. Dave plays the seasonal tendencies in gold and silver as good as anyone I know. Here is a snip from Dave's Meger's gold forecast from August 20.
Gold and silver have seen a small bounce off the extreme oversold condition. Remember I stated several times in my last few reports that I did not believe a bottom in the metals would be made until a capitulation move lower was seen.
I have been stating that Gold and Silver will still be strong in the month of September and into year end - the only question has been "Where will the bottom be made?" The sharp correction was a typical long liquidation break that seems to always go much deeper than most expect as longs are squeezed out of the market.
I called Dave to ask about the shortage of silver. I was halted mid-sentence. "Careful" Dave said. "There is not a shortage of gold or silver, there is only a shortage of certain retail forms of gold and silver. Producers have no real incentive to make some of these forms. If someone wants gold or silver they can always buy a future and take delivery."
Retail Demand A Contrary Indicator?
What follows now is my opinion. Retail investor demand for gold and silver may very well be a contrary indicator. Retail investors ignored gold at 250, 350, 450 all the way up to $1000. Now they are finally interested in buying this dip. Is this a good sign or a bad sign?
Continuing with Butler's "Smoking Gun"
Facts speak for themselves. Here are the facts. As of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.
For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This was put on as one massive position just before the market collapsed in price.
This data suggests other questions should be answered by banking regulators, the CFTC, or by those analysts who still doubt this market is rigged. Is there a connection between 2 U.S. banks selling an additional 27,606 silver futures contracts (138 million ounces) in a month, followed shortly thereafter by a severe decline in the price of silver? That’s equal to 20% of annual world mine production or the entire COMEX warehouse stockpile, the second largest inventory in the world. How could the concentrated sale of such quantities in such a short time not influence the price?
My Comment: The facts speak for themselves. The rooster crows every morning at dawn. The sun comes up without fail. In other words, correlation is not causation. Two US banks sold 27,606 futures. Ho hum. Investors bought 27,606 futures. Ho hum. Remember that for every long there is a short. Who was left to buy, and at what price?
The fact of the matter is silver rose from $5 to over $20. Commercials were short the entire way. If the commercials were not hedged, they would have been blown out of the water somewhere along the line.
What real legitimate business do 2 or 3 U.S. banks suddenly have for selling short such quantities of speculative instruments over a brief time period? Do we want banks to be engaging in this type of activity? If the manipulation was not successful, would U.S. taxpayers be called on to bail out yet another bank speculation gone bad?
My Comment: The answer is obvious. For every long there is a short. The market makers must take the other side of the bet. I keep pointing this out and it keeps falling on deaf ears. If longs want to prove a shortage of gold or silver all they have to do is take delivery and keep taking delivery. Instead we see herding behavior by longs accompanied by huge price runups. Buying interest then dries up and prices fall. It does not take collusion for this to happen.
The data in the Bank Participation report is so clear and compelling that it is hard to conclude anything but manipulation. It is beyond credulity to conclude other than two or three banks caused one of the most severe price collapses in precious metals history. The CFTC has a lot to answer for as the regulatory agency responsible for preventing this type of blatant manipulation.
My Comment: Closer examination reveals that there is nothing but allegations from the manipulation crowd. So let's continue with still more articles.
Wake-Up Call
Rob Kirby repeated many of the same arguments as butler in Wake-Up Call. He also offered this chart.
As I stated before, there were no compelling fundamentals. In fact there were compelling fundamentals brewing for a US dollar rally. What happened was entirely predictable. I talked about it in Gold, Silver and the Great Unwind.
Notice that"concentrated, manipulated, short selling arrow". Once again I point out that for every short there is a long. In essence, dollar bears were recklessly plowing into short-dollar long-gold plays just as Trichet was about to drop a bombshell on the currency markets.
The market was expecting Trichet to tighten and the dollar to sink. Instead Trichet reversed course. There was a mad scramble to exit the short-dollar long-gold trade. Gold got hammered in the process. This is Manipulation?
Disconnect Between Supply And Demand
Let's now turn our attention to the last article in the series. James Conrad presents some new arguments to consider in The Disconnect Between Supply and Demand in Gold & Silver Markets.
There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver. Indian shops are empty of both silver and gold. Even the Indian banks don't have any gold or silver. The big western bullion banks, based in New York and London, control both the gold and silver trade. Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal. Normally, if a banker’s bank knows that its customer-bank has firm orders, it would extend the smaller bank a bigger line of credit. Not now.
By refusing to extend lines of credit, the big bullion banks are essentially rationing a very thin supply.
My Comment: It's no big secret that liquidity is drying up. The simple fact of the matter is banks halted loans for houses, commercial real estate, credit cards, home equity lines, etc. Exactly why should banks be extending lines of credit for silver when they are not doing so for anything else? Seeking to halt speculation makes perfect sense. There has been rampant speculation in everything and quite simply market forces are putting an end to it.
Lease Rates
Conrad does present one new argument for which I have no answer. It pertains to lease rates.
As of a week ago, if you are a dealer, and you lease gold or silver, from the bullion banks, incredibly enough, THEY WILL PAY YOU! At the end of this article, I have attached a chart, showing the current negative lease rates for the various metals.
click on chart for sharper image
It does not make sense to me for lease rates to be negative, assuming they are indeed negative, as stated. However, just because something does not seemingly make any sense, is not proof of manipulation in and of itself.
More importantly, the alleged "disconnect" between supply and demand is completely imaginary.
Price Action vs. Physical Accumulation
I have heard one more argument recently regarding the alleged manipulation. Here it is: "The ETFs have shown no dishoarding for the huge falls in the metals which stands out like a sore thumb."
The argument is totally flawed. It presumes that repricing up or down must be accompanied by accumulation or dishoarding. For starters, the price of gold and silver ETFs must follow the futures market or there will be an arb play. For example, if the futures market rises or falls and the ETF does not, then there would be an instant profit available by exploiting the difference.
Repricings of all sorts in all markets can happen, even on zero sales. Consider the housing market. A builder finishes a subdivision. 50 people paid $400,000. The builder has 3 homes left and offers them for $350,000. Before any sale is made, the every house in the neighborhood would instantaneously be repriced lower by $50,000.
Clearly that housing example involved news. (By the way it does not have to. Sentiment can change overnight without news). At any rate, inquiring minds might be looking for news and/or sentiment changes that would have affected gold in the alleged manipulation timeframe.
Inquiring minds would not have to look too far. Trichet's reversal on interest rates was grounds for an immediate repricing of both the dollar and gold, and that holds true even if demand for the physical picked up at lower prices.
Report on Large Short Trader Activity in the Silver Futures Market
On May 13, 2008 the Commodity Futures Trading Commission addressed every issue, point by point raised above in exquisite detail. The only exception is lease rates. Note: This is a lengthy excerpt.
Inquiring minds very much need to consider the other side of the story as presented in Report on Large Short Trader Activity in the Silver Futures Market.
During the past 20 to 25 years, the Commodity Futures Trading Commission (CFTC or Commission) has received numerous letters, e-mails and phone calls from silver investors alleging that the price of silver futures on NYMEX has been manipulated downward.
In 2004, Dr. Michael Gorham, Director of the Division of Market Oversight (Division) addressed silver investors’ concerns in an open letter (2004 Silver Letter) that considered the plausibility of a long-term short-side manipulation of the silver futures market and provided an analysis of activity in the silver futures market. That letter concluded that the existence of a long-term manipulation was not plausible and that an analysis of activity in the silver futures market did not support the conclusion that the market was being manipulated.
Recently, silver commentators and a group of investors that rely upon them have reasserted their allegations that the silver futures market is being manipulated downward by a small group of traders on the short side of the market. As a result, DMO staff decided to revisit this issue by taking a fresh look at activity in the silver futures market.
The analysis draws the following conclusions:
There is no evidence of manipulation in the silver futures market.
• Silver cash and futures prices have risen dramatically between 2005 and 2007, with silver outperforming the gold, platinum and palladium markets, suggesting that silver futures prices are not depressed relative to other metals prices.
• NYMEX silver futures prices tend to track closely the price of physical silver.
• Concentration levels for the top four short futures traders in the silver futures market are comparable to those observed in the gold and copper futures markets, and generally are lower than the levels seen in the platinum and palladium futures markets.
The composition of the traders comprising the top four short futures traders, in terms of net positions, changes over time. These traders represent a diverse group, and their futures positions are driven by an even more diverse group of customers.
• There is no observable relationship between short-futures-trader concentration levels and silver prices.
• There is a slightly positive relationship between the total net position of the large short futures traders and silver prices; this suggests that larger short futures positions are associated with higher, not lower prices.
Advocates of the short-side manipulation argument contend that silver futures prices have been manipulated downward for close to 25 years. What these advocates fail to indicate, however, is where prices should be, except to argue that prices should be higher than they have been currently or in the recent past.
With respect to the claims of silver commentators that prices are being suppressed, it should be noted that these commentators have never articulated a credible explanation as to why, for more than 25 years, buyers have not entered the market to purchase silver (at the supposedly depressed prices), thereby driving up prices to a level that these commentators believe is reasonable. In this regard, no barrier to entry has been identified that would prevent individuals or firms from buying cash silver or entering into long silver futures positions.
Given the similarities between price movements in these four metals, it appears that general market forces that have contributed to an increase in gold, platinum and palladium prices have also supported an increase in the price of silver. Moreover, the fact that the price of silver outperformed the prices of the other metals during the period, while not definitively answering the question of whether silver prices have been manipulated, calls into question the contention that silver futures prices have been manipulated downward. In short, there is nothing obvious in the silver price series between 2005 and 2007, when compared to other metals’ prices, to suggest that silver prices have been manipulated downward.
click on chart for sharper image
Trader Concentration
An area that has drawn significant attention from silver commentators is the level of concentration among short traders in the silver futures market, as reported in the CFTC’s weekly Commitments of Traders (COT) reports.
Silver commentators have argued that the four-trader net short position reported in the COT reports is unusually high and imply that it is indicative of an effort by a specific group of four or fewer traders to maintain low prices indefinitely. The commentators also imply that the futures positions held by these traders are “naked” in that they are not legitimate hedge positions or otherwise entered into to offset positions in the physical silver market. To evaluate this claim, staff examined the specific traders comprising the top four shorts and their overall futures positions, their motives for holding these positions, how the levels of concentration in the silver futures market compare to those in similar futures markets (i.e., gold, platinum, palladium, and copper), and the relationship between open interest concentration and the level of open interest held by these futures traders to changes in silver futures prices.
The analysis of open interest, collected daily from June 6, 2005 through January 16, 2008—a total of 659 days in the sample—indicates that the composition of market participants among the top four net traders is not static, though certain traders do appear in the top four significantly more often than others. For the period as a whole, there were a total of 10 different traders who at some point were counted among the top four in terms of their net short futures position. Of those 10, three were present in the top four more than 50 percent of the time. The trader most often in the top four was usually ranked number two in terms of net position size among traders, when present. The trader present second most often was typically ranked fourth among the top four traders, and was never ranked first. Finally, the trader showing up third most often was usually the number one ranked trader, holding that position on 356 days of the 475 days in which they were present in the top four. Thus, the Commission’s large trader data shows that, as opposed to the allegation that four traders dominate the market by consistently holding a large concentrated short position, the top four traders at any point in time may involve any of 10 different market participants.
Notably, these large traders are not always net short; of these 10 traders, four at times were among the top four net long silver futures traders. These data show that any scheme to manipulate the silver futures market would require involvement of up to 10 traders as opposed to the four that silver commentators suggest. This renders the allegation more implausible, as such a large diverse group would increase the difficulty and complexity of effecting concerted actions while ensuring discipline within the group.
In addition, the top 10 traders are not monolithic and represent a wide diversity of business interests with diverse customer bases. In this regard, staff interviewed five of the largest traders that are included among the group of 10. Based on these interviews and from the Commission’s records, the staff has determined that the entities in this group are involved in the silver markets as dealer/merchants, index traders, swaps/derivatives dealers, money managers, banks and silver depositories. Two of the five traders interviewed indicated the futures positions they entered into were to offset activity that they engaged in with customers situated in the physical silver markets. This activity included buying silver from producers and selling silver to consumers in various manufacturing industries. Few of the futures positions of these two traders represented proprietary trading of the firms. The remaining three traders were less active in the physical markets, but, nonetheless, they primarily established futures positions to offset other obligations, such as over-the-counter swap trades and other financially settled contracts, that they had entered into with their customers. For each firm interviewed, their futures trading activities are driven primarily by the desires and needs of the firms’ customers to either buy or sell silver or to assume or hedge financial exposure to silver prices.
The understanding that the largest net short silver futures traders have an overall neutral position in the silver market is confirmed by information collected by NYMEX relating to several of these large traders. In August 2007, NYMEX contacted several of the largest short silver futures traders requesting specific information regarding their activity in the silver cash and OTC markets. The exchange found that these firms generally held significant forward purchase and sales agreements that, overall, left the firms with a net long silver exposure.
The short futures positions on NYMEX were approximately offset by their long cash exposure. This means that, contrary to the silver commentators’ allegations, the largest net short traders in the NYMEX silver futures markets are not “naked” shorts, as the firms’ overall exposure in the silver markets (considering their futures, cash and OTC positions) is approximately neutral.
Trotsky Weighs In
I asked my friend "Trotsky" if he had any additional comments to add on the subject of manipulation. Here goes:
You could add that it not unusual for a commodity market to experience a 23% correction in a short time. It happens all the time! In fact, during the 1970's bull market in the metals it happened several times as well. Were today's 'manipulators' at it back then too?
The 'physical silver and gold shortage' as you've correctly explained is an illusion. Only certain forms of retail product were in a shortage, and it is NOT bullish when the retail public clamors to buy the dip.
Also, I would emphasize the CFTC's explanation - one that has been confirmed by the former CEO of PAAS, who took on Butler's claims as well - that the large commercial shorts do in fact have offsetting positions in both physical and OTC derivatives markets, where they act as middlemen for a much larger group of customers.
Therefore, the apparent 'concentration' comes from the fact that these traders (the 10 biggest) tend to aggregate offsetting customer positions and hedge them in the silver futures market.
The fact remains, Butler and others have ZERO proof because if they had proof, they would present it. Furthermore, one would expect by now a whistleblower would talk, or some documents, or something to emerge. Instead the manipulation crowd continually infers things from watching the COT report, and their conclusions are simply wrong.
As the CFTC correctly states, to successfully co-ordinate an ongoing manipulation between 10 large traders over so many years (Butler has been writing about this for 20 years already) seems nigh impossible.
Their interests would diverge too often for one thing, and cartels have proved to be ineffective in both practice and well-established economic theory (see OPEC, which can not determine the price of oil in spite of controlling 40% of output).
So far NO-ONE has reported that they have suffered large losses from silver's 400% rally. That in and of itself is indirect confirmation that the commercial shorts have offsetting positions. And lastly, the mere fact that silver has rallied by 400% at all shows that there is no outside force controlling this market in a downward direction with the slightest success.
Butler and others act as if their issues have not been addressed. Clearly they have been addressed, on multiple occasions in great detail, by many people in addition to the CFTC.
Close scrutiny shows that the preponderance of evidence is solidly in supportive of the fact that there is no conspiracy or collusion between large COMEX traders.
Butler's gun keeps firing, but there is no smoke. It's a blank every time. The Great Gold And Silver Conspiracy Is Easily Explained. There simply is no conspiracy.
Mike "Mish" Shedlock
http://globaleconomicanal...
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Jon Nadler, Senior Analyst Kitco, Chimes In On The Precious Meta
Jon Nadler, Senior Analyst Kitco, Chimes In On The Precious Metals Conspiracy
The amount of hate email I have been receiving in response to The Great Gold, Silver Conspiracy Explained is large but not unsurprising. People simply want to blame others for their own trading mistakes. I will have more on that in a separate post.
Most of the emails I received are unprintable because of the profanity. However I will print one of them anyway with slight edits. I will voluntarily withhold the name of the person writing although no such request was asked.
Name Withheld Writes:
Man, he skims right over the below, as if it is a quirk or coincidental.
Well @$$hole, why else would "someone" want to pay you to borrow their gold/silver????
Conclusion: *&%@You!!!
The above rant was in response to lease rates where I wrote:
"It does not make sense to me for lease rates to be negative, assuming they are indeed negative, as stated. However, just because something does not seemingly make any sense, is not proof of manipulation in and of itself."
Rest assured I received many more similar emails, about many other points. Every such email was a ridiculous ill-informed rant about something.
The Mystery Of Lease Rates Explained
I can now explain lease rates, gladly, in fact. Amidst all the hate email, there was one jewel. It was from Jon Nadler, Senior Analyst, Kitco Bullion Dealers Montreal.
Jon Nadler, Senior Analyst, Kitco Writes
Dear Mike,
I read with great interest your rebuttal of the "smoking gun" article by Butler. You are 100% correct in your comments.
One mystery I can lay to rest for you and your readers is the anomaly of 'negative' interest rates. Simple. It never happened.
Kitco received a BAD DATA FEED from Reuters. The error was corrected. End of story. We now have a system in place to 'ring' an alarm any time lease rates pop more than 1/4 percent. Solution will prevent such errors from reoccurring. Imagine how the conspiracy theorists will look when shown one of the pillars of their argument was based on a bad data feed.
Finally, just so you are aware, there is another rebuttal coming their way - soon. It will be on Kitco and it will be at the Silver Summit. In the interim, here is a quick 'mini-rebuttal'.
A major industry research firm was recently commissioned by a silver producer to find the alleged “smoking gun” of price suppression in the silver market, and all they have found is that the people promulgating the conspiracy/suppression/manipulation fairy tales were the only ones likely to be smoking (something). The results of the research may soon see the light of day, but it has already become rather clear that Ted Butler and his supporters are chasing silvery ghosts.
The accusation that manipulation is visible in the silver market is not only an unwarranted claim, it is in fact, a totally ill-informed and ignorant one. There are many levels on which such a claim is not only wrong, but demonstrates an almost total lack of knowledge about how the commodities markets, including the futures markets, work.
Consider, for starters, just the simplest and most straightforward facts.
1. Banks are market-makers. They stand to buy or sell the commodities in which they make markets, taking the other side of a trade from other people or institutions entering a market. When prices fell sharply a few weeks ago, it was because investors, particularly short-term, technically oriented funds, were selling. These funds often use over-the-counter forwards and options to execute their buy or sell transactions.
2. The funds came to market to sell their silver. Commodities were on the decline, the dollar was looking attractive, they had profits to lock in, etc. The reasons were varied but logical. They had to find someone (a counterparty) who was willing to buy what they were selling. Guess who bought? It was the market-makers.
3. So, the market-makers (the banks) were heavy BUYERS, not SELLERS, during the time when prices declined. Now, because market-makers do not take naked, one-sided positions, as they were BUYING the metal in a sharply declining price environment, they were immediately seeking to HEDGE their large and growing LONG positions. How do you think they did that? Yes, they SOLD in the futures market, hedging their LONG positions.
Now, if one knows anything about markets, one understands that. The question is why the people who write the drivel you frequently read do not understand even such an elementary concept as the basic flow of trades. Anyone learns this fact in their first year economics course in college. One would think that people who purport to know about these markets would know what freshmen in college know, yes? Apparently, they do not.
There are many other issues that came in to play during the period in question. For one thing, market liquidity dried up as rapidly as silver prices fell. All of those cavalier traders that had started trading gold disappeared. There was only selling. Those few banks that stood up and did their market-making jobs naturally represented a larger percentage of the trades, because the others fled as soon as someone yelled “Fire!” That does not make for, nor does it sound like a conspiracy.
If the funds are selling long positions, the banks on the other sides of those transactions are taking long positions, in the OTC markets. They hedge these long positions by shorting the Comex. Thus, they appear in the regulated and reported futures and exchange traded options markets as shorts.
One of the important points that the conspiracy quacks always miss is that the banks are usually the passive agents in markets. They make the markets, and take what is coming at them. “Longs and shorts always match” is something people who do not understand the markets say.
Yes, they match, but the important factor to know for price discovery is which side is initiating the trade. In recent weeks it was the short side: Funds selling. The longs and shorts matched, but the impetus for the trades was selling. Thus, prices fell. At other times, if the impetus is from heavy buying, the market makers will be going long, offsetting forward short commitments they are making.
So, no, you would not expect to see a big increase in the market makers’ long positions on the Comex at a time when they primarily are buying long in the OTC markets. Another point to consider when deciding to ignore stupid comments about how ‘banks’ have 35% of the shorts is to say: “So, who else would be shorting gold at these low levels?” The real question is not why the ‘banks’ position is so high. The question is, why it is so low? Go to ETF Securities’ website, by the way, and see their notice today about the massive increase in fund buying in recent days in commodities ETFs – reversing their selling of recent weeks.
Also, by the way, why not NAME the banks in question? Why not ask them right out as to the motives behind their positions (better yet, who their clients were) and whether or not they acted in a willfully nefarious manner? One can take any database and make it suits their argument.
A quick scan of all commodities in the reports in question reveals that in fact US bank participation was -on average- just 2.2 across the board. Or, one could isolate sugar and say that non-US banks appeared to “gang up” on wheat, corn, and sugar in a 'disturbing' way in August. Give me a break.
What you have here is the footprints of the hedge funds exiting the commodities' markets in a mass stampede. Nothing more than that.
The 'smoking gun report' is completely in error. What we may have here is a bullion analyst grasping at straws, and trying to incite the retail public to buy physical silver in the hopes that it will reverse the growing tide of money exiting the commodities complex. The so-called “shortages of physical silver” are simply localized coin blank inventory problems (the US Mint) or manufacturers not operating on a 'let's stock it, whether we think we can sell it or not' basis.
While everyone is aware that physical demand can and did rise on the massive price break we've had since the highs of March, and those of July, such a reaction by the would-be buying public is quite normal. Surely, many would love to try to bring down a $20 (or higher) initial cost on their metal if they have a chance to buy more at $12 or $13 per ounce. As for silver supplies, there is quite an ample supply of the raw material from which to manufacture any small product. Let fabricators come back from their summer holidays and the situation might change soon.
There are no problems securing Austrian, Australian, or Canadian silver coins and (as of yesterday) and dealers feel confident that their current and pipeline US silver coin supplies will ensure the satisfaction of all of their commitments to their customers. The theory that the market is somehow sinisterly manipulated – (especially as it comes at a time when US regulators are keeping a keen eye on the goings-on in the commodities and financial markets for just such type of evidence), is simply ludicrous and totally out of touch with market reality. Caveat lector."
Regards,
Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
Jon, thanks much for clearing that up. Your email should put an end to this nonsense, but I am positive it won't. Conspiracy theorists have been ranting for 15 years and most likely will be ranting for another 15. They will continue to pour over COT data, inflows, foreign government sales and other such nonsense, not understanding what the data they are looking at even says.
Conspiracy theorists choose to believe 10 or more banks are all acting together over 15 years or more to suppress the price of gold, and in that time not a single person has stepped up to blow the whistle or expose the conspiracy in some fashion. Amazing!
One of the many baseless rants I received today was about foreign governments acting to suppress the price of gold. The real reason foreign governments are selling gold is because they are stupid. The height of stupidity was the Bank of England's sale marking the exact bottom in the market.
I am a big fan of Occam's Razor which states "All other things being equal, the simplest solution is the best." In other words, when multiple competing theories are equal in other respects, the principle recommends selecting the theory that introduces the fewest assumptions and postulates the fewest entities.
Competing Theories
Theory 1: The US government, foreign governments, central banks, various broker-dealers, and a consortium of 10 large US banks are all acting together in some massive conspiracy to suppress the price of precious metals, for 15 years running, and during that period not a single person has stepped up to expose the fraud even though CIA and other intelligence leaks have been running rampant.
Theory 2: There was massive selling by over-leveraged hedge funds in response to fundamental changes in regards to the US dollar vs. the Euro.
Mike "Mish" Shedlock
http://globaleconomicanal...
The amount of hate email I have been receiving in response to The Great Gold, Silver Conspiracy Explained is large but not unsurprising. People simply want to blame others for their own trading mistakes. I will have more on that in a separate post.
Most of the emails I received are unprintable because of the profanity. However I will print one of them anyway with slight edits. I will voluntarily withhold the name of the person writing although no such request was asked.
Name Withheld Writes:
Man, he skims right over the below, as if it is a quirk or coincidental.
Well @$$hole, why else would "someone" want to pay you to borrow their gold/silver????
Conclusion: *&%@You!!!
The above rant was in response to lease rates where I wrote:
"It does not make sense to me for lease rates to be negative, assuming they are indeed negative, as stated. However, just because something does not seemingly make any sense, is not proof of manipulation in and of itself."
Rest assured I received many more similar emails, about many other points. Every such email was a ridiculous ill-informed rant about something.
The Mystery Of Lease Rates Explained
I can now explain lease rates, gladly, in fact. Amidst all the hate email, there was one jewel. It was from Jon Nadler, Senior Analyst, Kitco Bullion Dealers Montreal.
Jon Nadler, Senior Analyst, Kitco Writes
Dear Mike,
I read with great interest your rebuttal of the "smoking gun" article by Butler. You are 100% correct in your comments.
One mystery I can lay to rest for you and your readers is the anomaly of 'negative' interest rates. Simple. It never happened.
Kitco received a BAD DATA FEED from Reuters. The error was corrected. End of story. We now have a system in place to 'ring' an alarm any time lease rates pop more than 1/4 percent. Solution will prevent such errors from reoccurring. Imagine how the conspiracy theorists will look when shown one of the pillars of their argument was based on a bad data feed.
Finally, just so you are aware, there is another rebuttal coming their way - soon. It will be on Kitco and it will be at the Silver Summit. In the interim, here is a quick 'mini-rebuttal'.
A major industry research firm was recently commissioned by a silver producer to find the alleged “smoking gun” of price suppression in the silver market, and all they have found is that the people promulgating the conspiracy/suppression/manipulation fairy tales were the only ones likely to be smoking (something). The results of the research may soon see the light of day, but it has already become rather clear that Ted Butler and his supporters are chasing silvery ghosts.
The accusation that manipulation is visible in the silver market is not only an unwarranted claim, it is in fact, a totally ill-informed and ignorant one. There are many levels on which such a claim is not only wrong, but demonstrates an almost total lack of knowledge about how the commodities markets, including the futures markets, work.
Consider, for starters, just the simplest and most straightforward facts.
1. Banks are market-makers. They stand to buy or sell the commodities in which they make markets, taking the other side of a trade from other people or institutions entering a market. When prices fell sharply a few weeks ago, it was because investors, particularly short-term, technically oriented funds, were selling. These funds often use over-the-counter forwards and options to execute their buy or sell transactions.
2. The funds came to market to sell their silver. Commodities were on the decline, the dollar was looking attractive, they had profits to lock in, etc. The reasons were varied but logical. They had to find someone (a counterparty) who was willing to buy what they were selling. Guess who bought? It was the market-makers.
3. So, the market-makers (the banks) were heavy BUYERS, not SELLERS, during the time when prices declined. Now, because market-makers do not take naked, one-sided positions, as they were BUYING the metal in a sharply declining price environment, they were immediately seeking to HEDGE their large and growing LONG positions. How do you think they did that? Yes, they SOLD in the futures market, hedging their LONG positions.
Now, if one knows anything about markets, one understands that. The question is why the people who write the drivel you frequently read do not understand even such an elementary concept as the basic flow of trades. Anyone learns this fact in their first year economics course in college. One would think that people who purport to know about these markets would know what freshmen in college know, yes? Apparently, they do not.
There are many other issues that came in to play during the period in question. For one thing, market liquidity dried up as rapidly as silver prices fell. All of those cavalier traders that had started trading gold disappeared. There was only selling. Those few banks that stood up and did their market-making jobs naturally represented a larger percentage of the trades, because the others fled as soon as someone yelled “Fire!” That does not make for, nor does it sound like a conspiracy.
If the funds are selling long positions, the banks on the other sides of those transactions are taking long positions, in the OTC markets. They hedge these long positions by shorting the Comex. Thus, they appear in the regulated and reported futures and exchange traded options markets as shorts.
One of the important points that the conspiracy quacks always miss is that the banks are usually the passive agents in markets. They make the markets, and take what is coming at them. “Longs and shorts always match” is something people who do not understand the markets say.
Yes, they match, but the important factor to know for price discovery is which side is initiating the trade. In recent weeks it was the short side: Funds selling. The longs and shorts matched, but the impetus for the trades was selling. Thus, prices fell. At other times, if the impetus is from heavy buying, the market makers will be going long, offsetting forward short commitments they are making.
So, no, you would not expect to see a big increase in the market makers’ long positions on the Comex at a time when they primarily are buying long in the OTC markets. Another point to consider when deciding to ignore stupid comments about how ‘banks’ have 35% of the shorts is to say: “So, who else would be shorting gold at these low levels?” The real question is not why the ‘banks’ position is so high. The question is, why it is so low? Go to ETF Securities’ website, by the way, and see their notice today about the massive increase in fund buying in recent days in commodities ETFs – reversing their selling of recent weeks.
Also, by the way, why not NAME the banks in question? Why not ask them right out as to the motives behind their positions (better yet, who their clients were) and whether or not they acted in a willfully nefarious manner? One can take any database and make it suits their argument.
A quick scan of all commodities in the reports in question reveals that in fact US bank participation was -on average- just 2.2 across the board. Or, one could isolate sugar and say that non-US banks appeared to “gang up” on wheat, corn, and sugar in a 'disturbing' way in August. Give me a break.
What you have here is the footprints of the hedge funds exiting the commodities' markets in a mass stampede. Nothing more than that.
The 'smoking gun report' is completely in error. What we may have here is a bullion analyst grasping at straws, and trying to incite the retail public to buy physical silver in the hopes that it will reverse the growing tide of money exiting the commodities complex. The so-called “shortages of physical silver” are simply localized coin blank inventory problems (the US Mint) or manufacturers not operating on a 'let's stock it, whether we think we can sell it or not' basis.
While everyone is aware that physical demand can and did rise on the massive price break we've had since the highs of March, and those of July, such a reaction by the would-be buying public is quite normal. Surely, many would love to try to bring down a $20 (or higher) initial cost on their metal if they have a chance to buy more at $12 or $13 per ounce. As for silver supplies, there is quite an ample supply of the raw material from which to manufacture any small product. Let fabricators come back from their summer holidays and the situation might change soon.
There are no problems securing Austrian, Australian, or Canadian silver coins and (as of yesterday) and dealers feel confident that their current and pipeline US silver coin supplies will ensure the satisfaction of all of their commitments to their customers. The theory that the market is somehow sinisterly manipulated – (especially as it comes at a time when US regulators are keeping a keen eye on the goings-on in the commodities and financial markets for just such type of evidence), is simply ludicrous and totally out of touch with market reality. Caveat lector."
Regards,
Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
Jon, thanks much for clearing that up. Your email should put an end to this nonsense, but I am positive it won't. Conspiracy theorists have been ranting for 15 years and most likely will be ranting for another 15. They will continue to pour over COT data, inflows, foreign government sales and other such nonsense, not understanding what the data they are looking at even says.
Conspiracy theorists choose to believe 10 or more banks are all acting together over 15 years or more to suppress the price of gold, and in that time not a single person has stepped up to blow the whistle or expose the conspiracy in some fashion. Amazing!
One of the many baseless rants I received today was about foreign governments acting to suppress the price of gold. The real reason foreign governments are selling gold is because they are stupid. The height of stupidity was the Bank of England's sale marking the exact bottom in the market.
I am a big fan of Occam's Razor which states "All other things being equal, the simplest solution is the best." In other words, when multiple competing theories are equal in other respects, the principle recommends selecting the theory that introduces the fewest assumptions and postulates the fewest entities.
Competing Theories
Theory 1: The US government, foreign governments, central banks, various broker-dealers, and a consortium of 10 large US banks are all acting together in some massive conspiracy to suppress the price of precious metals, for 15 years running, and during that period not a single person has stepped up to expose the fraud even though CIA and other intelligence leaks have been running rampant.
Theory 2: There was massive selling by over-leveraged hedge funds in response to fundamental changes in regards to the US dollar vs. the Euro.
Mike "Mish" Shedlock
http://globaleconomicanal...
no more kruggerands???
but there is no shortage folks!
World's Largest Gold Refiner Runs Out of Krugerrands (Update1)
By Claudia Carpenter
Aug. 28 (Bloomberg) -- Rand Refinery Ltd., the world's largest gold refinery, ran out of South African Krugerrands after an ``unusually large'' order from a buyer in Switzerland.
The order was for 5,000 ounces and it will take until Sept. 3 for inventories to be replenished, said Johan Botha, a spokesman for Rand Refinery in Germiston, east of Johannesburg. He declined to identify the buyer.
Coins and bars of precious metals are attracting investors as a haven against a sliding dollar and conflict between Russia and its neighbor Georgia. The U.S. Mint suspended sales of one- ounce ``American Eagle'' gold coins, Johnson Matthey Plc stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery and Heraeus Holding GmbH has a delivery waiting list of as long as two weeks for orders of gold bars in Europe.
``A lot of people are worried about the dollar, they're worried about inflation and now we have geopolitical risk with what's happening in Russia,'' said Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. O'Byrne said his company's sales are up fourfold this year, heading for a record since its founding in 2003.
Gold rose to a record in March and is 25 percent higher than this time last year, while the dollar dropped 7.4 percent against the euro. Silver is up 15 percent in the period.
Salt Lake
French Foreign Minister Bernard Kouchner said European Union leaders meeting in Brussels Sept. 1 will discuss sanctions against Russia after it recognized the independence of two regions of Georgia. U.K. Foreign Secretary David Miliband said yesterday Russia was trying to ``redraw the map'' of Europe.
Johnson Matthey's Salt Lake City refinery doesn't have the capacity to meet investor demand for 100-ounce silver bars, said spokesman Ian Godwin in London. He wouldn't comment on whether the company may expand capacity or end production.
The refinery usually gets orders for 1,000 ounce bars from banks and silver grains from jewelers, Godwin said.
Rand Refinery has manufactured, marketed and delivered more than 46 million ounces of Krugerrands since the gold coin was introduced in 1967, according to the company's Web site. Krugerrands are minted at the South African Mint from gold coin blanks supplied by Rand Refinery.
Gold for immediate delivery rose $2.29 to $829.19 an ounce by 5:24 p.m. in London. Silver gained 10.5 cents to $13.60.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
Last Updated: August 28, 2008 12:44 EDT
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as for me and my home, we shall worship the LORD
SIERRAHPBT Read: Jon Nadler, Senior Analyst Kitco
SIERRAHPBT Read: Jon Nadler, Senior Analyst Kitco
SIERRAHPBT,
I have been saying the same things for months while you called me an idiot. Now, THE SENIOR ANALYST, for KITCO, backs my assertions up:
" So, the market-makers (the banks) were heavy BUYERS, not SELLERS, during the time when prices declined. Now, because market-makers do not take naked, one-sided positions, as they were BUYING the metal in a sharply declining price environment, they were immediately seeking to HEDGE their large and growing LONG positions. How do you think they did that? Yes, they SOLD in the futures market, hedging their LONG positions.
Now, if one knows anything about markets, one understands that. The question is why the people who write the drivel you frequently read do not understand even such an elementary concept as the basic flow of trades. Anyone learns this fact in their first year economics course in college. One would think that people who purport to know about these markets would know what freshmen in college know, yes? Apparently, they do not". - Jon Nadar http://www.dailypaul.com/...
SIERRAHPBT Nadar is talking about YOU! You are the one that does not understand how the markets trade! You are the idiot who's poor financial advise has caused people to lose money right here on this board! It is you that has helped sell Ted Butler's 10 year old broken record conspiracy theory. It is you that is totally out of touch with market reality.
You my friend, and I say "my friend" with the same sincerity as John McCain, are a conspiracy quack who is ill informed, ignorant, and has absolutely no understanding of how the markets work. Shame on you for selling lies to unsuspecting people. Metals are a good long term investment, not a get rich quick scheme.
SIERRAHPBT your market timing advise has been awful, you have been proven wrong on Oil, the Dollar , and you scared cow SILVER. Enough already! If you were half as smart as you think you are, you would have sold your housing business in 2005. Like I told you before, a FOOL, like you, and his MONEY were lucky to get together in the first place.
Jeff, your a lowlife tool!
Jeff, your a lowlife tool! you have no clue as to whats going on.. keep shooting your mouth off.. your about to proven wrong real soon we will see if you have the balls to even show your your face around here! as far as kitco... kitco has been shown not to be a friend of the metals market.. they can and are used to manipulate pricing.. just do some research on that.. as far as my business goes.. I don't build houses I am involved in a part of building houses.. family has been in it since 1951! I love how smart you make yourself to be.. for someone who has never owned a business and is on public assistance you should't open your mouth.. you have no clue what is going on! you are little angry man who sits behind a computer keyboard who thinks he's rough and tough ... i got news for you YOUR STILL AN IDIOT! You believe anything that these morons in the mainstream media tell you.. not 1 time have you discredited any of the information I have given. I have proven you wrong several times.. even made you look like an idiot with your accusations against Sinclair! just keep it up ! You sir are going to find out here real soon just how badly you are screwing up! NOTHING has changed with the fed, and gov.! they still print money like crazy, they still spend money like crazy.. as you said I should have sold my housing businiess in 2005? well I guess your just admitting how dire and bad that part of the economy is and that it will pull the rest of the economy down with it! its starting to happen! you keep believing all the great talk and government statisitics that they feed you for me I will listen to Ron Paul, Sinclair, and Schiff... we will see just how smart you are real soon! and the 1 article above does not prove your right... lol you and being right on the economy! second I have not been wrong on oil! its at 117.00 per barrel! JZ said it was going to head south from 120! wow a whole 3 dollars off in what 4 months? all those tankers floating around with all that oil and no place to go? then why if all this oil is sitting, why is the price not significantly going down when a hurricane is shutting down production in the gulf? seems to me there must not be to many oil tankers floating around! what your not seeing is this crap with the dollar strengthening/ gold, silver coming down, and all this so called governement fed facts on the economy going to miss a recession is pure election time BS.! just wait till after the election! could oil come down? yep! I think it will to give the allusion of a stronger economy to help MCcain.. it will all be temporary! as far as my market timing... when you buy gold at 255.00 then trade thousands of ounces for silver at 5.00 I don't think my market timing is bad at all.. you need to go look where Gold was about a year ago? what was it in the 675.00 an ounce area? look at the charts for the last 8 years.. not the last 8 months..
we are still way over 100.00 per ounce higher then a year ago.. even after this "correction"
If you cannot look at the evidence that shows blatant manipulation of the silver market by reading the COT's then you are a fool! you keep drinking that government coolaid.. your about to get wiped out! lol how in the world the price of silver could drop 6.00 per ounce in such a short time when there is hardly any silver to buy is proof of manipulation! when there is less supply the price goes up.. when a product is over abundant the price comes down.. what we have just witnessed is economics in reverse.. if you have your head so far up your ass you can lick your own brain and not figure this out you are a fool! you just keep buying what you buy and do what you do.. we will see here shortly whats going to happen! the beauty of this thing is... no matter what happens I'm going to be sitting just fine.. No losses either way it goes! as far as calling me friend with the same sincerity an John MCcain... dude! everything you post is in direct opposition to Ron Pauls.. you say gold is a fiat currency?? that was ABSOLUTE CLASSIC THAT POST ITSELF GOEWS TO SHOW HOW MUCH OF A MENTAL MIDGET YOU REALLY ARE! that goes against everything Ron Paul says! Not 1 time have I seen you post anything on here in support of Ron Paul or any of his positions.. NOT 1 TIME.. your only on here to attack those of us who do! we see right through you Mr. Jeff!
Thanks SIERRA.
You've been absent. Everything okay?
___________
Lisa C.
www.dvds4delegates.com=Ron Paul, the 44th U.S. President
Join us at: www.campaignforliberty.com
Brought to you by: www.women4ronpaul.com
DAMN THE FEDERAL RESERVE!!!
We need Free Banking and a Gold Standard like we had from 1834-1861!!! PRICE STABILITY DAMNIT!!!
Period % Chng in Money Supply % Chng in Price Level
------- ---------------------- ---------------------
1834-37 + 61 + 28
1837-43 - 58 - 35
1843-48 + 102 + 9
1848-49 - 11 0
1849-54 + 109 + 32
1854-55 - 12 + 2
1855-57 + 18 + 1
1857-58 - 23 - 16
1858-61 + 35 - 4
(Sources: John Knox, A History of Banking in the United States, New York: Bradford Rhodes, 1903; and Historical Statistics, 1960, series E 1-12.
Mish, please answer GATA's emails!
___________
Lisa C.
www.dvds4delegates.com=Ron Paul, the 44th U.S. President
Join us at: www.campaignforliberty.com
Brought to you by: www.women4ronpaul.com
Where's neoconned?
___________
Lisa C.
www.dvds4delegates.com=Ron Paul, the 44th U.S. President
Join us at: www.campaignforliberty.com
Brought to you by: www.women4ronpaul.com
Overcomplicated
I believe you over complicated what happened.
Basically, 3 banks short sold truckloads worth of silver during July and the first week of August. That significant increase in (paper) supply caused an imbalance in the COMEX spot price due to supply/demand issues.
The amount of silver was approx 168 million ounces. Around 2.2 billion dollars worth of silver sold short.
We all know that the investing segment only accounts for approx 5% of the silver market. It's small. That's why it only took 2.2 billion dollars worth of supply (even though it is not real supply: short sales) to knock the spot price down by 38%.
Those 3 banks will eventually have to cover their short sales...
WHY did those banks short so much silver???
(I'm replying to my own message here to keep my points a bit more organized.)
There are a few reasons that I might guess about regarding why the 3 banks sold short such a huge quantity of silver during the 5 week period:
- To prop up the dollar during a strategically important time-period. (Precious metals down usually means the dollar goes up.)
-- The Olympics (all eyes on US)
-- Just prior to both the Democratic and Republican National Conventions
- Not long before election day
-- To help sway voters towards John McCain
--- The conflicts with Iran/Georgia and Russia also helped with this and interestingly happened around the same period of time.
- And another reason that makes me a bit concerned if it is a true possibility: The banks needed the money.
-- What happens if those banks collapse before they cover their short positions?
Simple Proof
For a while, the US Mint wasn't able to ship any new Gold Eagle coins. Now, it is rationing them. This is part of a conspiracy to suppress the price of gold. The rationed price of a gold eagle is currently $867
http://apmexdealer.blogsp...
http://www.apmex.com/Prod...
But the unrationed price on eBay is $1100.
http://search.ebay.com/ws...
(The one ounce Gold Eagle has a face value of $50, so do not be confused by the half-ounce $25 face value Gold Eagles.)
More reasons for
Dollar Rally...
http://www.telegraph.co.u...
Thanks takeaction
All the "funnymentalists" have been warning of the USD collapse and flaming me for saying otherwise.
Thy are chart illiterate and could have profitted handsomely if they could read.
Here it is almost September and this thing started 4 months ago.
The charts were whispering softly as far back as March.
http://www.gbemembers.com...
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
Not all "funnymentalists" are chart illiterate
or interested in profiting handsomely. Some of us merely lament the destruction of both our currency and the financial world as we have known it.
That's right.
It's a free country.
And without losers there can't be winners in a market.
Bless the loser's
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
?
?
Yes Gil. My 10 short August gold contracts netted $140k plus.
In two weeks.
So some gold bull(s) lost $140k.
Sowitworks.
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
I understand the trading part
which is why I don't trade. It takes a level of resources and commitment that I lack. But fundamentally, forget about TA, do you see anything dollar positive in the long term?
All I can offer is this
When the Dollar moves it moves for long periods of time. You have to look at weekly and monthly charts (meaning each bar or candle on the chart is a whole week or month). So given that the Dollar found strong support several times between mid March and mid July, it reversed it's 6 year down trend. The Dollar has strong resistance to get through at 80, 85 and 90. In fact it's stalled at 78, a minor resistance point, right now.
I got long at 72 and took profits at 77. 10 contracts @ $5k each profit.
I would not trade this market now because it's chopping up and down between 76 and 78. Looking at the charts it seems like it will continue up though. But I would not trade it.
It takes courage and faith to buy a market at it's lows. But that is often the safest trade even though it doesn't feel like it.
I strongly suggest taking advantage of learning this info.
http://www.gbemembers.com...
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
daddy...have u closed them??
just out of curiosity, my father had something in that area of gold shorts as well ...told him to close at 785.....and he opted to wait ...now at about 830.00 well off of those lows....u see it continuing downward?? interested to hear how far you see the dollar rallying as well...as in my earlier post i wrote about the heavy resistance that i have seen...not to mention what sort of reaction to expect out of Europe and Asia as the charts have clearly shown that both areas have had way less volume with august being a big vacation month....in fact volumes have really started to pick up here this week and it looks like a ping pong game...any insight....
Got short from 927 in July and closed out at 800
Seems like its going to chop sideways between 846 and 780 for a while. You must learn to read the charts so you can comfortably watch and wait for entries.
http://www.gbemembers.com...
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
thanks for the link
thanks for the link daddy, i graduate college this semester and would like to trade full time i've been doing so real time for only a short period after lots of demo trading and with relative chump change so not very easy to make lots but ive learned tons....as bearish as i am on the dollar...the daily's i have access too do show the reversal somewhere between march and april materialising....have read you alot on this site and appreciate the info u bring to the table.... being 25 and a poli sci major and econ minor has learned me lots of good info and now with mounting pressure to look for jobs..all i wanna do is trade...
txpaulscott: Here's an email I got today from another DP member
I just started my first two paper trades yesterday. This is actually
pretty fun! Thanks for setting me up with the GBE info. It is kind
of mind blowing how much the options can move from day to day
percentage wise...
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
daddy...have u closed them??
just out of curiosity, my father had something in that area of gold shorts as well ...told him to close at 785.....and he opted to wait ...now at about 830.00 well off of those lows....u see it continuing downward?? interested to hear how far you see the dollar rallying as well...as in my earlier post i wrote about the heavy resistance that i have seen...not to mention what sort of reaction to expect out of Europe and Asia as the charts have clearly shown that both areas have had way less volume with august being a big vacation month....in fact volumes have really started to pick up here this week and it looks like a ping pong game...any insight....
yes
"Committed To The Eradication Of Poverty Among Patriots"
"Those Who Strive For Excellence Refuse To Fear Mediocrity; They Eradicate It."
This is why the dollar rally
IT is a small paragraph....but explains a lot....
http://www.marketwatch.com/news/story/us-europe-japan-drafted-dollar/story.aspx?guid={6142254A-ADB1-44EB-8AB1-FDD615C71471}&dist=hplatest
No clue why it won't put a link.....
Try this one...
http://www.reuters.com/ar...
does the dollar rally continue?
yes the dollar has had an impressive rally over the last 5 to 6 weeks, be it intervention or not, over the last two weeks this rally has met some serious resistance. As a currency trader i've been somewhat perplexed by this rally, but looking back i suppose one could say that the dollar was due for a good solid breakout. i mainly trade in the swiss franc and the yen where heavy resistance has been met. im not gonna post charts but look them up for yourselves.....multiple rejections at at 110.35 on the swiss franc and 110.30 to 110.10 on the yen..inability to break these levels over the past 2 weeks combined with the return of vacationing players from both europe and asia could weigh somewhat on this dollar rally, furthermore, many seem to forget that currecncies are a function of interest rates present and future, as more and more players realize that the feds rate hike hysteria was likely just hysteria and no actual rate hike, it is likely to see the dollar recorrect to the downside. Gold typically moves with these foreign currencies or vice versa....that being said its hard to say that gold is not a quality buy at these levels
I've read both of these guys extensively
and at this time I'm questioning why Mish would write something like this. He knows what the game is, and it's a crooked game. He accuses Butler of not presenting facts, but responds only with "for every long there is a short". He countered Butler's argument regarding prices being far below moving averages with "Many stocks are far from moving averages. Nearly the entire financial sector is far from moving averages for example." Mish knows that the financials are some of the most manipulated stocks out there today. Or maybe he doesn't.
The fundamentals are screaming that the dollar is toast yet traders (short-sighted fools, imo) keep talking up the "rally" in the US$, just like they're supposed to. There are a lot of clueless people being played right now. Those of us who have gladly traded our FRNs for physical PMs will not be trading back any time soon. I wonder what motivated Mr. Shedlock to write this column?
He's acting like an idiot
He's acting like an idiot shill for the big boys He said if you want to prove it buy a contract and take delivery. That's the point these contracts have no silver behind them and a certain percentage of the market is buying and trading contracts never taking delivery so the big boys got greedy and started selling contracts with no real silver backing because they could, because they have no oversight. It's call fiat money or money from nothing and it's the same thing big financial institutions have been unable to resist through out history. Which is why it illegal in the futures market, but legal in the US for the Federal reserve to do with no oversight.
Maybe I'll just start writing checks for anything I want to buy hey there good backed the full faith and credit of me!
-----
Prepare For the Coming Storms, Join New FreelandersSelf Reliance & Preparedness Forums
Yeah right Mish...
buy a contract and take delivery. Delivery of what? I'll call my PM dealer and take physical delivery, thank you. There are a number of traders here at DP and I wish them all well. I just wonder how many realize that when the game ends there will be only one winner.
Jesus Christo
Next time LINK! it
The Case for Gold.
http://www.dailypaul.com/...
I think we have a pretty well documented case for a bullmarket ahead for gold. At the very least it is a strong argument that gold prices have a much higher probability of going up than down.
Your right,
The dollar has made a tremendous rally. THAT in itself is the ONLY conspiracy or I would call it manipulation or lie. EXPLAIN how the dollar goes UP, with billions printed and spent on Iraq, afgh, foreign aid, georgia, fannie mae and Mac, economic stimulous packages. GET MY DRIFT.
So silver and gold did not really go down, either the dollar went up, or as I recall the world banks got together and more or less devalued their currencies in unison to make the dollar look stronger, therefore knocking the price of silver and metals down... Maybe I look at a REALLY big picture too much.
Freedom may be worth searching for.
Remember, Dont battle the govt with guns(ALONE), Beat them in court, in state legislature, or hire Ron Paul for president.
Hahahaha
An article from "Mish Shedlock"! And do any of you wonder why?
Think about it.
STUPIDITY IS AS STUPIDITY
STUPIDITY IS AS STUPIDITY DOES! if you do not beleive there is NO conspiracy or rigging of the market don't buy! we will see where things are at in the near future.. how anyone can read the COT's and come up with a different conclusion then butler is idiotic! you do not understand what is going on!
as for me and my home, we shall worship the LORD
I'll return just to post
This
http://www.financialsense...
link. Seems like something's going on after all when physical silver sells for $17/oz (even crappy 100oz bars, and that's NOT including delivery, either!) on eBay while Kitco's paper claims to silver are under $14...
JMR
There is a very logical reason
for such. Buyers for physical silver have become irrational. In the late 90's and early 00's, buyers for tech products had become irrational. Each time a new gadget went to market, it brought a premium. And this premium was due to a buyers whom just had to have the latest gadget, and they had to have it NOW. But as an upgraded gadget to the original gadget becomes available, the original gadget would fall dramatically in price. The original gadget was still the same gadget, but it had lost its premium to the newer upgraded gadget. The premium was a psychological value premium. There was a market for the gadget AT A PREMIUM, and that market was create by people whom had to have it now. Those whom waited could buy their gadget at fair value.
lmao at irrational... tx...
lmao at irrational... tx... go into your neighborhood and ask 100 households how many of them have bought any form of silver in the last year... I would be willing to bet what maybe 1 household? iraational?/ not even close! THE FRIGGIN MARKET IS SMALL! THERE IS NOT ENOUGH SILVER FOR INVESTMENT DEMAND THAT IS COMING SOON.. what will the price do when the stupid american people get it figured out that the government is screwing them by printing dollars and devaluing the money people have worked for.. what is so hard to understand? why people sit here on this site and bad mouth this silver market is beyond me.. maybe its just something that they are not comfortable with. but brainwashings from keynsian economists in highschools and college go along way! you guys are going to miss out on one hell of an opportunity!
I would have to disagree.
I would have to disagree.
Buyers have not become irrational they are in fact being very rational. Lets see the dollar is in it’s death throws, Inflation is out of control, We are on the precipice of World War III, the Federal Reserve is printing money to bail out banks desperately trying to prolong the inevitable, and congress is still borrowing and deficit spending like a drunken sailor etc. etc. etc.
On the contrary physical buyers are doing the right thing they are not trying to make some killing in the dot.com boom they are doing the only rational thing they can to prepare for monetary and economic collapse and try and protect at least some of their hard earned fruits. They are not as worried about price as they are buying power. So there is no rational reason to put your money in a bank where it immediately looses value due to inflation rather then buying silver and gold which retain their buying power. It’s called the free market finally correcting the managed and manipulated BS called the futures market.
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Prepare For the Coming Storms, Join New FreelandersSelf Reliance & Preparedness Forums
As I read your response
so many thoughts go through my head that I could easily write a 1000 word respnse to you, the effects of optimism/pessimism on the markets, what has been the most effective method for protecting one's purchasing power over the last 37 years (since 1971), ect. But I'm not up to that right now, I'll just respond what relates tom my original comment, and the response you made.
You're response, "they are doing the only rational thing they can to prepare for monetary and economic collapse and try and protect at least some of their hard earned fruits. They are not as worried about price as they are buying power. So there is no rational reason to put your money in a bank where it immediately looses value due to inflation rather then buying silver and gold which retain their buying power. It’s called the free market finally correcting the managed and manipulated BS called the futures market.", is exactly what I was referring to when I said there is a psychological premium on silver.
At times putting your money in the bank can be the best way to protect its buying power, at other times the Stock Market may be best, other time it may be Bonds, and other times it may be metals or other commodities. I'm sure you've read that gold and silver have retained their purchasing power over a 5000 year period. That sounds impressive, but it is deceiving. The sellers of Stocks have often pushed stocks and use the comment that stocks have never suffered a 10 year loss, which is a true but deceiving statement. The stock market has never gone done 10 years in a row, but it has fallen so sharpy in a few years time that it takes MORE than 10 years to break even. The same is true with metals, they have retained their purchasing power over 5000 years, but have not retained this purchasing power consistently. There have been periods in which one has lost purchasing power and not regained it during their life time. And this is what is really important, what happens during the life time, not the average over 5000 years.
Many whom bought gold and silver in 1980 STILL to this day have not regained their pruchasing power, 28 years later.
Retaining purchasing power is a matter of making the right choice at the right time. People whom put their money in the bank in 1980 lost less than people whom put their money in the "safe" haven of gold and silver. In 1980 there was a psychological premium on Gold and Silver, it was priced far above fair value. In the early 70's the Hunts began to buy large amounts of physical silver, which eventually led to the little guy "panic buying" and losing their asses. Many of the circumstances are different, but the public is following the same pattern, from a psychological standpoint.
Agreed
Not to bash precious metals, I own a good chunk myself, but the argument that they retain their purchasing power from year to year is a bit flawed. Yes, metals will always be worth something, and can therefore be considered less risky than keeping your money in a bank in some ways, but the purchasing power of these metals fluctuates all of the time! For example, the spot price of gold has dropped almost 15% since the last peak in July. This means that, minus inflation (I think 1% a month is on the high end, but reasonable), gold has lost 14% of its purchasing power in a month alone.
Looking a few years back, gold has gained around 180% in "value" since 3 years ago. Have we had 60% inflation each year for the last three years? No way! Gold gained purchasing power as it rallied. The sad fact is that until we can start buying things with gold and silver, their "purchasing power" will be measured in the spot price in USD.
"The sinews of war are infinite money" ~ Cicero
Good because often long
Good because often long winded posts are just an attempt at justifying the unjustifiable. I don’t need to look back five thousand years to understand gold and silver retain their purchasing power. All I have to do is take a silver quarter out of my pocket and buy a gallon of gas with it. The same as it did in 1948.
With your statement : “Many whom bought gold and silver in 1980 STILL to this day have not regained their purchasing power, 28 years later.”
You Show your complete lack of understanding. First they never lost any
purchasing power and that purchasing power is the same today as it always was. It was the dollar that lost purchasing power not gold. If they needed more paper to buy gold that is not a flaw in gold. You make the same mistake those who panic buy and sell always make they think in terms of inflation as increasing value. That gold bought in 1980 will still buy those same goods and services today that it did then.
When the dollar devalues or inflates there are brief periods where exchanging gold/silver for paper dollars in terms of purchasing power are out of sink and need to catch up so to speak, but this is only because of the nature of fiat currency and inflation/deflation etc. not because gold and silver are unstable or lose anything.
I do agree with you to some degree on timing, however if you don’t think the timing is right at this point then you are not paying attention. By the way you still haven't explained why you think physical buyers are being irrational now.
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Prepare For the Coming Storms, Join New FreelandersSelf Reliance & Preparedness Forums
Well, uhhh...hmmmm,
the price of silver in 1948 was $.70, per Kitco data. Currently it is $13.58, per kitco data. An increase of 1940%
the Dow Jones Industials in 1948 were an average of around 185. Currently it is at about 11,600. An increase of about 6100%
So since 1948, that silver quarter buys you the same gallon of gas today that it did in 1948. That but the $.25 paper stock in the DJIA buys 3.1 gallons of gas today. And paper has lost value???
If you look at the face
If you look at the face value of each quarter, excluding the current value of silver, the purchase value of each quarter is different, Today's quarter would buy 0.03 cents worth of goods in 1948, it therefore takes about $2.28 to buy today what a quarter bought in 1948.
We must also realize that all appreciation either in the markets or even in the fiat value of commodities is based upon inflated fiat value. It should also be remembered that all values expressed in a fiat dollar $1.00 today are actually valued as 0.05 Cents in terms of a 100 Cent Dollar of 1913. That is a huge debasement of the currency, the purchasing power has been drained away from our currency.
wrong.. a quarter in 1948
wrong.. a quarter in 1948 was worth!!!!! A QUARTER! a quarter bought 1 gallon of gas.. same as today.. a 1948 quarter that is!
as for me and my home, we shall worship the LORD
It would be an EXTREMLY
rare gas station that will sell you 1 gallon of gas in exhange for a 1948 quarter. The mass majority of gas stations will give you $.25 worth of gas for a 1948 quarter.
all you have to do is sell
all you have to do is sell the 1948 quarter for the 4.00 in greenbacks and buy your gallon of gas! is that so hard to figure out?
as for me and my home, we shall worship the LORD
Just make sure you don't
Just make sure you don't have a 1948 Quarter in your pocket as you reach to pay for that gallon of gas.
In inflated terms, it now takes $2.28 cents to buy what that 1948 quarter bought in 1948, or that 1948 Quater, disreguarding the silver price value, is worth about 0.03 cents in purchasing power.
Ah, the Wonderful Wonders of the FED's Fiat Fantasy Fiasco!
What ever happened to the tradition of Tar and Feathering Scoundrels, or better making them Dance the Tiber Jig?