In today’s Featured Articles section below, we present an excellent article from LeMetropole Café by Michael Noonan. They are one of my favorite newsletters. You should check them out. Their newsletters is unique, and very valuable.
Michael Noonan’s article makes a good point. Even though the fundamentals we present to you should make for higher prices, Technical Analysis is setting the price – at least for now. All that’s necessary is to short gold (and silver) to key technical levels and then the hedge funds jump in and sell.
Ted Butler and Ed Steer (two of my favorite writers) maintain that at some point, JPMorgan will start to manipulate the market UP instead of down and the hedge funds will join in and the prices will rise dramatically. Since JPMorgan is heavily long in physical gold, that day will come. Here is an interesting article from Ted Butler:
At this time last week, I had estimated that the total net commercial short positions in Comex gold and silver would be down 25,000 contracts in gold and more than 3,000 contracts in silver, if the report was cut-off last Friday (and not the coming Tuesday). I should have left out the qualifier, as more than 28,000 contracts of gold and 3,200 contracts of net commercial shorts were eliminated as of Tuesday.
The fact is that many COT mavens were expecting big declines in the commercial short positions, so my point is not to pat myself on the back. My point is that more observers who study the COT reports can see that what moves prices are how the tech funds behave on the Comex. If you think about that for a moment, it’s kind of extraordinary. I agree that not everyone makes the connection that the commercials are tricking and controlling when the tech funds buy and sell, but to my mind it’s just a matter of time before they do. As backing for my assertion I would point out that a few years ago, a very small number of precious metals investors even considered the COTs. Now, many are making predictions of what the new reports may show based upon reporting week price action. That’s just a short distance away from viewing the reports as being what caused prices to move and the realization of that is price manipulation.
– Silver analyst Ted Butler, Butler Research, November 16, 2013
A decade ago, Jim Sinclair wrote that the same banks that are currently on the short side will be the ones on the long side when the price turns up. They will be the ones to make a fortune on the up move. I know it seems unlikely now, but it will happen.
My best guess, and it is a guess, as is any prediction, is that everything turns around before the end of the first quarter. At that point, Janet Yellen will be in place as Fed Head and the key delivery months of December and February will be history. Bill Holter and Andy Hoffman have written numerous articles that the Comex gold inventory is very low and if they can’t meet the delivery demand in December or February, game over. Currently, the Comex inventory is too low to meet any meaningful physical settlement. If even a small percentage of the holders of the contracts demand delivery instead of a dollar settlement, the price of gold will take off like a rocket.
Where will the banks get the bullion to deliver with inventories so low?” All traders who hold futures or options contracts for December have to sell, roll, or stand for delivery. Where will the banks get the gold to deliver? Here is a strong candidate. Below is an article from GATA:
Venezuela reported planning to pawn its gold through Goldman Sachs
Submitted by cpowell on Tue, 2013-11-19 18:33
The Venezuela newspaper El Nacional, the voice of that tortured country’s political opposition, reports today in the story appended here that, after triumphantly repatriating its gold reserves two years ago, Venezuela has sunk so much economically under its predatory socialist regime that it will raise cash by pawning its gold through Goldman Sachs.
That gold almost surely will be delivered by Goldman Sachs to the use of the Western central bank gold price suppression scheme.
Presumably Venezuela’s friend China could have bid directly for the gold and apparently didn’t, maybe suggesting that China may be glad of the resulting discounting of gold on the international market, especially since the Venezuelan gold well may end up in Beijing anyway after nicely knocking prices down in its travels.
The translation, done largely by Google Translator, is far from perfect but may convey the idea well enough.
Ed Steer wrote the following below about the manipulated gold trading on the COMEX –
I don’t have a thing to add to what I said earlier about yesterday’s price action, or lack of it, in both silver and gold. It was just another day off the calendar as we approach First Notice Day for the December delivery month.
All traders who hold futures or options contracts for December, have to sell, roll, or stand for delivery, and all that has to occur between now and the close of Comex trading next Thursday. I don’t expect much price action, except to the downside, between now and then. But as I said in this space yesterday, once December goes off the board, it’s a whole new ball game in my opinion, and we’ll have to wait until then.
Yesterday, at the close of Comex trading, was the cut-off for Friday’s Commitment of Traders Report. Just eye-balling the weekly price action that will be in that report, it’s a certainty that there will be an improvement in the Commercial net short position in silver, because a new low price was set for this move down yesterday. However, Ted Butler says that it’s too hard to tell with gold, as their was a big out-of-the-blue rally in electronic trading last Wednesday to start off this current reporting week, and it’s unknown whether it was short covering or a new long position being placed that caused it. So I’m prepared for either scenario.
As I’ve said before, if the Fed is looking for a little inflationary pressure, all they have to do is get their foot off these key commodities, and the free market will do the rest. Will it happen? Beats me, but it’s a scenario that I’ve been expecting for some time.
–Casey Research, November 20, 2013
I asked my friend, Trader David R where he thinks gold is going? He told me, “I think we will continue to drift lower or stay around here, as stop loss selling and producer hedging will come into play, but I think we see new all time highs next year…. unless we get more data manipulation from the government and keep dreaming of tapering and recovery…… it’s tough call these days as the data and markets are disconnected!”
He makes his living trading, not selling newsletter subscriptions, and I have found him to be very accurate. As you can see from his comments, he discusses government “data” manipulation. There is no question but the government does manipulate the inflation, employment and GDP numbers and the result is an over-valued Dow and undervalued gold.
2013 has not been kind to precious metals, but 2014 should be a catch-up year and the bull will be back in charge.