This past Friday was a near carbon copy of the previous Friday for the precious metals. Both were “outside reversal” days where the overnight and morning sessions were quite weak, only to bottom and then reverse to the upside strongly on very heavy volume by the day’s end. First, this type of action is almost unheard of for precious metals and has happened only a handful of times over the last 15-20 years. Also, both reversals were quite large from the day’s early lows to their final closes, the range was 3-4% which obliterated the long held “2% rule”. We have now seen this twice in exactly 6 trading days and both were on a Friday.
I want to emphasize “FRIDAY” and put it in capital letters to boot. Friday is the end of the week where there is no trading over the weekend. (It is also the most important day to chartists where the charts cut off and print a close for the weekly period.) Once business closes on Friday, participants are basically frozen in their position until Monday morning …or until the market reopens. Market participants obviously know this and either position themselves accordingly or square their books going into weekends, it has been this way since the beginning of markets. That said and as you know, I am a believer that we will see a system wide “re set” and this will in most all likelihood occur over a weekend.
I wasn’t sure when sitting down to write this how I’d structure it, meaning give you evidence and lead to a conclusion or the reverse? My conclusion is that we have hit a precious metals BOTTOM and are now reversing, the worst is over in my opinion! I must confess, I called a bottom 2 days after the low in June of 2013, some 16 months ago …which stood as correct until 2 weeks ago… I was wrong. I did not in any way believe the $1,180 level in gold would be broken, it was. That level was broken the day after the last FOMC meeting when 7 days’ worth of global production was sold at 12:30 AM on the COMEX. Clearly this sale was meant to “break the charts” and break the spirits of any remaining PM bulls. It did break the charts and sentiment along with it. I actually saw a bullish/bearish sentiment reading this past week at “0” bulls, I can’t remember where I saw it but I can tell you in 30 years I have never seen this before in any market.
OK, here is what I see and what leads me to believe we now have a hard bottom in. We had the two consecutive reversal Fridays and both on very big volume. These can be considered “impulse waves” if you will. The previous week’s raid occurred just as the GOFO lease rates were again going negative (an impossibility in any normal market scenario). Since then, the GOFO rates have gone further negative and have now seen two (possibly three, we will know on Monday?) record negative consecutive days. GOFO rates should never be negative yet they are more negative than any time since 2001 when the gold bull market began. Negative lease rates mean that the real metal is scarce which a direct contradiction to dropping prices is. I will say this, while the COMEX can create 7 days’ worth of paper gold and sell it while everyone is sleeping to “make” price, they cannot create real gold out of thin air to satisfy real leasing needs. What I am saying is this, rates in the “real” market show gold as very scarce, NOT plentiful as price would suggest.
Another anomaly occurred this past Thursday and Friday. Scotia was served 920 Nov. COMEX gold contracts on Thursday and another 462 Friday. This is VERY strange and can only be explained as “someone either needs or wants gold…NOW!” I say “now” because the November month is historically a very small delivery month, there are only a few days left and there were only 33 contracts open prior to these 920, and 462 being served. This represents 92,000 ounces of gold, almost three tons and 46,200 ounces or nearly 1 1/2 tons. In a contract that is going off the board in short order, for what possible reason would this ever be done? Who is the ultimate buyer and why now? We can’t know “who?” we can only speculate on “why now?” but we do know one thing for an absolute. Someone is desperate for gold and has to have it immediately! I have never seen anything like this in the COMEX metals in the last 15 years happen even once …but back to back day’s smacks of something really different! Stay tuned as I plan to write more about this anomaly and the GOFO backwardation in my next piece.
Other pieces to the puzzle include very high open interest for Dec. silver, still contracted for more than 7 ounces for each ounce represented in registered inventory. Interestingly, the bullish consensus on the dollar has never ever been higher than it is right now, everyone has moved to one side of the boat. Russia announced a doubling of their purchases over the last three months to 55 gold tons while China is averaging nearly this amount weekly …and India looks to again be ramping up purchases. We also have seen a rampage in Europe, particularly Germany where silver demand has recently been voracious. So much so that many mints have gone “back order” including the U.S. mint suspending the sales of Silver Eagles. Anecdotally, I would also like to mention the premiums on U.S. Gold Liberty coins has risen dramatically over the last two weeks, so much so that they now actually cost more than when gold itself was $30-$40 higher. I understand, “they don’t make these anymore” but dealers are being forced to raise what they will pay owners to entice product. NONE of this is the action of a market where the thought process is “get me out now!”
As a backdrop, we still need to hear from the G-20 and what was decided there along with the Swiss vote at the end of the month and also the “nuisance” factor of ISIS announcing they will create their own currencies …made of gold and silver. We already know the APEC/G-20 meetings have respectively shown little U.S. respect as President Obama was pictured far from the center and (I mean no disrespect) between two women…followed by Mr. Putin being isolated by his lonesome for the G-20 photo. I bring this up because China/Russia obviously knows the game of proper diplomacy, I can see no way a U.S. president would ever be treated like this unless something was afoot and close to being made public (I wrote about this in my “G-20 Massacre” article last week). As for the treatment of Mr. Putin who now says he will leave the summit early, do the G-7 members really believe there is an upside to poking “the bear”?
As for the Swiss vote, this may be quite interesting as the banking powers that be seem to be putting a public full court press for a “no” vote. If this was “no big deal,” there would not be as much or as many efforts to “scare” the voters away from gold. For that matter, the recent price action may be directly connected to this vote and is being used to scare the “yes” vote? I mentioned the announcement of gold and silver currency by ISIS because this will also increase demand. Please do not think the “timing” of their announcement was by any coincidence or by chance, they can see everything we do and understand precious metals are the Achilles Heel of the Western fiat systems.
One last area I’d like to address is sentiment from personal experience. In all my years as a broker and since then writing, I have never seen the fear that has been recently prevalent. I have never received so many e-mails and phone calls from fear the stricken as I have of late. These past two weeks have topped the charts. Even the die hard’s are questioning their logic. Never mind that demand far exceeds supply or that gold and silver cannot be produced for long at these prices, the fear has run rampant and blood is running through the streets (minds) of precious metals investors.
Please understand what is happening and why. President Obama met with the leaders of finance last year and then suddenly gold and silver started to drop. This in my mind was a last ditch effort to show the world “dollar is good, gold is bad”. It has worked … so far, the only problem being “gold cannot be printed” and the West will at some point run out of metal to supply the buyers. I did not take lightly “calling bottom” in June 2013 and I don’t do so now. That level held for 16 months until the most recent operation but it is what it is. The action of the last two Friday’s tells me that something has definitely changed and physical buyers are digging in their heels. In my opinion, we will not trade at the current levels for long. I will be surprised if the action from here is not “V” shaped and another impulse wave kicks it off. Whether or not we have a market closure, holiday and “re set” I don’t know but I do believe it is a likely scenario. Any number of events could possibly be pointed to as (“but if such and such didn’t happen we would have been fine”) a reason. There must be a “reason” for public consumption when in fact the “real reason” is simply an unworkable monetary experiment.
With a dollar in a rising mode vs other fiats, computers/HF will sell every paper gold/silver bounce imo.
All the best.
I am sure they will but …it is only paper.
Hopefully the next paper dump will bring even more sovereign purchases ie the only chance the western citizens have to get rid of this Financial oligarchy.
Waiting impatiently your next missive on gofo !
maybe this afternoon?
I agree with you, Bill. We have seen a significant change in behavior in the precious metal sector over the past two Fridays and so the bottom does appear to be in.
For those who say the Dollar is rising and strong and will cause the PM sector to be weak. I say the Dollar is rising mostly due to failed derivative bets which require Dollars to settle.
I believe there will be a move into the PM sector by those people who won their derivative bets as they now will seek a safe alternative to the paper casino and an alternative with zero counter-party risk.
In essence, both the Dollar and precious metals will rise together for different reasons.
good point Dan.
The question is when ?
Up to now only chinese and russian central bank is buying and indian people but it looks like gold imports in india is going to be forbidden soon…
“but it looks like gold imports in India is going to be forbidden soon…” really? then what of the massive amounts smuggled in? Gold will enter India, legally or illegally and it won’t be the “paper type”.
Agreed but the asian purchases are price sensitive and smuggling/ higher import taxes are costly so their demand is going to halve or something.
“imports will halve or something”… keep dreaming.
Dreaming ???? Nightmaring rather !
Indians are our comrade against fiat !
you wrote their demand will “halve”, it has not and won’t happen. Import taxes will only increase the amount of smuggling. Making import illegal will explode the demand via smuggling.
As usual, makes great sense, in compact, hard-hitting prose. Thanks for it, Bill!
thanks John.
Bill,
I have traded the gold market since 1977. About two months ago, I began visualizing heavy deliveries in an off month of Gold. I was telling my wife about these visualizations…and that this would be how a run on the Comex would begin. I have never thought or visualized this before in my 37 years of trading.
Needles to say, the deliveries this past Friday were nothing short of amazing…but…if I’m right…the heavy deliveries will set off a domino effect in the gold market. If next, we see a day of 3,000 plus contracts…the next day will be 7,000+..then 10,000+….then RESET!!!
Just my thoughts..
-Rodger-
Thanks Rodger, I would say, if we see any more sizeable notices served it can only mean one thing, they cannot get gold from anywhere else and the process of “jumping queue” (cutting in line) has started! Once understood, this process will be virtually an overnight experience.
Mr. Holter,
You hit the nail on the head when you said “why”? “Cutting in line” is a good term…I use “front running the December Contract” People “in the know” feel the need to get their gold NOW. It was also interesting to note that virtually none of this gold was traded on the electronic platform (at least, the volume did not show up on my system..showed only 30-40 contracts traded in the November month for all of Thursday and Friday). It was traded on the floor. Again, “why”? If we see another 1K+ delivery day or open interest increase by this amount, I agree with you and can easily see this as a major low.
-Rodger-
thanks Rodger, there was only open interest of 33 contracts when these were served/
Bill,
Right on cue:
India Precious Metals Import Explodes In October
https://www.bullionstar.com/blog/koos-jansen/india-precious-metals-import-explodes-in-october/
and then there is Japan in recession:
Defying Expectations, Japan’s Economy Falls Into Recession
http://www.nytimes.com/2014/11/17/business/international/defying-expectations-japans-economy-shrinks-further.html?hp&action=click&pgtype=Homepage&module=second-column-region®ion=top-news&WT.nav=top-news
It just keeps coming!
thanks Mark, “low prices will cure low prices”.
as I wrote above, do not get too excited with india, importing gold will be forbidden soon, modi is just another banker whore.
At this stage only russia & china sovereign purchases can take delivery of enough metal in order to crush one day or another paper shenigans.
…India will import legally or illegally and they are definitely part of the demand side of the equation.
I understand your readership may be sensitive to the $US price of PM. It seems obvious to me that you make bottom calls for this reason. To me, there is no bottom in these paper markets as there is no limit to their paper supply. Until the day comes where no more metal gets sent, we can see a continued flood of contracts. The sick twisted part is they have access to unlimited paper currency units as well whereas we must exchange our blood sweat and tears to get their paper garbage to survive and if we have anything left over, convert it to real money. It really sickens me.
something very big has changed, maybe they can continue with paperhanging but I do not believe we would have seen the COMEX raided if physical was aplenty elsewhere. We will see.
Are you as confident with your call for a bottom as you were about the “G-20 Massacre?”
I hope you’re right, but with oil falling, the dollar rising, and Japan moving into recession, I’m not sure that translates into rising PM prices in such manipulated markets.
ah…so at least you admit the markets are manipulated? Do you admit demand of PM’s are dwarfing the actual supply? As for the G-20 and APEC, we do not know yet what the fallout will be, Putin leaving early means something happened behind the scenes and …China is on their side rather than that of the West. It will be interesting. Just one question, why do you bother to read my work since you wrote I have no “cred”? Why would you say “I hope you’re right” if I am such an idiot, how could I possibly be right?
The “no cred” remark was aimed at a post concerning Zero Hedge, aka Zero Cred for their laughably sensationalistic predictions which go quickly down the memory hole when the predicted result fails to materialize.
Yes, the makets, especially the PM markets are crooked. It’s just that I’ve been reading predictions of their imminent demise for the past six years. They can keep on being manipulated for another six or sixteen, for all I know (or you know) before they crash. Just remember that old saw: the market can remain irrational longer than you can remain solvent.
Bill, I think the Swiss referendum will pass despite the propaganda by the Central Banks. The Swiss are angry over the weakening of their franc and this is their last good chance to put a stop to it. They had no problem getting the 50,000 signatures required and could have gotten 100,000. Deutsche Bank has now predicted passage. The Swiss will vote their displeasure for the same reason the US election reflected general displeasure. I think we’ll have a short but sweet buying opportunity next week. Also, I think the US will try to smash ISIS for announcing a PM backed currency. They won’t succeed and ISIS likely has discrete support from China and/or Russia. Other Nations are likely to follow at some point. TPTB are facing strong resistance and are in a panic over the daisy chain that may follow.
I hope you are right Silverado, a yes vote will crack this baby open like a watermelon from 10 feet!
If anything it will be very close at best (and that’s boots from the ground) IMHO. The proponents made a good campaign, but the nay sayers are out swinging hard. All the MSM is full of mis-info, scaremongering is systemic and at a level you would not believe it. MANY will say no (unfortunately)… AND remember it needs a “double majority” yes – both a yes in the votes overall, and a majority of the cantons approving. All political parties are against it, the whole government is against it, the SNB, and many neocon economists. It’s true, many folks are pissed, but even more are happy with the high SMI and they see gold as a threat to the CH/EURO peg at 1.2 … As I said close at best, so don’t count on a yes, there are lots of s(wiss)heeple round here too.
I agree, the odds of a no vote whether real or “mis” counted are high.
Good call Bill.
Will be interested to read what you say about GOFO.
I recently read this…9th Nov 2014
Dr Fraser Murrell…Permanent Gold Backwardation= Global meltdown.
looks at GOFO GLR and Libor.
Excellent article,strongly recommended to everyone with interests in PM’s.
Bill,
The holidays are upon us and I hope every one can enjoy quality time with their families. In the next few years this may become harder to do as trying to survive may be what all will be trying to do.
Once upon a time I use to believe in Santa Clause, but my older cousins exposed the ponzi scheme to me and I finally saw the truth.
Once upon a time I use to believe in fiat paper money, but once again the ponzi scheme has been shown to me.
Folks should be like China, Russia, and India in trying to get what silver and gold they can acquire before the ponzi scheme leaves them flat broke.
As to “RD” above I feel sorry for him and I hope his brain can start understanding the truth. I’ll pray for him. He gives Andy a hard time also.
Happy Holidays to all and I hope we can have happy holidays a year from now.
thanks Farrell, no problem, RD will get it one day as will most everyone.
The ISIS news is huge. If ISIS or another group reunites the Middle East into a unified region with a regional currency backed by precious metals the end game is over. Remember Libya? Countries could even sell out to such a new empire if there was debt forgiveness and delivery of oil in addition to “safeguarding” from acts of terror, I can see a new Islamic region easily toppling existing kingdoms if there was a promised redistribution of the oil wealth. Look at the Arab spring in 2011 which was really caused by food inflation caused by the Fed ultimately. I had this theory a few months ago and it’s slowly unfolding. Frankly this really is the end. You will be proven prophetic soon, but there will still be less than 1 percent who heard and took action.
I agree with you on the Middle East as alliances, borders and regimes will change.
Hey Bill here is what I got from a James Turks Interview. This makes sense to me!
Bloomberg quoted ECB Executive Board member Yves Mersch saying that the ECB’s proposed €1 trillion QE program could include buying gold. He said he was talking “theoretically.” but what if one of these Mondays the ECB actually announces a gold buying program as part of it efforts to inflate away the purchasing power of the euro to ease the repayment burden on over-indebted governments. Or consider what might happen on Monday, December 1st if the Swiss government announces that the Swiss Gold Initiative was voted into law.
So it is always very risky to be short gold, but particularly over a weekend.
I believe that many people do not want to keep a short position over the weekend either!
Thanks
shorting gold today is a death wish.
Well, it seems some had a great time to do it above 1200 especially with another SP500 record, business as usual !
Hoping your new missive any time now as it is really a dismal day in here in Belgium !
maybe 2 hours, our newsletter itself has been down.
With all due respect, the ISIS gold/silver currency story is made up fake. What with ISIS itself being supported through CIA fed weapons & all?!
It’s basically a false flag story made to say, “Look, look….Those terrorists all want to use gold & silver coins. Therefore, everyone who is for physical gold & silver MUST be a terrorist”.
Reductio argumentum ad absurdum.
this may be very true but the Arab world does believe in PMs.