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Forget Prayer, It's Lamb Slaughter Time: A Rational Man's Response To All Time High Gold Shorts

Tyler Durden's picture





 

Two days ago we suggested that "they better pray there is no short squeeze." Today, following the just released latest CFTC Commitment of Traders data which showed that the Comex gold short position grew once again to a new all time high of 79,416 shorts, all prayers are now off. If we may be so bold as to we suggest, the time has come to upgrade to the sacrificial slaughtering of at least a lamb on the altar of Saint Ben, because even the tiniest hint of a forced cover will now result in the biggest rip your face off levered short squeeze seen in the history of the yellow metal. Maybe throw in an ink cartridge or two for good measure...

 

Short positions in gold have risen 25% in the last 3 weeks

 

Chart: Bloomberg

 


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Fri, 05/24/2013 - 18:50 | Link to Comment OldPhart
OldPhart's picture

How can they lose?

It's all a rigged game anyway.

Fri, 05/24/2013 - 18:54 | Link to Comment Say What Again
Say What Again's picture

I'll pay up to get a front row seat for this show!!!

Fri, 05/24/2013 - 19:20 | Link to Comment bullionbaron
bullionbaron's picture

Which group of traders does the COMEX short position in the Zero Hedge article represent? COT report is here: http://news.goldseek.com/COT/1369424121.php

Fri, 05/24/2013 - 19:40 | Link to Comment CitizenPete
CitizenPete's picture

yeah... What he asked.

Fri, 05/24/2013 - 20:08 | Link to Comment AllThatGlitters
AllThatGlitters's picture

As one who tends to be a bit of a contrarian, I love seeing things like this. 

But I don't like seeing that others are seeing it.  Puts me in a quandary.

The chart looks horrible - http://www.pmbull.com/gold-price/

And several 1 ounce gold bars are still offered on that page for under $30 over spot.

That would normally be attractive to me, but then I pause and ask:

Why aren't the dealers seeing this obvious scenario?  Are they long futures as a hedge?

Wouldn't they normally be short as a hedge, to protect their inventory?

That short position is SO incredibly extreme now that I have to wonder if something is different and somebody is in the know?

- Oops, I said it.  That's my answer. Nothing is ever "different this time."  I'll buy and wait for the squeeze!

Fri, 05/24/2013 - 20:43 | Link to Comment Manthong
Manthong's picture

Bring it, MF's.

the ad pains me, but the message is important..

http://www.youtube.com/watch?v=73OiRZf7DsM

 

this works, too..
http://www.youtube.com/watch?v=514IEcgz1Q8

Fri, 05/24/2013 - 21:14 | Link to Comment UnpatrioticHoarder
UnpatrioticHoarder's picture

MF Global.... LOL OK I finally get the joke

Fri, 05/24/2013 - 21:24 | Link to Comment philipat
philipat's picture

The Bullion Banks are net Long. The only question is will they be able to resist the temptation to scalp the Hedgies? Remember they need The Fed as the (Virtually only at present) source of profits from all the free money. Maybe the Hedgies know that and the bet actually is that the BB's will continue to help The Fed manipulate PM's downwards?

Fri, 05/24/2013 - 21:48 | Link to Comment Manthong
Manthong's picture

At least it ain’t anything like Lunic Totalitairian Communist Monetarianists (LTCM)

Fri, 05/24/2013 - 23:00 | Link to Comment markmotive
markmotive's picture

This is what lambs to the slaughter looks like...Rush hour in Toronto:

http://www.dapperplanet.com/2013/05/photo-rush-hour-in-toronto-like-lamb...

Fri, 05/24/2013 - 23:15 | Link to Comment Manthong
Manthong's picture

geez.. wtf is that line for?

Fri, 05/24/2013 - 23:23 | Link to Comment silverserfer
silverserfer's picture

gold going down cause the stock market is going up DERRRRRRRRRRRR! Lets short DERRRRRRRRRRRR! Jim Cramer DERRRRRRRRR! Whopner on at 2:30 its 2:15 got to find a tv yeah. DERRRRRRRRRRRRRRRRRRRR!

Fri, 05/24/2013 - 23:43 | Link to Comment Manthong
Manthong's picture

was that going to a coin shop???

if so.. holy smokes...

Fri, 05/24/2013 - 23:57 | Link to Comment strannick
strannick's picture

Meanwhile Inspector Clouseau Shill-Chilton just keeps shrugging his shoulders, ''manipulation and excessive short positioning is difficult to prove'''...

Sat, 05/25/2013 - 00:16 | Link to Comment HulkHogan
HulkHogan's picture

I compared this chart to the price of gold over the same time. Every time the short interest went up, so did the price... except for this current move. I think gold is heading lower, unless a black swan comes to the rescue.

Sat, 05/25/2013 - 01:27 | Link to Comment Pinto Currency
Pinto Currency's picture

 

If gold rockets and bonds collapse then it is time to shut down the financial system and call it market failure.

Time then to implement collectivism as the final solution.

The plan is to kill the dollar: https://www.youtube.com/watch?v=ILKolTI1s50

Sat, 05/25/2013 - 01:37 | Link to Comment James_Cole
James_Cole's picture

Don't get why Tyler keeps bringing this up as if it's a good indicator? All it suggests is dangerous market - could move rapidly up OR down.

Sat, 05/25/2013 - 03:00 | Link to Comment The Navigator
The Navigator's picture

Short it all you want - I know what real money is (Au Ag) and I know what bullshit is (paper fiat).

The truth will win out.

When?

When the elite have scared all the chickens out at the lowest price.

Fuck You Bernanke, Fuck you.

Sat, 05/25/2013 - 07:29 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Your grandkid's tax dollars at work.

 

Thanks Ben Shalom.

Sat, 05/25/2013 - 09:33 | Link to Comment presk_eel_pundit
presk_eel_pundit's picture

It'd be nice if there was a chart going back 40 years so we could see the rise and fall in the 70's and early 80's.

Sat, 05/25/2013 - 12:45 | Link to Comment TraderTimm
TraderTimm's picture

@James_Cole

I'll field this one.

Tyler has brought us some rather good articles over the years, but when it comes the minute wiggles of < insert trading vehicle >, his anchored bias is decidedly lower and never to the upside (Unless its something that supports an overly-down market thesis.)

While most traders realize this bias is dangerous to profitability (opportunities occur when markets rally OR decline) the ZH view is - its all going to shit, we really don't know when - so hell, lets just say its going lower, and if it pops, we'll just exclaim its a totally rigged piece of shit, and we'll move on to something about the Euro.

While I believe that financial markets are indeed in a sorry state, I find it rather offputting that every decline is siezed upon as "THE MOMENT", only to be casually forgotten when the disaster fails to pan out as planned. If anything, the chart being shown should be considered not just as a "crowded trade", but the alternate but never-discussed probability of "what if they are RIGHT".

We now return to the current thread of everything is doomed, already in progress.

Sat, 05/25/2013 - 13:47 | Link to Comment James_Cole
James_Cole's picture

 

If anything, the chart being shown should be considered not just as a "crowded trade", but the alternate but never-discussed probability of "what if they are RIGHT".

But they have been right, short interest has been way up for a while and correct for the whole stretch.  No doubt people are looking at Tyler posting this and thinking 'great I'm gonna go buy a bar and then in a couple weeks these short positions will be creamed and the price will skyrocket and I'll be rich.' When I look at it I think 'wouldn't want to be holding physical with a chart like that, at least not in the near term.' 

 

Sat, 05/25/2013 - 15:48 | Link to Comment Not My Real Name
Not My Real Name's picture

When I look at it I think 'wouldn't want to be holding physical with a chart like that, at least not in the near term.' 

For those with strong hands, near-term is irrelevant.

Sat, 05/25/2013 - 02:11 | Link to Comment Pseudonymous
Pseudonymous's picture

He is simply an accomplice to the manipulation. He is the propaganda guy for the manipulating club. Deal with it. It doesn't change the basic fact that manipulation is unsustainable in the long run.

Sat, 05/25/2013 - 09:10 | Link to Comment FranSix
FranSix's picture

Here is the exact location.  You can see that there is construction in the vicinity of Union Station, the corner of Front & Bay sts. which is directly across from the Royal Bank Plaza, even though this streetmap photo is somewhat dated:

http://goo.gl/maps/fHMuY

I think the post 'lambs to the slaughter' without any explanation or even disclosing the location is meant to be a cynical attempt to gloat at workers in the financial sector, who are presently under the gun being replaced by foreign workers overseas.

The Royal Bank was scandalized by summarily firing employees in favour of cheap foreign labour in India.

Sat, 05/25/2013 - 03:58 | Link to Comment Jafo
Jafo's picture

How do you manipulate a trend?  I didn't think that was possible with present technology.  I thought that you could only accelerate the trend or retard the trend but that you could not change the trend until it was on time or on target (or both).

Sat, 05/25/2013 - 07:32 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Short real money with paper. Walk around back and buy the real stuff at discount prices.

 

Keep doing that until the whole system collapses......walk out smelling like a rose.

Sat, 05/25/2013 - 10:01 | Link to Comment Crash Overide
Crash Overide's picture

It's a setup, follow the money...

Sat, 05/25/2013 - 08:07 | Link to Comment spine001
spine001's picture

The market is so levered that when the correction comes people will struggle not to get squeezed out of their positions on margin calls and will need to sell gold like crazy to stay solvent. Cash during this brief transition will be at a premium and everything will deleverage. Those who survive the margin calls and are able to stay and stand the shit storm will experience an incredible ride up us CBs fight the deflationary wave. To cover their gold positions during the deflationary part of the incoming crisis they are using shorts. These guys are in another league with regards to taking risk with respect to most of us. They are playing with somebody else's money. For us the best we can do is keep our powder dry and be ready to take advantage of it.

Until next time,

Engineer

Sat, 05/25/2013 - 08:12 | Link to Comment Ban KKiller
Ban KKiller's picture

You have been looking at the past to see the future...I agree. Even fiat works for a SHORT time after the "correction".

Sat, 05/25/2013 - 08:23 | Link to Comment spine001
spine001's picture

Another thought that just came to mind is  that the value to compensate for the excess shadow credit and the value those who trade it right at kaximum leverage needs to come from somewhere (value redistribution) therefore whatever happens must hurt th3 big guys. There isn't enough value in the hands of the dam money. Not for the typebof correction thatt is coming. So watch out because either the hedge funds or large mutual funds will end up being on the wrong side big time.

Fri, 05/24/2013 - 20:19 | Link to Comment idea_hamster
idea_hamster's picture

Someone needs to find a pic of Lambchop getting the business for this article -- sacrificial lamb + muppet = LULZ!

Fri, 05/24/2013 - 23:35 | Link to Comment Manthong
Manthong's picture

Sheri was a neat person..  met her once... she is in peace with lamb chop now.

edit.. crap... like I figure most of the middle class will be,

Sat, 05/25/2013 - 03:18 | Link to Comment putaipan
putaipan's picture

god bless j.p. patches and gertrude/stan can the animal man!

Fri, 05/24/2013 - 20:42 | Link to Comment Quinvarius
Quinvarius's picture

It is never different.  It is the same as any industry short dogpile led by gs.  It ends in a rally.

Fri, 05/24/2013 - 20:50 | Link to Comment SAT 800
SAT 800's picture

The Silver futures chart is even crazier. In thirty years of trading this stuff I've never seen anything like it. The total number of open positions, or active contracts, actually went up at a steeper angle than the price came down; for say, the last half of April, first half of May; like that. Crazy. I already bought a contract; I put in a Hail Mary order at $21.00 even; and it got filled. WTF. whatever. It'll be interresting.

Fri, 05/24/2013 - 21:14 | Link to Comment KnightTakesKing
KnightTakesKing's picture

You gonna take delivery at 21?

Sat, 05/25/2013 - 00:05 | Link to Comment fourchan
fourchan's picture

i picked up a hundred more ounces today, fuck the fed.

Sat, 05/25/2013 - 06:39 | Link to Comment Manthong
Manthong's picture

FtFF..      F t Fed/Feds

that sounds like a nice acronym

Sat, 05/25/2013 - 11:49 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

wow, that's a coincidence.....i picked up 100 million trillion ounces today......they promised delivery in six months.

Fri, 05/24/2013 - 22:35 | Link to Comment dogbreath
dogbreath's picture

you need 10k more than the margin requirement

Fri, 05/24/2013 - 21:12 | Link to Comment greatbeard
greatbeard's picture

From the Bloomberg article in your link:

'Bullion has tumbled 18 percent this year as some investors lost faith in the metal:"

Total, unmittigated, horseshit (no offense entended to horseshit).  That takedown wasn't "some investors" losing faith, it's was a planned take down by someone very powerful.  It was no loss of confidence but a play to try and make people lose confidence.  It isn't working.

 

 

Fri, 05/24/2013 - 21:21 | Link to Comment CitizenPete
CitizenPete's picture

Definately a takedown

Fri, 05/24/2013 - 23:19 | Link to Comment wee-weed up
wee-weed up's picture

Just like the Obama Admin lackey-IRS trying to take down the Tea Party groups...

Sat, 05/25/2013 - 06:49 | Link to Comment Manthong
Manthong's picture

horseshit has utility value and can promote green sprouts..

unlike certain paper products contaminated with dictatorial crony ink.

Sat, 05/25/2013 - 10:03 | Link to Comment greatbeard
greatbeard's picture

>> the Obama Admin lackey-IRS trying to take down the Tea Party groups...

Feh, one corrupted, self serving bunch of sociopaths attacking another.  Meaningless in the scheme of things.  I know there are good and decent folks in the TP, but in general, they are no  better than any other group in our country.  Same could be said of the OWS folks.  Give them the power the Obama administration has and they'll abuse it just the same.

Fri, 05/24/2013 - 23:24 | Link to Comment Mrs. Haggy
Mrs. Haggy's picture

With all the chaos, sometimes you have to just stop and take a look around.  Survey the scene as you personally see it and not listen to anything but your own instincts.  Everyone that I know just keeps stacking;  nobody is even close to wavering, including myself.  I can't be spooked if nobody in my personal life is spooked.

Sat, 05/25/2013 - 07:34 | Link to Comment fuckitall
fuckitall's picture

Look folks, with a printing press you can distort any market in your favor. 

They don't have physical to back their shorts, it's just a paper game, brain-dead sheeple will believe it, sheeple always get sheared, don't pity them, don't try to educate them, it's their fate. 

They're gonna kill the dollar, they said so, they're doing it.  As the dollar dies they must prevent masses fleeing to PMs, they've unleashed a tsunami of MSM negativity toward PMs along with their printing-press-fueled market manipulation. 

Sure they can pay off in dollars, they have boatloads of dollars available, contracts say they can pay off in dollars if needed. 

It's not about the metal, it's about the message, 99% will believe it, enough to keep PMs down while they finish killing the dollar and bring in their new currency whatever it is. 

The goal is prevent flight to PMs (and other commodities) during the transition, keep people's money in stocks, bonds, etc, where they control the exchange from dollars to whatever. 

They can't do that with PM holders nor any other commodity holders.  Those things will skyrocket when the dollar dies, unlike stocks, bonds, etc. 

Ok, stocks will rise, but bonds won't.  Bonds are X number of dollars, worth something, worth nothing, whatever, doesn't matter, dollars wlll be worthless when the new currency is brought in, yes bondholders will be royally fucked, why they're making bonds so attractive now, sucker sheeple in and shear 'em good in the currency exchange.

How much you wana bet those "excess reserves" parked at the Fed won't be parked there much longer?  How 'bout quietly turned into PMs?  One of their "other reasons" for keeping spot price down? 

Yes Fed's balance sheet will be worthless when the dollar dies.  So what?  They don't care.  It's just a game to them anyway.

Sat, 05/25/2013 - 09:43 | Link to Comment lakecity55
lakecity55's picture

Yep.

My grandpa was born in 1900.

He collected Au and Ag in small quantities all his life. He left those to me. When he passed, the PM and numismatic values were higher than when he started. He never paid any attention to the markets concerning PMs (except he kept more Ag after 1964 cupro-nickel issuance).

I have done same. Now at 60, my stash is more valuable than when I started as a kid. I'm still looking for that 1909-S VDB, however.

The stash just grows and hopefully another set of kids will have it. It has been quite useful.

Ignore the markets, just

Keep Stackin!!

Sat, 05/25/2013 - 01:46 | Link to Comment Dry Drunk
Dry Drunk's picture
http://www.cftc.gov/dea/options/other_lof.htm

Disaggregated Commitments of Traders - Options and Futures Combined, May 21, 2013
The graph is Managed Money Short.

Managed Money Long 115,102
Managed Money Short 79,416
Managed Money Spreading 50,460

Fri, 05/24/2013 - 19:53 | Link to Comment Stoploss
Stoploss's picture

Column 2

Large traders and commercial hedgers, are you blind??

Fri, 05/24/2013 - 22:22 | Link to Comment Diablo
Diablo's picture

CFTC Disaggregated COT report....scroll down to gold, managed money: http://www.cftc.gov/dea/options/other_sof.htm

regardless, this articles' headline is misleading, while the shorts are at an all time high (makes sense since gold is getting its ass kicked), the number of LONGS is still > the number of shorts.

 

Sat, 05/25/2013 - 09:22 | Link to Comment constantine
constantine's picture

It's not misleading... Those shorts don't have the metal and yet they need to throw more and more derivatives at the 'market' to keep it going down. In the meantime, various exchanges are settling in cash and people trying to take delivery of gold they thought had been stored for them are being met with the same response. It's clearly a fractional ponzi scheme that is showing signs of stress. Japan's ponzi scheme is collapsing, soon to hit US shores... and yes... I want this corrupt financial system to see its way into its rightful position of failed economic trash heaps even if it causes people pain along the way. The goldbulls are correct.

Sat, 05/25/2013 - 10:00 | Link to Comment css1971
css1971's picture

No, a speculative short is net zero with a producer short. They have to acquire a contract to fulfill their short position and they'll do that with a producer, so a speculators short position assuming they don't have something to deliver will cancel out a short position of a producer.

Sat, 05/25/2013 - 09:07 | Link to Comment justinius1969
justinius1969's picture

Yes.. where is this big short position!

Fri, 05/24/2013 - 19:38 | Link to Comment stopcpdotcom
stopcpdotcom's picture

We will all have a front row seat.

Fri, 05/24/2013 - 21:21 | Link to Comment markettime
markettime's picture

Now all we need is a firestarter. I hope the shorts get blown out of the water!

Fri, 05/24/2013 - 23:05 | Link to Comment BeanusCountus
BeanusCountus's picture

Starting to think we are the show. Think about it. Obama meets with the head of biggest banks. No agenda published. Within a half hour of the end of the meeting, numerous investment arms come out against the metal. What the hell is going on here? Printing to infinity. Across the globe. Yet everyone wants the physical. Asia clamoring for it. US has to get stuff back to Germany. Over seven years for gods sake. European banks denying allocated accounts redemption. JPM deliverable down to nothing. Margin requirements on metals LOWERED just befote Investment arms putting 500 tonnes of futures up for sale at a time. With no physical to back it up. ETF holdings of physical metal showing massive liquidation, yet they have no technical obligation to give anyone the stuff. WTF?? Seems like everyone is under order here. An order they can't refuse. Not sure we are fighting a winnable battle.

Fri, 05/24/2013 - 23:46 | Link to Comment Silver Bully
Silver Bully's picture

'Not sure we are fighting a winnable battle.'

When the water drains from the pool, then you'll get to see who was swimming nekkid.

Sat, 05/25/2013 - 08:48 | Link to Comment Nightblade
Nightblade's picture

Chart I made to show what you are talking about:

http://scharts.co/19cnCpG

http://www.businessweek.com/news/2013-04-11/obama-meets-with-blankfein-d...

Even tho I don't usually believe in conspiracy theories, that is pretty amazing.

Fri, 05/24/2013 - 23:44 | Link to Comment Silver Bully
Silver Bully's picture

'I'll pay up to get a front row seat for this show!!!'

You ain't seen nothin' yet. This historic volatility is only BEGINNING.

The precious metals space is going to see successive lower record lows and successive higher record highs. Each vomit-inducing, rollercoaster mountain top and bottom valley will continue to absolutely devastate any thinking being trying to trade these markets. Like a crowd of people running from one side of the Titanic to the other, the swings in volatility will snap your neck. If you buy this stuff, make sure it isn't paper, strap yourself down, you take delivery, and you get the unencumbered metal IN YOUR HANDS. Stick it in a drawer, a safe, a hole in the ground, whatever, and then forget about the drawer, safe, or hole.

And if JPM is holding these record shorts, and they get their ever-lovin' face ripped off, you can bet who will come running to bail them out. That's right, Obama's favorite set of banksters is JPM, not Goldman Sachs. YOU AND I will pay to make JPM whole once the PM market eventually rips them to shreds (through their derivatives paper games, their shorts are chump change). And the excuse will be to 'prevent worldwide disaster!' 'Think of the people who will starve' because JPM can't get their hookers and blow while they keep their bonuses for breaking their company like a child breaks a toy. These bastards hold ALL OF THE WORLD MARKETS hostage while they get their rocks off.

Naw, we've never seen that gimmick get used before.

Meanwhile, the volatility in this market is only going to get worse. We will see higher highs and lower lows until the system breaks and can go no further. It will never get better until the giant levels of liquidity slosh out of the tank, and the dollar is reset.

I repeat: You ain't seen nothin' yet.

 

Sat, 05/25/2013 - 03:12 | Link to Comment The Navigator
The Navigator's picture

Silver Bully

You got it right - the only gold/silver you own is the gold/silver in your hands, any paper BS is just asking for tears.

I hope you're right about low LOWs and high HIGHs - I look forward to Buying the Fucking Dip beyond any lows beyond todays - helps to offset the new highs I have to pay for Mosint Nagants and MAS-49/56's, which will officially suffer boating accidents but actually be buried vertically.

Sat, 05/25/2013 - 09:54 | Link to Comment Long-John-Silver
Long-John-Silver's picture

I'll pay up to get a front row seat for this show!!!

 

Every seat in a Banker Circle Jerk is front row.

(Link opens in new window)

 

 

Fri, 05/24/2013 - 18:57 | Link to Comment CrashingDollars
CrashingDollars's picture

The sheets will get ripped off one day

Fri, 05/24/2013 - 19:01 | Link to Comment fortune114
fortune114's picture

What precisely is being shorted?  And please explain how there can be a short position without someone on the long side.  

Fri, 05/24/2013 - 19:09 | Link to Comment salvadordaly
salvadordaly's picture

I'm new to all of this. Someone break this down for me. In a "short" response?

Fri, 05/24/2013 - 19:19 | Link to Comment noless
noless's picture

People selling short into the futures market hope to profit by buying contracts and paying them back with the same amount of assets purchased at a lower price, hence profiting if the price of the asset falls below their purchase price Covering is when you buy the assets to transfer to profit on your short contract. If however the price rises and you are "naked" (don't actually own the assets) then you are forced into a short squeeze, where you must take a loss on your futures contracts by buying at higher than the price of the contract you sold.

Fri, 05/24/2013 - 19:54 | Link to Comment disabledvet
disabledvet's picture

Yeah but first you need to find the gold to "buy" first before you can then "sell it short" by borrowing it...at interest...and then selling it. "large speculators" indeed. These folks have massive amounts of cash and cash equivalents...possibly central banks who knows...they won't be suffering should some mythical "short squeeze" suddenly appear. Indeed...should prices continue to collapse as they have been all year they'll make a boat load of money. "goes a long way to understanding the rise of the gold price on Thursday when Ye olde "obliterate Japan trade" was initiated.

Fri, 05/24/2013 - 20:22 | Link to Comment I think I need ...
I think I need to buy a gun's picture

"The Fast Money team" hinted on CNBC tonight that while most americans will have shrimp on the Barbie Sunday night there maybe a little more than a problem in Japan on Sunday night,,,,,,,,,,

Fri, 05/24/2013 - 20:05 | Link to Comment auric1234
auric1234's picture

Not only "naked" shorts have to cover. Legit shorts too.

Think e.g. parties who borrowed gold and then sold it. They're short gold, they have to cover, but they're not doing anything illegal (whoever lent them the gold assumed counterparty risk).

 

Sat, 05/25/2013 - 00:54 | Link to Comment Impotent_Smurf
Impotent_Smurf's picture

Pure, morning...pure morning!

Fri, 05/24/2013 - 21:55 | Link to Comment New World Chaos
New World Chaos's picture

I think the big shorts are part of the plan.  They could even be profitable in and of themselves (in addition to scaring sheeple into stocks).

First off, when the PPT, the Fed, or someone with puppetmaster backing shorts gold with infinite 0% margin created from nothing, there is no need to cover.  No risk.  Any profits are theirs to keep.

If there is a collapse in the paper price due to destruction of trust in the market, whether by default or too much naked shorting, shorts can remain in the money on their paper contracts even as the price of physical goes to the moon.  When they manage to close the market permanently, shorts keep 100% of the value of their shorts without ever needing to cover or even pay taxes on their fraudulent gains!  Meanwhile, paper longs will get cashed out at some absurdly low paper price.  Probably the same thing will happen with allocated gold and any confiscations.  There are many profitable shenanagains available if the whole system backs up the puppetmasters by never, ever admitting that the market has been destroyed. 

This strategy is risky for unconnected little people.  Better to be short paper/long physical.  Remember that to be short anything without a corresponding long means you are long the dollar and that is dangerous in Zimbabwe Ben's bubble market.

Another reason for the shorts is that the puppetmasters themselves don't feel like spending too many clownbux on those last-minute solid gold toilets for their bugout submarines.  So they naked short gold and get the sukers and momo margin crowd to puke up the real stuff for cheap.

Finally, gold could be the fuse on the derivatives neutron bomb.  They could set off the bomb anytime they want with a rule change but since gold is guaranteed to blow it up eventually, and they will want to time the explosion for when they have rehypothecated their last customer's last ounce, how about using gold shorting to try to control the process?  They might try to get all the gold shorts and other black-hole-worthy sludge into JP Morgan, drain any remaining sovereign gold (including Ft. Knox gold) via the tunnel to the Fed's vault, and let the whole thing blow up.  JP Morgan would become the biggest "bad bank" ever.  Blythe Masters would take the fall for the collapse of the entire global financial system.  They would set up the NWO's global currency, ostensibly backed by gold (at first).  They would pinky-swear to never let all this corrupt shit happen again and to make sure it doesn't, the world financial system would be regulated by endless committees of unaccountable international bureaucrats who would be paid by the same crime families that are running things now. 

Fri, 05/24/2013 - 22:19 | Link to Comment Lore
Lore's picture

Good post. The psychopaths will change the rules however and whenever it suits them until the system finally breaks, and that's really all the layman needs to know. 

Three years ago, I was travelling overseas and had a conversation with a banker from India who made the comment that "America's banks are the most corrupt in the world."  I was stunned at the time, but there's no denying the symptoms and their complete disregard by the whore media... 

Fri, 05/24/2013 - 22:58 | Link to Comment willwork4food
willwork4food's picture

@ Lore

As a small time silver invester I can appreciate that. I figure the end game is coming since the banks will charge you for $35 for a bad check that someone else deposits into your account then charging a fortune more if you happen to write other checks on that assumption...which, incidentally, will not clear.

It's getting close.

Fri, 05/24/2013 - 23:51 | Link to Comment SAT 800
SAT 800's picture

This is false and written by someone who doesn't understand the futures market. There are no naked anything; this is terminology from the stock market. The futures market doesn't work this way. Please educate yourself before typing.

Sat, 05/25/2013 - 01:19 | Link to Comment Lore
Lore's picture

Re: "The futures market doesn't work this way."

PROVE IT. I DARE YA. I DOUBLE DOG DARE YA.

Sat, 05/25/2013 - 13:17 | Link to Comment noless
noless's picture

I agree with the other response to your above comment, its quite possible I'm transposing terminologies, would you please offer any corrections you think would be necessary for a proper understanding of options trading in regard to the topic of this article?

Sat, 05/25/2013 - 14:14 | Link to Comment rubearish10
rubearish10's picture

Open Interest in Futures Contracts = The aggregate of open longs and/or open shorts in a contract month. i.e. 20 entities long Long 50 Jun 13 vs 1 entity short 50 Jun 13. Open interest = 100.

With stocks you could borrow against your short position. In futures, you can't. It gets more complicated when you talk physical and the rehypothecation issue which is "managed" by the CB's leasing program. There lies the rub. Everything else is bullshit. 

This is why PM's remain backwardated and this is why there will be an eventual explosion in price once the the guest star "Black Swan" hovers above and nobody sees it until it's too late. 

 

 

Fri, 05/24/2013 - 19:26 | Link to Comment toothpicker
toothpicker's picture

it's called "naked short" ; something illegal nobody cares about, nothing to see here...just move on

 

 

Fri, 05/24/2013 - 19:39 | Link to Comment fortune114
fortune114's picture

Naked futures shorts?  Really?  And that's the graph of them up there?  Can someone tell me the symbol for "naked gold futures shorts" so I can graph it in my charting package too?

Fri, 05/24/2013 - 19:39 | Link to Comment worldtraveler
worldtraveler's picture

you are just clueless...

Fri, 05/24/2013 - 19:42 | Link to Comment hankwil74
hankwil74's picture

It's illegal to be naked short?  Where did you read that?

Fri, 05/24/2013 - 20:05 | Link to Comment SnobGobbler
SnobGobbler's picture

look up "bear stearns short".  basically means jpm offloaded their naked shorts from bear to the hedgies since gold started dropping; remember....gold is a barbarous relic after all... ;)

shitz gettin' real boyz!

edit: who the fuck said bankers follow the law, lemme clue you in...THEY DON'T

Fri, 05/24/2013 - 20:03 | Link to Comment auric1234
auric1234's picture

What would you think if I sold your house to someone else? Does this sound legal to you?

Right, you can't sell what you don't own. It's fraud.

 

Fri, 05/24/2013 - 20:11 | Link to Comment SnobGobbler
SnobGobbler's picture

then package those frauds into an MBS, flip it to the fed; and suddenly the fed owns your shit 10x over

Fri, 05/24/2013 - 23:19 | Link to Comment chindit13
chindit13's picture

You are confused.  The futures are just that:  a futures market.  Not a cash market.  A short in a future, whether it is gold, pork bellies or S&Ps, is under no legal obligation to possess the underlying instrument whose future he is selling.  Anyone is allowed to take whatever side of the market he wants.  It is a play on the "future" price of a good.  No fraud whatsoever, and markets of this type have been in existence since Babylon.

You might be confused by the concept of shorting in a cash market, like a single name equity. In those instances, the short seller is required to deliver for trade settlement, and must borrow the stock (and pay interest specific to that stock) so that there is no failure to deliver.  Among other things, that is what prime brokers are for:  to locate stocks for the shot seller, charging interest for the service.  There is no delivery in futures until the contract expires, so no need to borrow.  Understand the difference?  Your anger is misplaced.

Fri, 05/24/2013 - 23:53 | Link to Comment Silver Bully
Silver Bully's picture

'The futures are just that:  a futures market.  Not a cash market.'

Exactly why this market is being called a casino. And why it is better to actually go to Las Vegas, because at least you get booze, women, and entertainment while you lose your money.

Sat, 05/25/2013 - 00:26 | Link to Comment chindit13
chindit13's picture

It is the fact that it is a casino that makes it useful.  Liquidity.  End users and suppliers of any commodity are not always ready to transact at the exact same time, but liquidity allows each to see a tighter spread when the time comes to act.  If specs did not have the prospect of making money, they wouldn't play.  Also, for the most part specs tend to be of two minds, meaning some are bullish and long, while others are bearish and short.  Ideally these negate, leaving end users and suppliers with a fair price.

Sat, 05/25/2013 - 00:02 | Link to Comment nope-1004
nope-1004's picture

Thank you.  Was hoping some sense would be typed at some point.

 

Sat, 05/25/2013 - 07:14 | Link to Comment fiftybagger
fiftybagger's picture

Everyone here knows, or at least should know, that for every long there is a corresponding short.  Similarly, they should know that to trade futures all you need to put up is the necessary cash.  But all of you should also know that for there to be a real market there need to be hedgers; legitimate producers of the commodity who are net short most of the time.  These are the people who establish the basis for the market.  Futures markets need to be regulated for 2 among many reasons.  First, the regulators need to make sure that the hedgers aren't so outnumbered by paper speculators that the market becomes fake.  Second, the regulators need to make sure there are no oversized individual or collusive group positions which overwhelm the market one direction or another so that it no longer represents the supply and demand for the underlying, but rather pure price speculation fueled by piles of cash by someone who has unlimited amounts.  Both of these are the case now in the gold and silver futures markets, but especially silver.  This is because the regulators won't do their jobs, because they are captured by the people running the oversized, collusive, and manipulative short positions.  This will eventually all blow up in their faces, and the Americans will end up with about as much credibility as they would if it were proven they faked the moon landing.  Nevermind, that one is for another day ;-)

Silver For The People

Sat, 05/25/2013 - 12:40 | Link to Comment auric1234
auric1234's picture

This futures market is not like the others. If you sell copper futures, you have to have the ability to deliver copper. You will make sure that you either will receive the copper timely, or that you will have the funds to buy it from somewhere else.

In the gold futures market, the long side doesn't want gold. They're contempt with betting on the price alone. Naked short sellers take advantage of that by selling several orders of magnitude more futures than they're capable of servicing. In fact, they sell more promises to deliver gold than actual gold available for sale in the physical markets.

It is obvious that they can't live up to their promises if all the buyers demand delivery at once. This is just another form of fractional reserve banking. I.e. promising to deliver what you don't have (or can possibly acquire). I.e. fraud.

 

Fri, 05/24/2013 - 20:05 | Link to Comment Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

Better to be naked and long than naked and short....just sayin.

Sat, 05/25/2013 - 11:57 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

shit!

Fri, 05/24/2013 - 20:15 | Link to Comment Inbetween is pain
Inbetween is pain's picture

In futures markets, it's not illegal to naked short.  This is common practice. As long as you stay within your margin limits you can trade.  Many brokers don't even allow delivery of contracts so by definition when you sell a contract you are naked shorting and there is no way you could deliver that contract through that broker--they require you to paper settle on first notice day.  

Fri, 05/24/2013 - 20:24 | Link to Comment knukles
knukles's picture

Thank you....
Idiot savants everywhere... with the idiot half dominating

Fri, 05/24/2013 - 23:03 | Link to Comment willwork4food
willwork4food's picture

Bullshit. The Forex IDEA is if you want to accept delivery and IF you have the capital to do it,  it is SUPPOSE to be filled. It does not matter if you traded one small contract or a thousand.

Fri, 05/24/2013 - 23:32 | Link to Comment silverserfer
silverserfer's picture

yes odd that the folks here not understinging the comex game. BTW there has to be equal long contracts for every short contract out there. suprised Tyler didddnt mention anything about this. Who has the concentration of short psoitions and who has he concentration of long positions is just as important I think as this high volume

Fri, 05/24/2013 - 20:33 | Link to Comment Fuku Ben
Fuku Ben's picture

I'm a dwarf and I find your comment racist

Fri, 05/24/2013 - 22:38 | Link to Comment Overfed
Overfed's picture

A dwarf and a nudist?

Sat, 05/25/2013 - 11:59 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

a dwarf psychic escapes from jail.......the police announcement to the public is "there is a small medium at large"......

Sat, 05/25/2013 - 20:07 | Link to Comment WmMcK
WmMcK's picture

I was introduced to a dwarf at a nudist colony. When we shook, the pleasure was all mine.

Fri, 05/24/2013 - 19:16 | Link to Comment fortune114
fortune114's picture

OK, I'm going to say this is a really naive article/analysis.  Here's a link to the COT report:

http://www.cftc.gov/dea/futures/other_lf.htm

 

"Managed Money" is LONG 113k gold futures contracts and SHORT 76k contracts.  And of course, if you add up all the categories ("Managed Money" is just one) of traders, net long has to equal net short.

I have no idea where the 79K on the graph in this article comes from.  Please explain.

Fri, 05/24/2013 - 19:27 | Link to Comment bullionbaron
bullionbaron's picture

+1 fortune114

I can't work out what the graph represents either... e.g. which group of traders does it represent?

Fri, 05/24/2013 - 19:50 | Link to Comment FranSix
FranSix's picture

Gene Arensberg, Got Gold Report:

http://www.gotgoldreport.com/2013/05/courtesy-release-of-new-video-got-gold-report.html

Hedge funds are overwhelmingly short the metal, meaning they have contracted short selling in the metal betting that prices are set to collapse.  The bullion banks are net long, meaning they are readying for a rise in gold prices.

 

Precious metals options expiry is on Tuesday, after a long weekend.  Lease rates for gold bullion are positive, above the three-month treasury bill rate.  But this would be much more supportive should nominal rates on short term bills go negative, say in a stock market sell off.

Fri, 05/24/2013 - 20:00 | Link to Comment disabledvet
disabledvet's picture

Look! It's the Great Pumpkin Charlie Brown!

Fri, 05/24/2013 - 20:25 | Link to Comment bmusic
bmusic's picture

Yeah, but the stock market ALWAYS goes up on a Tuesday.

Fri, 05/24/2013 - 22:06 | Link to Comment FranSix
FranSix's picture

In the event that stock markets continue to persue their historic ascent, then bond markets are set to decline, and yields rise on the long end of the curve.  But not to on the short end of the curve, where rates have declined due to pressure for short term treasuries.

Either way, pressure will be at the short end of the yield curve, where rates are declining, not rising.

Fri, 05/24/2013 - 19:47 | Link to Comment eigenvalue
eigenvalue's picture

The number 79416 is from the combined report (options and futures)

http://www.cftc.gov/dea/options/other_sof.htm

Sat, 05/25/2013 - 07:44 | Link to Comment machineh
machineh's picture

Thanks!

Meanwhile, managed money is long 115,102 contracts, making them NET LONG.

And commercials -- traditionally the smart money -- are net short.

Before writing articles drawing conclusions from COT reports, one really ought to learn the basics.

Sat, 05/25/2013 - 09:42 | Link to Comment css1971
css1971's picture

Commercials are producers, miners... They're not going to be buying gold, they want to sell it. And managed money are shorter than they have been in years which is the point of the article.

Sat, 05/25/2013 - 10:15 | Link to Comment machineh
machineh's picture

When all else fails, try arithmetic:

Managed money, long: 115,102

Managed money, short: 79,416

Managed money, net position: +35,686 (net long)

http://www.cftc.gov/dea/options/other_sof.htm

One perceives sir, that you are not a futures trader.

Sat, 05/25/2013 - 00:19 | Link to Comment MythicalFish
MythicalFish's picture

Probably a bit late, but it works like this: At the beginning of time, there are no futures, open interest is zero. I buy one lot and you sell it to me, now open interest is one. Say I am a private investor trying to diversify my portfolio, and you are managing money for clients. Now Israel bombs Iran, and you want to cover but I don’t. That’s where the squeeze comes from, even if for every short there is indeed a long.

 

Tylers number is from Bloomberg, so probably 'overheard' in a chat between JPM traders. That's a joke, guess it's supposed to be managed money?

Fri, 05/24/2013 - 20:07 | Link to Comment jcamargo
jcamargo's picture

Nothing, they balance out with the longs of the other groups.

Even if it is a net long, managed money as a group increased their short position, while swap dealers as a group reduced theirs.

 

Fri, 05/24/2013 - 20:38 | Link to Comment tarsubil
Fri, 05/24/2013 - 20:54 | Link to Comment SAT 800
SAT 800's picture

100oz. futures delivery contracts are what's being shorted; and there is a long position opened for each short. the market is always perfectly balanced. But the different categories of people who take up the positions have different goals and plans.

Sat, 05/25/2013 - 01:31 | Link to Comment Yen Cross
Yen Cross's picture

 Being shorted, is akin to being { Bernakied}. ZIRP is the equivalent of being "ass raped".

Sat, 05/25/2013 - 08:35 | Link to Comment Quinvarius
Quinvarius's picture

It is about who is shorting.  It is speculators. 

Fri, 05/24/2013 - 19:21 | Link to Comment worldtraveler
worldtraveler's picture

I have been working in the futures industry for many years That's why I find it curious that this article shows a chart of gold shorts. Futures shorts are different from stock shorts because for every short futures contract, there is a long contract (zero sum game). That means, the longs are just as exposed. Remember 1980, when the Hunt brothers tried to corner the silver market? That market was forced down by allowing for liquidation only. 

Assume the shorts are operating with the consent of the CB's etc. Governments can also put a lid on the market by outlawing "hoarding" and/or better yet, add a transaction tax etc.

I'm long physical gold myself, but let's just not get overconfident about stacking every dime into PM's, keep some powder dry|

 

Fri, 05/24/2013 - 19:27 | Link to Comment toothpicker
toothpicker's picture

troll

Fri, 05/24/2013 - 20:19 | Link to Comment SnobGobbler
SnobGobbler's picture

whats illegal about taking delivery? the hunt brothers could've saved us a lot of trouble if they succeeded in defaulting the bullion banks.

 

guess we're gonna have to do it ounce-by-ounce to win imo.

Fri, 05/24/2013 - 21:44 | Link to Comment OneTinSoldier66
OneTinSoldier66's picture

I totally agree. Something I figured out almost immediately when I became aware of the Greenspan/Bernanke put.

Sat, 05/25/2013 - 15:48 | Link to Comment DosZap
DosZap's picture

guess we're gonna have to do it ounce-by-ounce to win imo.

 

Well, we have a LOT of help,IF they do a major drop, there will be NO phyzz left to buy,and damn few sellers.

Sat, 05/25/2013 - 08:37 | Link to Comment Quinvarius
Quinvarius's picture

It is about who is short.  The chart shows a particualr type of seller, the speculator. 

Sat, 05/25/2013 - 21:00 | Link to Comment FreeMktFisherMN
FreeMktFisherMN's picture

I believe JPM among others pick 'optimal times' to pile on shorts and get the momentum going down and tell CNBC to start bleating out ad infinitum 'look at gold selloff' and then they look for further capitulation and margin calls like what happened last month, then they can cover and probably go long at the lower price. They have such power because margin calls don't happen to these TBTFs, and they have infinite fiat to short with since they are shareholders of the criminal private banking cartel in the Fed. I saw last month that JPM was profitable each day. They never took a down PnL day. And people say this stuff isn't manipulated. 

Fri, 05/24/2013 - 19:26 | Link to Comment Croesus
Croesus's picture

"Find a Popular Misconception, and Bet Against It".

Short list of popular misconceptions:

1. Gold is not money.

2. Gold is in a bubble.

3. The Gold Bull is over. 

4. Stocks are where to be.

5. Real estate is coming back.

 

Fri, 05/24/2013 - 20:08 | Link to Comment disabledvet
disabledvet's picture

While I do agree "you've got money to burn if you want to short gold" (and definitely a wonderful attitude problem as well) one other wild idea that arise is "gold PRICES only go higher too."

Fri, 05/24/2013 - 21:00 | Link to Comment SAT 800
SAT 800's picture

In order to get rid of some short positions that you want to write off; but at a smaller loss than todays price; you might, if you were big enough; step on the market in New York; after making a phone call insuring co-operation from some people in London, who actually had a similar problem; and then you can buy at the bottom. Buying a contract is how you close out a short position.

Fri, 05/24/2013 - 21:06 | Link to Comment SAT 800
SAT 800's picture

If the Gold price went significantly lower; which it really hasn't; and stayed there for awhile; it would mean that you could buy more stuff for a dollar than you can today. It would mean that deflation had happened; or alterntively; all of a sudden there was a deal in town that was perfectly safe, that guaranteed higher returns than inflation. Reason two was why the metals tanked after Feb. 1980; because Paul Volcker made it possible to guarantee that you would make more money than inflation by buying ordinary T-bonds; and this made Gold unattractive to the large scale rational investors; who are like 150 times bigger than you, or something; so when they left the party the price went into a slide for a long time. Neither reason one nor reason two is possible at this time. Things are not possible don't happen.

Sat, 05/25/2013 - 12:06 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

well, hasn't BB guaranteed that the equity markets will not fall....therefore people are flocking out of traditionally 'safe' assets into risky assets to chase said RETURNS. it makes perfect sense....

 

BB runs the treasury market (low yields). indirectly BB runs the commodities market (no yields). when he guarantees the equity market and there is higher yield  there....this is where the big boys are going to flock....which they have.....this is the reason for the large YTD runup.

 

but if you know the game, the only safe place is in the commodities (and specifically the PMs).....why, BB can't manipulate it forever!

Fri, 05/24/2013 - 20:40 | Link to Comment worbsid
worbsid's picture

The market can remain irrational longer than you can remain solvent.

Fri, 05/24/2013 - 22:56 | Link to Comment akak
akak's picture

You have that backward, if you are not leveraged or in debt, as the market cannot remain irrational indefinitely, whereas most PM holders have a MUCH longer-term view and perspective than either the average market investor/gambler or the sociopaths managing these markets, whose ultimate failure is guaranteed.

Fri, 05/24/2013 - 23:19 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

^--- This ---^

Sat, 05/25/2013 - 06:21 | Link to Comment Pseudonymous
Pseudonymous's picture

Let's say that again:

We can hold our money (gold, silver) longer than the markets can stay irrational.

Sat, 05/25/2013 - 07:24 | Link to Comment fiftybagger
fiftybagger's picture

Hence financial repression, ZIRP, collapsing incomes and employment participation rate, and "we buy gold", as they try to starve your gold and silver out of you.

Fri, 05/24/2013 - 20:56 | Link to Comment SAT 800
SAT 800's picture

6. Bernanke knows what he's doing. 7. this time is different.

Sat, 05/25/2013 - 03:42 | Link to Comment resurger
resurger's picture

I had a Diamon trader from London calling me and telling me that , "gold and silver are not a good investment at the moement, they entered the bear territory"

When you hear someone like that says that what do you do?

 

You know the Answer more than i do .

 

Fri, 05/24/2013 - 19:47 | Link to Comment Kreditanstalt
Kreditanstalt's picture

"The Fed stands ready to supply gold into the market should the price rise" - A. Greenspan.

Like right now, to enable more naked short futures games...

Fri, 05/24/2013 - 21:09 | Link to Comment SAT 800
SAT 800's picture

There aren't any naked short futures games. the concept of a naked short comes from the stock market; there is no such thing in the futures market.

Fri, 05/24/2013 - 21:15 | Link to Comment SAT 800
SAT 800's picture

To make the lead to the article accurate; but less dramatic and exciting; it would need to say that Short and Long positions have risen sharply. There are always exactly the same number of Short and Long Positions in the futures market. But that's not very exciting; so Journalism requires some kind of less than realistic presentation.

Fri, 05/24/2013 - 21:53 | Link to Comment dark pools of soros
dark pools of soros's picture

and in the ignored by ZH since its too boring...  bitcoins have climbed back over $130 after a pretty big conference last weekend...

 

nothing to see here...except

http://bitcoinity.org/charts/gold_image?span=30d&reverse=1

 

 

 

Fri, 05/24/2013 - 22:23 | Link to Comment Al Huxley
Al Huxley's picture

The fucking point isn't that short and long positions are out of balance, its that the BULLION BANKS are record net long, and the bag-holding hedge funds are record net short.

Fri, 05/24/2013 - 22:44 | Link to Comment fonzannoon
fonzannoon's picture

Al I have been going back and forth for 15 mins trying to figure out if this article is crap or legit. Thank you for summarizing the important aspect of it in one sentence. Also credit goes to you as I know you said this would happen a while back. Way to nail it man.

Sat, 05/25/2013 - 07:30 | Link to Comment fiftybagger
fiftybagger's picture

bag-holding hedge funds representing the stupid rich, ala Madoff investors.  401k holding "investors" representing the stupid middle class.  Pension fund owning morons representing the stupid goobermint workers.  All of whom are about to be fleeced when the fat lady sings.  What's that saying about a fool and his money?

Fri, 05/24/2013 - 19:54 | Link to Comment Gringo Viejo
Gringo Viejo's picture

Gold will rise to new highs when China says so.

Not a moment before....not a moment after.

Sat, 05/25/2013 - 00:35 | Link to Comment Non Passaran
Non Passaran's picture

If I believed that I'd sell mine.
WTF would I want to depend on Chicoms?

Fri, 05/24/2013 - 21:19 | Link to Comment Silveramada
Silveramada's picture

they are taking the gold from the people, but like a tsunami the water first moves away from shores then come back like a 25Ft tall GOLD WAVE!

http://zysites.com/silververitas/

 

coming soon..

Sat, 05/25/2013 - 00:03 | Link to Comment mt paul
mt paul's picture

functional analogy ..

Fri, 05/24/2013 - 21:22 | Link to Comment philipat
philipat's picture

The Bullion Banks are net Long. The only question is will they be able to resist the temptation to scalp the Hedgies? Remember they need The Fed as the (Virtually only at present) source of profits from all the free money. Maybe the Hedgies know that and the bet actually is that the BB's will continue to help The Fed manipulate PM's downwards?

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