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Gold, Silver Speculative Longs Plunge To March 2009 Levels

Tyler Durden's picture


While the drop in speculative interest in various currencies made news last week, it is the turn of precious metals to be the key focus in this week's summary of the CFTC's Commitment of Traders report. As the chart below demonstrates, as of Thursday September 27, both gold and silver saw a massive plunge in the net long non-commercial interest (the cleanest proxy of how speculators are positioned in gold and silver). This is not surprising, following last Friday's CME hike in gold and silver margins, and this week's follow through action by the Shanghai Gold Exchange. The drop of 22,278 and 7,113 contracts, in gold and silver, to 127,801 and 15,425 contracts, respectively, brings the net total exposure to the lowest it has been since the fear of deflation was the only thing on everyone's mind in March of 2009. What is perplexing is that the net spec interest in silver is about half where it was on December 31, 2010 even with silver unchanged on the year, while only 56% of the long spec gold contracts from the beginning of the year remain even as gold is still up 15% YTD!

So while the drop is not unexpected, it is in fact beneficial for precious metal bulls as it means that the bulk of weak spec hands have evacuated the scene, and that any observations that gold and silver trades purely in tandem with spec interest are completely incorrect. This is also bad news for the CME as any additional margin hikes will have increasingly less impact. Lastly, it foes without saying that it would be delightfully ironic if the CFTC shows a net negative interest in non-commercial positions and gold is still be up for the year.


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Sat, 10/01/2011 - 14:23 | 1729202 tickhound
tickhound's picture

When a zh'er prompts you to nbc sitcom comedy, assume its worth the trip...

Hilarity about the irs, gold, the printing press, excess... according to your own inclination.

Sat, 10/01/2011 - 20:13 | 1729875 Strike Back
Strike Back's picture

Oh come on it was funny.  Green.

Sat, 10/01/2011 - 21:27 | 1729958 diesheepledie
diesheepledie's picture

Minutes of my life I will never get back. Fuck Off!

Sun, 10/02/2011 - 00:30 | 1730207 Real Estate Geek
Real Estate Geek's picture

OMFG.  Thanks for the reminder why I don't have TV.

Sat, 10/01/2011 - 14:21 | 1729204 Stonecold
Stonecold's picture

Comercial longs increased and comercial shorts have decreased.  That is what I would follow.

Sat, 10/01/2011 - 14:21 | 1729205 reader2010
reader2010's picture

NO Brainer. Just BTFD.

Sat, 10/01/2011 - 15:37 | 1729351 snowball777
snowball777's picture

As if any other kind of decision making were available to you.

Sat, 10/01/2011 - 16:35 | 1729455 nope-1004
nope-1004's picture


Investing in this ponzi of a market is sheer stupidity.

Putting your faith in Geithner, total suicide.

Trusting quiver lip Benocide, complete self-depracation.

No one has any other choice.  The economy is being held up by an illusion, a dream, some kind of farce, "a change you can believe in".  What a joke of a president.

We are FORCED to invest in PM's because this ship is going down.  Anyone who wants preservation of their hard earned wealth has no other choice.  Therein lies the gov't rationale to bash metals down.


Sat, 10/01/2011 - 17:20 | 1729548 AldousHuxley
AldousHuxley's picture

government, police, congress, Fed all in the game to favor the banksters.



See: "Fuck the Fed" protest in Boston Fed by OccupyBoston


Never could have imagined, but it is happening.

Sat, 10/01/2011 - 23:16 | 1730110 Hephasteus
Hephasteus's picture

It's funny because a controlled bullshit rebellion is bringing out the real deals.

Sat, 10/01/2011 - 23:16 | 1730109 reader2010
reader2010's picture

Marc Faber once famously said that owning gold is about to be your own central banker. 

Sun, 10/02/2011 - 12:30 | 1730866 Thomas
Thomas's picture

When asked why this is not 1981, one hedge fund manager noted that gold in 1981 was competing against an 8% real (inflation-adjusted) return on 30 year treasuries. That really seems to capture the spirit of my own bullishness. When there is something better than metals to own, I will swap them out.

Sun, 10/02/2011 - 13:24 | 1730928 reader2010
reader2010's picture

If you're after cash flow, own some brothels instead because it's inflation/deflation-proof entertainment biz. But when it comes down to preservation of wealth,  you'd better off in king's money.

Sat, 10/01/2011 - 14:22 | 1729207 Fips_OnTheSpot
Fips_OnTheSpot's picture

I'll order the next kilo Wednesday - screw them. It's all paper manipulation.


Where's the 90tons Mexico bought *physically* - they got a BOND delivery. LOL! Squeeze physical?

1:55, bitchez!

Sat, 10/01/2011 - 16:29 | 1729446 agent default
agent default's picture

Do you have a link to that story?

Sat, 10/01/2011 - 23:39 | 1730140 Ahmeexnal
Ahmeexnal's picture

Well, that certainly gives Mexico the right to nationalize gold/silver/copper mines....and get paid with gold to do so instead of having to pay.

Sat, 10/01/2011 - 14:39 | 1729213 DavidPierre
DavidPierre's picture

Try to sort through the noise of market commentary to decide for yourself where this market is going. Read as much as you can from both the bear and bull camps, and dismiss much of what you read as misguided nonsense, but there are still many unknown unknowns that will determine the outcome for the intermediate trend in both gold and silver.

The bearish 'knowns' include:

* the existence of a hostile Cartel that is well-funded and taking deliberate action to suppress both metals

* a breakdown in the charts for both silver and the entire junior mining sector, plus the pending threat of tax loss selling set to commence shortly

* only a small segment of the overall market participation is interested in the PM sector, and these investors are demoralized and sentiment has been decimated

The bullish 'knowns' include:

* seasonal strength for the metals
* long term chart for both gold and silver indicating the bull market
remains intact * inflationary pressures remain in effect and money printing continues unabated
* current low price regime for the metals will encourage further bullion buying worldwide
* CB buying has been increasing

Now there are questions that make a great deal of difference in terms of how the above factors will impact the performance for the sector. For example, read reports from many smaller bullion sellers that business is brisk and they are experiencing record sales for gold and silver, with few retail sellers in their shops. This is also confirmed by larger vendors like Sprott Precious Metals. Asian bullion demand has also been very strong. So assume that as this bullion is sold from the shops, these vendors are buying back inventory in bulk.

Silver stands out in particular because there are no CB reserves of silver that can be tapped to deliver against this demand. Where is this bullion coming from to supply the strong demand at these price levels? An estimate is that we are talking about tens of millions of ounces of silver bullion that has been accumulated during this dip worldwide, so that should make a dent even in the ridiculous paper trading scam at the LBMA and Comex.

They raiding the inventory of the ETFs and allocated bullion pools to supply this metal to a relentless market even as the prices have been crushed!

{On a personal note, I just received confirmation that my bullion order from the first day of the big selloff will not be shipped until the week of October 17th. This from a reputable dealer I have purchased from for several years. I paid in full for the metal and was told it was in stock when I bought and now I am back on a waiting list it seems. This appears very similar to 2008 when I had to wait several weeks to get any order filled and could not find a dealer anywhere that had gold or silver in stock for immediate shipment.}

 Indeed vendors are back ordered and the supplies have been coming from ETF inventories, at best this will only delay the demand curve. That metal still must be purchased and that buying pressure cannot be offset from a flood of paper promises that are unbacked by real metal.

The big question to resolve is what happened to the CB buyers? Why are China, Russia standing back to allow for this smackdown?

Assume they were covertly contacted and advised that a major intervention was coming and that they wisely will stand down and wait for lower price levels to begin buying again.  But is there any extra supply coming to market from this intervention?

 It is almost entirely paper contracts dumped at opportune windows of low market volume to trigger price collapse. Add in the collective buying pressure from smaller bullion retailers and and bigger buys from CBs. The spot market should be recovering sharply on physical demand but so far it has not happened. How much extra metal will be around for large scale buying when the CBs get back into the market? Where is it going to come from? And what advantage is there to allow the price to be smashed if the resumption of buying just runs the price right back up again in short order?

Do not think China, Russia, and others have any love for western nations that are in duress. Do not think they wish to support corrupt bullion banks and help them unwind manipulative derivative positions in the metals. What promises could have been made to get these nations on board for this planned meltdown? When will they return to the markets and start buying?

There is one other unknown in all of this. It was reported that Carlos Slim sold silver hedges for tens of millions of ounces at around the $25 level last year. I have not seen much commentary on this lately, but if the counterparty for that hedging was JPM? And as the bullion is delivered against those hedges, would this not amount to a war chest of strategic bullion that could be dumped as a massive order of physical silver to collapse the market and then allow for the paper contracts to be closed out as spec longs sell into this down wave? This could account for some of the unknowns  listed above. It would also neatly answer why the floor for this correction came in just above the $25 price range.

At this point remain focused on the long term, and remain committed to buying the dips as they are presented.

Discount the bubble nonsense, be not overly concerned that the long term top is already in.

Perhaps we have many years of decline ahead. It is a possibility but all of the evidence suggests otherwise. Bullion inventory is approaching a critical low and mine supply has not been able to keep up. Even as hedging contracts are delivered to private counter parties, that bullion is removed from the market and buyers must compete that much harder for the remaining mine supply. At some point that aggressive buying must translate into higher prices, and if prices are contained through the issuance of fraudulent paper contracts, then eventually a delivery failure must occur. There is no way out of this shortage as long as the demand for bullion runs higher than mine supply. And all of the evidence supports this conclusion. 

 Wait patiently and continue buying.

Sat, 10/01/2011 - 14:54 | 1729263 Confused
Confused's picture

Thanks for taking the time. 

Sat, 10/01/2011 - 15:10 | 1729293 Pegasus Muse
Pegasus Muse's picture

Excellent comments from le propriétaire. 

Some more color on the state of the retail physical markets, PM technical analysis, and review of the latest COT Report check out the Weekly Metals Wrap at KingWorldNews:

And for some good insights from a guy with four decades experience in the Precious Metals & Miners listen to John Hathaway:

He talks about a group of companies will likely be the high dividend paying “utilities” of the future.


Sat, 10/01/2011 - 15:22 | 1729321 mjk0259
mjk0259's picture

Maybe the vendors are betting it will go down and delaying shipment to increase their profits

Sat, 10/01/2011 - 15:23 | 1729324 austin0388
austin0388's picture

Some good comments, DavidPierre, but your statement "* only a small segment of the overall market participation is interested in the PM sector, and these investors are demoralized and sentiment has been decimated" should DEFINITLY be in the Bullish knowns list.

Sat, 10/01/2011 - 15:28 | 1729335 Motley Fool
Motley Fool's picture

" the existence of a hostile Cartel that is well-funded and taking deliberate action to suppress both metals"

I would argue that this is long term bullish as well.

Sat, 10/01/2011 - 16:40 | 1729463 nope-1004
nope-1004's picture

" the existence of a hostile Cartel that is well-funded and taking deliberate action to suppress both metals"

This statement, while true, is a direct cause of your other two points, being demoralization and less investment in PM's.  Whether it is bearish or bullish, I think it is the only statement that is true, because the other two are a RESULT of the first.  They aren't independent 'bearish' statements without #1 being the cause.


Sat, 10/01/2011 - 17:46 | 1729613 Bendromeda Strain
Bendromeda Strain's picture

Eric King's weekly wrap w/ CMI shows that physical buyers are far from demoralized and are actually active to beat the anticipated premium increases. Paper specs demoralized? So sorry.

Sat, 10/01/2011 - 19:03 | 1729788 Smiddywesson
Smiddywesson's picture

DavidPierre touched on a point I would like to, once again, emphasize.  

I have to laugh at all the people who continue to say Russia will do this, or China will do that, or Germany will do xyz.  The only reason they have been able to ride this leperous three legged dehydrated donkey so far across the blasted financial wasteland that has existed since BearSterns and Leahman is because ALL the central banks are on the same sheet of music.  China obviously doesn't like getting hosed.  They are angry and they are opening their own exchanges and playing the propaganda game, but they HAVE to be playing along with the kick the can game or gold would have spiked.  Any major player could bring this charade to an end by panicked buying or just issuing alarming statements.  And yet, they haven't.

We are going to continue to kick the can and suppress gold and silver prices as long as we can.  No matter how much we have to reluctantly print, no matter how much financial destruction we create, kicking the can is the Prime Directive.  That much is clear.  It is also clear that when the end nears, all of the major gold vendors will seize up and delay delivering product.  During this delay, they will assess how much richer they are becoming.  If that is an exponential climb, they will shutter their windows and will not deliver.  Anyone who hasn't acquired a good portion of the PMs they require to protect their wealth is playing with fire.  You can't time this collapse.  It can come tonight or two years from now.   

Sun, 10/02/2011 - 07:39 | 1730480 prole
prole's picture

or a hundred and two years from now...

Sun, 10/02/2011 - 11:21 | 1730750 Smiddywesson
Smiddywesson's picture

The system is too unstable to last more than a handful of years.  There is a point at which the central banks deem they have enough gold vs. the destruction of their wealth via outstanding loans being paid back in debased currencies.  They are losing money on kicking the can and debasing the currency being paid to them.  They are  making money on the gold they are acquiring (assuming they will ramp the price of gold in the future) plus paying off their own debts in debased currency.  At some point, they will pass over the line into solvency and halt what they are doing and announce a gold referrenced system.  Until then, they will keep buying gold while trying to convince you it is very risky and and a bad investment. 

Sat, 10/01/2011 - 14:30 | 1729221 macholatte
macholatte's picture

If you delete the speculative interest in a commodity and look only at its value in terms of USD that have inflated (maybe this is not possible) then you get the real current value of that commodity net of supply/demand. In Other words, is the base value of gold relative to the currently inflated USD really around $1600 or $600? Or is the Big Mac really the best indicator of current value?

the Big Mac index

Sat, 10/01/2011 - 16:04 | 1729404 Central Bankster
Central Bankster's picture


The measurement of GDP is hard to quantify in "real" terms.   This leads to problems in using it as a baseline for value of money.  In addition to this problem, we are not factoring for the future drag on real GDP from the curent unsustainable debts.  IE, is the economy as we measure it, sustainable?



Sat, 10/01/2011 - 14:33 | 1729226 GeneMarchbanks
GeneMarchbanks's picture

You cannot stop this gold bull.

Sat, 10/01/2011 - 18:06 | 1729660 midtowng
midtowng's picture

When you hike margins (2 or 3 times) you chase out the weak speculators. Unless they drop margins (unlikely) future margin hikes won't have much effect.

I'm feeling a little bit smart for a change. I took profits on my gold holdings 2-3 weeks ago, and just started buying more gold and gold stocks on Friday. Hope I guessed something near the bottom.

Sat, 10/01/2011 - 18:29 | 1729720 Melin
Melin's picture

good job.  I did just about the opposite.  Went dbl lng gold and silver about 3 weeks ago.  I dont' sell the physical and I haven't sold the etfs.  just blade runnin' downward and crossing my fingers.  Pretty dopey prolly.  

Sun, 10/02/2011 - 06:40 | 1730455 7bit
7bit's picture

You should have looked at a chart before you bought. In order to make profits you are supposed to buy low and sell high, not the other way around.

Sun, 10/02/2011 - 07:10 | 1730468 mayhem_korner
mayhem_korner's picture


I'm feeling a little bit smart for a change.

Based on what you're doing, I'd say that's "transitory."  You're still viewing PMs as a trading asset, not a wealth store.  If you view gold as a store of wealth, you would not be worrying about a "bottom" and would not be buying and selling paper. 

Not sure you are in the same stadium with most PM holders here.

Sat, 10/01/2011 - 14:34 | 1729229 MFL8240
MFL8240's picture

Exactly as the criminals planned it.  Great job Ben.  At least you suceeded at something.

Sat, 10/01/2011 - 14:40 | 1729238 Motley Fool
Motley Fool's picture

That is perplexing, but it is only paper.

Sat, 10/01/2011 - 14:42 | 1729241 DosZap
DosZap's picture

For those here in Denial.......................on paying taxes on PM sales.

Rules for Brokers and Other Taxpayers
  • In Publication 544, "Sales and Other Dispositions of Assets," the IRS states that gold is a capital asset when held by a taxpayer. Any gain or loss that the individual sustains when he sells the gold is regarded as a capital gain or loss. Taxpayers are required to report these transactions on Form 1099, where gains are reported as ordinary income. Taxes are paid to the federal government based on how long the gold was held, the initial price when the gold coins were bought and the sale price when the gold was sold. At the same time, brokers who sell gold coins are not required to report the sales to the federal government when fewer than 25 gold coins are sold in a single transaction. But, of course, coin dealers have been expected to report the amount they made from the sale as ordinary business income. The exact wording of the broker regulations is contained in the sales of precious metals section of the IRS Form 1099-B instructions.

Read more: What Are IRS Reporting Rules About Sale of Gold Coins? |

Sat, 10/01/2011 - 14:46 | 1729247 Fips_OnTheSpot
Fips_OnTheSpot's picture

Sweet - in Germany it's tax-free for gold. For silver it's 7% VAT (coins, 19% on bullion) *at buying*.

And that's it.

Sat, 10/01/2011 - 18:58 | 1729776 Ahmeexnal
Ahmeexnal's picture

When TSHTF, people who were smart enough to keep their wealth in gold/silver instead of fiat euro-kaiser-konfetti in Germany will be asked to please board a train and only pack a couple suitcases with them.
That's how the german power elite confiscated gold last time around.

Sat, 10/01/2011 - 15:00 | 1729271 Motley Fool
Motley Fool's picture

Simple workaround. Buy and don't sell. At least untill the US government breaks down. Shouldn't be too long now. :P

Sat, 10/01/2011 - 15:07 | 1729289 Long-John-Silver
Long-John-Silver's picture

or have an unfortunate boating accident and lose all your Gold and Silver when it sank.

Sat, 10/01/2011 - 15:10 | 1729291 Fips_OnTheSpot
Fips_OnTheSpot's picture

How so? I buy physical OTC (read: anonymous) I fail to see any sinking there.

Sat, 10/01/2011 - 15:58 | 1729395 DosZap
DosZap's picture


I buy OTC occasionally  also, and unless your buying only one or two ounces, your going to fill out paperwork for $10k's worth.

Name,addy,and SS#.

Sat, 10/01/2011 - 16:10 | 1729418 Motley Fool
Motley Fool's picture

yeah well. buy 9k worth. walk out the door, walk back in, reintroduce yourself. wash,rinse, repeat. :P

Sat, 10/01/2011 - 17:31 | 1729570 DosZap
DosZap's picture


Sorry No Workee that way.....................

They have a little rule called STACKING.

Doing as you suggest would likely/could likely cost you alll you own, and a stretch in the big house.

Sat, 10/01/2011 - 17:57 | 1729632 Motley Fool
Motley Fool's picture

Well. Fuck em. How would that work anyway?

I suppose if one has to one could buy from multiple dealers?

Sat, 10/01/2011 - 18:48 | 1729758 WmMcK
WmMcK's picture

Physical PM's only. Buy with FRN's (<10 K/). No name/SSN.
Make a list of every coin dealer in ~50 mile radius.
OK so far -- let's minimize the FUD.

Sun, 10/02/2011 - 08:56 | 1730550 darteaus
darteaus's picture

I've never had to produce ID.

-- John Smith

Sun, 10/02/2011 - 08:54 | 1730548 darteaus
darteaus's picture

Don't you have family? Stack them at the counter with your money.

Sat, 10/01/2011 - 16:26 | 1729442 no2foreclosures
no2foreclosures's picture

That's bullshit for the gold bullion sales.  There is no reporting requirements or extra paperwork for buying more than $10k. . . according to NWTM:

"Only if they involve cash or cash instruments such as cashiers checks which total over $10,000. No report on transactions involving single checks or bankwires are required. Currency regulations involving amounts over $10,000 were designed to thwart money launderers and drug dealers. More details here."

So, write a check or do a wire transfer next time you need to buy more than $10K.

Sat, 10/01/2011 - 17:43 | 1729598 DosZap
DosZap's picture


Sorry, I ASSUMED we were talking cash......................and if you re-read the post, you will see we were.

NO BS here.

Also,I may be wrong, but only Wire Transfers are going to accomplish your goal.

A Check (personal) is considered a cash deal.

Sat, 10/01/2011 - 17:51 | 1729618 Bendromeda Strain
Bendromeda Strain's picture

Well, you are wrong. If you aren't clear try Bullion Direct, they explain it most succinctly with little *asterisks* to alert you to reportable payment methods. Personal checks, whether $1 or $11k are not reported. Capice?

Sat, 10/01/2011 - 17:54 | 1729625 Bendromeda Strain
Bendromeda Strain's picture

As a matter of fact, the personal check discount makes them competitive with Gainesville, who doesn't even accept checks. You have to put your purchase into a cart and select check payment to see the discount.

Sun, 10/02/2011 - 01:26 | 1730250 AustriAnnie
AustriAnnie's picture

Because if they have your checking account, they have a record, which means they can get your name, addy, SSN.


Sat, 10/01/2011 - 16:41 | 1729464 agent default
agent default's picture

Buy as much as you can now then.  If you believe in the eventual outcome of all this, then  be certain that over the counter sales will be banned long before the end comes.

Sat, 10/01/2011 - 15:21 | 1729301 Pegasus Muse
Pegasus Muse's picture

Just a guess.  It is reasonable to assume owners of PMs will be every bit as diligent, uncompromising and rigorous in reporting their sales of PMs as GE, Boeing, Goldman Sachs and all other species of corporate tax evaders are at reporting their foreign income. 

Sat, 10/01/2011 - 16:04 | 1729405 DosZap
DosZap's picture


Oh, you/they/we will, when you get that 1099.

Sat, 10/01/2011 - 17:56 | 1729630 Bendromeda Strain
Bendromeda Strain's picture

You mean you guys don't report Amazon purchases on your state returns?     /facepalm

Sat, 10/01/2011 - 15:55 | 1729388 seek
seek's picture

Yep, plan on 28% tax on profits. I bake that into my decisions, with the upside being if there's a total collapse, I net 28% more. :)

Sat, 10/01/2011 - 16:00 | 1729401 DosZap
DosZap's picture

seek, '

 28 % ,Only if it's over 12  mos after purchase.

Then it's std deductions according to your tax bracket.

Sat, 10/01/2011 - 17:57 | 1729633 Bendromeda Strain
Bendromeda Strain's picture

You know, I find it hard to stack by age...

Sat, 10/01/2011 - 19:18 | 1729814 seek
seek's picture

Well, to put the 12-month thing in perspective, a significant amount of my holdings were purchased at $280/oz (some at $262.)

My tax bracket is also 28% so it's a wash.

I'm curious, though, if anyone here buys, holds for 11 months, sells and repurchases same day for tax purposes, and if that's legit accounting wise. (Presumably it is, you're taking the hit on the buy/sell spread on the trade, but I've never heard one way or the other.)

Sun, 10/02/2011 - 01:22 | 1730247 I did it by Occident
I did it by Occident's picture

It's total BS that they charge a different cap gains than for stocks.  Someone should sue.  Equal protection (treatment) and all that.

Sat, 10/01/2011 - 16:56 | 1729495 LongBalls
LongBalls's picture

Find a local dealer that only makes transactions in cash. Simple. They are everywhere. At least in my town anyway.

Sat, 10/01/2011 - 17:36 | 1729585 DosZap
DosZap's picture

Long Balls,

Bro, that's not the issue, cash dealers are everywhere,(they have reporting rules) it's the amount, the number of times you buy, how often and what amounts.

By IRS rules,5 purchases of $2k each over a 12 month period constitutes Stacking.(trying to get around the $10k reporting rules).

IF they want it to.

Sat, 10/01/2011 - 18:03 | 1729649 Bendromeda Strain
Bendromeda Strain's picture

Again, there is no $10k reporting rule outside of cash. There is nothing that says retailers have to do the Fed's work re: stacking. The IRS has the rule, but they don't enforce it because of the Godzilla sized headache. Why do you think Greece considered stuffing the income tax on the Greek's electric bill? Hmm?

Sun, 10/02/2011 - 08:46 | 1730542 darteaus
darteaus's picture

Karnak was my favorite bit.

Sat, 10/01/2011 - 22:27 | 1730046 Old. No. 7
Old. No. 7's picture

kiss my ass

Sat, 10/01/2011 - 14:50 | 1729255 Ye Ye
Ye Ye's picture

The best possible news here is that China decides to stop appreciating the Yuan or better yet reverses a bit. 

If you see any hint of that, back up the truck and load up!

Sat, 10/01/2011 - 14:53 | 1729262 Campagnolo
Campagnolo's picture

this fall is a tiping point. The US should and will sometime on 2012-13 either: 

1. Default

2. Devaluated USDollar and therefore

3. Super or hyperinflation

2012 is election year, debt ceiling has to be raise again, unemployment is going to be mayor concern, wall street indices may see a crash, etc...if oil start going high for conflicts on middle east, that's it, we collapse!...

gold at $6000 should cover just some of the debt, 20%, if the US decide to go gold standar again. The US has little chances of coming alive of this if none.

Sat, 10/01/2011 - 15:01 | 1729273 Fips_OnTheSpot
Fips_OnTheSpot's picture

Back to Gold-Standard would be like 75.000USD/ounce.

I love the sound of speaking "Superinflation"

Sat, 10/01/2011 - 15:25 | 1729328 Campagnolo
Campagnolo's picture

we may not see hyperinflation after all, very high inflation?, probably yes. $6000 gold with gold in a basket of commodities: Silver, land, etc..among them. $$6000 gold if gold standard talking start before elections, $9000 aprox. a year later due to deficit will aproach close to 20 trillion, just a wild guess.

Sat, 10/01/2011 - 15:32 | 1729345 Fips_OnTheSpot
Fips_OnTheSpot's picture

Tuesday the ECB will talk about its interest. At 3% "official" inflation for EU. I love the smell of inflation....

Sat, 10/01/2011 - 16:01 | 1729383 jomama
jomama's picture


Sat, 10/01/2011 - 15:01 | 1729270 Do You Speak Greek
Do You Speak Greek's picture

My theory on this drop which I anticipated hinges on the Pan Asian Gold Exchange.  This exchange will not open until the first quarter of 2012.  My guess is that Asian buyers (who have been the largest buyers of PMs over the last few years) and Chinese in particular will be "on strike" until this exchange is open so they can purchase PMs locally.  The Commercial shorts know that once this exchance is open their short positions are toast, as now ordinary Chinese can for the first time, buy PMs.  That is why they engineered this dramatic drop, right before the PAGE is open. 

What's more interesting about this weeks COT report is the MASSIVE drop in Commercial Net Shorts:

I would imagine we continue to drop in PMs going into next year, and then there will be the mother of all PM rallies.  Right in time for the Commercial Net Shorts (ie JPM and HSBC) to have fully closed their short positions and swung around to go long. 

Any opinions on this from my fellow ZHers?  Would love to hear what yall think on the matter...

Sat, 10/01/2011 - 15:46 | 1729369 Pegasus Muse
Pegasus Muse's picture

What's more interesting about this weeks COT report is the MASSIVE drop in Commercial Net Shorts:

Dan Norcini talked about this today in this week's KWN Metals Wrap (see link above).  Massive Commercial Short covering (JPM, HSBC, etc).  The Swap Dealers have also bailed out of their positions.  We may see a bit of consolidation and re-grouping, then it's back off to the races. 

Sat, 10/01/2011 - 15:51 | 1729377 seek
seek's picture

No direct comment on the rally, but when the short interest nosedives, it will be a sign of capitulation from the manipulators (ie JPM/HBSC) as it indicates that they are no longer manipulating the market with artificial paper PMs, and no longer have exposure to the price rise. At this point gold be be doing real price discovery. Presumably we'll see even less paper activities.

The increasingly higher margins are also indicators of decreasing manipulation; at 100% margin the market would be pure physical and no "weak hands" are left to manipulate.

I do think it's a safe presumption that at some point when the manipulation is on the verge of collapse they'll jump to the other side -- but that will require someone to sell physical to them, and I doubt that will happen at the same scale as the shorts have taken place at (if it would, they'd already be long and killed the manipulation long ago.)

The wildcard is how much backing the Fed/TPTB are giving them to lose in the market to suppress the price. A rapid drop in short interest could very well be the last signal of an internal manipulation policy change that frees PMs. That, or things are about to get so bad they're not bothering to spend resources on a relatively tiny market.


Sat, 10/01/2011 - 15:53 | 1729380 DosZap
DosZap's picture

 Do You Speak Greek

Only one comment, the Asians, and Chinese will not be on STRIKE until their exchange opens, if the price of the metals come down, they will be buyers of all they can get.'

They would be foolish not to.

Sat, 10/01/2011 - 16:10 | 1729419 Atlas Shrieked
Atlas Shrieked's picture

The physical vs. paper price of precious metals decoupling theory is coming to fruition.  There is a shortage of both gold and silver.  A friend of mine living in Abu Dhabi said the price of gold was over $2200/oz, even when the spot price was taken down below $1600/oz. last weekend.

Sat, 10/01/2011 - 16:36 | 1729459 unky
unky's picture

Stupid, who would pay so much over spot, when its cheaply available in so many other locations. Plus, there is no VAT on Gold in most countries, so why not let it being shipped in from a foreign country.

Sun, 10/02/2011 - 02:14 | 1730291 Ahmeexnal
Ahmeexnal's picture

Gold from a foreign country is not halal.

Sat, 10/01/2011 - 22:41 | 1730062 TGR
TGR's picture

"My guess is that Asian buyers (who have been the largest buyers of PMs over the last few years) and Chinese in particular will be on strike" until this exchange is open so they can purchase PMs locally."

I wouldn't bank on PMs continuing down if you are basing it largely on the above. 'Asians' can purchase PMs locally anyhow. Have been for decades. Chinese have been able to purchase investment grade buillion locally since '02, and trade (at retail level) on the Shanghai exchange for a couple of years now, and on the HK exchange for decades.

Noone will be holding out specifically for the new exchange to open, it doesn't make sense.

Sun, 10/02/2011 - 11:54 | 1730808 Smiddywesson
Smiddywesson's picture

Agreed.  Asians can already get physical.  The opening of the new exchange just means that the US and UK exchanges won't  control gold TRADING anymore.  Inasmuch as the Chinese are already coordinating margin hikes with TPTB, I disagree that the opening of their exchange means that the manipulation is going to end right away.  What it does mean is the Chinese can destroy the manipulation anytime they want, and they will, when it is in their self interest.  But they coordinated margin hikes only a week ago, so don't assume they will pull the plug right away.  They might, but they might not.

Sat, 10/01/2011 - 15:03 | 1729283 blindman
blindman's picture
Jesse's Café Américain
"..01 October 2011
An Important Addition and Clarification to the OCC Report Discussion
As I wanted to look into the gold and silver situation, and the concentrations there amongst the Anglo-Americans I left out an important fact about derivatives in general.
The US OCC report does include not only commercial banks and trusts with US subsidiaries, but also "Bank Holding Companies."
The bank holding company report, while shown at a high level, is not included in the breakdowns of positions in gold and silver, so it is not correct to assume that these fellows do not have positions there. Rob Kirby informs me that this is because the OCC has regulatory oversight for commerical banks and trust, but the Fed has authority over the holding companies.

Sat, 10/01/2011 - 15:04 | 1729285 bobert
bobert's picture


Would you ever consider using shorter sentences to make your point(s)?

I am a fan, however, your syntax is difficult for me to follow.

Best regards.


Sat, 10/01/2011 - 15:19 | 1729307 Motley Fool
Motley Fool's picture

I vote for longer sentences. What's with all this simplicity? :D

Sat, 10/01/2011 - 15:45 | 1729368 snowball777
snowball777's picture

It's the Tylers' voice(s) rocks, don't futz with it.

Sun, 10/02/2011 - 01:44 | 1730265 AustriAnnie
AustriAnnie's picture


Look here. Book is for sale.  Buy book. Read book.

All joking aside, Tylers' "syntax" is what most of us come here for.

Sun, 10/02/2011 - 02:18 | 1730294 Ahmeexnal
Ahmeexnal's picture

This is ZeroHedge, not Twitter, you twittbrained fool!

Sat, 10/01/2011 - 15:05 | 1729288 bugs_
bugs_'s picture

gasoline in the dfw area just cracked below $3.00.  this morning whilst touring the hardware stores looking for that impossible to find widget i noticed a few $2.99's out there.  the price drop is amazing and is consistent with the signal from Dr. Copper.  Word.

Sat, 10/01/2011 - 15:19 | 1729305 AladdinSaneGirl
AladdinSaneGirl's picture


Sat, 10/01/2011 - 15:23 | 1729310 no2foreclosures
no2foreclosures's picture

While "Gold, Silver Speculative Longs Plunge To March 2009 Levels," the price of gold is no where close to the low in March 2009.  Gold spot price in March 2009 was approximately $900 and now it's at $1625, an increase of over 80% in total or 32% per year.  This goes to demonstrate that the world gold market is more or less dictated by physical bullion as opposed to the manipulated CME spot price market.  In other words, the paper speculators trading on CME are getting squeezed out by CME.  The sooner the better.

Sat, 10/01/2011 - 16:08 | 1729415 DosZap
DosZap's picture



 In other words, the paper speculators trading on CME are getting squeezed out by CME.  The sooner the better.

A huge AMEN on that one.

Sun, 10/02/2011 - 08:40 | 1730532 darteaus
darteaus's picture

Yup. Let them go to churn and thus froth some other market.

Sat, 10/01/2011 - 15:44 | 1729364 passwordis
passwordis's picture

 That  "rule" ( is a rule a law?) only pertains to taxpayers (one word).  It's very telling that they use the phrase taxpaper as opposed to American Citizen. The distinction is an important one..Clearly not everyone is responsible to pay the tax. Only "Taxpayers" are liable to pay capital gains tax.  It is wise to learn what a taxpayer is.

 In any event, It boggles the mind to even consider the possibility that someone somewhere who holds physical metals would actually consider informing the criminals ( of whom you are protecting yourself against by holding PMs) of this.

Sun, 10/02/2011 - 12:03 | 1730821 Smiddywesson
Smiddywesson's picture

If you don't surrender to the concept that you have to own a home, they can't touch you.  They can't put everyone in jail, but they can harrass you by attaching your home and punishing your heirs.  Eventually they will win if you play by their games.  When this breaks bad, they are just going to take what they need.  I don't see outright confiscation coming.  I see confiscation through taxation.

Sat, 10/01/2011 - 15:47 | 1729372 Iwanttoknow
Iwanttoknow's picture

I'm not a Huffpo fan.I've no background in finance.I'm posting this to get some feedback from the pros at ZH. 

Sat, 10/01/2011 - 16:19 | 1729432 no2foreclosures
no2foreclosures's picture

I am not a pro or trader, but as I told Ms. Brown:

"There is nothing wrong with short sellers as long as they own the underlying stock of what they are shorting. Remember, short sellers are taking a calculated risk that has a very short life, unlike the long sellers. Of course, naked short sellers needs to be hung from the nearest Wall Street lamppost."

Short sellers play an integral role in the market.  It's the naked short sellers who need to be in jail, if not on some lamppost.

Sat, 10/01/2011 - 16:44 | 1729473 Smithovsky
Smithovsky's picture

He who sells what isn't his'n

Must buy it back or to go pris'n

Sun, 10/02/2011 - 03:52 | 1730356 Sokhmate
Sokhmate's picture

succinct poetry

Sun, 10/02/2011 - 12:04 | 1730822 Smiddywesson
Smiddywesson's picture

That was true when it was written but untrue today.

Sat, 10/01/2011 - 16:37 | 1729461 PulauHantu29
PulauHantu29's picture

You can't eat gold, but you don't have to pay your mortgage and live free for years...and years....

Sat, 10/01/2011 - 16:54 | 1729490 DymanicDoug
DymanicDoug's picture

12 yrs ago gold was @ $250.. the market Spot price price means nothing..try buying PM's now ...silver now..lead later


Sat, 10/01/2011 - 17:10 | 1729525 Iwanttoknow
Iwanttoknow's picture


Sat, 10/01/2011 - 18:00 | 1729643 Thought criminal
Thought criminal's picture

Isn't it possible that the whole spot and ETF market could collapse? If there really is 100:1 paper to physical, then I don't see why I couldn't one day go to zero...

Sat, 10/01/2011 - 19:14 | 1729804 CapitalistRock
CapitalistRock's picture

You honestly think someone will sell you physical at $0? Ummm... No. There may be a significant disconnect of the physical market from the futures market, but you can be certain the PM retailers aren't going to give away their inventory in the face of high demand.

Sun, 10/02/2011 - 09:11 | 1730566 Thought criminal
Thought criminal's picture

I wasn't suggesting that someone would sell physical for 0$. On the contrary I think once the price drops below 25$, there will be no physical available at that price. I was talking about all the metal backing ETFs and spot market that is being lent out mutiple times or doesn't even exist.

Sun, 10/02/2011 - 12:11 | 1730835 Smiddywesson
Smiddywesson's picture

Yes.  Anyone holding physical must be mentally prepared to take the pain when people laugh at them because PAPER prices drop.  Paper prices can very well decouple and plummet for a painful amount of time before the markets seize due to unavailability of physical.  We have already seen this in action when certain gold venders experience "technical problems" with their web sites, or just blatantly delay delivery for weeks.  You haven't seen anything yet, but you will.  When paper prices crashed recently, I quickly covered my paper position and shut off the monitor because I didn't want to take the pain of seeing my physical drop in price.  The end is clear, don't fret the paper prices. 

Sat, 10/01/2011 - 22:18 | 1730033 razorthin
razorthin's picture

That's it sweetie.  Come to pappa.

Sat, 10/01/2011 - 23:03 | 1730091 LookingWithAmazement
LookingWithAmazement's picture

BTFD or DTNP (Dump The Next Peak)?

Sun, 10/02/2011 - 02:23 | 1730300 Grand Supercycle
Grand Supercycle's picture

Analysis originally posted on my blog Feb 16, 2011.

“When DOW/S&P500 correction gathers momentum I expect:
UP ~ USD, various USDXXX currencies, VIX Index

Sun, 10/02/2011 - 03:04 | 1730332 sbs
sbs's picture

I thought I'd start posting here, after lurking for a while.

Gold and silver are different I believe.

Although central banks don't have silver, my local bullion dealer tell me that there are vast and unknowable amounts of physical silver out there, so that cornering the physical market is harder than it looks. That doesn't mean that silver might not go up a lot while the owners are encouraged to sell back, of course.

We always talk about central bank ownership of gold, but the private sector owns most gold. And the paper gold is owned in large part by short term investors. When cash is needed, gold is an obvious source, leading to drops like the recent one. Are there any potential shocks coming?

High inflation and falling growth in China are encouraging private gold purchases - but if the Chinese debt-financed export driven economy implodes, or any of the dodgy European countries default, this will be a de facto deflationary shock. There'll be a lot of private investors looking to raise some cash, and it won't be available in their banks.

Sun, 10/02/2011 - 13:45 | 1730955 Prometheus418
Prometheus418's picture

Two things at play there, though I've seen some anectdotal evidence that your bullion dealer is more right than wrong.

The first thing is pretty obvious- your dealer is willing to say that if the supply is tight, to justify buying back from you later at the price is right.  That's pretty self-limiting, as I would imagine he still needs to justify what he is charging when it's that time.  Mine doesn't say anything about there being lots of silver around anymore, as I am only a buyer, and he and I both know that it doesn't matter how much is out there somewhere, because it's not in his shop.

The second is Godwin's Law.  There were a lot of silver coins minted by the US, and a lot of people bought them at face value in 1964/1965 and hid them away.  As older people die or go to rest homes, their children have been finding milk jugs full of old halves, quarters and dimes (though for some reason, dollars don't seem to be as common.)  This happens more than once in a while- it happens over and over, in every town and in every state in the US.  Some get sold, but some just stay in the family.

It really is an unknown quantity, but in my opinion, that is precisely what makes it a better choice than gold as an unmanipulated currency.  You pay your money, and you take your chances, I guess.

Sun, 10/02/2011 - 10:58 | 1730720 Ultros88
Ultros88's picture

Assuming that there comes a time when FRNs are realized to be merely paper with pretty pictures and that they can no longer be exchanged for real goods, how will it be possible to secure property rights that will be upheld when the new governmental system is put in place if one has paid in gold/silver during the chaotic interim? Does anyone know how, or even if, large scale transfers of ownership have been upheld after the various hyper-inflationary periods of the past have resolved themselves?

Sun, 10/02/2011 - 11:11 | 1730737 blindman
blindman's picture

property transfers can take place without fed notes.
the agreement is in a contract and perhaps for property,
real estate, a title transfer. but if there is no office
to record the title because there is no payment of
office holders, no legal system for dispute resolution
and enforcement because no one is paid to do these things
then what prevents forgery of documentation. think..
robo-signing! so, that is the problem. we just need
new currency issued by the states at no interest or by
the federal treasury at no interest. yes, wiping out
the existing global financial paper markets. but new ones
would pop right up. one with some semblance of transparency
and relationship to actual socio-economic human activity
as it is, not as it is imagined in the mind of an uneducated
psychopath who believes we live to serve them and their class
of criminal.

Sun, 10/02/2011 - 11:29 | 1730770 blindman
blindman's picture
30 September 2011
The Anglo-American Precious Metals Derivatives Duopoly: Quarterly OCC Report
As general rule of thumb, if you are the House in any game, you should not be able to also sit at the table as a player, internal confidentiality agreements notwithstanding. It really is just that simple.

You should be taking money on a transactional service basis and net zero exposed. And if you can't do that and make enough money, then you need a new business model.

And the notion of commingling this sort of business with insured bank deposits and Federal Reserve subsidies is insane.

Any major commodities player needs to be compact enough to wrap up in a carpet and get rolled out the door, sans bailouts, should conditions require. Even a big player like Enron or Refco.

One cannot help but wonder if some of these mega banks have not become so interwined with government as to be in a virtual partnership in their implementers of fiscal and financial policy, which is a dangerous development indeed.

"Oh the shark has pretty teeth dear,
And he bears them dripping red,
A sharp knife has Macheath dear
And when he flicks it you are dead."

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