The London Trader

Eric "Leading the Witness" King's listeners globally are, no doubt, familiar with "The London Trader," who my sources assure me is not Mr. King's imaginary friend, despite the fact that his interviews are never released in audio form. Rather, he is a mysterious gentleman with a knack for popping up whenever the flagging enthusiasms of PM investors are badly in need of rekindling.

So today, almost on cue, hard upon gold's slicing through its 200-day moving average like a hot knife through butter, provoking ceaseless chatter of the "death of a bull" (and just days before Christmas!) ... he has come.

"We are making a historic bottom right now ... this recent plunge was orchestrated with borrowed gold, and that borrowed gold is now gone."

"Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold. They don’t understand what is happening in the physical market"

"[There will be] a huge, tectonic shift in price dynamics going forward, because [direct buyers are now] taking price discovery away from the bullion banks ... Every single month producers have a certain amount of gold and silver they sell. Normally they sell it to the bullion banks and the bullion banks, of course, leverage this gold and sell up to 100 times that in paper markets to control prices ... "

“The [silver] game is getting so stretched that it’s going to break ... The only way they have been able to keep silver depressed is by borrowing silver from SLV to meet immediate demand ... There isn’t enough silver for investors to buy (in large amounts), so ... SLV is over 20 million ounces short on the silver they are supposed to have in the vaults."

"Part of managing the price of silver recently has been for the central banks to attack the gold market ... [Their agents, the bullion banks] short-sell just enough tranches of COMEX contracts to surgically take out important support pivots ... turning the momentum buyers into sellers."

So, what to make of this guy, who purports to have his finger on the pulse of the Asian investor? (A constant motif of his is how Asian investors are eager to "suck up" the gold being thrown away by the desperate Western banks.) What's his track record?

He first emerged onto the scene on January 14, 2011, right after the metals had crashed from their New Years highs, saying: "The physical silver market is still extraordinarily tight here. Somewhere around the $28 area there should be a firm base as there is tremendous physical demand in that zone.”

Well, it wasn't the most auspicious start, for silver fell another $2 in the next week. But, undaunted, he made a reappearance soon thereafter, on January 26, redeeming himself by essentially calling the bottom of the correction to the day:

"Physical demand is incredibly robust from the eastern hemisphere creating a floor on the downside preventing a further breakdown. There are certain banking interests which have been making an effort to keep a lid on prices of gold and silver ... [but] big money is lining up to buy into any attempts to flush the price lower."

Also noteworthy, in keeping with his regular theme of deriding traders clueless about physical markets, he had this to say:

"Many of these hedge funds are run by kids who are only out of university for three years now and are literally just chasing a dot up and down a screen. They don’t look at what is happening with inventory levels at the Comex or what’s happening with SLV where real metal is being pulled out of that ETF"

After this formidable call, he went into hiding for over three months, as gold and especially silver rose parabolically, and PM bugs had no need for his services. But a few weeks after the May crash, out of the ethernet he emerged. He had this to say on May 16:

"[On account of Asian buying], gold is not going to go down much further at this point, so you should not see an awful lot more damage to silver."

And once again he was right. The very next day, silver began a steep ascent from the low thirties to ~$38 an ounce the last week of May. Next, we heard from him on July 18. When many of us were expecting the seasonal summer doldrums, he claimed that there was "major potential for short covering." He continued:

"If we get a pit close today in the US above either $1,600 gold or $40 silver, then you are going to see some huge capitulation by the shorts."

In this he was not quite accurate, as gold and silver finished right at his specified levels, yet still fell steeply the next day. Nonetheless, after 3 trading days, gold began the first leg of its ascent to $1900, pausing at $1650, when he made a reappearance (August 4):

"If gold closes above $1,680 we will also see some capitulation on the part of the shorts in silver as well, which will cause a huge pop because there will be an air pocket these guys are trying to cover into ... Remember, $1,680 is the key here."

Two days later, gold gapped up to $1680, and exploded into the $1700s, indeed because of massive short covering. He did not miss his chance to gloat; his victory lap on August 10 was titled: "Many Gold Shorts Wiped Out, Lost Everything!"

"These guys in London woke up with their asses handed to them and I don’t think some of these guys will ever be short again, if they are still in business."

Then, he added, correctly: "I believe there is still enough momentum to push gold into the $1,800’s."


“I fully expect to have $2 moves in silver and $50 moves in gold as absolutely normal at this point. If you don’t expect that, you are not going to understand what is going on."

Like Wynter Benton before him, perhaps he should have quit with a near perfect record. For, his piece on September 20, positing a "massive physical floor under the gold market" was a cataclysmic bust:

"There are massive orders between $1,715 and $1,760. This has the effect of putting a physical floor under the price of gold. If they make a push to the $1,715 level that would be suicide in my opinion. There are simply too many massive orders for physical gold down to that level for that to be breached."

Gold of course fell (briefly) to $1535 within days.

"As far as silver goes, it is possible there could be a spike to $37 or $38 in thin access trading, but the bottom line is that serious physical buying will be taking place anywhere below $40"

Here, too, he was dead wrong, although the attack did take place in "thin access trading."

Unlike Wynter Benton, however, the London Trader did not then disappear with his tail between his legs, never to be heard from again. No, he was back less than two weeks later, not to acknowledge his terrible call, but for more bullish prognostication -- though he did offer an explanation:

"The [hedge funds I spoke to] were not happy about [selling] their only good performing asset they had, in order to offset the losses on their common stocks. This was done for the purpose of end of the quarter window dressing. The indication was that they wanted to get back in as soon as possible"

"Western central banks got together, leased out some gold, and the bullion banks sold the gold. The central bank gold being unloaded by the bullion banks was not to get the best price, but to smash the price. The smartest way to sell the gold would be to do it in the liquid sessions. But the pattern during the decline was they were selling it in the overnight session when things are quiet. This was no different that what we saw at the end of April, beginning of May on that coordinated smash."

He concluded with a typical bullish evaluation of the battlefield:

"As it stands today, there are an unbelievable amount of physical orders that have not been filled. When gold was briefly down at $1,530, almost no one got any physical gold. No one was even getting fills."

But (perhaps chastened), he offered no specific price targets. Still, the metals began a slight rise that day, and in keeping with his measured optimism, sunk no lower over the next few weeks.

Then, with 2 posts on October 21, he hit another home run. That very day, when bearishness was all around, gold began a dramatic rise from the low $1600s back to $1800. Some excerpts:

"What we are seeing now is this consolidation pattern where the commercials are getting out of their short positions whenever possible. All the while they are squeezing fresh shorts. They take the metals down, make the charts look bearish to bring in fresh shorts, and later they squeeze them out of their positions on a rally and pocket the money"

"The Chinese bought a massive amount of physical today at the lows and that is why the market turned where it did ... Having said that, most of the physical orders are sitting ... between $1,585 and $1,605. We are talking about massive tonnage.” [Note that level has not yet been breached to the downside]

On silver, he continued with a favorite theme:

"The price of silver has no reality to the paper market at all, absolutely zero reality there anymore. There is extraordinarily tight supply right now in Asia. When you order silver there is so little available at these prices, that’s the trouble. Chances are you are not going to get quantity at this price."

My verdict on The London Trader is that he definitely deserves to be taken seriously, though of course skeptically. Look at the gold/silver charts below, with vertical lines marking the days of his bullish (and often contrarian) posts, and decide for yourselves.


Kid Dynamite said...

GM - as soon as the guy says

"There isn’t enough silver for investors to buy (in large amounts), so ... SLV is over 20 million ounces short on the silver they are supposed to have in the vaults"

you can instantly be clued in that he doesn't quite understand what he's talking about.

cliffnotes on that misunderstanding, driven by Ted Butler, here:

and yes - if you're going to ask me if the brilliant Ted Butler is wrong - he's absolutely, undeniably, embarrassingly wrong in his complete lack of understanding of SLV, and all he does is discredit himself and do a disservice to the entire PM market when he writes letters to Blackrock and the SEC about it.

Bron Suchecki said...

Hmm, well we've acquiring 20-30t of silver on a regular basis and no one is screwing us over on premium because they have so many buyers desperate for metal.

Possibly London Trader is Andrew Magurie (who says he has Asian connections). Alternatively he is a trader in a bullion bank and is using King to game the market and/or have some fun with the goldbugs.

Comment from a contact of mine on London Trader: "I couldn't imagine any trader for a major buyer (as he infers) being so vocal on public forums etc about what's happenign & staying a trader. If he was buying for China they would have sacked him long ago for his big mouth."

GM Jenkins said...

Ok, finally got a chance to fix the html, sorry everyone who had to suffer through reading the patchwork of fonts!

KD, thanks as always for your insights. Regarding Ted Butler, did you get a chance (or do you have the patience) to read his latest, which seemed to be something of a clarification of his position? I too had read the gotgoldreport post you linked, and recall being embarrassed for his sake.

However, I actually think you might be misreading what The London Trader meant in the quote you excerpt; I don't think he's saying silver is manipulated by shorting SLV (as Butler says), but rather that actual physical silver is being withdrawn from SLV and used to back paper that, leveraged, knocks the price down at tactical technical points. Comments on that?

Bron, very strong points, thanks for sharing your expertise. Btw, I also suspected the London Trader was Maguire but forgot to mention in this too long post. FWIW the first mention of "London Trader" on KWN refers to Maguire, dated March 2010.

Spicy Guacamole said...

the London Trader is obviously a permabull. When the market goes up, he's a genius seer of the future. When the market goes down - nevermind (was he saying "SELL" at $50? I'm sure the answer is no). Like Kid said, the SLV claim is prima facia evidence the guy is not connected and is merely repeating the mantra of the silver community. Reiterating the misquoted and false 100-1 claim is strike two.

Bringing out the China boogeyman is strike three. If I only had an ounce of silver for every time I hear someone say, "Ooooh, China is buying in size! Heavy bid here! There's no silver left!". No matter what the topic, Ags, copper, oil, steel, whatever, just say "China is buying!" and it somehow trumps all arguments. Bullshit.

Kid Dynamite said...

GM - the exact quote from LondonTrader was:

"SLV is over 20 million ounces short on the silver they are supposed to have in the vaults to back the shares which have been issued. The silver isn’t there. So there are people who purchased SLV to own physical silver, but all they have is shares that aren’t backed by the physical silver."

that's false. it looks pretty obvious to me that he read Butler's stuff and regurgitated it. Again, a surefire sign that the guy is missing huge pieces of the puzzle. (oh - by the way - I addressed the concept of "over-redemption of ETFs in my post "ETF Lesson Part I" but I know that you already read GotGold's explanation of why Butler is wrong.

LondonTrader also says "The only way they have been able to keep silver depressed is by borrowing silver from SLV to meet immediate demand."

huh? Borrowing? it's like he's combining what he reads on Harvey Organ and what he reads on Ted Butler. Wrong + wrong = more wrong though...

in any case - of course SLV and GLD are respectively the largest visible global stores of their respective bullion - PROOF that there is no shortage of either. Until we see real depletion from them in the face of rising bullion prices, we can be pretty confident that we're not running out of either silver or gold.

re: Butler: yes, I saw that latest. It confirms beyond the shadow of a doubt that he still doesn't understand what he's talking about - same errors in understanding of how SLV works. Short sellers should put up metal according to the prospectus? Come on Ted, "embarrassed" was the perfect description by GM Jenkins. Butler is doing a major disservice by miseducating all of the Silverbugs who take his word as gospel. Sad.

Anonymous said...

Very nice summary of the London Trader's pronouncements, GM. Looks decidedly fishy to me.

But perhaps there's a simple explanation. Are we talking about "London, UK" or "London, Ontario" here..? Because this chap seems to share a lot in common with our other favourite hot-shot trader from London, Ontario, you know... ;-)

GM Jenkins said...

You know, you might be right. I vaguely recall the London Trader accusing the Elders of Zion of causing the Fukushima disaster to control the price of silver.

Slow Loris Larry said...

Larry said:

KWN has just blown London Trader's cover for the second time, the first being his indentification with Andrew McGuire noted by GM Jenkins back in March 2010.

Although I cannot document this with the date, Last week Eric King mentioned at the end of a 'broadcast' that there was a new Blog entry by McGuire, but the only new posting was a second one by the London Trader.

So, now we know!

Brianinho said...

OK so the guy has got it right more than wrong GM says he should be taken seriously and I am in agreement there as I thought it was a nice piece..Some say this is a bankers Shill site but I am still undecided on that ...I like to hear both sides before I test the water...

GM Jenkins said...

Though if I had to update the chart of his record, his last post talking of "an historic bottom" was a few days before the pre-New Years plunge. So, it seems he has a knack for coming right before big movements, in either direction. . . Next time he appears think long straddle.

We're not banker shills, but we're not a PM cheerleading site either. Nothing necessarily wrong with the latter in my view; if you're a Packers fan, you want to be able to go to sites that aren't all objective (what's the chance Aaron Rogers will have another concussion, how does that impact odds? etc.), but if you're trying to bet on the game. . .

Now that i think about it, when i bet on sports I don't bet on a team I care about because it's hard to stay objective, but though I am a PM fan, I do trade metals. Probably a bad idea :P