Metals update

Gold has closed below its 144-day MA for the first time in 3 years. However, this still could be a monstrous bear trap. I have no intention of giving anyone investment advice (for which I am eminently unqualified) but we do have many readers who apparently like my silly charts, so for the record I haven't panic liquidated, though I'm somewhat hedged with a short position on the S&P500 (SDS).

The rest of the week will give us a lot of information as to what to expect in the medium term. (In the long run, this is of course just a game of waiting for some event, like a bank run, which should trigger the subsequent liquidity pump/money creation. But the Fed honchos are very, very clever at managing sheeple perceptions so that their own class, the banking class, may continue to prosper at our expense- let's please give credit where credit is due). If we have another day of waterfall declines, I will probably liquidate my main trading accounts and buy physical until the money printing event occurs. If anyone could tell me about their experience with, I'd truly appreciate it.

Critically, on the weekly gold chart, we need to close above the black line by Friday, and ideally not go down much further even intra-weekly.

Here, the dotted red line, touched by the 200 day MA, must hold:

Then, the silver YTD:

and the other daily chart from yesterday, magnified to the past 5 months:

and the long term chart, right at very important support, as of yet unbroken.


Robert LeRoy Parker said...

So when are you going to go physical and stop worrying about these charts?

Warren James said...

Don't forget it's options expiry this week! Gotta bring the value of those future contracts down a little! Next week should be a sea of green as those US Dollar holders find somewhere to put their stuff. :)

Hiya RLP, hey .. further to what we discussed by email, I'm forming the opinion that the contract/physical price disconnect will never happen, despite Turd saying it, and despite it being a key tenet for FOFOA. My theory is that the modern complexities (social connections between entities) has been underestimated.

For those of us who are forced to offload a little bullion in the short term, watching the contract price is important for timing. For the minute I'm with Kid Dynamite ... 'contract price = physical price'.

Robert LeRoy Parker said...

Kd doesn't even own gold last time I saw his disclosure related to the subject, yet one of his frequent talking points is ragging on how many decepticons there are in the PM community. Why bother? The arguments never change: misinformation this, hype that, Sprott is a douche, etc etc. I guess that draws blog traffic and supplements his retirement a bit. Or maybe it's because he genuinely wants to educate the masses. Or maybe he just likes to argue online.

KD was an insider and has vast expertise in how to navigate the financial markets. He is probably quite comfortable trusting his knowledge to keep his own wealth secure within the system.

I however, am completely disenfranchised by wall street brokers/traders/gurus/etc along with... every other person I know! Look at mfglobal and that lying asshole corzine. These people are in charge! Who could be comfortable with their life savings anywhere near these people besides an insider? Living within my means and holding my savings in physical gold gives me peace of mind. That's ultimately what counts. I'm all in.

GM Jenkins said...

I agree, RLP, I might join you soon - the MF Global thing did scare the hell out of me. I remember losing several thousand bucks when got closed, and was very lucky to avoid a similar fate when full tilt poker got shut down last spring (partly because I learned to withdraw winnings regularly). Now who's to say all brokerage accounts aren't headed for a similar fate? You really can't: these wall street entities are aware of loopholes within loopholes and will give no ground if any question arises about what really belongs to whom; they are perfectly evolved, giant, blood sucking flesh eating monsters who have pieces of diddlyshit investors sticking out of their stools.

Warren James said...

Good description GM, of the banksters :) Looks like my denial of the contract/physical separation was enough to trigger a real run towards what looks like a massive contract sell-off and real divergence. But I guess all those big fund contract gold people had their stop losses near the moving average or something. Trend still intact from a TA perspective?

It's days like these where FOFOA's view of contract gold behaviour makes the best sense. But it also indicates our messed up world - if price is not a reliable indicator then what can we rely on?

BOF said...

I agree GM, MF Global has been a game changer for me. As one who has long been a defender of CME and the futures markets, the reckless disregard of customer safeguards by MFG and its regulators has eliminated all my confidence in the system (thankfully, I did not have an account with MFG). It seems no institution can be trusted. Banks, brokers, corporations, hedge funds, mutual funds, governments, judges - who hasn't been found to abuse their power and/or steal from their customers?

Will there be a time that paper separates from physical? Six months ago I would have said no way - now I'm not so sure. As of today, the physical price is equal to the paper price. But as credibility and trust in the futures markets gets chipped away with each scandal, there may come a time that physical is the only way for people to safely transact.

Regarding the recent decline - I agree with RLP that the charts aren't much help. A lack of dollar liquidity and perhaps continued fallout from MFG is driving this in my view. This decline would be happening whether people traded in paper or physical. People need cash, so they are selling whatever they can. But I'm sure the printing presses will be back in action soon, and this will likely prove to be an excellent buying opportunity.

King Midas said...

Why goldmoney when you can buy fully allocated gold, held in your name, in any vault in the world with the option of taking delivery at any time? Haven't you heard of Gold bullion International? I suggest checking them out at or read FOFOA's profile of the company. Other than taking delivery, I wouldn't do it any other way. Gold money only sells you a share of a 400 ounce bar, good luck taking possession of that.

Jeanne d'Arc said...

@King Midas

I know for a fact that thanks to all his analytical skill, GM could easily buy a full 400 oz bar. Probably two or three, actually. So no worries there ;-)

King Midas said...

The problems with Goldmoney are many. First, all bar purchases and sales go through their own prop trading desk, so there is no price competition. Auditing is suspect, delivery charges insane, and again, no whole ownership. I just can't see using goldmoney when an option like GBI is right there.

GM Jenkins said...

Thanks King Midas for your feedback about Goldmoney. Your points are well taken.

However, JdA is correct: I deal only in 400 oz bars. I'm actually resting my feet on a makeshift ottoman of gold bricks as I write this.

GM Jenkins said...

Good to hear from you, BOF. If you say that it's not impossible to see paper "separating" from physical in the near future, what would be some early indicators that we should look for? I mean, as long as I can put several 400 oz bars into my Apmex shopping cart and pay the "paper" price, I think any talk of decoupling is nonsense. But could there be an incipient decoupling even with retail dealers charging spot?

Kid Dynamite said...

whoa whoa, RLP - wtf? Warren said he was with me on a simple FACT: there is no disconnect between the price of paper gold and the price of physical gold.

that is a fact. it's not debatable, and it's not something that has anything to do with all of the other facts that I've enlightened the misled metals minions on.

I don't really understand why you're bringing my positions into it, or my past writing, or my "intentions" - this is not a debate: it's FACT - that's the entire point!

it doesn't matter how many times Turd, Harvey, ZH, SGS, or Jesse tell you that "the price of physical gold and paper gold are decoupling" -


They WANT it to be true, but that doesn't make it true. In fact, it highlights everything that's wrong about their thesis.

That is a fact, and has nothing to do with me, anything I've written, or any positions that I hold. and yes - there are AMPLE decepticons in the PM community - and the fact that they repeat the same incorrect crap over and over again doesn't make it any less wrong.

Might that change someday - the price of paper and physical diverging? Maybe - but there's no sign, even in the wake of the MFG disaster, of it happening yet. Fact.

ps: re blog traffic and my retirement: I make roughly $100 a year off my blog. if you think that's worth arguing with metal-tards about, well, you and I value money differently.

GM Jenkins said...

KD, repeatedly stating that the paper/physical equivalency is a fact doesn't make it so. How bout some, you know, arguments to back your assertion. Don't get me wrong, I respect your expertise, and am also somewhat nonplussed by this talk of decoupling when (as I wrote above) I can buy a coin or a GLD/SLV share or a COMEX contract at pretty much the same price everywhere in the country. But what do guys like Jesse ("The paper metals market is diverging from the physical bullion market") mean, then? Could they really be so painfully, bone-crushingly stupid ("metal-tards" as you call them)? That seems unlikely. Also, to repeat the question I asked above, since you say a decoupling is a future possibility, what should we look for to know that such a phenomenon is occurring?

GM Jenkins said...

Now on King World News, the "London Trader" (who's been wrong before) says: "We are making a historic bottom right now. The paper gold, or virtual gold market, has diverged so far from the physical market that it’s no longer a credible marketplace." I mean can so many ostensibly intelligent and successful people be so stupid as to miss a plain self-evident FACT? If so, that's pretty damn frightening. Are these people's arguments not worth trying to undertsand in good faith, because they're "decepticons"?

Kid Dynamite said...

GM, are you for real? that's like saying "claiming that 2+2 = 4 doesn't make is so"

look - the paper price and the physical price are the same, not because I claim that they are - BUT BECAUSE THEY ARE! it's not something that I can argue with you - it just is.

maybe you need to go back and read this piece:

as I've said from the start - it is possible that one day people will lose faith in the COMEX, and that the paper price will no longer be "good" for getting real bullion in either gold or silver, but I wouldn't hold your breath on that, and I wouldn't expect any deviation to last long. Don't forget, your metal-tards have been telling you for YEARS that the COMEX is going to collapse next month. THat's because they are clueless as to how financial markets work.

yes- Jesse is COMPLETELY inaccurate when he says that paper and physical are diverging. it's false. he WANTS them to diverge - but they haven't yet. Yes - all these metal-tards are pushing their agenda with factual inaccuracies.

Don't you get it yet? that's part of the game - for example, if Eric Sprott and the Metals Mafia doesn't spread his propaganda and hype and help to create hundreds of millions of ounces of investment demand for silver on an annual basis, then there is a SURPLUS, not a shortage of silver.

You should read Bron's blog - he's addresses the paper/physical concept multiple times too.

"If so, that's pretty damn frightening."

Yes - GM - it's terrifying. The online metals community is indeed frightening. It's like Harry Camping's rapture crew, only the Metal-tards have somehow been able to be wrong about their calls for Armageddon over and over again and still keep their followers' faith. I guess it's cause they just blame it all on Blythe and the Cartel, and are thus able to completely ignore reality and accountability. Frightening indeed.

If you want to stack gold and silver coins in your safe because it makes you happy - go for it. I don't care. But if you're doing it because the paper and physical price is "diverging," well, you're a victim of misinformation - you've been had. Nothing is diverging yet. (again: that doesn't mean a divergence is impossible! it means it hasn't happened yet).

Robert LeRoy Parker said...

Are you sure you don't care? It sounds like you kinda do. Lack of counterparty is why 99% of people by precious metals. Not misinformation campaigns. Misinformation campaigns get people to by sprotts paper over other paper at bad prices.

Do you think it is rational for people to keep their money within the wall street financial system?

Kid Dynamite said...

@RLP - you want to go the Full Monty on monetary philosophy again? I'm trying to keep it simple here. Warren wrote that he agreed with me that paper price currently equals physical price. you seemed to disagree - you took issue with me, it seemed. That is the topic at hand, as far as I'm concerned. It's an easy one.

the other topics are harder:

I'd seriously argue with your claim "Lack of counterparty is why 99% of people by precious metals."

That's why people take delivery of their metals - and it's a perfectly reasonable reason. People buy them because they think that their wealth will be worth more with PMs than with other assets.

if you don't want to keep your money within the US Financial System, go for it - pull it all out. But as I've said before, I think your wealth would be better protected in REAL assets - those are farmland, crops, grains, animals, machinery, etc...

Gold and silver depend on the desire of other people to assign them value in order to have value (that is a point that cannot be overemphasized) - chickens and maple syrup do not. They have inherent value. And that's what I meant about the misinformation campaign in the precious metals - it's a relentless, never-ending campaign to convince more people to buy metals. After all, if people stopped buying metals, the metals prices would plummet - they aren't good for anything except selling to other people (blah blah blah - yes, I am well aware that there are industrial applications for both gold and silver. as I've already mentioned, there is a SURPLUS of both metals if you don't count investment demand. Investment is the key - and hence, the Metals Mafia)

you can build yourself a real, tangible non-financial life off the grid (I'm kinda doing a level zero version of that - I'm so utterly far from off the grid that it's almost a terrible example, but at least I have eggs and syrup. I wouldn't even count my garden, as I have to buy the seeds/crops elsewhere) - or you can build yourself a life off the grid that depends on the value that other people assign to gold and silver. I know which one I would choose if I were preparing for the real end of the world...

Kid Dynamite said...

@RLP - seriously - I don't care what anyone does with his own money. If you want to take every dollar you earn and re-deploy it into "stacking phyzz," I don't care. that's philosophy - it's not fact. Just because I wouldn't do that doesn't mean that I'm going to tell you that you're wrong to do it.

If you tell me that the paper and physical price are diverging, however, then I will tell you that you are incorrect.

I read a comment on ZH the other day that was a priceless summation of the MetalHead mentality. It was the day silver was down 6% or so, and one guy wrote something like "I still have the same footrest I had yesterday - 3 monster boxes = 1 footrest"

priceless. If you're buying monster boxes of silver in order to make bespoke footrests out of, then yes - your utility overnight was unchanged - you still had a footrest the next day. Your wealth was down 6% though - and I'd suggest that there are much much cheaper alternatives to footrests than stacked monster boxes of silver. 2 cinder blocks at Lowes cost about $2.75 total, for example.

Robert LeRoy Parker said...

Real assets are good!

MF Global is bad!

The world is not ending!

Robert LeRoy Parker said...

Gold is cornered! Read Another!

Argue with Fofoa!

Kid Dynamite said...

and paper price = physical price - still... !!! that was my only point in this thread!

hasta la pasta. I'm off to play soccer.

GM Jenkins said...

RLP says the main reason people buy metals is to avoid counterparty risk, and KD says it's to make a profit, and these two reasons aren't mutually exclusive; nor is the reason why I think most people buy metals, and that's because they need a store of value (which chickens and maple syrup are not ) (though things like whisky, cigarettes, and fine art are, but lacking in fungibility and liquidity etc).

Look, when average people wake up to the fact that little devious self-aggrandizing men are creating out of thin air, with the press of a button, that which they have worked a lifetime for, they feel a strong indignation. It's not necessarily about wanting to live off the grid or fearfulness of some Mad Max dystopia; it's a lucid reflection on Lenin's mantra "who? whom?" - as in who profits? who pays? The financial elite and the political elite (allied with the utterly feckless and dependent underclass that will soon comprise the majority of citizenry, by design) all have very good reason to hate sound money, which chickens and maple syrup are not.

Kid Dynamite said...

GM - I leave you with 2 concepts to ponder (since now i'm REALLY running out the door to soccer):

1) "store of value" is just a variation of "make a profit." Specifically, it's the "not lose money" part of the equation.

2) how can an instrument with no inherent value be a store of value? ponder that - it's the key philosophical point that goldbugs cannot acknowledge... the answer, of course, is that you depend on OTHERS to value it. That's what I meant about chicken and syrup, of course - they have value to me even if everyone else becomes a vegetarian and is diabetic... I don't need to hope that someone else will want them. Gold and silver will always have value to you if you value physical footrests (As in the comment I noted), but other than that, you're relying on others to value something for some reason... history? hmmmm... ponder that.

GM Jenkins said...

1) You're technically right here, money lost = negative profit. Abstract but true.

2) Your argument here only makes sense in a world without money. Yes, if we ever collapse into a barter economy, gold would be fairly useless (though it would still look pretty - why is your standard of value so utilitarian? If I were stranded on an island, I'd still enjoy a golden chamber pot to shit in). Seriously, though, I find it ironic that the biggest anti-gold bugs always resort to using the most extreme gold bug's premise to support their own anti-gold case: "If the world comes to an end, gold is useless." Who says the world is going to end? Not me. I'd prefer a debate in which we share the premise that shit might collapse but money of some sort will continue to exist.

Given that, I'd strongly prefer to live in a world in which the money that is used can't be conjured out of thin air (unless i could do the conjuring). You may disagree, but i hope you at least understand that when you say:

And that's what I meant about the misinformation campaign in the precious metals - it's a relentless, never-ending campaign to convince more people to buy metals. After all, if people stopped buying metals, the metals prices would plummet - they aren't good for anything except selling to other people

that you could say the same thing about Federal Reserve Notes! If people stopped using FRN's, then FRN "prices" would plummet (obviously, a FRN's 'price' = what you can exchange it for). "They aren't good for anything except 'selling' to other people." That's the nature of all money - it must be agreed upon.

Now, is there a "relentless, never-ending misinformation campaign" to convince people to value FRNs over gold and silver? Let's see, in our "sound money" corner, we have a few dozen diddlyshit blog proprietors, allied with a handful of wealthy entrepeneurs like Rob McEwen and Eric Sprott, and one politician. In the other corner, we haveevery central bank in the world, every government (and by extension every nation's military), virtually every corporate-owned media outlet, virtually every member of the banking elite, virtually every politician, etc. who bring all their collective power to bear to create the impression that the Federal Reserve Note is (and ought to be) the only game in town.

One only sees this state of affairs as normal and non-problematic if he believes a priori that FRNs = money, while gold and silver are not and will never be so again. Which of course, begs the question.

GM Jenkins said...

It's also ironic that you attribute the worst motives to the proselytizers of gold and silver (i.e. call them members of a "mafia" who intentionally "misinform" the public to drum up excitement for their wares, with the sole purpose of building their net worth), since that is exactly what you complain is done to you (KD is a banking shill, disinformation agent, etc). They could be wrong, and you do a wonderful job debunking them, but the original motives of what you call the "metals mafia" are not, in my opinion, improper or purely expedient. (Sure, once you convert your FRNs into gold and gold-vehicles, you are no longer a disinterested observer) (but the same can be said of those that possess no gold: my sources tell me Roubini shat his pants from joy last week).

Kid Dynamite said...

"that you could say the same thing about Federal Reserve Notes! "

this is a key misunderstanding. there is a very simple reason why FRNs have value: the Government requires that you pay your taxes with them. That's probably the most valuable simple lesson I took from the MMT crowd.

but note that you didn't refute my claim at all - you almost even agreed with it. It's very important to realize, if you're a goldbug, that you're dependent on the desires of other people to hold the asset that you value - which is especially ironic since I feel that the reason most goldbugs prefer gold to paper USD is that they think the dollar is inherently worthless. Just because gold cannot be conjured out of thin air doesn't mean it has value! My point was to question WHY you would assume that others would value it - because they used to? Because they did in the past? That's why I brought up utility. That's what people mean when they say "you can't eat gold," and that's what people mean when they talk about gold's potential use (or uselessness) as money in a barter society.

and I think I addressed your "it's pretty" point - if you want to use stacks of boxes of coins as a footrest, they'll always have utility for you.

I have a silver 1 ounce Kitco round on my desk. I just realized I could use it to smash garlic with. Not sure what else I'd do with it - it doesn't even feel good when I rub it on my chest. I could take it out of the sealed plastic sleeve - then it might feel better, but I'd lose some of the garlic smashing utility.

If we were on a desert island, i would prefer a laying hen to a golden chamber pot... but that's a personal preference.

as for The Mafia - I think you'll find that almost every one of these proselytizers I'm namelessly referring to is trying to sell you something - even if that something is just pageviews or advertising (although most are selling more than that). And if you're going to ask "KD, aren't YOU selling pageviews?" I'll reply as I did to RLP: "No, I make virtually nothing off my blog. I'm not in it for the money, and I'm not in it to profit from being short metals and manipulating the price lower with the information in my blog posts."

GM Jenkins said...

I have a silver 1 ounce Kitco round on my desk. I just realized I could use it to smash garlic with.

Lol you're an incorrigible paper bug KD.

Robert LeRoy Parker said...

This dependency on others argument is foolishness if you read Another. He would simply say you are entrenched in western thought.

Bron said...

Mining companies sell their 5-6t of weekly production to us at spot and all our big distributors are buying at spot, so paper price = physical price. There is no divergence.

When mining companies stop swapping their metal for London unallocated and buyers start paying a premium above spot (in addition to manufacturing premium) for physical metal, then you'll have divergence.

I'll let you know when that happens.