'The Silver Bomb' Bombs

A gratuitous book review of ‘The Silver Bomb: The End of Paper Wealth is Upon Us’ by Michael MacDonald and Christopher Whitestone (An independently published book, USA, 2012).
This self-inflicted chrissy prezzie arrived (from the UK but not from Amazon) in time to get read over the holidays when, in order to stay married, I didn’t dare leave home to go to my hide-out to get something worthwhile accomplished.  Anyway, as Jd’A has been fickle, the dust is building up again in the library there, and the weather down under here was a pleasant 26 degrees Celsius on Christmas morning and the view of the Poinciana tree covered in bright red blooms over its dark green foliage was stunning from the back deck at home, so that is where I parked myself to deal with this book. What a disappointment!

London Trader Redux

Observers of recent gold and silver price action will note that December 2012 is closely following December 2011's script. Last year, too, gold responded to bullish news by falling below its 200-day MA.

Also, on December 20 & 21 of last year, the London Trader made an appearance on KWN, prompting one of my more popular posts, an objective appraisal of his claims to insider connections (e.g. in Asia) and market foreknowledge. My best conclusion (in the comments) was: 

So, it seems [The London Trader] has a knack for coming right before big movements, in either direction. . . Next time he appears, think long straddle.

Well, it turns out that was pretty good advice for 2012. The red, dotted vertical lines on the chart below mark the dates that the London Trader appeared on KWN since last year's post:

Interestingly, on December 20 and 21 of this year, the London Trader did not make a KWN appearance, but Andrew Maguire did. It's pretty obvious, though, that Andrew Maguire is, in fact, the London Trader. For example, if you listen to the latest interview, the London-dwelling trader Maguire says that futures players at hedge funds are "just chasing dots on a screen," which echoes the London Trader's locution from last year: "These kids are literally just chasing a dot up and down a screen" 

So, I suppose we should expect some violent price action in the near future, either up or down.

GM's call of the year

November 18, 2012:

"I'm long the S&P 500 because I don't think the Plunge Protection Team will let gold outperform the S&P 500 in 2012, as it currently is on this ratio chart:"

Jim Sinclair:

Goldman is, in all practical senses, the Exchange Stabilization Fund because ESF is only a brokerage account. There is no fund in terms of what one thinks a fund’s office should look like. Read the law.

The President or US Secretary of the Treasury may appoint ANY person or entity to act on their behalf as the manager of the Exchange Stabilization Fund. The Exchange Stabilization Fund has a broad mandate that allows it to trade many things including GOLD.

And buy stocks, of course.

On Keeping my Little Lemur Purse Firmly Closed

It's been a while since I actually checked the gold price (I haven't owned any since around $1800, as regular readers are wont to remind me, usually in the same sentence as words such as 'naive' and 'deranged'). But a few emails plooping into my inbox over the last 24 hours prompted me to have a wander over to Kitco.

Oh, the humanity.

It's certainly pretty nasty. I mentioned in a comment a while ago that I was open to buying some gold at some point, and that I felt arrogant enough to declare that I would 'know' when that would be.

This ain't it, I don't think. Not by a long chalk. My little lemur purse is staying firmly closed.

Metals update 12/19

This sell-off will get ugly if the following lines are broken in gold and silver:

Eric Sprott's Third Bar List for PSLV

At the end of September 2012, Eric Sprott's funds quietly released an updated bar list, marking the third document for PSLV (and the fourth for PHYS). In light of this stupendous event, I felt it important to analyze the document!

Good Reading in the Metals 'osphere

I'm always inspired by good discussion, especially when it's others doing the hard work writing good content - here's my picks from the last month, in no particular order. Many of you will already have read these, so this is more like a personal bookmark with my own comments.

Sunday pre-game, 12/9/2012

I'll be traveling over the next two weeks, so a very brief update here. 

Nothing really surprising happened last week in gold, as the important $1695 level held on a closing basis. 

I know Screwtape readers are probably sick of the following monthly chart, but it's been my main moneymaker in 2012 (well, aside from my lucrative gig stripping at bachelorette parties). 

I sold my puts from last week at the bottom of the channel:

The real real interest rate

What is the real real interest rate measured in? (If you didn't say "gold" then go directly to King World News. Do not pass go, do not collect $200. And for f#@%'s sake, stop reading Jon Nadler.)

Let's extend my previous analysis. First, if we wish to fit a parabolic curve of the form ab^(-t^2) + c to a series of descending price points (or ratios of prices, as I've been doing), the constant c is important, because a "singularity" only happens if c is negative (as we saw with 10-yr yields measured in ounces of silver).

That doesn't look to be the case with gold.

Yes, the $TNX/$GOLD ratio is also descending parabolically on the log chart. And, as usual, we can interpret the $TNX/$GOLD ratio as the amount of gold the US Government gives you every year for lending it $1000 for ten years. Throughout the 1990's, that amount stayed constant at 1/5 of an ounce (almost literally; see horizontal regression line in chart below). Nowadays, it's below 1/100 oz.

Note also in the graph above that, as with silver, I had only to shift the upper curve down and (slightly) to the left to get a nice parabolic channel. 

The Silver Singularity

We all know that a line on a log chart depicts steady growth, where price = ab^t, where t is time, and the price increase per unit of time is equal to 100(b-1) percent. 

But what about a parabolic curve on a log chart, such as the one below? (The chart depicts the $TNX/$SILVER ratio, which can be interpreted as the number of ounces of silver you get in return for lending the US Government $1000 for ten years.)

Sunday pre-game, 12/2/2012

This is a huge week for gold and silver (also palladium; has anyone noticed its RSI is at 73?). I expect some dramatic price action. So many long term charts are at critical points.  I'm pretty much in cash except for some GLD puts I bought over the past week. 

Gold has to shit or get off the pot. Starting to look like it's rolling over: