Bear Down

falling-bearI’ve often stated that, since it took nine months for gold to fall from $1800 to $1180 and silver to fall from $36 to $18, the process of finding and confirming The Bottom will also likely take nine months. Nine months from late June of 2013 takes us all the way to late March of 2014.
For now, continue to remain patient. Diligent (as we must closely watch the June lows), yet patient. I still firmly believe that the Cartel Bank-induced, contrived and counter-intuitive selling scheme has run its course and has reached the point where it is unproductive for the banks to allow paper price to go much lower. February will be a very exciting and consequential month as Comex gold is delivered and the March silver and copper contracts move toward expiration. The economic data, beginning with this Friday’s BLSBS, is going to cause increasing volatility, too, as the realization begins to dawn upon the Status Quotians that QE really is to infinity, not simply this December.
So buckle in, & stay the course. Now is not the time to look away!

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By T. Ferguson, TFMetals Report:

Today, let’s review the longer-term charts to see why so many folks continue to call for lower prices.

Remember as you look at these charts that they are the product of a corrupt system.  The way that the world “prices” gold and silver is obscene. A handful of traders at TBTF banks, led by JPM, move price around in order to activate the buy and sell programs of a slightly larger handful of algo-based, spec money managers and hedge funds. There is next to zero connection to physical reality or supply/demand. Just the whims of some traders, basically all of them speculators, in the traditional sense of the word.

First of all, this is NOT how the futures/commodity markets are supposed to act. At no point does the supply of the underlying commodity (gold) factor into the picture. The producers of the commodity should have some say in the pricing but, instead, they are held hostage by the central banks and their monkey servants. Futures trading on the Comex is now “backed” at a ratio near 100:1 versus readily-deliverable gold. At what point do we fully comprehend the lunacy of this? At 200:1? 500:1? Shouldn’t there be some kind of minimum ratio in order to maintain at least some connection to the underlying physical reality?

Second, and frankly the bigger and more significant concern, is that this “market” has created a disconnect between the paper price and the physical demand. Because of this extreme “discount” and destruction of the traditional demand v price equilibrium, thousands of metric tonnes of U.S., British and German gold have been shipped to places such as Iran, Turkey, India and China. This means that, in it’s lust to maintain the current world power structure, “The West” has undercut it’s position in the next world power structure. It’s all so foolish, short-sighted and greedy and the cause of it is a pricing mechanism that embraces the phony, paper-based Comex.

OK, now that I’ve gotten that off my chest, let’s look at the charts and let’s start with gold. First, here’s a weekly chart that stretches back two years, past the point where QE∞ was announced and the massive, coordinated price smash scheme was initiated. This scheme allowed the Comex Commercials to reduce their NET SHORT position from 270,000 contracts in September of 2012 to just 20,000 contracts by June of 2013. Additionally, JPMorgan used this contrived selling to completely flip a 75,000 contract NET SHORT position to a 75,000 contract NET LONG position over the same time period.

Note that gold has once again reached a rather significant inflection point on the chart. On five, separate occasions over the past sixteen months, gold has reached toward this trendline and each time has failed to break through. Also note, however, that price has seemingly found a solid floor which has held for over seven months. Something has to give. Soon.

Now let’s look at another weekly chart, this time with a 5-year time horizon. Note that I’ve drawn the same primary trendline in red. I’ve also added a basic measure of price momentum called the RSI (Relative Strength Index). You can plainly see that we are approaching a very important crossroads. Either gold breaks through the trendline and The Bottom is confirmed OR $1180 will fail and price will very likely fall toward the next clear line of support near $1050. I’ve added the RSI to this chart because it may very well be the key indicator of what will happen. Note the downward trend of the RSI from the August 2011 price highs. If price can rally AND this weekly RSI moves up and through the 50 level, The Bottom should be readily identifiable to all but the most ardent of bears.

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Moving to silver which is, not surprisingly, in almost the exact same position. First, here’s a weekly chart of silver, also with the same, post-QE∞ time horizon. Note that silver appears to be failing again, right at the trendline.

And when we stretch out to five years and add the RSI, we again get a picture that is similar to gold. Like gold, if silver fails here and breaks down and through the June lows, I’d hold off on buying for a while as the next area of clear support doesn’t appear on the chart until price reached down toward $14.50. Also like gold, silver holding the $18-19 area AND breaking the RSI downtrend line at 50 would be a clear sign of The Bottom.

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Working in gold’s favor is the appearance…again…of very tight global supply. The February Comex delivery period has begun and…just as in August, October and December…GOFO rates have moved negative again.

DATE          1-mo            2-mo           3-mo         6-mo      12-mo

29-Jan-14    0.04833    0.06167    0.06833    0.10833    0.17333
30-Jan-14    0.05000    0.06333    0.07667    0.10333    0.17167
31-Jan-14    0.04000    0.05167    0.06167    0.09333    0.16500
03-Feb-14    0.02800    0.03600    0.04600    0.08600    0.15400
04-Feb-14    -0.00400    0.02600    0.03600    0.08000    0.14600

This clear signal of tight physical bar supply has shown to be an equally-clear indicator of paper price support and, because gold is pressing against such a sharply downward sloping trendline, all it simply needs to do is consolidate sideways for a while in order to break the trend. All of this puts the onus on the bears to re-ignite the downtrend. Can they? Will the NET LONG JPMorgan let them?

And if gold breaks its downtrend and confirms The Bottom, can silver be far behind? Probably not.

I’ve often stated that, since it took nine months for gold to fall from $1800 to $1180 and silver to fall from $36 to $18, the process of finding and confirming The Bottom will also likely take nine months. Nine months from late June of 2013 takes us all the way to late March of 2014.

For now, continue to remain patient. Diligent (as we must closely watch the June lows), yet patient. I still firmly believe that the Cartel Bank-induced, contrived and counter-intuitive selling scheme has run its course and has reached the point where it is unproductive for the banks to allow paper price to go much lower. February will be a very exciting and consequential month as Comex gold is delivered and the March silver and copper contracts move toward expiration. The economic data, beginning with this Friday’s BLSBS, is going to cause increasing volatility, too, as the realization begins to dawn upon the Status Quotians that QE really is to infinity, not simply this December.

So buckle in, stay the course and be sure to remain situationally aware. Now is not the time to look away.

TF

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