The Doc sat down with Turd Ferguson of TFMetalsReport Monday for an exclusive interview regarding gold & silver and the massive exodus of physical metal from the system.
In this explosive interview focusing on the metals, The Doc & TF discussed the massive reduction in the cartel’s net short position in silver, the LIBOR manipulation scandal, the new downturn in the US, the manipulation of ALL markets, and physical supply issues with gold and silver.
Full MUST LISTEN interview and transcript below:
Part 1: The Rest of the Bullion Bank Cartel has Turned on JP Morgan
Part 2: LIBOR is Manipulated, & Silver Isn’t? Are You Kidding Me?
When asked about his current take on gold and silver, TF responded:
There is a lot of despair, and it’s been painful. What did silver peak, 14 months ago? If I had told you during that 1st decline with all of the margin hikes back in May of 2011 that ‘this is nothing man, we’re going to deal with this for the next year!’, a lot of people would have thrown up their hands.
It’s always at the end, when you get that capitulation– we haven’t seen as much a dramatic price capitulation as we have an emotional capitulation of folks, and that’s part of setting the stage.
We have so many people ground out of the silver market, especially the COMEX post MF Global, it seems like there’s nobody left trading. As much as it’s been painful and it seems like it’s continued to go down through May and June, it really hasn’t. We’ve been in a range-bound trade, loosely bounded by $27 and $29 in silver, and about a $100 range in gold from $1530 to $1630.
With the benefit of hindsight we’ll be able to look back and say, look at that big long base from which this move started! It feels like we’re still in this agonizing decline, when in fact we’re in this $2 and $100 range.
There has to be a whole bunch of sell-stops for long held positions in silver below $26, and below $1525 in gold. The way the computers are driven by HFT and by the cartels, it has to be tempting. I mean their mouths have to be watering at the prospect of beginning some cascade event and driving it through there, and letting it generate its own momentum, and then sell back into all of the selling that gets generated as those sell stops get tripped. The challenge will be how do you drive paper price down when physical demand is this strong?
I’ve been discussing that with Andy Maguire for a couple of weeks. He’s of the thought that the physical demand every time price dips, and why the paper price keeps bouncing off these floors is because of this really strong physical demand that appears at those price levels. That physical demand will keep the paper price from falling. I look at it, and Stevie Wonder can see the amount of stops that have to be present below $26, and so we’ll see. Physical demand may keep them from falling any further, or there could be a spike down. They’re both possible, and we have to be mentally prepared for both.
When asked about how the deteriorating US economy heading back into recession will affect the metals TF responded:
The hard part about the unemployment report is that it’s such a joke anyway. Mostly it’s all guesswork on the part of the BLS. Then you throw in the political implications of a rising unemployment rate during an election year. That said, when you look at as lousy the May number was, and you look at the data that has come in over June, and you throw in the uncertainty of the Supreme Court Obamacare issue, at least if anything the CNBC panel will use that as an excuse for a lousy jobs number. Anyways, I’m expecting a pretty lousy number on Friday. So it would not surprise me in the least if we get another pretty strong move in the metals come Friday, and maybe that will be the thing that finally busts us out of these ranges.
When asked on his thoughts regarding the physical gold and silver demand TF stated:
You have to go with your gut and your trusted sources. Andrew Maguire talks about that a lot- the demand he sees that shows up at certain price levels in London. Even above certain price levels- the demand just shows up every single day. The metal is leaving the LBMA vaults and moving East. How can that surprise anybody? If you were the Chinese, or the Russians, or the Japanese- anybody sitting on dollar reserves, why would you not be diversifying? They have been diversifying for years, why would you expect that not to continue, especially with metals prices lower vs. last year!
Dollars are being converted into hard assets, gold and silver being part of that, and that gold and silver is leaving the system! I’m hearing reports of great efforts being made by LBMA banks to NOT deliver outside of the system. ‘You can place an order with us if you just allow us to transfer some paper certificates around or drive a fork lift around from one side of the vault to the other, but if you want a couple million ounces and you want us to ship it somewhere, I’m sorry, you might have to go someplace else.’
They’re trying so hard to keep that metal within the system, because the system is all based on this fractional reserve bullion banking. Every ounce that leaves their vault reduces their ability to leverage 100 to 1! So there’s a great effort to keep metal in the system, but the demand is there, and it’s that demand when people say ‘how will we ever stop the paper manipulators from suppressing price?’ , well it will be that physical demand that will ultimately break their back.
People who think that their isn’t a shortage say, ‘What are you talking about? I can go on APMEX or SD Bullion and get a tube of Maples!’ That’s not what we’re talking about. We’re talking about 2 million ounces in size delivered to a vault in Hong Kong, can do you that for me?
The bullion banks, particularly JP Morgan, know what they’re up against. They knew it 18 months ago, they knew it 14 months ago when we almost had a signal failure on the COMEX in April of last year.
They have engineered the last 14 months as an attempt to extricate themselves from this massive paper short position. They know what they’re up against from a physical standpoint, they can’t not know, and they don’t want to be the ones left holding the bag!
As long as that physical demand continues, and we certainly don’t see it abating, they’re going to move out of this short position. Once that’s changed, once the banks get close to flat or net long, who else is left to sell? It’s that basis that will drive silver higher. The physical demand will cause the banks to eventually give up that game just for their own well-being.
The Doc and TF also discussed the cartel’s new MO of raiding gold and silver on public speeches by Bernanke, and the recent 515 ton paper gold dump immediately prior to the June FOMC statement release. TF had this to say on the topic:
They (the cartel) can look at it and say, ok, we know where we are vs. the moving averages and possible support lines. So if you can come in and dump let’s say 10,000 contracts, that gets the ball rolling. That then trips some sell stops which is further selling. It starts the momentum chasing HFT machines- the algos- they start selling. So there’s this initial wad of say 10,000 contracts, that then generates the momentum for the downside.
Now this drives the price say $20 lower, where now the selling is all organic, it’s the HFT’s, the other specs that are selling. When they are now selling, who’s on the other side? Who’s buying? There has to be a buyer for every seller. The ones who are buying now that we’re $20 lower is the gold cartel member JP Morgan or Deutsche Bank or whomever that set it off in the first place.
In the end of the day, they’ve day traded themselves! They started a naked short and then they covered it down here at this lower price so that they don’t show a massive increase in their own position- but they effectively lowered the price. These days they do the exact same thing on the upside as well. Now that there’s so many specs that are short they can gun them to the upside- it’s just the exact same process in reverse. That’s all part of what you deal with when you trade paper metal.
The Doc also asked TF what impact the LIBOR manipulation scandal will have on the awareness of precious metals manipulation. TF ‘s thoughts on the matter:
In the end I think it further damages the credibility of the banks. The hard part is, it damages their credibility in your eyes, in my eyes, and in the eyes of the small percentage of people who are actually paying attention. In order for it to affect change, how many people have to be paying attention? Does the guy driving down the street listening to the guy on the radio say the stock market was up 180 points- is he paying attention? Is he going ‘those guys manipulated LIBOR!?!’
It speaks to the fact that EVERYTHING IS MANIPULATED, and it’s about perceptions. Whether it’s LIBOR, whether it’s a currency market, FOREX, the Treasury market (which is openly manipulated by the Fed now- that’s what QE is), the equity market, all the way down to gold and silver.
If FOREX is manipulated- and we know that! The Bank of Japan, the Swiss National Bank- all these Central Banks manipulate their currency! So we know FOREX is manipulated, we know the Treasury market is manipulated, we strongly suspect the equity market is manipulated, we now know LIBOR is manipulated, and SILVER ISN’T!?! Or GOLD ISN’T? Are you kidding?
The LIBOR scandal is a much bigger scandal in London than it is over here in the States, but in the end, it’s probably more further damning for the credibility of the bankers than anything else.
TF and The Doc also discussed the escalating European debt crisis with Spanish 10 year yields passing 7% again, Cyprus requesting a bailout, and Merkel appearing to cave on Eurobonds. TF stated he expects the stronger Northern European nations to break off and form their own currency:
Jim Willie has been stating for years that the stronger countries in Europe with less debt and stronger economies are going to branch off on their own. I think the term he’s used is a Northern Euro. It’s looking more and more realistic as time goes by. The Greeks would go back to the Drachma, the Italians will start issuing Lira again- that’s how it’s probably going to play out.
European banks are different than US banks who hold their own collateral. In Europe the banks are all collateralized amongst themselves. Bank A’s collateral is with Bank B. Bank B has taken that and put it with C. They’re all linked together, so that’s why they can’t allow really even any bank to fail.
Eventually, how much money can you pump at the problem before it all falls apart? It seems like just a waiting game.
As it relates to gold and silver, silver in particular, is if the paper market is going to continue to set price (which hopefully it won’t for a whole lot longer) and if no one in the paper markets are actively taking the long side in paper, it’s going to be pretty hard for paper metals to go up, regardless of how bad the headlines are!
So silver may continue to drift sideways, and gold may as well, but again, let’s wait for the physical market to finally start really impacting the paper market and I think we’ll both be astonished at how quickly they go up.
Regarding the latest COT reports in gold and silver which are the most bullish in recent memory TF stated:
On the COT report from Feb 28th, the bank or cartel sector in silver was long 34,000 contracts, and they were short 78,000 contracts. So the net difference is about 44,500 contracts. At that point in time, silver was trading above $37, and on the 28th it was breaking out and we were all excited.
They’ve smashed silver since. As price has gone from $37 to $26, the amount of contracts that they’re short has fallen from 78,000 down to 61,000. The amount that they’re long has gone from 34,000 up to 48,500 contracts! It’s a TREMENDOUS NET change!
We are at a point now where the total net short position is only 12,000 contracts. If you go back to last April when things were starting to get away from the cartel, the total net short position was 5 times that! It was 66-67,000 contracts! Now it’s down to only 12,000, we’re down about as far as we’re going to go.