Tag Archives: Comex

Gold And Silver May Be Setting Up For A Big Move

The price of gold soared over $13 Monday as flight-to-safety money flowed into the precious metals sector while the stock market went into a downward spiral. I see Monday’s market action as a preview of what’s in store going forward as price discovery once again engulfs the stock market and causes the most extreme stock bubble in U.S. history to deflate.

Despite the fact that it seems to be taking forever for gold and silver to enter into a prolonged move higher, the chart below should offer encouragement.

Gold, silver and mining stocks are deeply oversold technically. It’s  obvious that the western Central Banks are throwing everything they can at the gold price via the paper derivative gold markets in London and NYC in an attempt to prevent a massive move higher.  The data for gold and silver futures on the Comex show that the banks are working hard to stunt any rally by unloading loads of paper gold on the market.

This effort is rewarding the large physical gold importing countries in the east. India’s net import of gold jumped by 27 per cent to 192.4 tonnes in the first quarter of calendar year 2019 from 151 tonnes in the same period last year. In April India unofficially imported 121 tonnes of gold, up significantly from April 2018. The increase in import activity is attributable to the lower gold price. Note that the official statistics do not include smuggled gold, which is thought to average around 25 tonnes per month. China also has stepped up its gold buying over the last several weeks.

At some point the Fed is going to be forced by the market to cut the Fed Funds rate, as the 1yr Treasury is now yielding less that the Fed Funds target rate. In addition, the yield curve is inverted from 1yr out to 7yrs, with a steep inversion between the 1yr and 3yr Treasurys. It won’t take much flinching from the Fed to ignite a rally in the metals. In addition, the investor sentiment as measured by MarketVane is about as low as I’ve seen it in a long time (34% bullish for both gold and silver).

Despite the 600 pt sell-off in the Dow today, complacency persists, along with an expectation that the Fed will continue to support wanton speculation in the stock market.  But the inverted yield curve, combined with an effective Fed Funds rate that is above the interest rate used to calculate the quantity of free money given by the Fed to the banks on excess reserves, is strong evidence that the Fed is losing its ability to control the financial markets.  At some point the Fed and its western Central Bank collaborators, led by the BIS, will also lose control of the gold price.

Global Synchronized Depression: Buy Gold And Silver Not Copper

It’s not “different this time.” The steep, prolonged yield curve inversion reflects the onset of a deep global economic contraction which is now being confirmed by leading indicators such as semiconductor and auto sales.  At some point the Fed is going to be forced by the market to cut the Fed Funds rate, as the 1yr Treasury is now yielding less than the Fed  Funds target rate. In addition, the yield curve is inverted from 1yr out to 7yrs, with a steep inversion between the 1yr and 3yr Treasurys.  It won’t take much flinching from the Fed to ignite a rally in the metals.  In addition, the investor sentiment as measured by MarketVane is about as low as I’ve seen it in a long time (34% bullish for both gold and silver).

We are headed into a severe global recession with or w/out a trade agreement. To be sure, over the next 10-20 years, it’s likely the price of copper will move higher. But if my view plays out, a severe recession will cause a sharp drop in the demand for copper and other base metals relative to the demand over the last 10-15 years. This in turn will push out the current supply/demand forecasts for copper by several years and drive the price of copper lower.

Trevor Hall and I discuss the global economy, the intense western Central Bank gold price manipulation activity and the factors that will drive the price of real money – gold and silver – higher and commodities like copper lower in our latest Mining Stock Daily podcast – click here or on the graphic below:

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The Historical Stock Bubble And Undervalued Gold And Silver

When the hedge fund algos inevitably turn the other way and unload stocks, a meaningful amount of the capital that leaves the stock market will likely rush into gold and silver.  The record hedge fund net short position on the Comex will add fuel to the move in gold/silver.

James Anderson of Silver Doctors/SD Bullion invited me to discuss the largest stock bubble in U.S. history and why gold is extremely undervalued relative to the U.S. dollar.  (Note:  at the 20:44 mark I reference China’s foreign reserves to be $1.2 trillion. This is the dollar amount of China’s reserves; China’s total foreign reserve is $3 trillion).

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Hedge Funds Record Net Short Paper Gold

The latest commitment of traders report (COT report) showed that the hedge funds on the Comex (the “managed money” account) is now net short 33.9k contract of paper gold.  This is a record net short position in paper gold for the managed money account on the Comex.  The previous all-time high was 27.2k contracts at the end of December 2015.

This explains a lot to me about the character of the price decline in gold since early April. Just like in the stock market, the large macro “quant” funds use computer algorithms to momentum trade Comex futures. It’s this factor that caused the price of gold to drop quickly once it went below its 50 dma on April 12th. The shift to a net short positioned reflects hedge fund computers unloading long positions and piling into the short side.

At some point this dynamic will go the other way and, at the very least, there will be a significant short-covering rally as the hedge fund positioning swings back the other way. This will really get interesting if the hedge fund algo move to cover  shorts on the Comex at the same time the stock market heads south again. This would  stimulate a hedge fund algo party that could finally send gold over $1400.

The Mining Stock Journal focuses on junior exploration mining stock ideas and, on a selective basis, larger-cap producing mining stocks. You can learn more about this newsletter here:  Mining Stock Journal information

Tuesday’s Paper Gold Raid And Fake Journalism

“Central banks stand ready to lease gold in increasing quantities should the price rise.” – Alan Greenspan, July 1998 testimony to Congress

At 8:39 a.m. EST 523,200 ozs of paper gold were unloaded onto the Comex in the space of less one minute:

Anyone who’s traded big positions on a trading desk knows that the best way to unload a position that is larger than the immediate liquidity of the market in which the security trades (yes, Comex contracts are “securities,” not actual physical gold) is to feed it out over time.

In that chart above, why wouldn’t the seller try to sell its position in a way that would enable it to get a price for the entire position that was in the vicinity of the market price at the time the sell-order was executed? After all, the market has clearly rebounded to the price level at the time massive sell-order bombed the trading systems, suggesting that the seller could have achieved much larger sell proceeds with a little bit of patience in its selling

This is all rhetorical, of course, because the all-too familiar “fishing line” 1-minute chart is the blatant footprint of market manipulation. Of course, Kitco’s “reporter” on the scene chose to attribute the sudden price plunge to a market “hamstrung by not much risk aversion in the world marketplace” Kitco.com.

It’s hard to believe an educated person wrote that commentary (“Gold Prices Sink To 4-Month Low On Scant Risk Aversion” by Jim Wycoff). Honestly, that headline makes me chuckle. Well then, Jim, the Dow is now up 153 points as I write this 5 hours later, which by your logic would imply there’s even less risk aversion than the “scant” risk aversion at 8:39 a.m.  How come, Jim,  the price of gold rebounded to the level where it was trading when fear of “scant” risk aversion triggered someone to unload 16 tons of paper gold in less than 60 seconds if indeed fear of scant risk aversion was the catalyst for sell order?

Will Gold Continue Higher Despite Efforts To Keep It Capped?

“At the exact time that the one asset is supposed to defend against reckless Fed monetary policies should be going higher, it’s going the opposite way…and you’re telling me this isnt’ a  manipulated market?”

The current period reminds of 2008.  The price of gold was overtly manipulated lower ahead of the de facto collapse of the financial system. It’s highly probable the Central Banks are once again setting up the markets for another financial collapse, which is why it’s important for them to remove the dead canary from the coal mine before the worker bees see it.

Craig “Turd Ferguson” Hemke invited me to join him in a discussion about the large drop in the price of gold last week and why it points to official intervention in the gold market for the purpose of removing the warning signal a rising gold price transmits about the growing risk of financial and economic collapse.

You can click on the sound bar below or follow this link:  TF Metals Report to listen to our conversation.

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The Paper Raid On The Gold Price

Gold was smacked $22 from top to bottom overnight and this morning.  It was a classic paper derivative raid on the gold price, which was implemented after the large physical gold buyers in the eastern hemisphere had closed shop for the day.  This is what it looks like visually:

As you can see, as each key physical gold trading/delivery market closes, the price of gold is taken lower. The coup de grace occurs when the Comex gold pit opens. The Comex is a pure paper market, as very little physical gold is ever removed from the vaults and the paper derivative open interest far exceeds the amount gold that is reported to be held in the Comex vaults (note: the warehouse reports compiled by the banks that control the Comex are never independently audited).

Today technically is first notice day for April gold contracts despite March 29th as the official designation. Any account with a long position that does not intend to take delivery naturally sells its long position in April contracts. Any account not funded to accommodate a delivery is liquidated by 5 p.m. the day before first notice. This dynamic contributes to the ease with which a paper raid on the gold price can be successfully implemented.

In all probability the price of gold (June gold basis) will likely not stay below $1300 for long. China’s demand has been picking up and India’s importation of gold is running quite heavy for this time of the year. Soon India will be entering a seasonal festival period and gold imports will increase even more. Today’s price hit will likely stimulate more buying from India on Friday.

Gold And Silver Are Feeling Frisky

I sourced the chart below from a blog called The Macro Tourist. I added the title and the two yellow trend lines. The chart shows the daily price of gold since the inception of the bull market in 2000-2001. Last Friday (March 8th) gold popped $12 +/- (depending on the time from which you measure). I mentioned to some colleagues that “gold may be starting something special.”

The price of gold retested the $1300 level last week.  Aggressive futures short-selling on the Comex took the price of gold below $1300 on Thursday last week. The price ambush failed to keep gold below $1300, as strong Indian demand and a growing expectation that the Fed will stop its balance sheet liquidation and eventually re-start QE.

A lot of current precious metals and mining stock investors were not around for the 2008-2011 bull run and even less were around for the 2001-2006 bull run. The move from January 2016 to July 2016 was a head-fake that was part of the long period of  consolidation shown in the chart above. Many of you have not experienced how much money can be made investing in junior mining stocks when a real bull move takes place.

The chart above shows how cheap gold is vs. the SPX. Similarly, the mining stocks in relation to the priceof gold are almost as cheap as they were in 2001 and the end of 2015. In 2016 the GDXJ ran 300% from January to July. But in 2008, the HUI ran from 150 to 300 in 60 days and then from 300 to well over 600 over the next 2 1/2 year. Many juniors increased in value 10-20x. The move from 2001-2006 provided the same type of excitement.

I believe the long period of consolidation in the precious metals sector is finally ending. While there’s always the possibility that it could drag on longer, the risk/reward for investing in the juniors right now is as highly skewed toward “reward,” as it was in 2001 and 2008. The market will not go straight up and there will be some gut-wrenching, manipulated sell-offs. But I believe patience will be rewarded. This means not going “all-in” all at once but wading in slowly over time.

Gold Is Historically Cheap To The Stock Market

“The monetary authorities running the paper-money schemes of the present are anxious to forestall significant rises in the paper price of gold, because such rises would diminish confidence in the lasting value of the paper money in use today.”Hugo Salinas Price

The price of gold was victimized by yet another raid on the Comex paper gold market on Friday. The pattern has been repetitive over the last 15-20 years:  hedge funds push the price of gold higher accumulating a massive net long position in gold futures while the Comex bullion banks feed their appetite, building up a mirror-image large net short position.

A raid is implemented typically on a Friday after the rest of the world has shut down for the weekend, the Comex banks begin bombing the Comex with paper, which in turn sets-off hedge fund stop-losses set while the market is moving higher. This triggers a “flush” of hedge fund long positions which the banks use to cover short positions, booking huge profits.

As evidence, the preliminary Comex open interest report based on Friday’s activity shows the gold contract o/i dropped 14,316 contracts. For the week, gold contract o/i is down over 26,000 contracts representing 2.9 million ozs of paper gold. This is 8x the amount of “registered” – available for delivery – gold in the Comex gold warehouse.  I call this “a Comex open interest liquidation raid” by the bullion banks.  When the CFTC finally releases a COT report to reflect Comex trading activity for this past week, it will likely show a large drop in the net short position of the banks and a concomitant large drop in the hedge fund net long position.

Trump was out flogging the Fed on Friday for holding the dollar up with interest rates – interest rates that the Emperor of DC has declared “too high.” This likely signals a political campaign to drive the dollar lower, which will be bullish for gold.

Trevor Hall and I discuss on our Mining Stock Daily podcast why we believe the current sell-off in the price of gold will lead to higher prices. I also present a couple junior mining stocks I believe will be acquired in the escalating wave of gold mining company M&A transactions (click on the image or HERE to listen to the podcast):

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You can learn more about the highly undervalued junior mining stocks mentioned in the podcast plus many more in the Mining Stock Journal:  Mining Stock Journal information

What’s In Store For The Precious Metals Sector in 2019?

The Newmont/Goldcorp merger is the second mega-deal in the industry after Barrick acquired RandGold in September. Without question, the two deals reflect the growing need for large gold and silver mining companies to replace reserves, which are being depleted at these two companies more quickly than they are being replenished. The deal will give Newmont access to Goldcorp’s portfolio of developing and exploration projects acquired by Goldcorp over the last several years.

While this deal and the Barrick/Randgold deal will help cover-up the managerial, operational and financial warts on Barrick and Newmont, it will also likely stimulate an increase in M&A activity in the industry. I believe that the other largest gold mining companies – Kinross, Yamana, AngloGold Ashanti, Gold Fields, Eldorado, and Agnico-Eagle – will look closely at each other and at mid-cap gold producers to see if they can create “synergistic” merger deals

The same “impulse” holds true for silver companies, the largest of which are diversifying into gold or acquiring competitors (Pan American acquires Tahoe Resources and SRM Mining buys 9.9% of Silvercrest Metals, which will likely block First Majestic from going after Silvercrest, and Americas Silver buys Pershing Gold). Similarly, we could see mid-cap producers merging with each other or acquiring the junior producers.

Phil Kennedy – Kennedy Financial – invited me along with Craig Hempke – TF Metals Report – to discuss the implications of the two gold mega-deals, our outlook for the precious metals sector and a some other timely topics affecting the financial markets:

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In my latest issue of the Mining Stock Journal, I provided a list of gold and silver stocks that I believe could become acquisition targets this year, as well as an in-depth update on one of my top gold exploration stock ideas. You can learn more about this newsletter here: Mining Stock Journal