Your days of acquisition at this dollar-conversion price level are numbered.
You should be using this time ensure that you have enough “insurance” against the coming fiat disaster and TEOTGKE.
By Turd Ferguson, TFMetals Report:
The price of gold has rallied to begin the year. With today’s move UP through the 100-day moving average, price is now nearly $100 off of the lows of 12/31/13. Through January, you had to wonder which firms were buying and which were selling. With the release of the latest Bank Participation Report, we now have some idea.
First, some background. Recall that this monthly report aggregates the positions of the four largest U.S. banks and the twenty largest non-U.S. banks. In the “U.S.” category, this report always includes JPMorgan. The other three firms vary but often include the likes of Citi and MorganStanley. Firms included in the “non-U.S.” category are HSBC, The Scoshe, DoucheBank, UnlimitedBS, Barclays and others.
The critical change to this report came last June. Up until then, both sides of the report were NET SHORT since time immemorial. Led by JPM on the U.S. side and HSBC on the non-U.S., the 24 bank total NET SHORT position reached 185,000 contracts on the report dated 10/2/12. (It’s important to note that this was the beginning of the entire, post-QE∞ and counter-intuitive selloff that began at $1800 and concluded nine months later at $1180.) The report specifically looked like this:
DATE GROSS LONG GROSS SHORT NET
10/2/12 US Banks 40,625 146,809 -106,184
Non-U.S. 34,881 113,445 -78,564
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-184,748
By the time price had bottomed, the report looked like this:
DATE GROSS LONG GROSS SHORT NET
7/2/13 US Banks 69,656 24,939 +44,717
Non-U.S. 34,904 58,656 -23,752
---------------------------------------------------------------------------------------------------------------------------
+20,965
Taken as a whole, that’s a 205,713 contract FLIP. By ounces, that’s 20,571,300. By metric ton, that’s about 640!! Stated another way…At the onset of QE∞, the 24 largest banks were caught massively NET SHORT paper metal. Their only option was to smash price, creating speculative selling/shorting into which the banks could buy/cover. As you can see, this plan was remarkably effective.
In the seven months since, these summary positions have remained mostly unchanged. The total NET position dropped as low as 8,000 contracts on 9/3/13 and reached a peak of 43,000 on 12/3/13. As of last month, it looked like this:
DATE GROSS LONG GROSS SHORT NET
1/7/14 US Banks 59,291 20,032 +39,259
Non-U.S. 26,128 32,492 -6,364
--------------------------------------------------------------------------------------------------------------------------
+32,895
And, of of last Tuesday, it looks like this:
DATE GROSS LONG GROSS SHORT NET
2/4/14 US Banks 68,658 24,937 +43,721
Non-U.S. 18,752 48,860 -30,108
---------------------------------------------------------------------------------------------------------------------------
+13,613
There are certainly quite a few things that should jump out at you:
- First of all, JPM. They are The Big Tuna here. Of the U.S. Bank gross long position, I ascribe 90% to them. This gives them a current NET LONG position that once again exceeds 60,000 contracts. This is far and away the most significant factor that will effect price in the weeks ahead. As has been well-documented, JPM stopped over 6,000 contracts in December and that, along with their December rollovers, reduced the US Bank gross long position from 71,897 on 12/3/13 to 59,291 on 1/7/14. Note that JPM used the month of January to rebuild their position and the US Bank gross position is back to 68,658. Yes, I know that JPM does not appear to be stopping contracts in February. That’s fine. Let’s wait to see what they do in April and June.
- To answer the question posed in the opening paragraph, the firms that were selling and attempting to cap the January rally were basically “everybody but JPM”. The other three U.S. banks added some shorts but look at the massive change in the non-US position. They increased their NET SHORT position by over 400% or some 24,000 contracts. If you’re wondering who was pounding price back from $1260 and attempting to keep it in check, now you have your answer.
- And the similarities to the report of 9/3/13 must be noted. Back then, price had rallied well off the June lows and was UP over $200 at $1413. We all know what happened next. Price stalled and was beaten back through the fall of 2013 to the eventual Double Bottom. What did the BPR of 9/3/13 look like? Does it look familiar?
9/3/13 69,510 24,604 +44,906
23,626 60,350 -36,724
-------------------------------------------------------------------------------------------------------------------------
+8,182
So the question becomes…Will price continue to rally OR will price now falter, just as it did last September?
As much as you may not like it, the key will be the technicals such as horizontal resistance and the moving averages. Why? Because breaking these levels will spur the tech-based funds and WOPRs to cover shorts. Further rallies will create a double-buy by encouraging these specs to flip long, too.
Late last summer, as price rallied, it briefly exceeded the 50-day and the 100-day moving averages. This generated a virtuous cycle of buying and drove price all the way to $1434. However, back then the critical 200-day moving average was still all the way up near $1500 and price was never able to exceed it. Momentum faded. The non-US banks won and price receded.
What’s different this time?
- Upside momentum appears to be growing as more and more market participants become aware of The Double Bottom.
- Price has exceeded the 50-day MA and, just today, has exceeded the 100-day MA. too.
- The miners, as reflected by the HUI, are rallying with many maintaining above their own 200-day MAs.
- And, most importantly, the all-important 200-day MA has continued to decline and now resides near $1315. That’s just $40 away.
Now remember…I was just about the only guy in the entire blogosphere who told you in early December that the June lows would hold and that a Double Bottom would form before a rally in January.
http://www.tfmetalsreport.com/blog/5295/courage-and-conviction Suddenly, there are quite a few rear-window “analysts” in the bullish camp and that’s fine. Just remember, though, that I continue to urge patience. Crawling out of this Cartel Bank-induced hole has not and will not be easy. It will take time. As I’ve often stated, it took nine months to complete the Cartel book-flipping smash from $1800 to $1180. It will likely take another nine months before it is clear to everyone that price has turned and the bull market in paper gold has resumed. This means we could easily have another two months of slow, churning grind higher. Therefore, again, stay patient. If http://sdbullion.com/ is actually willing to sell you an ounce of gold for $1300, freaking take them up on it!
Your days of acquisition at this dollar-conversion price level are numbered. You should be using this time ensure that you have enough “insurance” against the coming fiat disaster and TEOTGKE.
TF
http://www.silverdoctors.com/t-ferguson-gold-crawling-out-of-cartel-induced-hell-hole/
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