Bill Murphy writes...............February 21 - Gold $679.50 up $22 - Silver $14.26 up 45 cents
EXTRAORDINARY! … HOLY MOLY! Gold Cartel Raid Fails! Gold Cartel In Full Panic!
Been at this for nearly a decade now and have not seen a day like this in all that time. What occurred today is unprecedented in my book … and puts the GATA analysis of the gold market front and center, on the front burner.
As discussed, The Gold Cartel pulled out all the stops yesterday, a full court press, in an effort to turn the funds into sellers. They only met modest success yesterday as the gold open interest fell 3476 contracts to 396,115, still leaving the OI at an extremely high, right off the all-time high level.
In doing so, the cabal forces thwarted a technical breakout above $670 on Monday and prevented a Commercial Signal Failure from coming into play. Normally, like 99% of the time, gold would have been under further pressure today, perhaps after a dead cat bounce of some sort … especially with oil down this morning and the dollar higher.
Not so. Gold firmed in the Access Market yesterday afternoon, then was hit by the bums at 3 AM this morning, as usual. But a Funny Thing Happened On The Way To The Forum. Ferocious buying showed up, from some very strong hands (perhaps Chinese), or panicked, suddenly weak ones. Before The Gold Cartel could work the funds into being sellers, gold began to take off … up $4, then $7, then $10, then $13, then $16, then $20, then $23.
As Dave in Denver put it:
I think today vindicates my counterpoint argument to Butler's COT analysis. Today was pure paper suppression early and the market popped during the London p.m. fix, indicating voracious physical demand from people who could give a crud about the Comex COT structure...
***
Or, as Greg G puts it:
Bill,
"Cabal, we'll see your $11 and raise you $11." We’re willing to show our hand at any time. Can the Cabal say the same?
I think this is my most enjoyable day say in six years.
Yo Gata!
Quite frankly, as you all know, this is what I was looking for yesterday. Clearly what we have witnessed is a desperate Gold Cartel raid which failed miserably. Today had nothing to do with oil, the dollar, etc. Yes, there could be something huge working in the background, to which we are not privy. Time will tell on that score. All that matters though is The Gold Cartel just got their butt handed to them and we are getting our expected Commercial Signal Failure.
My take on this is very simple; what has been brought your way for so long. This is all about the physical gold market burying the corrupt and crooked Gold Cartel. They DON’T HAVE THE GOLD to meet the surging demand. The IMF gold sales talk, the raid yesterday, etc., have been bluffs to get the market down, so they could cover shorts before the price exploded. We have been talking about a day like this one for years, but for the most part, it never came, and NEVER after a beating like we took yesterday. Well, here we are … finally.
OBVIOUSLY, the importance of holding gold below $670, and silver below $14, was not overstated, which was the reason for the bum’s raid and The Gold Cartel trying to hold the line. What is essential to repeat is that this is exactly what ought to happen, and has to happen for gold to take off for the moon … exploding out of nowhere, with the commercials massively short.
Gold and silver should go into an acceleration phase in the weeks to come:
April gold
https://futures.tradingcharts.com/chart/GD/47
March silver
https://futures.tradingcharts.com/chart/SV/37
The Fixes this morning of $658.60 and 661.25 revealed physical market strength, but revealed little as to what was to come. What was important is that the PM Fix was able to clear the critical $660 per ounce level.
Technical plus: neither gold or silver have gaps to fill. Our breakaway gaps to the upside are still to come. Both gold and silver were lower during the Comex trading session during the early going.
In retrospect, silver’s failure to come close to the gold plunge yesterday was very telling. The silver bears are sucking wind tonight.
The silver open interest went UP 547 contracts to 127,032.
Talk about lousy timing, a sure sign of a bottom in commodities:
https://www.ft.com/cms/s/4fbd5ace-bc53-11db-9cbc-0000779e2340.html
***
The euro fell .11 to 131.36.
Interesting enough, crude oil cleared its resistance at $60 per oil, just as gold and silver clear theirs.
Yesterday, oil was hit badly when it should have held its own, or gone up due to a major refinery fire and more trouble in Nigeria. Today's comeback with gold and silver LEADING the way, suggests that the assault on crude yesterday was an aspect of the raid on gold and silver.
More gold goodies:
I am sick - Gold derivative book proprietors sicker
Indian ex-duty premiums: AM 53c, PM $2.81, with world gold at $660.40 and $657.70. Too narrow, and adequate, for legal buying. The rupee closed unchanged on rumors of Central Bank activity, and the stock market lost 0.46%.
Once again, a buyer showed up on TOCOM. On volume equivalent to 42,921 NY lots (+135%) open interest leapt 15.1 tonnes (4,867 Comex lots): Mitsubishi’s data implies the public added 15.8 tonnes to their long. The active contract closed down 31 yen, but world gold went out $1.60 above the NY close.
The possibility exists that TOCOM is being used by a non-Japanese trader to adjust positions. Two days of big open interest growth is uncommon. There is a history of this in the PGM contracts, but it is rare in gold.
Yesterday’s $11.60 decline was widely attributed to long liquidation. Not a great deal of this was visible from the statistics. Combined CBOT volume was equivalent to 54,261 NY lots, and open interest rose 486 NY lots. Comex traded 80,234 lots with open interest falling 3476 contracts. US futures thus lost 2,946 (9.2 tonnes). Last week, as noted yesterday, Comex alone added 59.7 tonnes, on a static gold price. This is all now deeply under water, and to the degree it did not reflect actual sales of physical constitutes a serious problem for those involved.
In a pattern not seen for many years, COMEX gold rose almost without interruption and went out up $23.50. Volume in NY was abut 85,000 lots and combined CBOT volume was equivalent to about 67,000. Liquidity seems to have evaporated.
I am sick today, but not as sick as the proprietors of derivative books. They need help from City Hall.
***
CARTEL CAPITULATION WATCH
The DOW fell 48 to 12,738 and the DOG gained 5 to 2518.
Economic news:
A surprise to start off with…
0:22 Bank of Japan raises benchmark rate to 0.50% from 0.25%
The BOJ was expected to leave rates unchanged.
* * * * *
07:01 MBA mortgage purchase applications index (4.8%) in 16-Feb week
Compares to (1%) in prior week. The refi index (5.4%) following +4.5% in prior week. Average 30-year rate (5bp) to 6.19%.
* * * * *
From The King Report:
Last night the BoJ, after an 8 to 1 vote, hiked its key overnight interest rate 25pbs to 0.50%. The markets, except the yen, yawned at the hike. The reason for the market apathy to the rate hike might be the BoJ qualifying statement, probably for political reasons, that interest rates would probably remain very low and any rate hikes would be gradual.
The BoJ rate hike to 50bps is the highest level for its key overnight rate since 1998!!! This depth and duration of BoJ promiscuity is astonishing but is lost on most people.
NYSE margin debt soared to a record $185.61B in January. The previous peak was $278.5B in March 2000. Even if history only rhymes, this suggests that something unpleasant this way comes.
The NY Time’s Floyd Norris in a blog titled Housing and Recessions:
"Here’s another way to look at the housing start numbers: Take a three-month moving average of single family starts, at a seasonally adjusted rate. That smoothes out some of the weather-induced volatility. By that measure, starts have now fallen for 11 consecutive months, and are off more than 30 percent over that period. Here’s a list of the only four other times (going back to 1959) that the figure fell for 11 consecutive months.
1. November 1973 was the 11th month. A recession began that very month.
2. April 1980 was the 11th month. A recession began in January of that year.
3. November 1981 was the 11th month. A recession began in July of that year.
4. February 1991 was the 11th month. A recession began the previous July.
These days, almost no one thinks a recession is looming."
-END-
Not good:
US home loan demand drops to lowest this year
NEW YORK, Feb 21 (Reuters) - U.S. mortgage applications dropped more than 5 percent last week, hitting their lowest level this year, even as interest rates fell, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended Feb. 16 fell 5.2 percent to 606.6.…
-END-
Getting worse:
NovaStar Sheds One-Third of Market Value After Loss
Feb. 21 (Bloomberg) -- NovaStar Financial Inc. lost more than a third of its stock market value after posting a surprise fourth-quarter loss, the latest casualty from a rise in delinquencies in the so-called subprime mortgage market.
Shares of the Kansas City, Missouri-based real estate investment trust tumbled $6.14, or 35 percent, to $11.42 at 9:46 a.m. in trading on the New York Stock Exchange, wiping out more than $235 million of market value. The shares have fallen from a 52-week high of $38.49 in May. Rival New Century Financial Corp. fell $1.14, or 6.1 percent, to $17.63.
NovaStar reported a fourth-quarter loss of $14.4 million yesterday after the close of regular trading, and said it won't make much money on its mortgage investments for the next five years. Less than two weeks ago HSBC Holdings Plc, the world's third-largest bank, said it would set aside $1.8 billion more than it expected to cover loan losses and New Century said it may have a loss for the three months ended Dec. 31…
-END-
08:30 Jan CPI reported 0.2% vs consensus 0.1%; ex-Food & Energy 0.3% vs. consensus 0.2%
Prior CPI revised to 0.4% from 0.5%; ex-Food & Energy revised to 0.1% from 0.2%.
* * * * *
10:00 Jan LEI reported 0.1% vs. consensus 0.2%
Prior revised to 0.6% from 0.3%.
* * * * *
Troubles for the dollar:
IRAN TO CUT DOLLARS IN RESERVES TO 'MINIMUM LEVEL' NEEDED FOR PAYMENT COMMITMENTS - C.BANK
***
An oil pro on oil:
Bill,
I would like to comment on the contribution to the Midas about predicting oil will return to $35/bbl. This is the relevant quote
QUOTE
My cousin who has for the last 15+ years bought and sold oil in mass quantities, we are talking oil tankers, yes that is right tankers full of oil stopped by. I haven’t seen him in 5 years. However, over lunch I mentioned to him that I have been following gold and silver for the last couple years and since gold has been closely tied to the price of oil I asked him what his thoughts were on oil. He with a straight face said oil was headed back to $35 dollars a barrel over the next 3 years.
END
Having worked in a large oilfield company for 20 years and now running my own consultancy I spend a lot of time studying the oil market.
This is a discussion that can take a long time but I will try to put it in a nut-shell. First of all lets look at the worldwide demand and oil discoveries.
You can see that for over a century oil demand has risen almost unabated. It plateau-ed for a while in the 1980’s as conservation efforts slowed the demand growth due to the high price (of $40/bbl) reached as a result of the Iranian revolution and the Iran-Iraq War. The amount of oil we have discovered reached a peak in the 1960’s. So despite growing consumption we are finding less and less oil.
The price trend over the last 100 years is fairly well established. There has been a lot of volatility over the last 25 years but the long term nominal price trend reflects the worsening supply/demand dynamics.
Where many people get confused on the debate of where oil prices are going is that they dispel any possibility of higher prices persisting by pointing out that we are not running out of oil. This is absolutely true. We are not in imminent danger of running out of oil as we have only produced about 50% of all discovered all reserves. The problem is in how fast we can produce it. King Hubbert was a geophysicist working for Shell in the 1950’s who postulated that when 50% of the reserves in a province have been produced the production rate will have necessarily peaked and will be in decline and can not be increased above the previous production rate no matter how many wells are drilled. This has proven to be true in many provinces. King predicted US production would peak in 1971 and it did peak in 1971 and even with prolific drilling and the latest technology production rates have not been maintained let alone been raised above the peak rate. If you have had a keg of beer at a party (without a carbon dioxide gas cylinder) you may have observed that when the keg is full the beer flows out very fast. When it gets to about half full the beer comes out slower and slower until it is finally empty. This is the same with pressurized petroleum reservoirs. We have reached the half way point in the produced reserves such that what ever we do we can not produce much above 85-90 million barrels/day. Demand projections require this to increase to 120 million/day by 2030. That is just impossible.
This is what will drive the oil price higher. Demand for energy continues to grow (and has been for over 100 years) but our fossil fuels are constrained at somewhere close to current levels.
If anyone is prepared to offer me $35 oil in the next 5 years I will gladly take it! In my opinion $35 oil will be a thing to tell the grand kids about!
Cheers
Adrian
TOCOM:
Ladies and Gentlemen:
During the February 20th TOCOM sessions the seven large gold shorts increased their net short position by 1,143 contracts to 125,128 contracts.
https://www.tocom.or.jp/souba/gold/torikumi.html
In silver the same dealers increased their net short position by 95 contracts to 4,874 contracts.
https://www.tocom.or.jp/souba/silver/torikumi.html
Have a good night,
Scott
Bill,
It seems that Goldman Sachs is taking its strategy from the White House in that they seem to be employing "surge" tactics to try to quell the insurgency in the gold market! In contrast to increasing their short position by 2,821 contracts on Feb 19, in the Feb 20 session on the TOCOM they duly reduced by 416 contracts to bring their net short to 33,927 contracts. It could well be that the similarity may not end there; it is highly possible that the Cartel Gold War strategies may be about as successful as those being employed in the Iraq War.
Cheers
Adrian
This one is one of the most pathetic commentaries I have come across since opening the Café … because it is from someone who should know better:
Mark Hulbert blames bugs, not central banks, for gold's struggle
Submitted by cpowell on 04:58PM ET Tuesday, February 20, 2007. Section: Daily Dispatches
7:58p ET Tuesday, February 20, 2007
Dear Friend of GATA and Gold:
Today's commentary about gold by Mark Hulbert, editor of the Hulbert Financial Digest, blaming gold's inability to crack $670 on the over-exuberance of its advocates, could be so smug only because its author has never bothered to examine a few crucial things -- like the speech given in June 2005 by William R. White, head of the monetary and economic department of the Bank for International Settlements.
White declared that a primary purpose of international central bank cooperation is to suppress the price of gold:
https://www.gata.org/node/4279
In his commentary today Hulbert acknowledged hearing of complaints that the gold market is tampered with but he blithely dismissed them as mere conspiracy theory.
By the way, Mark Gilbert, the Bloomberg News Service columnist who a week ago sneered at suggestions that the gold market is manipulated (https://www.gata.org/node/4811),, did not acknowledge the cordial letter sent to him by GATA immediately afterward, in which several of the official admissions of the gold price suppression scheme were specified for him, complete with source citations.
People are being served terribly by what calls itself journalism. When they get hurt because of this, let it be noted again that Hulburt and Gilbert were among those who refused the chance to protect their readers.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
What's Holding Gold Back?
By Mark Hulbert
via Dow Jones News Service
Tuesday, February 20, 2007
ANNANDALE, Va. -- The gold bugs have been frustrated now for the better part of a year. Despite mounting evidence that inflation is only going to get worse, gold is lower today than where it stood in May, nine months ago.
What's going on?
Perhaps not surprisingly, the frustration has provided fertile ground for any of a number of conspiracy theories, as Richard Russell, editor of Dow Theory Letters, explained over the weekend: "Someone or somebody is selling gold at the 670 level, and that someone or somebody doesn't want gold higher than 670. I don't know whether the seller is a government, a hedge fund, or it may simply be speculators who are short -- I don't know. But to me it's obvious that there's a campaign going on with the object of halting gold at 670."
Of course, just as paranoids sometimes have enemies, conspiracies sometimes do exist. But, in this case at least, there is a simpler explanation for what has been holding gold bullion back in recent weeks: The gold bugs became too excited too quickly, which is bearish from the point of view of contrarian analysis.
At first blush, contrarian analysis can also look like a conspiracy theory. Why should the markets be so ornery as to regularly do the opposite of what the majority is expecting?
But, upon further reflection, there is nothing mysterious about why contrarian analysis works: When bullishness is at or near extremes, little cash remains on the sidelines that could be invested in the future and propel the market even further. And when bearishness is widespread, those investors who are going to be persuaded away from holding for the long term probably have already sold -- thus removing any additional selling pressure.
To see why contrarian analysis helps us understand what's going on currently in the gold market, consider the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average gold market exposure among a subset of gold timing newsletters tracked by the Hulbert Financial Digest. As of Friday night, the HGNSI stood at 75 percent, near the high end of its historical range that extends from minus 31.3 percent on the low end and 89.6 percent on the high end. (Negative HGNSI levels means that the average gold timing newsletter is recommending that its subscribers be short the gold market.)
The current reading means that almost all of the gold timing newsletters that are not bearish stopped clocks have already turned bullish.
That's another way of saying that the gold market already discounts a heck of a lot of bullish news. In order for gold to continue going up, the news needs not only to be good, but to be even better than expected. That's why gold can be a net loser even while news on the inflation front is showing inflation to be heating up.
Insofar as this contrarian analysis is on target, it means that the most bullish thing for the gold market right now would be for a significant proportion of the gold timers to conclude that the bull market, if not over, has entered in an extended hibernation. This turn away from bullishness could happen in any of a number of ways: It could come in the wake of a serious correction in the gold market, for example; alternately, it could be caused by frustration that gradually mounts as gold is unable to convincingly break above its recent trading range.
But regardless of how exuberance wanes among the gold timers, contrarians believe that it must happen before a sustained up-move in the gold market becomes an intelligent bet.
* * *
Hulbert:
You have a lot of nerve if you consider yourself a serious journalist. The existence and efforts of a Gold Cartel orchestrating the suppression the price of gold is not even debatable anymore. Obviously, you have done little to no homework on this issue. Would you care to debate this subject publicly since you have put your foot in your mouth? Then again, why bother. If today's action in gold hasn't put you in your place, nothing else will.
Bill Murphy
My thinking too … Adrian last night before gold went up:
Bill,
Yesterday Japan increased interest rates from 0.25% to 0.5%. This undoubtedly is the beginning of the end of low to zero interest rates in Japan, which in turn is the death knell for the Yen carry trade. The Yen carry trade has long been cited for being a step in the chain of gold price suppression.
Today is the deadline for Iran to comply with UN mandates to stop Uranium enrichment (which Iran has refused to do) and sanctions will go into effect as punishment for not doing so. This obviously is very provocative and may very likely spur Iran into retaliating with an oil embargo of its own. At the weekend Nigerian rebels captured three oil workers, and another refinery caught fire in Texas. One has to wonder in light of bullish developments in gold and bullish developments in oil how oil could have sold off on Feb 19 and how gold could have been taken to the wood-shed!
I don’t buy the contrarian analysis view point touted by Mark Hulbert that gold-bugs were getting too bullish on gold! The share action has been lousy, the volumes in the shares have been miserable, the interest in new café membership has been abysmal. How can gold-bugs be described as excessively bullish? Good grief, gold only just barely broke out of its consolidation triangle and it was already over-bought!? $670 was clearly an Achilles Heel for the cartel. What a coincidence that as soon as gold crossed that line it was smashed down $11 despite some really positive news events. The problem for the cartel is that they are fighting the gold price when it hasn’t been over-bought and the shares have not been part of a feeding frenzy. This puts in question the cartel’s ability to pull this one off. They will not give up easily but I don’t think this battle for $670 is over yet.
Cheers
Adrian
Later:
Update Feb 21
I wrote the above piece on the evening of Feb 20. Gold just closed today up $22! I have been indicating from my market force analysis that the gold market was behaving differently, that it was looking to blast off. I indicated that accumulation was occurring by some big investors who were taking on the Cartel and not pushing the market. I speculated that we were close to a commercial signal failure. In fact yesterday in my TOCOM update I said
QUOTE "As I have said before this is Battle Royale for gold $670. The Cartel forces are throwing everything that they have (or don’t have!) at this resistance. I have a sneaky suspicion that it won’t be enough. This is looking like Commercial Signal failure. The Bears are staring their Waterloo straight in the eyes" END
It certainly looks like the Cartel did not have enough to defend $670. Some very savvy entities have called their bluff and have pulled off a stunning victory for the bulls.
In hind sight what probably telegraphed to the smart money that the cartel was in trouble was the fact that a group of the top names in Central Banking was assembled to look at how the IMF could fix its budget shortfall. Their conclusion was that the IMF should sell 400 tons of gold! Why would a team of Central Bankers be required to analyze the books of the IMF? It would seem to me that the IMF must be stuffed full of able bodied accountants. If they really needed outside help why not recruit PriceWaterhouse or auditors who know what a balance sheet looks like? The Cartel in their desperation made a slip. The idiotic conclusion of the Eminent Panel of Gold Cartel Honchos revealed to those who were paying attention the secret Da Vinci Code of the Inner Temple of the Cartel. THEY DON"T HAVE ANY GOLD LEFT!
Cheers
Adrian
There was a substantial response to Toby Hansen’s piece on lead and zinc. Another company which might be worth a look in that area:
Herald Resources Ltd is a long established and well-regarded mining company, having been listed in the ASX for 57 years. Initially mining and processing industrial clays, under the present management the Company diversified in the mid-80’s into gold exploration. With its first mine in production in 1986, Herald has an enviable record of developing a new mine every 4 years on average since that time.
https://www.herald.net.au/
-END-
Bill,
Please inqure whether any of your readers who are shareholders of ECU Silver, maintain their brokerage accounts at ETRADE. Please have them email me at wistarholt@charter.net.
Thanks,
Wistar Holt
Great news from my second largest share holding, Samex, (please see Adrian’s commentary at The Dos Passos Table):
https://biz.yahoo.com/ccn/070220/200702200373841001.html?.v=1
***
The senior gold and silver shares roared. The XAU lifted 5.18 to 144.91 and the HUI rocketed up 15.47 to 354.57, a new high close for the move. The HUI has broken out to the upside out of a MASSIVE, bullish pennant formation:
HUI
https://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hui&sid=0&o_symb=hui&freq=1&time=8
This is beyond ridiculous. My share positions cost my net worth today. It is the goofiest market development I have ever seen. The smaller gold/silver companies are comatose, STILL, re the action of their share prices. Time and time again MIDAS has remarked how bullish this setup is, as the sentiment among the investing public has been abysmal so long. There is almost NO understanding of what this gold market is really about and what is to come. You can thank the mainstream gold world for that, and the world financial market press, which continues to ignore GATA or even admit that we exist.
The bottom line, especially now:
Gold, silver and the smaller gold/silver company remain THE historic investment opportunity of a lifetime!
Be there and stay there, when so many are so clueless.
GATA BE IN IT TO WIN IT!
MIDAS