Bill Murphy writes ...................January 13 – Gold $556.50 up $8.60 - Silver $9.09 up 12 cents
Gold Derivatives Neutron Bomb Going Off!
"Never believe anything is actually true until it has been officially denied at least three times."
- Otto Von Bismarck: Reich Chancellor
This is one of the craziest things I have ever seen.
First, I put up one of the most important MIDAS commentaries ever yesterday and it produced a big yawn. The Café Sentiment Indicator went down to a 4. Can it get weirder? The more bullish gold gets and the more the price goes up, the more ennui is produced. Either that or the public stares at gold, like a deer into oncoming headlights, and does nothing.
Second, is the dopey commentary why gold is doing what it is. Today, gold was supposedly on the move due to concerns over Iran. Horse manure. The mainstream gold world has it bass ackwards. It is more likely Iran itself buying, etc., not concern over Iran, that is helping to push up the price.
The CNBC Planet Wall Street crowd remains more clueless than ever. Today in referring to the potentially serious Iran crisis (a valid concern), they made mention of how it is going to affect the oil market and went to see what the price was doing. DOWN 29 cents. By the close oil closed off a couple of cents at $63.92 per barrel.
The stock market was flat and is still way up there. The dollar fell .57 to 88.66. No safe-haven buying there. The euro gained .84 to 127.67. Silver could only manage a 12 cent rally. Nothing was really happening except gold took off. Actually, it has been this way for many months … ever since Gold Rush 21.
If oil was up sharply and the US stock market got clocked, it would make sense to attribute the move to Iran. However, that was not the case.
Third, no one outside the GATA camp will get into the real reason gold is flying. I think most of the mainstream gold world would rather say it was Elmer Fudd buying up the market than say GATA was right all along.
The gold market is flying because the crooks have run out of enough available central bank gold to meet the surging physical market demand, probably led by the Russians, Chinese, Iranians, South Koreans, hedge funds, pension funds, etc AND because major shorts are desperately trying to buy back those positions. GATA’s stretcher-bearers are working overtime tending to Gold Cartel casualties.
What IS a significant factor at the moment is money coming into the metals sector across the board.
Copper, "The Energizer Bunny," went to another new high at $2.1125, up 2.25 cents.
Palladium roared up $10 to $278. It is on fire.
Platinum shot up $1036, up $17 and to a level where gold would be now if not for The Gold Cartel.
There is more:
Zinc, Lead Rise to a Record; Aluminum Reaches a 17-Year High
Jan. 13 (Bloomberg) -- Zinc and lead rose to a record in London and aluminum reached a 17-year high as speculators increased their investment in funds which track a basket of commodities, including the metals.
The amount of money in funds tracking commodity indexes will rise 38 percent to $110 billion in 2006, Barclays Capital said last week. The funds follow indexes such as the Goldman Sachs Commodity Index, which is pegged to commodities including zinc, aluminum and lead.
``It's fresh investments across commodities and a lot of this is in commodity index-linked funds,'' Roy Carson, a trader at Triland Metals Ltd., one of 11 companies trading on the floor of the London Metal Exchange, said in an interview today.
Zinc for delivery in three months on the London Metal Exchange rose to a record for a third consecutive day. The contract added as much as $51, or 2.5 percent, to $2,081 a metric ton and was at $2,075 as of 4:40 p.m. in London.
Lead rose as much as $33.20, or 2.8 percent, to a record $1,215.20 a ton. Aluminum climbed as much as $42, or 1.8 percent, to $2,415 a ton, its highest since January 1989.
There have been disruptions to zinc, lead and aluminum supplies, increasing speculation that production of the metal may not be sufficient to meet demand this year….
-END-
What classic bullish action we have seen the past few days. Yesterday gold storms back from an early $6 drubbing after holding support above $540. Today, early on, you could see the bullish tension building. Gold would sell off, pop back, sell off, pop back. It then crept up to the unchanged level. Once it made it above the unchanged mark, it was all over. Once $550 was cleared, it was off to the races.
The MIDAS scenario is playing out. Week after week we are witnessing our Commercial Signal Failure. The "so-called" smart money shorts are getting annihilated. It is turning into a rout, forcing a number of the Commercials to cover.
NOW, it is very likely that our long-awaited gold derivatives neutron bomb is going off. From John Brimelow yesterday:
All this is interesting because UBS has been saying for a number of days that the $550 level is critical for derivative reasons. Today:
"Our traders believe that $550/oz is an important level, with lots of exotic option strikes around that level… we believe that the metal will soon resume its climb higher: we recommend investors buy gold on dips."
What this means is that anything can happen to the gold price next week. Surely The Gold Cartel is trying to figure out how to handle the mess they are in. However, it is likely they can’t do much about what is going on. Demand is TOO strong from various quarters all over the world and they don’t have enough available supply to meet that demand. Meanwhile, you have all these trapped shorts trying to cover their positions.
I have yet to see any commentary outside of the GATA camp addressing this critical gold market issue. The farce goes on.
This is why MIDAS urges you to suggest to your friends to take a look at GATA’s www.GoldRush21.com and watch our 2 minute trailer, then order the DVD. The coming move in gold is going to shock Planet Wall Street. By listening to the speeches the average investor will be able to grasp why gold is going to clear $2,000 per ounce, and will very likely soar to between $3,000 and $5,000 per ounce. FORTUNES WILL BE MADE.
The gold open interest jumped 7215 contracts to 352,765, which is still 20,000 less than when gold was more than $100 lower. This tells us that, in addition to short covering yesterday, significant new buying showed up. It is important to keep in mind that EVERY gold long is a winner as of the close and EVERY gold short is a loser.
Some more strange! The AngloGold news about their giving up hedging yesterday was extremely bullish news. Yet, there has been nary a word about it anywhere. Course what do you expect when most of the mainstream gold world is neutral to bearish on gold at these levels and Planet Wall Street abhors what the gold price has done already.
Anything can now happen to the price of gold on the upside. Nothing should surprise any of us. The gold derivatives situation is nothing less than extremely EXPLOSIVE.
Silver continues to struggle. However, technically it looks terrific and should also EXPLODE. What is clear is the technical situation in silver is not anywhere as precarious as in gold. The short position has not blown up yet like it has in gold.
The silver open interest fell 415 contracts yesterday to 131,079. No new buying there.
JUST IN, LATE:
MORE BULLISH NEWS:
The large specs went long 3,720 more contracts, but sold 8,876 more contracts. The Commercials went more long by 8,191 contracts and only added 1,092 contracts to their short positions. The small specs went more long by 3,428 contracts, yet SOLD 5,371 more contracts.
What is going on here is Rock N’ Roll time. Here we are … in the midst of the greatest gold market move of ever and the specs are going more SHORT!!! This also confirms the MIDAS analysis that this is not a spec driven rally.
The John Brimelow Report
Lynching time for Bears?
Friday, January 13, 2006
Indian ex-duty premiums: AM $2.91, PM $3.36, with world gold at $545.90 and $547. Narrowishly adequate, and adequate, for legal imports. Bad news for Bears.
TOCOM was unenthusiastic. Volume fell 28% to the equivalent of 17,080 Comex lots, with open interest slipping 697 Comex (2.2 tonnes). Mitsubishi’s data implies a 1.2 tonne reduction in the public’s long. The active contract closed up 11 yen, but world gold went out $1.80 below the NY close. Apart from a lack of momentum in $US gold and the yen, Japanese attention was distracted by platinum, which achieved a multi-year high in Tokyo hours.
Comex yesterday traded 68, 210 contracts, with open interest surging 7,215 lots – 22.44 tonnes. Quite a steep increase. ScotiaMocatta noted "overseas selling" in the early morning slide; Macquarie some
"some good two way on the death - funds buying from dealers"
Volume on the day jumped 40% in the last half hour with gold failing to move much or regain its opening level. This advance is not going unopposed.
Standard attributes the recovery of the low to "…fund and ETF buying". In fact GLD has not added an ounce of gold since Monday. Comex however, has added 32.7 tonnes. Odd.
Today, of course, Comex smashed through the fabled $550 level on heavy volume – estimated at 70,000 lots, enormous for a shortened day. Perhaps, as suggested yesterday, shorts contemplating a long weekend with the key physical buying markets open took fright.
This development opens the way for interesting events driven by technical and possibly derivative book considerations.
The astute observer I reported on January 4th as seeing parallels between 1979 and the present, implying a geo-politically powered three-figure melt up, deserves to be congratulated. This dimension seems to be very difficult for North Americans to fully comprehend, or even discuss.
I may publish something on Monday.
JB
CARTEL CAPITULATION WATCH
The DOW was down 2 and the DOG was flat.
US economic news:
08:30 Dec. Retail Sales reported 0.7% vs. consensus 0.9%; ex-Autos 0.2% vs. consensus 0.4%
Prior Retail Sales revised to 0.8% from 0.3%; prior ex-Autos revised to (0.4%) from (0.3%).
* * * * *
08:30 Dec PPI reported 0.9% vs. consensus 0.4%; ex-Food & Energy 0.1% vs. consensus 0.2%
Prior PPI unrevised from (0.7%); prior ex-Food & Energy unrevised from 0.1%.
* * * * *
10:00 Nov. Business Inventories reported 0.5% vs. consensus 0.4%
Prior revised to 0.4% from 0.3%.
* * * * *
Treasury Secretary Snow seems a bit nervous about the gold move:
REUTERS SNOW SAYS SOME DIVERSIFICATION OUT OF DOLLAR ASSETS ON MARGINS W [FSRSXBB]
SNOW SAYS SOME DIVERSIFICATION OUT OF DOLLAR ASSETS ON MARGINS WOULD NOT CAUSE RIPPLES IN U.S.
US's Snow-some shift out of dollar reserves normal
WASHINGTON, Jan 13 (Reuters) - U.S. Treasury Secretary John Snow said on Friday some countries' movement of reserves out of dollar-denominated assets would have only a small effect on U.S. markets and that investors would continue to find U.S. investments attractive.
"I think some diversification at the margin is certainly to be expected. I don't think it'll have any major ripples on our domestic markets," he said on Bloomberg TV.
"We have the deepest and most liquid markets in the world and that'll continue to be the case," he said.
-END-
Rhody:
Good morning Bill:
Lease rates in gold rose yesterday and are falling today. Either the people leasing down gold are running for the hills or the central banks are adding to the subsidy to drop the rates to encourage more borrowing. Either interpretation fits the explosive move in gold today, which happened after the pm fix in London and on a Friday! Changes in the other metal rates are not significant.
https://www.kitco.com/market/lfrate.html
Have a pleasant weekend everyone, Rhody.
Good morning Bill:
Yesterday's lease rate data was gibberish until noon on Kitco but has been corrected now.
There was a large increase in the near term rates that pushed the gold rate curve into internal backwardation and brought us to the brink of inversion. "They" are seriously trying to lease down gold. Silver also had a rise in the one month which has flattened the rate curve, while platinum surged across all terms. Palladium also moved into incipient backwardation.
Yesterday there were ten contracts in silver delivered on COMEX and zero gold deliveries.
The pattern of deliveries occurring on most days even in non-delivery months continues in the silver market.
https://www.kitco.com/market/lfrate.html
Regards, Rhody
One Café member ordered 100 DVD’s today.
TOCOM gold:
Bill,
Last night Goldman Sachs on TOCOM increased their short position to 26,665 contracts and their long position to 4178 contracts. This is an increase in their NET short position of 989 contracts to 22487 contracts net short.
Despite the Anglogold announcement being super-bullish our favorite Cartel Honcho saw it wise to increase their short position.
The breach of $550 and the very solid and powerful way in which it was done suggests that GS is playing with fire. The cartel's influence on the gold market has significantly diminished. The bullies have not noticed that the people they have been pushing around have just graduated from Karate class ...with Black belts. Those that have traditionally been running with the Cartel Pack and making money without any effort would be well advised to pay attention.
Cheers
Adrian
What' s interesting about Adrian pointing out Goldman's behavior on the TOCOM is that I've noticed that since Jan 1, gold has been weak in overnight access trading and much stronger during the Comex session. Just the opposite of the way gold was behaving during the run up to and thru $500. It's impossible to know the exact motive for GS's behavior in this regard w/out being an insider, but I suspect it is no more complex than the cartel attempting to cap gold in terms of the Yen. It's bad enough for the cartel that China, India, the Middle East and Russia have been accumulating gold, but it will be a complete disaster for the cartel if the Japanese population unleashes its large pool of savings into the physical gold market.
For what it's worth, reading Midas on a nightly basis is even more valuable to me now that it has been for the past 2 years. Dave in Denver
Hello Bill,
I was looking at the Tokyo Commodity Exchange Gold Open Interest positions by member from Jan 2. to Jan 12. 2006 and I noticed something I found interesting.
https://www.tocom.or.jp/souba/gold/torikumi.html
In particular the positions of 4 firm's and their recent gold position changes:
1. Sumitomo Corporation went from short zero contracts of gold on Jan 2. to NET short 65284 contracts on Jan. 12.
2. Mitsubishi Corporation Futures Ltd. went from 14 contracts short of gold on Jan 2. to NET short 8069 contracts on Jan 12.
2. Mitsubishi Corporation went from zero contracts short gold on Jan 2. to NET short 23255 contracts on Jan 12.
3. Goldman Sachs went from zero contracts short of gold on Jan 2. to NET short 22487 contracts on Jan 12.
4. Mitsui & Co Ltd. went from 3109 contracts short gold on Jan 2. to NET short 57511 contracts on Jan 12.
What I find most interesting is that I count 73 members on TOCOM. The total open interest was 324,377 contracts on Jan 12. The net contract positions for all the dealers on TOCOM was 185,029 contracts. THE TOTAL NET SHORT POSITION OF THESE FOUR FIRMS WAS 176,606 CONTRACTS.
Am I reading this right? I verified on the web to confirm that Mitsubishi Corporation does in fact own Mitsubishi Corporation Futures Ltd. and that is why I counted these two firms as one firm. The TOCOM website also says that each gold contract is 1kg of gold. If 1 kg = 35.27396195 oz then these 4 firms went net short 6,229,593 ounces of gold and almost all of it was done since Jan 2.
Take care,
Scott
OOPS:
Bill,
There was HUGE call selling this AM. They took some of the out of the money option premiums down 50 percent on high volume. The 560's through 580's. were all sold big time. Whoever did this just got roasted. Just FYI.
Seth
One more request to get the word out there about the Gold Rush 21 DVD. Thanks to so many who have taken the time to do so.
The highly regarded Jason Hommel:
https://www.silverstockreport.com/
The banner from minersmanual for goldrush21 is linked.
Also, mention is going out in tonight's newsletter.
Jason
Hi Bill:
Ordered a handful of GR21 DVD's this morning.
Another Cafe member ordered 100 of the DVD's.
GATA's Ed Steer last night:
Call me crazy, guys...but I've been watching every twitch of this gold and silver market for the last six years...and I have a sense that something big big BIG is coming down the road. When it happens, the $600 gold barrier will disappear in a heartbeat.
There is a monster presence in this gold market that I've never sensed before...there is huge money and huge power just below the surface. It might be Ferdi's Gold Wars come to life. The western world's economic and financial system has to be on it's last legs, and some country (or two or three such countries) might decided to take full advantage of that when the time is ripe.
I'm not sure when it will happen...but it will be sooner rather that later...and certainly before the end of March.
Ed
On the gold shares:
Bill,
Since around the start of the new year, I've noticed a different way that the junior PM stocks I follow are trading. I'm sure you and others have noticed it too. As a group they are up a good bit. Here are some of the new patterns one can observe:
A stock that had badly lagged the others during 2005 suddenly shoots up, gaining 15%, 20% or more in a day or over a couple of days, to regain parity with its peers.
The sector no longer trades as a pack, all up or all down generally following the HUI. Instead of monolithic directional movement, individual stocks break away from the others and go either down or up in isolation, before rejoining the herd. The ones that go down are often the same ones that recently experienced a breakaway move and got "overbought", so these down moves appear as healthy corrections (buying opportunities) and not weakness.
A given stock suddenly shoots up, and up, and up! when a respected fund manager or other knowledgeable person recommends it. Last year, the same kinds of favorable mention generated very little interest in these same stocks. The fundamentals haven't changed that much, but the perception is very different now.
During these rapid advance moves, the price will follow not the 50-day moving average (usually counted on for support during a bull run) but may shoot up way above the 20-day moving average, sometimes for a couple of weeks at a time, before correcting back to the 50-day MA.
Do you remember the stale old pattern we used to see day after day: a stock would gain intraday, only to sell off at the close? This new kind of action is very exciting for a change, because it suggests the entry of new buyers and new money into the junior mining and exploration sector.
Marcia
ECU Silver, one of my largest positions, continues to come with the goods. This one should be a mega home run. Some highly regarded people in the industry I know compare it to Gammon Lake (in terms of market cap) … another company which came up with the goods, nobody paid attention to or cared about, and then the stock went nuts, from a low of 50 cents to a high of $15 and change.
ECU just came up with .6 of an ounce of gold over a 180 foot by 2 foot zone. To check out the latest ECU results, go to www.ecu.ca. They also completed a 5 ¾ million financing to carry out a massive drilling program.
ECU (58 cents Cdn, up 6 cents)
https://new.stockwatch.com/swnet/default.aspx
Adrian, checking in again from England:
Bill,
Bingo!
The cartel are becoming as predictable as they are desperate. Yesterday I said
QUOTE I suspect the Cartel has been active because the announcement from Anglogold was super-bullish. The futures and the HUI initially have tried to indicate that the Anglogold news is bearish!! This is a typical Cartel induced shakeout where they scare out the weak specs and pick up their shares and gold futures at a lower price. Look for a close today or latest tomorrow in the plus column for both the HUI and gold-END
And here we have the true response of the market to the SUPER BULLISH news of Anglogold saying they do not intend to hedge for at least two years. The response was capped yesterday but now we see what this announcement means. This is typical of the cartel in that they try to prevent the average punter who is not paying attention to put 2 and 2 together. Hedging, whether we agree with the practice or not, is a way in which mining companies have attempted to protect themselves from falling gold prices in the future by locking in current prices. What Anglogold has said translated into plain english is that "we see no risk of the gold price falling in the foreseeable future".
What more does anyone need to know about the direction of the gold market?
I have to remark on the comments of Richard Russell quoted in yesterday's Midas.
He noted that $550 was very important as it represented the 50% retracement of the Bear market in gold from $850 to $255 and so was a test of the nascent Bull in gold to breach a significant resistance. In my new interpretation of the gold market as being a 35 year Bull market with an extra trend manipulation to the downside (posted at the Hemingway table) $550 does not have the same significance because the Bear market never existed. It is a mis-labelling of the price movement caused by manipulation. Under my interpretation it is demonstrated that the manipulators are losing control as the gold price has broken up out of the "Greenspan Trend". The significance of $550 being broken is that the loss of control by the manipulators is "irreversible". The Bull market set in motion by Nixon closing the gold window is to reassert itself as the major influence in the price discovery process. This is what Anglogold has just confirmed. $550 is Custer's last stand. That is not to say that there will not be attacks on the gold price by the cartel in the coming days and months or any down days or corrections; it means that the move toward a freely traded gold market is IRREVERSIBLE.
Today is a great and glorious day for GATA and the Cafe.
Cheers
Adrian
Another salute to Adrian who laid out to Café members two months ago what the gold shares were going to do in January. One of the all-time great sleuth calls.
The XAU rose 4.38 to 141.97 and the HUI shot up 11.02 to 310.34.
HUI
https://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hui&sid=0&o_symb=hui&freq=1&time=8
Gold, silver and the shares remain THE historic investment opportunity of a lifetime. The gold/silver share train has pulled out of the station and is beginning to build some BIG MO as it speeds down the track. Time to be there.
GATA BE IN IT TO WIN IT!
MIDAS