Gold-Futures Firepower Mounts

By Adam Hamilton – Re-Blogged From Gold Eagle

Gold’s powerful post-stock-panic upleg hasn’t enjoyed buying support from the gold-futures speculators.  These influential traders often drive and even dominate major gold-price trends.  But they’ve been subtly selling into gold’s sharp recent rally.  Their dogged skepticism is actually very bullish for gold in coming months.  Gold-futures speculators are amassing big gold-futures-buying firepower that will be unleashed.

The maelstrom of extreme fear spawned by mid-March’s stock panic even briefly sucked in gold.  It had surged to a 7.1-year secular high of $1675 during the initial weeks of that heavy stock-market selling.  But once that went panic-grade, which is major stock indexes plummeting 20%+ in 2 weeks or less, even gold was dumped in the frantic dash for cash.  Similar to prior panics, gold plunged 12.1% in just 8 trading days.

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Covid-19 and Russia Collusion to Kill Shale!

By David Middleton – Re-Blogged From WUWT

As the Democrat-media-fueled Covid-19 panic continues to batter the global economy, Russia thinks they see an opportunity to kill the evil capitalist “shale” players…

Russia Yanks A Leg From U.S. Shale’s Three-Legged Stool

David Blackmon Contributor, Energy

For the last two-plus years, the U.S. shale industry has been able to continue its oil boom thanks to the existence of a figurative 3-legged stool of support. Those three legs have been easily identifiable:

*The ability to legally export crude oil to other countries;
*An ongoing license to build pipelines and conduct fracking operations; and
*The continuation of the OPEC+ deal limiting exports by other oil producing nations.

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Gold-Stock Head Fake?

By Adam Hamilton – Re-Blogged From Gold Eagle

Gold miners’ stocks blasted higher this past week, breaking out of their correction downtrend.  Rapidly-improving psychology fueled such strong upside momentum that sector benchmarks are challenging months-old upleg highs.  Most traders assume this is righteous, that gold stocks’ next upleg is starting to accelerate.  But key indicators argue the contrarian side, that this breakout surge is a head fake within a correction.

In early September, a major gold-stock upleg peaked after soaring higher on gold’s decisive bull-market breakout in late June.  The GDX VanEck Vectors Gold Miners ETF, this sector’s leading benchmark and trading vehicle, had powered 76.2% higher over 11.8 months.  It crested the same day gold’s own upleg did, hitting $30.95 on close.  That major 3.1-year high proved the apex of that impressive gold-stock upleg.

Gold started grinding lower after its own September 4th upleg zenith of $1554, capping a massive 32.4% run over 12.6 months.  The gold stocks corrected with gold like usual, as these miners are essentially leveraged plays on gold.  Since their earnings amplify gold-price changes, the major gold stocks dominating GDX generally leverage gold by 2x to 3xSo the gold stocks drifted lower over the next several months.

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Gold Correction Not Over

By Adam Hamilton – Re-Blogged From Gold Eagle

Gold has been correcting following last summer’s powerful bull-breakout upleg. Since peaking, gold has inexorably drifted lower in a well-defined downtrend. Traders are wondering when this necessary and healthy sentiment-rebalancing selloff will bottom, paving the way for gold’s next upleg. But this correction still has a ways to run, according to speculators’ gold-futures positioning which dominates gold’s price action.

Gold has enjoyed a strong 2019, still up 15.0% year-to-date as of the middle of this week. Unfortunately its gains have been overshadowed by a bigger stock-market surge, driven by extreme Fed easing. This central bank shifted its rate outlook from hiking to cutting, made 3 rate cuts in just 3.0 months, and birthed its massive 4th quantitative-easing campaign to monetize Treasuries! That’s incredible in just a half-year.

The resulting stock-market euphoria from the hyper-easy Fed squelched traders’ interest in gold. Yet it still enjoyed a strong surge after breaking out to its first new bull-market highs in 3.0 years in late June. Over the next 2.5 months it blasted 14.3% higher, a major move compressed into such a short span of time. That climaxed a bigger 32.4% upleg that unfolded over 12.6 months, the largest of this secular bull so far.

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Why Gold Price Has Stalled

[Adam recently wrote that as miners’ Q3 earnings come in, with stupendous earnings due to high Gold price, minors face good short term gains. The current essay is somewhat longer term and refers to Gold itself. –Bob
]
By Adam Hamilton – Re-Blogged From Gold Eagle

Gold has stalled out, drifting sideways to lower for nearly a couple months now. Traders are becoming more frustrated its preceding powerful rally has failed to resume. That is inexorably eroding this past summer’s bullish psychology. Corrective phases to rebalance sentiment are normal and healthy after strong uplegs. Gold had grown too overbought, exhausting traders’ near-term buying firepower in the process.

Bull markets are simply an alternating series of uplegs and corrections. Visualize the core bull-market trend as a rising straight line, and uplegs and corrections are like a sine wave oscillating around it. Prices power to new bull highs in uplegs, surging well above trend. That generates much greed, sucking in all available capital. Both speculators and investors interested in buying anytime soon pile in near bull highs.

That overdone buying late in uplegs necessitates corrections. They drag prices lower long enough to bleed off toppings’ excessive greed. The selling they spawn generates fear, eventually resetting traders’ buying potential and paving the way for the next upleg. The duration of corrections depends on how fast they can rebalance sentiment. They run on a continuum between big and quick to slow and drawn-out.

Gold’s last major interim high was 7 weeks ago, $1554 on September 4th. That followed a strong upleg, where gold powered 32.4% higher over 12.6 months. And like most uplegs, a large fraction of its gains accrued disproportionately in its final months. During the last 1/5th of this upleg which ran from gold’s decisive bull-market breakout in late June until its early-September peak, over half of its entire gains were seen!

That self-feeding buying frenzy last summer catapulted gold to extremely-overbought levels. The bigger and faster price gains, the greater the odds unsustainable overboughtness will result. After decades of study, my favorite indicator for quantifying overboughtness is where prices trade relative to their trailing 200-day moving averages. I developed a trading system around this over 15 years ago, called Relativity.

By early September gold had rocketed so far so fast that its price divided by its 200dma yielded a relative multiple of 1.166x. In other words, gold’s price had stretched 16.6% above its 200dma. That was the most-extreme seen in 8.0 years, since September 2011 right after gold’s last secular bull peaked! The current bull’s maiden upleg topped in early July 2016 after gold clocked a couple daily closes exceeding 1.15x.

What happened next wasn’t pretty, extreme overboughtness isn’t to be trifled with. Over the next 4.2 months into late 2011, gold plunged 18.3% in a severe correction that would later prove the start of a new bear market. And after that mid-2016 episode, gold dropped a similar 17.3% during the following 5.3 months. There are many more examples of major gold selloffs emerging out of extreme overboughtness.

It is such an ominous short-term omen because of how prices, sentiment, and buying firepower interact. Prices can only blast higher too far too fast when popular greed grows excessive. Big rallies breed greed, motivating traders to buy aggressively to chase the mounting gains. So they swiftly throw all the money they are willing to risk at that market. While that does quickly bid prices higher, it rapidly exhausts buyers’ capital.

The upward price velocity of uplegs is a direct function of how much buying speculators and investors are doing. The more they rush to buy, the more capital they throw at a hot market, the faster they expend their available buying firepower. Once that is tapped out and dries up, only sellers remain. Uplegs fail and roll over into corrections once all available buyers are essentially fully deployed. That just happened in gold.

The gold price has two dominant primary drivers, speculators’ collective gold-futures trading and investors’ investment demand. I discussed the former in depth in mid-September soon after gold’s latest peak, warning of a very-bearish gold-futures-selling overhang. Then a couple weeks ago I wrote on the fragile gold investment demand. Today’s essay melds these research threads to try and help frustrated traders.

Gold-futures trading overwhelmingly drives gold’s short-term price action for two reasons. Gold futures allow extreme leverage, greatly multiplying their capital’s collective impact on gold. And the resulting price happens to be the world’s reference one, which heavily colors gold’s overall psychology. Without a doubt the biggest mistake most traders of gold, silver, and their miners’ stocks make is not watching gold futures.

Most traders buy gold or gold ETFs outright, with each dollar deployed exerting that same amount of price pressure on gold. But gold-futures speculators punch way above their weight, giving them wildly-outsized influence on gold prices. This week each 100-troy-ounce gold-futures contact controlling $150,000 worth of gold at $1500 only required a maintenance margin of $4,500. That enables extreme leverage up to 33.3x!

So fully-margined gold-futures speculators can effectively multiply their capital’s price impact on gold up to 33x when buying and selling. Each dollar they deploy has the same price impetus as thirty-three dollars invested outright. Running extreme leverage is hyper-risky, as gold merely moving 3.0% against a position at 33.3x leverage will obliterate 100% of the capital risked! This necessitates an ultra-short-term focus.

While investors have time horizons measured in years, and normal speculators in months, gold-futures speculators are forced to think in terms of days or weeks at most. Their extreme leverage doesn’t give them the luxury of riding multi-month trends. All they can care about is what the gold price is doing and likely to do in the immediate future. This myopic focus renders most normal gold analysis irrelevant to them.

This chart superimposes gold over speculators’ total gold-futures long and short contracts, which are published weekly in the CFTC’s famous Commitments of Traders reports. Their longs or upside bets on gold are drawn in green, and shorts or downside bets in red. Note how gold’s price throughout this entire bull has closely mirrored what the gold-futures speculators as a herd are doing! That will continue to hold true.

In gold-futures trading, there are two ways to both buy and sell. Speculators can buy gold futures to add new longs, or buy to cover and close existing shorts. And they can sell to exit current longs, or sell to open new shorts. The gold price impact of buying and selling gold futures is identical whether it is done to open new or close current positions. Gold-futures buying and selling always drives gold’s uplegs and corrections.

Gold’s strong 32.4% upleg that peaked in early September was mostly fueled by specs adding 172.9k long contracts and buying to cover another 157.5k short ones. That added up to a huge 330.4k contracts of total spec gold-futures buying between mid-August 2018 to early-September 2019. That made for the equivalent of 1027.6 metric tons of gold buying! Keep that in mind to compare with investment buying later.

Note in this chart that this latest upleg’s strongest gold advances occurred when gold-futures specs were aggressively buying longs and covering shorts. This is evident in a rapidly-rising green line and a fast-falling red one. Conversely when specs’ positioning was stable, gold flatlined. And when they started selling, gold was dragged lower. Gold is hostage to specs’ gold-futures trading thanks to its extreme leverage.

I’ve actively traded for decades now, earning my fortune in the markets. In all that time, I’ve never once used margin. I think it is crazy. There is plenty of risk and great rewards to be won without taking on the wildly-amplified additional risks leverage entails. The large majority of speculators and investors share the same opinion on this. The fraction of traders willing to run 10x, 20x, 30x+ leverage is very small.

So both the pool of available gold-futures speculators and the collective capital they command is finite. Eventually their buying firepower gets exhausted, leaving them nothing to do but sell. While we can’t know exactly when that happens in real-time, we can certainly game the odds it is close. Both total spec gold-futures longs and shorts have carved trading ranges over the decades. These help define extremes.

As of the latest CoT week ending last Tuesday, speculators held 382.4k gold-futures long contracts and 94.2k short ones. These are really high and really low historically, suggesting there’s not much room to buy and drive gold higher. But there’s vast room to sell and pummel gold lower. The main reason that gold stalled since early September is speculators had exhausted their buying firepower on both sides of the trade.

Their total long contracts hit 433.0k and 431.0k in late August and early September, and bounced slightly higher in late September to 433.9k. These are extreme levels by any measure, the 2nd, 3rd, and 4th highest seen out off all 1085 CoT weeks since early 1999 in gold’s modern era! They were only eclipsed by early July 2016’s all-time-record high 440.4k, which again preceded a monster 17.3% gold correction.

In this chart it is crystal-clear that gold stalled out exactly when specs stopped buying gold-futures longs. With their positioning so excessively-bullish and extreme, that left a massive gold-futures-selling overhang threatening gold. Gold hasn’t corrected hard yet, only drifting modestly sideways to lower, because these guys haven’t been scared into selling en masse. But that could still happen anytime with the right catalyst hitting.

In this latest CoT week, total spec longs remained way up in the 97th percentile of all CoT weeks. There is far more likely to be major selling than big buying from here. Anything over 350k contracts is worrying, and that happens to coincide with about the 94th percentile. For 17 CoT weeks in a row now, total spec longs have been above 350k. They averaged a lofty 396.6k over that recent span, or the 98th percentile!

These recent persistent extreme spec-long levels are eerily reminiscent of mid-2016. This gold bull’s maiden upleg peaked then after rocketed 29.9% higher in just 6.7 months. Spec gold-futures longs remained above 350k continuously for 17 CoT weeks, averaging 409.8k or almost the 99th percentile of all modern CoT weeks. Spec longs can remain excessively-high for some time, but eventually they must normalize.

And that was seriously painful for traders ignoring the gold-futures situation, as gold again plunged 17.3% over the next 5.3 months. The major gold miners’ stocks amplified that downside by 2x to 3x like usual, with the leading GDX VanEck Vectors Gold Miners ETF plummeting 39.4% in roughly that same span! It doesn’t pay to buy gold and gold stocks high once speculators’ gold-futures buying nears exhaustion levels.

Compounding gold’s near-term downside risks, total spec shorts are near major lows. Back in late August they sunk to a deep 4.5-year low, and extended that slightly to a 4.6-year one just 3 CoT weeks ago. In this latest CoT week they were trading just 8% up into their gold-bull-market trading range since mid-December 2015. That compares to spec longs running 77% up into their own, after hitting 97% in late September.

As is apparent in this chart, spec shorts have an effective floor. No matter what gold does, there are always traders betting it will fall lower. Today’s spec shorts remain right near those bull-market lows, so there is little room left to buy to cover additional shorts. Instead there is vast room to add new shorts to pile on to gold’s downside momentum driven by specs dumping longs when the right catalyst inevitably arrives.

Considered from this bull’s extremes, in this latest CoT week speculators had room to add 57.9k longs and buy to cover another 14.5k shorts. That adds up to 72.5k contracts of potential buying. But they had room to sell 195.7k longs and short sell another 162.6k. That makes for 358.2k contracts of potential near-term selling. With room for selling outweighing room for buying by 4.9x, it’s hard to be bullish on gold.

Gold stalled out because these gold-dominating traders exhausted their buying in early September. And gold is going to struggle until those excessively-bullish bets are normalized by selling longs and adding shorts. Gold will remain saddled with serious downside risks until spec longs and shorts mean revert. I don’t like it either, and am eager for gold’s next upleg. But with this spec positioning, we have to stay wary.

The secondary reason gold has stalled out is identifiable investment inflows have disappeared as gold’s futures-fueled upleg peaked and started drifting lower. This next chart looks at this gold bull compared to the physical gold bullion held in trust by the world’s leading and dominant GLD SPDR Gold Shares gold ETF. It publishes its holdings daily, making them the best high-resolution proxy for gold investment demand.

While successful investment requires buying low then later selling high, gold investors love to buy high. They get most excited about gold when it is surging, succumbing to greed to pile in to ride that upside momentum. Differential buying of GLD shares during gold’s recent 32.4% upleg forced this ETF to add 122.5 metric tons to its holdings. That was less than 1/8th of spec gold-futures buying during that span!

New-high psychology is a powerful motivating force for investors to buy, and fueled a massive 131.8t GLD build in the 2.5 months between gold’s decisive bull-market breakout in late June and its early-September peak! That was actually bigger than GLD’s build over this entire upleg, since this ETF’s holdings slumped even lower in June than when gold’s upleg was born. American stock investors were buying big.

But once gold’s new highs ceased as gold-futures speculators’ buying firepower exhausted, so did the outsized gold investment demand soon after. With US stock markets hovering near all-time-record highs, investors feel little need to prudently diversify their stock-heavy portfolios. They aren’t worried about any material stock-market selloffs, so the only reason they flooded into gold recently was to ride the momentum.

That’s why this recent gold-investment-demand surge is quite fragile. As long as US stock markets don’t plunge, gold investors will flee when gold rolls over on the inevitable spec gold-futures selling coming. American stock investors in particular will dump GLD shares faster than gold is being sold, forcing this ETF’s managers to sell gold bullion exacerbating gold’s selloff. Gold’s momentum-dependent demand isn’t durable.

Again mid-2016’s precedent is ominous. Investors poured into gold early that year as this gold bull’s strong maiden upleg soared higher. And investors were mostly content to remain in gold as long as its price stayed near highs. But once gold turned south materially on gold-futures selling, investors rushed for the exits as evident in GLD’s holdings. The result was that miserable 17.3% gold correction in late 2016.

Every day I get e-mails from subscribers wondering why I’m not buying gold stocks right now. And my answer is simple. Why buy now if odds heavily favor materially-lower gold prices in the near future? The major gold stocks leverage gold corrections by 2x to 3x, so if gold corrects 10% GDX is going to fall 20% to 30%. At worst so far in late September, gold had merely retreated 5.2% from its early-September peak.

Successful trading isn’t about doing what you want to do, but what you ought to do. While you won’t win every time, the goal is to only trade big when the odds are most in your favor. A poker player who bets big holding a hand with just two pairs isn’t brave, but a fool. The smart ones won’t throw all-in unless they are holding something strong like a full house or four-of-a-kind. Probabilities need to offer high chances of success.

And the current still-overbought gold-price levels, still-excessively-bullish speculator positioning in gold futures, and momentum-driven gold investment make for high odds gold’s correction is not over. Few are taking it seriously so far because it has looked like a benign high consolidation. But until specs’ lopsided gold-futures bets mean revert to more-normal levels, it is highly likely gold faces more sizable selling soon.

Gold’s powerful upleg stalled out a couple months ago for major reasons, so as long as they persist there is no reason to expect this bull’s next upleg to start marching. We can’t change the markets, so it is futile to fight them and counterproductive to worry about what they are doing. When corrections are likely, the best course is to patiently wait them out in cash to preserve capital and boost buying power at their bottoms.

To multiply your capital in the markets, you have to trade like a contrarian. That means buying low when few others are willing, so you can later sell high when few others can. In the first half of 2019 well before gold stocks soared higher, we recommended buying many fundamentally-superior gold and silver miners in our popular weekly and monthly newsletters. We later realized big gains including 109.7%, 105.8%, and 103.0%!

To profitably trade gold stocks, you need to stay informed about gold’s major drivers and their likely near-term impacts. Our newsletters are a great way, easy to read and affordable. They draw on my vast experience, knowledge, wisdom, and ongoing research to explain what’s going on in the markets, why, and how to trade them with specific stocks. Subscribe today and take advantage of our 20%-off sale! Get onboard now so you can mirror our coming trades for gold’s next upleg after this correction largely passes.

The bottom line is gold’s strong summer advance stalled out for good reasons. Gold surged to super-overbought levels, sucking in all available near-term buying. Gold-futures speculators’ bets became so excessively-bullish that they exhausted all their capital firepower. And once gold’s advance flagged, the momentum-driven gold investment demand withered too. Gold won’t rally materially until all this is rectified.

Speculators’ collective gold-futures bets can stay extreme for some time, but sooner or later a catalyst hits forcing them to start normalizing. The radical leverage inherent in that market makes selloffs self-feeding. Gold, silver, and the stocks of their miners are going to remain precarious with serious downside risks until that necessary gold-futures selling comes to pass. Jumping the gun on buying will be punished.

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Gold-Stock Correction Underway

By Adam Hamilton – Re-Blogged From Gold Eagle

The gold miners’ stocks are correcting.  They’ve been sliding and drifting lower on balance since their powerful recent upleg peaked a month ago.  Corrections are normal and healthy in ongoing bull markets, rebalancing sentiment to pave the way for the next upleg.  They also offer the best buy-low opportunities seen inside secular uptrends.  Deploying capital in gold stocks after corrections multiplies wealth-building potential.

While most people dread corrections, battle-hardened speculators and investors embrace them.  They make prices oscillate around their bull-market uptrends, greatly expanding their overall travel.  The more price movement, the more potential upside to ride.  Today’s gold-stock bull proves this.  Consider it in terms of the most-popular gold-stock benchmark and trading vehicle, the GDX VanEck Vectors Gold Miners ETF.

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A Look At Futures Contracts

Mark J Lundeen – Re-Blogged From Gold Eagle

Every bull market advance eventually sees its last all-time high. No one rings a bell when it happens, but from that point on things begin to change for the worse for the bulls.

The Dow Jones’ BEV chart below begins at the -54% bear-market bottom of the 2007-09 credit crisis. We don’t see a -54% BEV value as I began this series on the March 09, 2009 bear-market bottom. So instead we see a 0.00%, as the first data point of all BEV series begins at zero percent.

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The Golden ‘Moment Of Truth’ Is Upon Us: $1,400-Plus Or Not?

By Michael Ballanger – Re-Blogged From Gold Eagle

With gold enjoying its best week of the year, with the Daily Sentiment Index charging northward, with the Relative Strength Index (RSI) pressing 72 for the GLD, with the RSI for GDX pushing 75, and finally, with the newsletter community all falling on top of themselves with self-laudatory backslaps, I think it is time to adopt the contrarian view and step back.

It was less than five weeks ago, with gold and the miners all coming off sharply oversold conditions (RSI in the mid-high 30s), that I wrote that “carpe diem” in reference to ownership of GLD calls and my two favorite leveraged miners, NUGT and JNUG. Sure enough, JNUG has moved from $6.50 to $9.50 and NUGT from $14.50 to $22.10, while the GLD July $120 calls rocketed from $2.20 to $7.60. (Note: I did not get “top tick” for any of them, but did bank yet another decent 40% return on the miners, and a double and a half on the GLD calls).

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Gold-Bull Breakout Potential

By Adam Hamilton – Re-Blogged From Gold Eagle

Gold has faded from interest in the past couple months, overshadowed by the monster stock-market rally.  But gold has been consolidating high, quietly basing before its next challenge to major $1350 bull-market resistance.  A decisive breakout above will really catch investors’ attention, greatly improving sentiment and driving major capital inflows.  With gold-futures speculators not very long yet, plenty of buying power exists.

Last August gold was pummeled to a 19.3-month low near $1174 by extreme all-time-record short selling in gold futures.  The speculators trading these derivatives command a wildly-disproportional influence on short-term gold price action, especially when investors aren’t buying.  Gold-futures trading bullies gold’s price around considerably to majorly, which can really distort psychology surrounding the gold market.

The main reason is the incredible leverage inherent in gold futures.  This week the maintenance margin required to trade a single 100-troy-ounce gold-futures contract is just $3400.  That’s the minimum cash traders have to keep in their accounts.  Yet at the recent $1300 gold price, each contract controls gold worth $130,000.  So gold-futures speculators are legally allowed to run extreme leverage up to 38.2x!

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Big Silver Price Move Foreshadowed As Industrial Panic Looms

Mike Gleason: It is my privilege now to welcome in David Jensen of Jensen Strategic, a highly-studied mining analyst in precious metals expert with close to two decades of experience in the mining industry, and it’s great to have him on.

David, thanks so much for the time today and nice to finally talk to you.

David Jensen: My pleasure, Mike. It’s good to touch base with you.

Mike Gleason: Well, David, you’ve been closely following the palladium market, and that’s where I wanted to focus much of our conversation today, because that’s obviously where most of the fireworks are happening in the metals these days. Now, for the most part over the last few years, gold and silver prices have been bouncing around and have been basically in trading ranges. But palladium has been a different story, however. The metal has been climbing steadily for most of the past three years. Things got off to a rough start in 2018, but since the middle of August, prices have rallied more than 30% and we’re back to all-time highs.

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Fed Gooses Gold Price And Miners

By Adam Hamilton – Re-Blogged From Gold Eagle

The dovish Federal Reserve lit a fire under gold and its miners’ stocks this week.  As universally expected the FOMC hiked rates for the 9th time in this cycle.  But it also lowered its 2019 rate-hike outlook bowing to the stock-market selloff.  Traders dumped gold initially thinking that wasn’t dovish enough.  But market reactions to the FOMC form over a couple days, and gold surged overnight.  Its post-Fed rally has great potential.

Gold-futures speculators dominate gold’s short-term trading action.  They punch way above their weight in capital terms thanks to the extreme leverage inherent in gold futures.  This week, the minimum margin for trading each 100-ounce contract controlling $125,000 worth of gold at $1250 was just $3400!  These traders can run crazy maximum leverage as high as 36.8x, compared to the stock markets’ legal limit of 2x.

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Silver Price Scandal

By Ted Butler – Re-Blogged From Silver Phoenix

A few follow up comments about the still rather remarkable announcement by the Department of Justice concerning the guilty plea by the former JPMorgan trader for spoofing in precious metals. Contained in the announcement was the statement that the guilty plea was accepted and sealed on Oct 9, nearly a month before it was unsealed on Nov 6. With a rather short sentencing date approaching on Dec 19, and the time it took to unseal the plea, it may be assumed that the trader has already fully cooperated in the hopes of reducing his jail time, said to approach 30 years with no cooperation.

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Record Gold/Silver Shorts!

[The latest week, reported after this essay was written, makes this case even more bullish. -Bob]

By Adam Hamilton – Re-Blogged From Gold Eagle

Gold and silver were thrashed this past summer, relentlessly pounded to deep new lows.  That has fueled extreme bearishness, with traders convinced the precious metals’ fundamentals are rotten.  But epic all-time-record futures short selling by speculators was the real culprit.  These unprecedented shorts must soon be covered with proportional buying, which is super-bullish for gold and silver prices in the coming months.

Traders generally assume fundamentals drive short-term price action, that real imbalances in supply and demand push prices to market-clearing levels.  Unfortunately these core underlying dynamics are heavily distorted in gold and silver.  Futures speculators who never own these precious metals are able to wield wildly-disproportional outsized influence over their prices.  The main reason is extreme leverage inherent in futures.

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Silver Speculators Go Short – Which Is Extremely Bullish

By John Rubino – Re-Blogged From Dollar Collapse

Friday’s commitment of traders (COT) report for gold and silver offered more of the same. Which is to say the gold futures action was boring and the silver action was strange and exciting.

Starting with gold, the large speculators – who, remember, tend to be wrong at big turning points – got a little less optimistic, while commercials – who tend to be right at big turning points – did the opposite. But both groups are still in unfavorable territory, with the speculators too long and the commercials too short. Looked at in a vacuum this is not good short-term news for gold.

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Fed Hikes, Dollar, and Gold

By Adam Hamilton – Re-Blogged From http://www.ZealLLC.com

The US dollar has fallen rather sharply over the past year or so, despite ongoing Fed rate hikes. This persistent dollar weakness has really boosted gold. There’s a fascinating interplay between these two currencies and futures speculators’ expectations for Fed rate hikes. These traders hang on every word from top Fed officials, which greatly influences their trading. So these relationships are important to understand.

In late December 2016, the venerable US Dollar Index surged to an incredible 14.0-year secular high. That was just a couple weeks after the Federal Reserve’s second interest-rate increase of this hiking cycle. Top Fed officials were forecasting three more rate hikes in 2017, fueling euphoric sentiment in this top reserve currency. Everyone believed higher prevailing interest rates would prove very bullish for the dollar.

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Bank Backing Out

By Ted Butler – Re-Blogged From http://www.Silver-Phoenix500.com

News reports this week indicated that the Bank of Nova Scotia (ScotiaBank), Canada’s third largest bank, had put its precious metals operation, ScotiaMocatta, up for sale. Various sources said the unit had been for sale for a year or so and it was thought or hoped that Chinese interests might buy the business. It was also reported that the Bank of Nova Scotia would shrink the unit if no buyer could be found. The impetus for the sale was said to be a scandal involving smuggled gold from South America to the US. Somewhat ironic, and interesting, was that the sale “listing” agent was none other than JPMorgan.

http://www.reuters.com/article/us-scotiabank-gold/scotiabank-mulls-sale-of-gold-trading-unit-sources-idUSKBN1CN2CN

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Gold Worm On The Yuan Hook

By Hugo Salinas Price – Re-Blogged From http://www.Gold-Eagle.com

Once again, I turn over in my mind the Chinese plan regarding their imported oil, which consists in convincing their oil suppliers to accept yuan in payment (and thus re-directing their sales outside the orbit of the US dollar) with an additional sweetener in case the oil exporters do not wish to hold assets denominated in yuan: the sweetener consists in offering to exchange the yuan received by the oil exporters, for gold purchased on the world markets – and not out of Chinese reserves.

Again, I mention that for the first time in 46 years – ever since that fateful date, August 15th, 1971, when Nixon took the US “off gold” – gold is once again mentioned as part of a commercial deal – and one of great importance.

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China Catalyst To Send Gold Over $10,000 Per Ounce?

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

Jim Rickards is on record forecasting $10,000 gold.

But is China about to provide the catalyst to send gold even higher? And by how much?

Today, we fare forth in the spirit of speculation… follow facts down strange roads… and arrive at a destination stranger still…

China — the world’s largest oil importer — struck lightning through international markets recently.

According to the Nikkei Asian Review, China has plans to buy imported oil with yuan instead of dollars.

Exporters could then exchange that yuan for gold on the Shanghai Gold Exchange.

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Gold Uplegs’ Three Stages

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

Gold bull markets offer outstanding opportunities for traders to grow their wealth. These bulls consist of series of alternating uplegs and corrections. Naturally the best times to buy low within ongoing bulls are right after corrections when major new uplegs are being born. Gold uplegs have three distinct stages that are evident in real-time in key datasets. Understanding how gold uplegs play out leads to superior gains.

Bull markets in gold can be exceedingly profitable for investors and speculators. The last secular gold bull ran between April 2001 to August 2011. During that 10.4-year span, gold powered 638.2% higher! That radically bested the general stock markets’ 1.9% loss per the S&P 500 over that same time frame. Hardened contrarians willing to buy low as gold bottoms after long bears can ride all of gold’s big bull gains.

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Silver Prospects

By Ted Butler – Re-Blogged From http://www.Silver-Phoenix500.com

Here’s a recent interview I did with Jim Cook, President of Investment Rarities, Inc., for whom I’ve consulted for more than 17 years (where did the time go?). It’s gotten to the point where about the only interviews I do are with Cook, but that’s not due to our long relationship. Rather, it’s because he comes prepared and wastes no words, making my role easy. With Cook, it’s always about getting to the heart of the matter, with the least amount of fluff as required.

Cook: Are you disappointed with the recent price action in silver?

Butler: Of course, I thought we might finally be breaking out.

Cook: What happened?

Butler: It’s the same old story.  As I outlined previously, we were setup for a strong rally at the recent lows, but whether the rally was of the now-typical $2 to $3 variety or the big one was based upon whether JPMorgan added aggressively to COMEX silver short positions. JPMorgan, once again, stopped the silver rally cold by adding massive amounts of short contracts, just as they have on every silver rally over the past ten years.

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Eight Crooks Against The World

By Ted Butler – Re-Blogged From http://www.Gold-Eagle.com

I’d like to share what may be a different way of looking at the gold and silver market, but still remain focused on what has been the primary driver of price – changes in the COMEX futures market structure. It has become fairly common knowledge that prices rise when the managed money traders buy and prices fall when these traders sell. So great is the effect on price of this COMEX derivatives positioning that it is discussed in more commentaries than ever before. And that is due to what has become a clearly observable pattern of cause and price effect.

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Gold/Silver Shorts Extreme

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The gold-futures and silver-futures short positions held by speculators have rocketed up to extremes in recent weeks. These elite traders are aggressively betting for further weakness in gold and silver prices. But history has proven extreme shorts are a powerful contrarian indicator. Right as speculators wax the most bearish as evidenced by their collective bets, gold and silver decisively bottom and birth major new rallies.

Futures trading has a wildly-outsized impact on gold and silver prices, especially over the short term. It is amazing how much volatility futures speculators’ collective buying and selling generates, often drowning out everything else. Two factors are responsible for this dominance. The extreme leverage inherent in futures trading and the unfortunate fact the resulting gold and silver prices are the world’s reference ones.

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Gold-Futures Shorting Attacks

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

Gold has suffered a sharp pullback over the past couple weeks, stoking much bearish sentiment.  While a variety of factors fed this selloff, the precipitating catalyst was a gold-futures shorting attack.  These are relatively-rare episodes of extreme selling specifically timed and executed to manipulate gold prices lower rapidly.  Traders need to understand these events, which are inherently self-limiting and soon bullish.

Gold-futures shorting attacks are very real, with telltale volume and price signatures unlike anything else.  I’ve studied them for many years now, and have written extensively about them in our newsletters as they occur.  But it’s critical to realize these rare events are only responsible for a tiny fraction of all gold selling.  The vast majority of the time gold selloffs are driven by other far-more-normal factors, not shorting attacks.

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CRB Index Deep Dive

By Surf City – Re-Blogged From http://www.Gold-Eagle.com

If you are going to trade the commodity sector, you had best follow the USD, which is why I do.  If I am correct that the USD’s longer 15 Year Super Cycle is toping in 2017, then the CRB will be a fun sector where we will focus.

With respect to Weinstein’s 4 Stage Model, here is a great site that is the best I have found that covers his model quite well.

(4 Stages: 1 = Basing, 2 = Bull, 3 = Toping, 4 = Bear)

http://www.nextbigtrade.com/stage-analysis/

If the USD is topping then inflation will start to show up in the CRB with Gold and Silver leading the way…

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Silver’s New Bull Market

By Adam Hamilton – Re-Blogged From http://www.Silver-Phoenix500.com

Silver officially entered a new bull market this week, decisively crossing the necessary +20% threshold.  Speculators and investors alike are returning as awareness spreads of how radically undervalued silver is compared to prevailing gold prices.  When silver awakens to a new bull market after a long bearish slumber, massive gains are usually unleashed.  Silver’s tiny advance so far is just the tip of the iceberg.

This Tuesday, silver surged 4.4% higher on strong Asian bidding in parallel with gold.  The catalyst was fascinating, China finally launching its long-awaited yuan-denominated gold benchmark.  China is the world’s largest gold producer, importer, and consumer, a commanding position that should grant it much bigger say in the gold industry.  The new yuan gold price will ultimately challenge London’s century-old hegemony.

The prospects of more Chinese with their deep cultural affinity for precious metals having easier price discovery and access catapulted silver into bull-market territory.  Its previous best close of 2016 about a week earlier was only 18.5% above its 6.4-year secular low in mid-December leading into the Fed’s first rate hike in 9.5 years.  Tuesday’s big Chinese silver rally boosted this young upleg’s gains to 23.7%.

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