Another round of smackdown is ahead for Gold and Silver

L

leon1998

Member
Past several weeks of gold futures reports have shown that commercial traders were slowly building up short position.
Today's report is here, http://news.goldseek.com/COT/1452889898.php
18,857 short contracts added last week alone, wow.

Worst part of this is, gold price didn't make any improvement in the last few weeks. I guess we'll see sub 1,000 usd per oz very soon; when commercial traders cover their shorts.
 
Yes, this run up smells of the same stuff as all the other false moves.
The U.S. dollar index is on the verge of a big move up.
This in itself can cause the next down leg for gold.
 
Record shorts in the COT reports didn't point to sub $1k gold last time, we've seen gold reject $1050 more than once and silver has failed to make new lows despite maybe 4 or 5 recent push backs below $14. I don't see the DXY action getting that much stronger even with a big pile into treasuries, for one thing people are going to be holding off to see what the fed plans to do, if they signal the 4 planned hikes are on them everything goes tits up, gold gets the safe haven bid we've all been waiting for, if they go doveish then that's got to be bullish for gold.

It would have to be a strange combination of sideways equities action and a big forex move into the dollar that for some reason wasn't helping gold catch a bid to have it go sub $1000.

Honestly I hope your right, I would love to get a chance at building another big long term gold position. With the aussie doing what it does I'm not sure how much more physical will be practical (below $1400aud I'm going all out and selling the clothes off my back though), but here's hoping.

I know one thing though, I'd chase silver all the way down below $13.75, I'd pick some up every cent it dropped. I know all about the doom and gloom predictions, but I'm pretty confident the downside is pretty limited.

In AUD terms the downside is particularly limited.

*edit* Just thought I'd add that the last couple weeks and especially last week we saw some interesting divergence, particularly between silver and oil and copper which are pretty strongly correlated. I don't think we're at the start of the big one but I think there's enough turmoil in the markets and geologically to prop PMs up while we see oil add a few other things make their final bottoms.

It's important to note that a lot of zinc byproduct mines are going offline as well as primary silver mines. This is important because we've seen a decline in silver that's on a similar level to the decline in crude and iron ore without any of the fundamental oversupply (at least nowhere near that scale). We're going to have an iron ore and crude oil glut for some time, but silver is believed to be in deficit, that doesn't instantly move markets but a little SLV buying could quickly torn that into a price moving story.
 
The new deal with Iran means that the US will be enjoying cheap oil prices (at least through the next election).

When oil is cheap, the economy benefits and the US Dollar gets even stronger relative to other currencies.

Unfortunately, when the US Dollar is strong, the price of silver plummets.

Another point to consider, is that the US will probably elect a Republican president in November, which traditionally leads to an even stronger US economy, so we may be sitting on cheap silver for a very long time to come.

This is a very good time to be buying, but bad news for those who were hoping to profit in the near term.
 
Ouija said:
The new deal with Iran means that the US will be enjoying cheap oil prices (at least through the next election).

When oil is cheap, the economy benefits and the US Dollar gets even stronger relative to other currencies.

Unfortunately, when the US Dollar is strong, the price of silver plummets.

Another point to consider, is that the US will probably elect a Republican president in November, which traditionally leads to an even stronger US economy, so we may be sitting on cheap silver for a very long time to come.

This is a very good time to be buying, but bad news for those who were hoping to profit in the near term.
Click to expand...

Weak oil prices have traditionally been good for the US market, but at these prices the pain it causes the increasingly important domestic energy sector is outweighing any benefit, there's been a strong and obvious correlation between days of lower crude prices and US equity weakness. In fact even the most obvious sectors that should be benefiting and are the traditional obvious place to park money during cheap oil are suffering terribly, namely the transports and to a lesser extent consumer discretionary.

Regarding the next president whether you like her or not Hillary is the odds on favorite and even if she weren't none of the top 3 GOP candidates are going to be good for the economy, not even for a short term bounce due to the optics of a Republican candidate.

The US dollar may get stronger, that's not impossible, but another 5-10% on the DXY would be absolutely crippling for the economy and would push inflation as officially measured so far below the 2% fed target that you could write off any more rare hikes and could even see easing, either of those would be extremely bullish for silver and gold.
 
I hate doing this but..
Between $960 and $985 USD is my view as a target sometime this year...

there I said it.. to be roasted later this year.
 
Initiated some short position on silver @14.50 spot; considering adding more short position tomorrow after FOMC announcement. ;)
 
leon1998 said:
Initiated some short position on silver @14.50 spot; considering adding more short position tomorrow after FOMC announcement. ;)
Click to expand...

hmm putting your money where your mouth is. I dig it. I'm sitting on the sidelines..
 
Probably not a bad move if you're expecting the Fed to disappoint with a hawkish statement. I'll have pending orders on either side of the AUD/USD pair. Couldn't really care less about COT analysis
 
So far with the Federal Reserve raising rates as they did, it has not harmed precious metals in any way apparently. I don't think they will raise rates again at this meeting but even if they do I'm not sure long-term that is going to hurt metals as much as everyone thinks. Let's have a look at some "conventional wisdom" and see how correct it turned out. Remember a few years ago how everyone said QE was going to be inflationary? Turns out QE was anything but inflationary and has led to our current situation which is deflation.

Everyone said that when they stopped QE the stock market would crash, while it did drop for a few days it recovered and reached new highs. Remember "peak oil" and how oil was going to over $200 per barrel, now it costs less than bottled water.

I would not be surprised to see metals smashed again considering it is at the top of its recent "range" but it will not be due to rising rates. In any event I have to say that Leon deserves props for making a call and for acting on it and telling us all about it. Such behavior is the opposite of about 99% of others on sites like this who make bold calls and/or drop in to criticize every else's calls.

Just my opinion.

Jim
 
Kudos to leon for having the stones to short Silver but I personally think it's madness. If there's going to be a PM smackdown then surely shorting Gold is the better play.
 
Jim4silver said:
So far with the Federal Reserve raising rates as they did, it has not harmed precious metals in any way apparently. I don't think they will raise rates again at this meeting but even if they do I'm not sure long-term that is going to hurt metals as much as everyone thinks. Let's have a look at some "conventional wisdom" and see how correct it turned out. Remember a few years ago how everyone said QE was going to be inflationary? Turns out QE was anything but inflationary and has led to our current situation which is deflation.

Everyone said that when they stopped QE the stock market would crash, while it did drop for a few days it recovered and reached new highs. Remember "peak oil" and how oil was going to over $200 per barrel, now it costs less than bottled water.

I would not be surprised to see metals smashed again considering it is at the top of its recent "range" but it will not be due to rising rates. In any event I have to say that Leon deserves props for making a call and for acting on it and telling us all about it. Such behavior is the opposite of about 99% of others on sites like this who make bold calls and/or drop in to criticize every else's calls.

Just my opinion.

Jim
Click to expand...

I don't think anyone at all is expecting a rate rise, the question is whether they put any soft language in the statement that people can Rorsarch test a rate rise delay in to. I'm not going to shorting silver but I'm hoping for a smackdown and I'll be buying all the way down to build another solid position.
 
I reckon they'll try to thread the needle. It's only been one meeting since they started the rate cycle so they won't want to be too dovish, but they'll recognise the recent volatility in the markets. How the markets interprets the statement is where the cheddar will be made or lost. If the market takes it that the Fed may take the March hike off the table, we may have seen the bottom in gold and silver prices. As it is, gold and silver are hovering around their 200 MDA on the daily chart.
 
leon1998 said:
Last weekly silver futures report, http://news.goldseek.com/COT/1454099561.php

Commercial traders massively increased their short position against silver; at the same time, they massively reduced their long position on gold.
Looks like my silver short position will be very profitable, soon. ;)
Click to expand...
It's only the total net position that matters.
This is its evolution, with the last price being the projected bottom price based on a bottom total position of 10000.
26/01/2016 45124 $14.33 > $11.82
19/01/2016 36034 $14.03 > $12.17
12/01/2016 30562 $13.88 > $12.41
05/01/2016 28799 $14.01 > $12.67
22/12/2015 31162 $14.24 > $12.73
15/12/2015 23542 $13.74 > $12.77
08/12/2015 31027 $14.24 > $12.74
01/12/2015 29821 $14.21 > $12.89
24/11/2015 28725 $14.14 > $12.89
17/11/2015 35524 $14.25 > $12.43
10/11/2015 50129 $14.55 > $11.68
03/11/2015 67141 $15.38 > $11.30
27/10/2015 69373 $15.80 > $11.56
20/10/2015 66800 $15.86 > $11.80
13/10/2015 58626 $15.61 > $12.14
06/10/2015 49502 $15.67 > $12.85
29/09/2015 30106 $14.56 > $13.12
22/09/2015 31314 $14.94 > $13.42
15/09/2015 22255 $14.35 > $13.475
08/09/2015 25560 $14.63 > $13.52
01/09/2015 24566 $14.68 > $13.64
25/08/2015 23970 $14.87 > $13.87
18/08/2015 25437 $15.23 > $13.41
09/06/2015 35941 $16.13 > $14.28
02/06/2015 57569 $16.70 > $13.30
26/05/2015 61502 $16.79 > $13.82
19/05/2015 62485 $17.40 > $13.71
12/05/2015 38103 $16.46 > $14.45
05/05/2015 37250 $16.42 > $14.44
28/04/2015 33999 $16.32 > $14.6
21/04/2015 33836 $16.08 > $14.38
14/04/2015 41980 $16.08 > $13.8
07/04/2015 50438 $16.86 > $13.97
31/03/2015 49861 $16.60 > $13.75
24/03/2015 39242 $16.97 > $14.88
17/03/2015 30210 $15.56 > $14.1
10/03/2015 33263 $15.78 > $14.1
03/03/2015 39712 $16.42 > $14.3
10/02/2015 53457 $16.80 > $13.7
03/02/2015 56199 $17.59 > $14.29
27/01/2015 61593 $17.87 > $14.18
20/01/2015 55641 $17.80 > $14.54
13/01/2015 46804 $17.00 > $14.37
06/01/2015 36951 $16.47 > $14.54
30/12/2014 38636 $16.25 > $14.20
23/12/2014 33732 $15.71 > $14.01
16/12/2014 33997 $15.87 > $14.16
09/12/2014 35357 $17.12 > $15.31
02/12/2014 26576 $16.31 > $15.13
25/11/2014 22043 $16.56 > $15.69
18/11/2014 18367 $16.08 > $15.48
04/11/2014 12408 $15.77 (lowest position of the 3-4 months cyclus)
As can be seen, early november last year had a same bleak outlook but didn't manifest then.
 
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