The Gold Trade Expects A Higher, Not Lower Price Of Gold In 2014 ...

Posted: 30 Mar 2014 04:46 PM PDT

By Gene Arensberg:

We at Got Gold Report have to believe that the gold trade now expects and is positioning for a higher, not a lower gold price in 2014. The sudden, overly large reduction in the Producer/Merchant gross shorts this COT week is kind of an earthquake in that regard.

SRSrocco: This is Guest Post by Gene Arensberg from the GotGoldReport site. I have followed Gene's work for years. While I don't believe in technical analysis as it pertains to candlestick charting or Elliot Wave Theory in a rigged market, Gene does excellent work charting the gold and silver traders positions.

According to Gene's analysis, he believes the COT trading structure in the gold market is setting up for a higher price in 2014 and not a move towards $1,000 as some of the typical large banks have recently forecasted. This is precisely why I posted this article on my site.

I believe the gold floor price is in the $1,200 area, which is about the same break-even cost for the gold miners as a group. Once we include the continued high demand for the yellow metal, it seems highly unlikely the price will fall to the ridiculously low level of $1,000.

Of course, the LOW BALL FIGURES come from the very banks whose livelihood comes from stealing wealth from Americans via the Fraudulent Fiat Monetary Regime…. WHAT A SHOCKER.

COMEX Commercial Traders Covering Gold Shorts in a Hurry

by Gene Arensberg,

HOUSTON (GotGoldReport) – Data supplied by the Commodity Futures Trading Commission (CFTC) on Friday, March 28, show that large commercial traders on the COMEX covered or offset 32,293 contracts of their net short positioning in one week – a very large number. That was as gold traded $44.69 or 3.3% lower to $1,310.81 for the Tuesday to Tuesday COT reporting week.

(Chart showing NET futures positions by traders the CFTC classes as Producers, Merchants, Processors and Users. Source: CFTC for COT data, Cash Market for gold, GGR. Note: The Producer/Merchants (PM) are nearly always net short because they are primarily using futures to hedge. On this graph as the blue line rises the PM net short position is getting smaller and vice versa.)The Producer/Merchants include the largest bullion dealers, refiners, manufacturers, fabricators, jewelry makers and the bullion trading banks they end up trading through on the New York and London bourses. In short, PM's include much of the "gold trade" who use futures to hedge.

This week's huge reduction in commercial traders net short positioning almost equals a March 6, 2012 reduction of 32,677 lots when gold was then trading for $1675. The previous example of an extremely large reduction occurred in August of 2008, during the heat of the financial crisis, when the PMs closed or offset a whopping 42,638 contracts with gold then $813.

As for what it means, we can point to the fact that it is really pretty rare to see the Producer/Merchants reducing their hedges in anomalously high amounts. We can check that notion through one half of the reporting – the gross short interest held by the Producer/Merchants which is shown in the graph below.

Chart showing gross short futures positions by traders the CFTC classes as Producers, Merchants, Processors and Users. Source: CFTC for COT data, Cash Market for gold, GGR.)

First the obvious. With gold having touched as high as $1390 earlier in the trading week, but by then, on Tuesday, having sold back down to the $1310 level (as shown in the graph below) apparently the largest, best funded and presumably the best informed traders of gold futures on the planet thought that gold had already moved lower enough to motivate them to reduce their hedges in a very big way.

Now for the not so obvious. In fact, it's pretty much off the radar screen if you try to go looking for commentary about it on the Web.

Refer again to the PM gross short position graph above for this point. Just the Producer/Merchant shorts are shown in isolation.

Anything jump out at you right off the bat? Go ahead, take a close look, but what I am talking about is about as simple as it gets…

Simply stated, with gold near $1300 in March of 2014 (now), the amount of gold hedged by the gold trade – the gold business players/operators – on the COMEX division of the CME — is at an extremely LOW level. Simply stated the gold trade is not at all motivated to hedge gold with a $1300 handle, so says the graph.

To quantify that, and looking at the chart we see that the previous low in gross shorts was during the financial crisis in 2008 when the PMs got all the way down to just 91,693 gross shorts (not much for an entire market). Moving up to more recently, we see that on December 10, 2013 the PMs reported holding a miniscule 75,406 gross short gold contracts (with gold then $1261).

And this past week? Nearly the largest reduction in PM shorts in our records as the Producer/Merchants reduced their gross shorts by an enormous 34,721 contracts in one COT reporting week (from 121,662 down to just 86,941 shorts). Hello.

In more general terms just look at where the blue Producer/Merchant shorts line is "living" in a $1300 gold world at the moment. Isn't it at or near the very bottom of the graph? And, doesn't that mean that there is less, repeat less, motivation on the part of the gold trade to protect their natural long positioning with hedges?

Yeah, we think so too here at Got Gold Report, regardless of what the bank analysts have been saying of late. We all recognize they are merely talking their already short gold book and have more than one dog in the hunt. Perhaps by looking at and interpreting what the industry is doing – with their own positioning over time – we can get a sense of their actual expectations, not just their talk.

So who has been pressing the down side – the short side of gold one might reasonably ask? Well, take a look at the graph below, a snapshot of the traders the CFTC calls Swap Dealers – the cutthroat, mercenary banks that we happen to believe are led by the Goldmans of the trading world.

(Chart showing short futures positions by traders the CFTC classes as Swap Dealers. Source: CFTC for COT data, Cash Market for gold, GGR.)

Swap Dealer commercials increased their shorts by 14,172 contracts this past week, taking them up to a relatively quite high 144,546 short bets on gold futures, the highest since August of 2011.

From what we see here and in the positioning of the U.S. banks in futures from last month we here at Got Gold Report have to believe that the gold trade now expects and is positioning for a higher, not a lower gold price in 2014. The sudden, overly large reduction in the Producer/Merchant gross shorts this COT week is kind of an earthquake in that regard.

Any way one wants to look at it, the gold trade got the heck out of a very large number of hedges on a not-all-that-big move lower for gold this week. Sure does seem like they were in a hurry in that regard.

Before we forget the Swap Dealer "punchline," recall that it was in no small part due to Swap Dealer short covering that the gold price skied up to $1900 in 2011, as the graph shows above. The pink line (the gold price) hurtling higher while the blue line (the SD gross shorts) plunged off a vertical cliff. It could be just a coincidence, of course, but today's level of SD gross shorts is about where it was back then when the short covering party got started.

That is all for now.

Gene Arensberg for Got Gold Report

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Prison Planet.com The Federal Reserve Has No Integrity

Posted: 01 Apr 2014 03:03 AM PDT

Paul Craig Roberts and Dave Kranzler
Prison Planet.com
April 1, 2014

As we documented in previous articles, the gold price is driven down in the paper futures market by naked short selling by the Fed's dependent bullion banks. Some people have a hard time accepting this fact even though it is known that the big banks have manipulated the LIBOR (London Interbank Overnight Rate – London's equivalent of the Fed Funds rate) interest rate and the twice-daily London gold price fix.

The Federal Reserve Has No Integrity 010414fed

Image: Federal Reserve (Wiki Commons).

Almost every week it is possible to illustrate the appearance of a large number of contracts shorting gold at times of day when trading is thin. The short-selling triggers stop-loss orders and margin calls and hammers down the gold price.

The Fed has resorted to this practice in order to protect the value of the US dollar from Quantitative Easing.

In order for the Fed to effectively support the reserve status of the U.S. dollar by pushing it higher when it starts to drop, the Fed has also to prevent the price of gold from rising. Intervention in the gold market has been occurring for a long time. However, in the last several years the intervention has become blatant and desperate, as rising concerns about the dollar are causing countries such as China and Russia to accumulate fewer dollars and more gold.

During the month of March the Fed and the big banks implemented aggressive intervention against the rising price of gold and the plunging value of the U.S. dollar. Events in Ukraine may have stimulated demand for physical gold and selling of the U.S. dollar, but it was mainly further erosion of the U.S. economy, as reflected in more deterioration of economic data released during March, that pushed gold up and the dollar down.

The dollar index is a "basket" of currencies used to measure the relative value of the U.S. dollar. The largest components of this basket are the euro and the yen (it also includes the British pound, Canadian dollar, Swedish krona and Swiss franc). During February and March, the dollar started to decline in response to increasingly negative U.S. economic reports, continued Fed money printing (QE) and the Ukraine crisis.

On the last day of February, the dollar index dropped below 80. The 80 level is a key technical trading level and if the dollar were to stay below this benchmark for an extended period of time, large holders of dollars would start selling their dollar holdings out of fear that the dollar would be headed even lower. The Fed and the U.S. Treasury needed to do something in order to force the dollar index back over 80.

A d v e r t i s e m e n t

As part of its intervention in the currency market to get the dollar back over 80, the Fed also needed to stop gold from rising back over $1400, which it was on the verge of doing by the middle of March. Just like 80 is key level, below which technical selling of the dollar kicks in, $1425 is another key level for gold for which large buy and short-covering orders would be triggered. In other words, to support any manipulated move higher in the dollar, the Fed needed to intervene in the gold market to force the price of gold lower. The graphs below illustrate the key points of dollar/gold intervention during March.

As we reported previously, the Fed, using its agent banks like JP Morgan and Goldman Sachs, intervenes in the gold market by "bombing" the market with a large quantity of Comex gold future contracts. This typically occurs at periods of time when the market is very quiet and trading is at a lull. These engineered market interventions are now commonly referred to as "mini-flash crashes."

As the dollar was consolidating its trading range below 80 and the price of gold was headed toward $1400, flash crashes started occurring more frequently and with more intensity. During the first week of March, gold was getting ready to shoot through the $1350 level and the Fed used two distinct flash crashes to contain gold below $1350 (first two red circles on the graph).

During the week of March 10th, the price of gold started moving quickly higher toward the $1400 level, as the Ukraine crisis was front and center in the news and investors moved money into the safe-haven of gold. The Fed used several mini-flash crashes in an attempt to contain the move. The red circles on the gold graph show the points in time in which the Comex gold futures market was "bombed" with contracts in order to slow down the upward momentum that the price of gold was gaining in the first half of March.

Then early in the morning on March 17th, with the tension subsiding somewhat between the U.S. and Russia after Crimea voted to join Russia and war didn't break out, the Fed and its agent banks went to work on manipulating the price of gold lower and forcing the U.S. dollar higher . The red arrows on the gold graph show where the Fed dropped gold future "bombs" on the gold market in order to force the price of gold lower. The huge bursts of sell-volume almost always occurred during periods of low trading activity.

On March 18th, the Federal Reserve Open Market Committee (FOMC) convened for a two-day meeting, with its policy statement to be released March 19th at 2 p.m. EST. A study of how gold performs during the week in which there is an FOMC meeting showed that, on average, gold drops $37 for that week. This compares to almost no change during the same week during months in which no meeting is held. As you can see, the mini-flash crashes were used to force the price of gold down $72 from top to bottom during the March FOMC meeting week. The dollar graph shows the big spike in the dollar, which took the dollar back over the 80 level right after the FOMC meeting was concluded.

The Fed's aggressive engineering of the mini-flash crashes continued during the last week of March. The group of red arrows on the right side of the gold graph show points in time Monday (March 24) – Friday (March 28) when there were sudden bursts of high volume selling in the April gold contract. Monday's flash crash to start the week involved 6,437 contracts dumped onto the Comex right as the Comex gold trading floor opened at 8:20 a.m. For comparison purposes, 855 contracts had traded the minute before the Comex opened. Recall from one of our previous articles that gold gets hit right at the open of the Comex flooor trading session at least 85% of the time. This serves to set a downward momentum for the day's trading.

Remember, the purpose of Quantitative Easing is to support the balance sheets of a few over-sized banks and to finance the federal budget deficit at an artificially low rate of interest. In other words, QE supports failed banks and federal fiscal irresponsibility. In order to successfully carry off this blatant misuse of public policy, the price of gold, a measure of the dollar's value, must be suppressed. The Federal Reserve's lack of integrity speaks volumes about the corruption of the US government.

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

This article was posted: Tuesday, April 1, 2014 at 5:03 am

The Gold Trade Expects A Higher, Not Lower Price Of Gold In 2014 ...

The <b>Gold</b> Trade Expects A Higher, Not Lower <b>Price</b> Of <b>Gold</b> In 2014 <b>...</b>

COMEX Commercial Traders Covering Gold Shorts in a Hurry

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