"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Thursday, July 24, 2014

Weak Chinese Demand news undercuts Gold

The Chinese trade group, China Gold Association, issued a report noting that total Chinese gold demand for the first half of 2014 fell by 136.91 tons to 569.45 metric tons. That is down 19% from the previous year same period.

It seems a dueling bit of data in the sense that while gold bar and gold coin demand fell off ( down 62% for the bars and 44% for the coins), gold jewelry and gold industrial demand picked up ( 11% increase in both of these categories).

The drop off was rather precipitous to the point that it had some questioning whether China would be able to remain in first place behind India in terms of total gold demand. We'll have to see about that however especially as concerns grow that India is not going to lift that import tariff on gold.

Either way, it was not good news for the friends of gold who need both China and India to remain very strong buyers in the face of what has been rather moribund Western-oriented investment demand. While the recent data from the giant gold ETF, GLD, has been positive, ( as it has shown increasing reported tonnage ), the fact remains that the total amount of gold in this particular ETF is up a mere 7 tons since the beginning of this year - not exactly a barn burning rate of increase especially given all the geopolitical tensions that have arisen thus far this year.

The news dropped gold back under psychological round number support at $1300. It also lost moving average support for the moment however the session is not over yet.

The ADX is falling indicating the lack of a clear trend although short term indicators are now pointing lower. We'll have to see how the metal handles the support zone near its old friend, the $1280 region, should prices dip that low. Gold bulls will not want to see it breach that level. Given the remaining geopolitical tensions, one would expect that level to hold it. If it did not, I am not sure what the bulls are going to be able to seize upon next to support their claim that higher prices are inevitable. The more talk of rising interest rates takes hold, the more headwinds gold will encounter.


It is going to take a severe undercutting of the US Dollar, a sharp rise in the commodity indices which have fallen rather sharply over the last three weeks and/or renewed geopolitical events to undergird this market and propel it sharply higher as some are hoping.  



by the way, as a side note - this is why I am personally disgusted whenever I read that claptrap that poses for analysis which is centered around permanently spinning ( read that as conjecture based on nothing of substance ) the COT reports for Gold to be perennially bullish no matter what the damned thing shows us. The COT is NOT THE HOLY GRAIL of trading and those who peddle subscriptions and newsletters claiming that they have some sort of esoteric insight into it which gives them a unique ability to predict future price action based upon their mystical interpretations of it are frauds. How is that for clarity?

As noted yesterday, sentiment can change so swiftly and so rapidly in today's markets that one had best be careful about being dogmatic about much of anything these days. Again, if trading were easy, if investing were simple, everyone who attempted it would be richer than Croesus. The truth is trading is an extremely trying profession which keeps those who are successful at it doing large amounts of research and spending long hours studying the actions of various markets in an attempt to understand what drives them. Wouldn't it be just peachy-keen if all one had to do was pull up a COT report and start loading up on positions in the market while they waited for their ship to come in!

Copper was marked up last evening on Chinese manufacturing data that showed greater than expected strength. It not only held that strength heading into New York, it added some. It looks as if the Chinese data outweighed the US new homes sales data. Copper looks as if it is headed for a test of strong overhead chart resistance beginning near $3.29 and extending to $3.31.

New Home sales data was out from the Commerce Department this AM noting a fall in June sales and a sharp downward revision to the May data. The June number was 406,000, down considerably from expectations of a 475,000 number. The big deal to the market was the downward May revision however. The previous number was 504,000. The new number was 442,000. That is significant to say the least!

Here's another tidbit from the data - the supply of new homes rose to 5.8 months at the end of last month. That was up from a 5.2 month supply at the end of April.

It is also interesting to note that the pace of sales varies considerably among the various states. Texas was big as it is having remarkably strong job growth while some other states are lagging.

Once again the data suggests an economic recovery that continues to be very slow.

I hope some of you hog producers out there took advantage of the rally to get some Q4 and Q1 2015 hedge coverage. If not, you missed a very good chance to lock in some of the best profits in a lifetime. You cattle guys might want to start thinking about doing the same on some expected production. Prices are high but they are not going to stay this high forever and the market will give little warning when it decides to turn. Prudence dictates taking some risk off of your table and locking in a portion of those profits for your ranch/operation.

I am noting that the S&P 500 notched yet another new all-time high. Simply amazing... Traders will tell you that nothing goes up forever but I am starting to wonder if the world has found an exception to that axiomatic truth.

More later... as time permits...

79 comments:

  1. Dan to be fair to the gold bugs who picked up on it. The Chinese import structure has changed with gold now being imported undisclosed via Shanghai instead of Hong Kong.

    Also Tuesday is options expiry day and gold is behaving just like it normally has for the past few years by plunging a few days before.

    ReplyDelete
  2. Hi,

    We would like to advertise the Binary/Forex brands in our network on your blog/website.

    Preferably setting you up on an affiliate deal.

    Would this be possible?

    Please get in touch.

    Kind regards,
    Andrew
    http://www.Advertising365.com
    http://afs.advertising365.com/afs/wsignup.form.php
    Skype:kratke

    ReplyDelete
    Replies
    1. Andrew;

      I am not interested but thank you for asking first.

      Dan

      Delete
    2. Barring a late day reversal, I would say that our favorite #1 huckster better find some new un-named, 30 year veterans of the mkts and consultants to the ptb to shore up these fading pm mkts; even pall and plat are buckling in here. Red metal however is confounding all in its 6 cent rally. Take care all, and hang in there.

      Delete
  3. "Terrifying Endgame of Destruction" now hitting gold and commodity markets across the board, while consumer stocks like Dr. Pepper/Snapple and Facebook surge to all time, lifetime highs.

    Stay in the system.

    ReplyDelete
  4. The "Frightening Collapse" in gasoline prices today has caused an unprecedented frenzy in buying action in consumer stocks like Under Armor,

    Wow, if we would have loaded our entire account with that stock at $8 during the "This Is It!!" EuroZone crisis, effective today, we would be:

    - Done

    - Finished

    - Retired

    ReplyDelete
    Replies
    1. Only hyperinflation in site is big mac williams trying to fit into under armour figure flattering clothing

      Delete
  5. I have come to believe that the Trading profession is for the highly insane individual. Unfortunately, I am highly qualified...

    ReplyDelete
    Replies
    1. Welcome to the club :)
      And learn the song.
      http://www.youtube.com/watch?v=BEm0AjTbsac

      Delete
    2. Bob;

      Only those who know the song are entitled to be in the insane traders' guild.

      Delete
  6. "claptrap that poses for analysis"

    Well put Dan.

    Do these people feel shame at all ?

    ReplyDelete
  7. Dr. Paul Craig Roberts and that guy Stockman must be on the verge of a nervous breakdown.

    Watching these consumer stocks like Zillow and Skechers soar to all time highs today on meager earnings.

    Imagine watching these stocks every day on your screen go up virtually every day, day in, day out, regardless of wars and geopolitical conflicts.

    Who would have known that shoes and sporting apparel would have yielded the No. 1 wealth building gains the last 3 years?

    I guess it pays to ignore all the Scroom Screechers and just buy the dip on these "cult" retail plays.

    ReplyDelete
  8. everything feels very heavy to me; would be surprised if Friday brings any kind of decent rallies in any sector, commods, stks, or bondolas.

    ReplyDelete
  9. Just some thoughts to all who visit this first class blog; I am not only about average intelligence, BUT I can tell you one thing and that is that I have a memory like an elephant. To wit, Ray Dalio in "05, Warren Buffett in "09, Jeremy Grantham in '10 or thereabouts, and all of their thoughts were bullshit and wrong, wrong, wrong. Yeah, they are all big picture guys, blsh, blah, blah, but you know what? All paid for ads that they own. So, do your own thinking; swb

    ReplyDelete
  10. AT LAST! SOME GOOD NEWS!!

    oh, let there be celebration! Let the World rejoice! Boy! do we ever deserve this break! We have waited so very long, and now our patience is to be rewarded!

    I know that there are some of you - Doubting Thomas's to the last - who will look at today's reversal in the Precious Metals (Gollum) and scoff that a trap-door has opened up beneath the permabulls, but DO I HAVE NEWS FOR YOU, MISTER!!!

    Oh yes! Oh yes indeed I do! Because I am now in a position to reveal to you what I and many have secretly known all along and - concealed beneath the time-honoured traditional "Hookers Gob" photo, I bring you the glorious, splendid news that "Gold Is Set To Skyrocket!" http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/7/24_Shocking_Charts_Show_That_Gold_Is_Set_To_Skyrocket.html

    Oh yes in very deed I do! Apparently, according to a 42-year Market Veteran (which means he is right, and everyone with even ever so slightly less experience is wrong) this is due to the sober fact that there has been has been a shocking plunge in terms of gold discovered since 1990, from levels of between 50 million ounces each year to well over 100 million ounces per year, all the way down to below 10 million ounces per year in 2010. This of course had no influence whatsoever on the Gold price since 2010 until now, but it - I trust you will agree - precisely the lift-off event which we have all been waiting for, and from here onwards it's just up up up! (Maybe)And this is on top of the fact that Western central banks have no gold left in their vaults.

    So, there you have it. What are you waiting for? Get out there, back up the truck, sell at least one kidney, sell your wife and children into slavery, and KEEP STACKIN'

    You KNOW it makes sense, surely you do

    ReplyDelete
  11. Post; Could not have said it better; the only argument is who is more out of line, Eric himself with his headlines, or the re-hashed and very, very tired arguments put forth by 50 year veterans of the mkts, consultants to the world, and yayayayay, and man is it not old, old, and hey, can you all get out of the rear view mirror and point me forward, but I know, you all bought the dead nuts low 15 years ago at $250 and you all dine with Eric Sprott, Rick Rule and Egon; lol

    ReplyDelete
  12. Utter rubbish!

    During 2013 Chinese demand for Gold went through the roof - and the price went through the floor

    Therefore, collapsing Chinese demand is surely an extremely BULLISH indicator for Gold

    (either that, or there is no robust correlation between what we imagine Chinese demand might be, and what ultimately plays out in the Gold price. The simple fact remains that, for rhe time being, there are more people in the West who want to sell Gold than there are people in the East, South or far North who want to buy it)

    ReplyDelete
  13. Dan, or Post, or Hubert; I have been wanting to ask this for the longest time but keep forgetting to; to wit, since all the perma pm's seem to know that there is no longer any gold in Ft. Knox, NYC, SF, Denver, New Orleans and so on, where did it all magically disappear to?

    ReplyDelete
    Replies
    1. it is just a mkt, nothing more and nothing less

      Delete
    2. Steve,
      As long as you can't prove that there is no more gold there, the rest of the world will assume (or pretend) that it is.
      As you will never be able to prove it...it is as if it is still there anyway :)

      Delete
  14. This comment has been removed by the author.

    ReplyDelete
  15. This comment has been removed by the author.

    ReplyDelete
  16. Steve -

    you raise an important point (which is INCREDIBLY BULLISH for Gold) viz. that once the Gold has "disappeared" from vaults in the West, it then "disappears" again once it arrives in warehouses in China, making it doubly scarce, and going some way to explaining the stratospheric price levels we have seen recently. Or will soon, anyhow. For sure. Maybe. Did I say "ponzi" yet?

    So now we face a TRIPLE SHORTAGE - because according to the abovementioned 450 year old market veteran, there is also no Gold left below ground either! Astonishing!

    So where has it gone? I saw a video on youtube last night blaming it on the Ukranian separatists - apparently they manipulated the price of Gold as it was flying from Europe to Asia (while the USA was asleep) by throwing BRICS at it, initially "capping" it at 33,000 ft and then causing a sudden uncontrolled descent from its "natural" stratospheric altitude, accompanied by noxious vapour trails all across Western mainstream media calling for Putin's head on a commemorative Silver Round. Since then all we have seen are "painted" radar charts and Goldman revising its Q4 earnings forecast for the Transportation sector. As the saying goes - "What goes down, must be manipulated"

    ReplyDelete
    Replies
    1. Post; I would like to have a few drinks with you!!!

      Delete
    2. Brilliant analysis! Do you have a paid blog I can subscribe to?

      Delete
    3. Funny stuff, for sure!

      Also, mysteriously lost in the world of the permas, is the fact that the "traded" gold they love to cackle over (CB deposits, CME, China, etc) is just a small fraction (<5%) of the world's historical stockpile. Thus, it could all be "swallowed up!" "disappear!", etc, and the market would simply dip into the remaining pile for physical transactions, and the world would keep turning.

      BTW, why would ANYONE go by the name of Turd?

      Delete
  17. Is there gold in Fort Knox? ......I don't know but I assume not. Why would there be? Its much more profitable to lease it out than sit on it. What would be really sad is if they have also leased out all the gold belonging to other countries. If the dollar has no gold backing, why have a gold reserve.

    ReplyDelete
    Replies
    1. There are 2 ways to find out. They could do an audit. But that is the difficult way. Or they could ask Sean Connery Who better to ask then the guy who was in fort knox during the shooting of Goldfinger.

      Delete
  18. This comment has been removed by a blog administrator.

    ReplyDelete
    Replies
    1. Is there no possibility to simply block this nickname?
      This BOT's spam everyday is really annoying.
      Especially beccause it's advertising SPAMMING for a poor quality website known as Capital Stars...

      Delete
    2. Hubert;

      Yes, It can be blocked. It would however entail putting a temporary hold on any posts until they can be first reviewed which might prove a bit annoying. I will look into it further.

      I trust by now that the regular readers of this site understand what low life pond scums these people are because they have not the moral integrity to actually attempt to pay for advertising as they "steal" from others. Any firm or site that does business like that is morally bankrupt.

      If enough of the regular readers/posters here want to see them permanently blocked from posting here, we can make it work.

      the best thing is to not click on their links...

      Delete
    3. Just ignore them they are without shame and will only erect another persona when this one becomes too well known.

      Delete
    4. Yes. I was wondering if erasing their individual aliases would be possible and a one-click task. If not, best is to ignore those XXX

      Delete
  19. Eur Usd still around 1.3440 and nearing end of the week... maybe an easy call this time when 1.35 was broken?
    Let's see... my target (first) is 1.3350 but it's not collapsing either after yesterday... another trap? :(

    ReplyDelete
  20. U.S. Dollar continues to surge.

    John Rubino and James Turk must be coughing up blood right about now.

    Hey, you can buy their book "The Coming Collapse of the Dollar" used for 76 cents on Amazon, LOL!!!!!

    I'm watching in amazement the outright collapse in energy prices, which for sure will keep a lid on any stock market correction.

    ReplyDelete
  21. Mark, they could not throw rocks into the ocean if they were standing on the beach. Have a good wknd!

    ReplyDelete
  22. The TRUTH about China's Massive Gold Hoard! Chinese demand is actually inline with last year!

    http://news.goldseek.com/GoldSeek/1406051163.php

    ReplyDelete
  23. http://www.crossingwallstreet.com/archives/2014/07/the-gold-model-revisited.html

    The gold model

    ReplyDelete
  24. Gold near 1310, USD Index 81... is it possible that geopolitical events and interest rates differentials make gold and the dollar rise simultaneously?
    Adding the recent huge problems of some large bulgarian and portuguese banks within the eurozone, maybe we are witnessing some capital flight from euro to both dollar and gold?
    I don't know, but I'll keep my short eur usd position, hoping we won't see a big short squeeze on monday.
    On the monthly time unit, the inf bollinger band is near the fibonacci level at 1.2750, which means we have some room on the way down. MACD 9 20 7 is about to cross down as well.
    On the weekly time scale, the bollinger bands are now diverging, and prices are pushing the inf bollinger band down, which means that we may have found the energy to get our of the range whose support was in the 1.35 area.
    On the daily time scale, watching 2 years back on the MACD, MACD 9 20 7 is now meeting a propagation axis which saw prices bump on it successfully 3 times before. Let's see if there will be a bump this time. We are getting closer from the blue support area near 1.3390 now, and if me manage to reach that level quickly next week, I think I'll make the 1/3 profit on my position to secure the trade. Maybe even before : it will depend if bullish divergences appear on the 4 hour time unit.

    http://i60.tinypic.com/2v0iv0w.jpg





    ReplyDelete
  25. Hubert, let us face it that in trading these miserable currencies that it is purely a den of thieves. None of them are any good, but vs. what? All of the CBs are selling out their people and it is very sad. The silver and gold daily charts are as sloppy as I can ever remember, but on a weekly basis, there looks like a chance for a bottom being put in. I do not know and rather than bottom pick I think I will wait for strength to buy into. Very tough. Take care.

    ReplyDelete
  26. Gold : to me, it still seems like a draw this week, and nothing interesting to trade. On the weekly time unit, thanks to friday close, the support mlh inf of the upwards pitchfork near 1300 is preserved. The 1330 downards long-term resistance is still there as well. So...it's a status quo about the way out, once more. I don't update my previous weekly chart on gold, as there is just one more candle to add.
    Daily, a descending wedge might be forming on the short term. Resistance of the descending wedge is now around 1307...wait a minute...did you say 1307? That number reminds me something...oh, no, not again? :)

    SP500 : this one is going to make me crazy. I have some hints of an imminent stall on the weekly time scale. Dan, am I dreaming it? Damn, I shouldn't ask you....trading is a lonely activity :-) but I'm afraid to short too early again on the daily time unit. Last time a bearish marubozu appeared there, closing under the ma20, it was only to be unvalidated by new historic highs a few days later... still... I have this bad feeling of an imminent "real" correction i.e maybe 50 points lol.

    ReplyDelete
  27. Silver : well...I'm not bullish for sure. I recently tried to play a buy stop above 21.30 due to a quick breack of resistance levels on the OBVD...but I was worried by the fact that prices didn't rally their previous price levels when OBVD was there before (near 22 $), so I cut half of my position very quickly, then the other half near 21 $ for a small loss.
    Since, on the 2day time unit, the stochastic momentum index confirmed its bearish signal : every time it reached its horizontal resistance and reversed, prices did the same (the 3 last times anyway). My range 19-22.30 has a middle symetry line in the 21.60 area and we broke it recently on the way down. So I don't have much of a bullish signal on silver for now. I'm out as well.
    OK, have a nice weekend,

    ReplyDelete
  28. Trading note: for those here with a futures acct, I have had good luck this year selling option strangles, that is betting that the price of a given commodity will stay WITHIN two strike prices at a given expiration. The PMs and CL trading ranges that we have seen over the last several months have really lent themselves to this approach. For those of us who watch mkts day in and day out, it is a way of putting that huge amt of observation to work. It takes some practice, and obviously doesn't always work, but it feels great when you are right, and see BOTH those option strikes decay into oblivion.

    ReplyDelete
  29. @Rico

    Gambling only pays when you're winning

    each to their own, but writing naked options is an extremely risk strategy, and over the past 3 decades I have seen individuals bankrupted and professional careers ended by unhedged Vega and Gamma (the latter especially toxic close to expiry)

    Writing even Delta-neutral straddles is going to cost you your shirt if either volatility spikes from its currently muted level, or if the market gaps up or down. One "Black Swan" and you are going to be wearing the scar tissue for the rest of your life

    If you want to play a smart arb game in options, wise up on Risk Reversals, which are both Delta and Gamma neutral, and lock in profitable discrepancies in the volatility surface. If you spot Calls trading at a different Implied Volatility to Puts, sell the expensive option, buy the cheap one and hedge out the resulting position in the futures; this is not possible At the Money and involves opportunistically trading either equal-delta OTM (0.25/-0.25 is typical) or a delta-weighted ratio of calls to puts). The position requires steady adjustment of the futures hedge as time passes, such that at Expiry of the option positions this is totally eliminated unless either the Put or the Call goes Into The Money

    I am sure you can Google this strategy, but it is a darned sight less suicidal than writing naked straddles and praying for fair weather

    ReplyDelete
  30. To each his own. You have accurately described your strategy, but have misrepresented mine. The strangle (not straddle) has proved itself in range-bound mkts, but brokers love to scare the punters with tales of unlimited losses, etc. Meanwhile, their trading desks do it all the livelong day...

    I have never found writing options suicidal, and I've been at it a good long time. What do you think stops are for?

    ReplyDelete
    Replies
    1. I agree with Rico this is a good strategy that is only available with options (making money when prices remain flat), but in the same time, many traders told me that it was very hard to make money being short volatility, i.e betting on an absence of trend rather than a trend.
      I'd say...use with great care if you arre a beginner :) but I think the tool is quite worth mentioning. My only opinion as usual...

      Delete
  31. no breaks for 24 months @1300 bottom in S&P; these things never end pretty or quietly; take care all that embrace the "don't fight the Fed" story

    ReplyDelete
  32. Dan,

    Now it would be extremely useful if you were to apply your critical thinking to this recent Zh article:

    http://www.zerohedge.com/news/2014-07-26/london-fix-gold-rigging-bullion-bank-exposed-class-action-lawsuit-complete-charts

    It is based on an existing law suit which claims systemic manipulation of gold prices, and includes the original reference material.

    If you could offer a compelling alternative explanation for what appear to be rather obvious conclusions, it would be very enlightening.

    Regards,

    PW

    ReplyDelete
  33. There is no manipulation in gold.

    Zero.
    Nada.
    Zip.

    If there was, then the gold coin dealer prices would not move "tick for tick" with the COMEX prices.

    If prices were truly manipulated on the futures exchanges, hedge funds would be all over it to immediately arbitrage the difference between physical and futures prices and it would self-correct within 48 hours, ergo, forcing the paper futures contracts back up to equilibrium.

    Hedge funds today are arbing even the smallest differences between price discrepancies on various stock indexes and other derivatives, if the gold price manipulations were truly going on, then that would be easy money for the hedgies because the price disparity would be huge and offer immense profits in arbitrage.

    "But Wait!. The LBMA is going to default! Any minute now, I swear!"

    I wish we could post images to our posts, I would follow that comment up with a Ukrainian escort with red lipstick eating an apple, LOL!!!!

    ReplyDelete
  34. @rico

    as you note in your original comment, the strategy you recommend is based on "good luck" and "betting" rather than any objective analysis of the Risk/Reward profile.

    This is certainly not a suitable approach for Widows & Orphans money, nor in my opinion for most retail investors or Family Office funds, and smacks of naivite - an opinion confirmed by your attempt to draw a comforting but illusory distinction between Staddles & Strangles. I sense you are not fully conversant with either Variation Margin or with how Stops work (or, rather, frequently don't) when trading illiquid Option series

    Good Luck, my Friend - but that is all it is

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
    2. (sigh) yes, I am familiar with the vocabulary you use, only I like to communicate with as little jargon as possible. You evidently trade markets that are entirely predictable, and guarantee you profits on every trade--good for you.

      Unfortunately, like all other mortals, I have to take what the markets give me: every time I take a directional position, I am "betting" that I'm right. If I'm wrong, I get out. Unlike you, I don't take these types of small losses personally, as they are simply a cost of doing business. To the best of my knowledge, no one has a working crystal ball, but perhaps you do--you certainly talk as if you know more than everybody else.

      The markets are no different than playing poker or horse betting--you're the one who is naive, if you believe otherwise. Successful speculation and money management skills are useful across a range of human endeavors. Who the hell is talking about managing assets for Widows and Orphans, family offices, etc. here?? Maybe you should try Seeking Alpha...This is a blog about trading the commodities markets, so get off your high horse. Or don't--I really don't care.

      Delete
  35. @Paul & Dan

    no doubt Gold is going to skyrocket next week - because although they have recently been taking a breather, the Eastern countries will soon be buying "hundreds of tons" - as follows:

    "Once these billions of dollars of paper bets are settled at option expiration, what’s going to happen? We have a coiled spring is what we’ve got.” http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/7/26_Maguire__Hundreds_Of_Tons_Of_Gold_Bought_By_East_In_14_Days.html

    Now, Andrew Maguire is an "expert", ok, so he must be right, right? It would help if he understood markets, however, and over the past year ir so his remarks have betrayed a crass ignorance of Options in particular. (Well, that is the most charitable interpretation I can put on it)

    Options - if they expire In the Money - spawn a position in Futures, not physical metal, and so it pays to check the COMEX Open Interest report (to see which Strikes are outstanding and likely to "pin") http://www.cmegroup.com/daily_bulletin/current/Section64_Metals_Option_Products.pdf and to consider that, if it is Puts which end up being settled (due to a falling/fallen price) then this will produce a net short position in the Futures market. How on earth can closing a Short position involve buying hundreds of tons of physical Gold? Nobody in their right mind is going to think "Oh shoot! That negative-sentiment Options position I took paid off because the market tanked, and now I am going to have to load up on physical metal in order to deliver against the darned thing!". Nope, those puppies are either going to be closed out PDQ to lock in the gains (which are already cleared via daily Margin payments), or left to run if the holder is still bearish

    Overall, the notion that there is a massive sovereign "stealth" bid at $1300 is farcical unless you are willing to believe that Andrew "Nibody has ever heard of him" Maguire is also a stealth operator with special knowledge of foreign central bank secret trading positions (which he is nonetheless at liberty to discuss in public on KWN)

    Personally, I'm not buying it (the bullshit) and neither are the Chinese (the Gold)

    ReplyDelete
    Replies
    1. Post
      I have just quit listening and reading him and his ilk. Easier on the blood pressure.

      Delete
  36. Neither of the two previous posters (Mark and PcB) have actually read or commented on the linked article and law suit. I've taken Dan to task for using King World headlines as targets, and the very first thing that PcB does is to produce the same straw men.

    I appreciate Mark attempts to explain why he believes that gold cannot have been manipulated, but he hasn't addressed the questions raised by the law suit and in the linked ZH article.

    On a previous thread, others requested examples of serious claims into manipulation, and this law suit certainly fits the bill. So let's see some comments that specifically refute the claims in the suit, and/or produce an alternative explanation.

    ReplyDelete
    Replies
    1. Ive seen cultist that dont understand markets enough to make their own argument post these articles for two year now asking dan to comment. Its a waste of time. Gold will bottom bounce for another year no manipulation required.

      Delete
    2. Now we can add Jasper's ad hominem attack to the list.

      Still awaiting a serious response.

      Delete
    3. Paul - the lawsuit is laughable because it relies on the fact that prices move into the fix and then revert after the fix to prove manipulation.

      It's hard to respond to because, well, that's a laughable conclusion.

      Let me put it this way: the reason I'm retired is because my desk made a lot of money many years ago trading around client flow in equities. We'd take the other side of 10% of our clients' orders and try to make money on the reversion.

      There's nothing unusual, conspiratorial, or manipulative about this: prices move into liquidity events like the MOC for equities, or like the fix for metals.

      prices move lower into the fix when there are sellers. Prices move higher into the fix when there are buyers. If there is a seller on the fix, the price moves lower into the fix, and the price rebounds after the fix, experienced market participants will just stare blankly at you when you tell them that because there isn't anything remotely unusual about it. Charlatans and their cultists will scream MANIPULATION because they are fraudsters selling a story instead of explaining reality.

      and of course, much has already been written about the trend of price moves during different times of day, which the Charlatans explain as proof of manipulation, and the experienced market participants explain using real, sensible market mechanics (like who is selling on the fix, migration of gold west to east, etc)

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    4. Paul Warfield;

      I have not had much time this weekend to post or comment on much of anything and am just now getting around to looking over the various threads.

      The posters here have responded to you better than I could have in regards to the lawsuit.

      Besides, anyone can file a lawsuit these days - proving it or winning the case is an entirely different matter.

      Also, I have dealt with this stuff so many times in the past few years that spending any more of my time responding to things like this is a waste of what valuable time I have. Go back and read the blog if you want to see my thoughts on this.

      I remember the entire perma gold bull community breathlessly pointing to the fact that a firm with a trader accused of "rigging the fix" was proof positive that gold was manipulated all the time and that those of us who did not believe that were now all convicted as ignorant idiots and naïve fools. We are also accused of working for the feds, in bed with the bullion banks, etc.
      My dog was also accused of being a spy for the CIA., etc.

      I noted a price chart of gold at that time, the day on which the alleged violations were specifically singled out, showing that was the absolute bottom in the price of gold for many weeks thereafter. It if was a deliberate attempt to artificially suppress the price of gold, it failed miserably.

      Also, as I noted at that time ( why oh why can folks who hold to this view and cannot see another objectively not read my posts to learn something) that a lawsuit dealing with the banks involved on the fix is AN ENTIRELY DIFFERENT matter than attributing the moves in gold to government forces using the bullion banks to attack the price of gold over at the Comex every time it experiences a sharp move lower.

      Let me just say this as a final word to you - if you really believe that the price of gold is hundreds, if not thousands, of dollars lower than it really should be were it not for price manipulation, then what in the world are you doing wasting your wealth tying it up in an asset that is being systematically attacked by the powers that be? It is a losing investment "strategy" if you could use that word to describe it. Yours is a strategy of HOPE. You hope that one day the manipulation scheme will fail and the price will skyrocket making you filthy rich in the process. That is not an investment strategy nor it is a trading strategy.

      Both of the above are based on solid analysis of price action and trends based around market sentiment and money flows along with many, many hours of research.

      I am sorry if your yellow metal god is not doing what you hope it might do. Personally I own the stuff but I hope I never have to use it. I do not want to live in the world that many of you gold bugs are fervently hoping and wishing for.

      You have no idea what you are desiring to come to pass. Do yourself a favor; get objective and learn the language of the markets if you want to succeed. the only people making money in gold at this time are the ones selling newsletters and peddling theories and other sensationalism. I am embarrassed at this stage of the game to see what KWN has degenerated into as I once lent my name to that. I too am always learning and I learned something very important by allowing my name to once be linked with it. That will never happen again.

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    5. The best thing KWN had going for it was the weekly metals wrap with Dan Norcini. It was the reason I listened in each week. Besides the perspectives from the weekly metals wrap, the best information I got from it was the url to THIS blog. I do apprectiate KWN for airing that show but no longer listen in...

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  37. Hey Paul

    I read the ZH article - half of it, before a little bit if pee came out and I had to stop, lest I soil myself - and it is, to say the least, farcical, Noting that price occasionally moves following a fix could in certain circumstances be indicative of collusion BUT the examples shown do not illustrate that, the only "victims" of such collusion would be those involved in the Fix itself (having bought too high or sold artificially low) and the examples cited take no account of market events and news emerging simultaneously with or shortly after the fix

    If a market has been falling before the fix, and then reverses straight afterwards, that sounds like its the market which is rigged, not the fix!

    Overall, however, I think that the main concerns are as follows:

    - allegations of price fixing typically only occur when the market falls, and there us typically no outrage when gold spikes up

    - occasional extreme moves are not unique to the Gold market, though allegations of "TPTB" manipulation pretty much are

    - there is strong evidence to suggest that Hedge Funds and discretionary investment shape the market in a way and to an extent which "TPTB" and bullion banks can not; on the contrary, the notion that Central Banks collude with the intention of "capping" or suppressing the price of gold are pretty much undermined by the repeated publication of agreements NOTto sell Gold

    - Gold is an Asset Class, not a religious totem, and not only is there no divinely-ordained Law that the price should always and only ever rise, neither is there any compulsion for you or anyone else to stay in this particular kitchen if you can't take the heat. Gold is the way it is, and the Market could care tuppence whether you happen to agree with that or believe that it ain't fair

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  38. Well, I'd like to see John "Big Mac" Williams' reaction to the absolute plunge in gasoline prices since the 4th of July, as shown here:

    http://charts.gasbuddy.com/ch.gaschart?Country=Canada&Crude=f&Period=1&Areas=USA%20Average,,&Unit=US%20$/G

    Outside of a few areas like meat, there is no commodity price inflation whatsoever, and the LEI's are still pointing up, indicating that the economy is recovering, although at a slow pace.

    We are living in a "Nirvana" economic world which has never ever been seen or recorded in our lifetimes.

    - Constant and continuous stock market price rises
    - Ultra cheap interest rates
    - Strong dollar
    - Zero inflation
    - Ability to finance unlimited deficits with "Infinite Fiat"

    Oh, well all this truly must be a dream.

    I guess I should go back to reality and get back to Greg Hunter's USA Watchdog:

    "Big Mac" Williams claims the U.S. Economy is about to plunge.

    http://usawatchdog.com/u-s-economy-plunge-stagnation-turning-down-anew-john-williams/

    Jim "T-Shirt" Willie jumping up and down screaming and yelling about the end of the U.S. Dollar and the upcoming freeze in the U.S. Treasury market

    http://usawatchdog.com/germany-secretly-planning-on-joining-brics-jim-willie/

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  39. but what about Prince Prechter, General Jim and Harvey Organ?

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  40. Lets see if the dollar can finally break its range

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  41. All the gold in the world can be stacked 10 meters high in the infield at Fenway. (or maybe 30 meters high as I always forget) As Harry Markopolos said in his book "Nobody Would Listen", If you took 10 SEC guys out to the park, it would take them until the 6th inning to figure out where 2nd base was. Sometimes I think you could say the same thing about quite a few of the gold enthusiasts (bugs?) out there, no?? As an aside, the 1 year action in the yellow metal more and more from a weekly and monthly standpoint is taking on the look of consolidation of the main trend, which is to say that the odds are growing stronger that the next big move is to the downside. Maybe we do print a 9 in front of this mkt, afterall.

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  42. Looks like a battle brewing at 159.8 level for October live cattle. A standoff at this level Wed, Thurs and Friday of last week looks like a line in the sand for the time being.

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  43. Thanks to the above posters who got to the heart of the matter.

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  44. "Weak Chinese demand, not a good time to buy gold" Words from someone who labels himself as someone who trades.

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  48. OK - apologies for the repeated revisions, but my first stab at this was conducted on my mobile phone quite literally in the jungles of Borneo (Safi Island, if you are curious) and I am now back at my desk and able to conduct some more robust analysis - based this time on the September COMEX Options series (all references still to http://www.cmegroup.com/daily_bulletin/current/Section64_Metals_Option_Products.pdf and value 25th July with Gold at 1300 nominal, settlement 26th August)

    Market Analysis
    ATM 1300 Sep Call: Premium 21.80 Implied Vol: 14%
    ATM 1300 Sep Put: Premium 17.50 Implied Vol: 12%

    1400 Call (Open Int 4920): Premium 1.40 Implied Vol 16% Vega 0.43
    1200 Put (Open Int 4748): Premium: 1.00 Implied Vol: 16% Vega 0.33

    Selling the Out of the Money 1400 Call and 1200 Put nets a premium of 2.40

    Delta/Gamma Sensitivity

    If the price of Gold were to suddenly gap to either 1200 or 1400 (around a 7.7% move) then one or other of these options would be At the Money (just as the 1300 strikes are now) implying a value of at least 17.50, compared to the aggregate sale proceeds of 2.40 In other words, the potential loss exceeds the maximum upside by a factor of 17.5/2.4 = 730%

    Vega Sensitivity

    Gold historical volatility has averaged around 22% http://www.oanda.sg/wandacache/the-emotions-of-gold-3-6d7b10495380e567594035cd3008a98a008769b4.gif and is currently fairly muted (see Keith Weiner's latest views on this at www.monetary-metals.com ).

    If Implied Volatility were to spike up to 22% then both options would increase in value - to 5.34 for the Call and 4.03 for the Put, giving a net loss of 9.37 compared to a maximum upside of 2.40 (before taxes and brokerage) - a ratio of 390%

    If both events were to occur simultaneously - i.e. one of the Options became At the Money and vol spiked to 22%, then the loss would be at least 30.56, which is equivalent to 30.56/2.40 = 1273%

    P&L Profile and Hedging

    Firstly, it should be noted that these losses would not be incurred at expiry, but instantaneously via the Variation Margin mechanism

    Secondly, it is not possible to hedge Volatility using Futures, and any purchase of other options for hedge purchase would erode the maximum 2.40% upside. Effectively, the Vega risk is naked

    Thirdly, Option Delta is not linear, such that if you try to hedge it either with a rolling futures position, or on at a given strike level, you need to keep readjusting the hedge; with Gold at 1300, this strangle would be effectively Delta neutral, whereas at 1200 or 1300 it would be close to 0.50

    Finally, if anyone has ever tried to operate Stop Loss orders in illiquid strike options, they will surely know that this can be both extremely unpredictable in operation and brutally expensive; in many instances, you ARE the market, and persuading anyone to catch a falling blade and take the opposite side of the bargain in order to get you out of your predicament can prove brutally expensive. "At Market" stops are a graveyard for novices, and putting in a Bid at any given premium is an open invitation for someone either to smack you to Kingdom come, or completely ignore you. In these circumstances - i.e. a sudden jump in price or a spike in vol - Stop orders will likely increase your ultimate losses, not immunise them

    Again, apologies for labouring this point, but I wanted to spell it out in black and white: it is not entirely implausible that Gold will move by 7% over the next 30 days - as the existence of significant Open Interest at the Put and 1400 Call level attests - and trying to bet on this exposes you to potentially massive and entirely disproportionate losses if a Black Swan event occurs. This is not what I call trading", but is more akin to Russian Roulette

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  49. hmm...yeah...well, I'll stick to directional trading :)
    At least it's simpler to understand : if it goes up and you are long, you win some, else, you lose some :)

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  50. The most complicated thing I do is sometimes sell some covered calls on my ETF's. Then pray for a few weeks that they expire worthless. Pretty close to plain vanilla.

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  51. this morning (that is for me a few hours ago, but now I'm in Paris, err...), divergence MACD/price on the Eur/Usd on the 4h and 1h time scale, plus support area forming at 1.3430, so maybe we'll bounce upwards short-term.

    I think I'm not going to detail too short-term time units here, as it is not probably the purpose of the blog, which seems more oriented towards "swing-trading" i.e a few days, a few weeks max trades.

    But if I see an interesting signal on the daily time unit, confirmed by the 4h "tactical' unit, I will update.
    Have a nice day,

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