"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


Wednesday, March 2, 2011

4 Hour Long Bond Chart

The Bonds were not able to recapture much strength after the Beige Book was released.

4 Hour Gold Chart

Open Interest Tale of Two Cities

Speculators are pouring into gold based on the data we have from the exchange recapping yesterday's open interest readings. There was a very good increase of a bit over 6,000 contracts with the bulk of that coming in the June contract as apparently some of the newcomers have decided to forego buying the April and having to roll in a few weeks' time. These new additions were what drove gold past its all time yesterday. As long as this continues, gold will keep moving on to make new highs.

Silver on the other hand showed a drop of 412 contracts with the bulk of that coming out of the March contract which continues to dwindle and is now down to 2,251 contracts. March remains at a discount to the May continuing that pattern which lowers the odds of any short squeeze in that contract month before the March goes off the board. We are still monitoring that situation closely for any developments however. Deliveries were rather small yesterday with only 9 contracts issued and stopped.

Even without any fireworks in the March contract delivery process, silver continues soaring ahead. It is proving that it doesn't need any! I do find that drop in open interest yesterday when it pushed past the recent 30 year high noteworthy. There are obviously a large number of shorts who are in deep trouble in this market. They are continuing to get run over and are moving out as longs keep pressing them. 

As a matter of fact the big silver shorts, the banks, have been steadily drawing down their short side exposure by 10,000 contracts since September of last year. Even at that however, the ground is littered with bleeding shorts. Interestingly enough, that last Commitment of Traders report showed all the speculative money, no matter from what category, managed money, general public or other large reportables, all on the long side on a net basis. The only group of traders on the short side on a net basis are the Commercial/Swap Dealers class and right now that class is getting run over.