-- Posted Monday, 12 April 2010 | | Source: GoldSeek.com
By Gene ArensbergEsse quam videri – To be rather than to seem.
Largest Gold Futures Short Sellers Strongly Oppose Gold’s Thrust Above $1,130
HOUSTON – Gold broke out of its 3-month triangular consolidation this past week, but as we mentioned in the blog, the breakout was strongly opposed by the “usual suspects” on the COMEX futures bourse.It is Game-On for gold!
There has been an awful lot happening in the gold bullion and gold futures universe just lately and one place every gold and silver maven ought to have on their Internet rabbit trail is the Gold Anti-Trust Action Committee (GATA) web site.Why?Simply because the indefatigable Chris Powell of GATA constantly updates the GATA home page with so much good grist for our gold and silver mills – that’s why.
If you haven’t been there recently you are missing out on a story that could very well affect the gold and silver markets profoundly – it may be already.After reading our report (of course) be sure to check out the latest dispatch today (GATA’s message going mainstream via the New York Post) and get back there every day at http://www.gata.org/.
Here’s this week’s closing table:
April 9, 2010
Got Gold Report Indicator Comparison
w/w Chg %
Gold Weekly Close (USD)
Silver Weekly Close (USD)
GLD Metal Holdings (Tonnes)
SLV Metal Holdings (Tonnes)
Gold Close COT Date
Silver Close COT Date
Gold LCNS (Contracts Net Short)
Silver LCNS (Contracts Net Short)
HUI EOW Close
US Dollar Index Weekly Close
ICE Commercial Net $ Pos. (Contracts)
Gold:Silver Ratio Weekly Close
Gold Intra-week High
Gold Intra-week Low
Silver Intra-week High
Silver Intra-week Low
Gold High/Low Spread
Silver High/Low Spread
This Week’s Radar Screen
The purpose of the Radar Screen is to briefly summarize our positioning for the gold and silver markets, and also to highlight one, two or maybe even three of the dozens of indicators, ratios and graphs we keep in constant touch with at Got Gold Report.Long-time readers know we update most of the Got Gold Report linked charts each week, even the weekends when we don’t publish the full report.
For a little while longer, readers need only pull up the last full report and click on the chart links on “off weeks” to see any updated comments.Changes are almost always completed by on Sunday evening and occasionally during the week itself as events unfold. The chart links are always at or near the bottom of the report.
Pretty soon now, however, all of the chart links will have to change as we are in the process of transitioning to our new permanent web home for the Got Gold Report, which should allow for a lot more of our analysis to be available for our valued readers.More GGR info, in a timelier, more immediate fashion is the primary goal.
This week, with the expert assistance of Toronto-based Tracy Wesloski and Fred Cowan’s Pro-Edge Consulting, Inc., we launched the web log portion of the new site, (the first hint of what is coming soon), and readers can find it at www.GotGoldReport.com .
The latest GGR blog post from Saturday deals with the U.S. bank participation (or lack of it) in this past week’s big jump higher in net short positioning by commercial traders on the COMEX bourse. COT-watching traders won’t want to miss it.
Back to this week’s Radar Screen:Having returned to the gold bullish camp on February 5, with gold then in the $1,050s, we have been patient and cautious, keeping our short-term trading stops for goldin the minor-profit $1,080s.We had kept our trading stops for silver in the no-loss $15.90s-equivalent ($15.58 for SLV and $15.88 for SIVR) with the mindset of being willing to allow for more than normal volatility, but being unwilling to allow our “winners” to become “losers.”
That’s where we remained positioned as of Friday, March 26, as we reported then, but in the two weeks since then we have ratcheted up our trading stops to the $1,105 region for gold and the $16.50s-equivalent for silver as the precious metals both advanced as expected.More about that in just a moment and in the linked charts below.
We have been comfortable with our positioning, which allowed us to participate should gold and silver move forward, while allowing for more than the usual amount of weekly volatility.As regular readers will already know, for three consecutive COT reporting weeks prior to this past reporting week, the largest hedgers and short sellers of gold futures in New York had been reducing their exposure to the gold short side as gold consolidated.That changed this past reporting week (the reporting week of April 6) and it changed in a really big way as we covered in a “COT Flash” update on the new GotGoldReport.com blog on Friday shortly after the COT report was released.
Now that COMEX commercial traders have shown they are very intent on opposing this new breakout for gold we know (at least) two important things.We know that the commercials suddenly became motivated to “hedge” gold as it was breaking out above the $1,120s consolidation resistance, but we also know that all of the new “hedges” put on by the COMEX commercials have already been significantly overrun as gold didn’t even pause in the $1,130s.Instead, gold thrust up to and even a little above the $1,160 level, with a last Friday print of $1,161.60 as shown in the closing table above.More about that just below and on the web log later this coming week.
This week in the Radar Screen we first want to call attention to SPDR Gold Trust (NYSE:GLD) and the fact that GLD is now holding a record amount of gold metal in allocated gold bars held in ultra-secure soccer-field-sized vaults in and near London.Then, we’ll take a look at GLD’s counterpart in the silver arena, BlackRock’s iShares Silver Trust (NYSE:SLV) which, contrary to GLD, has seen recent redemptions and has reduced their metal holdings and share count.Then, finally, we’ll mention one of the companies on our Vulture Bargain Hunter list we think is in the “cheap zone” once again and worthy of some attention by our valued readers, but first, here’s the short-term gold graph:
Breakout Means Something Changed
Houston, we have a bona fide breakout, but as we show in the blog posts, this breakout is definitely not going unopposed.Gold powered higher through obvious implied resistance in the $1,120s, breaking out of the 3-month triangular consolidation.Upside breakouts are calls to attention to all technically minded traders.Breakouts of well-established consolidation formations indicate that something has changed to alter whatever had confined the trading inside the formation.Technically minded traders understand that either the supply has diminished or the demand has increased or both, and materially so, or the trading would still be confined to the consolidation.
Resistance initially attempted to form at the $1,153 level Wednesday, following the breakout and again on Thursday, but very staunch buying pressure on just about any dip kicked in both days.An early Friday sell-down attempt in New York, to just below $1,152 was handily and swiftly reversed on big volume and the rest of the trading day/week saw gold futures traders – on balance - more afraid to go into the weekend short than long, as evidenced by the upward slope up to just before the noon hour in the one-day graph below courtesy of Kitco.com.
Note only modest profit taking from - on.
Again, much of this week’s commentary is contained in comments inserted in the actual linked charts below, and we will be adding additional “intel” to the blog often going forward, so we’ll leave it there for now.
Before moving on to this week’s Radar Screen items of interest, we want to highlight and call attention to a thoughtful and brief comment about this week’s breakout for gold from our friend and GoldMoney founder James Turk.We think the key paragraph in James’ Free Gold Money Report update this week is quoted just below, but everyone please do take the time to view the full comment:
“Given that the market is becoming increasingly aware from GATA’s efforts that the gold cartel is a naked short, it is unlikely that the demand for physical metal will subside here. I expect in fact that it will continue to grow. After all, what would you rather own? Physical gold, or a piece of paper purporting to represent your ownership of gold? Or a comparison even more stark, would you rather own physical gold or the debt of Greece, UK, Spain, the US or any other overleveraged debtor?”
Once again we reiterate our longer-term view that the world will most likely continue down a path of fiat currency debasement, weakening confidence in all fiat currencies.We see the setup as long-term very bullish for gold metal and extraordinarily bullish for silver looking well ahead – if the world “holds it more or less together.”
Moving on to the first of the Radar Screen-worthy items this week.
Gold ETFs:SPDR Gold Shares (GLD), by far the largest gold exchange traded fund, reported adding a big 11.22 tonnes to show 1,141.04 tonnes of allocated gold bars held by a custodian in London.That is a new record for gold metal held by an ETF. As of the Friday, April 9 close GLD’s metal holdings were worth USD $42.3 billion.Just below is our graph of GLD’s metal holdings over the last year (right axis) along with the price of gold (left axis).
Source for data SPDR Gold Shares.
The authorized market participants for gold ETFs add gold (and increase the number of shares in the trading float) in response to more buying pressure than selling pressure and vice versa.
Although GLD’s metal holdings have reached a new all-time record size over the past week, notice please that the metal holdings have also broken out of a wide, triangular consolidation. If GLD’s metal holdings were a stock, we’d say it was attempting a breakout now.
The previous high for GLD metal holdings, 1,134.03 tonnes, occurred all the way back on June 1 of 2009 (9 months ago).From June 1, ’09 to August 25 GLD shed about 72 tonnes of gold bars (to 1,061.83 tonnes August 25) as the price of gold actually drifted higher from $938.25 to $950.50.
As gold caught a bid last year in September, GLD metal holdings “answered,” reflecting consistently more buying pressure than selling pressure.By December 31 (3 months and 10 days ago) the trust held 1,133.62 tonnes, just under the previous June’s record size.
Thus, it has taken nine months of consolidation for there to be enough of a difference in buying pressure over selling pressure for shares of GLD to cause the authorized market participants (AMPs) for the trust to increase the number of shares in the trading float and bring the ETF’s metal holdings to a new all-time high.
Another way of looking at it is that for the last nine months the buying and selling pressure for shares of GLD has, more or less, been relatively balanced, but as shown in the graph just above, we can see that since about February 4 of this year (1,104.55 tonnes with gold at $1,083.25) there has, once again, been modestly more buying than selling pressure for the ETF shares.Since February 4 GLD metal holdings have increased by 36.49 tonnes or 3.3% as gold metal has advanced $78.75 or 7.3%.
The graph above might lead someone to conclude that there has been a lot of change in the GLD metal holdings over the last year, but the scale of the right axis and the relatively short timeframe skews that impression somewhat.When we look at a longer-term graph of the change in metal holdings for GLD, such as the one just below going back to early 2006, we see the consolidation of the last nine months in better context.
The past nine months have not been much more than near-flat in other words.Has the market now finally digested a gold price above $1,000?Are we about to go into another period of much heavier investor buying of GLD shares than selling?
We don’t know for sure, but the fact that GLD just reported a new high in metal holdings means that there has been more buying than selling just recently. We also know that if there is more buying than selling pressure it will show up in the form of increased metal holdings at GLD, and vice versa.
Silver ETFs: Despite the positive money flow into gold ETFs, metal holdings for BlackRock’siShares Silver Trust (SLV) have recently been heading in the opposite direction.We find that odd and mildly disconcerting because on the surface it suggests that investors are more intent on taking silver profits than they are in accumulating silver.That it comes at a time when there could be a physical-grab from the various futures and forwards exchanges in the near-term works is puzzling, to say the least.
Over the past week metal holdings at SLV declined a relatively small 38.9 tonnes to a reported 9,178.27 tonnes of average 1,000-ounce allocated silver bar inventory. As of the Friday close the largest ETF silver hoard in the world (held by SLV) was worth $5.4 billion.Just below is our graph of SLV metal holdings over the past year.
Source for data, iShares Silver Trust.
Like GLD, the authorized market participants for SLV add silver (and increase the number of shares in the trading float) in response to more buying pressure than selling pressure and vice versa.
On December 21 SLV reported holding 9,514.35 tonnes with silver then trading at $17.27.As of Friday silver closed at $18.39 on the cash market and SLV reported allocated silver bar holdings of 9,178.27 tonnes.Over that roughly three-month period, as silver actually rose about $1.12 or 6.4% metal holdings at SLV declined 336.08 tonnes or 3.5%.So, what we have been seeing since about December 21 has apparently been more selling pressure on SLV shares than buying pressure. Go figure.
Just as we did with GLD above, let’s take a look at a longer-term graph for SLV metal holdings for a little context.
Yes, there has been some negative money flow for the largest silver ETF just recently, but when we view it in a longer term context it really doesn’t seem all that much of a decline, does it?
Having said that, with premiums for physical metal back to ordinary and normal levels recently (especially for our favorite physical silver item; pre-1965 90% U.S. coins in $1,000 face value bags), and with the recent upsurge in investor concerns about third-party and counter-party risk, we can understand if some SLV investors have decided to convert their SLV shares into physical metal while the “converting is good,” or perhaps diversifying out of SLV into another of the various silver trading vehicles, such as the ETFS Silver Trust (NYSE:SIVR) for example.
We could be wrong, but we sincerely doubt that the current condition of lower metal holdings for SLV will continue very much longer.If this current breakout for gold isn’t quickly clobbered into submission with a mountain of paper gold we fully expect to see the world populace embracing the white metal once again.That would almost certainly translate into increased metal holdings for silver ETFs. We’ll see.
Full disclosure, we’ve been doing a bit of that SLV conversion idea opportunistically here at Got Gold Report.Not because we have concerns about SLV.We really don’t.We have been converting some, that’s some, our SLV shares into physical metal because we want the satisfaction of having taken advantage of the recent drop in what had been quite high premiums not very long ago.We very much doubt that physical premiums will stay so reasonable once there is a general rush back into silver, whenever that day arrives.
We are pleased to announce that the very first portion of GotGoldReport.com is now operational.Special thanks to Ron Brown, of Pro-Edge Consulting Inc. are in order, who, along with Tracy Wesloski made this not-so-young bullion trader comfortable with the editing software which makes GotGoldReport.com a possibility.We are still working through the various “architecture plans” and getting the full web site model designed, but for now we have a new platform for the immediate dissemination of important “GGR intel” for our valued readers without any delay.
The long-range plan for the web site is to invite corporate sponsors for the new blog initially, then, if there is enough reader support, we plan on moving to an exclusive subscription-based model for the full Got Gold Reports.We are gratified and humbled at the large number of unique visitors in just the first several days it’s been around.Tracy tells me that the number of visitors vastly exceeded her wildest expectations and there are already numerous comments from new readers in the comments section.We sure are proud to have your company there.
One Vulture Prospect
We remain on the hunt for special situations and “vulture opportunities” via “stink bids” for obvious lack-of-liquidity, non-news-related, over-reaction sell-downs on the miners via our Vulture Bargain Hunter Method.Companies we believe have been sold down too far with longer-term high-percentage recovery possibilities.
As long-time readers know we track and chart somewhere in the vicinity of 80 companies in the resources exploration and production business, and, as good Vultures, we prefer to take our positions in them shortly after they have made what we think are “bottom consolidations” or “after trauma” consolidations.The idea is to accumulate the companies when they are out of favor, but have the potential to come back into favor some day.It can be a really “fun” way to play, but takes patience and tenacity, so it’s not for everyone and certainly not for the hot-money day-trading crowd.
All of the companies we track made it onto our list as the recommendation or former recommendation of the best gurus in the small resource company business.We track them sometimes for many months or even years before we ever attempt a trade with them.Watching, waiting patiently, for a particular setup that has worked very well for us in years past.There more to it than that (a great deal more as the clients who saw our presentation at the New Orleans Investment Conference last year will attest to) and we will be discussing it more once that portion of the new web site is up and functioning.
Our valued readers will find much more technical and fundamental commentary in the linked charts just below.
One final Vulture comment.We are not surprised in the least that this current breakout attempt for gold has been strongly opposed by the big short sellers on the COMEX.We believe THEY believe they can “worry” the market back down with the weight of their own futures trading and in OTC forwards.But we also know and believe that we cannot expect the gold market to advance strongly without buying pressure coming from both sides of the gold battlefield – those betting on the upside long and those forced to cover their downside short bets at the same time.
And, if, that’s if, enough of the largest bullion longs in the market really do decide to stand for delivery of physical metal sometime in the next few weeks and months, then the sky is the limit for gold and silver prices if what we are now learning from GATA and others about the amount of bullion available for actual delivery is true.The link to GATA is in the second paragraph.It’s Game-On in the bullion biz as we send this out to the faithful.
That’s it from Houston this week.Until next time, thanks for honoring us with your time, good luck, good trading and as always, MIND YOUR STOPS.Got Gold?
The above contains opinion and commentary of the author. Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure:The author and/or his family currently holds a long position in SPDR Gold Shares, net long iShares Silver Trust, long the following “Vulture Bargain Hunter Stocks” mentioned in this report or within the last year: Timberline Resources (TLR), Paragon Minerals (PGR.V), Forum Uranium (FDC.V), Odyssey Resources (ODX.V), Terraco Gold (TEN.V), Hathor Uranium (HAT.V),Gold Port Resources (GPO.V), Bravo Venture (BVG.V), Millrock Resources (MRO.V), Atna Resources (ATN.T), Riverstone Resources (RVS.V), Premium Exploration (PEM.V), Constantine Metal Resources (CEM.V), Canadian Shield Resources (EXP.V), Rye Patch Minerals (new) and currently holds various (approximately 15) other long and occasionally short positions in mining and exploration companies. The author receives no compensation from any company mentioned in this report.To contact Gene use LLCCMAN (at) AOL (dotcom).
A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets.In 2000 Gene started sharing his own market research with fellow traders and fund managers.Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene’s more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com.
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