Gold Manipulation to the Rescue
Trader Scott’s Market Blog
February 12, 2017
The gold market has had a good run from the December lows, and the bullishness is building. There isn’t the cockiness and surety as there was in early November right before the election, when I was getting very concerned about gold if it traded above $1305. My approach to markets is the opposite of many, as I get concerned about markets when they get above certain prices (resistance), and get more bullish when they get below support. And coming in prepared everyday for the potential opportunities to enter or exit markets, stepping up and buying into weakness or selling into strength, rather than predicting where they’re going. If the trend is up, then my (brilliant) prediction is the market is going higher. So it’s about having a plan/outlook to buy into the backups in that uptrend. Breaking support areas doesn’t freak me out, as they are potential buying opportunities. But blasting thru resistance areas does freak me out, if I’m long. And several times recently, I’ve left comments about not wanting to see gold blast thru $1245 in an emotional spike, especially this past week on a timing basis for an interim high. PMs often have a surge to finish off their upmoves during the last several days of a rally. And silver lagging is not a concern, we heard the same concern off of the October 2008 low and the December 2015 low. It will catch up, and it’s the surges which are potentially the most worrisome. Just looking over the last 14 months, at the lags and the surges – it’s not the lagging which concerns me. Look at the surges into early July highs and the early November high – how is that bullish?
So to put things into perspective for the current situation, from thatNov. 1stpost: “My belief has been gold will generally rally into the end of October, but it was in the first part of November when we have to get concerned about a secondary top. However we would continue to see some rally attempts. So here we go, November 1st and gold is getting itself into a bit of a pickle. It has gotten quite overbought and is seeing distribution coming in (blue arrow). So now, I will do some light selling of gold, and likely also do some shorting, if gold trades above a large (for now) resistance area around $1305 … Right now is a lousy time to be buying PMs.” The situation now is not as off balance as it was then, but for me, now is a lousy time to be buying PMs. A big back up from here would be the only thing that would entice me to add on to miners or silver, and a surge from here would not be bullish at all. The market could care less what my view is, so it’s just about waiting for the great opportunities, and this isn’t it.
I pay no attention to all of the focus on manipulation, except as a sentiment indicator, and as a potential buying opportunity. I gave fair warning, and ran this silver chart for several months, about buying silver below $15.75 – the aggressive buy zone on the silver chart. The other buy zones are for trading only. So while my approach is to use the “manipulation” as a possible opportunity, there are too many who focus way too much time on it. In an interview last week (posted below), they go thru all of the details of the “bullion banks” suppression/manipulation of gold last Thursday. And if this is true, then we can thank them for keeping gold from getting too off balance. And the weak hands should be especially grateful for keeping them from buying into a big price surge. In the interview, they discuss tonnage this and tonnage that. It’s unlikely Stan Druckenmiller, focused one bit on tonnage and manipulation when he bought gold in December and January. But one person who loves talking about tonnage is “Billionaire” Eric Sprott (is Billionaire his first name now?) He used that flawless method to be super bullish on silver in thisarticlefrom April 2011, after it had well more than doubledin eight months and at around $46 was within a week of the almost $50 high. He had a vested interest in promoting silver with his new fund, but really? And now in this recent interview, he’s “encouraged” by the weakness in the $, because “Trump wants a cheaper Dollar”, and he’s “encouraged” by the big rally in the shares. And of course, he’s encouraged by the tonnage. There are other bullish stories out about PMs now like this one from Marketwatch discussing Druckenmiller’s purchase of gold. And there is a great comment in it from Druckenmiller, which sums up how to make this business so “simple”: “I wanted to own some currency and no country wants its currency to strengthen….Gold was down a lot, so I bought it.” There you go.
So the bullish stories are being trotted back out now, but what has happened to the storieswhich were running back in December, like this bearishMarketwatch storyby a widely read columnistdiscussing how gold is certainly going lower. Or this December 2015 classic from theesteemed WSJ,which practically nailed the exact low, discussing how the Fed rate increase means lower gold prices. Of course only someone who works for the esteemed WSJ could understand the intricacies of the gold market.
Dave Kranzler: Gold has been in a steady uptrend since December 18th, bottoming at $1,131 after a four and half month price correction. Firmly back over the 50-day moving average, the price momentum appears to be a threat to the bullion banks who suppress the price of gold in the paper derivatives market on behalf of the Western central banks and, ultimately, the Bank for International Settlements (BIS)…
The banks must feel threatened by the recent activity in both physical and paper gold trading. This morning the price of gold was attacked in the Comex paper market after St. Louis Fed-head, James Bullard, delivered remarks about interest rate policy that should have propelled the price of gold higher.
At 9:54 a.m. EST, 3,927 April gold futures contracts (paper gold) weredropped on the Comex. Prior to this, the average number of contracts per minute since the Comex had opened was under 500 contracts. This is 11.1 tonnes of paper gold which hit the Comex trading floor and electronic trading system in a 60 second window. It represents approximately 30% of the total amount of gold the Comex vault operators are reporting to be available for delivery under Comex contracts – dumped in paper form in 1 minute.
“In addition, China’s demand for gold seems to be accelerating. Based on Swiss export numbers, 158 tonnes of gold was shipped to China in December— far higher than the numbers presented by “official” organizations tracking gold flows. Current premiums to the global market price of gold on the Shanghai Gold Exchange are running in the low teens. So far this week well over 100 tonnes of gold have been delivered onto the Shanghai Gold Exchange (SGE). Except for the PBoC (People’s Bank of China), all gold distributed inside China must first pass through the SGE.
The Western central banks will have a problem if the price of gold begins to take-offbecausethey will lose control of their ability to control the price using derivatives. Perhaps in addition to the standard price containment operation on the Comex this morning, the attack on the price of gold in the paper market was in response to Eric Sprott’s comments on King World News yesterday:
“There’s no doubt about it if they (investors) keep coming in and buying that kind of tonnage. At some point they will look inside at what little gold is left in the Western vaults and say:
‘No mas. We can’t keep doing this at the rate that they are buying tonnage
because we will run out of gold.’
And if they see that they are going to run out of gold in a year or so, when do they raise the white flag? I have told you many times that the Western central banks have been making up for the imbalance in term of supply and demand by dishoarding their gold hoard surreptitiously.”
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
February 12, 2017 @ 7:36 pm Jon
I’m amazed at the lack of volatility and steady (hesitant) climb in PM’s since mid Dec. The character of this rally is different from last year. I expect volatility will reappear soon as the $ looks to have turned the corner and is headed up. It’s a breath of fresh air to read your perspective on support/resistance. I used to be one of the guys that freaked on support breaks but no mas. Maybe change your handle to Trader Yoda-the force is with you…
February 12, 2017 @ 8:15 pm traderscott
Jon, it’s about the trend. If, the big if, the trend is up, the support will hold. And trading below is like stealing. But it’s why you have to work so hard on trend determination, and then believe in your work (yourself). And this is on any time frame, we just need to remember and stick with what that time frame is, otherwise it can backfire – changing time frames mid-trade is possible, but tough.
February 12, 2017 @ 7:48 pm Jon
Yen and gold headed down in early trading. Silver looks like it wants to spike above 18. Hmmm..
Hope you saw Grant’s vid. As always, the final outcome will be something no one expects. Murphy’s Law…
February 12, 2017 @ 8:27 pm traderscott
Silver has not gotten too weird yet, “hopefully” it won’t be too silverish, and just back off first. But I’m already reading the silver MUST stay above blah, blah or it’s at risk of blah, blah. So that’s a positive. And for the $, more re-testing of the lows would be perfectly “normal”, but you know my feelings about how we needed to break below 99.40 to really start to set up the bottom. And what ever happened to the great Trump US$ Bull Market Cruise Ship. Apparently it hit an iceberg and sunk. You see how dumb those people look now, right into that major resistance, they were all bulled up.
February 12, 2017 @ 11:05 pm Easy Al
I do not deny there is some short term manipulations to take advantage of the leverage nature of future contract on Comex. When gold and silver are trending down, off-loading a sizable contract when volume is sparse to run stops is clearly a strategy to accelerate the decline so that one can presumably cover the short position at more favorable price and perhaps more quickly. But I rarely see that the bear runs take place when the trend of the gold is up. When the trend is up, one also sees similar bull runs, sometimes, when volume is low too.
What I have trouble to understand is that bullion banks would consistently offer gold and silver below the market price just to suppress the price of precious metal. If a grocery store keeps offering me items at below the market price, I would go there every week and I would tell my friends to go there too. However, I just do not think the store will last for too long.
When it comes to the depth of pocket and the time horizon for the profitable trade, there is asymmetry between bullion banks and speculators. Bullion banks have much deeper pocket and are willing to suffer temporary paper loss for quite a period of time to ensure a profitable trade. Speculators often have to report to their shareholders monthly or quarterly. They do not have very deep pocket to begin with. And they can not withstand a temporary paper loss for long because some of their shareholders can get nervous and will redeem when their funds does not perform.
February 13, 2017 @ 12:19 am traderscott
Good unbiased perspective. Your store analogy is excellent, and on the opposite side of speculation is hedging, it’s a business decision for them to hedge. And yes, gold is manipulated just like Treasury Bonds, cotton, Apple stock, etc. – and it’s done legally and illegally. I saw it as a floor trader. But there’s nothing new here. So how it became an obsession with gold is what’s baffling. If these so-called bullion banks actually exist, the manipulation crowd should be ecstatic, because they are the most incompetent crooks around. How did gold go from $250-1925 in 12 years with all of that suppression. And BILLIONAIRE Eric Sprott with his constant whining about it, he sells a “paper gold” product himself, what a hypocrite. If the folks who focus on manipulation would instead have spent all of those hours studying how markets actually operate, they would be far better off right now. And why in the world would anyone have been buying gold (short-term trading aside) in November right before the election. The market was not remotely bullish. But the gold sellers were out in full force then with their propaganda.
February 13, 2017 @ 2:28 am traderscott
You’re a hard worker Fen, just believe in yourself.
February 13, 2017 @ 7:59 am traderscott
The scrap heap is a good place to start looking for opportunities. It’s where I got ags, ag equities, clean tech, Russia, etc. The scrap heap alone is NOT a reason to buy. If there is a fundamental bullish POTENTIAL, then I’m looking for the technical spark. FCEL from David – and the group – BLDP, PLUG.
February 13, 2017 @ 9:59 am traderscott
Larry has a very good question:
Ok, first let me say that I’m not bitching here. Well maybe I am but just let me say that I am not!
I understand that a mine is a hole with a bunch of liars sitting around it. That can be said about companies also, as well as most websites covering the subject. So we do due diligence to try to weed out the bad to find the good without spend thousands of dollars and countless hours (time, and money, being my most precious commodity).
However, there are literally hundreds of each. How do you get to the point to even separate the wheat from the chaff ? Where do you look to find quality companies to invest in? I’m talking longer time periods but you must also take that into consideration when short term trading.
You may have covered this in previous posts but I’m relatively new to your blog. Thank you for your time and great videos. They help me to focus on just what you are trying to bring across.
A: Larry, I highly recommend you familiarize yourself with what is a sign of strength. it’s super important as an alert to something which is building a cause to move at some point, instead of just laying dead. So this whole thing is just about working at this every day, as much as possible. Doing the research, absorbing things, thinking of scenarios, and being adept at the technical part of the market, which is the most important part – accumulation, the trend, and support and resistance.
February 13, 2017 @ 10:25 am traderscott
There’s a new post – my US$ worksheet which is updated by hand every day. I keep numerous worksheets. I do as much work away from the computer as possible. The work done at the computer does not have nearly the impact on our brains as doing stuff with paper and pencil (or crayons if you wish). It can be seen at the blog homepage.
February 13, 2017 @ 10:29 am traderscott
The $ is at resistance again. Time for another useless attempt by the Administration to talk it down.
Also, the ag stocks are moving today. They are very volatile, and need to be bought into weakness ONLY. Mosaic is at a 52 week high today. The IBD breakout folks will be on these at some point, if not already.
February 13, 2017 @ 11:57 am traderscott
If anyone can figure this out (click here), let me know. I’m lost. The fancy methods are apparently supposed to be impressive.
February 13, 2017 @ 12:16 pm PRice
Haha “road bump resistance” hahaha.
February 13, 2017 @ 12:21 pm traderscott
Hey PRice, yes, he goes thru this elaborate and fancy method, which I’m clueless about, and then road bump resistance. What is that?
February 13, 2017 @ 12:50 pm Easy Al
His columns or their abbreviated versions have appeared a few times on KingWorldNews. I do not understand it either. But it appears work fairly well in last few months. I do not have any idea of his long term track records.
The owner of KingWorldNews, Eric King, may be biased for gold and silver. But he is a good interviewer who finds good interviewees, does good preparation work and asks really good questions.
February 13, 2017 @ 12:53 pm traderscott
Well he gets a lot of links from me, so he probably likes me.
February 13, 2017 @ 8:31 pm Larry
First time I’ve ever seen that site. Quite colorful. It reminds me of those old colorful posters at the circus that try to lure you into see the sideshow freaks or the web sites that tell you about a stock that is going rise a “Brazilian” fold (Brazilian being a George Bush word denoting a large quantity; i.e. When told that they captured 3 Brazilian refugees President Bush replied, “Wow that sounds like a lot, where are we gonna keep ’em all?!”.