It isn't fun to watch gold and silver drop like they have. The upside is that the bullion houses seem to be moving to the long side as evidenced by the COT report. Late last week and on Monday they were buyers so it isn't a complete surprise to see the
I have never seen a report with a swing like this. It shows that the bullion houses were net buyers of around 36,000 contracts of gold and 11,000 contracts of silver with large and small speculators doing the selling. This should be very bullish for gold and silver next week.
The news that JP Morgan has a loss of Two Billion and a position that is still open IS A BIG DEAL. The initial market reaction was to sell off but now silver and gold are moving up. The chances are now increasing that they will be forced to stop taking these huge trading positions and this may well mean that they have to cover their silver shorts.
The selling is paper and manipulated by governments. In the end physical beats paper and as we dip here I am buying as much as I can.
The FAZ/AGQ spread has given up some ground this morning but is still making a profit. Markets are reacting in various ways to the end of austerity elections in Europe - in my view this means money printing will start in earnest. To counter this we can expect central banks to do a coordinated raid on Gold and Silver and as silver drops I will be buying - as I do so I will close out the spread trade a little at a time.
The FAZ/AGQ spread worked well today moving 2.28% in my favour. Everyone will have their own theory about the "fat finger" gold sell off this week. The COT shows a large increase in the bullion house ( HSBC and JPM short positions ? ) - my theory is that they tried to jam the market down and got caught by a very deep pocket trader ( China ?? ). I think they have a problem here and we could see them take some big losses on this trade.
The spread moved 0.67% against me today but I really like this trade as we could see some huge volatility if the market breaks and if we see stimulus silver should rally faster than stocks - so I am staying with the trade and looking to add to the position tomorrow.
A good way to look at this trade is to pull up the FAS chart compared to AGQ which shows FAS up around 60% in the last six months and AGQ down 20%. So by buying FAZ one is basically going short FAS and looking for the gap to close. We could see silver out perform as physical deliveries get made. The bullion banks have spent the last month increasing the available silver in COMEX by about 40 Million ounces to "140 Million ounces" but this could just be SLV silver that has been "re-allocated". Their registered silver has increased from under 30 Million ounces to around 34 Million ounces - in my view they are painting the tape to make it look as if there has been a big increase in silver availability and the "buyers" know better.