In two weeks, the follow-up reports detailed that it really was just
these hedge funds that were covering those shorts and when you cover a
short position, you have to buy it back.
You're buying and that's what make the price go up.
So that's what happened.
And now we're kind of in this kind of No Man's Land, kind of Limp, you
know, limbo area where maybe they'll come in and short some more maybe
price will go higher and cause more short covering that's typically
our rallies begin.
And you start by getting short covering and flipping those positions
but we haven't quite cross that bridge yet.
So we're kind of stuck here on twenty bucks.
Well, you know, I've been following the commitment of Traders reports
for about as long as I've been running Tif Metals report, which is a
dozen years now and the first thing people need to know.
Is there not a trading device?
Because the information is surveyed every Tuesday at the comex close,
some of the banks and other Market participants in the past have been
fined for submitting false information.
So you got to take that into To account.
But if anything the information that they do get is then it takes some
74 hours to process it and make it public.
So all you can really use the co T.
The commitment of Traders reports for is kind of you have to have a
historical basis.
You know, when you look at them, you got to go back and remember
times, when, you know, the structure of the large speculators or the
hedge funds and, you know, versus the commercials and the banks At
times in the past, when the structure has been the same and then
compare that to where price is versus where the price was back then
and try to draw some comparisons and that's about, that's really the
value of it.
In kind of the bigger picture you can look at it as and say, well,
okay, when there's speculative excess and price is getting ready to
fall.
It means that the speculators in the hedge funds are all long, you
know, and that all the entities that usually trade on the long side.
Have gotten long and at that point you have potential for more sellers
and buyers and all that needs to happen is for price to tip over and
then thing starts to, you know, kind of cascade itself down and you
start getting some stops and, you know, that sort of thing.
And we recognize that and we've seen that, obviously for longer than I
can remember, the opposite is also true but people don't necessarily
want to believe it.
That bottoms those same speculators and hedge funds get short.
And after a while, all that are going to get short have gotten.
Short, which then leads you to have more buyers and sellers eventually
and price starts to go up and shorts.
Get squeezed and covered and price goes up some more.
That's exactly what we saw over the last.
Mmm, 34 weeks I guess is silver.
Drop down to $18 one day.
Intraday.
We saw that the say the hedge fund category.
Within those reports showed a position of something like 18,000
contracts, net short which for context.
I mean we've seen that as many as 60 or 80 thousand contracts net long
before.
So when you get that short, which means then the the issuing banks are
long.
You feel they like you're pretty close to a bottom and what happened
is you got this surge off of that eighteen dollar level.
Price rally cheese.
What 15% in two weeks, the follow-up reports detailed that it really
was just these hedge funds that were covering those shorts or when you
cover a short position, you have to buy it back.
You're buying and that's what make the price go up.
So that's what happened.
And now we're kind of in this kind of No Man's Land, kind of Limp, you
know, limbo area where maybe they'll come in and short some more,
maybe price will go higher and cause more short covering Hurry.
That's typically our rallies begin you.
Start by getting short covering and flipping those positions but we
haven't quite cross that bridge yet.
So we're kind of stuck here on twenty bucks.
Well, this has been pretty aggravating for me and people at my site
because we saw this move coming out of lack late last year and in the
first part of this year, I wrote about it in my hole annual forecast.
I write every January and that the Fed was going to go through these
Shenanigans and and jawboning to get into Reach higher to try to
control inflation and that would probably prompt a drop.
You know, the 1800 and gold and below $20 and silver.
And I thought, well, that would probably be the lowest.
I thought that would happen maybe by May June.
And here, we are now in August, and we're still at these levels.
And that's the hard part is, you know, where this is headed.
I mean, eventually, the feds got to start cutting again.
And interest rates are going to go back down.
It's the same games that they've been playing now since 2009.
Problem is, doesn't move at my Pace.
My preferred Pace, you know, I I thought maybe the stock market would
crash and it would prompt the FED to Pivot with a stock market crash,
but it really didn't cause that pivot.
And so things are just kind of moving along at a slower Pace than I'd
hoped So eventually.
Yeah, the FED will pivot and I'll start cutting again and I'll have to
do, QE to monetize, you know, all new debt and refunding.
That's coming.
But until that actually happens, we're kind of kind of go sideways.
It de period is analogous to late 2018.
In the first half of 19 Elijah where the FED, it's been about four
years trying to jaw, bone quantitative, tightening and interest rates.
I got the 10-year up to three and a quarter.
And then the stock market collapse, you got the Powell pivot in late
December of 18, but the FED didn't actually start cutting rates until
June of nineteen.
So in that period of, you know, of six months gold went up and then it
kind of grinded backwards.
And then once the FED started cutting in June of nineteen, it shot
higher about 25%.
Any days.
That's kind of where we are again now, I think Powell regardless what
anybody says pivoted with his language at the last fomc meeting three
weeks ago when he said we have moved in the past tense to a neutral
rate, we have moved, that's what he said.
So now we just wait you know, the four five, six months whatever.
It takes to the FED actually pivots with policy and so that's why we
might continue to kind of just slowly grind higher.
For the next, you know, several weeks or a couple of months, if you're
short, I don't know.
A hundred silver contracts at a price of $19.90 on back in early July
thinking, it was going to go to 16 or whatever.
And all of a sudden the price goes to 20, when you're underwater, what
five thousand dollars on a hundred contracts.
That's Five hundred thousand dollars.
I can't even do that math on the Fly and eventually you're starting to
get margin calls and you're like, oh man, I can't lose any more in
this position and so you cover it.
And so the higher price goes, the more of those existing shorts are
now under water and it increases the pressure on those hedge funds, to
either put up more money as a margin call or just cover them.
Just get out, just lick your wounds and move on and that's you know
that's generally where you get it.
It's just the opposite of when price comes down, you're piling in the
lungs because you're all excited.
Because price is going to go, higher price starts to break down.
You put some stops early, you know, say it breaks below the 50-day
moving average.
Maybe you're going to put a stop below there.
Some other technical level in the stop gets hit and price Falls
farther.
The same thing happens in a short, squeeze the upside which is how we
got fifteen percent in in two weeks.
The key level now is pretty clear on the chart.
The 50-day moving average is something that the front month September
has fallen back.
Below just this week but also there's you know that level up around
we're banging up against it last week around twenty seventy five to
twenty eighty.
If you can bounce and get back above the 50-day primary, maybe on
dollar weakness later this week or next.
And then you can start maybe making a higher high above 21 because now
think of it this way, Elijah, if you're a, if you're running, if
you're a Trader and you're shorter, your hedge fund, you're short and
you're kind of, okay, maybe we're safe, silver came back, Down 3%
yesterday.
Okay, where am I going to put a stop on this position of by stop.
If price accelerates again, what you're going to look at the chart,
you're gonna do well, let's see, last week, it got up to 2880, let's
put in a buy, stop at 21.
If it breaks above 21, then we'll buy, and we'll cover and get out of
this because it probably means is going to 22.
Well, then that's what, you know, that's what we'll wait for next on
the upside is will think okay, if price get above 21, then you'll
probably get like an air pocket.
pocket where price goes from 21 to 2125 in like five minutes and so
that's that's how that
Process works.
So now we need if you want to rally and see some gains in the short
term then you need to get back above the 50-day and make a higher high
than where we were Friday at Friday's close to prompt more of the
short covered.
It does seem like we're seeing, it's possible that we could be seeing
like a coolant not cooling off, but topping of inflation, right?
Where we're starting, then to see disinflation because we did see the
recent inflation number at Five percent rather than the month before
at 9.1%.
Do you think that is going to impact the fed's decision at all?
Well, yeah, I don't know.
It depends.
They're gonna have to eventually pick one of the other.
I mean, they can keep hiking away, you know, and drive mortgage rates
to 8% and all that kind of stuff.
And it further, kill the economy, they've already inverted the yield
curve by 30 or 40 basis points.
We're already clearly in a recession unless you want to change the
definition of recession.
Like like, you know, the political economists are trying to do So they
can do that and pushes, you know, us into a deep deep recession or
they can ease off and try to keep the markets afloat and and
everything economy afloat to.
I think that's the direction they'll go but what do I know?
You know I'm just as dope out here in the middle of nowhere, the
watches and stuff.
I don't you know, I don't know.
Elijah it'll be interesting to see where the inflation numbers go from
here.
The drop, or again, we're inflation.
Still eight and a half.
%, you know, higher than last year.
The he's in the advancement of it was predictable just because crude
oils had gone down from 125 to 95, you know, and that's the biggest
driver of everything is Energy prices and gasoline falling from $5 to
four dollars.
And so that was predictable.
But now you look and it's like, well okay we're heading into the
winter time us natural gas prices are the highest they've been since
2008 natural gas price in Europe or just outrageous.
I just read something this morning about how the cotton crop has been
essentially destroyed by the Heat and the drought in the Southern
Plains this year and so copper, prices are, soaring are cotton prices
are soaring.
I should say.
So, what what's, what do?
I don't use cotton for anything, so don't worry about that.
So I, I just, I think it's kind of, I don't want to say naive silly,
maybe not fully thought out.
This idea that suddenly were going to go into deflation.
Even when there are still so many input costs are soaring you know and
we still have all these dollars that are out there that you know
whatever it is 45 trillion in dollar you know dollars that were
created a couple years ago they're out there sloshing around chasing
too few goods so inflation May he's back before going up again.
I don't think there's any way the FED will ever get the bed funds rate
up above the inflation rate that I don't think they can never get that
far before they have to Pivot in reverse.
It does seem like as long as that real inflation rate then does stay
above or does stay - then that should be bullish for gold.
It just seems right kind of interesting how over the last two years
gold has pretty much gone sideways and silver down.
Well and again this gets back to how it's priced.
Elijah you know and and who trades the all these derivative contracts
that set the price.
I mean, I just mentioned yeah, it's almost all markets are run by
computers and not just the Futures markets.
I mean this Stock market is 80% hft computer.
That's how you're able to get, you know, a however, many billions of
shares are traded every day because he's hfts print stock positions
back and forth, trying to Nick each other for fractions of a penny.
Well, the same thing is true in the Futures markets, you got these
machines that are pre-programmed to either buy or sell gold.
Futures are silver Futures based off primarily movements in the dollar
intraday and movements in the bond market intraday Well, they're also
watching real interest rates and here's the fallacy of that.
I mean, real interest rates are the 95% correlated to gold prices, not
just inflation, but inflation-adjusted, interest rates.
Well, problem with that is you and I thinking rational human beings,
we would sit back and, and equate or come up with a real interest rate
using today's numbers we go.
Okay.
10 year treasury.
Let's say is 3%.
Current CPI is eight and a half percent and we go.
Okay, well least at the time of me purchasing, this 10-year treasury
note I'm locking in a five and a half percent loss of purchasing power
this first year and then I got to look forward to decide if this is a
smart idea.
Okay.
Well what's my real rate going to be next year?
Maybe negative 3 you know, as inflation comes down low how positive to
real rates have to get over the life of that tenure investment to
actually get 20 remember to have to have some pretty positive, real
rates in year 7, 8, 9 and 10, to get back to where at least I broke
even, right?
That's how you.
And I would look at it, but the machines don't have time to do that.
They just look at the 10 year inflation expectations.
As of this moment, which is like, God, they can't even tell you what
the weather's going to be a week from now.
Every Economist are notoriously incorrect with not only your economic
forecast but their inflation rate.
Forecast look at the Fed.
Inflation rate, forecast, for the last 10 years are horrible.
But yet we're supposed to believe, right?
That the tenure breakevens as they call it, because believe it or not,
there are markets that trade on inflation.
Expectations.
Most believe that, that inflation expectation, 10 years out is
accurate.
And so, these computers are programmed to buy and sell Futures
contracts based on the difference between the current nominal rate of
the 10-year note, and
Current.
It can your inflation expectation which is like 2.6 percent on some of
these measures so they actually computers.
Look at it is saying it's a plus point to when you and I look at it in
real time ago.
No, it's -5.5.
But that's that fallacy is a part, this part of how the computers are
program is, it's also due to how we price these things price gold,
that creates this illusion that somehow gold is no longer an inflation
hedge.
I suspect it is and that a tin ore or gold is quite the bargain in the
grand scheme of things.
But everybody else just wants to look at it through this lens.
This prism of how the markets trade and write it off as being a
golden.
Anymore.
Now we'll see give it time.