Silver & Gold Update; It’s “Managed Retreat” Time – Eric Dubin

TND Exclusive:  Eric Dubin |

The other day I tossed GATA’s Bill Murphy an email, reflecting on the phrase he coined.  If there ever was a week that displayed what the initial “retreat” phase of “managed retreat” looks like, it’s this week.  If you’ve been following my work since the Silver Doctors May 30th Weekly Metals & Markets show, you’ll know exactly what I mean.  June precious metals trading is unfolding as I forecasted.

Yesterday’s pop higher after Janet Yellen and her marry band of central bankers pushed expectations for interest rate normalization further out in time.  Gold and silver shot higher.  But what was far more interesting was precious metals trading during the 48 hours prior to the FOMC announcement.  On Tuesday, there was a small raid, but gold and silver reversed and recouped about 75% of the damage within just a few hours.

Historically, the cartel almost always attacks in advance of a FOMC news release.  Their Tuesday attack failed. Wednesday’s trading leading up to the FOMC announcement was also highly uncharacteristic as far as cartel behavior is concerned.  Gold and silver were left largely unmolested and traded in a gentle, tight trading range.  Yes, prices drifted downward, but that sort of tight, gentle trading range is exactly what one would expect to see a normal market produce when market participants are waiting for a news event and are just marking time.  Given the establishment’s need to manipulate silver and gold markets, the precious metals markets are anything but normal markets.  Were we not in managed retreat mode, the cartel would have been smacking gold and silver far more aggressively in the 48 hours leading up to the FOMC release.

What’s going on?  Examining the ballooning open interest in silver over the last month and the all out war associated with cartel naked shorting that I discussed last week (click here) and on last Friday’s SD Weekly Metals & Markets I’ve argued that the cartel has been naked shorting the snot out of silver with the hopes of pulling down gold, and that the short position became untenable largely in the face of very strong physical demand — demand that the mainstream financial media is failing to report, I might add, especially concerning Chinese gold demand beyond the Hong Kong import window and India’s massive silver accumulation.

Today’s trading offers another example of the cartel leading a capping effort by attacking silver.  You can even see this in Kitco 72 hour charts.  Compare the initial moves down today.  Notice that silver is far closer to a veritable 90% down shot starting the move, whereas gold displays a lag and a less sharp downward slope.  Yes, silver trades in a more volatile and extended pattern to gold.  But when we’re talking about the initial phase of an out-of-the-blue reversal, silver’s leverage to gold is not what’s key in the below charts.  See the difference in the slope of the price trace, especially with silver’s 90 degree dive during the first third of the down draft, the footprints of an attack on silver with the hopes of also taking down gold.

The cartel is over-extended with silver naked shorts.  That’s the prime reason why we saw a small short covering rally on June 15:

Remember last week, when that early a.m. Wednesday raid on silver produced a sharp downward blast but gold moved HIGHER at the exact same time? Click here for charts and my explanation.  I’ve followed the gold and silver markets on a daily basis for over 15 years and that was one of the most unusual trading patterns associated with a cartel raid I’ve ever seen.

Bottom-line:  we are witnessing a “managed retreat” this week and as I’ve been arguing since May 30th, June is going to surprise a lot of precious metals market observers.  The precious metals cyclical bear market ended in 4Q-2014 and the secular bull market has resumed, but few people recognize this.

As Jim Sinclair is fond of saying, a “mercantile sense”of market dynamics is helpful when forecasting gold and silver price moves.  Analyzing gold and silver markets with technical analysis in isolation is hazardous to one’s wealth.  Understanding cartel market history combined with an expansive, multi-factoral analysis of fundamentals and global macro dynamics — with technical analysis around the edges — is the best way to get a handle on what’s going on in precious metals.