SoT – Craig Hemke: Demand For Physical Gold/Silver Will Break The System

Investment Research Dynamics

The 50 day moving average in gold has turned up and it has bullishly crossed through the 100 dma – it has also bullishly crossed through the 200 dma…It’s almost like the HFT hedge fund programs have been flipped from “sell every rally” to now “buy every dip” because the technical picture is so good. – Craig “Turd Ferguson” Hemke on the Shadow of Truth

The debate raging in the precious metals community is if and when the a big raid on the precious metals market will commence.  Today, for instance, gold had drifted higher in overnight trading only to be smacked pretty hard when the Comex opened.   That’s nothing new.  But what’s new, given the way in which the precious metals market is set up right now, is that after being taken down $12 by the criminal traders on the Comex, gold grinded higher until it was only down a couple bucks by the time the stock market closed.  Even more interesting is that fact that the mining stocks (HUI Amex Gold Bugs Index)  rejected repeated attempts to take them into negative territory and they finished up over 6 points – 3.6% – on the day.

The trading pattern of the precious metals sector – at least for now – has defied all expectations of the market given that the technical factors currently in place have historically ushered in a vicious takedown of the sector.

This data that I refer to when I talk about the bank picture, whether its the Commitment of Traders report or the Bank Participation report, it’s all dubious crap anyway because it’s generated by the criminals at the CFTC…when they crank out these reports, we’re supposed to take them seriously in the first place? The CFTC is a criminal co-conspirator [in the precious metals manipulation scheme] – Craig “Turd Ferguson” Hemke, SoT

A big variable in the expectation of a big sell-off in gold and silver is the COT “structure.”  As of last Tuesday, the “Commercial Sector,” which is primarily the bullion banks, is net short 171,000 gold future contracts.  The hedge funds  segment of the COT is net long 104k gold future contracts.  The “other reportables” and “non-reportable (retail trader) segments make up the rest of the long side of the bullion bank short position.

The net short of the bullion banks is 17.1 million ounces. Currently, the Comex vaults are showing 377k ounces of gold in the “deliverable” account and 6.8 million total ounces. This ratio of short interest to the amount of physical underlying is absurd.  Technically it’s illegal because, as Craig discusses in the interview (see below), the CFTC continuously defies the laws in place and enables the banks to skirt mandated position limits on the Comex.

What will happen if one of these days the hedge funds decide to stand for delivery?  If just 50% of the hedge funds stand for delivery?  While it’s true that in any given delivery period that, at most, 1% of the long open interest stands for delivery, the laws of probability suggest that one of these days a significant portion of the longs will decide to take delivery.  This will bust the Comex.

In the interview session below, we discuss this issue with Craig and several other factors right now that are affecting both the markets  and the Central Banks ability to manipulate the markets.  At some point the demand for physical gold/silver will break the system:

Someday something will change and the confidence scheme will fail. Every uptick [of gold] increases the pressure on that confidence scheme which is why the banks are fighting it so hard…in the end they are just not going to be able to…Craig “Turd Ferguson” Hemke on SoT