SOMETHING BIG HAPPENED IN THE GOLD MARKET: Must See Charts

Something BIG happened in the gold market this year and very few investors understand the significance.  While precious metal analysts debate whether the huge gold rally since the beginning of the year is sustainable, I am beginning to wonder if certain indicators are no longer reliable.

I’ll get into that in a moment, but wanted to share a few things as it pertains to my views on the precious metals.

A few weeks ago I was able to get away on a short vacation with my family.  We stayed at a nice Bed & Breakfast and at night I enjoyed listening to several different guests talking about their jobs and past-times.  In my experience, I have found out that the majority of people would rather talk about themselves rather than listen to others.  This doesn’t bother me at all as I get to learn more things with my mouth shut than I do with it open.

Regardless, the most interesting chat I had was with the Bed & Breakfast owner’s son.  He stated to talk about the Presidential race and it moved to different aspects of the economy and finance.  It happens that the son went to college to study economics, so this was a huge treat for me as I had a good idea where this would lead.

Before I could mention the subject of precious metals, my wife (sitting next to me) asked the son, “If he had a nice chunk of change to invest, what would he invest in?”  I knew where my wife was going with this because she knows a lot about gold and silver due to my 15 years of boring her to death with all the details.

Anyhow, his answer was quite interesting.  He said, “I would buy travel Visa’s”  I thought that was an interesting answer as I have never heard of it before.  He explained why he would invest in that, then I asked him what he thought about the precious metals??  His answer was, “YOU CAN’T EAT GOLD.”  He did not have anything good to say about the precious metals…. LOLOL.

I didn’t find this surprising at all, as I’ve heard that KNEE-JERK response over and over from supposedly intelligent individuals.   Actually the next day, I thought it might be a good idea for a promotional precious metals T-SHIRT by having on one side of the shirt printed with, YOU CAN’T EAT GOLD, and on the other side, YOU CAN’T EAT YOUR 401K.

YOU CAN’T EAT GOLD… Oh Really??

Anyhow, this is the problem with most Americans.  At some point down the line they heard “YOU CAN’T EAT GOLD” from someone and they continue to regurgitate it as if it makes some sort of sense.  Well, of course you can’t eat gold…. what a stupid statement.  On the other hand, humans actually do actually eat a little gold.  Have you heard of Goldschlager Schnapps or chocolate cake with gold leaf?

Chocolate-GoldLeaf-Cake-&-Goldschlager

So, people have been consuming gold for quite a while.  Now, the question is… who would drink little pieces of their 401K in their schnapps or draped over their birthday cake???

Anyhow, I continue to come across silly or ignorant comments about the precious metals all the time because the individual is either repeating a stupid line they heard, or the person doesn’t understand the underlying fundamentals.

For example, a reader on another website made a comment about my article on The Fundamental Reason The Silver Price Will Explode Much Higher Than Gold.  He said, “Ridiculous. why don’t you writers talk about something worthwhile, like the silver basis.”

First of all, my analysis is NOT BASED on short-term forecasts.  Rather, I look to the mid-longer term trends.  My analysis on comparing gold and silver scrap supply versus total demand of those metals shows how much more silver is lost in the market than gold.  This supply imbalance will translate into a much higher silver percentage gains in the future.  I never said this was going to impact the silver price this year.

Secondly, many market indicators are becoming less reliable today than they were years ago.  This is due to the manipulation of the market by the Fed and Central Banks.  Furthermore, the silver or gold basis may be flawed due to precious metal market manipulation.  I will discuss this shortly.

Lastly, MORE & MORE AMERICANS are finally waking up.  I know this because 40% of my visitors are new EYEBALLS to my site each day.  Here are the SRSrocco Report site Google Analytic stats for the past 30 days:

SRSrocco-Report-Stats

Of the 143,331 individuals who visited my site over the past 30 days, 57,448 were NEW visitors, while 85,863 were RETURNING.  That’s a lot of new people stopping by the SRSrocco Report in a month.

As I have stated over and over, if just 1-2% more of the population moved into physical gold and silver, it would be game over.  There just isn’t enough metal to go around… only a much higher prices.

Okay… let’s get back to really interesting information.

SOMETHING BIG HAPPENED IN THE GOLD MARKET

Most precious metals investors have read about the huge price move in gold and the large flows into Gold ETFs & Funds in the first six months of 2016.  However, very few realize just how significant the changes have been in the gold market if we compare it to the past.

This chart is the Monthly Change of Transparent Gold Holdings from Sharelynx.com.  These holdings represent Gold ETFs, Funds and Repositories, such as the Comex:

Monthly-Transparent-Gold-Holdings-10-Year

From the beginning of 2009 to the end of 2011, these total gold holdings increased approximately 45 million oz (Moz).  So, as the price of gold moved up from a low of $780 at the beginning of 2009 to nearly $1,900 in September 2011, total gold holdings increased 45 Moz.  Now, compare this to the massive 25 Moz increase of total gold holdings in the first half of the year as the price moved up only $300.

The significance of this present change in the gold market can be better seen in the chart below:

Change-In-Gold-ETFs-Funds-&-Repository-Holdings

The average annual increase in total gold holdings during the 2009-2012 period was 15 Moz compared to 25 Moz for the first half of 2016!!  If demand for gold continues as strong in the second part of the year, we could see upwards of 50 Moz move into these total gold holdings versus 45 Moz for the 2009-2012 period.

That being said, I highly doubt these Gold ETF’s, Funds and Repositories are receiving all the gold they report.  Why?  Well, if we look at the Gold Supply-Demand situation, the gold market will experience a large deficit for the first half of the year.  According to the World Gold Council, the huge surge in Gold ETF & Fund demand caused a 151 metric ton (4.8 Moz) deficit for Q1 2016:

World-Gold-Council-Q1-2016-Table

If we assume total Gold ETF & Fund holdings doubled to 700 metric tons (mt) in the first half of the year (they increased by 363.7 mt Q1 2016, shown in the table above), this will likely push the deficit to over 300 mt or 9 Moz for 1H 2016.

So, how does a net change of Gold ETF & Fund flows of 831 mt (-131 outflow 2H 2015 + 700 mt inflow 1H 2016) since the second half of 2015, not impact the gold basis as reported by Keith Weiner of Monetary Metals??  In Keith’s last update, he stated the following about gold:

The price of the dollar continued to drop (i.e. the price of gold, measured in dollars, rose). And the scarcity of gold (i.e. the cobasis, the red line) rose. So far, it’s looking like a bounce off the bottom of the abyss. But it is notable that it happened with a rise in the price of the metal.

Gold-Cobasis-Monetary-Metals

Our calculated fundamental price of gold is up a further $50 ($100 higher than on June 24). Now the fundamental is only $170 below the market price.

What Keith is stating here is that if the gold price was set to really rise, the BLUE LINE (gold basis) would be trending down, not up.  Even though it fell a bit recently, the trend has been moving higher since the beginning of March.  When the blue line trends higher, according to Keith’s analysis, there is more abundance of gold.

So, how does 25 Moz more of gold demand into the Gold ETF & Fund Market during the first half of 2016 not impact the gold basis, as reported by Keith Weiner???  How much does an additional 25 Moz impact the market???  Global gold mine supply was a little more than 1,500 mt (48 Moz) in the first half of 2015.  This new Gold ETF & Fund demand devoured 50% of global mine supply, not including gold jewelry, industry, bar-coin or Central Bank demand. 

I will tell you how 25 Moz of gold moving into the Gold ETF’s and Funds doesn’t impact the gold basis….. because more paper gold is accounted for than the physical gold in their inventories, or some of the gold that is being reportedly held by these ETFs & Funds are owned by several parties.  Thus, the gold basis would not be able to provide an ACCURATE reading if the supposed “abundance of gold” was due gold bars with several owners.

Again, how does a 25 Moz movement of metal in Gold ETF’s & Funds in the first half of 2016 not impact the market or gold basis when there was a 4 Moz outflow in the second half of 2015??

If You Can’t Eat Your Gold, Maybe You Can Sell The Same Bar To Several Owners

This is the issue we face today.  The market is bathed in fraud from top to bottom.  Nothing is as it seems.  While I use certain data, information or indicators to forecast mid-long term trends, I try to stay away from short-term forecasts.  Yes, I did publish a 20 year chart showing the 50 MA of Silver and how the $20.35 price was a huge trend line.  This was not something I look at, but what other big traders pay attention to.  If big traders are still controlling the market today, then it makes sense to see what they are doing.

Regardless, the huge $300 price move in gold since the beginning of the year has set a record in another aspect of the market.  The Commercials, which are the bullion banks, hold the highest net short positions ever:

COT-REPORT-Gold-Chart-10-Year

The price of gold is shown by the BLACK LINE, while the COMMERCIALS are in RED and the LARGE SPECS are in GREEN.  The Commercials have controlled the price of gold and silver forever it seems.  When the Commercials hold a record high net short position, normally we see a reversal and correction lower in the gold price.

As you can see in the chart, the Commercials hold a record 325,462 net short positions.  For those new to the precious metals market, short contracts are a bet for the price to go lower, while long contracts are a bet that the price will go higher.  The LARGE SPECS are large traders and hedge funds (GREEN) that are betting on a higher gold price move, while the COMMERCIALS (RED) are banking on a much lower price.

Now, when I said, “The Commercials are banking on a much lower price”, I wasn’t just making a pun.  Because the Commercials are the big bullion banks like JP Morgan and HSBC.  If we go all the way back to 2006, the Commercial net short position (RED DASHED LINE) has never been higher.  This is also the same for the LARGE SPECS.  They hold the largest amount of net Long positions (GREEN DASHED LINE).  Even when the price of gold surged to $1,900 in 2011, the Commercials net short positions were substantially less.

At some point, there will be a Commercial Short Squeeze, which would result in a skyrocketing gold price as the bullion banks scramble to buy back their positions.   If the situation in the European banks continues to disintegrate, the Commercials may be forced to either ADD more shorts or COVER and buy back their positions.  We will see….

So, there are several interesting questions we can ask.

  1. Why hasn’t a 25 Moz move into Gold ETF’s & Funds not impacted the gold basis as analyzed by Keith Weiner?
  2. Where is the extra gold coming from to supply this huge surge in Gold ETF and Fund demand?
  3. How much gold is actually moving into these Gold ETF’s & Funds, or how much of the reported gold is held by several owners?
  4. How long can Central Banks continue to prop up the market with QE and monetary stimulus before the system crashes?
  5. When will investors finally realize owning physical gold is better than holding a Sovereign Bond with a negative rate?

I will continue to come across individuals who tell me that “YOU CAN’T EAT GOLD” or write comments stating that the information in my articles is not worth reading.  This doesn’t bother me a bit because I am concerned about the 5-10 year horizon.  My next article will include some updated U.S. energy data.  Let me tell you, WE ARE IN SERIOUS TROUBLE and there isn’t much we can do about it.

Unfortunately, most of the analysis out there is way too specialized so the analyst community falls victim to the LEFT HAND not knowing what the RIGHT HAND is doing.

I call this as INTELLIGENT STUPIDITY.

While it’s true you can’t eat a gold bar, you can’t eat a 401K either.  That being said, I would bet anyone during the next financial and economic collapse that you will have a lot more options holding physical gold than a worthless 401k.

IMPORTANT UPDATE:  The SRSrocco Report Precious Metals Webinar is FREE and will take place on Tuesday, August 2nd at 6 pm EST.  I will provide more details in the next several days.

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43 Comments on "SOMETHING BIG HAPPENED IN THE GOLD MARKET: Must See Charts"

  1. Take your gold and trade it for fiat dollars then eat that, better still buy some bread, milk etc.

    People that still think of Gold as a barbarous Relic have yet much to learn.

    • The “you can’t eat gold” comment is that of a brainwashed fool. Keynesian indoctrination.

      We will see… (Can you eat a visa?)

    • We know this is the largest gold short in history and we know the EFT’S have bought tons of gold but we don’t know where they get it. And, they have using those short positions, as we speak, to smash gold and silver into oblivion as silver soared to over 21 an oz and is now 19.50 a two dollar smash since the Brexit crisis.

      The takedown has been relentless and unless we get another massive crisis soon, they will continue to do so into options expiry next week. There is nothing new about this pattern. The Comex is not going broke. The LBMA is not going bust and all markets are being brought under control and subjugation by the central bankers yet once again.

  2. Weiner is a putz – do waste your time on someone who doesn’t believe the BIS and other banks are playing him like a fool.

  3. Brilliant analysis.

    Thanks,

    SteveW

  4. People around the globe are indeed discovering that holding physical gold versus a negative rate bond, is actually a positive return. They are assured the return of their money, rather than a promised return on their money.
    This is especially true in Europe as the differing populations have their respect for gold in common. Reports by bullion retail dealers, are filtering out about very tight supply and above average demand, with longer wait times.
    The average North American is going to be caught flat footed when the herd begins to stampede.

  5. jimmy trotter | July 19, 2016 at 5:55 pm | Reply

    Just curious about the bread and breakfast. What type of bread did you sleep on?

  6. I’ve seen kilo bars of hashish with gold foil labels in the early 80’s.

  7. Hello Good work as is you usual, Very good news as to the number of new readers I have been concerned that tis work has been “Preaching to the choir”

  8. Another German Schnaps would be: https://de.wikipedia.org/wiki/Danziger_Goldwasser
    But we do not drink gold – we drink silver, almost daily as colloidal silver, which promises to work as an anti cancer.

    BTW: “Lastly, MORE & MORE AMERICANS are finally waking up. I know this because 40% of my visitors are new EYEBALLS to my site each day.”
    I am a German in Spanish speaking America. You are nowadays sometimes translated on goldseiten.de, your hope that these “eyeballs” are UScits might be an error in judgement. Everybody understands english as the language is so simple, we all start with it in school. Y senor “St Angelo” seguramente habla tambien mas que un idioma verdad? Today we all speak at least two to three and understand (if we have to) another three, right? You are an international rock star Don Steve!

    • @ Wanderer….
      Not so fast friend.
      Remember that a person who speaks three languages is called tri-lingual.
      And that a person speaking two languages is bi-lingual.
      But what can you safely call someone who speaks one language? An American.

      • Try the French as well…
        As if the French all have some kind of inherited brain damage that prevents them from being able to learn another language… not to mention prononciation, when those few who (finally) manage to learn a few words of English (or Spanish) try & speak!

        Funny that the Swiss, Belgian, or Canadian French speaking people don’t seem to have the same kind of problems with other languages, huh?

  9. Steve… The following was a classic:

    “I knew where my wife was going with this because she knows a lot about gold and silver due to my 15 years of boring her to death with all the details”.

    And your wife still lives with you… even goes on holidays with you… you want to hang onto her…. Lololol

    So does mine !!!!!

  10. Gold will go down for the rest of July which is only 10 more days.
    Check out my YouTube videos

    https://www.youtube.com/user/ApisBullTrading

    • I’m not so sure. So far everything that has been ordinary seems to start and end with Brexit/Trump.

    • Jud: Thanks for providing a direct link to the YouTube video you are referring to…
      As for Gold going down for the 10 next days, I’m not sure on that one (as far as timing goes).
      However, in terms of price targets, here is what I see:
      – Gold HAS TO go down somewhat, as there is a Price / RSI divergence that started on Feb. 11, 2016.
      – Fibo retracements from the May 30th, 2016 Low to the July 11 Top are:
      $1308 for a 38.2% retracement (possible, as the Daily RSI has already come down from 72+ to 50 now.
      $1287 for a 50% retracement.
      $1266 for a 61.8% retracement (possibly intra-day),or anywhere in between, should (possible-probable) new financial bad news occur in Europe, Turkey, or whatever…

      – Should the 38.2 Fibo not provide support, Elliott Wave current short Term (down) Target line points to the +/- 1270-1275 area (The later, the lower).

      Finally, may I ask where you got the end of July Timing target?

      Please also note that none of the above bothers me a bit, though, as PMs had to take a rest, as – just like Steve – I’m a whole lot more interested in Medium – Long Term on Precious Metals.

      As for the guy who said that “You can’t eat Gold”, I’m not sure where this guy comes from, as Gold (and Silver) have held VALUE for the last 5,000+ years… Which means it has been convertible to ANYTHING people wanted at any time they wished to…

      But of course, one should never forget Albert Einstein’s famous quote that says:
      “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former”.

  11. You can’t eat a house, so why buy a house? You can’t eat a car, so why buy a car? You can’t eat tools, so why buy tools? Eating is not the only determinate for real value. What can you do with gold or silver? How plentiful is it? That is why gold and silver have value and why it is real money. Forget colored paper that loses value over time and the new speculative bitcoin joke…wait until people figure out it is worthless like the pet rock. Once again , what can you make with gold and silver and what can you make with colored paper or bitcoin? Then try to sell these to people in other countries. Don’t you think the gold and silver loving people of India would laugh at you with your bitcoin or your colored paper? Of course there is nothing wrong with making a profit from any of these if you can. Best of luck to those who try.

  12. Steve: Your 5 to 10 year prognostication is something to behold. When I started with you gurus back
    in 2010 that was the theme i.e. 5 to 10 years out. Well that’s 6 1/2 years ago. All these gurus were PREMATURE. Their analysis was flawed. If they knew anything they should have told us in 2010 to start accumulating silver in 2016. But, they are sellers of silver and a good way to get buyers, especially
    with a 1.5% T-Note is to tell them silver is going to $50 or $100 and some say $300. The asset these gurus have is TIME. My broker told me to buy mutual funds for the long term i.e. 25 to 30 years. To buy
    monthly. Well its been 35 years and he is still telling me that you must invest for the LONG TERM. If the gurus knew anything they knew they could, under this scenario, sell silver, whether it is $15; $20 or $50 and make a living. I could buy any utility i.e. AT&T and in 10 years it will be double what it is today and
    in the meantime I get 5% dividend. Admit it Steve, your guru friends know nothing about the present
    state of silver. Their advice is speculative at best. I’ll just buy silver monthly, as I have these past 6 1/2
    years. WC Fields said it best, : There’s a sucker born every minute.” All buying these past 6 years was
    PREMATURE!.

    • Joe,

      Always a pleasure reading your thoughtful and varied comments. However, you may find your time more valuable leaving positive comments on the Banking sites where they are doing GOD’s WORK.

      steve

      • What’s all this talk about banks? All I know is they are corrupt. And why the reference
        to their doing God’s work? Please explain. How do bank’s do God’s work?

        • Do you take everything literally? Have a sense of humor! Lighten up!

          By the way…

          “My broker told me to buy mutual funds for the long term i.e. 25 to 30 years. To buy
          monthly. Well its been 35 years and he is still telling me that you must invest for the LONG TERM”

          I’m assuming you are over 60. If your broker is still talking about investing for the LONG TERM, you need to think about that strategy, i.e. what will come of your new investments 25 to 30 years from now. I’m sure this broker is a good man, but to me that is grossly irresponsible, unless you have so many assets the new investments are for your heirs. BTW I’m over 60.

    • Good grief. My favorite thing to do with paper like stock certificates takes place in the bath room. I am pretty sure I could eat them before they went there, but wouldn’t get much more nutrition than the gold bar. They only things of value are things you cannot print or make (beyond a few things like furniture and toilets).

      I love this one the most: The stock market ALWAYS goes up.

      Well ALWAYS only applies to two things: Dying someday and taxes in the mean time.

      (Unless you want to talk about the love and grace of God.)

      • It was only a dark thought about the FDR past but my biggest fear is a law mandating governmental confiscation of gold and silver. Pretty sure now after a dozen years that is inevitable. What are you going to do my fellow gold and silver bugs? FDR said we can’t let the Germans and Japanese have the gold so sell it to us – for $20. Then, a year or two later inflated it to $35 to keep the Paper Inflation Genie in the bottle.

        I think that discussion should not happen in public

        This is the problem my gold friend. We may not be able to eat gold, but we won’t be able to buy bread with it legally either.

        • I hate to spam but Joe Lindell, it is now pretty common to know and see that the COMEX is heavily manipulated. And if it has been MANIPULATED for 30 YEARS why is 1-5-10 such a big deal.

          Who is going to predict when or how Doc Holiday pulls four aces at every table?

          And when he doesn’t.

          I’m 99% sure that he won’t at some point. I just cannot guess when.

          When he does not pull the four Aces, he being Doc Holliday, will pull and use his guy if he has too.

          Confiscation.

          • Marc Lichti | July 19, 2016 at 10:12 pm |

            guy was supposed to be gun

            come on. there are a few Tombstone cultists out there.

          • Petedivine | July 20, 2016 at 1:15 pm |

            Why would Doc Holiday pull his gun? Once the Doc pulls his gun he loses all credibility and can be shot for being a thief. Not to mention the gun is being pulled on fellow gun fighters. The rich own gold. The elites own gold. Americans own 401Ks. Whose gold will the government steal? When will they announce to the world that their currency is junk and they will resort to robbing savers and their own citizens at gun point. Such an action would have dire consequences for TPTB.

    • Joe,
      You are the sucker, and against your own better judgement, you insist on expressing yourself like a moron.
      I don’t think you are a moron, but apparently something…Bitter? Angry?

    • I paid $AU19 for my silver coins six years ago. They are now worth $AU36+. That is nearly a 100% gain which is as good a return on a physical asset as you could hope for. And I can sleep at night knowing I own something that has been money for over 3000 years.
      A good nights sleep and a reasonable return. What the hell are you talking about?

  13. How is a BREAD and Breakfast different from a BED and Breakfast?

  14. You can’t eat oil !
    ^
    without

  15. Very good Steve, as always…thanks

  16. I live in Mesa, AZ. I have known Keith for over 5 years. He does not believe the markets, gold and silver, are manipulated.

    I like Keith. He’s a really smart guy. But, I believe he is wrong on the manipulation of gold and silver.

    He truly works toward getting the US back on the gold standard.

    Keith is a student of Prof. Antal Fekete who’s also a brilliant guy. Unfortunately he is getting really old.

    • “I live in Mesa, AZ. I have known Keith for over 5 years. He does not believe the markets, gold and silver, are manipulated.”

      Where does he live; under a rock?

      Does he belong to The Flat Earth Society? Believe in placing leaches removes a bone infection?

      Does he believe a jet engine can’t work to propel aircraft? What else doe he “believe”?

      I’m tired of people who in effect say to the world “becasue I believe [or don’t believe] something, that’s the way it is…for everybody”.

  17. Thanks Steve another excellent article!

    I don’t think the published Comex data is of ANY significance at this time (possibly was in years prior), except as to demonstrate what the banking Cartel would like us to believe. Its total smoke and mirrors and represents an insignificant portion of the Cartel’s current bets and derivatives on the near future of the PM’s.

    As with ETF “holdings”, as you eloquently explain, it’s a well-planned deception and happily allowed by a criminal DOJ and SEC. What could be more appropriate though for a US election time with two great fraudster / conmen running against each other?

    • D Lazof,

      Perhaps, but large short positions in G or S almost always are followed by an effective price smash, like right now. Shorts in G & S are at all time records, and check out spot prices now and last last couple days. So COT reports still mean something…until they don’t.

  18. First, physical gold and silver were leveraged with paper claims. Now, physical inventories are being leveraged with several claims on the same inventory. Hey, let’s leverage leverage!

    Sometin’s fishy:
    http://www.freegoldclock.org

    They simply cannot provide enough physical metal. If you don’t hold it, you don’t own it.

  19. “While it’s true you can’t eat a gold bar, you can’t eat a 401K either”

    You also can’t eat dollar bills or digits on a screen. I would rather have something of value that has no counterparty risk than excess fiat currency or bank deposits that can be bailed in or prevented from withdrawing (think Cypress or Greece). Fun times ahead!

  20. I would like to thank you guys for all of your input concerning the situation of precious metals and human nature but which one of you would help a person if you saw them half beaten and left for dead on the side of the road? Without CHRIST we are all like that fellow,remember what Christ has done for us and remember without Jesus we are useless and as dead as those statues that the church of the known world puts out for all to see. My hearts desire is that all of you come to the knowledge of who JESUS truly is. I’m happy you have done very well for yourselves but remember this those who Love not there neighbors when they are in need Love not God and the ones who say they do and do nothing,”like the known Churches of this day ,” are in deep trouble, for if the Jews of old didn’t escape the wrath of GOD how much more shall the wrath of God fall upon them in these last days? Our great Nation is in serious trouble guys, for the known Churches have been sitting in Judas Iscariot seat,”give me the money!” But those that know he that is true shall be able to overcome ,and yes even those who call on the Name of the Lord shall be Saved. God bless all of you this day.

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