Ratcheting Up The Gold-Friendly COT Tension

Once again the COT report from last Tuesday has revealed continued pressure on the already taut firing pins of the gold and silver markets with more shorts added by the Large Spec algobots and more longs/fewer shorts reported by the Commercials largely represented by the bullion banks. If it is the gold cartel that has capped rallies in the $1,350-1,375 range since August 2016, it is that same gold cartel that are actually positioned for a rally today and where the market is baffling everyone is the failure of the Crimex Criminals to launch the rally. The answer lies in the ascent of the machines in dictating direction in any and all markets. Whereas the algos have been focused on all things non-metal in recent years, they have taken to the gold and silver markets lately and are displaying phenomenal power and control in thwarting the intentions of the bullion bank cartel.

My new line of speculation has at its core the notion that the intervention "end-game" for the big players in the gold arena may involve developing an algorithm of their own to combat the power of the banks in controlling price. To be more specific, if the algos can take the market down and force capitulation amongst the bullion banks, who are now long gold for the first time since 2001, it would be somewhat of a pyrrhic victory of sorts. To achieve victory over the always-right bullion bank behemoths by taking price DOWN may be the ideal set-up for the inevitable rally that we all expect is long overdue. Perhaps in breaking the stranglehold of the Commercial Cretins on the downside, they will clear the path to $1,400-plus by way of burning the invisible hands of intervention and searing the memory of blistering financial pain in the same way that the cat avoids the stovetop in ancient folklore.

Before you all ask the point in the week where the locks came of the booze box and medicine chest, I must confess that self-medication and auto-sedative behaviors have reached the point of necessity in this logic-starved environment for precious metals investing. To wit, this has been a BRUTAL year for gold speculators and worse than 2015 in many respects despite prices being higher than that point in time.

Sure, the COT structure looks terrific as sentiment continues at extremes not seen since the late 1990s but what traders want to see is a trend that lasts longer than a few hours (or minutes) and that is something that has been largely non-existent for the better part of the year. Unlike 2016, when gold experienced a vicious reversal just below $1,050 based upon the whims of the Commercials, gold absolutely refuses to yield to them in this go-around and my position is that until I can see evidence that the have either won control or have capitulated, I remain sidelined in terms of the Gold Miner ETFs or further options or futures positioning.

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Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.