Midas snippett on option expiry

Had to bring back that quote after Bernanke’s "No" responseto Congressman Paul’s public question about whether gold is money.

Am up early this morning working on GATA’s London conference, which is only 9 days off now. So far, so good. The GATA dinner featuring Eric Sprott is sold out (320) and it looks like we will have a TV hookup in another room for another 80 people to watch Eric’s presentation.

So far our press conference prior to our Thursday reception is gathering steam. Bloomberg, Reuters, and others have accepted so far. CNBC Europe just did too.

Next week is going to be very hectic. I am off to London early to have various meetings and make sure all the details are worked out for the conference. With all that is going on, my plan is to give a market recap mid-week, with the commentary of the featured input sent our way by your fellow Café members. The conference on Friday and Saturday will take me completely out of the loop, although other commentaries will be posted as usual.

I have had a rare vacation over the last 13 years without staying all over the markets. So, after the conference I am off to Cannes in the South of France. Will need to relax after our conference is over and I can’t think of a nicer place to do it. Have not been there in around 30 years. The Concorde was in operation back then. My plan is to do another market recap in the middle of that week to touch base. Then, it will be back home the following Sunday.

What an interesting day. President Obama was on the tube last night, giving his pitch on the debt talks, followed by Speaker of the House, Boehner. The markets reacted very quietly this morning to the stalemate. But then the dollar began to fall, followed by the DOW. Gold and silver rallied, but were clearly capped going into the gold option expiry this afternoon.

With the dollar under pressure and oil crossing $100 per barrel, gold and silver had every reason to put in solid gains. Instead those gains were marginalized by the bums.

As we all know, today is a key gold option expiry, with nearly 18,900 $1600 calls still on the books. At times like this, The Gold Cartel almost always brings the price down so they don’t have to pay out to the spec option long public. Why not today?

There was just too much going against them with the dollar so weak, the DOW under pressure, and the childish Republican/Democrat haggling over our US debt issue and unending diatribe. The Gold Cartel had all they could do to prevent the gold/silver prices from exploding.

On the face of it, knowing what we know, today’s action was extremely constructive for future prices going into our Gold Rush 2011 conference. The Gold Cartel wanted the price of gold down badly and they could not do it.

While today was very important, tomorrow will say it all. Dave from Denver, Jessie and I all have seen an option expiry like this one, only to have The Gold Cartel attack the next day because a number of option holder longs will then take the futures contract. The Gold Cartel knows these new longs will be very vulnerable to a selloff, likely to pitch those longs quickly, so they pounce on them.

While that is normal tactic of theirs, tomorrow is likely to be a huge crapshoot for them, as the fundamental reasons for the price of gold to soar are growing. Their action today was like capping a volcano. They are going to need some sort of excuse to attack gold and flush those longs out … a bogus rumor, a resolution to our debt ceiling issue, or something like that. Heck, gold was bombed straight down three times last week alone. They would not hesitate to try again. But, if the outside markets continue to go against them, they would be in the unusual position of having to cover their new shorts on the way up. At least those outside The Gold Cartel would do so.

The gold open interest made a new high at 541,404, up 6742 contracts. The silver open interest continues to diddle, down 56 contracts to 117,195.

How egregious was the capping of gold and silver today? Platinum was up $20 to $1806 and palladium was up $30 to $834. Both rose SHARPLY as the day wore on and the dollar was hit hard.

RG:

Dave from Denver this afternoon...

One quick technical point about the gold market. As of this morning there were about 18,900 open calls at 1600 that expire today on Comex gold futures. Historically, the big bank manipulators write those calls and then drive the market below the price point at which they've written calls in order to keep the premiums. It's not huge money but it's been easy money for them over the last 10 years. Today obviously those calls expired in the money by about $17, which means the holders of those calls will likely exercise their option and take delivery of futures contract. A few months ago this same situation occurred and the manipulators hammered the silver market the day after expiration, likely creating a large number of sellers out of the traders who had taken delivery of their profit-position silver futures. It was a very transparent manipulative move, but effective nonetheless. IF we don't see the manipulators successfully "run the stops" tomorrow or Wed, my bet is that we will likely see $1650 gold very quickly, as this will be a very bullish signal that the gold cartel is losing its ability to manipulate the market at will.

Options expiry failure

Hey Bill,
I think the failure of the Cartel to hammer gold below $1600 is pretty significant for the shares as some of them really started to move after the CRIMEX close. I swiped some profit in overbought long term core positions like First Majestic earlier this week and took positions is some oversold exploration and junior near term producer lottery tickets. I keep track of 100 or so charts of various PM juniors and some of them are VERY attractive here. Many of them have formed reverse head and shoulders patterns way below their 200 day avg. In fact as I am typing this e-mail one of my long term holds Silvermex is up 35% on no news! I have never looked this forward to a gold conference as I am this one as I believe that we are about to experience what we ALL have been waiting for for SO long! Can you say MANIA PHASE DEAD AHEAD?! In Vancouver recently I remember you asking me about which companies that I have recently taken positions in as you are so busy doing an incredible job of keeping us all informed that you do not have any time to do any research. Well, here are three juniors that I have just taken positions in:

RPMGF Rye Patch Gold
GXEXF Geologix Resources
KSKTF Kiska Metals

All of these are what I believe to be at low risk entry points. They have great mgmt. and are cashed up with no debt and a tight share structure. I never give out share recommendations but hey, you asked! Also, I missed getting the conference reg in time for the dinner. Will the standing room only for the Sprott speech be first come first served or do we have to reserve a space? Thanks so much for all that you do and I will see you next week!
GO GATA!!!!
Dave E.