The PM market: 15 card monty with shells.

The gold and silver markets are like an expanded version of the three card Monty with shells. Perhaps you have seen this game or maybe even lost playing it? The Dealer puts a bean under one of three hollowed out walnut shells, shuffles them then you can bet on where the bean is located. Of course, if the game is played honestly, you have a one in three chance of being right, but the Dealer pays you only one to one odds. If the game is rigged, the Dealer removes the bean so you lose when you place your bet and the Dealer slips in the bean when/if you demand to see where the bean is.

The gold and silver markets are like this game but with 15 hollow shells. You try to follow the hand that's shuffling the shells, but the hand is quicker than the eye.

In the PM business, there are more hands shuffling the shells and ready to confuse you. First, there is the COT report. This is the Commodity Futures Trading Commission Report. A report of what? The COT refers to the Commitment of Traders; the number of Traders holding positions of 20 or more above a level established by the CFTL. Good luck running down this reference, but it is a Committee that has to do with setting rules in PM trading. There are SWAP Dealers. What are they? They are like Market Makers for stock who buy and sell stock. There is a small charge for selling you the gold and the fee goes to the SWAP Dealer. Then there are Commercial Interests (the Commercials). These are banks, mostly Central banks or Bouillon banks. Then there are the Unreported interests, which includes China. And there are individual traders and investors.

OK, so what is the picture of all this shuffling now?

First, here are the results of recent trades in gold and silver:

We see the breakout of both gold and silver, the former actually giving us a false golden cross (the 50 DMA crossing the 200 DMA). We do not expect that the Commercials like the FED would ignore this . And they haven't. The hands are moving to shuffle the bean. SWAT dealers have gone short, hedge funds are on the long side and Commercials are covering shorts. The 600 lb gorilla is moving to increase the value of the US Dollar, which is expected to drop gold prices:

This morning, the USD is up substantially. That's how the SWAP dealers know that an attempt is in the works to suppress silver and gold prices (especially silver). How low will they take silver and gold? Untill the small Traders' stop losses are hit and they are flushed out. Then the cycle will be repeated.