Bada bing

11:27 am (Hawaii) Bullish for gold? Fast Money reporting via Doug Kass that someone bought 50,000 gold call options between $1600 and $1800/oz (out of the money). They will expire in August-Sept, a total of $50 million in call premium paid — whatever that means. Kass says given the size of the purchase, it's likely a central bank or sovereign fund. Is this positioning for QE3?

Brian Kelly thinks it's China swinging for a home run, a win-win plus delivery of physical gold. Terranova thinks it's a good trade. Adami isn't sure central banks are allowed to buy calls. "If they're right, they'll make 10 times that."

What they say is always interesting, but doesn't affect my trades. They won't talk about Endeavour Silver or Extorre Gold Mines. Not today.

Baby steps

10:22 am (Hawaii) In two words, my life could be so different. Sleeping pills. They could harness the power within, sending me off to sweet slumberland long before midnight. I could (ideally) be up by 2 am for premarket trading, be consistently prepared for the 3:30 am opening bell and sustain proper execution and energy through the trading day as the final bell rings at 10 am. Maybe hang around to keep tabs on any after hours activity until 2 pm. Or get out and enjoy the mid-day.


In reality, I've always been a night owl, more by body clock, work hours and nature than by insomnia or addictions. Today, I'm a little frustrated, not mad. I had my entry points set for AGQ and EXK after they bolted higher at the open. I was willing to let them cool off and come back to a Fibonacci level, each of them, that would be a comfortable entry. But before that happened, my attempt at an all-nighter failed. I crashed sometime around 5 or 6 am. 

This is what I wrote at 4:25 am: New retrace levels: EXK 8.97, AGQ 180.62. EXK extremely strong so far, finally a minor dip in the last couple of minutes after hitting a high of 9.24. Daytraders are so done with XG; all the action is in silver and other gold miners who didn't get a big bump like XG did yesterday. Haven't sold or bought anything this morning. Still 90% cash.

EXK and AGQ did, indeed, return to those levels just briefly. Then they took off for a second run to the peaks. I was completely in REM land. By the time I got up around 9 am, there was just one hour left in the session, my one holding (XG) had fallen from 11 to 10.50 (my entry wsa 10.73) and I was miffed. While 78% of my Metals list was green, I went and picked up one of the few plays that was down for the day. Even a monkey tossing darts at a board would've done better.

The saving grace, I believe, is that gold will be steady in the near term. XG simply had profit-taking after a great move to an all-time high, and the rest of the gold miners really caught up today. EXK closed strong, and against my policy of letting hot runners come back down, I grabbed a partial position at the close. The volume and gap up on the daily chart enticed me, and the fair probability of Spot Silver moving up another buck or two before the weekend sealed it. So now I'm back in these two small, growing miners, as I was two or three weeks ago. Still heavy in cash (80%). 

EXK is well off its all-time high of 12.75. This is strictly a momentum approach because that's the way silver behaves with all the manipulation and cult-like following. I'm not expecting 12 or 11, but it would be nice. XG is in new territory after being just above 2 one year ago. Though it dropped about 3% from my entry point, it's a small, partial position and I'm willing to stand through the storm. In fact, 10.43 is the level where I previously considered adding more shares. For now, I'll just wait this out. Greece's economy, and Portugal's could be in symbolic ruins soon, and Europeans don't wait around hoping for miracles. They have a history of flocking to gold. 

Interesting that AGQ gapped up and stayed up, but never went ballistic. Volume (3.1 mil) was nearly double of yesterday. I realize technicals and candlesticks mean so little in the world of silver, but it's worth noting that AGQ has always "followed" its gap direction, at least in the past seven months.

Once again, Spot prices have been stable and/or higher since the onset of gold futures trading in Hong Kong. I believe paper trading schemes there will eventually resemble those of the CME Mafia. Every party has its role in this food chain. There are no excuses for the leveraged. Everyone knows exactly where the train tracks are. If you are tied to leverage (margin) and can't undo that knot that keeps you strapped to the track, the mafia will get your wallet, your jewelry and leave you to rot. I'm willing to risk taking a small hit in XG and EXK, but never will I go on the tracks like a fool (and his gold). Whether its CME and/or the soul-less machines that slice fractions of a penny off any stock that moves, margin is not the answer. It's almost as if those high-frequency computers can sniff out precisely where the most leverage exists. Where it is most vulnerable. It would make sense, because that would also be where leveraged traders are quickest to leave the table. 

As for my positions, economic forces could do more damage than anything. Need to be awake. Need those sleeping pills.

Update 11:10 am (Hawaii) This is what I missed while snoozing in bed. Goldman Sachs makes a u-turn on commodities.

MSN Money: Goldman Sachs 'more bullish' on commodities (May 24 2011)

Ni hao!

3:24 am (Hawaii) Just minutes before the opening bell. Everything (almost) is green right now. Spot Gold and Spot Silver are near their highs, if not above the previous high of the morning. PM stocks are taking the cue and moving up, too. 68% of my Metals list is green with only 15% red.

XG hardly trades in premarket or after hours. It might move when the bell rings. The Cerro Moro mine has been officially approved by the local province in Argentina. Might just be a formality to traders, but who knows?

I also like EXK, as always, and it has barely moved in premarket, too. AGQ is up 4.5% already (on just 100k shares) to 180.44. It was above 181 earlier. I'm taking a cautious approach here.

UCO is up 3.9% to 47.22 as commodities are in full force to the upside so far.

An interesting watch will be LNKD, which can be shorted beginning today. Down 2.7% in premarket so far to 85.89. I won't be touching that load of dynamite.

But, as I veer back toward PMs, it will continue to channel back to China demand, inflation, et al.

Marketwire: Extorre receives approval (May 24 2011)

Update 4:04 am (Hawaii) Missed a good entry point (it turned out) on AGQ at 181-182 as it rode up, but it's on the way back down from its high. I'm looking for a bullish retrace (31.8% of today's gain) at 180.54. May not happen, but I will not chase. Yet.

EXK was also within my grasp at 8.95, but I hesitated instead of starting a partial position, and it ran over 9.00. My retrace level is 8.92, which seems like a long shot here.

XG sold off a bit at the opening bell on typical thin volume — it pulled back to 10.44, almost exactly to my retrace level — but climbed quickly above 11.00 and is now at ... well it was above 11. Now it's at 10.95. I'll hold that for awhile. Too much good news there. Could've added more at 10.44-10.45. Gun shy.

Indices are fractionally up, but my Metals list is 78% green. Spot silver at 36.22. Spot Gold at 1526. Everything seems all right for now . . .

Update 4:25 am (Hawaii) New retrace levels: EXK 8.97, AGQ 180.62. EXK extremely strong so far, finally a minor dip in the last couple of minutes after hitting a high of 9.24. Daytraders are so done with XG; all the action is in silver and other gold miners who didn't get a big bump like XG did yesterday.

Haven't sold or bought anything this morning. Still 90% cash.

Pre-game warmup music

No need ... no need to get jumpy ...

Independencia Y Libertad!

12:53 am (Hawaii) I'm hooked a bit on Mexican silver pesos. I've been shopping for physical silver (and gold) lately and, frankly, said no to myself many a time, far more than I've said yes. But I definitely appreciate the distinct and regal look of many coins that used to be currency, more so the ones from south of the border than north. The 1947-48 Mexican 5-peso silver coin (below) is especially cool. What can you say? No matter how original and heroic George Washington (definitely) or Queen Elizabeth (not so much) were, how can they beat the style and warrior-esque look of this coin?

Of course, what also appeals to me about Mexican silver coins is the growing possibility that silver could become currency again in that nation if Hugo Salinas Price has his way. But that's a big novella yet to be written.

For now, Spot Gold (1522) and Spot Silver (35.80) are up nicely this morning. I really can't determine whether it's true or not, but from afar it appears possible that the opening of gold futures trading at the Hong Kong Exchange on May 18 was a turning point for precious metals. Up to then, it was an all-out barrage followed by a few desperate takedown attempts by the CME Mafia, using five margin requirement changes to stifle what had seemed to be a free-market explosion in silver. Not only is the HKMEx in the paper gold game now (for better or worse), Shanghai announced yesterday that it will open a paper silver futures instrument by the end of this year. It seems, from plenty of the prognosticators who wrote about China recently, that there will be no explosion of price, not when their central bank is still in acquire mode.

Mao would be shaking his head, yet applauding right about here. As a cheapskate who loathes credit cards and loans, I understand the principle of austerity. It pains me to know that most of my friends and most of this great nation fell into that obscene lifestyle of living on a lie for years and years. Now? Now we pay the price and, worse yet, the rest of the planet is forced to pay the price for our stupidity and greed.

I don't buy the assertion that Spot Silver will never get over $60/oz just because industry and defense need it so much. If silver rose way above that level, I'm sure Congress and/or the Fed would work out a price-containment system for absolute essentials (weapons, etc.). As for tech companies (solar, iPads, etc.) that need silver, they can always hedge by going long Spot Silver on the open market. That will work itself out, no doubt at all.

It is gold that has remained relatively stable and could be ready to ride back to the recent high. Silver holding strong above 35 is good news for long-term investors who have stacks of physical metal. I've been saying that the time to get physical was last year and the year before, when Spot was still below 20. I didn't buy any paper or physical until this spring, so I'm way behind the times. I also realize that I'm better off trading the paper than buying at the peak. I didn't buy or even consider buying physical silver above 40 and 45. But since Spot dropped to 35, I've picked up a few ounces here and there. I'm not going to be shocked if it still moves back to 33 or 30 or 27. But the ride from 19 to 49 left us with a 50% retrace level of 34, and it has proven to be an excellent pit stop.

There is still nearly an hour until the peon premarket (for people like me) opens, so I'm not assuming these spot prices will hold. But if they do, XG will likely be up ... but then again, it does hardly any trading in premarket or afterhours. So I may have to wait until the opening bell in 2 1/2 hours to make a decision on whether to exit or remain in the position.

Golden armor

10:03 am (Hawaii) Opened a partial position on XG at 10.73. If it slips to 10.43 or so, I may add a few more shares. I'm expecting a gradual gain in Spot Gold this week with so much uncertainty in Europe and so much bullishness on PMs in China and other global markets. Unlike Gold, Spot Silver is not QE-proof, and until there is evidence of more POMO funds going into the market, silver will diminish gradually with the equity market ... unless today's Shanghai news is just the tip of the iceberg.

I'm not hoping (well, yes I am) that the news (and anticipation) of Shanghai's silver futures market (due to open in December) will send the spot price to the moon. I'm hoping that we get more consistently higher prices that will counter any CME Mafia attacks. I do NOT believe in using margin, but I am NOT against it either. Free markets should allow leverage as long as borrowers make good on their debts. Goes both ways, so more power to the borrower and hopefully he doesn't get blasted when volatility hits. (And those of you who rely on leverage, you know anything that is overhyped is going to be too good to be true; nothing is an automatic home run.)

So, 1. I don't expect Hong Kong gold futures or Shanghai silver futures to kick spot gold to 2000 or spot silver to 50 (or 100), but 2. I do hope that these additions will keep the market stable without losing volatility that traders like me want to play in. Otherwise, I'm staying in cash.

Imagine tens or hundreds of millions of Chinese citizens trading paper gold and silver ... while also owning a ton of physical silver and gold. The central bank there could pull a mafia move with major margin requirement changes on any spot peak price ... but just getting to that peak would be astronomical in height and speed.

The Australian: Chinese demand keeps gold soaring (May 23 2011)

Forbes: You should know what the People's Bank of China is up to (May 23 2011)

ETF Daily News: Will the gold bubble burst or is it buying time? (May 23 2011)

Larry Edelson: "I expect silver support ($32) to soon give way" (May 23 2011)

(video) Tony Segami: Dumpster diving for Japanese bargains (May 21 2011)

(video) Tony Segami: A tale of two central bankers (Apr 9 2011)

Update 11:25 am (Hawaii) Dennis Gartman on the euro and gold during Fast Money:

"Absolutely, I've said it for months and months and months. You want to own gold but predicated in non-US dollar terms. You want to own gold in euro terms. You want to own gold in sterling terms. You want to own gold in Swiss franc terms., and if you take a look at it, even if gold in US dollar terms is not making new highs, gold in euro terms today made new highs. Gold in sterling is making new highs. Much more impressive to be long of the gold market in euro terms, in sterling terms, in Swiss franc terms. I was impressed today that gold traded higher on the day. Even in US dollar terms, as crude oil was down at one time 3 dollars, and most commodities were going down. ... People are moving out of the euro and they're moving into gold as the other currency. It's a very logical trade."

Update 1:17 pm (Hawaii) A few thoughts from James Turk via King World News:

“I think this summer is going to surprise a lot of people. Many are thinking this is going to be another typical summer where precious metals prices are weak, but it doesn’t always happen that way Eric. Sentiment is set up this way because it has been 29 years since we have seen a big rally in the summer. Back in 1982, the Mexican debt default lit a fire under the precious metals and the gold price nearly doubled over the next six months.”

I noted the other day that Spot Gold has meandered in the past two summers before spiking up later in 2009 and '10. But things are different now, aren't they?

King World News: James Turk interview (May 23 2011)

Update 1:45 pm (Hawaii) Hugo Salinas Price interview with James Turk back in February.

Update 3:28 pm (Hawaii) Some stuff I watched and read this afternoon while procrastinating. Spot Gold is climbing, now 1518 with Hong Kong open. Spot Silver up, too, now 35.14.

Dan Norcini: Gold strength in euro and British pound terms firming up (May 23 2011)

Chris Martenson: John Rubino interview

(video) H1INC: Why you can't crash JP Morgan by buying silver (May 13 2011)

Sean Brodnick: The golden bottom (May 20 2011)

Daily Bell: Hugo Salinas Price on the nature of money (May 23 2010)

Don't cry for me, Argentina

9:42 am (Hawaii) XG finally pulling back from enormous new high (11.26). XG was at 9 last week, and when I eyeballed it on Thursday, was in the 9.50 area. I still didn't pull the trigger like I wanted on Friday, though I was bullish enough on gold to get a little bit of physical.

From Friday's closing price (10.17) to today's high (11.26), XG is now 10.76. It has already retraced 50% after touching 10.72 a few minutes ago. Interesting level. Sure, maybe Brian Kelly is right and the Fed will roll out some press conference news that will stabilize the Euro, etc. Maybe gold will cool off tomorrow. But overall, there is no real happy solution for Greece and the PIIGS and the US currency crumble-thon.

That's what makes XG compelling in a strong market for the yellow metal, especially with the rest of the market generally in the red. All three indices are more than 1% down after rallying a bit earlier. I'm inclined to wait this out and let XG drop more, but a partial position might be a proper approach. Extorre's execution in Argentina the past several months have been very good. In fact, with a fourth mine on tap, the price may stall out here. The $2 move in the past two sessions means a stall-out could result in normal profit-taking and a move back to 10.50, so there's no rush to to all in.

And there goes XG ... now at 10.66. By the closing bell, this could be at 10.40. I will wait and watch. Still 100% cash.

Posted this video last week, but worth watching again. This is exploration success and marketing at its finest. No hype, just facts presented in a fluid, informative fashion.

Update 9:55 am (Hawaii) From Thursday's close in XG of 9.60 to today's high of 11.26, a 50% retrace is 10.43. Not a strong or overly bullish sign when anything gives up 50% of its gain, but not bearish either, of course. A retrace of 31.8% and no lower would tell me this is still on fire. XG came down to 10.66 a few minutes ago and is holding ground there (10.73). Tough call.