Ahoy all ‘Rocketeers of the Happy Silver Ship’,..
Richard Guthrie
Posted Jun 15, 2012
“This is your Captain speaking,.. Please take your seats,.. The ‘Fasten Seat Belts’ sign is flashing code red as there is now a very strong risk the weather could change violently at any time”,..
Ever since Gold’s peak in late August last year the price of the precious metal and the performance of the Euro have followed almost tic for tic (see the graph below).
(Click on images to enlarge)
The market’s perception of economic malaise from the continuous fallout of the seemingly unsolvable Euro Crisis and the desire to sit in US dollar denominated assets has moved sentiment out of the debasement busting hedges of our favourite metals, Gold and Silver.
Well one has to wonder, with all the unsolvable economic problems overhanging Uncle Sam, just how much longer this ‘Pro Dollar Indian Summer’ can last before the inevitable chill of winter rolls back in and bites that syphilitic old man in his own proverbial backside!
As if to highlight this, take a look at the latest view from our ‘Bridge’,.. It’s an absolute stunner. This isn’t so much a storm cloud dead ahead, but more likely another ‘Hurricane Katrina in the works’.
The chart below highlights the ‘Net Long’ position the Commercials (read Big Banks) presently hold in the Euro.
The first point to grasp is how grotesquely overextended this position has now become. The Commercials are now long the Euro to the tune of 259,000 contracts, an absolutely eye watering $32 Bln worth. This means that those on the other side of this heavily imbalanced trade, the Speculators, who collectively almost always get royally screwed every time by the Big Guys, are seemingly riding the last few feet of an ‘Everest Sized Sugar High Short Position’ which is very likely to leave a large majority of them financially dead within the next few weeks/months ahead!
The second point to note is how fast and steep the Commercial Net Long Position has grown in the last 2 months alone. Since the beginning of April the Long Position has grown by over a staggering 150,000 contracts, which is circa 110% greater than its entire last extreme in mid 2010!
The last point to grasp is that this is just one massive flashing indicator to show how unlikely it is that
the Euro will be/can be allowed to collapse (which is essentially where mainstream’s bet’s are now seemingly all placed), because the conitations to the banking sector would be so deadly!
It therefore looks increasingly likely to me that there are very few feet left to climb on this present Dollar rally and when it becomes increasingly obvious that there’s no more height left in this ascent, the rush to get off this unstable mountain could very easily set off the most enormous avalanche!
This should prove to be absolute Rocket Fuel to our own engine room!
Here’s hoping,..
Yours aye,..
Rich (Live from 'The Bridge of the Silver Rocket Ship')
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Richard Guthrie
Captain
The Silver Rocket Ship
Email richard@theSilverRocketShip.co.uk
This article is by The Silver Rocket Ship Company Limited, registered office is 137 Scalby Road, Scarborough, North Yorkshire, YO12 6TB and is registered in England under company number 483844.
The contents and information above are presented for interest and entertainment purposes only. They do not constitute professional advice.
The commentary represents purely the opinion of Richard Guthrie only and should not be mistaken as constituting a recommendation to buy or sell any securities or investments in any financial market. Anyone wishing to buy or sell securities in the market place should take suitable investment advice before undertaking such action.
The contents of this article may not be disclosed to or used by anyone, nor may it be copied in any way unless authorised by The Silver Rocket Ship Company Limited.
321gold Ltd
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