YESTERDAY IN GOLD AND SILVER

Gold's secondary high [around $1,386 spot] came shortly after London opened Wednesday morning...then hit its low of the day [$1,375.80 spot] around 10:20 a.m. in New York.  But it wasn't until after noon that gold managed to catch a bit of a bid...and hit its absolute high of the day [$1,390.10 spot] shortly before the close.

Silver's high occurred in London shortly after its open, before declining into the New York open.  It then spent most of the afternoon struggling to close in positive territory.

This was the second day in a row where both gold and silver languished in New York trading while both platinum and palladium moved considerably higher.  Gold, silver, platinum and palladium were up 0.49%, 0.47%, 1.92% and 3.45% respectively. Oil was up again...corn and soybeans made huge moves...and most of the industrial metals were higher as well.  The dollar got smoked.  Needless to say I wasn't impressed with this lack of price action, when both metals should have been screaming to the upside.  I don't know what to make of it.

After a brief dip in London trading, the dollar was back to unchanged by the 8:00 a.m. in New York...and then began an 80 basis point decline that ended four hours later at 80.00 right on the button.  It then traded sideways into the New York close.  Despite the one percent drop in the world's reserve currency, there was no sign of it in either the gold or silver price until more than four hours after the decline began.

On Tuesday, if you remember, the dollar rose 35 basis points while gold dropped 14 bucks...the change in one versus the other was virtually instantaneous.  That certainly wasn't the case on Wednesday.

  

The gold stocks bottomed around 10:20 a.m. when the gold price hit its nadir.  And even though the Dow was well into positive territory, the gold stocks just couldn't hold on to what small gains they'd made...and the HUI finished down 0.14%.

  

The CME Delivery Report showed that 65 gold and 41 silver contracts were posted for delivery on Friday.  And, as always, JPMorgan and the Bank of Nova Scotia were the major players once again.

For the first time this year, there were no changes in either GLD or SLV.

After having nothing to say on Tuesday, the U.S. Mint had a sales report on Wednesday.  They sold another 10,000 ounces of gold eagles, plus a smallish 50,000 silver eagles.  For January so far, the mint has sold 43,500 ounces of gold eagles, along with 3,407,000 silver eagles.  Silver eagles are outselling gold eagles by a factor of 78 ounces to 1...while the gold/silver ratio is 47 to 1.  This buying pressure in silver is not about to go away any time soon.  My bullion dealer says that it's more like 300 to 1 [minimum] at his store.

There was a lot of activity over at the Comex-approved depositories on Tuesday.  The net result was that 112,637 troy ounces of silver were withdrawn...but the in/out activity at all four warehouses is worth the look...and the link is here.

Before I get into today's list of stories, here's a graph that I ran between Christmas and New Years.  It's called the Continuous Commodity Index...or CCI.  It's the old version of the CRB...not the emasculated new version.  Despite the fact that neither gold nor silver have made any positive contributions to this index since the New Year began...it has now broken out to another new high.

  

Here's the 'new and improved' CRB that we use today...and, in hindsight, it's obvious why it got changed.  When you look at this graph, inflation is still not a serious issue.

  

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CRITICAL READS

Portugal's bond auction yesterday was a 'success'. One of the reasons for that was the fact that China stepped up to the plate and bought €1 billion worth.  Japan was also a buyer.  Australian reader Wesley Legrand sent me this one-paragraph story that's posted over at the zerohedge.com website.  The headline reads "China Confirmed As Buyer Of Directly Placed Portuguese Debt"...and the link is here.

Here's another story on the problems in Europe.  This one is posted over at the German website spiegel.de...and is courtesy of reader Roy Stephens.  The headline reads "Currency Crisis: Brussels Plans Bigger Euro Rescue Package".  As Einstein said... "stupidity is doing the same thing over and over, expecting to get different results".  The link to the story is here.

The final word on Europe's woes comes in this 10-minute RT.com video featuring euroskeptic Nigel Farage.  Nigel gives another unvarnished, and uncensored, interview with RT, in which he lays out his reasons why a plunge in Italy bonds has, at best, been delayed.  The interview is imbedded in a story posted over at zerohedge.com...and is headlined "Nigel Farage On Whether Italy Is Next".  Nigel neither guilds lilies...nor suffers fools gladly.  He certain doesn't in this interview...and I feel it's worth your time.  I thank Wesley Legrand for sending it along...and the link is here.

Food inflation is alive and well in India.  Here's a story from the January 6th edition of The Times of India that's headlined "Inflation up to 18.32% on veggie prices"...Among the individual items, onions became dearer by 82.47 per cent on annual basis, while eggs, meat and fish became costlier by 20.83 per cent, fruits by 19.99 per cent and milk by 19.59 per cent.  Reader David in California sent me this story...and the link is here.

Back in North America, here's a Reuters piece that's courtesy of reader Phil Barlett.  The eye-opening headline reads "Home price drops exceed Great Depression: Zillow".  Home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump.  It's a very short must read story...and the link is here.

Here's a graph that reader 'David in California' provided.  David says that "the Fed balance sheet looks Japanesesque"...and indeed it does.  The chart is titled "Reserve Bank Credit Outstanding"...and needs no further embellishment from me.

Wesley Legrand's last offering today is another zerohedge.com piece that's headlined "2011 Starts With A Bang: $4.2 Billion In OUTFLOWS From Domestic Equity Funds".  As Tyler Durden says..."As we predicted, looking at last week's inflows in taxable bond funds, the year starts with an equity outflow, confirming that the retail lemmings are really not as stupid as the Fed and the Primary Dealers believe they are.  This was the largest one week outflow since early October!  It's not a great start to the year...and the link to the story is here.

Today's first gold-related story is from Russian reader Alex Lvov...and it's a beauty.  The zerohedge.com headline reads India Gold Imports Hit Record As "Price Is No Longer A Factor".  This is a very short must read...and the link is here

Lastly is this story that was posted over at gata.org yesterday...and I was only too happy to steal it for this column.  It appeared in Forbes on January 11th...and the headline reads "There Is No Getting Around Gold".  As the opening two sentences of this article state with stunning clarity:  "Money has lacked a golden anchor for 40 years.  It has proved a stupendous failure."  Yes...it has.  This short piece is a must read from one end to the other...and the link is here.

THE FUNNIES




THE WRAP

Digital money is not worth the paper it's not printed on. - Gerald Celente

As I mentioned at the beginning, I was not impressed with yesterday's price action in either gold or silver.  Why it didn't do as well as it should have is a complete mystery to me.  I suppose 'da boyz' could have been sitting on the price in New York...but the price patterns just don't look like that was the case.

The CME's preliminary volume numbers for Wednesday's trading shows that volume wasn't particularly heavy in either metal...and, judging by the preliminary open interest figures, I'd say that there won't be much in the way of changes when the final numbers are posted later this morning.

Tuesday's open interest figures shows that gold o.i. rose 3,190 contracts...and silver's o.i. was up 648 contracts.  These are not big numbers...and I wouldn't read a thing into them.

Today's CFTC meeting on position limits is likely to be a letdown, as silver analyst Ted Butler reported in private commentary to his clients yesterday.  He also had this to say about it..."This time it's very likely that the Commission will approve the staff's proposal and formula, perhaps unanimously.  My guess is that the CME Group dropped its behind-the-scenes opposition to the staff's proposal after they were reminded that this is essentially the very formula originally advanced by the CME...with slight modifications.  It's kind of hard to argue with something that you originally proposed yourself."  Click here for that story.

Ted goes on to say that..."While we will have to wait to learn of any special details, it does not appear that the staff proposal on position limits will take into account the thousands of public comments received by the agency calling for the limit in silver to be 1,500 contracts, as advanced by me.  That's too bad, as it indicates disdain on the part of the CFTC for public opinion.  After all, the Commission asked for public opinion on this matter on several occasions and received a near-unanimous response for a 1,500 contract limit in silver.  In my opinion, it's disrespectful for the agency not to at least recognized and acknowledge the will of the people.  There will be yet another public comment period following tomorrow's hearing when, presumably, the Commission will again ignore the will of the people."

Right now, the dollar isn't doing much of anything...and is back to almost unchanged from its close on Wednesday afternoon.  Gold is down about five bucks...and silver is down two bits, as of 4:34 a.m. Eastern time.

After yesterday's disappointing price action, I won't even hazard a guess as to what might happen during the New York session today...but we'll find out in short order.

See you on Friday.