Gold & Silver Daily
"All four precious metals wanted to do their versions of a NASA space launch"

¤ Yesterday In Gold & Silver

The gold price began to rally the moment that trading began in New York on their Monday evening, but barely got a sniff of the $1,200 spot before getting capped---and then chopped sideways within a five dollar price range until about 8:30 a.m. GMT in London.  Then things got a big friskier---and once the noon silver fix was in, gold blasted higher like a homesick angel.  The HFT boyz and their algorithms were there within minutes to cap the rally---and then they really went to town once the London p.m. gold fix was in---and by the time they were done forty minutes later, they not only had the price back below $1,200---but also below Monday's closing price in New York as well.  The price bounced back, but got capped around noon EST---and it chopped quietly sideways with very light volume into the 5:15 p.m. electronic close.

The high and low ticks were reported by the CME Group as $1,223.90 and $1,187.80 in the February contract.

Gold closed in New York yesterday afternoon at $1,195.00 spot, up $1.50 on the day.  Volume, net of December and January, was huge at 250,000 contracts.

Here's Brad Robertson's 5-minute gold tick chart showing just how busy a day it was---starting at 2 p.m. MST.  Don't forget to add two hours for EST---and the 'click to enlarge' feature is very useful here.

The price path in silver was similar, as were all the inflection points, so I shan't repeat myself.  The high and low price ticks were recorded as $16.665 and $15.54 in the March contract.

Silver finished the Monday trading session in New York at $15.715 spot, down another 47 cents from Monday's close.  Volume, net of the December and January was very close to 80,000 contracts.

Platinum also rallied at 6 p.m. on Monday evening and, like gold and silver, wasn't allowed to get very far.  A rally began at noon in Zurich, hit its high tick at the London silver fix---and that, as they say, was that---as platinum got sold down 32 bucks from its high.  A buyer at the $1,188 spot mark showed up at the COMEX close---and that's as low as 'da boyz' could get the price.  From there it rallied a few dollars into the close, finishing the day at $1,192 spot, down 7 bucks from Monday.

The palladium price chart is a mini version of the platinum chart---with the high and low coming at the same time.  Palladium was closed down 16 bucks on the day at $780 spot.

The dollar index closed late on Monday afternoon in New York at 88.43---and chopped quietly lower until London opened on their Tuesday morning.  By minutes before 8 a.m. EST five hours later, the index was down to its 87.67 low tick before begin rescued.  The last gasp of the counter-trend rally after that came around 2:35 p.m. EST---and the 88.13 level---and from there it chopped quietly lower into the close, finishing the day at 87.97---down 46 basis points from Monday.

The gold stocks gapped up a bit over 2 percent at the open---and chopped lower in a broad range for the remainder of the New York trading session.  They closed just off their low tick, as the HUI finished down 1.81%---its fifth losing session in a row.

The silver equities gapped down at the open, but rallied into positive territory by a bit almost immediately.  But that was the high for the day---and by 10:45 a.m. EST, they were down a bit over 4 percent.  They rallied strongly for the next hour, but once they rolled over the second time, there was no looking back---and Nick Laird's Intraday Silver Sentiment Index closed down 3.96%.

The CME Daily Delivery Report showed that 7 gold and 72 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.  The short/issuer of note was Deutsche Bank with 68 contracts.  HSBC USA stopped 60 contracts.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Tuesday trading session showed that December open interest in gold declined by 30 contracts---and is now down to 771 contracts still open.  Silver's December o.i. declined by another 14 contracts---and currently sits at 180 contracts, from which you must subtract the 72 contracts mentioned in the preceding paragraph to get a true and current picture of December silver o.i. at the moment.

There was another withdrawal from GLD yesterday.  This time an authorized participant took out 57,643 troy ounces---and as of 10:44 p.m. EST yesterday evening, there were no reported changes in SLV.

I continue to be amazed that the U.S. Mint is still producing 2014 silver eagles---as they reported selling another 151,000 of them yesterday.  But what is equally amazing, as I've been alluding to for the last week or so, is the fact the mint hasn't sold a gold ounce of anything, either eagle or buffalo, in the last two weeks.  Not one.  As Ted Butler pointed out yesterday, normally sales are brisk this time of year because of Christmas.

And as Ted pointed out in his weekly review on Saturday, the mint hasn't sold any platinum eagles for more than two months now.

It was a very quiet day in both gold and silver at the COMEX-approved depositories on Monday.  Only 700 ounces of gold was reported received---and nothing shipped out.  And in silver, nothing was reported received---and only 29,825 troy ounces were shipped out the door.

Here's a chart that Nick passed around last evening---and it's an update on the 30-day Russian Rouble/Gold situation that was posted in this space yesterday.  As you can tell, it was a wild day for gold priced in roubles on Tuesday.

I have a decent number of stories again today---and I'll happily leave the final edit up to you.


¤ Critical Reads

The MSM Misleads Again: Housing Starts Didn’t ‘Weaken’ A Tad In November, They Plunged

Don’t believe everything you read in the mainstream media. Especially don’t believe anything in the financial news media until you’ve looked at the data yourself.  It’s no wonder investors are so often caught flatfooted in the markets. Financial “journalists” feed their readers and viewers a constant stream of misinformation and bad data. Financial reporters are so atrocious at serving their audience I have to believe that they are, wittingly or unwittingly, part of a deliberate and elaborate campaign of disinformation… unless you believe in Coincidence Theory.

Housing starts collapsed in November. They weren’t good, they weren’t even so-so as media reports intimated. The seasonally adjusted annualized number which the paid flacks report is absolute nonsense. It’s fiction.

Actual, not seasonally adjusted single family starts were down by 10,400 units in November to 47,700 units. November is always a down month but this was the worst November performance since 2008, in the teeth of the housing crash.  On a year to year basis starts were down by 6.3%. It’s absurd that you can’t find that fact anywhere near the mainstream media headlines. In fact, Bloomberg outright lied about it.

This commentary by Lee Adler appeared on David Stockman's website yesterday sometime---and today's first story is courtesy of Roy Stephens.


Federal Reserve Reinflating Real Estate Bubble - Mike Maloney

This 5:51 minute video clip with Mike Maloney put in an appearance on the Internet site yesterday sometime.  I thank Dan Rubock for sending it my way.


Oil plunge, Russia crisis challenge U.S. Federal Reserve

The relentless fall in oil prices and Russia's plunging currency pose big challenges as the US Federal Reserve opens a two-day meeting Tuesday.

The Fed's last meeting of 2014 was expected to confirm its path toward monetary policy normalization after holding its base interest rate at the zero level for six years to bring the country out of the Great Recession.

But stagnating economies in Europe and Japan and slowing growth in China, coupled with the threats to markets and the financial system from the oil price and Russian crises, could force the US central bank to weigh a pause.

While the world's most powerful central bank is unlikely to make any immediate changes to its interest rate and liquidity stance, it could signal via comments and economic forecasts a readiness to stick to that stance for longer than expected to help the global economy through a rough period.

This AFP article, filed from Washington, appeared on the Internet site at 5:16 p.m. EST on Tuesday---and it's the first offering of the day from South African reader B.V.


Obama will sign Russia sanctions bill despite reservations

The bill - which primarily sanctions Russia's defence industries - passed with overwhelming support in Congress.

Spokesman Josh Earnest said the bill sent "a confusing message to our allies" but Mr Obama will sign it because it "preserves flexibility".

Russia's rouble has lost half its value this year amid lower oil prices and Western sanctions.

The currency went into free-fall in trading on Tuesday.

The bill would also give Mr Obama the authority to provide lethal and non-lethal military assistance to Ukraine, but not require him to do so.

This short article appeared on the Internet site at 4:39 p.m. EST yesterday afternoon---and it's the second offering of the day from Roy Stephens.


T. Boone Pickens on where oil prices will settle

This 6:08 minute video interview from Fox Business was posted on the Internet site at 8:41 p.m. EST on Monday evening---and I thank reader William Gebhardt for sending it along.


$1 Trillion in Global CapEx at "Unambiguous" Risk as a Result of Crude Crash

Just like with the Mohammed Islam story, the religious belief by the cheerleading crew that the crashing price of oil is so "unambiguously, unquestionably, indisputably" good for the U.S. is so taken for granted, that nobody actually checked the facts.  So here is one such attempt by the Financial Times, which writes that "almost $1 trillion of spending on future oil projects is at risk as a result of the plunge in crude to $60."

The price plunge has shaken the energy industry, throwing some of the majors’ most ambitious plans into doubt and pummeling oil company shares. Projects in challenging frontier regions like the deep waters of the Gulf of Mexico are predicated on high oil prices and may not be economic with oil at $60 a barrel — the level Brent was trading at on Monday afternoon.

Goldman has examined 400 oil and gas fields around the world, many of which are still awaiting a final investment decision. Its analysis, based on a $70 oil price, shows that fields representing 2.3m b/d of output by 2020 and awaiting a green light have now become uneconomic. That figure rises to 7.5m b/d of production by 2025. The analysis excludes U.S. shale.

The bank shows that companies will need to cut costs by up to 30 per cent — for example by forcing suppliers to take steep price cuts — to make these projects profitable at $70 a barrel.

This Zero Hedge article appeared on their Internet site at 10:58 a.m. EST on Tuesday---and it's the first contribution of the day from Manitoba reader U.M.


Jim Rickards: Same Currency War, New Battle Phase

The current global currency war started in 2010. My book, Currency Wars, came out a little bit after that. One of the points that I made in the book is that the world is not always in a currency war. But when we are, they can last for a very long time. They can last for five, 10 or 15 years, sometimes longer.

And so it’s really not a surprise that here we are in 2014 talking about currency wars because it’s the same on that’s been going on. A lot of what you read or see on the TV is after some policy move by, let’s say, Japan to weaken the yen. And reporters will say: “Hey, there’s a currency war going on,” or “There’s a new currency war.”

I roll my eyes a little bit and go: “No, this is the same one, the same currency war; it’s just a new phase or new battle.”

So yes, it is going on. And it does have a lot of explanatory power. It’s one of the most important things going on in economics today. I think a year from now, I’ll be writing to you and we’ll still be talking about it.

This commentary by Jim appeared on the Internet site on Monday sometime---and it's courtesy of Harold Jacobsen.


Venezuela—The Sequel

The government fixing of prices in grocery stores has caused unnaturally low prices on many staple goods. A predictable result has been that Venezuelans have been cleaning out the shelves at supermarkets and taking the goods to neighbouring Colombia for resale. (Colombia maintains free-market pricing, and as such, a profit can be made by Venezuelans.)

Typically, such staples as meat, grains, and toilet paper are bought immediately upon delivery to the supermarkets in Venezuela. Shortages are so significant that people frequently queue at supermarkets in shifts, as the waits are so long to receive goods.

This movie is, of course, ongoing. Historically, however, food shortages tend to occur in the latter stages of a decline, just prior to collapse of the system. (No fear is more gripping in the minds of a population than the fear of starvation, and already, in the last year, food prices have nearly doubled in Venezuela.)

This commentary by Jeff Thomas appeared on the Internet site on Monday---and I thank their senior editor Nick Giambruno for sending it along yesterday.


German Private Sector Activity Hits 18 Month Low: Report

The German private sector, considered the backbone of the country's economy, expanded at the slowest pace in 18 months in December, increasing the risk that growth will slow further at the beginning of 2015, said a report released by the Markit Economics research group Tuesday.

"Today's flash PMI [Purchasing Managers' Index for manufacturing and services] results showed that private sector output growth in Germany slowed further in December. The pace of expansion was in fact the weakest in one-and-a-half years and well below levels seen earlier in the year, when GDP grew 0.8%," the author of the study Oliver Kolodseike said in comments to the report.

Kolodseike suggested that the reduction of oil prices and energy costs gave German private companies a chance to lower prices, but do not help the firms attract new customers.

Overall German company performance has also been affected by the recent train operator and airline pilot strikes in Germany in late October and November of this year.

This short business news item showed up on the Internet site at 6:58 p.m. Moscow time on their Tuesday afternoon, which was 8:58 a.m. in New York.  I thank South African reader B.V. for sharing it with us.


Chevron suspends Ukrainian shale efforts

U.S. energy company Chevron said it was still looking for opportunities in Ukraine, but opted to shelve a contract to tap the country's shale gas potential.

In October, members of a regional council in Ukraine approved a draft production agreement for shale natural gas with Chevron. The deal was formalized in November.

Ukraine is one of the Eastern European countries thought to be rich in shale natural gas and the government estimates there may be enough natural gas in shale plays to meet the country's needs without imports.

Peter Clark, country manager for Chevron, told the Kiev Post the company terminated the production agreement because of legislative hurdles in Ukraine.

This very interesting UPI story showed up on their website at 8:01 a.m. EST yesterday---and I thank Roy Stephens for sharing it with us.


The Real Reason Shell Halted Its Ukrainian Shale Operations

Royal Dutch Shell has blamed air strikes by the government in Kiev against its own citizens in southern Ukraine as the reason it decided to declare a halt to its shale oil projects in the troubled region.

In reality, the truth may be closer to the fact that company is disappointed with the economic viability of what it once thought was a large shale deposit and is looking for a way out.

After a series of dramatic statements and the signing of a $410-million letter of intent, a veil of uncertainty is being drawn around the myth of Ukrainian shale.

According to a recent statement by the former head of Royal Dutch Shell, Peter Voser, “the company is now analyzing its business in shale,” which, translated from the streamlined language of press releases, means: The project is not earning its keep and we need to do something (Read: write off expenses).

This very interesting article [datelined 19 June 2014] put in an appearance on the Internet site---and it's definitely worth reading in light of the UPI/Chevron article posted above it.  I thank Brad Robertson for digging this up on our behalf.


Putin Discusses Donbas Situation With Merkel, Hollande, Poroshenko: Kremlin

Russian President Vladimir Putin has held a telephone conversation with German Chancellor Angela Merkel, French President Francois Hollande and Ukrainian President Petro Poroshenko, discussing the situation in Donbas (Ukraine's southeastern regions), the Kremlin's press service announced Wednesday.

The Kremlin's statement stressed "the importance of a swift meeting of the Contact Group with the aim of implementing the Minsk agreements and facilitating dialogue between Kiev and [Ukraine's] southeast".

"The issues of the economic recovery of the affected regions [Donbas] and the provision of humanitarian and social support to the [local] population have [also] been discussed," the statement added.

This news item, filed from Moscow, showed up on the website at 2:02 a.m. Moscow time on their Wednesday morning---and it's another contribution from Roy Stephens.


THE INTERVIEW: 'We will survive sanctions,’ says Russian foreign minister

“Russia will not only survive but will come out much stronger,” he said, brushing aside concerns about the country's crisis-hit economy. “We have been in much worse situations in our history and every time we have got out of our fix much stronger.”

Lavrov pulled no punches over his contempt for Western-imposed sanctions, levied against Russia for its alleged meddling in a pro-Moscow insurgency in eastern Ukraine following the ouster of the pro-Kremlin president in February. 

He saved his most scathing comments for the E.U.: “Of course sanctions hurt, but I don’t believe the sanctions will help the European Union. The United States ordered the E.U. to impose sanctions and frankly we have overestimated the independence of the European Union [from the U.S.].”

“Sanctions are a sign of irritation, they are not the instrument of serious policies,” he added.

This must watch video interview, especially for any serious student of the New Great Game, showed up on the Internet site yesterday afternoon.  It runs for a surprising 25:15 minutes.  There is a transcript, but it's tiny.  It's another offering from reader B.V.


The Russian Ruble is Hereby Halted Until Further Notice

Earlier, we reported that various currency brokers such as FXCM and FxPro, would - as a result of the soaring liquidity in the USD/RUB pair - suspend trading in the Russian Ruble (while other merely hiked margins to ridiculous levels). It appears things have escalated again, and as FXCM just reported, instead of just politely advising clients not to open new USD/RUB position tomorrow, it has advised anyone long, or short, the USD/RUB that their positions will be forcibly shut in moments.

So for those curious why there appears to be a collapse in Ruble volatility in the past few hours which in turn has sent both stocks and crude soaring, the answer is simple: nobody is trading it!

And this is what happened following the post: as soon as all those short the RUB (long USD/RUB) realized they have to take profits, the USD/RUB tumbled some 500 pips (!) in the process sending stocks surging.

This must read news item, along with some excellent charts, appeared on the Zero Hedge website at 2:20 p.m. EST yesterday---and I thank 'David in California' for sending it our way.


George Friedman: Viewing Russia From the Inside

Last week I flew into Moscow, arriving at 4:30 p.m. on Dec. 8. It gets dark in Moscow around that time, and the sun doesn't rise until about 10 a.m. at this time of the year — the so-called Black Days versus White Nights. For anyone used to life closer to the equator, this is unsettling. It is the first sign that you are not only in a foreign country, which I am used to, but also in a foreign environment. Yet as we drove toward downtown Moscow, well over an hour away, the traffic, the road work, were all commonplace. Moscow has three airports, and we flew into the farthest one from downtown, Domodedovo — the primary international airport. There is endless renovation going on in Moscow, and while it holds up traffic, it indicates that prosperity continues, at least in the capital.

Our host met us and we quickly went to work getting a sense of each other and talking about the events of the day. He had spent a great deal of time in the United States and was far more familiar with the nuances of American life than I was with Russian. In that he was the perfect host, translating his country to me, always with the spin of a Russian patriot, which he surely was. We talked as we drove into Moscow, managing to dive deep into the subject.

From him, and from conversations with Russian experts on most of the regions of the world — students at the Institute of International Relations — and with a handful of what I took to be ordinary citizens (not employed by government agencies engaged in managing Russia's foreign and economic affairs), I gained a sense of Russia's concerns. The concerns are what you might expect. The emphasis and order of those concerns were not.

This commentary by Stratfor Chairman George Friedman appeared on their Internet site at 9:02 a.m. GMT yesterday---and it's definitely worth reading, especially for all serious students of the New Great Game.  It will take you 15 minutes to run through this, but it's more than worth it if you have the interest.  The first reader through the door with this yesterday was Roy Stephens.


Oil Trades Near 5-Year Low as Russia Matches OPEC Output Policy

Oil in New York traded near a five-year low as Russia reiterated that it will keep crude production steady next year, echoing OPEC’s strategy to refrain from curbing supply to tackle a global surplus.

Futures fell as much as 2.4 percent after sliding below $54 a barrel yesterday for the first time since May 2009. Output from Russia, the world’s largest crude producer, will be similar to this year’s 10.6 million barrels a day, according to Energy Minister Alexander Novak. Iran is said to be offering shipments to Asia at the deepest discount in at least 14 years, taking a cue from Saudi Arabia in cutting price differentials.

Oil has slumped 44 percent this year as a surge in shale drilling lifted U.S. output to the fastest pace in three decades amid slowing world demand growth. Leading members of the Organization of Petroleum Exporting Countries such as Saudi Arabia have resisted calls from smaller producers including Venezuela and Ecuador to reduce quotas to stem the price rout.

“OPEC won’t make a move unless the U.S. cuts its production first, and for now it looks like the game of chicken will most likely continue through next year,” Kang Yoo Jin, a commodities analyst at Woori Investment & Securities Co. in Seoul, said by phone. “As oil prices are slumping, it seems to be a strategic decision for producing countries including OPEC and Russia to keep their output levels unchanged.”

This Bloomberg story, filed from Seoul, South Korea on Wednesday morning, appeared on their website at 10:45 p.m. MST on Tuesday evening.  Marin Katusa passed it around the Casey Research crowd late last night.


Russia's Alternative to SWIFT Would Cause Big Problems for the West

The international financial system is based on the U.S. dollar. The greenback is both the world’s “reserve currency” — the one everyone wants to hold when things go bad — and the principal means of exchange. The vast majority of transactions between companies, countries and people are denominated in dollars.

As my investment-oriented colleagues regularly discuss on this page, the dollar’s dominance isn’t unchallenged. The Chinese yuan, in particular, has pretensions to become a second global currency, one so widely used that transactions unrelated to China could be conducted in yuan.

But there’s another challenge on the horizon … a new international interbank system that could create important opportunities — or chaos — for the world economy, depending on how the proverbial ball bounces.

This very interesting commentary showed up on the Internet site yesterday---via The Sovereign Investor.  It's also courtesy of Roy Stephens.


Erdogan speech indicates deep rift with E.U.

Turkish leader Recep Tayyip Erdogan has told the EU to “mind its own business” on free press, marking an ever-deeper rift in relations.

He made the comments at a speech in the Tupras oil refinery outside Istanbul on Monday (15 December) after European officials criticised his latest arrests of opposition-linked journalists.

“They cry press freedom, but they [the arrests] have nothing to do with this … We have no concern about what the EU might say, whether the EU accepts us as members or not, we have no such concern. Please keep your wisdom to yourself”, he said.

“The EU should not intervene in acts taken by the police and judiciary against entities that jeopardise our national security. It should mind its own business”.

This news item, filed from Brussels, appeared on the Internet site at 8:43 a.m. on their Tuesday morning---and it's the final offering of the day from Roy Stephens, and I thank him on your behalf.


China’s Treasury Holdings Fall to Lowest Since February 2013

China’s holdings of U.S. Treasuries fell to a 20-month low in October, as yuan appreciation indicated less of an impetus to buy the government securities.

China held $1.25 trillion in U.S. debt as of October, a $13.6 billion drop from September, the Treasury Department said in a monthly report today. The nation remains the largest foreign holder, ahead of Japan, whose stockpile increased $0.6 billion to $1.22 trillion, reducing the gap between the two countries to the narrowest since September 2012.

The yuan rose 0.4 percent against the dollar in October as the government moves toward a market-determined exchange rate, part of efforts to expand the currency’s use worldwide. The less China intervenes to weaken its currency, the less it needs to buy securities such as Treasuries.

“The lack of growth in their Treasury portfolio has been happening throughout this year, so I tend to think it’s more of a structural trend that’s developing,” said Stanley Sun, an interest-rates strategy analyst at Nomura Securities International Inc. in New York. He said he expects “a grind lower rather than any sharp decline” in holdings.

This Bloomberg article, filed from Washington, was posted on their website at 3:53 p.m. Denver time on Monday afternoon---and I thank reader M.A. for bringing it to our attention.


Traders betting Russia's next move will be to sell gold

Russia’s surprise interest-rate increase failed to stop the plummeting ruble. The next weapon available to repair economic havoc caused by sanctions and falling oil prices: selling gold.

Russia holds about 1,169.5 metric tons of the precious metal, the central bank said last month. That’s about 10 percent of its foreign reserves, according to the London-based World Gold Council. The country added 150 tons this year through Nov. 18, central bank Governor Elvira Nabiullina told lawmakers. 

Russia’s cash pile has dropped to a five-year low as its central bank spent more than $80 billion trying to slow the ruble’s retreat. The currency’s collapse combined with more than a 40 percent tumble in oil prices this year is robbing Russia of the hard currency it needs in the face of sanctions imposed after President Vladimir Putin’s annexation of Crimea. A fall in gold prices signals that traders are betting that the country will tap its reserves.

I'll be amazed if Russia taps its gold reserves---and I expect an update with their November Central Bank gold purchases on Friday.  This Bloomberg story showed up on their website sometime yesterday afternoon Denver time, but was updated just before midnight.  It also carries another propaganda line about Russia's annexation of the Crimea.  I found it in a GATA release yesterday.


Commodity Trading Giant Exits Physical Gold Due to "Lack of Physical With a Documented Origin"

Back in March, otherwise very under-the-radar Swiss commodities trading giant Gunvor and the fifth largest oil trader in the world, made headlines in the press when one of its then-Russian owners, billionaire Gennady Timchenko (estimated net worth of $8.5 billion), sold his entire 44% stake in the company to his partner in the firm, Torbjorn Tonqvist, just a day before the U.S. revealed its first round of sanctions against individuals affiliated with the Putin regime. Timchenko was among them. As a result of the sale, however, Gunvor avoided falling on the U.S. sanctions list and a Treasury official said that "Gunvor Group Ltd. isn’t subject to automatic blocking from dealing with U.S. persons under Russian sanctions because co-founder Gennady Timchenko owns less than 50 percent of the company."

Since then the Geneva-based company rarely appeared in the media which is how the nondescript company liked it. Until last week, that is, when Bloomberg reported that the company was giving up trading physical precious metals, read gold, less than a year after the commodity house started a business dedicated to buying and selling gold. Gunvor is, or rather was, one of the few large commodity firms that handles precious metals.

But the biggest surprise in this story was the reason why Gunvor chose to discontinues its gold trading. Per Bloomberg, "executives decided to abandon the precious metals trading business partly because of difficulties in finding steady supplies of gold where the origin could be well documented, one of the people said."

I'm not sure what to make of this Zero Hedge/Bloomberg piece that appeared on their Internet site at 10:35 p.m. EST last night.  It's worth reading---and I thank reader 'David in California' for sending it along.


Gold hedging creeps back

Mining companies are set to increase their outstanding net forward gold sales by between 42 and 52 tonnes in 2014, the largest expansion of the global gold hedge book of any year since 1999, an industry report said on Tuesday.

In their quarterly Global Hedge Book Analysis, Société Générale and GFMS analysts at Thomson Reuters said although the global hedge book shrank by 6 tonnes in the third quarter and will contract further in the fourth, they still expect net hedging in the full year.

Increased hedging would theoretically be negative for gold prices, as forward sales add to supply as gold is leased and sold forward. But despite the recent price drop, mining companies are wary of a wholesale return to hedging, after they lost billions of dollars unwinding hedged positions in the mid 2000s.

No gold mining company will sell their production forward at these prices---and even if they did, these small amounts are not even close to being material.  This Reuters story, filed from London yesterday, is much ado about nothing.  I thank reader U.M. for bringing it to my attention---and now to yours.


Gold Imports ‘Phenomenal’ In India - 571 Percent Surge To 150 Tonnes in November

India's gold imports were over a staggering 150 tonnes in November and have seen a "phenomenal" rise in India according to India’s Trade Secretary, Rajeev Kher.

A few weeks ago we said that the death of the Indian gold market was greatly exaggerated. The latest gold import data out of India confirms this.

The import restrictions on gold that were imposed on Indians in August of 2013 were lifted at the end of last month. Despite the fact that the restrictions were still in place gold importation in November surged an incredible 571% relative to the same month last year at over 151.58 tonnes.

This was an increase of 38 percent from 109.55 tonnes a month earlier, trade ministry data showed on Tuesday.

261 tonnes of gold imports in two months for India is a huge amount---and along with what China's taking off the market, one has to wonder where all this gold is coming from.  This commentary on Indian gold imports by Mark O'Byrne appeared on the Internet site yesterday---and is worth your while.


India to weigh gold policy impact after jump in November imports

India will weigh the impact of last month's easing of gold import rules after inbound shipments jumped 38 percent in November to push its trade deficit to an 18-month high, Trade Secretary Rajeev Kher said on Tuesday.

In a surprise move, the world's second-biggest gold consumer scrapped a rule for traders to export 20 percent of all gold imports, belying expectations for tighter curbs instead.

After the change, gold imports surged to 151.58 tonnes in November, an increase of 38 percent from 109.55 tonnes a month earlier, trade ministry data showed on Tuesday.

This gold-related Reuters story, filed from Mumbai, was posted on their Internet site at 10:25 p.m IST on their Tuesday evening---and contains a lot of the same information that was in Mark's column posted above, but there is other information, so it's worth your while if you have the time.  I thank Manitoba reader U.M. for her final contribution in today's column.


Lower Barrick ore grades, Midas sale cuts into U.S. gold output by 7 percent Y.T.D.

U.S. gold mine production declined 7% in the first nine months of this year, the U.S. Geological Survey has reported.

The decline was partly attributed to lower production from Barrick Gold Corp. and Newmont Mining.

Barrick’s Cortez Mine in northern Nevada produced 21,600 kg (684,451 troy ounces) in the first nine months of this year for a 36% decline in output, which was attributed to a lower ore grade.

Production for Newmont’s Nevada operations during the same period also dropped 10% to 34,600 kg (1,112,407 oz) because of the sale of the Midas Mine and a development phase that will increase waste stripping and decrease mill throughput at several mines, said the USGS.

The production decreases were partially offset by Rio Tinto’s Bingham Canyon Mine with 7,060 kg (226,982 oz) in the first nine months of the year, a 70% increase over the same period of last year when the operation was still recovering from a massive landslide.

There are a lot of facts and figures in this news item that appeared on the Internet site yesterday---and it's definitely worth your while if you're into numbers.



¤ The Funnies

Avrupa and Antofagasta intersect copper-rich VMS in Pyrite Belt, Portugal

•             First Greenfields discovery of massive sulfide mineralization in 20 years in the Iberian Pyrite Belt

•             10.85 meters of massive and semi-massive/stockwork sulfide mineralization grading 1.81% Cu, 2.57% Pb, 4.38% Zn, 0.13% Sn, and 75.27 ppm Ag

•             Including 7.95 meters @ 2.21% Cu, 3.05% Pb, 4.82% Zn, 0.15% Sn, 89.8 ppm Ag

•             Followed by 2.90 meters @ 0.71% Cu, 1.27% Pb, 3.17% Zn, 0.092% Sn, 35.4 ppm Ag

•             Avrupa and Antofagasta sign an amended Joint Venture Agreement

Please visit our website to learn more about the company and current exploration program.


¤ The Wrap

Another physical silver related issue that remains overlooked is the deposit/withdrawal pattern of metal in the big silver ETF, SLV, the world’s single largest holding of metal. Despite the two best price weeks recently and on higher than normal volume, over that same time a significant amount of silver has been redeemed from the trust; more than 9 million oz. There’s no way of me knowing if the metal was physically shipped out of the London warehouses, or stayed in place as a result of a conversion of shares to physical metal ownership, a simple process for those who may be involved. In either event, the reduction in reported metal holdings in SLV is serious food for thought.

For one thing, the redemptions in SLV are completely counterintuitive to what normally occurs when prices rise and trading is heavy. Usually, net investment demand increases on strong buying and higher prices, necessitating the deposit of metal to correspond with the increase in new shares created by the investment demand. The best current example is in GLD, the big gold ETF.

While the redemption pattern in GLD has been pronounced over the past two years as investors sold on declining gold prices, there have been three straight days of metal deposits into GLD on the recent price strength and higher trading volume. In other words, the deposit pattern in GLD this week was completely normal; whereas the redemptions in SLV on the same or greater price strength and trading volume was as cockeyed as it gets. - Silver analyst Ted Butler: 13 December 2014

Yet none of the so-called 'precious metal analysts' anywhere on Planet Earth---lunatic fringe or otherwise---will talk about this dichotomy, let alone try to explain it if they do.  You have to ask yourself why this is.

It was a wild day where all four precious metals wanted to do their versions of a NASA space launch at the London silver fix, but JPMorgan et al---and their HFT buddies---were having none of it.  The charts say it all---so I shan't beat this to death any further here.  Even the most brain dead could see that yesterday's price action had zero to do with supply and demand---and everything to do with price management in the face of all the uncertainty going on at the moment.  I would also guess, as I pointed out in The Wrap yesterday, that there's a certain amount of illiquidity in the gold and silver futures markets at the moment as well.

Posted below are the 6-month charts for all four precious metals, plus WTIC.  Crude oil traded at a new low yesterday, but didn't close there.

Although gold didn't close at a new low for this engineered price move down, that certainly wasn't the case for the other three precious metals, as they got smoked for the second day in a row.

Yesterday was the cut-off for this Friday's Commitment of Traders Report---and pretty much all of yesterday's volume should be in it.

As I type this paragraph, the London open is fifteen minutes away.  As occurred on Monday, gold rallied a bit at the New York open on Tuesday evening, but the moment it got within spitting distance of the $1,200 mark once again, that was it---and it traded just under that price point for the remainder of the Far East session on their Wednesday.  At the moment, it's up 4 bucks.  Silver was up over 20 cents at one point---and it, too, has been trading quietly in the Far East and is still up 15 cents or so.  Platinum and palladium's rallies also ran out of gas after small gains---and both are up about 5 bucks at the moment.

Gold volume is a bit over 15,000 contracts, but silver's volume is already pretty decent at 6,300 contracts.  The dollar index is up 14 basis points.

Today the kiddies at the Fed say their thing, as the FOMC meeting ends today---and we'll find out how badly the precious metals get hit at 2 p.m. EST.  And if they do take off on whatever news is released, then I don't expect the rallies to be allowed to last for long.  I'd love to be spectacularly wrong about this, of course.

So we wait some more.

And as I send this out the door at 4:45 a.m. EST, I note that gold poked its nose above the $1,200 spot mark just before London opened---and promptly got sold down below that mark the second that it did open.  Silver is trading sideways, but still in positive territory---platinum is up 10 bucks---and palladium rallied until 10 a.m. in Zurich before getting sold down a few bucks, and is currently up 7 dollars at the moment. Gold volume is around 22,500 contracts, which isn't a lot---and silver's volume is now a bit over 8,000 contracts, which is quite a bit.  The dollar index is up 26 basis points from its close in New York late yesterday afternoon---and up 59 basis points from its 8 a.m. low in New York yesterday morning.  Crude oil is currently down another 74 cents a barrel.

All eyes should be on what happens at 2 p.m. EST today, even before Yellen opens her yap.  I'm not expecting good things, but you just never know.

Whatever happens, I'll have it for you in tomorrow's column---and I'll see you then.

Ed Steer