Well, Far East and early London trading were but a harbinger of things to come during the rest of the Tuesday trading day... as gold took off around noon in London... and really accelerated about 9:30 a.m. in New York. This party lasted until precisely noon Eastern time, before either the buyer disappeared. or a seller of some substance arrived on the scene. The equity markets took a header in the last half-hour of trading, and that may have been a contributing factor to gold's decline shortly before 4:00 p.m. yesterday afternoon. Gold's high was reported as $1,275.70 spot
Silver showed a similar pattern, but its impressive advance got sold off shortly after London trading began yesterday morning and, despite what the gold price was doing, continued to decline right up until 9:40 a.m. in New York. Silver rallied from that point, but its rally was muted compared to gold's... and it couldn't [or wasn't allowed to] close above the magic $20.50 spot mark. Silver's high price tick of the day [$20.54 spot] was in electronic trading after the Comex trading day was over.
The world's reserve currency took in the neck again on Tuesday... down over 90 basis points... with most of the damage coming between 9:00 a.m. and 12:00 noon in New York yesterday morning. After that, the dollar didn't do much into the close. From it's Friday close, until it's absolute low around 12:45 p.m. yesterday, the US$ dropped over 180 basis points in two trading days. Despite the big dollar drop on Monday, the gold price was capped for a small loss on the day, but was up big on Tuesday to make up for it.
The US$ chart below shows the last three business days. The big pop in the price last night was the admission by the Bank of Japan that they were intervening in the currency markets to drive down the value of the yen against the dollar. So far, the dollar is up over 60 basis points on the BoJ's efforts. Let's see how they make out as Wednesday trading progresses.
The precious metals stocks took off right from the New York open at 9:30 a.m. and the HUI had almost reached its high of the day by 10:30 a.m... despite the fact that both gold and silver powered ever higher until noon Eastern time. From that peak, the HUI managed to stay over the 500 mark until the last half hour of trading... when a quick decline in both the gold price and the equity markets dragged the gold stocks with it. The HUI finished up 3.40%... well off its high of the day. The silver stocks did particularly well for the second day in a row. The HUI is up 15.4% year-to-date.
The CME Delivery Report for Tuesday showed that zero gold and 54 silver contracts were posted for delivery on Thursday. We're just about half way through the September delivery month for silver and 1,625 silver contracts have been delivered. The September month shows that 1,204 silver contracts are still open. These contracts must be closed out, or delivered into, before September 29th. The link to yesterday's delivery report is here.
The GLD ETF reported taking in another 195,445 ounces of gold yesterday... and there were no reported changes in SLV. The U.S. Mint had no sales report... and the Comex-approved depositories showed that they received a net 608,917 ounces of silver into their collective inventories on Monday. The link to that action is here.
There sure wasn't much activity over at Switzerland's Zürcher Kantonalbank last week. Their gold ETF only took in 2,302 ounces... and their silver SLV was flat on the week. I thank Nick Laird for providing this week's numbers.
Today's first story is from today's edition of The Wall Street Journal... and is courtesy of reader 'Vern in Ventura'. The headline reads "The 1099 Insurrection". The Senate will vote on amendments to the White House small business bill that would rescind an ObamaCare mandate that companies track and submit to the IRS all business-to-business transactions over $600 annually. Democrats tucked the 1099 reporting footnote into the bill to raise an estimated $17.1 billion, part of the effort to claim that ObamaCare reduces the deficit by $100 billion or so. If you live in the U.S.A... and operate a business of any kind... this is a must read. The link is here.
The next item today is courtesy of Casey Research's own John Grandits. It's a piece out of Monday's edition of The Washington Post that bears the headline "More banks missing TARP dividend payments". The latest report from the agency shows that more than 120 institutions - nearly all of them small banks - have missed their scheduled quarterly dividend payments, which is more than a sixth of the banks that received federal aid during the financial crisis. In addition, five banks that received capital injections from the controversial $700 billion Troubled Assets Relief Program [TARP] have failed altogether. This is a situation that continues to get worse with each passing month... and, until its fully dealt with, the entire U.S. banking system is dead in the water. This story is well worth the read and the link is here.
I have two stories about hyperinflation for you today. This first is a longish read from back on Monday, August 23rd. Nick Laird sent it to me last week and somehow it ended up in my 'Junk' e-mail box. I fished it out yesterday afternoon... and here it is. The author is Gonzalo Lira... and the headline reads "How Hyperinflation Will Happen". I'd never heard of the guy until James Turk mentioned him favourably in an e-mail on Monday. It's wonderfully written... and although the prose are rather pithy at times... it's a must read. The link is here.
The next piece on hyperinflation was sent to me by reader Tony Beck from South Carolina. It's a zerohedge.com article headlined John Williams Sees The Onset Of Hyperinflation In As Little As 6 To 9 Months As Fed "Tap Dances On A Land Mine". John is arguably one of the best trackers of real, un-manipulated government data in the U.S.A. Yesterday he released a note to clients in which he warned that hyperinflation may hit as soon as 6 to 9 months. The zerohedge.com piece is not very long... and there's a link to John's piece over at his own website, shadowstats.com. The link to 'all of the above' is here.
My last four offerings today are all precious metals related... but before I post the first one, here's a graph that Nick Laird over at sharelynx.com just sent me moments ago. It's the PM Index Fund... and it shows the breakout from November 2009. I'll be a lot more convinced that the breakout is for real when it's well above its highs from back in 2007/08.
Today's first gold-related story is a posting over at kitco.com that Australian reader Wesley Legrand sent me yesterday. It's a synopsis of what Marc Faber had to say at the Kitco Metals eConference on Monday. There are no flies on Marc... and what he says in this posting is very much worth reading. The headline states "Gold Holds Value Free From Default Risk—Faber"... and the link is here.
Well, the last of the big hedgers is heading for the exits. In a Bloomberg story yesterday, AngloGold Ashanti, Africa’s biggest gold producer, plans to sell 15.8 million new shares and offer bonds that convert into the same number of American depository receipts to fund an end to its gold hedges. It's the end of an very ugly era, dear reader... and I for one am glad to see it gone... hopefully for good. Their rush to pay off their hedgebook in full, is a sure sign that gold prices are heading higher... much higher. The headline reads "AngloGold Plans Share, Bond Sales to Help End Hedges". It's a very short read... and the link is here.
Here's today's second graph courtesy of Nick Laird over at sharelynx.com. It's call the Silver Seven Stock Index. You can see that we've broken out of the current trading range... but we have miles to go before we even get a sniff of a new all-time high in this index. I pointed out earlier in this column that the silver stocks had done particularly well during the last two days... but it's obvious that they have they haven't done much in the grand scheme of things.
By the way, the Silver Seven are comprised of Coeur d'Alene Mines, First Majestic Silver, Hecla Mining, Pan American Silver, Peñoles, Silver Wheaton and Silver Standard Resources.
Toronto-based Inter-Citic Minerals Inc. (TSX: ICI) is a gold exploration and development company, developing what could be one of China's largest open-pit gold deposits. Inter-Citic's 279 sq km Dachang Gold Project in Qinghai Province, China, with 50,000 meters of drilling underway in 2008.
The total NI 43-101 compliant Inferred Mineral Resource Estimate at Dachang now stands at 2.9 million oz Au contained (approximately 25 million tonnes with an average grade of 3.6 gpt Au), with more drilling underway on the DMZ to further define the existing 43-101 inferred mineral resource estimate in preparation for a scoping study, as well as additional drilling in highly prospective new areas focused on resource expansion. Gold mineralization in the Dachang Main Zone begins at surface and has not been significantly drilled below 150 meters, and numerous known areas of surface gold mineralization on adjacent and other parts of the property have the potential for further discoveries. The Dachang Main Zone itself remains open at depth and along strike.
Under a 30-year joint venture agreement with the Qinghai Geological Survey Institute (QGSI – the provincial geological survey body), Inter-Citic has a fully-vested 83% interest in the property, with 17% belonging to QGSI. Inter-Citic has a further option to increase its total interest to 90% at pre-feasibility. The Dachang property consists of several exploration license areas. They have all been renewed by the Company as they have come due in regular course. The business license for the Dachang Gold Project is currently valid to December 26, 2033.
There are no market anymore... only interventions. - Chris Powell, GATA
Hopefully, yesterday's action in both silver and gold is a sign of things to come. As I mentioned earlier, I'll be much happier when I see both the HUI and the XAU break the old highs set back in early 2008. We're at record highs in gold... and almost at a 30-year high in silver... and the precious metals shares are still lagging.
As I also mentioned yesterday, silver is now into overbought territory, with gold not that far behind. I am concerned about a correction of some sort... and I'm also wondering how the Bank of Japan's intervention in the currency markets yesterday evening will affect things in the hours and days ahead. Right now [as of 4:01 a.m. Eastern] it appears that the BoJ's intervention has stalled, but they may have more interventions planned. Here's the 2-year silver chart that shows the current overbought situation more clearly. I suspect that any correction will be shallow and short, as other corrections have been in similar overbought situations.
Volume in gold yesterday was pretty heavy... and the bullion banks were most likely shorting this rally. Because it happened on a Tuesday, which is the cut-off for Friday's Commitment of Traders report, there's an excellent chance that none of this volume will show up in that report... as the bullion banks are very tardy in reporting Tuesday's changes when there's been a big move... either up or down. Silver's volume was equally heavy... none of which will show up in Friday's COT report either, even though it should.
In Far East and early London trading, both metals are creeping slowly higher... and it should be another interesting trading day once New York opens for business.
I hope your Wednesday goes well... and I'll see you here tomorrow.