As I stated in 'The Wrap' yesterday morning just minutes before my 5:20 a.m. Eastern time filing deadline..."It remains to be seen whether these rallies [in gold and silver] continue in London...or get stepped on before New York opens..."
With the benefit of 20/20 hindsight, it's easy to see that virtually all the excitement was over by 9:20 a.m. BST in London. There was a vertical price spike at 1:00 p.m. BST, twenty minutes before the Comex open...but it got hammered flat in pretty short order. The rally after the London p.m. gold fix at 10:00 a.m. Eastern time wasn't allowed to get too far, either.
Gold closed at $1,701.30 spot...up $7.90 on the day. Net volume was pretty enormous...around 190,000 contracts, so it should be obvious that gold's attempt to rally well over the $1,700 price mark was not going unopposed...and that JPMorgan et al were going short against all comers.
It was virtually the same story in silver...and the price pattern was virtually identical, as you can see from the Kitco chart below. Silver closed at $32.71 spot...up 44 cents from Wednesday's close. Volume was very heavy as well...around 57,000 contracts.
The dollar index opened on Wednesday night in New York at 81.20...and then declined in fits and starts down to about 81.07 at 8:00 a.m. in New York. Then at precisely that moment...the moment that both gold and silver began to spike higher at 1:00 p.m. in London...the dollar index turned on a dime, reaching its 81.42 zenith about 9:40 a.m. in New York...and by 11:00 a.m. Eastern that entire gain had reversed itself. The dollar index closed at 81.12...down about 8 basis points from Wednesday.
If you check the above gold and silver charts, you will note that all the major price activity in New York in both gold and silver happened precisely between those two times. Hardly a coincidence, I'm sure.
The gold stocks gapped up...and after a bit of sag, worked their way slowly higher for the rest of the day. The HUI finished on its high tick...up 2.67%.
The silver stocks were mostly up on the day...but there were a few red arrows amongst the green ones. Nick Laird's Silver Sentiment Index closed up another 1.44%.
(Click on image to enlarge)
The CME's Daily Delivery Report showed that 5 gold and 157 silver contracts were posted for delivery within the Comex-approved warehouse system on Monday. In silver, the big short/issuer was the Bank of Nova Scotia...and to no one's surprise I'm sure, JPMorgan was the biggest long/stopper with 93 contracts in its proprietary [house] account...along with 46 contracts in its client account. The link to yesterday's Issuers and Stoppers Report is here.
The CME's preliminary volume report for yesterday shows that only 1,103 silver contracts remain open in September. That's almost a 50 percent drop since Monday.
There were no reported changes in either GLD or SLV...and the U.S. Mint didn't have a sales report, either.
Wednesday was another active day over at the Comex-approved depositories. They received 926,750 troy ounces of silver...and shipped 1,116,483 troy ounces of the stuff out the door. Here's the link to that activity.
Nick Laird sent me his "Transparent PM Holdings" chart very late last night...and it's definitely worth looking at. As Nick pointed out..."it's still hitting new highs day after day."
(Click on image to enlarge)
I have the usual number of stories for you today...and the final edit is yours.
The market has come to think of economic growth and Federal Reserve action as interchangeable. That is what is meant by the "Bernanke Put." If growth sags, the Fed will step in.
But could Thursday's rally be based on a different idea — that the market could get both better economic data and quantitative easing too?
There is some reason to think it could happen, with the Fed offering new bond purchases of Treasuries and mortgage-backed securities even if the jobs number is strong Friday...as the August minutes offered promise of action that is likely unique for the Fed.
“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” the minutes said.
With the jobs numbers due out at 8:30 a.m. Eastern time, we'll find out pretty quickly after that I would think. I thank West Virginia reader Elliot Simon for our first story of the day. It's posted on the CNBC website...and the link is here.
JPMorgan Chase & Co.’s wrong-way bets on derivatives are the focus of an escalating investigation by a U.S. Senate panel led by Carl Levin that has grilled executives from banks including Goldman Sachs Group Inc. and HSBC Holdings Plc, three people briefed on the inquiry said.
Levin’s Permanent Subcommittee on Investigations is seeking testimony from those who worked in or helped lead JPMorgan’s chief investment office, according to the people, who asked not to be identified because the inquiry isn’t public. The unit’s London staff lost at least $5.8 billion this year on the botched wagers, which were large enough to shift markets.
The market value of JPMorgan, the nation’s largest bank by assets, has dropped more than $22 billion since Bloomberg News first reported on April 5 that the firm amassed a large and illiquid position in credit derivatives in the London office. The bank has said it could lose as much as $7.5 billion in total while closing out the position.
This is a very interesting behind-the-scenes story that was posted on the Bloomberg Internet site late yesterday morning. I thank Washington state reader S.A. for sending it our way...and the link is here.
Private equity firms just don't care about the success of the companies they take over, according to Matt Taibbi.
"What people have to understand is that private equity companies do not exist to turn around companies. "Their function is to make a profit for their investors and for the private equity firm, and these things are at cross-purposes."
Taibbi said though private equity firms have spawned some success stories, the industry's fundamental business model promotes layoffs and even company failure. The industry's proponents argue that private equity firms make companies more efficient.
This 4:53 minute video was a real education...and is well worth watching. It's posted over at the huffingtonpost.com Internet site...and I thank Roy Stephens for bringing it to our attention. The link is here.
Well, a headline like that needs little further comment from me. The link to the graph...and the Smith & Wesson Investor Presentation package for September 2012...was posted on the zerohedge.com Internet site yesterday. The first reader through the door with this story was Elliot Simon...and the link is here.
The European Central Bank has resembled a sieve this week. Ahead of Thursday's much anticipated press conference, financial websites and business papers were full of reports detailing ECB President Mario Draghi's plan for holding down the borrowing costs of debt-plagued euro-zone member states. Discretion was in short supply.
When Draghi did finally step in front of the microphone on Thursday, he confirmed what most already knew. The ECB is to launch a new bond-buying program to hold interest rates on euro-zone sovereign bonds in check. The program, called Outright Monetary Transactions (OMTs), allows for unlimited ECB purchases of sovereign bonds on the secondary market. The program is to focus on bonds with a period of three years and less.
"OMTs will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro," Draghi said in a statement. "Hence, under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios."
Well, no surprises here...as it's 'Print, or die' time everywhere on Planet Earth now. This story showed up on the spiegel.de Internet site yesterday...and I thank Roy Stephens for bringing it to our attention. The link is here.
If, like me, you have come to see the single currency as completely unsustainable in its present form, both politically and economically, then plainly not. But, as with previous ECB initiatives, Mr Draghi has at least managed to buy a bit more time. The endgame has been pushed further, possibly quite a lot further, into the future.
Without the conditional bond-buying programme agreed by the ECB governing council today, the show would certainly have been over by Christmas, with either Spain or Italy blowing it up in frustration. We can forget poor little Greece, which in its pride still manfully soldiers on with a project which condemns the country to permanent depression. Whether it leaves or stays no longer makes much difference to anyone else. Most of the preparation for its exit has already been done.
But both Italy and Spain are core to the continued existence of meaningful monetary union in Europe, so they had to be placated in some way or other.
This story was posted on the telegraph.co.uk Internet site last evening...and it's another offering from Roy Stephens. The link is here.
Capital flight from Spain has exceeded levels reached in Asia during the region’s financial crisis in the 1990s, according to research from Nomura Securities. The overall amount of money that flowed out of Spain in the second quarter was equal to 50% of the nation's gross domestic product.
That's all there was to this story that was posted on the euobserver.com website early yesterday morning. It will be interesting to see if Draghi's money printing scheme will reverse, or even slow down, this capital exodus. Ken Metcalfe sent me this 1-paragraph story...and the link to the hard copy is here.
The chart needs no commentary, neither does what it represents. In May, Greek unemployment, pre-revision, was 23.1%. It was subsequently revised higher to 23.5%, but this is merely to make the jump to the June number more palatable. What was June? 24.4%. In other words, no matter how one looks at it, the unemployment rate rose by 1% in one month.
You just read almost the entire Zero Hedge story. The chart is worth the trip...and click on it to make sure you see the whole thing. Washington state reader S.A. sent me this short piece yesterday...and the link is here.
The sales culture that has riddled the banking industry with scandal must end and lenders must "recast" themselves as boring and trustworthy with a focus on customers, according to Lloyds Banking Group’s chief executive.
António Horta-Osório said banks had let the public down by becoming “complacent, non-customer focused and inefficient”.
Speaking at the CBI Scotland annual dinner, the boss of the 41pc taxpayer-owned bank said: “The banking industry has done itself no favours. Issue by issue and scandal by scandal, the faith and trust in our industry has been eroded.” To restore trust, “the industry must change. We must recast the banking model ... retail and commercial banks should be simple and they should be boring”.
His comments came after the bank revealed earlier this week that it is scrapping bonus schemes which the Financial Services Authority claimed encouraged mis-selling.
Well, it sound encouraging...but we'll have to wait many years to see if this new culture permeates the rest of the banking industry...both in Britain and in North America. This story was posted on The Telegraph's website last evening...and I thank Donald Sinclair for sending it to me. The link is here.
The first blog is with Egon von Greyerz...and the headline reads "The ECB Move, $4,000 - $5,000 Gold & $150 Silver". The next one is with Dan Norcini...and it's entitled "What Hedge Funds are now Doing in the Gold & Silver Markets". The last blog is with Citi's Tom Fitzpatrick. It's headlined "Special Friday Gold & Silver 'Chart Mania'". The audio interview is with Dr. Marc Faber.
A judge has ruled that ten rare gold coins worth $80 million belong to the U.S. government and not to a family that had sued the U.S. Treasury, claiming it had illegally seized them.
The disputed coins are among the rarest and most valuable in the world. Known as Double Eagles, each coin was originally worth $20 when they were minted in 1933, although one sold for $7.6 million at a Sotheby's auction in 2002.
The coins were originally commissioned by then President Theodore Roosevelt because who wanted American coins to be more beautiful.
More than 445,000 Double Eagles were minted, but the President then banned the payout of gold coins to combat a financial crisis. Most of the coins were melted into gold bars before they entered circulation, although some have surfaced over the years.
This story showed up on the dailymail.co.uk Internet site yesterday evening BST...and I thank Washington state reader S.A. for bringing this very interesting article to our attention. The link is here.
Julian argues that part of the side-lining of gold from the monetary system was through its undervaluation as an asset, something he says is changing.
As the value of assets of various governments and potentially U.S. bonds are threatened by over-indebtedness, commercial banks are left with little recourse except changing the situation by changing the rules for the banks. Hence, the current discussions on gold's definition in the bank's balance sheets. If gold is redefined as a Tier I asset, then when any future loss of asset value of paper assets occurs, there will be no need for banks to sell gold to compensate for such falls. And, as gold has amply demonstrated, the gold price is more than likely to rise in such situations, proving to be a ‘counter to all paper assets' on the bank's balance sheets.
Such a change will do a great deal to remove a shock to the solvency of so many commercial banks in credit crunches and the like. Will the change happen? We believe so and expect this to take effect on January 1st 2013.
I've posted stories and comments about the Basel III meetings before, but Julian wraps it all up in one neat parcel. It was posted over at the mineweb.com Internet site early Wednesday morning in London...but I just didn't have the room for it in yesterday's column. Here it is now...and I thank Donald Sinclair for sharing it with us. The link is here.
After a long summer slumber, the gold market looks set to re-awaken, thanks to some powerful jolts from central banks that could launch the precious metal to record highs.
Market watchers said the European Central Bank’s announcement of a bond-purchase quantitative easing (QE) program Thursday, together with the U.S. Federal Reserve Board edging closer to unveiling a new QE program of its own as early as next week, have injected life into gold after a sluggish six months of sideways trading.
“The fundamental argument behind it is monetary policy in Europe and the United States. [Quantitative easing] is basically printing money,” said Aaron Fennell, futures specialist at ScotiaMcLeod.
This story showed up in Toronto's Globe and Mail newspaper yesterday...and I thank Roy Stephens for his final offering in today's column. The link is here.
Low interest rates and extremely accommodative monetary policies will leave the country with no choice but to return to a modern version of the gold standard, said publisher and one-time GOP presidential hopeful Steve Forbes.
The GOP platform has called for a commission to study the feasibility of the gold standard, which attaches the value of the dollar to a fixed weight of gold.
President Richard Nixon dropped the gold standard in 1971 and opened the era of a fiat dollar. Supporters of the gold standard’s revival say the plan would prevent the government from living outside of its means like it does today.
"But the yellow metal will be a hot topic in the next 24 months. The commission is going to take on an importance that will astound today’s political punditry, besotted as they are with stale Keynesian quackeries about money, taxes and spending,” Forbes wrote in his publication.
This story appeared on the moneynews.com Internet site yesterday morning...and I thank Elliot Simon for his last offering in today's column. The link is here.
The Indian government is looking at increasing the import duty on gold for the third time this year to 7.5% in order to cut down on deficit and in a bid to shore up the weak rupee says Prithviraj Kothari, president of the Bombay Bullion Association.
With gold imports forecast to stage a smart comeback in the second half of 2012 given the ongoing festive season, the move, if implemented, could deal a body blow to the industry which has been grappling with low demand, given the duty hikes and high prices.
Imports slid 42% in the first 6 months of 2012 to just 340 tonnes, according to the World Gold Council.
"With the government raising import duty on gold to 2% at the start of the year, physical imports of gold were impacted. It had also hurt demand at the jewellery retailer end,'' said Kothari.
India is pulling a Vietnam. If implemented, all this will do will increase smuggling. This story was filed from Mumbai...and was posted on the mineweb.com Internet site yesterday. I thank Donald Sinclair for sending it...and the link to this must read story is here.
On a day gold prices touched a new high, the Reserve Bank of India urged the public against choosing gold as an asset for savings or investment.
"Because interest rates are very low, people are investing in gold. But the poor should never invest in gold, for whenever they have purchased gold, it either lands up in the temple or in the hands of the moneylender or, at most, it may be given away during a daughter's marriage," said RBI Deputy Governor K.C. Chakrabarty.
Speaking at a function that marked the eighth edition of the M.R. Pai Awards, given in memory of the founder of the All-India Bank Depositors Association, Chakrabarty said that this is one area in which the association needs to educate the public.
"How many poor people," Chakrabarty asked, "have managed to save money by buying gold? Banks are selling gold, but do they buy it back? And if they do, at what price?"
The deputy governor added that the $60 billion worth of gold India imported annually was one of the main reasons behind the current account deficit.
I found this story in a GATA release...and it was posted on the timesofindia.com Internet site earlier this morning India Standard Time. It's a must read as well...and the link is here.
Aben Resources (TSX.V: ABN) is a Canadian gold and silver exploration company with a focus on developing properties in the Yukon. The Company's flagship project is its 100% owned Justin Gold Project located 35 kilometres southeast of the Cantung Mine and has an all season road running through its claims. A phase one drill program was carried out in 2011 on the 18,314 acre Justin Project in which a significant new greenfields gold discovery was made at the property’s POW Zone. The Company intercepted 60 metres of 1.19 g/t gold in hole JN11009 at a vertical depth of 113 metres. Additionally, a new high grade silver-copper zone was discovered at the Kangas Zone with hole JN11003 returning 1.07 metres of 7320 g/t silver (234 oz/ton) and 3.52% copper near surface. As a result of these discoveries on the Justin Project, Aben acquired 14,274 additional acres of mineral tenure in the immediate vicinity of the project to facilitate a more aggressive work program this upcoming season. The Company has four other prospective Yukon and NWT projects in its portfolio along with a seasoned management and geological team. Aben’s chairman, Ron Netolitzky, is credited with exploration success on numerous properties including three Western Canadian gold and silver projects which became producing mines. Please visit our website to learn more about the company and request information.
Well, it was just another day when JPMorgan et al threw everything they had at the precious metals to prevent them from blowing sky high...as the volume figures were enormous, especially in gold.
Today we get the jobs report at 8:30 a.m. Eastern...and as I say every month at this time, it will be interesting to see how gold reacts to this data...or is allowed to react. I've noticed in the past...that there are times that 'da boyz' will soften up the price in advance of the jobs numbers, especially if they're particularly bad, so that when the gold price does pop at 8:30 a.m....the precious metals have a hole to dig themselves out before turning positive on the day. That may [or may not] be what went on in the precious metals market earlier today. We'll see.
We also get the Commitment of Traders Report as well...and I'll be waiting at the keyboard at precisely 3:30 p.m. Eastern time, which is when they post it on the CFTC website. I'll have that data in tomorrow's column.
As I mentioned two paragraphs ago, both gold and silver came under some selling pressure in Far East trading on their Friday. The lows in both gold and silver were in around 1:00 p.m. Hong Kong time...and are continuing to rally now that London has been open for a bit more than two hours. It will be interesting to see how long that lasts, or is allowed to last. Gold volume is already very high...around 35,000 contracts and, like yesterday, silver's volume is at 12,000+ contracts once again. The dollar index is down about 20 basis points, gold is down about six bucks...and silver is down 50 cents as I hit the 'send' button at 5:18 a.m. Eastern time.
With the exception of palladium, the other three precious metals are still well into overbought territory...especially silver. Based on that, it will be interesting to see if JPMorgan et al can, or will, engineer another sell-off in the near future. Here's the 6-month silver chart.
(Click on image to enlarge)
With gold and silver shares roaring higher, there's still an opportunity to either readjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.
Today is another day where I look forward to the 8:20 a.m. Comex open with great interest. Enjoy your weekend...and I'll see you here tomorrow.