Gold & Silver Daily

¤ Yesterday In Gold & Silver

The gold price didn't do a lot up until 1 p.m. BST in London on their Wednesday, as it traded a couple of dollars either side of $1,290 spot up until that point.  Then, at the time mentioned, away it went to the upside, with most of the gains of the day recorded by minutes after 9:30 a.m. EDT.  From there, the price didn't do much, as it chopped sideways into the 5:15 p.m. EDT close of electronic trading.

The CME Group recorded the low and high ticks as $1,288.50 and $1,311.00 in the December contract.

Gold finished the Wednesday trading session at $1,305.90 spot, up $17.30 on the day.  Volume, net of August and September, was pretty hefty at 171,000 contracts.

After the obligatory downtick at the New York open on Tuesday evening, it was more or less the same chart pattern in silver on Wednesday.  The metal began to rally sharply at 1 p.m. BST as well---and the spike high at 9:30 a.m. EDT got hammered back down to the $20 spot mark within minutes.  After that, like gold, it traded within a few pennies of that price for the remainder of the day.

The low and high ticks were recorded as $19.77 and $20.135 in the September contract.

Silver closed yesterday at $20.005 spot, up 26.5 cents from Tuesday's close.  Net volume was way up there once again at 45,500 contracts.

With some minor variations, platinum and palladium had similar charts patterns as well.  Platinum closed up $10---and palladium finished the Wednesday session up $3.  Here are the charts.

The dollar index closed late on Tuesday afternoon in New York at 81.53---and then chopped sideways in a tight range until 9 a.m. BST in London yesterday morning.  From there it rallied up to 81.70 by 11:30 a.m. BST.  Then it was pretty much all down hill into the close, as the index finished the Wednesday session around 81.43, which was down 10 basis points on the day.

Not surprisingly, the gold stocks gapped up more than 2% at the open---and did manage to tack on a bit more in the way of gains later in the day, but got sold down off their highs in the last thirty minutes of trading.  The HUI finished up 2.30%.

It was more or less the same chart pattern for the silver equities, although they managed to finish the Wednesday session up a bit more, as Nick Laird's Intraday Silver Sentiment Index closed up 2.77%.

The CME's Daily Delivery Report for Day 5 of the August delivery month showed that only 10 gold and 2 silver contracts were posted for delivery within the Comex-approved depositories on Friday.  Nothing to see here.

And checking the CME's Preliminary Report for Wednesday, I note that gold open interest for August is now down to 2,618 contracts.  Silver's open interest in August is currently a dozen contracts or so.  But total open interest in gold blew out by more than 8,100 contracts with Thursday's price action, however silver's total o.i. was flat.  The gold number is not a surprise, but the silver o.i. number, is.  However, it's dangerous to read too much into these preliminary numbers.

There was a withdrawal from GLD yesterday, as an authorized participant removed 76,974 troy ounces---and as of 7:38 p.m. EDT yesterday evening, there were no reported changes in SLV.  But when I was editing today's column at 3:45 a.m. EDT, I noticed that an authorized participant had added 767,711 troy ounces of silver.

The U.S Mint had its third sales report in as many days, as they sold 2,000 troy ounces of gold eagles---500 one-ounce 24K gold buffaloes---and 380,000 silver eagles.

There was more movement in gold over at the Comex-approved depositories on Tuesday, as 26,692 troy ounces were reported received---and 353 troy ounces were shipped out.  The link to that activity is here.

Ted pointed out something that I'd missed in Tuesday's column on Comex gold inventories---and that was the fact that the 595,102 troy ounces that the report showed withdrawn from JPMorgan on Friday was, with the exception of a few ounces, totally reversed in Monday's report from the Comex.

It was a decent day in silver, as 55,676 troy ounces were reported received----and 778,776 troy ounces were reported shipped out.  The link to that action is here.

Here's the 5-minute tick gold chart from yesterday---and note all times are MDT, so add two hours for EDT.  The chart runs from 11:30 p.m. on Tuesday evening Denver time, up until the 5:15 p.m. EDT close of the electronic market in New York yesterday---and once again I thank reader Brad Robertson for passing it along.  Note the huge volumes that were associated with yesterday's rally.

Once again I have a very decent number of stories---and I hope you have the necessary time to read the ones that interest you the most.


¤ Critical Reads

WSJ/NBC News Poll: 64 Percent of Americans Still Feeling Recession

A total of 64% of Americans say they are still feeling the impact of the recession, and 40% say a household member had lost a job during the last five years, according to a Wall Street Journal/NBC News poll of 1,000 adults taken last week.

In addition, 71% those polled believe the United States is on the wrong track, up from 63% in June, and 60% believe we're on the decline.

And what's to blame? The political leadership in Washington, according to 70% of Americans. A whopping 79% expressed some dissatisfaction with our political system.

Half of the respondents said they feel the economy is improving, while 49% think it's still in recession, down from 58% a year ago.

No surprises here.  This new item was posted on the Internet site at 10:36 a.m. EDT on Wednesday---and today's first story is courtesy of West Virginia reader Elliot Simon.


Bank of America Nears $17 Billion Settlement Over Mortgages

Bank of America and the Justice Department have reached a tentative deal that would cost the bank nearly $17 billion to settle an investigation into its sale of toxic mortgage securities in the run-up to the financial crisis, according to people briefed on the matter, the latest eye-popping rebuke of a giant bank.

The agreement, which is not final and could still fall apart, would represent a record for the government. It would be the largest sum the Justice Department has ever extracted from a single company.

The bank has agreed to pay a roughly $9 billion cash penalty to the United States Treasury — last month, Citigroup agreed to pay a $4 billion penalty — while providing the remaining money in the form of relief to struggling homeowners, the people briefed on the matter said. Just a few weeks ago, the bank was offering only $3 billion in cash, a figure that temporarily caused talks to break down.

Despite the huge penalty, critics contend that the government crackdown has amounted to little more than a slap on the wrist. No Bank of America employee will face charges, and the case against the bank is civil, rather than criminal.

This New York Times article was picked up on the Internet site sometime yesterday---and I thank Orlando, Florida reader Dennis Mong for sharing it with us.


BATS Close to Settling High-Speed Trading Case in US: WSJ

BATS Global Markets Inc, the second-largest U.S. exchange operator by volume, is in advanced talks with regulators to settle allegations that it gave unfair advantages to high-speed traders, The Wall Street Journal reported, citing people familiar with the matter.

Any deal would mark the first regulatory action out of a nearly three-year investigation by the U.S. Securities and Exchange Commission into whether some exchanges offered certain types of orders that gave sophisticated traders an edge over other investors, the Journal said.

BATS and the SEC were not immediately available to comment.

High-frequency trading has also been under intense scrutiny, following the release of Michael Lewis' book "Flash Boys: A Wall Street Revolt," earlier this year.

This article appeared on the Reuters website at 7:19 a.m. EDT on Wednesday morning---and it's the second offering of the day from Elliot Simon.


David Stockman: Wall Street Isn’t Fixed---and TBTF Is Alive and More Dangerous Than Ever

Practically since the day Lehman went down in September 2008 Washington has been conducting a monumental farce. It has been pretending to uncover the causes of the thundering financial crisis which struck that month and to enact measures insuring that it would never happen again. In fact, however, official policy has done just the opposite.

The Fed’s massive money printing campaign has perpetuated and drastically enlarged the Wall Street casino, making the pre-crisis gamblers in CDOs, CDS and other derivatives appear like pikers compared to the present momentum chasing madness.  In a nutshell, the Fed’s prolonged regime of ZIRP and wealth effects based “puts” under risk assets has destroyed two-way markets. The market’s natural mechanism of risk containment and stabilization—-short sellers—has been driven from the casino. Accordingly, carry-trade speculators engorged with free money funding have taken the market to lunatic heights, while leaving it vulnerable to a violent collapse upon an unexpected drop because the market’s natural braking mechanism—short sellers taking profits—-has been eviscerated.

At the same time, the giant regulatory diversion known as Dodd-Frank has actually permitted the TBTF banks to get even bigger and more dangerous. Indeed, JPM and BAC were taken to their present unmanageable size by regulators—ostensibly fighting the last outbreak of TBTF—who imposed or acquiesced to the shotgun mergers of late 2008.

This commentary by Stockman showed up on his Internet site yesterday---and it's the first contribution of the day from Roy Stephens.


UN Says Ukraine Violence Will Affect Millions

The U.N. has expressed its major concern over the plight of the eastern Ukrainian territories and their soaring numbers of refugees. There are 118,000 internally displaced people, and 740,000 have fled to Russia during the crisis.

“What we are scared about is the way the military operations are conducted. What will happen if we have intense fighting inside the big urban centers of Lugansk and Donetsk? Fighting in highly intensified urban areas could lead to massive exodus and massive destruction,” UN High Commissioner for Refugees Vincent Cochetel stated on Tuesday.

Almost 4 million people live in a region that has been the hardest-hit by violence, and “face imminent security threats from the fighting,” which has also led to massive damage to infrastructure and the interruption of power and water supplies, John Ging, the head of UN’s Office for Coordination of Humanitarian Affairs, stated.

This commentary put in an appearance on the Russia Today Web site at 12:25 p.m. Moscow time on their Wednesday afternoon, which was 4:25 a.m. in New York.  Make it three in a row for Roy Stephens.


UN: Scared of the Way Military Operations Conducted in East Ukraine

The U.N. has expressed its major concern over the plight of the eastern Ukrainian territories and their soaring numbers of refugees. There are 118,000 internally displaced people, and 740,000 have fled to Russia during the crisis.

“What we are scared about is the way the military operations are conducted. What will happen if we have intense fighting inside the big urban centers of Lugansk and Donetsk? Fighting in highly intensified urban areas could lead to massive exodus and massive destruction,” UN High Commissioner for Refugees Vincent Cochetel stated on Tuesday.

Almost 4 million people live in a region that has been the hardest-hit by violence, and “face imminent security threats from the fighting,” which has also led to massive damage to infrastructure and the interruption of power and water supplies, John Ging, the head of UN’s Office for Coordination of Humanitarian Affairs, stated.

This commentary put in an appearance on the Russia Today Web site at 12:25 p.m. Moscow time on their Wednesday afternoon, which was 4:25 a.m. in New York.  Make it three in a row for Roy Stephens.


MH17 Brought Down by Air-to-Air Missile, Finished Off by 30-mm Cannon, Experts Allege

The Malaysian Boeing plane that crashed in eastern Ukraine in mid-July, could have been brought down by an air-to-air missile and a cannon of the Su-25 fighter that had been “shadowing it,” The New Straits Times reported on Wednesday citing experts.

Experts believe that MH17 flight was shot down by an air-to-air missile fired from the fighter that later finished it off with a burst of 30mm cannon fire, the newspaper has reported.

According to the experts, if this hypothesis is true, it would explain the bullet holes in some sections of MH17’s fuselage.

“Some showed blast patterns consistent with shrapnel from a proximity-fused weapon while some showed the more precise grouping consistent with that of cannon fire. We’re analyzing this,” said one of the sources, adding that a detailed analysis of the pieces of the jetliner is needed to corroborate this emerging theory.

We'll see if the above story proves to be true or not---but in the interim, I'm still waiting for the contents of the black boxes on flight MH17---and the fact that we haven't heard anything is alarming enough as it is.  This article was posted on the RIA Novosti Internet site at 6:43 p.m. Moscow time on their Wednesday evening.  Once again I thank Roy Stephens for sending it.


Reports of Russia’s Military Buildup on Ukraine Border Groundless - Moscow

Moscow slammed NATO and Pentagon claims that Russia is amassing military near the border with Ukraine calling them unsubstantiated, according to a statement made by a Ministry of Defense spokesman.

"In Russia’s Ministry of Defense such statements only raise sympathy for the speakers of the Pentagon, the US State Department and NATO. It seems the people are serious, but they have to constantly improvise during their speeches to somehow add seriousness to their statements," said Igor Konashenkov, spokesman for the ministry Major General, on Wednesday.

Pentagon spokesman, Rear Admiral John Kirby, told reporters on Tuesday that Russia has at least 10,000 troops on Ukraine's border.

Following this, on Wednesday, NATO spokeswoman Oana Lungescu stated that Russia has already amassed around 20,000 combat-ready troops on the border.

The b.s. coming out of Washington and the Pentagon about Russia is becoming more than annoying.  It also smacks of desperation.  This Russia Today news item put in an appearance on their Web site at 1:21 p.m. Moscow time on their Wednesday afternoon---and it's courtesy of Roy Stephens.


Airlines Lose Billions Amid Rumors of Trans-Siberian Flight Blockade

Major airlines saw stock shares nosedive on Wednesday, after media reports said that Russia could block flights over Siberia. However, Russian Foreign Minister Sergey Lavrov said the reports are simply rumors.

“I’m not an advocate of using the method of bans and creating real problems for passengers, ordinary citizens who have absolutely no connection to the actions of those who unleashed this war,” Lavrov said on Wednesday.

Tuesday media reports said Dobrolet fallout could lead the Russian government to close its airspace altogether, forcing flights from Europe to Asia to reroute, costing billions. Each E.U. country has a bilateral agreement with Moscow on flying over Russian air space, and Russia is legally entitled to close it off, according to the European Commission.

By mid-day Wednesday, Western airline shares had lost an estimated $4.5 billion, dragging down European markets, ITAR–TASS reports.

This Russia Today news item appeared on their Web site at 4:37 p.m. Moscow time on their Wednesday afternoon, which is 8:37 a.m. EDT---and I thank South African reader B.V. for sending it our way.


Russia to Ban All US Agricultural Products, All EU Fruit, Vegetable Imports

Russia plans to impose a ban on imports of all agricultural products from the United States, as well as fruits and vegetables from all the countries of the European Union, Russia’s agricultural and veterinary watchdog Rosselkhoznadzor said Wednesday.

“Everything [in the agricultural sector] that is produced and imported to Russia from the United States will be banned,” Alexey Alekseenko, an aide to the head of the Federal Service for Veterinary and Phytosanitary Surveillance told RIA Novosti.

“Fruits and vegetables from the European Union will also be under full ban," Alekseenko said.

This RIA Novosti Web site just before midnight Moscow time last night---and it's worth reading.   It's also the second contribution in a row from reader B.V.


Russia Sanctions Accelerate Risk to Dollar Dominance

U.S. and European Union sanctions against Russia threaten to hasten a move away from the dollar that’s been stirring since the global financial crisis.

One place the shift has become evident is Hong Kong, where dollar selling has led the central bank to buy more than $9.5 billion since July 1 to prevent its currency from rallying as the sanctions stoked speculation of an influx of Russian cash. OAO MegaFon, Russia’s second-largest wireless operator, shifted some cash holdings into the city’s dollar. Trading of the Chinese yuan versus the Russian ruble rose to the highest on July 31 since the end of 2010, according to the Moscow Exchange.

While no one’s suggesting the dollar will lose its status as the main currency of business any time soon, its dominance is ebbing. The greenback’s share of global reserves has already shrunk to under 61% from more than 72% in 2001. The drumbeat has only gotten louder since the financial crisis in 2008, an event that began in the U.S. when subprime mortgage loans soured, and the largest emerging-market nations including Russia have vowed to conduct more business in their currencies.

This Bloomberg article, filed from New York, appeared on their Web site at 9:51 a.m. Denver time on Wednesday.  I thank reader U.D. for passing this story around yesterday.


Italy Shows Euro Zone May Never Have Left Recession

For U.S. investors who piled into European equities last year, Italy’s unexpected second-quarter contraction raises the question of whether the euro zone itself ever actually left recession.

Italy’s 0.2% quarter-on-quarter contraction (which made for a year-on-year drop of 0.4%) is being widely billed as the third dip into recession territory since 2007. But in reality, the Italian economy has managed to eke out only one paltry quarter of growth in the past three years.

So rather than lament a triple dip, Italians could be forgiven for feeling they never escaped a recession in the first place.

This article, filed from New York, appeared on their Web site at 11:25 a.m. EDT yesterday---and once again I thank Roy Stephens for finding it for us.


One-Man State: Presidential Election Set to Seal Erdogan's Supremacy

Snipers are in position on the roofs while helicopters circle above the square, where a crowd of people are waving flags depicting a crescent moon. Thousands have come from Istanbul, Ankara and the Black Sea to the small city of Yozgat in Central Anatolia. They have waited for hours in the heat to cheer for their leader. They chant his name as his campaign's theme song booms from the loudspeakers: "Man of the People, Recep Tayyip Erdogan."

When the Turkish prime minister walks onto the stage, women in headscarves break out in tears and bearded men fall to their knees. Erdogan raises his hands and shouts: "Are we brothers and sisters? Are we Turks?" The crowd responds: "Tayyip, we will go to our deaths for you!" It's campaign season in Turkey, but that barely explains the frenzy. Erdogan has described his campaign as a war of liberation. His voters, the ones he hopes will make him president, are his troops.

"War of liberation" was the term with which Mustafa Kemal, known as Atatürk, referred to the campaign against the Western allies that led to the establishment of the Turkish republic. His election campaign has seen Erdogan travel to the places where that war began. And like a modern-day Atatürk, he bellows into his microphone: "We will not allow outside forces to harm Turkey!" He is referring to the students who occupied Gezi Park in Istanbul, the secular opposition and Europe.

This two-page essay put in an appearance on the German Web site at 3:28 p.m. Europe time on Wednesday afternoon---and if the politics of this area appeals to you, then it certainly falls into the must read category.  But if you really want to understand Turkey, then this book is a must read as well.  The stories from Roy Stephens just keep on coming.


Vladimir Putin Signs Historic $20bn Oil Deal with Iran to Bypass Western Sanctions

Vladimir Putin has agreed a $20bn (£11.8bn) trade deal with Iran that will see Russia sidestep Western sanctions on its energy sector.

Under the terms of a five-year accord, Russia will help Iran organise oil sales as well as “cooperate in the oil-gas industry, construction of power plants, grids, supply of machinery, consumer goods and agriculture products”, according to a statement by the Energy Ministry in Moscow.

The Russian government issued a new statement on Wednesday after mysteriously withdrawing a similar release on Tuesday.

Russian Energy Minister Alexander Novak said on Wednesday that his government will help Iran bring its oil to market. In return, Iran wants to import power and pump equipment, steel products such as pipes, machinery for its leather and textile industries, wood, wheat, pulses, oil seeds and meat.

This news item was posted on the Internet site at 4:40 p.m. BST yesterday afternoon---and I thank Roy Stephens once again for sharing it with us.  Here's the Russia Today spin on this story.  It's headlined "Sanctioned Russia and Iran sign 5-year deal to ease Western pressure"---and I thank reader B.V. for finding this one for us.


India Central Bank Chief Warns of Another Market Crash

India's central bank governor, renowned for forecasting the 2008 financial meltdown, has warned that the world economy faces risk of another market crash as asset prices surge.

Increasing global financial instability stems from investors chasing ever higher yields, Raghuram Rajan, a former International Monetary Fund (IMF) chief economist, told the Central Banking Journal.

"True, it (another financial sector crisis) may not happen if we can find a way to unwind everything steadily," Rajan, who is famed for predicting the 2008 markets crash years in advance, said in the interview posted late Wednesday on the journal's Web site.

"But it is a big hope and prayer," said the Reserve Bank of India (RBI) governor, adding there is a risk of sudden price reversals and sharp spikes in financial volatility.

This AFP story was picked up by the Internet site---and it was posted on their Web site sometime on Wednesday.  I found it embedded in a GATA release headlined "Indian central banker fears competitive devaluations."


China's "Prelude to a Storm" As Record Private Bonds Mature

With Shanghai having limited retail exposure to high-yield bonds, and the Chinese corporate bond market has overtaken the United States as the world's biggest and is set to soak up a third of global company debt needs over the next five years, it is no wonder that, as Bloomberg reports, analysts fear "a prelude to a storm." Privately issued notes totaling 6.2 billion yuan ($1 billion) come due next quarter, the most since authorities first allowed such offerings from small-to-medium-sized borrowers in 2012. This week a fourth issuer has faced a "payment crisis" and while officials are trying to expand financing for small companies which account for 70% of China's economy, with debt-to-equity ratios exceeding 200%, this is nothing but more ponzi. As Goldman Sachs warns, it appears China's Minsky Moment is drawing near (as the hangover from Q1's credit impulse kicks in).

China's small companies are fundamentally a disaster...

Number of Chinese firms whose liabilities are double their equity has surged since global financial crisis, suggesting more defaults may come.

Publicly traded non-financial corporates with debt-to-equity ratios exceeding 200% have jumped 68% since 2007.

This longish commentary was posted on the Zero Hedge Web site at 10:44 p.m. EDT last night---and is certainly worth skimming.  I thank Joe Nordgaard for sliding this into my inbox in the wee hours of this morning.


Three King World News Commentaries

1. Louise Yamada: "Gold, Silver and Other Key Metals on the Move"  2. John Hathaway: "The Next Mega-Crisis That Will Shock the World"  3. William Kaye: "Putin, Gold---and a Stock Market Panic That Will Frighten Investors"

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]


Gold Spikes and FTSE 100 Drops on Russia Invasion Worries

Mounting concern that Russia may be preparing to invade Ukraine helped to wipe £11.7bn off the value of Britain’s biggest companies, as investors fled shares and took shelter in safe-haven gold.

The FTSE 100 fell as much as 1.4% before finishing down 46.32 points, or 0.7%, at 6,636.16. That slide took Britain’s benchmark index to its worst close since mid-April.

The fall in London was mirrored by stock markets across Europe. The CAC 40 in France lost 0.6%, Germany’s DAX slid 0.7% and the Spanish IBEX dropped 1%.

Gold, which investors buy in times of uncertainty, surged, with the spot price of the yellow metal rising nearly 1.5%. The flight to safety was also evident in the bond markets, with the yield on 10-year US Treasuries testing its lowest level since May.

This article appeared on the Internet site at 7:21 p.m. BST yesterday evening, or so it says.  But Roy Stephens sent it to me at 11:14 a.m. EDT, so it's obviously been edited since it was originally posted.


Steve Forbes Interview: A “Sinning” Federal Reserve Is “Undermining the Dollar”

Steve Forbes has had enough of the Federal Reserve and its policies to undermine the dollar. In this no-holds-barred interview, only with Birch Gold Group, the legendary publisher and CEO of Forbes, Inc. reveals the damage that our central bank has created. Plus, find out why he believes so strongly in the gold standard, and the one single scenario under which he would ever sell his gold.

This 6:14-minute audio interview appeared on the Internet site on Monday.


Bullion Management Group: Manipulation in the Gold Market and a Related Opportunity

Arthur Schopenhauer said that “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is  accepted as being self-evident.” Well, it is now self-evident that the gold market is manipulated. On May 23, 2014, Barclays was fined $44 million for failures in internal controls that allowed a trader to manipulate the setting of gold prices. It’s egregious that this occurred just one day after the bank was fined for rigging LIBOR interest rates in 2012. To those with a passing interest in gold, the Barclays fine may have raised some eyebrows. For many in the gold community, however, the manipulation has been evident for years; this was simply the most recent example. According to Jim Rickards, author of Currency Wars and The Death of Money, “The manipulation of the gold market is not something that’s really debatable any longer. If I were running the manipulation, I would actually be embarrassed at this point because it's so blatant.

If I were running the manipulation, I would be embarrassed as well because, with the exception of 2013, gold has been a top-performing asset for the past 14 years. Can you imagine what the price would be without the manipulation? Nick Barisheff, president and CEO of Bullion Management Group and author of $10,000 Gold, says that “the future price of gold will shock the casual observer, and that $10,000 an ounce is not a pie in the sky number once gold is released to find its free market price”.

Paul de Sousa, the Executive Vice President at Bullion Management Group managed to write this excellent six-page PDF article without mentioning either GATA or Ted Butler, although he managed to cram everyone else's name in there.  Despite that---and the fact that there's not really much that's new, as it's all been said before by others---it's very much worth reading.


Jeff Clark: "The Single Most Important Strategy Most Investors Ignore"

“If I scare you this morning, and as a result you take action, then I will have accomplished my goal.” That’s what I told the audience at the Sprott Natural Resource Symposium in Vancouver two weeks ago.

But the reality is that I didn’t need to try to scare anyone. The evidence is overwhelming and has already alarmed most investors; our greatest risk is not a bad investment but our political exposure.

And yet most of these same investors do not see any need to stash bullion outside their home countries. They view international diversification as an extreme move. Many don’t even care if capital controls are instituted.

I’m convinced that this is the most common—and important—strategic investment error made today. So let me share a few key points from my Sprott presentation and let you decide for yourself if you need to reconsider your own strategy.

This commentary by Jeff was posted on the Casey Research Web site in the wee hours of yesterday morning---and it's definitely worth reading.


Australian Gold Miners Note Crash in Exploration

If there is one key message from this week’s presentations at the gold dominated Diggers and Dealers conference, it is that increasing exploration is essential to the sustainability of the gold sector.

Gold exploration expenditure dropped off 30 per cent or $34.8 million during the March quarter, in line with a 25.5% fall in total exploration expenditure.

Evolution Mining chairman Jake Klein told the conference that the last 12 to 18 months have been the toughest he has experienced during his more than 20 years in the industry.

“Gold discoveries have become increasingly rare and in fact over the last couple of years increasingly bleak,” Mr Klein said.

But not a word was spoken about why gold prices are where they are.  This interesting article showed up on the Australian Financial Review website earlier today local time in Melbourne.  The above headline was courtesy of Chris Powell, as I found it over at the Internet site yesterday evening MDT---and the actual headline reads "Gold exploration Loses Its Lustre."


Central Banks Continuing to Boost Gold Reserves

Given the crisis in Ukraine and deteriorating ties with the West, Russia has been aggressively accumulating gold reserves.

The IMF, in its recently released International Financial Statistics report, showed that the Russian central bank has hiked its gold holdings by 16.8 tonnes to 1,094.8 tonnes in June. 

Indeed, most central banks are increasing their gold reserves, IMF data showed. Russia, Mexico, Kazakhstan, Kyrgyzstan, Tajikistan, Serbia, Greece and Ecuador have all reported higher gold reserves for June.

Between Q1 2009 to Q1 2014, Russia's gold reserves almost doubled to 1,040.71 tonnes, while India's central bank increased its gold reserves 56% to 557 tonnes. China's central bank, on the other hand, increased its gold reserves 75% to 1,054 tonnes when it last stated official reserves in 2009, data showed. It is widely believed that China has accumulated larger - possibly much larger - reserves since.

The global meltdown of 2008 sparked off the current race to buy gold.

This gold-related commentary, filed from Mumbai, appeared on the Internet site on Tuesday sometime---and it's worth reading.  I thank Elliot Simon for bringing it to our attention.


Lawrence Williams: Mixed Indicators for Gold Keep Markets Muted

But it is apparent that it still seems to be the U.S. market, and COMEX in particular, which has been driving the gold price despite much of the physical metal purchasing action taking place elsewhere in the world. Despite the slowdown in Asian demand, physical gold still seems to be moving from weaker hands in the West to much firmer ones in the East.  But these weaker hands appear to be diminishing.

The big futures sales seem to be continuing, but this year with much more limited effect. A recent pattern appears to have developed with the price being driven down at or near U.S. COMEX opening and then picking back up again in later trade during the day. There is thus something of a suggestion that the end game of U.S paper gold sales driving down prices is beginning to come to an end as the amount of real gold on the physical markets is diminishing in the West and not returning to the market in the East.

This commentary by Lawrie, obviously written and posted on the Internet site before the 1 p.m. BST rally in gold on Wednesday, is still worth reading nonetheless.



¤ The Funnies

I took this photo yesterday morning.  It's a Sphinx Moth caterpillar trying hard not to be noticed.  This moth is rare this far north in Alberta, so I was rather surprised to find this critter---and for a caterpillar, it was pretty chunky.

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¤ The Wrap

One question that has never been answered by those denying that the COT reports are accurate, is why in the world would the CFTC publish data which provided proof of a silver manipulation by intentionally misreporting the data? There have been times in the past several years where JPMorgan held 40% of the short side in Comex silver; why would the CFTC report that if it wasn’t true? To those that may suggest JPMorgan’s concentrated short position was even greater, perhaps that may be true, but the market share was great enough to prove manipulation as reported.

More than ever before, the changing structure of the COT reports has come to represent the sole reason for price movement on the Comex, with actual supply/demand fundamentals not mattering at all. That’s why, despite allegations the reports can’t be relied upon, more analysts and commentators than ever before have embraced the COTs as an important market tool. Ask yourself this – if it were not for the remarkable changes in the COT structure this year in Comex silver, gold and copper, what else could possibly explain the price moves to date? - Silver analyst Ted Butler: 06 August 2014

I was happy to see the nice rallies in all four precious metals yesterday, but I wasn't happy to see the big volume associated with both gold and silver.  It was obvious, whether the rally was short covering or new long buying as the 50-day moving average in gold was broken, that JPMorgan et al. were going short against all comers in order to cap the rallies---and that's why the volume was as high as it was.

All the improvements in the Commercial net short position that occurred on Tuesday, were totally negated by the end of trading on Wednesday.  So we're almost back to square one---and tomorrow's Commitment of Traders Report is most likely "yesterday's news" already.

Here are the updated six-month charts for both gold and silver.

Where we go from here is unknown.  Higher perhaps?  Sure, but that monster Commercial net short position in silver is still there---and in gold as well.  So whether yesterday's price action is the beginning of a new rally, or a temporary respite from the ongoing engineered price declines, it doesn't change the situation one iota.

Of course JPMorgan et al. could get overrun and blown out of the water.  But as Ted Butler has been saying for more than a decade---if they do, it will be for the first time.

Here are a couple of charts that Nick Laird sent my way yesterday evening.  They're the monthly average intraday charts for both gold and silver for the month of July based on the two-minute tick.  Nick computes it by adding up every two-minute tick from each trading day---and averages them out for the month---and it produces the two charts below---the first for gold---and the second for silver.

And as you can see, the daily price has a pattern in both metals once the "noise" is averaged out.  The downside price pressure in both metals begins about an hour after the London a.m. gold fix---and ends at 11:30 a.m. in New York.  Ditto for silver.  As a matter of fact, the gold and silver charts are virtual carbon copies of each other over the entire 24 hour periods.

This sort of price pattern would never occur in a free market---ever!

And as I write this paragraph, the London market has been open about 10 minutes on their Thursday morning.  The gold price has barely twitched since the New York closed yesterday---and it's only up a couple of bucks at the moment.  And it's been mostly the same in silver, as the price is up only a penny or two.  But platinum and palladium have rallied a decent amount.  Gold volume is extremely light---and silver volume is almost nonexistent.  The dollar index is up a small handful of basis points.

As is almost always the case, there is no follow-though in the rallies that begin [and end] in New York trading.

And as I send this off to Stowe, Vermont at 4:55 a.m. EDT, I see that all four precious metals have rolled over a bit.  Both gold and silver are down a fraction---and a lot of the gains that platinum and palladium had, have disappeared.  Gold volume is now a bit over 20,000 contracts, but is increasing at a crawl at the moment.  Silver volume is higher as well, but very much on the extremely light end of the spectrum.  The dollar index is now up a slightly larger handful of basis points.

After yesterday's price action, nothing will surprise me when I power up my computer later this morning---and it shouldn't surprise you, either.

I hope your day goes well---and I'll see you here tomorrow.