Gold & Silver Daily
"You have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes."

¤ Yesterday In Gold & Silver

Gold set another new low for this move down about an hour before London opened yesterday.  From that low, the gold price rallied right a bit right up until the Comex open...and was under a bit of selling pressure from that point onward.

But the major selling pressure came once the Comex was through trading at 1:30 p.m. Eastern time...with the low price tick of the day [$1,540.70 spot] coming just moments before 4:00 p.m. in New York in the very thinly traded electronic market.  From that low, gold recovered a few dollars going into the close at 5:15 p.m. Eastern.

Gold finished the Thursday trading day at $1,544.30...down another $12.20.  Net volume was pretty decent at around 143,000 contracts.

It was pretty much the same price pattern in silver...except the engineered sell-off was far more intense.  Silver's low price tick [$27.51 spot] came at the same time as gold's...and the silver price recovered about 20 cents going into the electronic close.

Silver closed the day at $27.72 spot...down 46 cents from Monday.  Net volume was pretty high at 37,000 contracts, more or less.

The dollar index traded in a narrow 10 basis point range of 80.60 for a goodly portion of Tuesday.  That lasted until shortly before 9:00 a.m. in New York...and then away it went to the upside until about 3:20 p.m. Eastern time where it traded sideways into the close.  The dollar index closed up about 65 basis points.

The gold stocks started off in positive territory...and then got sold off...but recovered back to unchanged just before lunch in New York.  It was all down hill from there.  The HUI got smacked for another 3.83%.

The silver stocks really got crucified again...and Nick Laird's Silver Sentiment Index took it on the chin for another 5.95%.

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The CME's Daily Delivery Report showed that 1 gold and 123 silver contracts were posted for delivery on Friday.  The big short/issuer was Merrill with 113 contracts...and the short/stoppers were a mixed bag.  The link to the Issuers and Stoppers Report is here.

There were no changes in either GLD or SLV yesterday.  Ted Butler and I were discussing the big 1.6 million ounce surprise deposit in SLV on Monday...and Ted figured it probably had something to do with covering a short position in SLV shares.  We'll know more when the new report is posted over at a week from today.

The U.S. Mint had a sales report worthy of the name yesterday.  The sold 3,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 150,000 silver eagles.  Month-to-date the mint has sold 34,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 1,135,000 silver eagles.

It was a busy day over at the Comex-approved depositories on Monday.  They reported receiving 1,526,942 troy ounces of silver...and shipped 305,421 ounces of the stuff out the door.  The link to that action is here.

German gold analyst Dimitri Speck was kind enough to send me several of his excellent charts...and I'm more than happy to post them here.  I'll post the gold charts today...and the silver charts tomorrow.

The first chart shows the "Intraday Price Movements" in gold over about eighteen years.  The high at the London open...and the low at the London p.m. gold fix...are the most prominent features.

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The second chart shows the intraday price movements for the first quarter of 2012...and there are subtle differences, but the overall price pattern is the same...and only the times of the highs and lows have shifted.

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And lastly, here's the chart for 2011 on its own...the same, but slightly different once again.  The negative price bias in London really stands out in this chart.

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I have a lot of stories again today...and I hope you have time to read through most of them


¤ Critical Reads

The "London Whale" Swamps JPMorgan

Bloomberg's Stephanie Ruhle reports on Jamie Dimon's disclosure of JPMorgan's $2 billion trading loss, how regulations may have forced his hand in revealing the loss and that there may be further losses yet to come.

This 1:36 minute video was posted over at the website on Monday...and Casey Research's own David Galland sent it around to everyone yesterday morning.  It's a must watch for sure...and the link is here.


JPM Losses already $3-4 bln; Europe's Core Emergency Ongoing bank runs: Greece to Re-default: Eric Sprott

My friend Aaron Krowne over at reported on the highlights of Eric Sprott's speech at the New York 2012 Hard Assets Conference that's going on now.  It's a short must read...and the link is here.


Dodd-Frank Swaps Legislation Delayed After JPMorgan Trade Losses

U.S. House lawmakers, acting after JPMorgan Chase & Co. (JPM) announced $2 billion in derivatives trading losses, delayed a committee vote on legislation easing Dodd- Frank Act swaps rules.

The U.S. House Agriculture Committee postponed a May 17 committee meeting to vote on the measures, which would limit the international reach of the 2010 regulatory-overhaul law’s swaps regulations and allow more derivatives trading to occur in federally insured banks.

“As always, Washington has a tendency to overreact. While the news of JPMorgan’s trading loss is unfortunate, the bipartisan legislation the committee was scheduled to consider is unrelated to the cause of the trading loss,” Representative Frank D. Lucas, an Oklahoma Republican and chairman of the committee, said in a statement.

“However, this committee will take the time to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions,” Lucas said.

This Bloomberg story from yesterday is courtesy of Australian reader Wesley Legrand...and the link is here.


Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'

It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.

The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.

Last week, in response to an motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.

This Matt Taibbi blog was posted over at the Rolling Stone website yesterday afternoon.  It's a long, but very interesting read...and I'm sure this issue isn't going away.  I thank Roy Stephens for sending me this...and the link is here.


Foreigners Boost Buys of Long-Term U.S. Securities: Treasury

Foreigners increased purchases of long-dated U.S. securities, including government bonds, in March, the U.S. Treasury said on Tuesday, but lightened up on short-term assets such as bills.

Overseas investors bought a net $36.19 billion in long-term assets in March, above February's inflow of $10.14 billion. They increased Treasury holdings by $20.47 billion after buying a net $15.35 billion the prior month.

China, the largest foreign U.S. creditor increased its Treasury holdings to $1.170 trillion from a downwardly adjusted total of $1.155 trillion in February. Brazil increased its holdings by $9 billion to $237.4 billion.

This story from yesterday's New York Times was posted on their website yesterday morning...and I thank Phil Barlett for sending it along.  The link is here.


Homebuilder Confidence Rises To 5 Year High As Actual Sales Remain Near All Time Lows

America may not sell many new homes (read - sales are near or at all time lows), but that does not prevent homebuilders from having a dream, or in this case confidence that soon, soon, SOON, things will finally improve. Sure enough, in May the NAHB homebuilder confidence soared to 29, from 24, on expectations of a 26 print.

Of course, these numbers are completely meaningless, and only serve to get the algos ramping momentum in an upward direction. In the meantime, the reality of actual sales, can be seen on the chart below.

These two paragraphs comprised the entire article yesterday...but the graph mentioned is well worth looking at...and the link is here.  I thank Phil Barlett for his second contribution in a row.


Scottish pensions crisis: Scots born today ‘will retire at 77’

Scots infants will be forced to work until they are 77 years old before they become eligible for a state pension, according to a new report that paints a grim picture of aged toil.

The age at which the public becomes eligible for a state pension is set to rise to 77 for today’s children, with the following generation likely to work until they are 85.

As the UK government announced in the Queen’s Speech that the state pension age will now be linked to how long the average person lives, and will rise to 67 in 2028, the new study predicts it will go up again to 68 by 2031, adding an extra year of work for those aged 48 or younger.

This story showed up over at the website yesterday...and I thank Andrew Holland for sending it along.  The link is here.


New Elections in June Markets Fall after Greek Talks Collapse

It was the final act in the tragedy surrounding the attempts to form a Greek government -- and it had a dramatic ending. Greece will hold a new election in June after politicians failed to form a government on Tuesday, nine days after a vote that produced a stalemate.

Athens now faces at least another month of political uncertainty that threatens to push Greece closer to bankruptcy and an exit from the euro.

After a third day of failed talks with political leaders, a spokesman for President Karolos Papoulias said the process of seeking a compromise had failed and a new vote must be held. Elections rules suggest it will be in mid-June, possibly June 17. A caretaker government is to be formed on Wednesday to lead the country until the new vote can be held.

This story was posted over at the German website yesterday...and I thank Roy Stephens once again for sending it along.  The link is here.


Greek Bank Run accelerates: Depositors withdrew $898 million from Banks Monday

Greek depositors withdrew €700 million ($898 million) from the country's banks on Monday, fueling fears of a bank run amid the growing political disarray.

With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.

Greek President Karolos Papoulias told the country's political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.

This subscriber-protected story was posted in The Wall Street Journal yesterday...and the link to what's available for public viewing is here.  I thank reader U.D. for sending it.


Global lenders face 'killer losses' on Greek debt

The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro

“What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”

“A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International

Political Economy in Brussels, said. “No other course of events is now likely.”

This story was filed in The Telegraph late last night...and I thank Roy Stephens for bringing it to our attention.  The link is here.


This is how the euro ends – not with a whimper but a bang

So it's still possible that Greeks will, when push comes to shove, simply surrender and take their punishment. It hardly needs saying that such an outcome would resolve nothing.

And the other possible outcome? Greece is indeed forced in despair to quit. With the precedent set, there would follow a mass flight of deposits out of Italy and Spain into safer havens, such as Germany and even the US and the UK. Indeed, this process has already begun. The only way of stopping it is to impose capital controls, but once major economies begin to do this, the euro is essentially over. It's no longer a single currency.

With or without capital controls, the European Central Bank would in any case need to step into the breach to stop the Italian and Spanish banking systems from collapsing. Ironically, the liquidity to do this would come from Germany and other surplus nations such as Finland and Austria, setting in train a giant, money merry-go-round.

Think about it. The Italian depositor removes his money and places it in a "safe" German bank account. There's nothing safe to invest in, so the German banker places the money on deposit with the Bundesbank, which then lends it to the ECB, which lends it back to the original Italian bank struggling with funding because of the flight of capital. The upshot is a massive build up of German central bank claims on Italy and Spain. In Germany alone, these contingent liabilities already exceed €600bn, or around a quarter of German GDP.

This is another story from The Telegraph yesterday...and it's also courtesy of Roy Stephens.  The link is here.


China: Listed firms offer bleak outlook

Almost half of the companies listed on the mainland's two bourses that have so far released financial forecasts for the first six months expect to see a decline in earnings or to fall into the red, primarily due to falling demand amid an economic slowdown.

According to Wind Information Co Ltd, a leading provider of economic data and financial information, 845 companies listed on the Shenzhen and Shanghai stock exchanges had released January-June financial performance forecasts as of May 13.

A total of 384 companies forecast a slump in their net profit or a loss, accounting for 45.4 percent.

This is no real surprise...and confirms that China's economy is following the rest of the world into the proverbial dumpster.  I thank Hong Kong reader Graham C. for sharing this story with us.  It was posted over at the website yesterday morning...and the link is here.


Checking the Vaults: Germans Fret about Their Foreign Gold Reserves

A large portion of Germany's massive gold reserves are stored abroad, mainly in the Federal Reserve in New York. But are the bars really where they are supposed to be? A dispute has broken out over whether the central bank needs to check on its gold, or if Germany can trust its international partners.

Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked.

Germany's federal audit office, the Bundesrechnungshof, which monitors the German government's financial management, is unhappy with how Germany's central bank, the Bundesbank, keeps tabs on its gold. According to media reports, the auditors are dissatisfied with the fact that gold reserves in Frankfurt are more closely monitored than those held abroad.

In Germany, spot checks are carried out to make sure that the gold bars are in the right place. But for the German gold that is stored on the Bundesbank's behalf by the US Federal Reserve in New York, the Bank of England in London and the Banque de France in France, the German central bank relies on the assurances of its foreign counterparts that the gold is where it should be. The three foreign central banks give the Bundesbank annual statements confirming the size of the reserves, but the Germans do not usually carry out physical inspections of the bars.

The rest of this story from yesterday is posted on their Internet site...and the link to this must read story is here.  Roy Stephens provided this story as well.


Bundesbank Confirms German Gold Held By FED, BOE and Banque De France

This story was posted over at the website yesterday...and is certainly worth reading.  It covers a lot of territory, including the surge in gold demand coming out of the Far East...which is certainly no surprise to me.

I thank Richard Craggs for sending me this story...and as I said in the previous paragraph, it's worth your time.  The link is here.


Stoferle, Macleod discuss clamor for gold reserve repatriation

In an audio discussion at GoldMoney's Internet site, Erste Bank gold market analyst Ronald Stoferle and economist Alasdair Macleod discuss the market and calls to repatriate national gold reserves held by foreign central banks.

I borrowed the headline and the introductory paragraph from a GATA release yesterday.  It's certainly worth the listen...and the link is here.


Three King World News Blogs

The first one is with Paul Brodsky...and it's headlined "The Paralyzing Fear Among Investors Today".  The second blog features Michael Pento...and it bears the title "Here is What is Facing Investors & The World Today".  And lastly is this blog with James Turk...and it's headlined "Expect Tremendous Chaos, Europe Deterorating Rapidly".


Palladium shortage to be 714,000 ounces in 2012: UBS

The palladium market is expected to be in a 714,000 ounce deficit in 2012 as demand for the commodity continues to exceed supply, UBS stated in a report.

In view of the same, the bank has raised its palladium price forecast for 2012 to $760/oz from the previous $725/oz. This shortage in the market is expected to continue for about the next 3 years until 2016 when the palladium will shift into surplus.

Meanwhile, its cousin platinum will see a 143,000 ounce surplus this year. But despite this, the bank has raised its price forecast to $1,700/oz from $1,675/oz. Platinum and its related metals are expected to benefit in Q2 largely due to improved growth in the US and emerging economies.

This story was posted over at the website on Monday...and I thank reader Richard Craggs for sending it along.  The link is here.


Gold Slides to New 2012 Low: Buying Opportunity or Bull Market Breakdown?

Casey Research's own Louis James was interviewed by the good folks over at yesterday.  The video clip runs for 4:14 minutes...or you can read the transcript.  It's a must watch/listen...and the link is here.


Brodsky and Quaintance: Central banks aim to redistribute gold and push it way up

In their May letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that the investment case for gold is to a great extent a matter of its likely official revaluation upward to support confidence-based currencies that have lost the market's confidence.

As improbable as it may seem lately, what with the constant suppression of gold and silver prices on the futures markets, Brodsky and Quaintance conclude that central banks now really mean to push the gold price up -- way up -- once the gold necessary for the plan has been obtained and redistributed among central banks.

This is one of my pet theories as well...and it's the last arrow in the quiver of the fiat currency crowd.  We certainly won't see a convertible currency from it, but certainly a much higher gold price.  If in fact this scenario does materialize, my estimate is somewhere between $8,000 and $18,000 the ounce.  These are about the same numbers that Jim Rickards has thrown around from time to time.

The rest of Chris Powell's comments, plus the link to their May newsletter, is contained in this GATA release...and the link is here.  It's well worth reading.


Miners will need $3,000 gold price to be profitable, WGC head says

Sharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday.

Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.

"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term.

I found this Reuters story posted in a GATA release yesterday...and the link is here.


Soros Ramps Up Gold ETF Holdings

Soros Fund Management picked up a new stake in J.P. Morgan Chase in the first quarter, sold out of Google and nearly quadrupled exposure to the SPDR Gold Trust, a quarterly portfolio disclosure shows.

This very short story was posted over in Barron's late yesterday afternoon...and the link is here.


Jim Puplava: Keeping the Faith: Holding Onto Your Gold Stocks When Your Emotions Tell You To Sell

This 50-minute audio commentary was posted over at the website on Saturday...and if you have the time, it's worth the listen.  I thank reader Howard Brown for sending it along...and the link is here.



¤ The Funnies

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¤ The Wrap

While the US Dollar and Treasury debt are the twin foundations of the system, the major modern indicators of how the system is functioning are the stock market and the precious metals, Gold in particular but also Silver. A stock market investment is a bet ON the system, a purchase of physical Gold and/or Silver is a bet AGAINST it. This is clearly shown by the lengths to which the financial powers that be will go to support the stock market - and to undermine the price of the precious metals. - Bill Buckler, The Privateer, 12 May 2012

Well, the pain continued unabated again yesterday.  Everything that occurred up to and including the close of Comex trading at 1:30 p.m. in New York yesterday, should be in this Friday's Commitment of Traders Report...and as I pointed out in this space yesterday, it should be a stunner.

Unfortunately, 'da boyz' leaned on the precious metals particularly hard after the Comex close yesterday...and that data won't be in Friday's report.

Here are the 3-year charts for all four precious metals, with the exception of palladium, which had a price bounce yesterday, every other precious metal is more oversold than its been in the last three years.

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As I mentioned further up in this column, you have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes.  One only has to read Bill Buckler's quote above to understand.

But once this engineered 'correction' has run its course, it's my guess that JPMorgan et al will be nowhere to be found [fingers crossed!] on the next rally...unless it's a short-covering rally that they themselves instigate.

I've been watching the precious metals ever since they opened for trading in the Far East earlier today...and in London this morning.  Once again, the 'salami is being sliced' to the more new lows were set in all four precious metals shortly after the London open.  Net volumes as of 4:49 a.m. Eastern time were monstrous in both metals.  In gold it was 46,000 contracts...and in silver it was just under 10,000 contracts.  The dollar index rallied about 25 basis points overnight, but topped out shortly after the London open...and is now back to virtually unchanged from Tuesday's New York close.

One has to wonder just how much more 'oversold' this market can get, as we are already in record territory in that regard...and I'll be watching the price activity during the Comex trading session in New York with great interest when I get out of bed later this morning.

See you on Thursday.