Gold & Silver Daily

¤ Yesterday In Gold & Silver

Once again it was a nothing day in Far East trading---and the tiny rally that began around 9 a.m. in London, met the usual fate from the usual suspects shortly before 9 a.m. EDT.  By 12:25 p.m. in New York, the gold price was back to unchanged---and traded flat for the rest of the Wednesday session.

And, once again, the high and low ticks aren't worth trouble of looking up.

Gold closed in New York yesterday at $1,260.60 spot, up 70 cents from Tuesday's close.  Volume, net of June and July, was only 81,000 contracts.

The silver price didn't do a thing in either Far East or morning trading in London---and the smallish rally that began shortly before New York open, ran into not-for-profit sellers moments before 9 a.m. EDT just like gold did.  Nothing free market about this.  From thereon in, the price pattern in silver was a mini version of what happened in gold.

The low and high aren't worth looking up here, either.

Silver finished the Wednesday session at $19.195 spot, up a half a cent from Tuesday.  Net volume was pretty light at 20,500 contracts.

Platinum traded flat until 10 a.m. in Zurich---and the tiny rally that started at that point didn't get far---and by the close of New York trading was only up a buck.

The action in palladium was a bit more interesting.  After trading flat in the Far East, the price began to inch higher at the Zurich open---and then jumped seven or eight bucks about 10:30 a.m. in New York.  That rally obviously got capped---and the metal traded sideways for the remainder of the day, but closed up 6 bucks.

The dollar index close late Tuesday afternoon in New York at 80.805---and jumped to its 80.89 high shortly after trading began in the Far East on their Wednesday morning.  But from there, the index chopped quietly lower---and the index closed at 80.77, down a small handful of basis points.

The gold stocks gapped up a bit---and then ran up to their high of the day by around 12:15 EDT in New York.  From there they got sold down, but began to rally anew around 1:15 p.m. EDT---and came very close to gaining back all their loses.  As it was, the HUI closed up 1.83%---and within a whisker of its 12:15 p.m. high tick.

The silver equities put in a similar price performance---and Nick Laird's Intraday Silver Sentiment closed up 1.90%.

The CME Daily Delivery Report showed that 235 gold and zero silver contracts were posted for delivery within the Comex-approved warehouses on Friday.  The only short/issuer was Barclays.  There was a decent list of long/stoppers, but the 'big 4' were Morgan Stanley, Barclays, JPMorgan in its client account---and Deutsche Bank.  They will take delivery on 216 of those contracts between them---and if you want to see the details, the link to yesterday's Issuers and Stoppers Report is here.

There was no reported change in GLD yesterday, but an authorized participant removed 1,056,400 troy ounces from SLV.  Based on the silver price action over the last week or so, it's a good bet that this metal was needed elsewhere---and a buyer showed up, bought the shares---and immediately redeemed them.

There was no sales report from the U.S. Mint.

Over at the Comex-approved depositories on Tuesday, they reported receiving 16,075 troy ounces of gold---and shipped out 32,114 troy ounces.  The link to that activity is here.  And in silver, nothing was reported received---and 135,802 troy ounces were shipped out the door for parts unknown.  The link to that action is here.

Before I start posting stories, here are four charts showing the long-term trends in Japan---and certainly gives credence to why Kyle Bass is short Japanese bonds.  I thank Casey Research's Louis James for passing these around yesterday---and Nick Laird for getting them in shape for posting.

I have the usual number of stories for a weekday column---and I'm more than happy to leave the final edit up to you.


¤ Critical Reads

U.S. records $130B budget deficit in May

The U.S. government's monthly budget returned to deficit in May after a big April surplus. But the overall imbalance so far is far smaller than it was the same period last year, putting the country on track for the lowest annual deficit in six years.

The Treasury Department says the May deficit totaled $130 billion after a surplus of $106.9 billion in April, a month when the government usually runs surpluses because of a flood of tax revenues.

For the first eight months of this budget year, the deficit totals $436.4 billion, down from $626.3 billion for the same period in 2013. It was the smallest imbalance since 2008. The Congressional Budget Office is forecasting a deficit of $492 billion for the full budget year ending Sept. 30.

These three paragraphs are all there is to this brief AP story that appeared on the CNBC website early Wednesday afternoon EDT---and today's first new item is courtesy of West Virginia reader Elliot Simon.


Fed Prepares to Maintain Record Balance Sheet for Years

Federal Reserve officials, concerned that selling bonds from their $4.3 trillion portfolio could crush the U.S. recovery, are preparing to keep their balance sheet close to record levels for years.

Central bankers are stepping back from a three-year-old strategy for an exit from the unprecedented easing they deployed to battle the worst recession since the Great Depression. Minutes of their last meeting in April made no mention of asset sales.

Officials worry that such sales would spark an abrupt increase in long-term interest rates, making it more expensive for consumers to buy goods on credit and companies to invest, according to James Bullard, president of the Federal Reserve Bank of St. Louis.

That “is a widespread view in parts of the Fed, I think, and in financial markets,” Bullard said in an interview last week. While he disagrees with that perspective, it “won the day.”

Party on, dude!  This Bloomberg news item showed up on their Internet site at 3:34 p.m. Denver time yesterday afternoon---and it's the second contribution in a row from Elliot Simon.


Kyle Bass on the Canadian housing bubble

This 1:57 minute video clip should give you some hint as to how bad the real estate bubble is in Canada. It's not that bad in most areas of the country, but the lower mainland of British Columbia---and the Toronto area are accidents waiting to happen---and have been for years. I thank reader Joe Nordgaard for sending it our way.


How Ukraine's tax cheats stole billions from the country's coffers

As Ukraine's tax chief tells it, the billion-dollar theft was planned at a clear plastic table in a sound-proof vault.

The table and six matching transparent chairs sit in a secret chamber on an upper story of the Tax Ministry in Kiev. It was the epicentre, he and other tax officials say, of a massive fraud suspected of squeezing 130 billion hryvnias ($11bn) from Kiev's coffers over the past three years — an amount equal to more than half a year's tax revenue for the entire country.

Deputy Tax Minister Ihor Bilous, the country's new tax boss, says his predecessor was in on the scam, helping to organise a wide network of phantom firms in return for a cut of the cash. The criminals, he says, operated with impunity.

"They didn't care about the police, the security services. Nobody was checking," Bilous told The Associated Press in a recent interview. "That's why this cancer ... spread over the whole country."

This news item put in an appearance on Internet site at 4:17 p.m. BST yesterday afternoon---and it's the first contribution of the day from South African reader B.V.


Putin accuses Ukraine of sabotaging gas talks

Russian President Vladimir Putin accused Ukraine on Wednesday of forcing gas talks into a "dead end" by rejecting the offer of a cut in duty to resolve a price dispute that threatens supplies not just to Ukraine but to the rest of Europe.

Talks ended with Kiev demanding contract changes to bring down the highest prices in Europe for Russian gas supplies, and Moscow suggesting its proposed cut of about one-fifth to around $385 per 1,000 cubic metres was its final offer.

Further negotiations could take place by phone before Monday, when Moscow has threatened to halt supplies.

The dispute is part of a broader stand-off between Ukraine and its former Soviet master, as Kiev's new West-leaning leadership struggles to contain a pro-Russian separatist rebellion in its eastern provinces.

This Reuters article, co-filed from Brussels and Novo-Ogaryovo in Russia, was posted on their Internet site at 5:20 p.m. EDT Wednesday afternoon---and it's the first offering of the day from Roy Stephens.


Ukraine to shut down border with Russia, considers using land mines

Ukraine intends to close off its border with Russia in the east, advisor to Ukraine's minister of the interior Anton Gerashenko said. Earlier the Ukrainian government decided to partially close off the border in the eastern part of the country where the fighting between Ukrainian military and local militia continues unabated. At the moment a total of eight border entry points were shut down.

Ukrainian authorities claim that armed militants enter Ukraine via the Russian border, though Russian officials did not confirm this statement.

"While we should consider other options, the border needs to be shut down immediately. The necessary measures and methods are being evaluated now," Gerashenko said.

When asked whether the Ukrainian authorities intend to use land mines, he said that it's risky as "mine laying on Ukrainian territory endangers the lives of Ukrainian citizens and livestock." He also added that while the national security is paramount, the pros and cons of this particular option need to be considered carefully.

This brief news item appeared on The Voice of Russia website at 2:01 p.m. Moscow time yesterday afternoon---that was 6 a.m. EDT.  It's the second article in today's column from reader B.V.


E.U. sanctions on Russia could push gas prices up 50% - World Bank

Russia and the EU would both suffer if sanctions escalate, energy markets the most, according to a World Bank report. The loss of the European market would cut Russian government revenue by 10 percent of GDP, and European gas prices would jump 50 percent.

Most dependent EU countries could see higher gas prices. Countries from Central and South East Europe like Germany, Italy, Hungary, and Poland are up to 80 percent dependent on Russian gas imports, says the World Bank.

Increased tension between Russia and the EU is a key downside risk to regional forecasts.

Should tensions further escalate, more intrusive sanctions, possibly interrupting trade and banking flows, cannot be ruled out,” the World Bank report said. “Given the close economic interdependence between the EU and Russia, the escalation of sanctions would likely impose large economic costs, damaging recoveries in both.

This Russia Today news item appeared on their website at 4:05 p.m. Moscow time Wednesday afternoon---and once again I thank reader B.V. for sharing it with us.


Russia deploys 24 warships for Baltic Sea drills

Russia has deployed a grouping of 24 Baltic Fleet warships and vessels for military drills in the westernmost Kaliningrad Region, the Russian Defense Ministry’s press office said on Wednesday.

Russia started on Tuesday military exercises of the Baltic Fleet, Airborne Troops and Air Force in the Kaliningrad Region, its exclave on the Baltic Sea coast.

"The squadrons of warships are performing the tasks of ensuring the protection of the state border of the Russian Federation, protecting marine communications, providing for shipping safety, organizing air defense, searching for and detecting surface ships and submarines of the imaginary enemy," Russia’s Defense Ministry said.

The exercises are taking place simultaneously with NATO’s international drills Saber Strike 2014 and BALTOPS 2014.

This news item appeared on The Voice of Russia website very late yesterday afternoon Moscow time---and that makes it three in a row from reader B.V.


Islamist militants seize control of Iraq's second city

The militants, believed to be from the Islamic State of Iraq and the Levant (ISIL), overran the provincial government headquarters in Mosul late on Monday, effectively taking control of Iraq’s second-largest city following days of fighting.

The suspected Sunni Islamists overran Mosul and the surrounding province of Nineveh, in a major blow to a government apparently incapable of stopping militant advances in the region.

Hundreds of militants seized the provincial government headquarters and the Nineveh Operations Command as well as the airport, an army brigadier general told AFP.

They also freed hundreds of prisoners after launching assaults on three jails.

This news item showed up on the Internet site yesterday---and the first reader through the door with this story was Roy Stephens. Roy also sent another story on this from Radio Free Europe---and it's headlined "Islamic Militants Take Control of Iraq's Mosul"


West’s bloody game still played out in Iraq

The shocking news that the city of Mosul in northern Iraq has just been overrun by ISIS Sunni extremists exposes beyond dispute the disastrous policy that is being followed by the British government in the Middle East.

More broadly it also shows the pressing need to hold the original authors of the ongoing disaster in Iraq - Tony Blair, Alistair Campbell, Jack Straw et al in Britain - to moral and legal account.

For the past three or four years the chaos that has swept Iraq without interruption has slipped off the radar screen, due to the focus on the Arab Spring and its fallout in Libya, Egypt, and most of all Syria. However the level of sectarian violence in the country has matched if not exceeded the carnage that has engulfed parts of Syria in recent years.

The blood that has flowed in every part of Iraq as a direct result of Bush’s and Blair’s madcap military adventure back in 2003 surely renders any notion of Britain and the US as being anything other than a scourge on the rest of the world redundant. The extremism that has proliferated across the Arab and Muslim world over the past decade is the direct result of the extremism that has emanated from Downing Street and the White House over the same period.

This commentary appeared on the Russia Today website at 9:58 a.m. Moscow time on Wednesday morning---and it's also courtesy of Roy Stephens.  It's certainly worth reading.


NATO holds emergency meeting on Iraq crisis at Turkey's request

NATO ambassadors held an emergency meeting at Turkey's request on Wednesday on the situation in northern Iraq, where Islamist militants have seized swathes of territory and taken 80 Turkish citizens hostage. "Turkey briefed the other allies on the situation in (the Iraqi city of) Mosul and the hostage-taking of Turkish citizens, including the consul general," a NATO official said.

He said the meeting was held for informational purposes and not under Article 4 of NATO's founding treaty, which permits a member of the 28-nation alliance to ask for consultations with other allies when it feels its security is threatened.

"Allies continue to follow events very closely and with grave concern," the official said, Reuters reports.

He said attacks by militants from the Islamic State in Iraq and the Levant in Mosul represented "a serious threat to the security of Iraq and to the stability of the region".

This article was posted on The Voice of Russia website just after midnight Thursday morning in Moscow---and it's another offering from reader B.V.


ISIL Extends Gains in Iraq, Takes Turk Diplomats Hostage

Militants from a breakaway al-Qaeda group extended their control over a swath of Iraq, advancing toward Baghdad after capturing the birthplace of Saddam Hussein, as the U.S. continued to weigh an Iraqi request for air strikes.

After seizing Mosul, Iraq’s second-biggest city, fighters from the Islamic State in Iraq and the Levant moved yesterday into Saddam’s hometown of Tikrit, about 80 miles (130 kilometers) north of Baghdad, Noureddin Qablan, vice chairman of the Nineveh provincial council, said by phone. In Mosul, ISIL took dozens of people hostage at the Turkish consulate, as hundreds of thousands of residents fled the city.

The U.S. has yet to respond to a request from Iraq made last month to mount air attacks against militant training camps in western Iraq, according to two American officials who asked not to be identified discussing internal deliberations. One of the officials said President Barack Obama is reluctant to revisit a war that he opposed and repeatedly has declared over.

This Bloomberg story on the current situation over there showed up on their website at 8:53 p.m. MDT yesterday evening---and it's courtesy of Roy Stephens.  This story's original headlined read "Al-qaeda offshoot threatens Iraq energy sites after taking Mosul".


China’s Record Oil Hoarding Seen Keeping Crude Above $100

China is hoarding crude at the fastest pace in at least a decade, shielding itself from supply disruptions and helping keep prices above $100 a barrel.

The country imported a record volume in April as it emulates steps taken by the U.S. in the 1970s to create a strategic petroleum reserve, government data show. Chinese President Xi Jinping is building stockpiles as his nation clashes with Vietnam over resources in the South China Sea and faces potential risks to oil sales from Russia, Africa and the Middle East because of sanctions and violence.

The purchases are helping drive oil prices higher, according to Barclays Plc, Citigroup Inc. and Nomura Holdings Inc. As China’s thirst for crude grows with the expansion of its emergency stockpiles and refining, the International Energy Agency estimates that the Asian nation is poised to surpass the U.S. as the world’s largest oil consumer by 2030.

“This panicked stockpiling is one of the ways that geopolitical tensions can actually tighten physical oil markets,” Seth Kleinman, a London-based analyst at Citigroup, said yesterday by e-mail. “This buying spree is partly driven by the infrastructure needs of China’s ongoing refinery expansion, but also reflects the rise in geopolitical tensions.”

This news item appeared on the Bloomberg Internet site at 1:53 p.m. Wednesday afternoon Denver time---and it's the final offering of the day from Roy Stephens.


Three King World News Interviews

1. Victor Sperandeo [#1]: "Former Soros Associate Warns, "How Would They Stop Putin?""  2. Dr. Paul Craig Roberts:  "China Threatens to Wipe Out the U.S."  3. Victor Sperandeo [#2]: "A Legend's Take on Mobius China Comments---and a Scary Chart"

[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]


Lonmin risks running out of cash

Platinum producer Lonmin may soon need to raise capital to survive South Africa's longest and costliest mining strike, which has paralysed its operations and slashed its revenue.

As prospects dim for a quick resolution to the strike, Lonmin risks running out of cash towards the end of the year, possibly forcing it to shut up shop unless it gets a fund injection and takes steps to save money, analysts and market sources said.

"I think they are the worst off among the producers and they will have to get capital soon. They could do that through a rights issue if that works," an industry source said.

Anglo Platinum (Amplats) and Impala Platinum (Implats) are also suffering from the strike but Lonmin, the smallest of the world's three top producers of the precious metal, is vulnerable as most of its operations are in South Africa's platinum belt.

This story found a home over at the Internet site at 7 a.m. SAST yesterday morning---and once again I thank reader B.V. for bringing it to my attention---and now to yours.  It's worth reading.


Platinum majors have mass retrenchment options – lawyer

As yet another round of platinum strike negotiations reach a deadlock, platinum majors may this week be reviewing legal options to end the unprecedented five-month strike through the implementation of sweeping mass retrenchments that could leave the estimated 70 000-strong striking workforce jobless.

Norton Rose Fulbright employment law senior partner Joe Mothibihas told Mining Weekly Online that, while miners Lonmin, Anglo American Platinum (Amplats) and Impala Platinum (Implats) – which have lost a combined R21.9-billion in revenues since the start of the strike – were unable to retrench workers under the definition of a protected strike, there could “come a point” at which employees could be retrenched not because they were on strike but because of “the economics of the situation”.

He explained that the platinum miners would be able to embark on mass retrenchment exercises during a protected strike if they were able to prove that external economic factors, such as a depressed platinum price and low demand, occurring concurrently with the strike, had threatened the economic viability of the company as a going concern.

This strike-related story, filed from Johannesburg, was posted on the Internet site yesterday sometime---and it's the final contribution of the day from South African reader B.V.


Palladium Surges to 14 Year High; "Can Go to $1,000" on Miner Strikes

Palladium prices last traded this high in March 2001.The recent price spike has been driven by investors' concerns that a mining strike in No. 2 producer South Africa, could chock off supplies at the same as an over-exuberant auto manufacturing world drives demand for the car-exhaust metal.

Palladium's industrial uses, and the dependence on South Africa for supplies, have helped keep the metal aloft even as other precious metals stumbled this year. Miners in South Africa went on strike in January for the second time in two years, demanding higher wages and better working conditions.

As The Wall Street Journal reports, the walkout has sharply reduced palladium exports from South Africa, leaving global palladium inventories now sufficient to meet only 16 weeks of demand and investors exclaiming... "There is no reason to sell palladium right now," said Frank Lesh, a broker at Future Path Trading. "This thing can go to $1,000." But not everyone's so bullish.

This Zero Hedge news item appeared on their website at 11:42 a.m. EDT yesterday morning---and I found the story on the Sharps Pixley website.


India needs to rationalise gold import duty - trade secretary

India needs to "rationalise" duty on gold imports, which plunged 72 percent in May, Trade Secretary Rajeev Kher told reporters on Wednesday.

Following a steep rise in the country's current account deficit, India raised the gold import tax last year to 10 percent from 4 percent.

This tiny Reuters story, filed from New Delhi, was posted on their Internet site at 1:11 p.m. IST on Wednesday---and I thank Ulrike Marx for sending it our way.


Lawrence Williams: China has world’s second largest gold resource

While China has now been the world’s largest producer of gold for the past seven years, there have always been questions asked as to whether the current level of gold output (430 tonnes in 2013) is sustainable.  Now figures out of The Bureau of Raw Material from the Ministry of Industry and Information Technology suggest that there certainly are sufficient gold resources available to retain this position for the foreseeable future.

According to a report on Asia First Chan Yanhua, Director of the Bureau has said that reserves found through geological prospecting had been increasing faster than the country’s mining rate – and had seen a substantial rise over the past three years.  The Bureau put China’s gold resources as being 8,200 tonnes (263.6 million ounces), which it says is only exceeded by known South African resources of 31,000 tonnes (close to 1 billion ounces).

While total resources and economically mineable reserves are not the same thing – a fact borne out strongly by the South African situation where grade and depth of resources preclude most of them being exploited at current gold prices on any kind of commercial basis, the Chinese figures do at least give credence to the likelihood that the country will be able to retain, and perhaps increase, its current output levels and comfortably maintain its global No. 1 producer status.  It currently produces around 65% more gold annually than global No.2 miner, Australia – and almost 140% more than South Africa’s current production, although that country dominated world gold output for most of the last century.

This commentary by Lawrie was posted on the Internet site yesterday---and it's the final offering of the day from Manitoba reader Ulrike Marx.


What Casey Research Staff Are Buying This Summer

In the June BIG GOLD, I told subscribers to put the final touches on their precious metals portfolio over the summer, to take advantage of low prices. Do I take my own advice? What about the rest of our staff? And what about those at Casey Research who write non-gold publications?

I decided to poll our editors to see if they follow the advice in BIG GOLD and International Speculator and what they plan to buy this summer in the precious metals arena. Here’s what they told me…

This commentary from BIG GOLD editor Jeff Clark appeared on the Casey Research Internet site on Monday as part of that day's Casey Daily Dispatch---and it's worth reading.



¤ The Funnies

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¤ The Wrap

In trying to gauge how far the coming price blast might carry, there is one key variable to consider, namely, how aggressive the commercials will be in selling to the technical funds when (not if) those funds enter the market on the buy side. The image in my mind is that the technical funds are like a large herd of wild stallions corralled and itching to bust out. Then a gate is suddenly opened (an upside penetration of the moving averages) and the herd bolts in a flash. Unless some equal and counterbalancing force restrains the herd, the stallions will run like the wind. The only restraining force for the technical funds which are short in the silver corral, is commercial selling---both the selling of existing long positions and the new short selling of additional COMEX contracts. I want to be consistent here; the commercials maneuver and control the technical funds whether the funds are selling or buying.

While there is no way to know for sure how aggressive the commercials will be in selling to the technical funds, we do know from past experience that the technical funds will likely be as aggressive as they usually are when closing out positions moving against them. That is to say that when the technical funds move to buy back their silver shorts they will do so with “at the market” orders and not by trying to buy as low as possible with limit buy orders placed under prevailing prices. That’s how technical funds operate, by and large. The only question is how high the commercials will force the technical funds to pay up to buy back short positions. - Silver analyst Ted Butler: 11 June 2014

It was a very quiet day for both gold and silver on Wednesday---and volumes certainly reflected that.  However, as I pointed out in this space yesterday, any sign of a rally during the New York session in either of these metals is always greeted the same way---and they finish with little or no gain---especially silver.  That was the case again yesterday---and also applies to platinum and palladium as well.

Here are the 6-month charts for both gold and silver and, as usual, they have the 20 and 50-day moving averages showing.

The current gold price is about ten bucks below its 20-day moving average---and for the third day in a row, the silver price was stopped cold at its 20-day moving average.  Please re-read Ted Butler's quote above concerning the script of what will happen when these moving averages are penetrated with some authority to the upside.  His comments on silver apply almost equally to gold.  As you already know, the major difference being that JPMorgan is controlling the gold price with a long-side corner in the Comex gold market.

I'm relieved to see that the precious metal equities are starting to show signs of life.  Nothing too extravagant to be sure, but the trend, at least for the moment, is up.  

Here's the 3-year HUI chart---and although we're off the low of late December 2013, we have a ways to go to get back to the March high---and the old November 2011 high would require gold equity increases in the order of 200 percent from where they are now.

Here's the Silver 7 Index going all the way back to January 2009---and the configuration since the May 1 drive-by shooting by JPMorgan et al is pretty much the same as gold's---and the old high is a 200 percent move away as well.

Please don't forget for one second that these charts are a paint job by JPMorgan et al.  We would be back the old highs---and beyond, in one day---if "da boyz" just put their hands in their pockets and let a market-clearing event occur in all four precious metals.

And as I type this paragraph, the London open is six minutes away.  Prices didn't do a thing in Far East trading on their Thursday, but all four precious metals have a positive bias at the moment---and it remains to be see if this continues much past the open.  Volumes are shockingly low---8,400 contracts in gold---and 2,700 net in silver.  It wasn't even this low between Christmas and New Years.  The dollar index isn't doing a thing, either.

It's time to hit the send button on today's column.  It's now 5:10 a.m. EDT---and London has been open a bit more than two hours.  Both gold and silver aren't doing much.  Volumes in both metals are up quite a bit, but that's not saying much at these levels.  The other two precious metals are showing more price volatility---especially platinum---and it remains to be see how it, and the other three precious metals fare, as the Thursday trading day progresses.

See here tomorrow.