Gold & Silver Daily
"The world as we know it will change forever from that point onward"

¤ Yesterday In Gold & Silver

The gold price got sold down about five bucks or so by lunch time in Hong Kong on their Friday---and then chopped more or less sideways until at, or minutes after the London p.m. gold fix.  Then a thoughtful seller peeled another ten bucks off the price, with the low tick coming at 10:15 a.m. EST.  Gold recovered most of that loss by the close of electronic trading.

The high and low tick were reported as $1,302.90 and $1,284.30 in the February contract.

Gold closed in New York yesterday at $1,294.10 spot, down $8.00 from Thursday's close.

Silver's price path was very similar to gold's---and after the 20 cent downdraft shortly after 10 a.m. EST, the silver price recovered almost back to the unchanged mark.

The high and lows were recorded as $18.415 and $18.12 in the March contract.

Silver finished the Friday session at $18.295 spot, down 1.5 cents from Thursday.  Net volume wasn't very heavy at only 28,500 contracts.

For the most part, the palladium price was under selling pressure throughout the entire Friday session, with its low tick coming around 3 p.m. EST in electronic trading.  The price recovered about four bucks into the close.  Platinum finished the day at $1,264 spot, down 17 bucks.

Like the other three precious metals, the New York open on Thursday evening, was the high tick for the Friday session in palladium as well.  By around noon in the Far East, the palladium price was down about ten bucks---and from there traded in a broad price range either side of that mark for the remainder of the day.  When all was said and done, palladium closed down 2 dollars at $773 spot.

The dollar index closed late on Thursday afternoon in New York at 94.195.  From there it didn't do much until about 8:20 a.m. GMT in London, then away it blasted to the upside.  The 95.48 high tick came shortly after 12 o'clock noon in London---and then it sold off to the 94.50 mark by 10:30 a.m. EST.  The rally commenced anew at this point---and the dollar index closed a hair under the 95.00 mark---up another 80 basis points on the day.  Where does it stop?

Once again, here's the 1-year U.S. Dollar Index so you can see the insanity for yourself.

The gold stocks gapped down a bit at the open---and chopped lower until 2:30 p.m., when the rallied a bit into the close.  The HUI is back below the 200 mark once again---and closed down 3.57 percent, a down-move out of all proportion to the eight dollar drop in price.

Even more egregious was the action in the silver equities, as they followed an almost identical path to the gold equities, complete with the tiny rally that began at 2:30 p.m. EST.  Nick Laird's Intraday Silver Sentiment Index got creamed for 3.39 percent, despite the tiny decline in the silver price.

I'm underwhelmed at the performance of the precious metal equities---and I'm wondering out loud if that isn't a sign of things to come---and that we've seen the top of the current rally.  I'll have more about this in The Wrap.

The CME Daily Delivery Report showed that zero gold and 1 silver contract were posted for delivery within the COMEX-approved depositories on Tuesday.  Nothing to see here.

The CME Preliminary Report for the Friday trading session showed that January gold open interest dropped 14 contracts yesterday---and January o.i. is now 36 contracts.  Silver open interest in January increased by 5 contracts to 8 contracts still open.

With the January delivery month winding down, I doubt we'll see any more delivery surprises between now and next Thursday.

After a withdrawal on Wednesday---and no change on Thursday---an authorized participant added 38,414 troy ounces to GLD on Friday.  And as of 10:52 p.m. EST yesterday evening, there were no reported changes in SLV.

The U.S. Mint reported selling 104,500 silver eagles yesterday, but no gold of any description.

Month-to-date the mint has sold 78,500 troy ounces of gold eagles---32,500 one-ounce 24K gold buffaloes---and 4,760,500 silver eagles.  Based on these sales, the silver/gold sales ratio works out to a bit under 43 to 1.

There wasn't much activity in gold at the COMEX-approved depositories on Thursday.  Nothing was reported received---and only 964 troy ounces were shipped out.  In silver, there was 576,404 troy ounces reported received, but nothing was shipped out the door.  All the action in silver was at Canada's Scotiabank---and the link to that activity is here.

The Commitment of Traders, for positions held at the close of trading on Tuesday, was even worse than I expected---particularly in gold.  But I'll start with silver.

In silver, the Commercial net short position blew out by 8,837 contracts, or 44.2 million troy ounces.  To put this in perspective, physical silver production during the same reporting week was around 11 million ounces.  The Commercial net short position is now up to a monstrous 278.2 million troy ounces, a number that we haven't seen for years.

Under the hood in the Disaggregated COT Report, the technical funds in the Manged Money category went long and covered short positions to the tune of 7,741 contracts.

On the other side of the trade, the raptors [the Commercial traders other than the Big 8] sold 6,200 long contracts---and the Big 4 [read JPMorgan] added 4,000 contracts to their short position.  The "5 through 8" Commercial traders actually covered 1,500 contracts of their short position during the reporting week.

Ted says that JPMorgan's short position in silver is around 18,000 contracts, or 90 million ounces.  That's from a low of about 7,000 contracts a few weeks ago.  One can only imagine what the silver price would be today if they hadn't shorted this rally all the way up.

It was even worse in gold.  The Commercial net short position exploded by 40,134 contracts, or 4.01 million ounces.  The Commercial net short position has skyrocketed up to 17.78 million troy ounces.

The technical funds in the Managed Money category, whose buying got this rally started, sold 3,971 of their short positions---and added 23,429 long contracts during the reporting week.

As for the Commercial traders, they were the short sellers of last resort in all categories---the Big 4, the "5 through 8"---and the raptors.  The "Big 4" went short a huge 16,300 contracts, the "5 through 8" added 4,700 contracts to their respective short positions---and the raptors purchased 19,000 gold short contracts.

Ted Butler mentioned that since the Commercial net short positions lows back in early November, these same Commercial traders have added 43,000 short contracts in silver----and a chunky 127,000 short contracts in gold, as they were the not-for-profit sellers---and sellers of last resort during this rally.

Only the action of these traders has prevented the four precious metals, plus a lot of other commodities, from taking off for the moon and the stars.  But that's what these traders are there for, specifically the Big 8.  The raptors just ride their coat tails for fun, profit and, in the process, contribute to the price management scheme in their own way.

And, without doubt, the Commercial net short position in both silver and gold has grown materially worse since the Tuesday cut-off.

Here's Nick Laird's "Days of World Production to Cover COMEX Short Positions" chart showing the short positions of the Big 4 and Big 8 traders in all physically traded commodities on the COMEX.

In the above chart in the Big 4 and Big 8 categories in silver, about 80 days of world production are held short by two entities---JPMorgan and Canada's Scotiabank.  That's a bit over half of the short position of the Big 8---and around 75 percent of the short position of the Big 4 short holders.  And the CME Group and the CFTC do nothing.

There was another big withdrawal from the Shanghai Gold Exchange reported for the week ending on Friday, January 16.  This time it was 70.003 tonnes---and here's Nick's most excellent chart.  Nick says that this was the third highest 1-week gold withdrawal on record.  Watch for more withdrawal records to fall as the year progresses.

I have a lot of stories for your reading "pleasure" this weekend.  Quite a few of them are on the longer side---and several are ones that I've been saving for today's column.  I hope you have enough time left in your weekend to read the ones that interest you.


¤ Critical Reads

Kyle Bass: Falling oil to push back Fed rate hike

Hedge fund manager Kyle Bass told CNBC on Friday that falling oil prices are creating a "deflationary environment" that will force the Fed to delay its interest rate increases.

Like many market watchers, the founder of Dallas-based Hayman Capital Management said he had expected the first rate hike to be in June.

"Now maybe you won't. Maybe you'll see it in October or November," Bass said in a "Squawk Box" interview from the World Economic Forum in Davos, Switzerland. "The problem the Fed has now is you have a real kind of deflationary environment because of oil, even though you have close to full employment."

This 4:41 minute CNBC video interview, with transcript, was posted on their website very early Friday morning EST---and today's first news item is courtesy of Ken Hurt.


U.S. Treasury's Lew backs strong dollar, points to improved economy

U.S. Treasury Secretary Jack Lew said today a strong U.S. dollar was good for America and that the robust performance of the U.S. economy was driving movements in currency markets.

His comments supported a long-standing policy of the Treasury that strength in the currency was positive if it reflected economic fundamentals rather than efforts by foreign governments to gain an unfair edge in global trade.

The dollar has surged about 20 percent against its major trading partners since early May. Lew suggested that fundamentals were a factor in its rise.

"The strong dollar, as all of my predecessors have joined me in saying, is a good thing. It's good for America."

But how long the dollar remains this strong is open to debate.  This Reuters article, based on a CNBC interview from Davos, appeared on their Internet site at 9:53 a.m. EST yesterday---and I found it embedded in a GATA release.


Richard Duncan: How Capitalism Died---and Where That Leaves Us

This 43:17 minute video speech by Richard Duncan was presented in Melbourne, Australia---and it's not often that anything he writes or says appears in the clear.  So this is a rare opportunity to hear his thoughts.

It was was posted on the Internet site---and I thank D'Anne Blume for finding it for us on Wednesday.


David Stockman: The Epochal Consequences Of Woodrow Wilson’s War

My humble thesis tonight is that the entire 20th Century was a giant mistake.

And that you can put the blame for this monumental error squarely on Thomas Woodrow Wilson——-a megalomaniacal madman who was the very worst President in American history……..well, except for the last two.

His unforgivable error was to put the United States into the Great War for utterly no good reason of national interest. The European war posed not an iota of threat to the safety and security of the citizens of Lincoln NE, or Worcester MA or Sacramento CA. In that respect, Wilson’s putative defense of “freedom of the seas” and the rights of neutrals was an empty shibboleth; his call to make the world safe for democracy, a preposterous pipe dream.

Actually, his thinly veiled reason for plunging the US into the cauldron of the Great War was to obtain a seat at the peace conference table——so that he could remake the world in response to god’s calling.

But this was a world about which he was blatantly ignorant; a task for which he was temperamentally unsuited; and an utter chimera based on 14 points that were so abstractly devoid of substance as to constitute mental play dough.

This longish commentary appeared on David Stockman's website on Wednesday as well---and is definitely worth reading.  It's another article I'd been saving for today---and it's the first contribution of the day from Roy Stephens.


‘We didn’t even really know who we were firing at’ – former U.S. drone operator

Former U.S. drone sensor operator Brandon Bryant admits he “couldn’t stand” himself for his participation in the country’s drone program for six years – firing on targets whose identities often went unconfirmed.

Since 2001, and increasingly under the Obama administration, the US has been carrying out drone strikes against targets believed to be affiliated with terrorist organizations in countries like Afghanistan, Yemen, Pakistan and Somalia. The program, which has been shrouded in secrecy, has been routinely criticized for the high number of resultant civilian casualties.

Pakistan’s Peshawar High Court ruled in 2013 that the attacks constitute a war crime and violate the UN Universal Declaration on Human Rights. Meanwhile the Obama administration continues to insist that drone warfare is a precise and effective method of combat.

According to data collected by the human rights group Reprieve and published last November, attempts to kill 41 targeted individuals across Pakistan and Yemen resulted in the deaths of some 1,147 people. Often a kill requires multiple strikes, the group noted.

This article appeared on the Russia Today website at 9:06 p.m. Moscow time on their Thursday evening---and it's the second offering in a row from Roy Stephens.


Former FBI Official Ali Soufan Condemns Guantanamo Torture

SPIEGEL: Mr. Soufan, during your time as an FBI agent, you spent years conducting interrogations. Now you have also written a book about torture at secret American prisons. Were there any surprises for you in the recently released US Senate Intelligence Committee report on CIA torture?

Soufan: Yes, there were few things I didn't know. That we put prisoners (including Zubaydah) in a big box for a total of 266 hours -- that's 11 days and 2 hours -- and that we simply kept one of our most important prisoners, our only high-value-detainee at the time, in total isolation for 47 days instead of questioning him and gaining important information. As a matter of fact, I didn't know about these things.

SPIEGEL: Were details of the report still shocking to you, even though you had known about the allegations for years?

Soufan: At some point it was difficult for me to read on, especially the passages about the torture of the first important prisoner we interrogated, the terror facilitator Zubaydah. The level of unprofessionalism that the report reveals is incredible. It is really shocking. But I should not be surprised, given that 80 percent of this harsh interrogation program was outsourced to outside contractors who had no clue about interrogations. We left our most important prisoners to amateurs.

This disturbing article appeared on the German website at 4:06 p.m. Europe time yesterday afternoon---and I thank Roy Stephens for his third story in a row in today's column.  It now sports a softer headline.  It reads "Ex-FBI Official: 'We Left Our Most Important Prisoners to Amateurs'".


Las Vegas Consumer Electronics Show: All Things Flying

More than the usual electricity of Las Vegas air, the skies above CES are buzzing with drones and flying cameras — some tiny, some mighty, some simply smart and others downright brilliant. 

Move over selfie stick. The sky (or maybe the convention center ceiling) is the limit at this year’s International Consumer Electronics Show. Flying quadcopters, octocopters and wearable cameras that boomerang back to you — all have one thing in common: they are able to capture every moment like an eye in the sky.

Drones are so ubiquitous at this year’s CES, event organizers sponsored the Game of Drones, where remote-controlled drones faced off in a rowdy game of skyward bumper cars. For the event, participants used the Action Sports Airframe, a drone body design that’s able to resist fire, water and extreme impacts. The resulting carnage of crashes and broken blades.

These are just a few of the drones, cameras and copters buzzing around CES this year, but it’s clear we can expect more in the near future. Ben Wood, senior analyst as CCS Insights said drones, while exceedingly fun, are a magnet for all sorts of privacy and safety issues.

This extremely interesting story, with lots of video clips embedded, appeared on the Internet site back on Wednesday, January 14---and I forgot to include it in last Saturday's column, so here it is now.  I thank Orlando, Florida reader Dennis Mong for sharing it with us.


FATCA: “The Worst Law Nobody Has Ever Heard of,” [Part II]

Whom does FATCA affect?

The short answer is: just about everybody.

At the top of the list are those who carry U.S. indicia (see Part I) and who live outside of the United States.

In Canada these are estimated to represent approximately 3% of the Canadian population. Add to that their spouses and family members with whom they share accounts, and a much larger figure is indicated (perhaps, as has been suggested by some, as great as 12%.)

Publicity about FATCA has served to educate not only “overseas U.S. Persons” about citizenship-based taxation (CBT) and the Foreign Bank Account Report (FBAR), but also those who employ them or otherwise associate with them.

Wow!  This amazing article appeared on the Internet site yesterday---and I thank their senior editor, Nick Giambruno for sharing it with us.  It's definitely a must read, if it affects you, or anyone you know.


‘Easy money’ to worsen inequality in Europe – George Soros

The decision by the European Central Bank to begin €1.14 trillion quantitative easing (QE) program will eventually reinforce inequality within Europe and have serious political consequences, billionaire George Soros told RT in Davos.

“Excessive reliance on monetary policy and attempts to enrich the owners of property will not relieve the downward pressure on wages,” said Soros to a question from RT during a news conference in Davos. He says it’s too early to react to QE measures in Europe, but they will clearly deepen the crisis of trust between the rich and the poor.

The European Central Bank announced Thursday a €1.14 trillion ($1.3 trillion) quantitative easing program from March. The bank will buy government debt by monthly injecting €60 billion in public and private securities. The move is expected to drive inflation to the target of 2 percent and overcome a triple-dip recession in the eurozone.

The anti-poverty charity Oxfam released a report ahead of the Davos meeting this week, warning of the unprecedented economic inequality splitting the world apart.

This Russia Today article appeared on their website at 11:08 a.m. Moscow time on their Friday morning---and I thank Roy Stephens for sending it.


Coeure Says ECB Might Extend QE as Visco Calls Buying Open-Ended

European Central Bank policy makers Benoit Coeure and Ignazio Visco underlined that their new bond-buying program will be extended if it doesn’t show results.

“If we haven’t achieved what we want to achieve,” said Coeure, the ECB’s head of market operations, “then we’ll have to do more, or we have to do it for longer.” Visco, the Italian central-bank governor, said earlier on Friday that “we are open-ended” about asset purchases.

Both men spoke in Bloomberg Television interviews in Davos, where they were among a small coterie of Governing Council members who traveled to the Swiss resort after completing an historic monetary-policy decision in Frankfurt the day before. ECB President Mario Draghi pledged to buy 60 billion euros ($68 billion) a month of assets including government bonds through September 2016, while also committing to do so until officials see “a sustained adjustment in the path of inflation.”

The ECB’s calculations show the program will add 0.4 percentage point to inflation in 2015 and 0.3 percentage point in 2016, according to a euro-area official. Consumer prices fell an annual 0.2 percent in December, compared with the ECB’s medium-term inflation goal of just under 2 percent. Prices probably slid 0.5 percent this month from a year earlier, according to a Bloomberg survey before data due on Jan. 30.

This Bloomberg news item, filed from Frankfurt, appeared on their Internet site at 5:01 p.m. Denver time yesterday afternoon---and I thank Manitoba reader U.M. for finding it for us.


Jim Rickards: The Currency Wars’ “Pearl Harbor”

The most dramatic battle yet in the currency wars took place last Thursday. It was the financial equivalent of a Pearl Harbor sneak attack…

“I find it a bit surprising that he did not contact me,” IMF Director Christine Lagarde told CNBC’s Steve Liesman that day, “but, you know, we’ll check on that.”

You can almost imagine the conversation afterwards between Mario Draghi of the European Central Bank (ECB) and Swiss National Bank (SNB) President Thomas Jordan…

Mario Draghi: “Did you tell Christine?”

Thomas Jordan: “I thought you were going to tell her…”

Mario Draghi:Wait, I thought you were!”

This must read commentary, which includes Jim's comments on gold, appeared on the Internet site on Thursday---and I thank West Virginia reader Elliot Simon for sending it along.


Germany's finance minister says no Greek euro exit modelled

Germany has not modelled a potential Greek exit — the so-called "Grexit" — from the 19-nation eurozone, Germany's finance minister insisted Friday, two days ahead of a Greek election that may bring an anti-bailout party to power in Athens.

"We don't model any exit," Wolfgang Schaeuble said at a panel Friday at the World Economic Forum in the Swiss resort of Davos.

The potential of a "Grexit" has resurfaced ahead of Sunday's election, which opinion polls suggest will see the left-wing Syriza party come first ahead of Prime Minister Antonis Samaras' center-right New Democracy.

While praising Greece's better-than-expected efforts to get its economy in order, Schaeuble warned that Greece won't be allowed to benefit from the European Central Bank's new stimulus program if the government in Athens ditches the reform program required for bailout cash.

This AP story, filed from Davos, was picked up by the Internet site early Friday morning EST---and it's the second offering of the day from reader U.M.


Peculiarities of Russian National Character

Recent events, such as the overthrow of the government in Ukraine, the secession of Crimea and its decision to join the Russian Federation, the subsequent military campaign against civilians in Eastern Ukraine, western sanctions against Russia, and, most recently, the attack on the ruble, have caused a certain phase transition to occur within Russian society, which, I believe, is very poorly, if at all, understood in the west. This lack of understanding puts Europe at a significant disadvantage in being able to negotiate an end to this crisis.

Whereas prior to these events the Russians were rather content to consider themselves “just another European country,” they have now remembered that they are a distinct civilization, with different civilizational roots (Byzantium rather than Rome)—one that has been subject to concerted western efforts to destroy it once or twice a century, be it by Sweden, Poland, France, Germany, or some combination of the above. This has conditioned the Russian character in a specific set of ways which, if not adequately understood, is likely to lead to disaster for Europe and the world.

Lest you think that Byzantium is some minor cultural influence on Russia, it is, in fact, rather key. Byzantine cultural influences, which came along with Orthodox Christianity, first through Crimea (the birthplace of Christianity in Russia), then through the Russian capital Kiev (the same Kiev that is now the capital of Ukraine), allowed Russia to leapfrog across a millennium or so of cultural development. Such influences include the opaque and ponderously bureaucratic nature of Russian governance, which the westerners, who love transparency (if only in others) find so unnerving, along with many other things. Russians sometimes like to call Moscow the Third Rome—third after Rome itself and Constantinople—and this is not an entirely empty claim. But this is not to say that Russian civilization is derivative; yes, it has managed to absorb the entire classical heritage, viewed through a distinctly eastern lens, but its vast northern environment has transformed that heritage into something radically different.

This extremely interesting essay put in an appearance on the website on Tuesday, January 13---and it's worth reading if you want a quick history lesson on Russia's origins.  I thank Tolling Jennings for digging it up for us---and for obvious reasons, had to wait for a spot in my Saturday missive.


The Chilly Fallout Between Putin and His Oligarch Pals

Vladimir Putin isn’t just angering leaders from Berlin to Washington. He’s irking some of his richest friends, too, by snubbing their pleas to end the conflict in Ukraine and ostracizing all but a handful of hardliners.

The ruble’s plunge has heightened opposition to Putin’s backing of the rebellion in Ukraine among his wealthiest allies, prompting the president to shrink his inner circle from dozens of confidants to a small group of security officials united by their support for the separatists, two longtime associates said.

Putin is increasingly suspicious of men who owe their wealth to their ties to him and who are being hurt the most by U.S. and European sanctions, according to the people, who spoke on condition of anonymity to avoid reprisal. The 21 most affluent people in the country lost a total of $61 billion last year, a quarter of their combined fortune, according to the Bloomberg Billionaires Index.

Businessmen who have long been close to Putin are “on the periphery now,” said Sergei Markov, a political consultant who helped monitor the referendum in Crimea that led to Russia’s annexation of the peninsula in March.

This longish Bloomberg article, filed from Moscow, should be read with your propaganda meter on it's high gain setting.  It was posted on their Internet site at 6:50 a.m. Denver time on Friday morning.


Saudi King Abdullah’s death sets up complex succession process

Saudi Arabia’s King Abdullah bin Adbul Aziz died early Friday, setting the stage for a transition of power at a critical moment as the key U.S. ally in the Middle East struggles with falling oil prices and rising Islamist violence.

The monarch, believed to be 90, was succeeded by his brother, Crown Prince Salman, according to state television. That put the region’s most important Sunni power and America’s closest Arab ally in the hands of a 79-year-old who is reportedly in poor health and suffering from dementia.

Salman’s rise to the throne postpones the question of when the Saudi monarchy will turn to the next generation of princes to run their country of 28 million people at a crucial moment in a region mired in crisis.

This in-depth article appeared on The Washington Post's website on Thursday---and is worth reading if the topic interests you, which it should.  I thank Casey Research's own Marin Katusa for passing it around yesterday.


James Rickards discusses future of Saudia Arabia

This 7:43 minute video clip from the Internet site, was conducted by CCTV America---and it's certainly worth watching.  It was posted on Thursday sometime---and it's courtesy of Harold Jacobsen.


Record high Chinese imports of Russian oil in 2014

Chinese imports of oil from major OPEC countries fell last year, while the purchases of Russian oil saw a record increase, said the Chinese General Administration of Customs. It is part of Chinese plans to diversify its oil sources.

Last year, the share of Saudi oil in the Chinese market fell 8 percent and the volume from Venezuela dropped 11 percent (below 20 million tons), while the share of Russian oil leapt 36 percent, the equivalent to 665,000 barrels a day, General Administration of Customs said Friday in a report.

Saudi Arabia remains China’s largest supplier with 49.67 million tons of exports in 2014, or 997,000 barrels a day, the least since 2010.

This Russia Today story, filed from Moscow, was posted on their Internet site at 4:01 p.m. local time, which was 8:01 a.m. in New York.  It's another contribution from reader U.M.


Doug Pollitt: Vlad in the machine

While the United States has been running a speculative attack on the Russian ruble, Russia likely is running a more subtle attack on U.S. dollar hegemony by putting a bid under gold, Doug Pollitt of Pollitt & Co. writes in the Toronto brokerage firm's market letter for January.

Pollitt also notes the complaints of Comex metals traders about "spoof" trades driven by computers, the sort of practice that would have driven human traders from the floor in the old days. With Pollitt's kind permission, his January letter, titled "Vlad in the Machine," is posted in PDF format at GATA's Internet site.

This amazing 7-page article defies description, but it definitely falls into the absolute must read category---and you can come to your own conclusions about it once you're done.


Koos Jansen: Will gold be part of a new international monetary system?

Bullion Star market analyst and GATA consultant Koos Jansen, reviewing U.S. government records showing government officials meeting in secret to plan their secret interventions in the gold and currency markets -- that is, not "conspiracy theory" but conspiracy facts -- joins those observers who are inclined to think that the secret policy of the world's major central banks is to redistribute gold reserves among themselves more fairly. A review of such speculation was dispatched by GATA on Tuesday.

Jansen's commentary is headlined "Will Gold Be Part of a New International Monetary System?" and it's posted at the Internet site.  I stole all of the above from a GATA release, but the first reader through the door with the story yesterday was Dan Lazicki.  It's worth reading, as is the link in the previous paragraph.


Sprott Money Weekly Wrap Up

Listen to Eric Sprott share his views on the ongoing chaos in foreign currency markets, the renewed interest in gold and his short-term outlook for that metal.

This 9:46 minute audio interview was conducted by's Geoff Rutherford yesterday.


Dr. Marc Faber: Feckless central banks to underpin gold

Central bankers are professors who never worked a day in their lives and whose easy-money policies will ultimately be disastrous for markets, says Marc Faber, publisher of the Gloom, Boom & Doom Report.

That's why he says he thinks gold could be the "trade of the century" and why he recommends additional exposure to gold through junior miners. He explains his investing strategy today on Commodities.

This 7:07 video clip was posted on Canada's Broadcast News Network on Friday---and I thank reader Ken Hurt for his second contribution to today's column.  I haven't had the chance to listen to it yet, but will make amends over the weekend.


Lawrence Williams: 2015 Black Swans proliferate – Safe Haven gold investment to benefit

January 2015 has already been remarkable for the number of Black Swan (unanticipated) events which have hit the markets in such a short space of time.  Some of these have been totally unheralded like the Swiss National Bank’s decision to unpeg the Swiss Franc from the Euro – which really did take the markets by surprise – while others may, in hindsight have been a little more predictable.  These include the escalation of fighting in Eastern Ukraine as both sides appear to have used a recent ceasefire to boost their military arsenals and prepare for more fighting; the death yesterday of King Abdullah of Saudi Arabia – perhaps predictable in that he was 90 years old and in poor health – but nonetheless promoting new uncertainties in what is a particularly volatile part of the world; the apparent growth in strength of Boko Haram in West Africa which has the potential perhaps to spread to major gold producing areas if the rebel group is unable to be held back; the Charlie Hebdo massacre in Paris which threatens to unleash an anti-Muslim backlash throughout Europe, or stimulate copycat killings by other fanatical fundamentalists.  And all this within a three week period!  Who knows what else lies in store for us in the remaining 49 weeks that lie ahead?

Gold should thrive on uncertainty in terms of a big rise in safe haven demand – and we already look like having a very uncertain year ahead.  Gold may have come back from its recent interim peaks following the SNB decision in  particular and the much-heralded announcement of the ECB’s QE programme (although this turned out to be bigger than expected) and it seems to be having difficulty today holding on to the $1,300 level.  But this could be just a temporary hiatus.  As other geopolitical and economic factors come into play, there could be a huge boost – and that’s just from events which might be seen as predictable.  More Black Swans could further upset the applecart that is the global economy and lead to yet another gold price upsurge as a result.

This commentary by Lawrie showed up on his website sometime yesterday.


This is What Gold Does in a Currency Crisis, Euro Edition

Yesterday the European Central Bank acknowledged that the currency it manages is being sucked into a deflationary vortex. It responded in the usual way with, in effect, a massive devaluation. Eurozone citizens have also responded predictably, by converting their unbacked, make-believe, soon-to-be-worth-a-lot-less paper money into something tangible. They’re bidding gold up dramatically.

So after falling hard in 2013 and treading water for most of 2014, the euro price of gold has gone parabolic in the space of a couple of months. This sudden rather than gradual awakening is the standard pattern for a currency crisis, mainly because it takes a long time for most people to figure out their government is clueless and/or lying. But once they do figure it out, they act quickly.

Europe’s gold chart isn’t as dramatic as Russia’s (see it here) because Europe doesn’t depend on oil exports and the euro, while dropping versus the dollar, isn’t yet in free-fall. But with another trillion euros due to hit the market in the coming year, and a series of currency union-threatening political crises in the pipeline, the flight to safety could easily become a stampede.

This short, but excellent article, along with a couple of terrific charts, appeared on the Zero Hedge Internet site at 8:09 a.m. on Friday morning.


Lawrence Williams: Russian Central Bank continues to build its gold reserves

It had been suggested last month that Russia would have to sell some of its gold reserves – the World’s fifth largest national central bank holding (ignoring the IMF’s holding) – to help prop up the ruble.  The Russian currency has been being driven down, almost in free fall for a time, by the unholy alliance of drastically falling oil and gas prices coupled with U.S. and European sanctions over the Crimea annexation and possible Russian involvement in the continuing uprising by pro-Russian rebels in Eastern Ukraine.

But, the opposite has been the case.  The Russian Central bank announced yesterday that its gold reserves grew by a further 600,000 ounces (18.7 tonnes) in December – the ninth successive month of gold reserve increases.  Clearly President Putin is a believer in the ultimate economic benefits of a strong national gold holding – particularly if some kind of global reserve currency realignment lies ahead in the relatively near future.

As a Reuters report points out, Russia has now more than tripled its gold reserves in the past 10 years, even as it recently has presumably had to use some of its its international currency reserves to defend the ruble with the national economy having been driven to the brink of recession. The ruble slid almost 50 percent in the past 12 months which makes the nation’s gold reserves ever more important to its global economic status.

This very interesting commentary by Lawrie was also posted on this website yesterday---and it's worth reading as well.


India's Gold imports come to halt as discounts widen

Gold import in India has halted in recent days, with the market offering a widening discount over prices in London, now at $12-15 an ounce or Rs 240-300 per 10g.

When demand is good, importers charge a premium over London prices. With this not so, they would like to offload their stocks; holding the metal is costly. The present discounts are due to a huge carryover stock from imports in November, when 151 tonnes came in, far above India’s normal monthly demand.

Only 39 tonnes of gold was imported in December, when the marriage season had paused. The latter has restarted after January 14 but most of the buying was done  when prices were lower in October-November. Now, demand is also absent as global prices have shot up to $1,300 an oz.  

A person working closely with gold importing agencies said the high discounts had led to a halt in imports. The price in India is determined on the cost of imports and the margins in these are thin. The prevailing discount of one per cent makes these unviable. This month so far, only 15-20 tonnes might have come in.

This gold-related news story appeared on the Internet site at 1:21 p.m. IST on their Saturday afternoon---and it's courtesy of reader Danny Carroll.



¤ The Funnies

Alexandria doubles gold resources at 100% owned Sleepy Property in Val d’Or, Quebec; inferred resources have increased to 307,350 ounces of gold at a 3 g/t cut-off. Not only has the resource been expanded, but the grade has increased by 60% to an average of 5.1 g/t Au. The Sleepy project is now the size and grade of average historical mines in Val d’Or and, better, it is a disseminated gold-pyrite deposit rather than a narrow high grade deposit.

Since Alexandria discovered Quebec’s next gold mine in 2012-2014 at the Akasaba West Zone, the company has embarked on an exploration program to find more similar gold-copper resources on the western half of its property package. Through the compilation and digitization of historical exploration data over the broader property package, company geologists have identified significant copper-gold targets. The company is in the midst of a 12,000 m drill program testing geophysical targets coincident with these gold-copper targets, including a 7 km long porphyry copper-gold trend in and around the contact zone of the East Sullivan granitic stock. Alexandria’s estimated current resources now total 1.6 million oz. of gold (696,000 M&I; 731,000 Inf.) from three advanced exploration projects on its large 35 km long property package in Val d’Or.


¤ The Wrap

Up until the [previous] COT report, the bulk (80%) of the commercial selling in silver since November has been long liquidation on the part of the raptors (the smaller commercials apart from the big 8), rather than new shorting by the big 4 and 8. But with not many raptor long contracts left to liquidate (12,500 in the last COT report), any new commercial selling beyond that must be new short selling by the big 8---or new shorting by the raptors. Since the raptors haven’t gone significantly short in years, it looks like any heavy commercial selling from this point would come from the big 4 and 8. If that were to occur, everyone should have a problem with that.

With the price of silver below the average primary cost of production, the number of legitimate hedgers looking to sell and lock in current prices should be as rare as a hen’s teeth. So, if there is a notable increase in short selling by the big 4 and 8, those short sales can only be designed to cap and manipulate the price. No greater proof of manipulation is possible than one or a few traders being the sole short sellers. I suspect that will be the case but maybe I’ll be wrong. [He wasn't! - Ed] - Silver analyst Ted Butler: 21 January 2015

Today's pop blast from the past is an instrumental classic from the 1960s---and unfortunately you have to be be of my vintage to remember it well.  It's certainly an oldie but goodie.  Neither the tune, nor the performers, require any further introduction---and the link is here.

Ernesto Lecuona was, without doubt, Cuba's most famous composer from the first half of the 20th century.  Here's his Rapsodia Argentina for Piano and Orchestra, with Thomas Tirino doing the honours.  I have the recording---and I never tire of listening to it.  The link is here.

The gold price action has been really sloppy the last couple of days---and gold's sojourn above the $1,300 spot price mark lasted less than twelve hours.  The share price action in the last few days hasn't inspired confidence, either.

As for silver, it's solidly above the $18 spot price mark, a place it hasn't been for a long time, but its respective equities are stinking up the place as well.

Here are the 6-month charts for all four precious metals, plus copper and crude oil.

Gold is some distance above its 200-day moving average---and the RSI trace is well into overbought territory.  Silver has now kissed its 200-day moving average---and it's moved into overbought territory as well.

With the ugliest Commitment of Traders Report in years, all the warning flags are snapping in gale-force winds---and using the past as prologue, it isn't looking good.

Could gold and silver power higher in price from here?  You bet.  Could JPMorgan and the other short sellers of last resort get over run? Yes, but as Ted Butler has been saying for at least fifteen years, if they do, it will be for the very first time.

Despite what appears to the imminent collapse of our current economic and financial system, along with rampant central bank money printing, the powers-that-be still have the precious metals in particular---and the entire commodities complex in general---in lock-down mode.

Then, to make things even more interesting, the price management scheme in the precious metals is completely overriding the over-the-top supply/demand fundamentals in both silver and gold---conditions that I've discussed in this column for years now.

The fact that China, India and Russia on their own are absorbing all the new gold being mined every year is a situation that obviously cannot last forever, as Western central bank gold inventories are being drained to meet the balance of world gold demand---and as a reader asked yesterday "Perhaps you can explain why "da Boyz" are suppressing gold, when even they must know the Russians, Chinese and others are buying it."

Isn't that the $64,000 question, dear reader---and there are two intertwined schools of thought on why that's the case, both of which have been around for a very long time.

The first is contained in Peter Warburton's classic April 2001 tome "Debasement of World Currency: It is Inflation, but not as we know it."  The three pertinent paragraphs are quoted below---and this is the umpteenth time I've posted them in this space since I started writing for Casey Research eight or so years ago.  But at this point in history, they are definitely worth rereading!

Central banks are engaged in a desperate battle on two fronts

What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years---since 1994. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the U.S. dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade. [Emphasis mine. - Ed]

The second reason for keeping precious metal prices suppressed, particularly in the last few years, was the prospect of a partially gold-backed Special Drawing Rights [SDR] courtesy of the IMF.  Jim Rickards picked up this fact in his latest book "The Death of Money: The Coming Collapse of the International Monetary System"---and his current comments on China and Russia's reasons for buying gold was outlined and expanded upon in a piece posted over at the Internet site on Tuesday, that was in my Wednesday column.  It's embedded in a GATA release headlined "Jim Rickards: Gold price manipulation is now a global effort to appease China".  While you're there, the other articles that Chris linked will help you understand the current situation even more.

So there you have it---the two most plausible reasons why the powers-that-be are still sitting on precious metal prices---gold and silver in particular.  For obvious supply/demand reasons, the current situation is untenable---and as I said in my Cambridge House interview in Vancouver on Sunday, it will end suddenly, with no advance notice---and in the same fashion as the Swiss Central Bank dropped the euro peg last week.

Whatever, day, month and year that happens---the world as we know it will change forever from that point onward.

I'm done for the day---and the week.

See you on Tuesday.

Ed Steer