Gold & Silver Daily
"There is a major disconnect between the price of the physical precious metals and the paper precious metals."
 

¤ Yesterday In Gold & Silver

The sudden twenty-five dollar price spike in gold around 2:00 p.m. Hong Kong time...along with the commensurate price spikes in the other three precious metals...was the only price activity of note everywhere on Planet Earth on Friday.

After that spike, the gold price slowly got sold off...and shortly before the 1:30 p.m. Comex close in New York, the price was back to where it had closed at on Thursday afternoon.  However, the subsequent rally after that, put the gold price firmly back in the black, with gold finally closing above the $1,400 spot price mark.

Gold closed the week at $1,406.50 spot...up $14.40 from Thursday's close. Gold volumes were way up there once again, this time it was 207,000 contracts.

The silver price action was very similar, but the intraday price move showed more 'volatility' than did gold...almost a dollar from high tick to low tick.

The low of the day [$22.83 spot] came at the 1:25 p.m. Comex close...which is five minutes sooner than the Comex close for gold.  After that, silver rallied as well, closing the day at 23.29...up a penny on the day...and right in the 3 cent gap between Wednesday's closing price and Thursday's closing price...and only 5 cents below Monday's closing price.  Whoever was riding shotgun over the silver price must have nothing better to do at the end of the trading day.

Silver's net volume was pretty decent as well...around 37,000 contracts.

The dollar index closed in New York late Thursday afternoon at 82.55...and then didn't do much until 8:00 a.m. in New York.  The dollar had a small double bottom between then and around 9:30 a.m. Eastern time...and then a rally of sorts developed, which sort of faded in the last thirty minutes of the trading day.  The index closed at 82.77...up 22 basis points on the day.

The gold stocks gapped up at the open, but couldn't hold those gains in the face of the shallow, but relentless price decline.  However, once gold hit its low tick of the day shortly before the Comex close, a decent rally ensued...and the HUI close up a respectable 1.56%.

Even though silver finished the day virtually unchanged, most of its associated equities finished in positive territory as well...and Nick Laird's Intraday Silver Sentiment Index closed up 0.63%.

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Here's the longer-term silver chart, so you can put the current price action in some sort of context.

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The CME's Daily Delivery Report for Friday showed that 42 gold and 10 silver contracts were posted for delivery on Tuesday...and with the exception of a handful of contracts issued by Marex in both metals...it was all "the usual suspects" as short/issuers and long/stoppers.  The link to yesterday's Issuers and Stoppers Report is here.

The withdrawals from GLD just don't stop, as an authorized participant withdrew another 319,167 troy ounces yesterday.  And as of 11:55 p.m. Eastern time yesterday evening, there were no reported withdrawals from SLV.

The U.S. Mint had another sales report yesterday.  They sold 14,500 ounces of gold eagles...and 2,500 one-ounce 24K gold buffaloes.  No silver eagles were reported sold.  Month-to-date the mint has sold 167,500 ounces of gold eagles...21,500 one-ounce 24K gold buffaloes...and 2,387,000 silver eagles.  Based on these sales the silver/gold sales ratio for the month so far is only around 13 to 1.

I would guess the ratio is low for three possible reasons, a] they aren't meeting their production quota on silver eagles, and b] in lieu of not having any silver eagles to buy, customers are buying gold instead, and c] I would guess that a large portion of the gold sales from this month went overseas...especially the two tonnes of gold eagles that were reported sold on one day earlier this week.

Thursday was another big day over at the Comex-approved depositories.  They reported receiving 1,807,345 troy ounces of silver...and shipped 904,002 troy ounces out the door.  It was another monster week for in/out movement at these depositories...and I'm sure Ted Butler will have more to say in his weekly commentary to his paying subscribers later today. The link to yesterday's activity is here.

Well, I took one look at the numbers in yesterday's Commitment of Traders Report and knew immediately they weren't right.  They weren't even close to what they should have been...in either silver, copper, or gold.  Even Ted had to admit that he didn't know what to make of them.  But he did point out that the numbers in the Nonreportable category appeared to be what one might expect considering the price action of the reporting week...and I agreed.

But the numbers that appeared in the Non-Commercial and Commercial categories were simply not believable...and unless it was a just huge reporting mistake, which they'll correct on Monday, it's my belief that the report has been tampered with.  Ted certainly didn't rule that out, but was obviously not happy that it might have come to this...and I'll be more than interested in what he has to say about it later today. But if you wish to look them over, the link to the legacy COT report is here...and I'll have more to say about this in Tuesday's column.

Yesterday was the biggest sales day in the bullion store's history, even though we only had silver maple leafs and 100 oz. silver bars to sell...as these are the only two items that we were able to order and get delivery of in a timely manner.  Over-the-counter sales were decent, but it was the huge order-in sales that were the standout.

Then at 2:00 p.m. local time, our supplier called us to say that silver maple leafs were no longer available...and from that point on, we only were selling the 100 ounce bars.  But faced with buying that large a bar, or walking away empty handed, our customers bought them like they were party favours!  Even when silver was approaching $50 the ounce back in April 2011, we've never had a week like we've had this past week.  The psychology of the buyer today is totally different from what they were thinking two years ago.  Back then they were buying to [hopefully] make a quick buck...now it's the Cyprus thingy, no interest on bank deposits, along with the new 'bail in' provisions for Canada's 'too big to fail' banks that showed up in Canada's recent budget.  The people are finally starting to wake up...and not just in this country.

Here's an e-mail sent to a friend of Casey Research's own Dennis Miller earlier this week...and I can tell you that it's already out of date, because NTR isn't taking orders for anything now, either.

Yesterday, my good friend Richard Nachbar sent me the chart posted below, which updates the wholesale premiums bid by dealers for 90% U.S. silver coinage.  As you can tell, it's taken quite a jump in the last week.  [Richard, keep these Friday reports coming!  Thanks in advance. - Ed]

Since their normal update day...the 20th of the month, falls on a Saturday...The Central Bank of the Russian Federation updated their website with their March numbers on Friday...and it showed that they purchased another 200,000 troy ounces of gold for their reserves, which now sit at 31.6 million ounces...very close to the 1,000 tonne mark.  Nick Laird's most excellent chart below reflects that change.

(Click on image to enlarge)

And here's your "cute quote" for the day...

I don't have a huge number of stories for you today, which suits me fine...and probably you as well.  But the ones I do have, especially those relating to unprecedented world-wide retail demand for precious metals, are all worth reading.

 

¤ Critical Reads

Doug Noland: Fault Lines

Over the years, I’ve highlighted the thinking of the old codgers (including Andrew Mellon) in the late-twenties that had witnessed enough boom and bust cycles during their lifetimes to confidently warn of impending collapse. They were convinced that attempts by our central bank to sustain a protracted inflationary boom (that commenced with the “Great War”) would risk destroying both the economy and the Credit system. These are Dr. Bernanke’s disdained “Bubble poppers.”

Well, we’ve been witnessing similar dynamics in real time. The more “money” central banks inject into the global system, the more this liquidity inflates and distorts securities markets. The greater the stimulus employed to combat deflation risk, the more the over- and mal-investment, especially in China and Asia. The more aggressively activist central banks work to inflate liquidity and market levels, the more encompassing the pool of global speculative finance working to profit from desperate policy measures. The more intensively policymakers in the U.S., Europe, Japan, China and elsewhere work to sustain (“terminal”) late-cycle global Credit excess, the more prominent the inequitable redistribution of wealth to a relatively small group of beneficiaries. We’re deeply into the phase where massive liquidity injections receive little real economy bang for the buck.

Here's Doug's weekly Credit Bubble Bulletin.  It was posted on the prudentbear.com Internet site last evening...and it's always a must read in my books.  I thank reader U.D. for sending it.

Read more...

According to 'French' Fitch, France is Now Rated Higher Than The U.K.

Fitch has just downgraded the U.K. from AAA to AA+...now lower than France's.

Fitch doesn't see the U.K. economy reaching 2007 highs until 2014 - so there's hope? As for debt: Fitch now forecasts that general government gross debt (GGGD) will peak at 101% of GDP in 2015-16 (equivalent to 86% of GDP for public sector net debt, PSND) and will only gradually decline from 2017-18. This compares with Fitch's previous projection for GGGD peaking at 97% and declining from 2016-17 and the 'AAA' median of around 50%.

What does it matter, dear reader, as both countries are totally bankrupt anyway, because these debts are never going to be repaid.  This story appeared on the Zero Hedge website yesterday morning...and I thank West Virginia reader Elliot Simon for sending it.

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Pier Luigi Bersani resignation plunges Italian politics into further chaos

The chaos gripping Italian politics deepened on Friday night as centre-left leader Pier Luigi Bersani announced his imminent resignation, lashing out at a rebellion which saw off both his candidates for president and exposed the deep divides within his party.

An angry and bitter Bersani told MPs he would stand down as leader of the Democratic party (PD) as soon as parliament managed to elect a new head of state – a contest that is crucial in deciding how and if Italy can extract itself from political gridlock.

The dramatic announcement came after the two men the PD head had backed for president – former union leader Franco Marini and two-time prime minister Romano Prodi – failed to attract the necessary number of votes in ballots.

This story appeared in The Guardian shortly after midnight this morning British Summer Time...and it's courtesy of Roy Stephens.

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Yen Declines as G-20 Gives Japan Leeway on Stimulus; Pound Falls

The yen fell for a fourth day against the dollar after the Group of 20 gave Japan leeway to reflate its economy by indicating the nation’s monetary stimulus plan doesn’t contravene a pact to avoid currency devaluations.

Japan’s currency dropped at least 1 percent versus all of its 16 most-traded peers amid bets on more of the quantitative- easing stimulus from the Bank of Japan (8301) that has helped the currency slide to a four-year low versus the greenback. Sterling extended a drop versus the greenback after Fitch Ratings cut the U.K.’s credit grade by one level. South Korea’s won climbed.

“G-20 and the BOJ have made it very clear to the financial community that Japan has the green light regarding continued QE and resulting yen weakness,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, wrote today in a client note. “The global hope is that inflation will drive growth in Japan, finally awakening this sleeping giant. Yen weakness is now a given; the only uncertainty is the pace at which this unfolds.”

This Bloomberg article was posted on their website mid-afternoon on Friday MDT...and I thank Manitoba reader Ulrike Marx for her first story of the day.

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Five King World News Blogs/Audio Interviews

The first interview is with hedge fund manager William Kaye...and it's headlined "Central Planners Risk Having All Hell Break Loose Here".  The second blog is with Jim Sinclair.  It bears the title "The U.S. Will Be Cyprused and We Will See $50,000 Gold".  And lastly is this commentary from Egon von Greyerz...and it's entitled "Refiners Can't Keep Up With Massive Global Gold Demand".  The first audio interview is with Nigel Farage...and the second audio interview is with Rick Rule.

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Gold shops shuttered on volatility

Several gold shops have decided to close temporarily, saying it would be their only chance to stem further losses after the price of gold sunk to a two-year low. The bearish trend is set to continue.

The owner of Aurora Gold shop on Sukhumvit Soi 103 said she decided to close shop yesterday and has yet to decide when to resume business.

"I took this chance to make minor renovations instead of opening the store only to lose more cash. Since the week began, the sharp fall in gold prices prompted people to rush to the shop to buy gold. Our gold bullion is out of stock and we are not going to place orders until the global prices settle," she said.

Normally, gold bullion buyers have to pay first and wait for a week to receive the products, but now demand has shot up and there is no guarantee how long they have to wait.

This article appeared in the Bangkok Post yesterday...and it's courtesy of Dan Alexander via Ted Butler.

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Shortage of gold bars and coins in Dubai, says World Gold Council

The World Gold Council, which has been tracking the global gold market pattern, has found that there is a shortage for bars and coins in Dubai which is creating a supply shortage.

Aram Shishmanian, CEO, World Gold Council: "It has become increasingly clear over the course of the past week that the fall in the gold price was triggered by speculative traders operating in the futures markets. Their short-term view of generating a trading profit is in stark contrast to the views of long term investors in gold, as evidenced by the massive wave of physical gold buying that began over the weekend and accelerated following Monday's further decline.

The surge in gold purchases is spanning markets from India and China to the US, Japan and Europe. Buyers are viewing this as an opportunity to purchase gold at prices not seen in the past couple of years."

This story appeared on The Economic Times of India website during the lunch hour IST yesterday...and it's courtesy of U.A.E. reader Laurent-Patrick Gally.

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Demand for Krugerrands skyrockets

The demand for Krugerrands has skyrocketed during the past week as investors tried to benefit from the weaker gold price.

Glenn Schoeman, chief executive officer of Gold Reef City Mint and chairman of the South African Numismatic Dealers (SAAND) also indicated to Moneyweb that the dramatic drop in the gold price during the past week has sparked off a “massive, massive buying spree”.

Schoeman says Gold Reef City Mint’s Krugerrand manufacturer – Rand Refinery – is currently unable to meet the demand for the coin.

“Quite honestly the supply does not even meet it (the demand) by any manner or means,” he says.

This moneyweb.za.com article from yesterday was picked up by the mineweb.com Internet site...and falls into the must read category.  I thank Ulrike Marx for her second offering in today's column.

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Slump in gold price releases years of pent-up retail demand

As big investors rush out, consumers rush in...

Gold retailers struggled to cope this week as parents buying dowries, casual shoppers and tourists snapped up bars, coins, nuggets and jewellery as a slump in the price of the yellow metal released years of pent-up retail demand.

The price decline in the past week, the steepest in 30 years, has tarnished gold's appeal for the portfolio investors whose money had fuelled a 12-year bull run. As investors rush out, consumers that were priced out of the market for years have rushed in.

"It's just like the sales after Christmas," said Nigel Moffatt, treasurer at Perth Mint, which refines between 300 and 400 tonnes of precious metals each year at what it says is the largest facility in the southern hemisphere.

"My sales are 50 percent more than last year ... and we expect good business to continue as weddings will last till July," said Kumar Jain at his shop in Zaveri Bazaar, India's biggest gold market, in Mumbai.

This Reuters story, filed from Singapore, was posted on their website very early yesterday morning Eastern Daylight Time...and it's Ulrike Marx's final offering in today's column.

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Chinese Gold Exchange Sold Out - Begins Importing From Switzerland

Hong Kong’s Chinese Gold & Silver Exchange Society has been in operations for over a century, and it’s President Haywood Cheung was interviewed by Bloomberg news earlier today.  Whoever orchestrated the attack on gold and silver in the last week or so has gravely miscalculated, since the response to the drop has been surging demand for physical gold and silver.

While I [Michael Krieger] tend to be skeptical when I hear about silver shortages since these reports have been so exaggerated in the past, the lack of silver coin availability and premiums are the most extreme I have seen since the financial and economic meltdown of 2008.  Now we discover that the Chinese Gold & Silver Exchange Society has essentially sold out of gold bullion, and must wait until Wednesday for shipments to arrive from Switzerland and London.

This short Zero Hedge article from early yesterday afternoon has a short 1:44 minute video clip embedded in it...and I thank Matthew Nel for sending it along.

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U.S. Mint’s Sales of Gold Coins Soar After Futures Slump

The U.S. Mint in April has sold 153,000 ounces of American Eagle gold coins, the highest in almost three years, after futures prices started the week by plunging the most since 1980.

Sales have more than doubled from March and surged sevenfold from a year earlier, data on the Mint’s website showed. The amount for all of May 2010 was 190,000 ounce.

The China Gold Association said that retail sales soared on April 15 and April 16, and the All India Gems & Jewellery Trade Federation said that demand climbed to the highest this year. Sales surged from Australia’s Perth Mint, which refines almost all of the nation’s bullion, Treasurer Nigel Moffatt said. He didn’t provide precise figures.

This Bloomberg item was filed from New York...and posted on their website mid-afternoon on Thursday MDT.  My thanks go out to Elliot Simon for digging it up on our behalf.

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Sprott's Thoughts: Gold Bear Market or Physical Gold Discount Sale??

Back in 1980, just as the gold price blasted upwards past $800/oz, buyers reportedly lined up in droves at various bullion dealers to participate in the rally. Investment analyst Jay Taylor writes, “I remember 1980… there was panic buying of gold by people in the streets of New York City. They were lined up around the block to buy gold and Krugerrands at that time.” That flurry of buying ended up representing a classic top. As gold failed to move higher, the speculative frenzy soon reversed into a despondency that dragged gold into a twenty year bear cycle. For those investors who bought at the top, it was a hard lesson learned.

Fast forward to today, and in the days that have followed this past Friday’s (and Monday’s) incredible gold price smash, the strangest thing has happened: physical buyers have come out in droves, but this time they’re buying immediately following an unprecedented $200 price decline.

We still don’t know what entity chose to crush the gold price with a 400 tonne sell order last Friday. Certainly no rational group would dump that much paper gold on the market without a pre-established desire to torpedo the gold price. Their efforts clearly worked in the short-term, but the reaction from physical buyers strongly indicates an official bifurcation between physical metals investors and the exchange-oriented investors who trade gold through financial products.

The days to come will prove if this surge in physical demand is an aberration, or the beginning of a new chapter for the physical gold market. If it represents the latter, precious metals investors may be wise to ignore the ‘paper’ price of gold altogether. The line-ups in 1980 represented the top of the gold bull market. But what do line-ups for gold represent when the price has already fallen 30% from its all-time high? That’s the question, and we’re guessing it means this current gold bull market isn’t close to being over.

This most excellent must read article by David Baker was posted on the sprottgroup.com Internet site yesterday...and if I had to pick just one story for you to read today, this would be it.

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James Turk: What's next for gold?

GoldMoney founder and GATA consultant James Turk shakes his head at the recent "five standard deviation" move in gold and remarks that nothing has diminished the fundamental considerations arguing for higher prices for the monetary metals.

This short essay was posted on the goldmoney.com Internet site yesterday...and I found it embedded in a GATA release.  It's definitely worth reading.

Read more...

Video of CBC's 'The Secret World of Gold' posted at GoldSeek

Video of Thursday night's broadcast of the documentary "The Secret World of Gold" on the Canadian Broadcasting Corporation's "Doc Zone" program has been posted in three parts at the goldseek.com Internet site.

I wouldn't wait around to watch it, as CBC may take great umbrage with the fact that it has been "stolen"...and ask that they remove it.  It's a must watch.

Read more...

 

¤ The Funnies

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¤ The Wrap

For now, all we can conclude is this: There is definitely a striking psychological disconnect growing between the buyers of physical gold and silver, and the financial community that trades precious metals through ETF’s and futures contracts.  While the latter have ostensibly turned their backs on gold (see the plethora of negative sentiment expressed by various pundits over the past three days), the former group has been spurred into action as if they know something the other group does not. Certainly we wouldn’t expect individuals to be buying these metals if they believed the price was going to drop further, or perhaps they don’t care either way and simply want to own something tangible. Nonetheless, it is a wholly peculiar phenomenon, and it is definitely not the same investment behaviour we have seen before. - David Baker, Sprott Asset Management...19 April 2013

Today's pop 'blast from the past' was the first number one hit of The Association the year I graduated from high school in 1966.  You'll know it instantly...and the link is here.

The classical offering today is a bit more obscure, but any Jean Sibelius fan will know it instantly.  It's a short piece entitled "Valse triste, Op. 44"...and the link is here.  This is a particularly stunning performance...and it's just too bad that the youtube.com audio track is not up to producing the full fidelity of the orchestra.

I'm not sure what, if anything, should be read into yesterday's price action in all the precious metals, but I have to agree totally with what David Baker over at Sprott had to say in the above quote...and that there is a major disconnect between the price of the physical precious metals and the paper precious metals. It's a situation that remains unresolved, but I doubt very much that it will remain that way for long.

Like David, I was somewhat taken aback by the mind set of the buyers that have been showing up at the bullion store all week.  Things really are different this time...and if the buyers are out in force on a $200 price decline, one can only imagine what the buying frenzy will be like as the precious metals being their inevitable rallies back to new highs...especially in silver.

I'm sure that "the powers that be" are just as surprised, as they certainly would have been caught even more off-guard than we were...and how this resolves itself in the days and weeks ahead will be interesting to watch.  This is not just a North American phenomenon...it's world-wide...and amazing to read about in the stories posted in today's column.

It's still my opinion that somewhere in the not-too-distant future, we'll see a shockingly high price for all the precious metals...but whether it's by edict, or market action, is still unknown.

The other real concern I have is what appears [at least to me] to be the deliberate falsification of data in the Non-Commercial and Commercial categories of yesterday's Commitment of Traders Report.  But I will give the CFTC the benefit of the doubt until Tuesday to see if they correct their figures, because what is posted in that report, just cannot be...considering the price action on Friday of last week and Monday of this week.

Before heading off to bed, here's one last chart from Nick Laird...and it's the usual "Total PMs Pool" graph that I post every week that shows the amounts and dollar values of all known precious metals in all known depositories.  The value figure has taken a huge hit...but the total ounces have barely moved.

(Click on image to enlarge)

Looking at the world today, I'm sure not looking forward to the 'end of all things' when that day finally does arrive...and the closer we get, the worse it looks.  And as I've said before, I hope we've done enough advance preparation that we survive it.

I leave you on that cheery note...and I'll see you on Tuesday.