Casey Research Publication
Gold & Silver Daily
"The Fed minutes gave JPMorgan et al the opportunity to launch a bear raid on all the precious metals."
 

¤ Yesterday In Gold & Silver

The high price tick for gold on Thursday [around $1,690 spot] came shortly after 9:00 a.m. in Hong Kong...and from there it was all down hill into the Comex open.  The subsequent, but very tiny rally that followed, died at the London p.m. gold fix...which came very shortly after 10:00 a.m. in New York and, once again, it was all down hill until 2:00 p.m. in the very thinly-traded electronic market.

At that time, the Fed minutes were released...and the gold price took a dive...and I would guess that the high-frequency traders for JPMorgan et al piled on top for good measure.  Gold's absolute low price tick [$1,660.10 spot] coming around 3:35 p.m. Eastern..before recovering a hair into the close.

Gold finished the Thursday session at $1,663.80 spot...down $21.80 from Wednesday's close. Gross volume was around 174,000 contracts.

After trading mostly flat during the Far East business day, the silver price began to slide slowly lower about an hour or so after the London open...and by the Comex open it was down about 20 cents from its Wednesday close in New York.

It rallied for around thirty minutes starting around 9:40 a.m. Eastern and, like gold, it's high price tick [$31.14 spot] in New York came shortly after the 3:00 p.m. GMT London p.m. gold fix.  From there, the silver price continued to get sold off...and then really got hammered on the Fed news by 'all the usual suspects' in much the same fashion...and at precisely the same times...as gold did.  Silver's absolute low price tick [$29.91 spot] came at 3:35 p.m. as well.

Silver finished the Thursday trading day at $30.10 spot...down 88 cents on the day...but had an intraday move of over a dollar.  Gross volume was a hair under 50,000 contracts.

Here are the platinum and palladium charts.  Of the two, palladium got hit the hardest, as it was under selling pressure right from the Comex open...and it's obvious that platinum had to be coerced into closing down on the day.  If you hadn't known about the release of the Fed minutes, you would never know anything happened at 2:00 p.m. Eastern time, as the sell-offs in both these precious metals were barely noticeable.

I'll have much more to say about yesterday's price action in gold and silver in 'The Wrap' at the bottom of today's column.

The dollar index closed on Wednesday at 79.86...and in stair-step fashion it worked its way higher right from the open in Far East trading on their Thursday...and closed at 80.50...up 64 basis points.  With the benefit of 20/20 hindsight, it's easy to see that the current rally started as soon as trading began on the morning of January 2nd in the Far East.  Here's the 3-day chart so you can take in the whole thing.

But to pin all of yesterday's big engineered sell-off in gold and silver on the bump in the dollar index at 2:00 p.m. in New York yesterday is beyond laughable.  If that was indeed the case, then I need someone to explain the price patterns in yesterday's corresponding platinum and palladium charts.

The gold stocks spent most of yesterday following the gold price around like a shadow...and then got sold off hard once the engineered price decline began.  The HUI came within a whisker of closing on its absolute low of the day...down 4.10%...erasing all of Monday's and Wednesday's big gains in one fell swoop.

Considering the fact that "da boyz" really creamed the silver price yesterday, the silver stocks themselves turned in a rather decent performance...all things considered, of course.  Nick Laird's intraday Silver Sentiment Index closed down 3.60%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 20 gold and 7 silver contracts were posted for delivery from within the Comex-approved depositories on Monday.

There was a big withdrawal from GLD by an authorized participant[s] yesterday...as 309,876 troy ounces were shipped out for parts unknown.  A smallish 139,546 troy ounces of silver were withdrawn from SLV as well.  Based on the price action of the last three business days, it's hard to understand why there would be withdrawals of any kind, as gold and silver should have been pouring into both ETFs.

The U.S. Mint had another sales report yesterday.  They sold 7,000 ounces of gold eagles...and another 5,000 one-ounce 24K gold buffaloes.  I had two reader kindly inform me that the U.S. Mint was not accepting/shipping orders for the 2013 silver eagles until Monday, January 7th...so that's the reason why there have been no reported sales on either day so far this year.

It was a very quiet day over at the Comex-approved depositories on Wednesday, as only 3,031 troy ounces of silver were reported shipped out...and nothing was received.

I have a lot of stories today...and I'll happily leave the final edit up to you.

 

¤ Critical Reads

CEOs Pan "Fiscal Cliff" Deal...Calling it a 'Disaster' and a 'Joke'

"I think this deal's a disaster," said Peter Huntsman, chief executive of chemical producer Huntsman Corp.

"We're just living in a fantasy land. We're borrowing more and more money. This did absolutely nothing to address the fundamental issue of the debt cliff."

Former Wells Fargo CEO Dick Kovacevich said the agreement confirms that Washington and both parties are totally out of control.

"I think it's a joke," Kovacevich said of the deal. "It's stunning to me that after working on this for months and supposedly really getting to work in the last 30 days that this is what you come up with."

Kovacevich and others said business leaders need to consider a different approach, one that either bypasses lawmakers or lays out a much more specific plan for deficit reduction.

This article showed up on the moneynews.com Internet site early yesterday morning Eastern time...and I thank West Virginia reader Elliot Simon for our first story of the day.  The link is here.

Read more...

Senator Shelby: US in Danger of European Style Debt Crisis

The United States risks a debt crisis just like Europe’s if we don’t get our act together soon on the budget, says Sen. Richard Shelby, R-Ala.

He was one of eight senators to vote against the fiscal cliff agreement.

“We’re always wanting to spend and promise and spend and borrow, but not cut,” he told Fox News Wednesday. “We’ve got to get real about this. We’re headed down the road that Europe’s already on.”

This is the second story in a row from Elliot Simon...and also the second story from the moneynews.com Internet site...this one from late Wednesday afternoon Eastern time.  The link is here.

Read more...

Moody's: More Budget Work Needed to Avoid Downgrade

The United States must do more than the recently passed fiscal cliff measures if the country is to rescue its Aaa debt rating from its current negative outlook, rating agency Moody's Investors Service said.

Standard & Poor's said the deal does not affect its negative view of the U.S. credit outlook, and said more work remains ahead for policymakers.

The last minute deal passed on Tuesday to avert potentially devastating tax hikes and spending cuts clarifies the medium-term deficit and debt trajectory of the federal government, Moody's said in a statement.

However, it does not provide a basis for meaningful improvement in the government's debt ratios over the medium-term, Moody's said.

Well, dear reader, they deserve a junk-rated status as they, just like every other sovereign nation on earth...as they will never, every repay their debts.  And if they do, it will be in a currency that is worth pennies on the dollar compared to what the dollar is today.

This is the third story in a row from the moneynews.com Internet site...and the third and final offering of the day from Elliot Simon.  The link is here.

Read more...

Analyst: Today the Market Began to Fear a '1994' Scenario

It was a stereotypically "risk-on" day (stocks up, dollar down, etc.) until the Fed minutes came out.

The minutes revealed (apparently to the market's surprise) that several members of the FOMC were reluctant to keep Quantitative Easing far beyond the middle of the year.

So the risk-on-move reversed itself and became a very un-QE day. Stocks fell. The dollar shot up. Gold fell. Yields at the long end of the curve started to rise.

In light of this move, Citi's Steven Englander warns of a '1994'-like scenario.

This Joe Weisenthal commentary was posted on Bloomberg late yesterday evening...and is definitely worth reading.  It's courtesy of Roy Stephens...and the link is here.

Read more...

Golden Arches and Broken Dreams: American Cities Drown in Debt

San Bernardino, California, has gone from being the birthplace of McDonald's, one of the world's most successful companies, to a mound of unpaid debts. It's a sad example of what a lack of infrastructure investment and an almost religious aversion to higher taxes have done to cities across the United States.

On August 1, 2012, San Bernardino filed for bankruptcy. Today this city, located an hour's drive east of Los Angeles, is one of the poorest, most violent cities in the United States. Once the setting for one of America's greatest success stories, the city can no longer even afford to pay its police officers and is rotting in its own waste.

The situation is a catastrophe for everyone who hasn't packed up and moved away. It is also representative of the bankruptcy of a country that failed to use its prosperous decades to sustain a functioning government. Funds are short at all levels, from Washington to the states to the cities and towns. The US is no longer investing in its infrastructure, weakening the foundation that gives all Americans a chance to have a piece of the American Dream.

This short, but interesting essay, showed up on the German website spiegel.de yesterday...and it's courtesy of Roy Stephens as well.  The link is here.

Read more...

Geithner Said to Plan Departure Before Debt Ceiling Deal

Treasury Secretary Timothy F. Geithner finds himself in a familiar position: eager to resume life outside government and facing contentious negotiations with Congress over raising the federal debt ceiling.

The last time he was in this predicament, in June 2011, President Barack Obama persuaded him to stay. This time, Geithner has indicated to White House officials he wants to carry through with his plan to leave the administration by the end of this month, even if a deal on the debt limit isn’t in place, according to two people familiar with the matter

Geithner’s departure would increase pressure on the president to name his successor at Treasury. White House Chief of Staff Jack Lew remains the leading contender for the Treasury job, according to the people, who requested anonymity to discuss the private talks.

This Bloomberg story appeared on their website very early yesterday evening Mountain Time...and it's courtesy of Marshall Angeles.  The link is here.

Read more...

JPMorgan Faces Sanction for Refusing to Provide Madoff Documents

The Treasury Department’s inspector general has threatened to punish JPMorgan Chase & Co. for failing to turn over documents to regulators investigating the bank’s ties to Bernard Madoff’s Ponzi scheme.

Inspector General Eric Thorson gave the largest U.S. bank a Jan. 11 deadline to cooperate with the Office of the Comptroller of the Currency probe or risk sanctions for impeding the agency’s oversight. JPMorgan, according to the Dec. 21 letter, contends the information is protected by attorney-client privilege.

The previously undisclosed OCC probe adds to the lender’s troubles in Washington, where several agencies and lawmakers are investigating the bank’s loss of at least $6.2 billion on botched derivatives trades. The losses have prompted regulators including the Federal Reserve to consider tightening proposed restrictions on proprietary trading.

This Bloomberg story was posted on their Internet site late last night Mountain Time...and it's the first story of the day from Ulrike Marx.  The link is here.

Read more...

Europe's dream of toppling dollar fades as Asian Tigers dump euro

International Monetary Fund data show that emerging nations have cut the weighting of EMU bonds in their reserves to 24.7pc from a peak of 30pc at the onset of Europe’s crisis three years ago, with a record drop in the third quarter of 2012.

“They have lost their appetite for peripheral EMU bonds, and some have simply cut Italy and other countries from their benchmarks,” said Jens Nordvik, currency chief at Nomura.

The IMF data also show a record $19bn (£12bn) surge in holdings of sterling by advanced central banks to $98bn, the biggest three-month jump ever recorded. Analysts say this is almost certainly caused by the Swiss National Bank as it takes extreme measures to hold down the franc. The SNB has already bought an estimated $80bn-worth of euro bonds and is increasingly switching to other assets.

“There aren’t many places to go in this 'ugly contest’ if you don’t like the euro, dollar or yen,” said HSBC’s David Bloom.

Well, how about gold and silver?  It wouldn't take many billions to bury JPMorgan et al where their bodies would never be found.  This Ambrose Evans-Pritchard offering was posted on the telegraph.co.uk Internet site yesterday evening GMT...and I thank Ulrike Marx for her second offering of the day...and it's definitely worth reading.  The link is here.

Read more...

Switzerland and Britain are now in a currency war

It seems you can’t debase your coinage these days even if you try.

The Bank of England is straining every sinew to drive down sterling with quantitative easing, and what happens?

The Swiss National Bank trumps Threadneedle Street with an outright blitz of Gilt purchases. They just print it, and buy.

The Swiss and UK central banks are effectively fighting a "low intensity" currency war against each other. It has come to this.

It's a race to the bottom that nobody wins...and only the precious metals will remain standing.  This AE-S blog from The Telegraph yesterday, is a parallel story to the one just above it and, it too, is worth reading.  It's also courtesy of Ulrike Marx...and the link is here.

Read more...

Welcome to Russia: Putin grants citizenship to Depardieu

President Vladimir Putin has signed a decree granting Russian citizenship to French film star and tax exile Gerard Depardieu, who is renouncing his French citizenship to search for an easier tax climate outside of his native country.

­The Academy Award-nominated Depardieu is a regular in Moscow. The actor made headlines across the world when he announced in late December that “Putin has already sent me a passport!” The statement was a joke, but it soon became reality.

The day after the announcement, Putin told a press conference that the French bon vivant was a welcome guest in Russia: “If Gerard Depardieu really wants to have Russian residence permit or a Russian passport, we can consider the issue resolved positively."

Putin also said that he has long had “kind, friendly, personal relations” with the leading light of French cinema.

On the morning of January 3, the Kremlin released a statement announcing that "Vladimir Putin has signed a decree granting Russian citizenship to France's Gerard Depardieu."

This article showed up on the Russia Today website yesterday afternoon Moscow time...and I thank Roy Stephens for sending it. The link is here.

Read more...

The Greece of Asia: Japan's Growing Sovereign Debt Time Bomb

The eyes of the financial world are on Greece and other heavily indebted euro-zone countries. But Japan is in even worse shape. The country's debt load is immense and growing, to the point that a quarter of its budget goes to servicing it. The government in Tokyo has done little to change things.

For years, the world's third-largest economy has been unapologetically living on borrowed cash, more so than any other country in the world. In recent decades, Japanese governments have piled up debts worth some €11 trillion ($14.6 trillion). This corresponds to 230 percent of annual gross domestic product, a debt level that is far higher than Greece's 165 percent.

Such profligate spending has turned Japan into a ticking time bomb -- and an example that Europe can learn from as it seeks to tackle its own sovereign debt crisis. Japan, the postwar economic miracle, has never managed to recover from the stock market crash and real estate crisis that convulsed the country in the 1990s. The government had to bail out banks; insurance companies went bust. Since then, annual growth rates have often been paltry and tax revenues don't even cover half of government expenditures. Indeed, the country has gotten trapped in an inescapable spiral of deficit spending.

This essay appeared on the spiegel.de Internet site yesterday...and is definitely worth the read.  It, too, is courtesy of Roy Stephens...and the link is here.

Read more...

Continent in Crisis: China Overtakes Sluggish Europe in Car Sales

It's no secret that Europe's automobile industry isn't exactly booming. Several carmakers on the Continent are struggling as demand has fallen off during the euro crisis, particularly in southern European countries, where austerity programs have taken a bite out of prosperity.

In China, however, more and more cars are flying off the lots. And in 2012, for the first time ever, Chinese consumers purchased more automobiles than did buyers in Europe, according to the daily Süddeutsche Zeitung, citing an unpublished report by Germany's VDA automobile industry association. The report indicates that whereas 13.2 million cars were registered in China in 2012, in Europe, the total fell from the previous year's 13.6 million to just 12.5 million.

The reasons, of course, are many. On the one hand, China's middle class continues to swell rapidly, even as the economy there grew more slowly last year than it had in previous years. For the increasing number of those who can afford them, cars offer both greater mobility and an important status symbol.

Here's another story from Roy that posted on the spiegel.de Internet site yesterday...and the link is here.

Read more...

Two King World News Blogs

The first is with Egon von Greyerz...and it's headlined "Gold to See 186% Gain as System Collapses & Silver Hits $150".  The second blog is with Louise Yamada...and it's entitled "Incredibly Important Chart & Commentary on Gold".

Read more...

Dec 2012 American Eagle silver coins sales 3rd highest in history

Annual sales of American Eagle silver bullion coins totaled 33,742,500 ounces in 2012, down substantially from the sales of 39,868,500 ounces in silver bullion coins reported by the Mint in 2011. Nevertheless, December 2012 American Eagle silver bullion sales were the third highest in the Silver Eagle’s history.

December 2012 American Eagle silver bullion coin sales totaled 1,635,000 ounces, down 18.6% from the 2,009,000 ounces sold in December 2011.

Of course the reason that silver eagle sales weren't higher in December, is because the mint didn't have any to sell...not because the sales weren't there...a fact that wasn't pointed out in this article posted over at the mineweb.com Internet site yesterday.  The link is here.

Read more...

Silver, Rogers and cash - Mineweb's Top 10 for 2012

Mineweb readers were more than a little fixated on silver in 2012 and, well they might be. After spending much of 2011 above $40 an ounce silver dropped below $30 in December of that year and started 2012 at $27.82.

There was much expected from the metal during the year but, other than a high of $36.96 on February 29, the metal was content to vacillate between the mid $20 and mid $30 level for much of the year.

But, as is evident from the year's best, third-best and eighth best-read stories: "Silver's outperformance over gold to be staggering long term - Butler", " Silver gives you more - at least potentially" and "New innovations boost silver demand, but could price be taken down again?", Mineweb readers remained hopeful that, longer term, the poor man's gold will outperform.

It should come as no surprise to you, dear reader, that two of silver analyst Ted Butler's commentaries made the top 10...#1 and #3.  If you missed them, or any other of the eight commentaries on the list, you can make up for it now.  The link is here.

Read more...

Gold-Loan Companies Surge on Central Bank Report: Mumbai Mover

Manappuram Finance Ltd. surged the most in more than two years and Muthoot Finance Ltd. rallied to a record after a central bank report eased uncertainty about Indian gold-loan companies’ business.

Asset quality, bad loans, capital adequacy and borrowing sources of these companies aren’t a cause for concern, a panel set up by the Reserve Bank of India said in a report released after markets closed yesterday. Manappuram soared by the 20 percent limit, the steepest climb since August 2010, to 40.60 rupees at 12:14 p.m. in Mumbai. Muthoot jumped 16 percent to a record 242.15 rupees.

“The report provides legal status to the gold loan business,” Espirito Santo analysts Santosh Singh and Nidhesh Jain wrote in a report today. The panel report “removes the regulator uncertainty and overhang.” The analysts maintained their Nov. 26 recommendation to buy Manappuram shares with a target of 45 rupees. Muthoot isn’t tracked by the brokerage.

Assets at non-bank lenders such as Manappuram and Muthoot have increased 20 percent annually for the past five years to $670 billion, according to a November report by the Basel, Switzerland-based Financial Stability Board. That makes India the world’s fastest-growing market after Indonesia for lending outside the banking system, according to the report. It also poses risks for a country where 65 percent of the population and 92 percent of small businesses don’t have access to banks, World Bank and government data show.

This story showed up on the Bloomberg website minutes before midnight on Wednesday Mountain Time...and I thank Ulrike Marx for her final offering in today's column.  The link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

As long as the concentrated short position of JPMorgan in COMEX silver exists, the manipulation of the price of silver will exist. Under that circumstance, the price of silver will fluctuate much as it has over the past few years’ trading range; say between $25 to $50. Since all price manipulations must end and because the silver manipulation is of the short-side variety...so when it ends, the price must react violently higher; say over $100 or more. Therefore, at current levels the potential long-term risk/reward investment equation for silver is excellent, better than for any other alternative asset I can think of. The timing comes down to when the silver manipulation ends. - Silver analyst Ted Butler...02 January 2013

Although it's certainly possible to pin a small part of yesterday's price decline in gold and silver on the Fed minutes, it would be a real stretch to attribute it all to that.  Silver's sell-off was out of all proportion to gold...and platinum and palladium showed few signs of a sell-off based on that news.  It's rare to see gold get hit...and silver not get hit much harder at the same time...and yesterday's price action was a case in point.

The above is especially true when you consider what happened once trading began when the Globex opened at 6:00 p.m. last night in New York, as all four precious metals came under selling pressure at the same time in the most thinly traded of all time periods...and that continued through early Far East trading...and then into the 8:00 a.m. GMT London open earlier this morning.

The Fed minutes gave JPMorgan et al the opportunity to launch a bear raid on all the precious metals...and they took full advantage of it...negating all the gains from this week, and then some.  They rang the cash register real good, as the tech funds were forced to cough up their futures contracts as sell stops were hit...and all the fees that these new longs paid out since the tiny rally that began just before Christmas, got transferred into "da boyz" bank accounts yesterday...and that process continues as of this writing.

Just eye-balling the charts as of 3:00 a.m. Eastern time...the London open this morning...gold has been hit for about $50...and silver was hammered for about $2.20...all within the space of a forty-one hours.  None of this decline will show up in today's Commitment of Traders Report, so we'll have to wait until the 11th before we find out all the gory details.  But, once again, this was all paper trading on the Comex.

As it turns out, we got nowhere near the 50-day moving averages on this 'rally'...and we are now back below the 200-day moving averages in both metals...with new lows for this move down in silver...and it remains to be seen if there is further pain to come.  As Ted Butler mentioned, there is still a monstrous short position in both gold...and particularly silver...and we're nowhere near the July lows on this move down that [temporarily?] ended just before Christmas.

It remains to be seen whether JPMorgan et al are going to go the Full Monty...but they made a good start on it with yesterday's [and now today's] price action...and there's the potential for even more price pain if that turns out to be the case.

Here are two charts Nick sent me in the wee hours of this morning. They are the intraday gold and silver charts for the month of December...and they are very similar.

During the month, gold's high came around 9:30 a.m. in London...and its average low tick came just after 11:30 a.m. in New York.  The a.m. and p.m. gold fixes are hardly noticeable on this chart.

(Click on image to enlarge)

In silver's intraday chart for December, the average high tick came at 9:00 a.m. in London and, once again, the fixes...either silver or gold...played little part in the overall price pattern.  The low for the day came at almost the same time as gold's low...about 11:45 Eastern time.

(Click on image to enlarge)

I'm only guessing here, but the big sell-offs in both gold and silver that we experienced in December probably had a large influence on the way these charts look for the month that was.  It may look different for January.

As a 'for instance'...here's the Gold Intraday Moving Average chart for the last five years.

(Click on image to enlarge)

And here's silver's 5-year chart..

(Click on image to enlarge)

The price movements before and after the London fixes in both silver and gold stand out like the proverbial sore thumbs that they are.

As I hit the 'send' button on today's column at 5:20 a.m. Eastern time, I note that the price pressure is still on, with silver making continuous new lows...and gold close to taking out its pre-Christmas Day low as well.  Platinum and palladium are under selling pressure too, but not as much.  Not surprisingly, volumes are massive...north of 70,000 contracts in gold and 18,000 contracts in silver, so it appears that JPMorgan et al are really serious about it this time.  The dollar index is up about 27 basis points.

I await the Comex open with great interest...and don't forget to the buy the dip.

Enjoy your weekend...or what's left of it if you live west of the International Date Line...and I'll see you here tomorrow.