It was a nothing sort of day on Thursday. The low price tick [around $1,586 spot] came shortly after 11:00 a.m. in London...and from there the price rallied to its high of the day...$1,603.10 spot...which came at the London p.m. gold fix at 10:00 a.m. Eastern time right on the button. From there it got sold off into the close. It was obvious, at least to me, that gold would have closed well above the $1,600 mark if it had been left to its own devices...which it wasn't.
Gold finished the Thursday trading session at $1,593.40 spot...down $4.00 from Wednesday's close. Net volume was around 114,000 contracts...a 60% decline from Wednesday.
Silver's price in Far East trading was more 'volatile'...but had recovered to just above unchanged by the London open. Then minutes after 9:00 a.m. BST, silver got sold down to it's low of the day...which came shortly after 11:00 a.m. BST...the same as gold's low price tick.
Then, also like gold, it rallied to its high of the day [$29.58 spot] at the London p.m. gold fix at precisely 3:00 p.m. local time...10:00 a.m. in New York. From there it got sold off hard into the close of electronic trading at 5:15 p.m. Eastern time. Silver, too, would have closed significantly higher if it hadn't run into selling pressure after the London p.m. fix.
As it was, silver closed at $29.04 spot...down 23 cents from Thursday's close. Net volume was only 31,000 contracts.
The dollar index didn't do much of anything...spending almost all of the Thursday trading day barely above the 80.00 mark.
Not surprisingly, the precious metal shares peaked shortly after the highs at the London p.m. gold fix at 10:00 a.m. Eastern time. From there they fell all the way back into negative territory...and basically traded sideways into the close, but the HUI managed to finished slightly in the black...up 0.33% on the day.
The silver stocks were mixed once again...but finished marginally higher. Despite that, Nick Laird's Silver Sentiment Index closed down a smallish 0.15%.
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The CME's Daily Delivery Report showed that 21 gold and 47 silver contracts were posted for delivery on Monday...and the link to the Issuers and Stoppers Report is here.
The GLD ETF reported that an authorized participant deposited 67,961 troy ounces of gold yesterday...and there were no reported changed in SLV.
The U.S. Mint had a small sales report yesterday. They sold 1,000 ounces of gold eagles...and another 75,000 silver eagles. Month-to-date the mint has sold 31,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 435,000 silver eagles. I'm underwhelmed.
Over at the Comex-approved depositories on Wednesday they reported receiving 101,993 troy ounces of silver...and shipped 801,311 ounces of the stuff out the door. The link to that action is here.
Nick Laird, who lives on the edge of the tropical jungle near the coast in north central Australia, sent me these two photos from around his yard. Creepy-crawlies like this Green Tree Snake...and this Bat Flower are pretty standard fare in his location.
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While on the subject of Nick Laird, here's his "Gold Price Oscillator" chart that he sent me in the wee hours of this morning...and he's not at all happy with what it shows...and this is what he had to say about it..."This indicator over the last five years has given some of the most brilliant buy signals of all the charts I have. On each of the buy signals the markets ended up considerably higher many months later. Now it has just given a sell signal."
"I don't know what will follow, but I think we'll find out soon enough. New lows won't surprise me now. Sub $1,500 is a good possibility."
"But I want to add the caveat that we could still bottom between here and the low in December...and if we bottom in the next $30 and then move higher then the low in December...that will validate it as the low. If we break that low, then yes, it could get ugly."
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I have the usual number of stories for you today. The final edit is up to you.
A massive trading bet boomeranged on J.P. Morgan Chase & Co., leaving the bank with at least $2 billion in trading losses and its chief executive, James Dimon, with a rare black eye following a long run as what some called the "King of Wall Street."
The losses stemmed from wagers gone wrong in the bank's Chief Investment Office, which manages risk for the New York company. The Wall Street Journal reported early last month that large positions taken in that office by a trader nicknamed "the London whale" had roiled a sector of the debt markets.
It's a good bet that there are other loses that we haven't heard about...and I'm sure we haven't heard the last of this. I thank reader Marvin Wieler for being first to alert me to what was happening. I have three stories...Marvin's story from zerohedge.com linked here...this money.cnn.com story from Scott Pluschau...and this Wall Street Journal story from Federico Schiavio.
Deutsche Bank agreed on Thursday to pay the federal government more than $200 million to settle accusations that it knowingly misled the Department of Housing and Urban Development about the quality of mortgages that later defaulted.
The defaults ultimately cost taxpayers about $368 million. The settlement resolves a lawsuit filed against Deutsche in May 2011 by the United States attorney for the Southern District of New York, Preet Bharara, along with HUD and the Department of Justice.
This story was posted in The New York Times yesterday...and I thank Phil Barlett for sending it along. The link is here.
Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort — sometimes referred to as the Brown-Kaufman amendment — received the support of 33 senators and failed on the floor of the Senate.
On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE Banking Act, which would force the largest four banks in the country to shrink.
His proposal, while not likely to become law immediately, is garnering support from across the political spectrum — and more support than essentially the same ideas received two years ago.
The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic.
This op-ed piece showed in The New York Times yesterday...and is the second offering in a row from Phil Barlett. The link is here.
While we have heard a lot from Jim Grant recently - all pointedly correct and substantial - [but yesterday] marked the pinnacle of propaganda-brinksmanship. Explaining to Maria B. just why the world in which she lives, Bernanke-lovers-all, is nothing but a hall of mirrors - a fake mirage - of the true reality thanks to central bank repression of all that we know about risk and return.
"By changing interest rates, central banks change the perception of every asset class - so what seems cheap may not be cheap" as Grant notes that when you can fund investment at 0%, we are collectively being manipulated and moreover should try to realize - as an investing public - that we are Jim Carrey in The Truman Show.
This story was posted over at the zerohedge.com website at midnight last night...and I thank Roy Stephens for digging it up on our behalf. It's well worth watching...and the link is here.
Go away, American millionaires.
That’s what some of the world’s largest wealth-management firms are saying ahead of Washington’s implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc (HSBA), Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. (DBS) all say they have turned away business.
“I don’t open U.S. accounts, period,” said Su Shan Tan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender, who described regulatory attitudes toward U.S. clients as “Draconian.”
This story was posted over on the Bloomberg website on Tuesday morning...and I thank West Virginia reader Elliot Simon for sharing it with us. The link is here.
Occupy Wall Street has its 1 percent answer, of course. A consulting firm that studies the wealthy has a broader definition, based on millionaire status. Many financial planners have a cautionary third answer — that appearances, and account balances, can be deceiving, and you may not be as rich as you think you are.
The Occupy Wall Street forces focus more on income than on wealth. But if its 1 percent label were applied to assets, the dividing line between the 1 percent and everyone else would be $8.4 million.
Based on its research, the consulting firm, Spectrem Group, said about 8.6 million American households had a net worth of at least $1 million last year, not including their equity in a home — just over 7 percent of the 117 million American households.
This story appeared in The New York Times on Wednesday...and is Phil Barlett's third offering in today's column. The link is here.
When given the opportunity to expand on his thoughts, Marc Faber, of the Gloom, Boom, & Doom Report, provides dismally clarifying detail on the state of the world. In an excellent Bloomberg TV interview, the admittedly ursine Faber reflects on the US (slowing of revenue growth and the real linkages to European stress) noting that unless we get a huge QE3, there will be "a crash, like in 1987"
He also believes we have seen the highs for the year; on the likelihood of QE3 (agreeing with us that the Fed won't act unless asset markets plunge first); on Greece's exit of the Euro and whether policy-makers can manage the exit properly "bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the "best would be to dissolve the whole euro zone"
Gee, I wonder if the good doctor will tell us what he really thinks. This is Phil Barlett's fourth and final offering in today's column. It's posted over at the zerohedge.com website...and the link is here.
Greeks have yet to conclude that the euro itself is the cause of their catastrophe – though they are getting there. By the euro, I mean the whole structure of monetary union, made worse under current policy settings (incompetence). There can be no possible escape from this lamentable state of affairs at this late stage until they return to the drachma.
As Charles Dumas from Lombard Street Research argues, the EU doctrine of "internal devaluations" is based on a fallacy. Restoring competitiveness through wage cuts is not remotely equivalent to currency devaluation.
The mechanism of an internal devaluation is to push unemployment to excruciating levels until it breaks the back of labour resistance, opening the way for pay cuts. In fact, it tends to break societies before this theoretical outcome is achieved.
This AE-P blog was posted on The Telegraph's website yesterday...and it's certainly worth your while if you have the time. It's Roy Stephen second offering of the day...and the link is here.
More than three years have passed since the Bank of England embarked on the emergency measure of quantitative easing.
At the time, it was considered very much a one-off. Nobody knew whether it would work, or indeed how it would work, but something had to be done to counter the collapse in money supply and credit.
Few would have imagined, even back then in the depths of the banking crisis, that all this time later it would still be going. Nor would they have thought it so ineffective. Despite the Bank's actions in buying up nearly a third of the gilts market, the economy remains flat on its back, a pale shadow of its pre-crisis self. The best that can be said of QE is that things might have been even worse without it.
Well, the Bank has now exhausted the last tranche of asset purchases, and must decide on Thursday whether to do even more. There is little point this close to the event attempting to predict how the Monetary Policy Committee is going to vote.
This is another story from The Telegraph. This one was posted on their website on Wednesday...and it's also worth skimming. I thank Roy Stephens once again...and the link is here.
Germany's central bank has indicated it may tolerate higher inflation in Germany as the price of rebalancing economies within the euro zone. The move marks a major shift away from the Bundesbank's hard-line approach on price stability. Economists have hailed the decision as a "breakthrough."
Inflation is a political hot button issue in Germany, where the hyperinflation of the early 1920s has not been forgotten and many people still have a deep-rooted fear of their money losing value. Now Germany's central bank, the Bundesbank, has made waves with signals that it is willing to tolerate higher inflation.
On Wednesday, Jens Ulbrich, head of the Bundesbank's economics department, told the finance committee of the German parliament that Germany is likely to have inflation rates "somewhat above the average within the European monetary union" in the future and that the country might have to tolerate higher inflation for the sake of rebalancing within the euro zone. Inflation would, however, only rise from a very low to a moderate level, Ulbrich said.
This story was posted over at the German website spiegel.de yesterday...and is Roy's fourth and final offering in today's column. The link is here.
Norway's sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges.
The $610 billion Government Pension Fund Global returned 7.1 percent, or 234 billion kroner ($41 billion), as measured by a basket of currencies, in the first quarter, the Oslo-based investor said today. Its equity holdings gained 11 percent while its fixed-income investments rose 1.6 percent.
The fund, which voted against Greece's debt swap this year because it disagreed with being subordinated to the European Central Bank, also said it reduced debt holdings in Italy and Spain amid a broader strategy to cut investments in Europe. The fund added government bonds from emerging markets such as Brazil, Mexico and India.
This story was posted in the San Francisco Chronicle yesterday...and I thank reader Mike Cullinane for sending it to me in the wee hours of this morning. The link is here.
The first is with Dan Norcini talking about the yield on U.S. 10-year notes. It's headlined "If This Happens, it Will Signal a Collapse". The second blog is with Citibank analyst Tom Fitzpatrick. It's entitled "Stocks to Crater 27%, Bonds to Rally & Gold to Remain Firm". And lastly is this Egon von Greyerz commentary headlined "Investors Need to be Positioned for More Chaos". It's my opinion that they're all worth your time, if you have it.
The Shanghai Futures Exchange launched silver futures trading earlier in the day, which attracted massive interest from investors, although price performance was short of expectations.
The most-active contract for September delivery lost 0.7 percent from the basis price set by the exchange to 6,122 yuan per kilogram ($30.18 an ounce).
The spot deferred silver contract on the Shanghai Gold Exchange stood at 6,172 yuan.
"A lot of people had expected a high premium at the opening, eyeing arbitrage opportunities against spot prices, but the overall market sentiment is still weak and that's why prices are easing," said Chen Jiajie, an analyst at Orient Futures based in Shanghai.
This Reuters story was filed from Singapore after the markets had closed in the Far East yesterday afternoon. You have to scroll down a bit to find it. I thank Casey Research's own John Grandits for bringing it to our attention. The link is here.
A technocrat-turned-public interest litigant, Raghunath Shankar Kelkar, has challenged the Reserve Bank of India's move to deposit abroad 265.49 tonnes of gold out of its total stock of 557.75 tonnes by filing a public interest litigation in the Bombay High Court and has demanded that the precious metal be brought back into the country according to the provisions of the law.
Kelkar, 56, who used to manufacture computers, has filed the petition as he found that the move by the central bank contradicts Section 33(5) of Reserve Bank of India Act of 1934, which stipulates that 85 per cent of the bank's gold reserves should be kept in India.
The Bombay High Court bench, comprising D.D. Sinha and V.K. Tahilramani, heard the petition recently. The court noted that no one appeared for the RBI. The order stated, "Considering the issue involved in the present public interest litigation, we grant one opportunity to the RBI to put an appearance through its lawyer on the next day of hearing and assist the court."
This story was posted on the punemirror.in website last Friday...and I plucked it from a GATA release yesterday. The headline of the article reads "RBI Gets High Court Notice to Explain Gold Deposits with Bank of England". It's certainly worth the read...and the link is here.
The beating that Sprott Inc.'s shares have taken in recent months may have made them an attractive entry point for investors looking to play a bullish outlook for gold and silver.
Forty per cent of Sprott’s $9.7-billion in assets under management are invested in bullion, while the precious metals exposure rises to 70 per cent when one includes the gold and silver equities in its mutual and hedge funds.
Eric Sprott, the firm’s founder and architect of the dominant precious metals theme, is a big believer that the price of gold and silver – as stores of value – will climb as governments debase their currency by printing money to stimulate their economies. While the metals stocks have sharply lagged their bullion peers, the firm argues that these oversold stocks are poised for a rebound.
This story was posted in Canada's Globe and Mail newspaper early yesterday evening...and I thank Ontario reader Richard O'Mara for sending it along. The link is here.
North American Nickel’s latest news from our 100% owned Post Creek property in the Sudbury mining camp is what geologists always hope for….a large, clearly defined, un-tested target close to surface in a known camp with excellent infrastructure advantages for mining. Drilling is scheduled to begin in September. In this case it’s an EM anomaly 200 m long, that has been interpreted as the electromagnetic signature of ‘near-massive to massive sulphide.’ It’s located approximately 55 m below surface and the trend of the anomaly corresponds, in part, to both the CJ#1 dyke and the Whistle Offset Structure to the south. Please visit our website to read the full news release and learn more about North American Nickel.
If I asked you to leave something for your great grandkids in a package to be opened one hundred years from now, would you leave them a wad of hundred dollar bills or one hundred gold coins? If you had any brains you would pick the gold coins. I'd venture that Warren Buffet would also pick the coins. Why? Because we know that one hundred years from now the gold coins would represent value and purchasing power and the dollar might not exist. End of story. - Richard Russell...04 May 2012
There's not a lot to talk about with yesterday's price action in either gold or silver. It's obvious from the charts of both metals, that the rallies that began at 11:00 a.m. in London got smacked once the London gold fix was in.
Here are the 3-year charts for all four of the precious metals. As you can see from the RSI plot, we are at...or approaching...the most oversold conditions of the last three years in all these metals...and as I said yesterday, one has to wonder how much more downside price action there is left.
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In Far East trading on Friday, not much happened until 9:00 a.m. Hong Kong time. Then the high-frequency traders showed up and began moving the price lower...tripping sell stops along the way. As I write this paragraph [and the next] at 4:04 a.m. Eastern time, silver has once again hit new lows for this move down...and is currently down 50 cents from Thursday's close. It was precisely the same price pattern in gold, starting at precisely the same time. The gold price has hit new lows for this move down as well...and at the moment, gold is down about seventeen bucks from Thursday's closing price in New York.
Volume, which had been reasonably light right up until about an hour before the London open, has now picked up substantially in both metals. The dollar index is up about 6 basis points at the moment, so this engineered sell-off has nothing to do with whatever may be going on in the currency markets in late Far East or early London trading.
Today we get the eagerly anticipated Commitment of Traders Report for positions held at the close of Comex trading on Tuesday...and whatever improvements in the Commercial net short position it shows in both silver and gold, it's already out of date. With the new lows set on Wednesday, plus these new lows set so far during the Friday trading session, it's a sure bet that the internal structure of the COT Report has improved further. It's just a matter of how much of that improvement has come from technical fund long liquidation...and further shorting by these same technical funds.
And as I hit the 'send' button at 5:20 a.m. Eastern time, gold has recovered off its earlier 8:30 a.m. London low...as has palladium and silver...but platinum has just set a new low in the last few minutes. Gold volume is up about 25 percent in the last hour or so...and silver's net volume has almost doubled...and is well north of 8,000 contracts.
Needless to say, I'm rather apprehensive about what the Comex trading session will bring when it begins at 8:20 a.m. Eastern time this morning. From what's been happening so far this Friday in the Far East and London markets...it could, as Nick Laird said, "get ugly".
Have a good weekend...and I'll see you here on Saturday sometime.