After the obligatory sell-off during the first hour at the Sunday night open in New York, the gold price rebounded once trading began in Tokyo.
After gaining back all the loss from New York, the gold price crawled higher for the rest of the Monday trading day everywhere on Planet Earth.
Gold closed at $1,729.50 spot, up $9.00...almost on its high of the day...which was 1,730.90 spot...and that particular price was printed around 12:50 p.m. in New York. Volume was close to 116,000 contracts, which was pretty light.
It was much the same story in silver, although the high tick of the day [32.56 spot] came at the London p.m. gold fix at 3:05 p.m. BST...10:05 a.m. in New York.
Both silver and gold rallied during the electronic trading session after the 1:30 p.m. Eastern time Comex close...and silver, too, almost finished on its high of the day at $32.45 spot...up 38 cents. Volume, around 31,500 contracts, was light.
The dollar index opened at 79.63...and then spent all of Monday chopping around between 79.65 and 79.50...and then closing at 79.56, virtually unchanged. Nothing to see here.
The gold stocks gapped up a percent at the open...and then flopped around in positive territory for the rest of the trading session, before rallying strongly into the close...with the HUI finishing virtually on its high tick of the day at 502.47...up 1.37%.
The silver stocks did even better...and Nick Laird's Silver Sentiment Index closed up 2.21%.
(Click on image to enlarge)
Here's a new chart that Nick has been working on...at my request. It shows the intra-day price movement of the seven stocks that make up the SSI. It's not a 'live' chart...but a compilation that Nick will be doing at the end of each trading day. This is his first effort...and it's still a 'work in progress'...but I doubt very much that the final product will look a lot different than what you see here...which is OK by me.
(Click on image to enlarge)
It's interesting to compare it to the HUI. As you can see, the silver stocks trade in a very similar pattern to the gold stocks. The only difference is in the magnitude of the gains and losses, one vs. the other. I don't like to use the word 'volatile'...because it's my opinion that this volatility is mostly produced by JPMorgan et al.
The CME's Daily Delivery Report from Monday was a pretty quiet affair, as zero gold and 15 silver contracts were posted for delivery on Wednesday.
I was somewhat surprised to see that an authorized participant added 87,226 troy ounces of gold to GLD yesterday...and there were no reported changes in SLV.
The U.S. Mint had a sales report yesterday. They sold 2,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and a chunky 432,500 silver eagles.
The Comex-approved depositories reported receiving 124,939 troy ounces of silver on Friday...and shipped 809,362 troy ounces out the door. The link to that activity is here.
Just as a point of interest, here is an e-mail that I sent to Rick Waugh, the CEO of the Bank of Nova Scotia...or Scotiabank as it's now called. It had to do with the big change in the October Bank Participation Report. As you can tell, I sent it yesterday...and I'll let you know what answer I get, if any.
22 October 2012
44 King Street West
Toronto, Ontario M5H 1H1
Attention: Mr. Rick Waugh, CEO
Dear Mr. Waugh,
I'm a keen observer of the financial scene, both here in Canada and abroad...but my main area of expertise is in the precious metal markets. I write a daily blog on this subject for Casey Research out of Stowe, Vermont...and here is the link to my webpage.
Part of my reading material includes two reports that are issued by the U.S. Commodity Futures Trading Commission...the CFTC. The most notable of those are the weekly Commitment of Traders Report and the monthly Bank Participation Report.
If you click on the Bank Participation Report link, you'll note that the CFTC has included a comment about its October figures that took quite a few people who follow this report, completely by surprise...including me.
The comment states... "The October 2012 Bank Participation Report includes COMEX gold and COMEX silver futures and options positions for a newly classified non-U.S. bank, based upon the entity's self-description on its latest CFTC Form 40. Given the methodology of the Bank Participation Report, the entity's most recent Form 40 submission results in all of its futures and options positions now being included within the report. For more information on the methodology used for the Bank Participation Report, see Explanatory Notes" [Emphasis is mine. - Ed]
Looking through the list of market-making members of the LBMA...my first thought was that the bank most likely to fit that description would be The Bank of Nova Scotia - Scotia Mocatta. So I called Andy Montano at your head office about a week ago. We had a pleasant chat...and he said that he knew nothing about it. I asked him who might know...and he had no suggestion.
So I thought I would write directly to you, sir.
All I need to know is if the "non-U.S. bank" that the CFTC is referring to in its comments above...and on its Bank Participation Report home page...is The Bank of Nova Scotia - Scotia Mocatta.
A simple 'yes' or 'no' answer will suffice.
Thank you for your attention in this matter...and I remain,
Edward Steer, Editor
Ed Steer's Gold & Silver Daily
Here's a chart that I just didn't have room for in Saturday's column, so here it is now. It's Nick Laird's "Transparent PM Holdings" graph, which I've posted on countless occasions over the years. As you can see, it's still progressing from "lower left, to upper right" as Dennis Gartman is wont to say.
(Click on image to enlarge)
This next chart is courtesy of Washington state reader S.A...which I just know he stole from somewhere...probably Zero Hedge...and it requires no further embellishment from me.
(Click on image to enlarge)
Since this is my Tuesday column, I have a lot of stories for your consideration today...and a lot of them are must reads/views, so I hope you have the time to do them all justice.
Caterpillar has cut its profit forecast for this year as the world's biggest maker of construction and mining equipment is squeezed by a slowing global economy.
The US manufacturer has temporarily laid off some of its almost 130,000 employees and reduced production to compensate for the decline in demand.
The warning comes with just over two months of the year remaining and is significant, because Caterpillar's operations in countries like China and Brazil allow investors to take the pulse of the global economy.
Sales in China, which is a major buyer of Caterpillar's flagship trucks, declined in the third quarter.
This story showed up in The Telegraph at 2:29 p.m. BST yesterday afternoon...9:29 a.m. Eastern time...and I thank Roy Stephens for our first story of the day. The link is here.
The Presidential race is boiling down to one dominant issue: which party's policies will do more to help the financially stressed American middle class. President Obama's campaign theme is that Mitt Romney and the Republicans cater to the rich, while Mr. Obama cares about struggling families.
He may care, but he sure hasn't done much for them. New income data from the Census Bureau, tabulated by former Census income specialists at the nonpartisan economic consulting firm Sentier Research, reveal that the three-and-a-half years of the Obama Presidency have done enormous harm to middle-class households.
In January 2009, the month President Obama entered the Oval Office and shortly before he signed his stimulus spending bill, median household income was $54,983. By June 2012, it had tumbled to $50,964, adjusted for inflation. (See the chart nearby.) That's $4,019 in lost real income, a little less than a month's income every year.
This story was from The Wall Street Journal way back in August, but the story and the embedded chart are still worth looking at. I borrowed it from yesterday's edition of the King Report...and the link is here.
After historic changes last month, Federal Reserve officials this week will discuss a possible expansion of the size of its third round of bond buying and better ways to guide markets about future policy actions.
At its two-day meeting that starts today, the Fed may abandon its calendar date.approach to forward guidance and adopt some form of numerical target for policy, analysts said.
And the central bank [may] consider whether to expand its bond-buying at the end of the year to take account of Treasury purchases under its Operation Twist plan that finishes at year-end.
This MarketWatch story was picked up by the finance.yahoo.com Internet site yesterday...and I thank West Virginia reader Elliot Simon for bringing it to our attention. The link is here.
Jon Corzine's lawyers say allegations that he fraudulently ran MF Global Holdings Ltd make "no sense" and that a lawsuit seeking to hold him and others responsible for the futures brokerage's bankruptcy must be thrown out.
Corzine, former colleagues and several banks, including JPMorgan Chase & Co and Goldman Sachs Group Inc, filed papers on Friday night to dismiss investor litigation over MF Global's collapse. The company's October 31, 2011, bankruptcy was Wall Street's biggest meltdown since 2008.
Plaintiffs led by the Virginia Retirement System and the province of Alberta, Canada, have accused MF Global in the U.S. District Court in Manhattan of inflating its ability to manage risk, obscuring risks from a big bet on European sovereign debt and improperly accounting for deferred tax assets.
This Reuters story showed up on the finance.yahoo.com Internet site yesterday...and I thank Manitoba reader Ulrike Marx for sending it along. The link is here.
The special edition by Alan is your first must read of the day. It's very long...but what he has to say is more than worth your time, or I wouldn't be posting it.
Alan has been around for a long time...and I was reading his stuff back in 1999 when I first got on the Internet. It was posted on the cross-currents.net website on October 12th...and I thank reader U.D. for sharing it with us. The link is here.
The most recent European Union summit exposed deep differences between German Chancellor Angela Merkel and French President François Hollande. Berlin wants Brussels to be bestowed with greater power over national budgets and Paris is calling for an end to austerity. The dispute threatens to intensify the euro crisis.
Since the days of former German Chancellor Konrad Adenauer and former French President Charles de Gaulle, Germany and France have generally been run by politicians who placed more value on unity than their differences. The axis between former German Chancellor Helmut Schmidt and former French President Valéry d'Estaing axis proved to be just as resilient as the partnership between their successors, Helmut Kohl and Francois Mitterand.
Under Merkel and Hollande, however, the German-French partnership threatens to deteriorate into nothing but a façade. The two politicians, who hold the fate of the continent in their hands, greet each other politely with kisses on the cheek, and their respective public relations staffs extol their "professional" and "trusting" cooperation.
In truth, however, the relationship began on a cool note and has since slipped below the freezing point. Hollande doesn't want to forgive Merkel for having campaigned for his conservative opponent, former President Nicolas Sarkozy. Now the Chancellery suspects that Hollande is secretly planning a campaign for Merkel's challenger from the center-left Social Democratic Party (SPD), former Finance Minister Peer Steinbrück.
This story, which was originally entitled "Crisis-of-confidence-develops-between-Merkel-and-Hollande", was posted on the German website spiegel.de yesterday...and is courtesy of Roy Stephens. It's well worth reading...and the link is here.
Japan is poised to join the world's "currency wars" as it battles a triple crisis of crashing exports, recession, and a suffocatingly-strong yen.
The country's exports plunged 10.3 percent in September from a year ago, dimming hopes of rapid recovery in the Far East. Exports to Europe crashed 21 percent. Shipments to China fell 14 percent as the Diaoyu-Senkaku islands dispute led to a slump in car sales. Honda, Mazda, and Nissan all saw sales plunge near 30 percent as Chinese consumers boycotted Japanese brands. Nomura said the export slump will push country into full recession.
Stephen Jen from SLJ Macro Partners said the global storm is drifting eastwards into Asia, opening a "third chapter" of the crisis that will last well into 2013. "Many analysts have declared that the low in the global economic cycle is in place. We are not convinced," he said, predicting a rise in currency protectionism.
Japan is the awakening giant in this conflict. The yen has risen 30 percent against China's yuan, 65 percent against the euro, and 80 percent against Sterling since 2008. Tokyo is itching to fight back.
I found this story from the telegraph.co.uk Internet site posted in a GATA release yesterday...and the link is here.
1. Michael Pento: Why Money is Now Pouring Into Hard Assets All Over the World 2. Robert Fitzwilson: Deus Ex Machina & Ground Zero of Fiat Currency Destruction. 3. John Embry: Relentless Demand Setting Gold Up For a Big Move. 4. Paul Brodsky and Lee Quaintance: Significant Monetary Change is Likely Headed Our Way. 5. Dan Norcini: This Key Chart Continues to Worry the Gold & Silver Bears. 6. Michael Pento [again!]: No More Exits, We Are Already to the Point of no Return. 7. James Turk: Audio interview. 8. Rick Rule: Audio interview.
This 8:19 youtube.com video with Jim Rickards was done with investigative reporter, Ted Goldenberg. As always, I consider anything that involves Jim Rickards worth watching or reading...and this clip is no exception. Jim spends a lot of time talking about gold. I thank reader 'David in California' for digging it up for us...and the link is here.
Mike Kosares of Centennial Precious Metals in Denver heaps skepticism on the idea of using European central bank gold as some sort of collateral for government bonds. The gold is probably gone or otherwise hypothecated into oblivion already, Kosares notes. His commentary is headlined "Golden Solution or Golden Folly?"
I borrowed the headline and the introductory paragraph from a GATA release yesterday. The article is posted over that the usagold.com Internet site...and the link is here.
It's not too often that you see a major shift within the gold market.
The last such recalibration in sentiment for gold investors was the introduction of the first gold-backed ETF in 2004, and the subsequent explosion in exchange-traded products (ETPs) for bullion and precious-metals equities.
Today, another tidal change is under way, as the flow of funds into structured bullion products ebbs. I think this shift - as you'll read about in a moment - signals two things. First, it confirms that growing numbers of investors are increasingly nervous about the reckless monetary and fiscal paths being pursued on a global scale. Identifying this trend early on will let investors position themselves accordingly.
Second, it tells me that acting now - securing the gold you want and need - is critical to withstanding the likely fallout ahead from the mountain of un-payable government debt and promised benefits. If we're correct about the dismal future of all major currencies - the dollar's inexorable decay in purchasing power and the "race to the bottom" between it and other currencies - then failing to act will greatly degrade your future standard of living.
What is this new trend? It's simple, yet powerful...investors are shifting from paper to physical.
As I, and others, have been saying since GLD and SLV [along with other similar ETFs] were first foisted on the unsuspecting public, I wouldn't touch any of these with the proverbial 10-foot cattle prod...and it's wonderful to see that the average investor is now fully awake on this issue. Good on 'em! This commentary by BIG GOLD editor, Jeff Clark, was embedded in yesterday's edition of Casey Daily Dispatch...and is a must read. The link is here.
The transfer of gold from Western central banks to Eastern central banks in recent years amounts to a policy of price suppression by the former, GoldMoney research director Alasdair Macleod writes today. He says Western nations thus "are left with no 'Plan B' in the event of a monetary crisis. A global collapse of paper money, which is inevitable if current monetary policies are not reversed, will give Asians considerable wealth relative to the rest of us. History will surely judge the central bankers' promotion of ephemeral paper at the expense of gold in the harshest terms."
Of course one might argue that the gold price suppression scheme of the Western central banks is their "Plan B" and that it has more or less been working, cushioning the decline of Western currencies, and that the Western central banks will need "Plan C" when the gold run out. But it's still hard to argue with Macleod's conclusion.
This is another headline and preamble that I shamelessly ripped from a GATA release yesterday. It's certainly worth reading...and the link is here.
First it was more than the UK. Then more than Portugal. Then a month ago we said that as of September, "it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings." Sure enough, according to the latest release from the Hong Kong Census and Statistics Department, through the end of August, China had imported a whopping gross 512 tons of gold, 10 tons more than the latest official ECB gold holdings. We can now safely say that as of today, China will have imported more gold than the 11th largest official holder of gold, India, with 558 tons.
I'd love to see the source documents that this Zero Hedge poster is using. These are eye-watering amount of gold...and if you add in the 350 tonnes that China produces from their own mines, you're talking over one third of the world's gold production disappearing into China. One has to wonder how that is possible without bidding the price of gold up to the moon and the stars...despite what JPMorgan et al are doing.
I thank reader 'David in California' for his second offering in today's column...and the link to the Zero Hedge story is here.
Is China building its gold reserves surreptitiously? The balance of probabilities suggests it is - and perhaps at a faster rate than many would contemplate.
Perhaps the biggest conundrum facing gold investors is China. What is it really doing? Is it building gold reserves surreptitiously? Is it buying gold on the dips thus creating a floor price? The answer is that we don't know for sure as the giant Asian economy plays its cards pretty close to its chest. So all we are left with is informed speculation gleaned through trying to pick up guidance from public utterances by senior Chinese officials and, in trying to make sense of the gold import statistics via Hong Kong, believed to be the primary route for gold coming into China. However, one does not know for sure if perhaps there are other channels through which gold is imported as well. We are reliant wholly on what China actually tells us, but Chinese data is not exactly reckoned to be transparent and the general belief is that the statistics only tell the outside world what China's powers-that-be want us to believe.
Lawrence [Lawrie] Williams from over at the mineweb.com steps forward with this more-than-timely article that showed up on their Internet site yesterday. It's a must read...and I thank Donald Sinclair for bringing it to our attention. The link is here.
Yesterday, the German press was full of stories of concern about the German gold reserves.
Germany's largest newspaper, Bild-Zeitung, reported that the German central bank, the Bundesbank, had refused to let two members of the German parliament, the Bundestag, inspect the nation's gold reserves held abroad. The Internet site of financial news from Germany, MMNews.de, summarizes the Bild-Zeitung report in English here.
But the German magazine Der Spiegel reports that the German court of auditors is demanding that the Bundesbank begin auditing its foreign-held gold and, if Zero Hedge's Internet translation is correct, the Bundesbank has already decided to repatriate some of the gold, if very slowly.
This GATA release contains "all of the above" paragraphs...plus much, much more...and I'll let Chris Powell take over. This is a must read of course...and the link is here.
With the Associated Press report appended here, the German gold audit story has just exploded into the English-language press with some important revelations:
-- The gold vaulted by the German central bank, the Bundesbank, with the Bank of England "has fallen 'below 500 tons' due to recent sales and repatriations. ..." So despite the lack of official announcement, Germany lately has been selling gold from London -- perhaps as part of the secret "strategic activities" grudgingly acknowledged two years ago by the Bundesbank to GATA's friend, the German financial journalist Lars Schall:
The lack of announcement of the sale of the German gold in London suggests that the sale was actually part of a gold swap with another central bank -- like the New York Fed. That is, the powerful implication here is that German gold in London was sold at the behest of the United States and in exchange Germany took title to United States gold vaulted in the United States -- or title to gold supposedly vaulted in the United States. This way the Bundesbank could continue to claim ownership of the same amount of gold without lying, at least not technically.
Wow! You can't make this stuff up. Reg Howe, Bob Landis, James Turk...and others...are now completely vindicated. It's been a long time coming. It's incredible what a little group of people, enticed out of obscurity by Bill Murphy and Chris Powell at GATA, has been able to find out despite the walls thrown up against them by all the power and all the money in the world.
This is another must read GATA release...and Chris Powell has a field day with it. The link is here.
This is a 28-minute must watch video from Grant Williams of Vulpes Investment Management out of Singapore. He is the author of the widely acclaimed Internet commentary entitled "Things That Make You Go Hmmmmm!"
Nick Laird sent me this youtube.com video clip late on Saturday evening...and up that point it had only had 315 views. Less than three days later, that number is up to just over 27,000 as I hit the 'send' button on today's column. I've watched it twice...and suggest you watch it at least once. The link is here.
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If we get the resolution to the downside as appears likely at this point, many will cry manipulation. A sharp price drop will, of course, be manipulative, but the real manipulation has taken place all along as JPMorgan increased its concentrated short position beyond any legitimate level. At the core of the manipulation resides JPMorgan’s concentrated short position. That the regulators have allowed this to occur and put so many investors at risk is shameful beyond description. I don’t know how Gensler and Chilton look themselves in the mirror. Maybe the average investor has difficulty in fully comprehending the COTs, but not the agency itself. - Silver analyst Ted Butler...20 October 2012
I wouldn't read a thing into yesterday's price action...although I was happy to see both gold and silver rally during the electronic market, something you don't see too often.
But where we go from here, is still up in the air. The explosive story about Germany's real or imaginary gold holdings, is still not fully told...but when it is, it will show that every central bank has nowhere near the amount of gold they say they have. GATA's guess many years ago was somewhere around 16,000 tonnes. That figure has since been revised downwards.
The truth of the matter is, that no one really knows. The gold world is totally opaque...and the central banks of the world would love to keep it that way, but that can't continue much longer.
However, as explosive as the gold world is, the fuse is lit on silver as well. Nowhere on Planet Earth does any central bank hold even one good delivery bar of silver...and when that silver thermonuclear device finally does reach critical mass...look out. Ted Butler was hard at work on this 15 years before GATA showed up on the scene...and it's an unknown which metal will explode first. But one thing is for sure, the one that blows up first, will take the other with it...and when the smoke finally clears, the world on the other side of this event will be totally different than the one we live in today.
I certainly hope you have your share, dear reader...as I'm still "all in".
Both gold and silver faded a bit during the Far East trading session on their Tuesday...and by the time that London opened at 8:00 a.m. BST, all the gains that occurred during the New York electronic market on Monday afternoon, had disappeared.
Once London began to trade, both metals came under further selling pressure...and as I hit the 'send' button at 5:20 a.m. Eastern time, silver is down 56 cents...and gold is down around thirteen bucks. The dollar index is still pretty much chopping sideways, just like it did all of yesterday...and volumes are about average for this time of day.
It beats me what's going to happen during the New York session today, but we'll find out soon enough.
See you on Wednesday.