Gold traded very quietly in the Far East and early London trading. The low, such as it was, came just after 12 o'clock noon in London...and by 11:00 a.m. in New York four hours later, gold was back to unchanged from Friday's close.
Then the gold price popped about fifteen bucks or so...hitting its high of the day, $1,589.50 spot, just minutes before the Comex close. From there it got sold down a few dollars going into the electronic trading session.
Gold closed at $1,585.30 spot...up an even $13 on the day. Volume, which had been exceedingly light up until that price jump, soared all the way up to around 114,000 contracts net.
The silver price made another attempt to break through the $27 spot price mark the moment that the market opened on Sunday night in New York, but that got sold down 40 cents in pretty short order. Silver the rose back to unchanged about 2:00 p.m. Hong Kong time...and it slid to its London low at the 12:00 o'clock noon silver fix.
The subsequent rally lasted until 11:15 a.m. in New York, making it all the way back to Friday's closing price. Then the silver price rose rapidly from there...and most of the significant gains were in by shortly after 12 o'clock noon in New York. Silver moved a bit higher from there, with the high of the day [27.77 spot] coming about five minutes before the Comex closed.
From that high, silver got sold off about two bits...and closed at $27.54 spot...up 64 cents on the day. Gross volume was huge...but net volume was pretty light at around 24,000 contracts. Silver had an intraday price move of about $1.17...or 4.35% to the upside.
The dollar index rallied a bit yesterday, hitting its high tick of the day...about half-past lunchtime in London, which was 7:30 a.m. Eastern. After that, it gave up about half its gains...and finished the Monday session in New York up about 20 basis points.
The gold stocks started off slowly...and finally broke into positive territory to stay on the gold price run-up in the last hour of trading yesterday morning. The high of the day for the HUI was around 1:30 p.m. Eastern...and it faded a hair into the close...but finished up 1.12% on the day.
The silver stocks were a mixed bag yesterday, but there were more green arrows than red ones...and Nick Laird's Silver Sentiment Index closed up a tiny 0.16%.
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Considering that the equity markets in general did so poorly, I'm grateful for the gains that we got in the shares, as the yesterday's gains in the metal itself were rather modest, even though the chart patterns looked impressive.
The CME's Daily Delivery Report showed that 2 gold and 29 silver contracts were posted for delivery tomorrow. The data isn't even worth a cursory glance.
There were no reported changes in either GLD or SLV.
However, the U.S. Mint had a sales report yesterday. They sold 3,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 493,000 silver eagles. Month-to-date the mint has sold 46,500 ounce of gold eagles...8,500 one-ounce 24K gold buffaloes...and 2,568,000 silver eagles.
The Comex-approved depositories showed that they received 797,388 troy ounces of silver on Friday...and shipped 740,519 ounces of the stuff out the door. The link to that activity is here.
Well, Nick Laird dropped a bomb on me last night. I'd been waiting impatiently for the second quarter derivatives report from the Office of the Comptroller of the Currency...and it was posted yesterday. Table 9 on Page 33 tells us a lot about what's going on in the precious metals derivatives market. But the shocker was that instead of including the top 5 U.S. banks, this report only shows the top 4 U.S. banks. They dropped off HSBC...the second largest precious metals derivatives holder. I'm sure they still hold these derivatives, but they're no longer in this report...and Nick's graph below reflects that. All his data comes from that table on that page.
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After exchanging a couple of e-mails on this issue, I finally came up with the reason why Table 9 [and a bunch of others] may be down to four banks...and here it is:
If you check Table 1 on page 25, you'll see that the 'big 4' U.S. banks hold 93% of all the derivatives in the U.S. banking system...and HSBC in No. 5 spot, despite the fact that it holds a huge derivatives position in the precious metals, is now small potatoes in the grand scheme of things at only $4.47 trillion...1.96% of the total.
As you said, you just checked it's history and when they OCC started, they had 9 top banks in Table 9...then 7 - then 6 - then 5, and now 4...and that's probably the reason why we're down to 4 banks. The rest are basically immaterial. Ed
93% of all derivatives in the U.S. banking system are held by 4 banks. They are JPMorgan, Citibank, Bank of America, Goldman Sachs...and in very distant fifth position is HSBC USA
I have the usual number of stories for a Tuesday...and that's quite a few.
The euro area faces a major economic crisis, most likely a series of rolling, country-specific problems involving some combination of failing banks and sovereigns that can’t pay their debts in full.
This will culminate in system-wide stress, emergency liquidity loans from the European Central Bank and politicians from all the countries involved increasingly at one another’s throats.
Even the optimists now say openly that Europe will only solve its problems when the alternatives look sufficiently bleak and time has run out. Less optimistic people increasingly think that the euro area will break up because all the proposed solutions are pie-in-the-sky. If the latter view is right -- or even if concern about dissolution grows in coming months -- markets, investors, regulators and governments need to worry not just about interest-rate risk and credit risk, but also dissolution risk.
What’s more, they also need to worry a great deal about what the re-pricing of risk will do to the world’s thinly capitalized and highly leveraged megabanks. Officials, unfortunately, appear not to have thought about this at all; the Group of 20 meeting and communiqué last week exuded complacency and neglect.
This op-ed piece by Simon Johnson was posted on the Bloomberg website on Sunday afternoon. Johnson, who served as chief economist at the International Monetary Fund in 2007 and 2008, is a professor of entrepreneurship at the Massachusetts Institute of Technology's Sloan School of Management. I thank reader "Tom in Thailand" for sending it...and it's a must read. The link is here.
Pity Ben Bernanke and his colleagues on the Federal Reserve's main policymaking committee. Once again they felt compelled to do something to be seen as countering a renewed slowing of the domestic economy that is compounded by a deepening European crisis and less buoyant emerging economies. But in continuing to act on its own, all the Fed will do is buy some time that will again be wasted by the country's politicians. Meanwhile, collateral damage will mount, making the next policy steps even more excruciating.
It is not so long that the Fed was discussing how to exit the unconventional policy phase initiated in the midst of the 2008 global financial crisis. Instead, and having already ballooned the balance sheet to 20 per cent of US gross domestic product, it will now exchange even more of its short-term Treasury holdings (up to 3-year maturities) for longer-dated (6-30 year) bonds. This extension of "Operation Twist" has, as an intermediate objective, repressing market interest rates to push investors to assume more risk, trigger the wealth effect, and reignite animal spirits.
This story, headlined "The Fed's Second-Best Solution" appeared in the Financial Times last Wednesday...and is posted in the clear in this GATA release. It, too, is worth reading...and the link is here.
On Jan. 23, 2008...John A. Boehner (R-Ohio) met Paulson for breakfast. Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment.
The next day, the White House unveiled the stimulus package.
Boehner is one of 34 members of Congress who took steps to recast their financial portfolios during the financial crisis after phone calls or meetings with Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms.
The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials. The party affiliation of the lawmakers was about evenly divided between Democrats and Republicans, 19 to 15.
So, what else is new? This story showed up in The Washington Post yesterday...and I thank Washington reader S.A. for sharing it with us. The link is here.
Over the past week, various entities controlled by bailed out UK-bank RBS, focusing primarily on NatWest, have seen clients unable to access virtually any of their funds, perform any financial transactions, or even get an accurate reading of their assets. The official reason: "system outage"... yet as the outage drags on inexplicably for the 5th consecutive day, the anger grows, as does speculation that there may be more sinister reasons involved for the cash hold up than a mere computer bug.
Branches of Royal Bank of Scotland will open on a Sunday for the first time this weekend as RBS Group struggles to deal with the aftermath of technical problems that have affected up to 12 million customers. The taxpayer-owned group took the unprecedented step of extending the hours of more than 1,000 RBS and NatWest branches that normally open on a Saturday to 6pm, and opening them again tomorrow morning, as it faces an angry backlash from people unable to access accounts, withdraw wages or pay bills and mortgage payments.
This story showed up over at the zerohedge.com website on Saturday...and I thank reader Bob Fitzwilson for sending it along. The link is here.
Another week, another summit. This week's shindig of EU leaders in Brussels will be bound to focus on efforts to shore up the euro and...once again, it is likely to disappoint. The main issue is well-known; bail-outs for indigent, non-tax-paying southerners at the expense of hard-working northerners.
But the real issue goes deeper. All the bailout mechanisms under the sun cannot make the euro-zone work. Such bailouts are still, in the end, loans. Even if the interest rates are set very low, interest is due to be paid and the debt eventually to be repaid.
What would make some difference is if the money provided were not some sort of loan but rather an outright gift. Such gifts can be made in advance (although they rarely are) or after the event, when they are called write-offs. Sometimes a recipient itself turns what was once a loan into a gift.
This is called a default. But northern countries understandably don't want their past loans turned into gifts, and they don't want to be forced to make new gifts until the crack of doom.
LOL!!! That pretty much sums it up. This story was posted in The Telegraph on Sunday evening local time...and I thank Roy Stephens for his first offering of the day. The link is here.
It wasn't long ago that Mario Draghi was spreading confidence and good cheer. "The worst is over," the head of the European Central Bank (ECB) told Germany's Bild newspaper only a few weeks ago. The situation in the euro zone had "stabilized," Draghi said, and "investor confidence was returning." And because everything seemed to be on track, Draghi even accepted a Prussian spiked helmet from the reporters. Hurrah.
Last week, however, Europe's chief monetary watchdog wasn't looking nearly as happy in photos taken in front of a circle of blue-and-yellow stars inside the Euro Tower, the ECB's Frankfurt headquarters, where he was congratulating the winners of an international student contest. He smiled, shook hands and handed out certificates. But what he had to tell his listeners no longer sounded optimistic. Instead, Draghi sounded deeply concerned and even displayed a touch of resignation. "You are the first generation that has grown up with the euro and is no longer familiar with the old currencies," he said. "I hope we won't experience them again."
The fact that Europe's top central banker is no longer willing to rule out a return to the old national currencies shows how serious the situation is. Until recently, it was seen as a sign of political correctness to not even consider the possibility of a euro collapse. But now that the currency dispute has escalated in Europe, the inconceivable is becoming conceivable, at all levels of politics and the economy.
This story showed up on the German website spiegel.de yesterday...and I thank reader Donald Sinclair for bringing it to our attention. The link is here.
Members of the Bank of England's Monetary Policy Committee should take heed of the warnings being sounded in the Bank for International Settlements (BIS) latest annual report before launching another bout of quantitative easing, as they are widely expected to do next week.
Regrettably, it's unlikely to make much difference to their actions, even if they do. The BIS, often referred to as the central bankers' bank, did better than most in warning about the expansion of credit ahead of the bust, but nobody took a blind bit of notice.
There's no reason to suppose it will be any different this time. With an evident lack of realistic alternatives, QE has become the default growth strategy of choice – practiced, if for no other reason, than at least to be seen to be doing something.
By the look of the last MPC minutes, as well as recent comments and speeches by committee members, QE III is already pretty much a done deal, whatever the BIS says. It awaits only the Chancellor's formal say-so, which given how desperate he is for anything that might pass as a growth initiative, can be taken as read.
Britain is now fully in "print, or die" mode. This story was posted on the telegraph.co.uk Internet site last night...and is Roy Stephens second offering of the day. The link is here.
Luis de Guindos, Spain’s finance minister, wrote to Jean-Claude Juncker asking for access to the €100bn (£80bn) offer of bank loans from Brussels, but did not specify either the required amount or any conditions.
There was still no agreement on the key uncertainty over whether the loans will come from the European Financial Stability Fund (EFSF), which expires next month, or European Stability Mechanism (ESM), whose bonds would have precedence over private creditors.
After taking almost three weeks to take up Brussels’ offer for help, Madrid promised a full deal would be agreed within weeks. But traders bet it would take longer than the market could wait.
Within hours there was anticipation that Moody’s was preparing to downgrade Spain’s banks. Meanwhile, experts at Open Europe warned the loan agreement could back-fire and destablise Madrid even more.
This Roy Stephens offering was posted on The Telegraph's website yesterday evening...and the link is here.
Moody's just downgraded 28 Spanish banks, some by up to four notches. This comes two weeks after the credit rating agency cut Spain's sovereign rating.
"Today's actions follow the weakening of the Spanish government's creditworthiness, as captured by Moody's downgrade of Spain's government bond ratings to Baa3 from A3 on 13 June 2012, and the initiation of a review for further downgrade," said the credit rating agency in a press release.
"16 standalone ratings remain on review for downgrade reflecting the continuing review for downgrade of the Spanish government's Baa3 bond rating."
This businessinsider.com story was posted on their website late yesterday afternoon...and is another item from Roy. The link is here.
Heavily exposed to the crisis in Greece, cash-starved Cyprus needs to recapitalise its second-largest bank by Friday. For weeks, it has been trying to juggle its options between a bailout from Europe's EFSF fund or a bilateral loan from either Russia or China.
It was unclear whether a loan from either country would be forthcoming, giving the Mediterranean island precious little leeway to rustle together €1.8bn for Cyprus Popular Bank by the end of the week.
On Monday afternoon, the Cypriot government said it would seek financial assistance from the European Union's bailout funds as the country sought to stem risks to its financial sector from a spillover of Greek exposure.
This item was posted on The Telegraph's website early yesterday afternoon British Summer Time...and I thank Roy Stephens for bringing it to my attention...and now to yours. The link is here.
Those running the big investment banks and trading floors today bear an uncanny resemblance to the generals on both sides of the conflict in WWI. There is an old military saying about the folly of fighting the “next” war by the methods of the last war. In modern times, the best illustration of the truth of that adage is what happened on the Western Front between 1914 and 1918.
When 1914 dawned, Europe had not seen a continental war for a century. Most of the generals and the vast majority of their political masters on both sides had not noticed that the years since the Battle of Waterloo in 1815 had seen what was and remains the greatest technological revolution in the history of the world. Both sides had seen the US Civil War of 1861-65, a war which proved beyond all shadow of a doubt that a frontal assault on an established defensive position was almost guaranteed to fail. Both sides completely ignored the lesson. The literal “cannon fodder” on both sides paid a gruesome price.
Here's a rare chance to read something by Bill Buckler that's been posted in the clear. This is a couple of pages from his latest edition of The Privateer...and it's posted over at Zero Hedge. It's a must read...and I thank West Virginia reader Elliot Simon for sending it. The link is here.
Egypt’s military rulers on Sunday officially recognized Mohamed Morsi of the Muslim Brotherhood as the winner of Egypt’s first competitive presidential election, handing the Islamists both a symbolic triumph and a potent weapon in their struggle for power against the country’s top generals.
Following a week of doubt, delays and fears of a coup after a public count showed Mr. Morsi winning, the generals showed a measure of respect for at least some core elements of electoral democracy by accepting the victory of a political opponent over their ally, the former air force general Ahmed Shafik.
Mr. Morsi’s status as president-elect, however, does little to resolve the larger standoff between the generals and the Brotherhood over the institutions of government and the future constitution. Two weeks before June 30, their promised date to hand over power, the generals instead shut down the democratically elected and Islamist-led Parliament; took over its powers to make laws and set budgets; decreed an interim Constitution stripping the incoming president of most of his powers; and re-imposed martial law by authorizing soldiers to arrest civilians. In the process, the generals gave themselves, in effect, a veto over provisions of a planned permanent Constitution.
This story appeared in the Sunday edition of The New York Times...and I thank Roy for sending it along. The link is here. Another story about the Egyptian elections was posted at the spiegel.de Internet site yesterday...and the link to that story is here.
Foreign-currency deposits fell to 10.52 billion on June 15, the central bank said in a report Friday. Those deposits are overwhelmingly US dollars, which Argentines view as a safe haven amid times of economic uncertainty.
The loss of dollar deposits still isn't a serious threat to banks, as they represent less than 10% of their total deposit base.
However, the dwindling stock of dollar deposits likely will make export financing more expensive. The outflows also have dented the central bank's international reserves.
This story was posted on the mercopress.com website on Sunday...and I thank reader 'David in California' for sharing it with us. The link is here.
The first is with Richard Russell...and it's entitled "This Terrifying Financial Collapse & Gold". The next is with James Turk. It bears the headline "Capital Controls, Panic, the Great Depression & Gold". The third blog is with Bob Fitzwilson of The Portola Group...and it's headlined "Brace for Turmoil in Global Markets as Spanish Domino Falls". And lastly is this audio interview with Ben Davies...CEO of Hinde Capital.
"An inch of time is an inch of gold, but you can't buy that inch of time with an inch of gold." Is this Chinese proverb proving correct in the case of Indians who invest in the yellow metal for good times tomorrow? Or is the craze for the glittering object really ruining the country's economy?
Time and again the Indian government, economists, and experts have ridiculed the people's obsession with gold and pointed out the need to curtail imports of the yellow metal to reduce the nation's trade deficit.
Indians have an irresistible temptation to buy gold -- either as ornaments or as investment. Their obsession with the gold jewelry has roots in their culture, tradition, and in the economic realities in the rural and grassroots levels of society. As an investment, gold has been an easier bet to hedge against inflation and other risks. Indians have been buying and trading in gold since time immemorial, and they continue to buy even now, when it is more expensive than ever.
This story was posted on the ibtimes.com Internet site on Saturday...and I found it hidden in a GATA release...and the link is here.
This podcast runs about 23 minutes...and Don spends a lot of that time talking about gold...and why you should own lots of it. I thank reader Neil West for sending it along...and it's posted over at the bellwebcasting.ca website. The link is here.
GATA's Chris Powell wrote an extensive preamble to this Ben Davies piece...and rather me cut and paste it, I'll just post the GATA release and be done with it. But it was reader David Ball that first brought this essay to my attention...and the link to this must read piece is here.
In what might be the most underreported financial story of the year, US banking regulators recently circulated a memorandum for comment, including proposed adjustments to current regulatory capital risk-weightings for various assets. For the first time, unencumbered gold bullion is to be classified as zero risk, in line with dollar cash, US Treasuries and other explicitly government-guaranteed assets. If implemented, this will be an important step in the re-monetisation of gold and, other factors equal, should be strongly supportive of the gold price, both outright and relative to that for government bonds, the primary beneficiaries of the most recent flight to safety. Stay tuned.
This is a similar story to the Davies piece that preceded it, but it's different in some ways. I consider it a must read as well...and I thank Bob Fitzwilson for his second offering in today's column...and it was posted over at the financialsense.com website yesterday. The link is here.
The bank reported a profit of Special Drawing Rights 758.9 million. A gain of SDR 78.7 million arose on the sale of 3 tonnes of gold (3 tonnes from 119 tonnes, including gold loans) and there was a gain of SDR 34.7 million from the release of a provision set up in prior years on a gold loan that was repaid.
Hence the profit arising from the sale of physical gold and the repayment of gold loans was SDR 113.5 million. Fifteen percent of the bank's reported profit came from this source.
In addition there was a net revaluation gain on the remaining gold investment assets of SDR 551.8 million. This together with the SDR 113.5 million gold-related profit noted above represented 41 percent of the reported comprehensive income of SDR 1,607.2 million for the year. (Comprehensive income essentially means profit plus unrealised net valuation gains.)
This year's BIS annual report is 210 pages long and includes extensive commentaries on aspects of the financial crisis. The financial statements themselves cover 68 pages and as far as I can see nowhere is the importance of its gains on gold and gold-related transactions highlighted in the report. Imagine the furor if Coca-Cola published their annual report and chose not to highlight the contribution to its profits from Coke itself.
This story was posted in a GATA release from Hong Kong. It, too, is a must read...and the link is here.
For the past eighteen months, gold stocks have been pummeled.
They showed some life from mid-May to mid-June - GDX, the gold miner's index, was up 21%, while gold rose 5.5%. That bounce was exciting, but they've still got a lot of lost ground to make up. Since January 1, 2011, GDX is down 28%, while gold is up 10%.
So what's going to move these darn stocks? Will their day ever come? Could our research - gulp - be wrong? Jokes have even started circulating...
This Jeff Clark contribution was in yesterday's edition of Casey's Daily Dispatch...and the link is here.
Make "Big Oil" Pay For Your Retirement
Oil fat cats get rich on $4 gas.
Now how'd you like to make them pay you back?
This little-known “loophole” let's you collect up to triple the retirement income most stocks or bonds pay... without touching the stock market... and all while "Big Oil" gets stuck with the bill.
David Stockman had it dead right. The safest investment strategy today is indeed the ABCD - Anything Bernanke (Draghi, King, Carney, Stevens et al) Cannot Destroy - approach.
That's why the Asians are buying Gold. That's why the Europeans and increasing numbers of people in the English-speaking world are buying Gold. That's why even central banks are buying Gold. Very few are selling physical Gold right now. But they are selling (and shorting) paper claims to the stuff. Bernanke can destroy those, but he can't touch the real thing. - Bill Buckler, Gold This Week...22 June 2012
It's impossible to tell whether the price rallies during the New York trading session yesterday were short covering or new longs being placed...but if I had to bet a dollar, I'd guess that it was new longs being place in gold...and short covering in silver...and that's just a guess. I've stopped looking at the daily open interest numbers, because I've learned from hard experience that you can't rely on them. But one thing is for sure, is that Monday's data will be in Friday's Commitment of Traders Report.
Of course I read Ted Butler's weekend commentary with great interest...and he mentioned something that I thought was worth pointing out. He said that "the weekly closes were the lowest of the year, with silver' weekly closing being the lowest since the fall of 2010." I always look at the daily charts for both silver and gold...and never the weekly charts, so I thought that maybe I should. The 3-year weekly silver chart was a sight to behold...
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Based on the RSI, silver is the most oversold on a weekly basis, than it has been at any point in the last three years...and by a very wide margin. If that isn't a screaming buy signal, I don't know what is. Too bad this chart didn't go back another couple of years to take in the 'crash' of 2008.
As a comparison, here's the same 3-year weekly chart for gold...
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Gold is oversold on a weekly basis as well, but nothing like silver...and that's all because of the unprecedented scale of the price management scheme run by JPMorgan et al.
Today, at the close of Comex trading at 1:30 p.m. Eastern time, is the cut-off for this Friday's Commitment of Traders Report. So I expect that whatever happens in today's price action, should be in Friday's report...unless the volume data is not reported in a 'timely manner', which is another little trick that 'da boyz' use to their advantage at times.
Neither gold nor silver did very much in Far East trading on their Tuesday...and trading has been uneventful in London for the first couple of hours as well. Net volume in both metals is shockingly low for this time of day...and the dollar index is comatose as well. As I hit the 'send' button at 5:05 a.m. Eastern time, both metals are down a hair from Monday's close.
It's too quiet out there...and I wonder what the Comex trading session will bring today?
See you here tomorrow.