The gold price didn't do much until about 3:30 p.m. Hong Kong time...thirty minutes before the 8:00 a.m. London open. From that point gold began to sell off...and by shortly after 10:00 a.m. BST, gold was down about eighteen dollars from Monday's close.
Then gold began to rally slowly from there...and by 10:45 a.m. Eastern time, gold was back to within a couple of dollars of Monday's closing price. Then the dollar began to rally with renewed strength...and the gold price headed south. Judging by the chart pattern, it appears more than likely that the gold price had some 'help' getting there.
By the time the trading day was done at 5:15 p.m. in New York, the gold price was down $24.10 from Monday, closing at $1,568.30 spot. Not surprisingly, net volume was more than decent...around 150,000 contracts.
Silver's price action was very similar...and only the timing of the price changes were different. The silver price held up pretty well until an hour before the London open...and it was as they say, all down hill from there until 11:30 a.m. BST...which may have been an early silver fix.
From that point, silver began to rally nicely...and really took off at 10:00 a.m. in New York, only to run into a brick wall at around 10:45 a.m...the same time as gold. The sell-off from there looked pretty engineered to me as well, as every time the selling stopped, the price began to rally.
From its New York high of $28.93...to its low of $27.88...silver had another big intraday price move. This time it was 3.6%.
Silver closed at $28.20 spot...down 27 cents from Monday. Net volume was very decent at 38,000 contracts...more or less.
The dollar index hung around the 81.00 mark until about 9:20 a.m. in London before rallying a bit and then holding steady around the 81.20/81.30 mark until 10:45 a.m. in New York. Despite that tiny rally, it was obvious that gold was being bid higher...and silver was about to blast through $29 spot. Then at that magic 10:45 a.m. Eastern time mark, someone hit the buy dollar index/sell gold-silver button...and the rest is history.
The dollar index finished up about 65 basis points on the day...with about half of the gain coming before the 10:45 a.m. Eastern time smack down in the precious metals. I don't believe for one second that yesterday's price action in the precious metals was all currency related...but you were certainly encouraged to reach that conclusion when you looked at the chart.
The gold shares gapped down a bit at the open, but began to rally immediately...despite the fact that the gold price never got into positive territory all day long in New York. The HUI hit its high tick of the day at 10:50 a.m. Eastern time...and it was all down hill from there, albeit very slowly. The stocks remained in positive territory for quite a while after the gold price headed south, but got sold off a little more severely during the last ninety minutes of trading...as did the Dow.
And also like the Dow, the gold stocks rallied a hair into the close. The HUI finished the day down only 1.14%. For the second day running it appeared that someone was buying precious metal stocks with both hands.
It should come as no surprise that Nick Laird's Silver Sentiment Index finished down on the day...but only down 0.61%.
(Click on image to enlarge)
The CME's Daily Delivery Report showed that 44 gold and 21 silver contracts were posted for delivery tomorrow. The link to the Issuers and Stoppers Report is here.
There was a big withdrawal from GLD yesterday...to the tune of 563,024 troy ounces. GLD is now back to the inventory level it held on January 26th. There were no reported changes in SLV.
Over at Switzerland's Zürcher Kantonalbank they reported updates for their gold and silver ETFs as of May 21, 2012...and there weren't any big changes. Their gold ETF had a withdrawal of only 820 troy ounces...and their silver ETF reported no change at all from the prior report on May 15th.
And there was no sales report from the U.S. Mint.
And, for whatever reason, the CME did not update the Comex-approved depositories' inventory level for silver on Monday.
Here's a chart that Washington state reader S.A. sent me yesterday...and its contents are pretty much self-explanatory.
(Click on image to enlarge)
Here's another chart for you. This is one that Australian reader Wesley Legrand sent me in the wee hours of this morning. It's the 1-year Gold Miners Bullish Percent Index. It's only got one way to go...and that's up.
(Click on image to enlarge)
And lastly is this photo I borrowed from the good folks over at spaceweather.com on Monday. It shows the annular solar eclipse of the sun on Sunday as photographed by Jacob Thumberger from Gail, Texas. You can read more about it here...and the link is well worth your time.
I have fewer stories for you reading 'pleasure' today. I don't know about you, but I'm very happy about that.
Add it to the growing list of people going after JPMorgan Chase. Employees are suing the bank over the $2 billion trading loss that they say hurt their retirement plans.
A lawsuit filed on behalf of JPMorgan employees says their retirement accounts fell in value after news broke about the trading loss, Reuters reports. That’s because the plan holds JPMorgan shares which have dropped 18% since the loss was announced on May 10.
The complaint, filed in U.S. District Court, Southern District of New York, names the bank, its CEO and chairman Jamie Dimon as well as former CIO Ina Drew, who resigned soon after the loss was revealed, as defendants. According to the suit, the defendants violated the federal Employee Retirement Income Security Act which gives plan participants the right to sue for breaches of fiduciary duty.
This story appeared in Forbes yesterday...and I thank Washington state reader S.A. for bringing it to our attention. The link is here.
A corporate lawyer, a professional trader and an anonymous middleman carried out a lucrative insider trading scheme for nearly two decades, baffling federal authorities who were trying to unravel the mystery. Like characters in a crime novel, the three men evaded arrest by dumping cellphones, using code names and rendezvousing in Atlantic City to divide their bounty.
Then last year, authorities found the culprits. Relying on new tools, investigators at the Securities and Exchange Commission traced the conspiracy to Matthew H. Kluger, Garrett D. Bauer and Kenneth T. Robinson. In April, the three men, who have all pleaded guilty to criminal charges, agreed to pay the S.E.C. roughly $32 million.
Embarrassed after missing the warning signs of the financial crisis and the Ponzi scheme of Bernard L. Madoff, the agency’s enforcement division has adopted several new — if somewhat unconventional — strategies to restore its credibility. The S.E.C. is taking its cue from criminal authorities, studying statistical formulas to trace connections, creating a powerful unit to cull tips and assign cases and even striking a deal with the Federal Bureau of Investigation to have agents embedded with the regulator.
This story showed up on The New York Times website on Monday evening...and I thank reader Phil Barlett for sending it. The link is here.
Mary Schapiro, chairman of the Securities and Exchange Commission, told the Senate Banking Committee Tuesday that the agency is examining JPMorgan's earnings statements and first-quarter financial reports to determine if they were "accurate and truthful."
Schapiro and Gary Gensler, chairman of the Commodity Futures Trading Commission, said the $2 billion-plus loss at JPMorgan should be a lesson for regulators that they need to tighten rules mandated under the 2010 financial overhaul.
"It would be wrong for us not to take this example," Schapiro said. JPMorgan is the biggest U.S. bank by assets and the only major U.S. bank to stay profitable during the 2008 financial crisis.
This AP story was posted over at the barchart.com website yesterday afternoon...and I thank West Virginia reader Elliot Simon for digging it up on our behalf. The link is here.
Wall Street bankers could have averted the global financial crisis, so why didn't they? In this exclusive extract from his book Inside Job, Charles Ferguson argues that they should be prosecuted.
It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud. The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident.
This behaviour is criminal. We are talking about deliberate concealment of financial transactions that aided terrorism, nuclear weapons proliferation and large-scale tax evasion; assisting in major financial frauds and in concealment of criminal assets; and committing frauds that substantially worsened the worst financial bubbles and crises since the Depression.
Total fines on the banks for their role in the Enron fraud, the internet bubble, violation of sanctions against countries including Iran and money-laundering activities appear to be far less than 1% of financial sector profits and bonuses during the same period.
This story is basically a review of the above mentioned book by the author himself, that was posted on The Guardian's website on Sunday. It's a longish read, but certainly more than worth it if you have the time. I thank reader U.D. for sending it...and the link is here.
Is there now any doubt after seeing this why the proverbial four horseman are really just one giant black swan, only not one of failed bond auctions or something quite as dramatic, but something as simple and mundane as the smallest uptick higher in rates which would blow up the entire global financial farce, starting with the most imbalanced domino of all - the land of the rising sun?
Most readers are already well aware of the problems facing Japan these days...and this short read posted over at zerohedge.com is a must read, but it's the graphs that are worth looking at. I thank David Galland over at Casey Research for sending this around yesterday...and the link is here.
Japan’s sovereign-rating cut by Fitch Ratings escalated pressure on lawmakers to double the sales tax, with the Organization for Economic Cooperation and Development warning the nation’s debt is heading into “uncharted territory.”
The local-currency rating was reduced one step, and foreign-currency grade two levels, to A+, the fifth-highest ranking, Fitch said in a statement yesterday. The Paris-based OECD said separately that boosting the 5 percent consumption levy is a “top priority.”
A surge in demand for Japanese government bonds that sent 10-year yields to the lowest level since 2003 this month is masking the risks from rising debt. Prime Minister Yoshihiko Noda has failed to persuade opposition lawmakers to support his legislation, leaving gross public debt poised to reach 223 percent of gross domestic product next year, the OECD said.
“It’s an alarm bell for Japanese politics and the slow progress in Japan’s fiscal consolidation,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo and a former central bank official. “There’s no commitment to fiscal consolidation -- in the long run, Japan’s creditworthiness and fiscal sustainability aren’t looking good.”
This Bloomberg story was posted on their website early yesterday evening...and it's another offering from West Virginia reader Elliot Simon. The link is here.
Right now, though, things aren't going so well for the chancellor, as she travels this week from one international summit to the next. At the NATO summit in Chicago, a dispute developed over the Afghanistan withdrawal, while at the G-8 summit at Camp David, France's new President François Hollande flexed his muscles. He said he would do the same at a planned dinner in Brussels this Wednesday with the leaders of the European Union member states. The Socialist leader is searching for allies to break Merkel's austerity-led approach in the euro crisis and to back euro bonds, which are deeply unpopular in Berlin. His efforts haven't been fruitless either -- and Germany could soon face further isolation.
That might all be more palatable for Merkel if things were going better for her on the domestic political front -- and if she could rely on the stability of her coalition government. But the domestic front for Merkel is anything but quiet. Merkel's decision to fire her environment minister, Norbert Röttgen, last week has created turbulence within the coalition government of her conservative Christian Democrats (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the business-friendly Free Democratic Party. The CDU is unsettled following the dismissal in ways seldom seen before. But this time it isn't over differences in policy. This time it is about the chancellor herself -- about her leadership style and her character.
This story was posted on the German website spiegel.de yesterday...and I thank Roy Stephens for sending it along. The link is here.
There has been no official announcement. No terms or conditions have been disclosed. But Greece's banking system is being propped up by an estimated E100 billion or so of emergency liquidity provided by the country's central bank -- approved secretly by the European Central Bank in Frankfurt. If Greece were to leave the eurozone, the immediate cause might be an ECB decision to pull the plug.
Extensive use of "emergency liquidity assistance" (ELA) to help banks in the weakest economies has been one of the less-noticed features of the eurozone crisis. Separate from normal supplies of liquidity and meant originally as a temporary facility for national authorities to use when banks hit problems, ELA proved a lifesaver for the financial system Ireland and is now even more so in Greece. As such, it has given the ECB -- which has ultimate control over the facility -- considerable power to determine countries' fates.
This story was in the Financial Times of London yesterday...and is posted in the clear in this GATA release. It's a must read...and the link is here.
A panel of the Swiss parliament is discussing the introduction of the parallel ‘Gold franc’ currency.
Bloomberg has picked up on the news which was reported by Neue Luzerner Zeitung .
The Swiss parliament panel will discuss a proposal aimed at introducing a new currency, or a so-called gold franc.
Under the proposal, which will be debated in the lower house’s economic panel in Bern today, one coin in gold would be worth about 5 Swiss francs ($5.30), the Swiss newspaper reported. The Swiss franc would remain the official currency, the paper said.
The proposal may lead to a wider debate about the Swiss franc and the role gold might again play to protect the Swiss franc from currency debasement.
The initiative is part of the “Healthy Currency” campaign which is being promoted by the country’s biggest party – the conservative Swiss People’s Party (SVP).
This story was posted on the GoldCore Limited website yesterday...but was picked up by my good friend Peter Spina over at goldseek.com. You've already read the entire story, but the link to the hard copy is here. I thank reader 'David in California' for sending it along.
The first blog is with James Turk. It's entitled "Important Chart Suggests Massive Move for Silver & Gold". The next one is with John Embry. That one is headlined "Banks are Loaning Out "Allocated" Gold". Lastly is the audio interview with Egon von Greyerz. I posted the blog of that in this column yesterday.
I have one more KWN blog...and it was posted in a GATA release yesterday. I'm including that version, as Chris Powell had a few things to say, especially to American readers, that are worth reading. It's a must read for sure...and the link is here.
In real terms gold is cheaper now than it was in 2005 at $400 per ounce, investment banker and Wits Gold Chairman Adam Fleming tells GoldMoney's James Turk in the latest GoldMoney interview. Both men spoke at GATA's Gold Rush 21 conference in Dawson City, Yukon Territory, Canada, back in 2005 and it's great to see them together again.
Fleming is pessimistic about the eurozone but optimistic about South Africa, which, he says, remains a great place for living and working. I borrowed the headline and the preamble from a GATA release yesterday. The interview is 24 minutes long and you can watch it at the GoldMoney Internet site here.
Bayfield Ventures Corp. (TSX.V: BYV) is exploring for gold and silver in the Rainy River District of NW Ontario. The Company’s 100% owned “Burns” Block property adjoins the immediate east of Rainy River Resources’ (TSX.V: RR) world-class gold deposit which includes an indicated resource of 5.72 million ounces of gold, averaging 1.18 g/t, in addition to an inferred resource of 2.25 million ounces of gold, averaging 0.79 g/t. Drilling to date on Bayfield’s Burns Block demonstrates that the ODM17gold zone extends from Rainy River Resources' ground onto the Burns Block. Bayfield is currently carrying out 100,000 metres of diamond drilling on its Rainy River properties. Drill results thus far have been very encouraging. Notable drill results include 60.05 grams per tonne gold and 362.96 grams per tonne silver over 11.2 metres within 26.70 grams per tonne gold and 170.69 grams per tonne silver over 25.5 metres, as well as 35.93 grams per tonne gold and 359.65 grams per tonne silver over 10.0 metres. Bayfield also holds a 100% interest in two other properties in the Rainy River District. Claim blocks “B” and “C” are well located to the immediate east and west (respectively) of Rainy River Resources’ #433 and ODM17 gold zones. Please visit our website to learn more about the company and request information.
The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.
- John Kenneth Galbraith
There isn't a lot to say about the gold and silver price action that I haven't already mentioned further up in this column. Certainly some of yesterday's drop in gold and silver prices that began at 10:45 a.m. was currency related...but as I said earlier, it was obvious [at least to me] that the precious metals prices had to be 'encouraged' to decline.
Yesterday, at the close of Comex trading, was also the cut-off for this Friday's Commitment of Traders Report. The declines in both metals that occurred after 1:30 p.m. Eastern time won't be included in that report. Too bad.
We are nowhere near the lows of a week ago in either silver or gold...yet...so the only speculative longs that have been forced to sell are the ones placed during the rally late last week. Because of that, it's hard to imagine that there will be any improvement in Friday's COT report based on the price action during the reporting week. Of course part of the rallies we saw last week might have been of the short covering variety, but if that was the case, it was well hidden by spread trades.
In Far East trading, both gold and silver got sold off once trading began on their Wednesday. Gold was down ten dollars...and silver was sold down over 60 cents about a half an hour before London opened. The dollar index rose about twenty basis points from its New York close, but has since lost all that and a bit more, so its somewhat of a stretch once again to say that all of gold's losses were currency related. Volumes are similar to what they were at this time yesterday...heavy.
And as I hit the 'send' button at 5:20 a.m. Eastern time, gold is now down about twelve dollars...and silver, which had dipped as low as $27.50...down 70 cents from Tuesday's close...is now 'only' down about 55 cents. The dollar index, which had been down a hair earlier, popped a bit...and is now basically unchanged from yesterday's New York close.
I have no idea what will happen pricewise during the Comex trading session today, but it's pretty much a given that it won't be without incident.
See you on Thursday.