It was a very quiet trading day for both gold and silver yesterday.
In gold, the high tick came shortly after 3:00 p.m. Hong Kong time...and from there, the gold price wandered around within five bucks of the $1,640 spot price for the rest of the Wednesday trading day.
Gold closed at $1,643.00 spot...up $10.80 on the day. Volume, net of all roll-overs out of the February contact, was around 130,000 contracts...almost the same as Tuesday's volume. This is quite big volume considering the lack of price movement.
The silver price didn't do too much either. It was pretty steady until 2:00 p.m. Hong Kong time...and then rose to its high of the day at 10:00 a.m. in London, before getting sold off to its low of the day about five minutes after Comex trading began in New York.
The subsequent price rally ended around 11:40 a.m. Eastern time...and then declined about 30 cents going into the close of Comex trading. From there it traded pretty flat until the close of electronic trading at 5:15 p.m. Eastern.
Silver closed just under the $30 mark for the second day in a row, at $29.97 spot...up 3 whole cents. Net volume was 35,000 contracts...a few thousand less than Tuesday.
As I mentioned in 'The Wrap' yesterday, the U.S. dollar index rose and fell about 25 basis points between the New York open on Tuesday evening...and 5:00 a.m. Eastern time on Wednesday morning, which was 10:00 a.m. in London.
Then it blasted 50 basis points higher in two hours flat, crawling up to its high of the day around 11:30 a.m. in New York. From there it declined gently into the close. The dollar index closed up about 45 points on the day.
The approximately ten dollar decline in the gold price [that accompanied the 50 basis point rally in the dollar] between 10 a.m. and noon in London is pretty obvious on the Kitco gold chart above...but it wasn't much of a decline for such a big dollar move. And by the time the dollar rally was done around 11:30 a.m. Eastern, the gold price had rallied back to within a few bucks of its starting point at 10:00 a.m. in London...5:00 a.m. Eastern time. That's a bullish sign in my books.
On the bad news of out of Hecla Mining yesterday, the HUI gapped down at the open. The low came at 10:30 a.m. Eastern...and then the rest of the gold stocks spent the day crawling higher. I'm sure that if it hadn't been for the 21% pounding in Hecla's stock price, the HUI would have finished in positive territory yesterday. As it was, the HUI finished well off its low, closing down only 1.02%.
With the odd exception, the silver stocks didn't do overly well...and with Hecla Mining being one of the major components of Nick Laird's Silver Sentiment Index, it got hit for a 2.77% loss yesterday. BIG GOLD editor Jeff Clark informed me that Hecla will lose about 3.5 million ounces of silver production because of the closure of the Lucky Friday mine...if it stays closed all year, that is.
(Click on image to enlarge)
The CME's Daily Delivery Report was a bit of a surprise. Only 8 gold contracts were posted for delivery on Friday...but a very chunky [for this time of month] 125 silver contracts were also posted for delivery. As usual, it was Jefferies on the short/issuer side...and the Bank of Nova Scotia and JPMorgan as the only long/stoppers. The link to the action is here.
There was a very minor withdrawal from the GLD ETF yesterday...13,239 troy ounces...which was probably a fee payment. There were no reported changes in SLV.
There was no sales report from the U.S. Mint yesterday, either.
The Comex-approved warehouses are still busy places these days. Tuesday's report showed that 701,831 troy ounces were shipped in...and 426,528 troy ounces were shipped out. The link to that action is here.
Silver analyst Ted Butler posted his mid-week commentary for his paying subscribers yesterday...and here are the usual two free paragraphs...
"The main issue with the CME is the inherent conflict between its role as a for-profit corporation...and as a self-regulator. Let’s face it, allowing any for-profit entity to essentially regulate itself, is just asking for trouble. And that is the problem. This conflict is at the heart of the new criticism...yet, curiously, is not mentioned often enough. Instead, observers of the current drama involving the CME and MF Global are misled by sound bites and clutter that fail to mention any inherent conflict of interest on the CME’s part. That’s because the CME is a master at spin-doctoring."
"Because the CME is more interested in profit at any cost, not only has its self-regulatory role been compromised, it has actually enacted and encouraged developments which are downright hostile to the efficient functioning of its markets. You need not look further than the scourge of High Frequency Trading (HFT) for an example of what the CME has done wrong. HFT does nothing to enhance our markets, except generate excessive trading fees for the CME. HFT works against the very purpose for our futures markets of legitimate hedging because HFT is nothing more than day trading gone mad. Legitimate hedgers have no use for frantic day trading. High Frequency Trading also allows for markets to be manipulated easier."
I have a decent number of stories for you today...and most of them are precious metals related. I hope you have the time to spend on them.
The U.S. Commodity Futures Trading Commission proposed limits on banks’ proprietary trading and hedge fund investments under the Dodd-Frank Act’s Volcker rule.
The CFTC voted 3-2 to propose the ban, becoming the last of five regulators to seek public comment on the proposal. Today’s vote opens the measure to 60 days of public comment.
The rule, named for former Federal Reserve Chairman Paul Volcker, was included in Dodd-Frank to rein in risky trading at banks that benefit from federal deposit insurance and Fed discount window borrowing privileges.
This can't come too soon as far as I'm concerned. If passed...JPMorgan, for one, will no longer be able to trade commodities [especially the four precious metals] in their proprietary [in-house] trading account.
This Bloomberg story from yesterday is courtesy of Washington state reader S.A...and the link is here.
While America focused on New Hampshire, a classic example of revolving-door politics took place in Washington, going almost completely unnoticed. It’s a move that ranks up there with the hire of Louisiana congressman Billy Tauzin to head the pharmaceutical lobbying conglomerate PhRMA -- at a salary of over $2 million a year -- immediately after Tauzin helped ram through the Medicare Prescription Drug Bill, a huge handout to the pharmaceutical industry.
In this case, the hire involves Walter Lukken, who toward the end of the Bush years was the acting head of the Commodity Futures Trading Commission. As the chief regulator of the commodities markets, it was Lukken’s job to spot and combat speculative abuses and manipulations that might have led to artificial price hikes and other disruptions.
Lukken has just been named to head the Futures Industry Association, or FIA, the chief lobbying arm of futures investors.
This follows the Tauzin pattern of revolving-door hires: a government official carries water for a powerful industry, then moves on to take the cushy job with the industry’s lobbying arm once he leaves office.
Matt Taibbi over at Rolling Stone magazine really does a number on Lukken...and rightfully so. This is Roy Stephens first offering of the day. It's a must read...and the link is here.
Here's a 25-minute interview with Casey Research's chief economist, Bud Conrad, that he had with Jim Puplava over at the financialsense.com website on Tuesday.
They discuss the ongoing European financial crisis and its implications for Europe and the rest of the world. Bud also sees more money-printing ahead, followed by higher gold prices.
I would think that it's well worth your time if you have it...and the link is here.
An Iranian nuclear scientist was blown up in his car by a motorbike hit man, prompting Tehran to blame Israeli and U.S. agents but insist the killing would not derail a nuclear program that has raised fears of war and threatened world oil supplies.
The fifth daylight attack on technical experts in two years, the magnetic bomb delivered a targeted blast to the door of 32-year-old Mostafa Ahmadi-Roshan's car during Wednesday's morning rush-hour. The chemical engineer's driver also died, Iranian media said, and a passer-by was slightly hurt.
Israel, whose military chief said on Tuesday that Iran could expect to suffer more mysterious mishaps, declined comment. The White House, struggling for Chinese and Russian help on economic sanctions, denied any U.S. role and condemned the attack.
This Reuters story was filed from Tehran at 10:43 p.m. Eastern time last night. [I note with some amazement that sometime between midnight and 4:00 a.m. Eastern time, Reuters changed the headline to read "U.S. wins Japan support over Iran nuclear program". The 'thought police' are everywhere when war is in the air and, as Winston Churchill so famously remarked..."The first casualty of war, is the truth."] I thank Roy Stephens for his second story of the day. It's a must read, of course...and the link is here.
Here's the same new story posted over at the Russia Today website.
War correspondent Eric Margolis told RT that the latest assassination, which he describes as an international crime, will not seriously affect Iran’s nuclear program. “It may slow things down, but it won’t end them because Iran is a big country, it has a large cadre of scientists. It will continue to work.”
According to Margolis, possible retaliation from Iran could be directed against Israeli or American scientific figures or diplomats in the region. “The Iranians are very anxious to get revenge, but they are being cautious because war seems not so far away in the Gulf,” he added.
Roy Stephens sent me this story as well...and the link is here.
Mining entrepreneur and gold advocate Jim Sinclair told King World News yesterday that gold's plunge at the end of 2011 was "an operation" and that he agrees with the Tocqueville Gold Fund's John Hathaway that a short squeeze is imminent.
I borrowed the above introductory paragraph from a GATA release yesterday...and the link to the KWN blog is here.
Gold is investors' favorite asset for 2012, and developed markets are preferred over emerging markets when it comes to putting money in stocks or bonds, according to a poll carried out by Japanese investment bank Nomura.
Of the 164 investors who took part in Nomura's poll, 19.5 percent said they would choose to buy gold and hold it until the end of the year. Other favored assets were stocks and investment-grade corporate bonds in developed markets, with about 13 percent of responses.
This cnbc.com story was posted on their website yesterday morning...and I thank reader Phil Barlett for sharing it with us. The link is here.
Strong buying demand out of China pushes gold higher for a second day, rising 0.5% to $1,639.60 an ounce. Despite a rise in the dollar index, gold bullishness prevailed on record imports from Hong Kong ahead of the Chinese New Year later this month.
Gold prices are up 2% so far this week, now sitting at a 4-week high. The precious metal also closed above the 200-day moving average of $1,632.69 an ounce; signaling what could be a significant shift in sentiment.
"We predict that $2,400 is a reasonable target for this year," says Donald Doyle, Chairman & CEO at Blanchard & Co.—the largest retail metals dealer in the U.S. "The principle factors that are pushing gold higher now have really been in place for some time."
This 4:27 minute video was posted over at the finance.yahoo.com website yesterday...and I thank Casey Research's own Alex Daley for sending it along. The link is here.
GoldMoney founder and GATA consultant James Turk told Bull Market Thinking's Tekoa Da Silva that there are two kinds of gold -- real metal and paper -- and the closer you get to the real metal, the higher the price.
This interview was done yesterday...and is posted over at the bullmarketthinking.com website...and the link is here.
Over the past 11 years, both metals have not only shot up in price, but have dramatically outperformed every fiat currency on earth.
Gold and silver prices have been in effective lockdown recently because of the ongoing global slump. This comes as no surprise to folks who follow gold closely.
After all, western government have feared that gold might be seen as a better store of value than sovereign debt or other financial assets in their rapidly failing systems of fiat currencies.
John's essay was posted over at the Investor's Digest of Canada on December 30th. It's a must read...and the link is here.
Eric King sent me this John Embry blog shortly before midnight. It's well worth the read...and it's posted over at the King World News website. The link is here.
Wednesday brought news that gold imports to China through Hong Kong set a fresh monthly record in November of more than 100 tonnes.
That's quite a chunk however you weigh it. China's full-year 2010 imports are estimated to have been some 245 tonnes. Domestic gold mining production (now the biggest in the world, and trapped by a ban on gold exports) totaled some 340 tonnes. Already last year, record monthly gold imports from Hong Kong in October had led one analyst, Tom Kendall of Credit Suisse, to forecast total 2011 imports of perhaps 490 tonnes. Double the 2010 total by weight, that would represent a 150% rise in Chinese gold imports by Yuan value, and come on top of the 10% rise in domestic gold mining output to 375 tonnes forecast in August by the Ministry of Industry and Information Technology.
Ever-more Chinese wealth, in short, is going to gold, and coupled with households' fear of inflation, this new debate over actively devaluing the currency means gold investment demand is only likely to rise again. That would depress China's trade surplus, despite its world-beating mine output. Which given how panicked Beijing is about growth, might perhaps put its friendly policy towards gold at risk.
This story was posted over at the safehaven.com website yesterday...and is Roy Stephens last offering in today's column. It's a must read, of course...and the link is here.
2011 was a good year for gold bullion, up 11.3%, but a tough year for gold stocks which declined 18.3% based on the XAU index of gold and silver stocks. We addressed the reasons for the disparity between the performance of gold bullion and gold mining stocks at length in our web site article (The Golden Mulligan-September 2011). We concluded then, and still maintain, that gold mining equities represent a compelling investment strategy to participate in the secular bull market in gold bullion, and conversely, the secular bear market in paper currencies.
Since its peak price of $1,921/ounce on September 6 of this year, the metal has corrected 18.6% to its current price of $1,564. The four month pullback has taken its toll on gold mining shares, which declined 20.4% during the same period. For reasons to be elaborated in the following paragraphs, we believe that the decline in both the metal and the shares has run its course. We also believe that this painful correction has set the stage for significant new highs in both the metal and the shares in 2012.
I'd like to thank reader U.D. for bringing this excellent John Hathaway commentary to our attention. It's posted over at the tocqueville.com website..and the link is here. It's well worth your time.
Great Panther Silver Limited (TSX: GPR) is one of the fastest growing primary silver producers in Mexico. The Company’s organic growth strategy will see output from mining operations increase by 30% in 2011 to 3.0 million ounces silver equivalent and again by 27% in 2012 to 3.8 million ounces silver equivalent, providing strong leverage to rising silver prices.
The Company has also been growing its resource and reserve base at both 100% owned operations. A new resource/reserve estimate was released for the Guanajuato Mines in late December 2010 and a new resource/reserve estimate for the Topia Mines is expected during the first quarter is 2011. The Company is also advancing drilling activities at its new discovery at the San Ignacio property in Guanajuato. Great Panther continues to replace mined ounces, grow resources and reserves at both operations, and is targeting a 10 year mine live at each.
Great Panther is committed to becoming a leading primary silver producer by acquiring, developing and profitably mining precious and base metals in Latin America.
The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. - Ernest Hemingway
It was pretty much a nothing sort of day in both gold and silver on Wednesday, as both metals didn't do much of anything. The preliminary open interest numbers were down a couple of thousand contracts in gold...and a few hundred contracts in silver.
One thing that I did notice, was that January open interest in silver had been sneaking up slowly during the week, with 102 contracts added yesterday. That was certainly associated with the fairly large delivery notice in silver [125 contracts] that was reported by the CME last evening...which I mentioned close to the top of this column.
Not much happened during the Far East trading session during their Thursday...and not much is going on during the first hour of trading in London, either. As of 3:40 a.m. Eastern time, gold is up about four bucks...and silver is up about 15 cents. Volumes in both metals are very light...and the dollar index is flat.
About ninety minutes has gone by since I wrote that last paragraph. It's now 10:10 a.m. in London...5:10 a.m. Eastern time...and both gold and silver are showing some signs of life. Gold is now up about eight bucks...and silver is up a hair over 40 cents. Volume has picked up a bit as well...and the dollar index is now down about 20 basis point. It's nothing to get excited about, but it's more price action than there's been since the New York open at 6:00 p.m. Eastern last night.
Tomorrow we get the new Commitment of Traders Report...and based on the price activity of the reporting week that ended on Tuesday, I wouldn't be at all surprised if there was deterioration in the Commercial net short positions in both gold and silver, as I'm sure that the technical funds were covering their short positions...and the small commercial traders were selling out to them and taking profits.
This is not what either Ted Butler or myself is hoping for, but that's the most plausible outcome at the moment. We'll see how much truth there is to this speculation tomorrow at 3:30 p.m. Eastern time.
That's all I have for today. I hope your Thursday goes well...and I'll see you here tomorrow.