Gold & Silver Daily
"Ted's comment that "it would be hard for a technical fund to resist going short on this type of silver price pattern" right on the money."

¤ Yesterday In Gold & Silver

The gold market was on Valium right up until the London open on Wednesday morning, as absolutely nothing was happening either in price or in volume.  From there, the price didn't do much, either...but the volume picked up substantially.

By 12:30 p.m. in New York yesterday, gold was only down a dollar or so from Tuesday's close...and then in the space of just a few minutes, the gold price cratered fifteen bucks...and then recovered all of that and a bit more by ten minutes after the close of Comex trading at 1:30 p.m. in New York.

Despite a slight dip in price after that, gold pretty much gained all that back by the close of electronic trading at 5:15 p.m. Eastern...and the gold price closed at $1,644.30 spot...up $2.80 from Tuesday.

Considering the price action, the net volume was way up there at 155,000 contracts.  That's amazing considering the fact that in the first nine hours of trading on Wednesday, only 7,000 contracts had traded...and the rest traded in the following fifteen hours on a net price move of only $2.80.

Like gold, silver did nothing in Far East trading...and volume was non-existent.  Once London opened, the silver price began to slowly creep up toward the $31 mark...and once it broke through that price [$31.10 spot] about 9:20 a.m. in New York, the engineered price decline began in earnest.

There was a secondary low at precisely 11:30 a.m...and the low price tick of the day [$29.87 spot] came at 12:40 p.m. Eastern.  After the low was in, the silver price came roaring back...and then followed the same price path as gold, trading basically sideways from about ten minutes after the close of Comex trading.

Silver closed at $30.71 spot, down twelve cents when all was said and done. Gross volume was north of 107,000 contracts, but once all the roll-over and spreads were removed, net volume dropped all the way down to 26,000 contracts.

Here's the New York Spot Silver [Bid] chart on its own, which shows in minute detail all the pertinent price action from yesterday.

The dollar index chopped quietly lower and bounced off the 79.00 level once at 3:00 p.m. in New York yesterday afternoon.  From there it gained a hair...finishing the Wednesday trading session barely above the 79.00 mark...down about 15 basis points from Tuesday.

Needless to say, the action in the dollar index had nothing to do with what was going on in the precious metals on Wednesday.

The gold stocks opened in positive territory...but didn't do much until after the fifteen dollar take down at 12:30 p.m. in New York.  After that, the stocks really gained some momentum...and the HUI finished up a very respectable 2.76%.

With the odd exception, the silver stocks were on a tear yesterday...and Nick Laird's Silver Sentiment Index close up 3.03%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 26 gold and 12 silver contracts were posted for delivery on Friday.  As I said, it's going to be quiet for the rest of the April delivery month. The link to what action there was, is here.

For the second day in a row, there were no changes reported in either GLD or SLV...and no report from the U.S. Mint once again, either.

The Comex-approved depositories reported receiving 600,284 troy ounces of silver on Tuesday...and shipped 621,471 ounce on the door.  All the action was over at Brink's, Inc...and the link to that is here.

Silver analyst Ted Butler posted his mid-week commentary to his paying subscribers on Wednesday...and here are two free paragraphs...

"Silver got hammered right out of the gate on Monday morning (actually Sunday evening), along with other relevant markets like gold and copper. The silver smash followed the usual script of the price first falling sharply on very low volume (HFT-driven) and once the price was put down, more volume came in on the lower price levels. Undoubtedly, the trading was characterized by speculative selling and commercial buying, same as it ever was. There should also be little doubt that the price take down was another deliberate attempt to set off as much speculative selling as possible. There was nothing coincidental about what took place.

"My guess is that the commercials were successful (once again) in inducing a fair amount of speculative selling in silver on Monday and this should be reflected in this week’s COT report. One thing I will be looking for in Friday’s report is if there was an increase in new short selling in the managed money category in the disaggregated version of the COT report. This is the category of the technical funds that follow price patterns, buying on rising prices and selling on falling prices. Going into Monday’s sell-off, the technical funds had liquidated enough long contracts to be close to where they were at the extreme COT readings of this past December, but had not yet added enough new short positions to approach where they stood back then. Monday’s silver takedown, continued through today [Wednesday - Ed], took out the lows back to January and it would be hard for a technical fund to resist going short on this type of price pattern. After the sell-off, I suspect both further long liquidation and new shorting in this category, perhaps enough to mark a bottom. The good news is that we won’t have to wait long to see if this activity occurred, at least for Monday’s activity."

Washington state reader S.A. provided a couple of charts for today's column.  The first shows the amount [in billions of euros] that European banks are exposed to Commercial Real Estate.

His second chart came out of a Wall Street Journal story on Monday...and here are the first two paragraphs from this 'Subscriber Protected' story...

"Hundreds of small banks can't afford to repay federal bailout loans, a top watchdog will warn Wednesday in a report that challenges the government's upbeat assessment of its financial-system rescue."

"Christy Romero, special inspector general for the Troubled Asset Relief Program, said 351 small banks with some $15 billion in outstanding TARP loans face a "significant challenge" in raising new funds to repay the government."

Reader Scott Pluschau had a few things to say about the current condition of the U.S. dollar index in his blog yesterday...and if you're interested, the link is here.

I have the usual number of stories for you today...and I hope you can find the time to read the ones you find of interest.


¤ Critical Reads

Bernanke Too Upbeat? Hedge Funds Worried

Looking at growth – “Bernanke gave the market what it wanted to hear,” says trader Tim Seymour. And he painted a better jobs picture too.

And he said the Fed wouldn't hesitate to take further action, should the economy require additional support.

All told that sounds like a recipe for a rally, right?

Top hedge fund manager Anthony Scaramucci says that’s not the case.

After talking with his smart money peers, Scaramucci tells us the hedge fund community feels Bernanke was too positive.

“It sounds like he’s jaw boning and trying to talk up the market. That sends the wrong signal,” Scaramucci says.

This story showed up over at the website yesterday...and I thank West Virginia reader Elliot Simon for sending it along.  The link is here.


Two King World News Blogs on the Fed Statement and Bernanke press conference

The first is with Richard Yamarone, senior economist at Bloomberg Brief.  It's headlined "We Are Literally Witnessing a Collapse"...and the second is with Bill Fleckenstein.  The headline to that reads "Fed Idiots Wrong, Big Problems in Europe & US".


So Long, US Dollar: Marin Katusa, Casey Research

There's a major shift under way, one the US mainstream media has left largely untouched even though it will send the United States into an economic maelstrom and dramatically reduce the country's importance in the world: the demise of the US dollar as the world's reserve currency.

For decades the US dollar has been absolutely dominant in international trade, especially in the oil markets. This role has created immense demand for US dollars, and that international demand constitutes a huge part of the dollar's valuation. Not only did the global-currency role add massive value to the dollar, it also created an almost endless pool of demand for US Treasuries as countries around the world sought to maintain stores of petrodollars. The availability of all this credit, denominated in a dollar supported by nothing less than the entirety of global trade, enabled the American federal government to borrow without limit and spend with abandon.

The dominance of the dollar gave the United States incredible power and influence around the world… but the times they are a-changing. As the world's emerging economies gain ever more prominence, the US is losing hold of its position as the world's superpower. Many on the long list of nations that dislike America are pondering ways to reduce American influence in their affairs. Ditching the dollar is a very good start.

This rather long read was posted on the Casey Research website yesterday...and is well worth your time if you have it.  I thank Roy Stephens for letting me know about it.  The link is here.


UK economy in double-dip recession

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012.  A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.

A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.

BBC economics editor Stephanie Flanders says it "adds to the picture that the economy is bumping along the bottom".

This story was posted over at the website yesterday...and is Roy Stephens first story of the day.  The link is here.


Europe faces Japan syndrome as credit demand implodes: Ambrose Evans-Pritchard

Europe (minus Germany) looks more like post-bubble Japan each month.

The long-feared credit crunch has mutated instead into a collapse in demand for loans. Households and firms are comatose, or scared stiff, in a string of countries.

Demand for housing loans fell 70pc in Portugal, 44pc in Italy, and 42pc in the Netherlands in the first quarter of 2012. Enterprise loans fell 38pc in Italy. The survey took place in late March and early April, and therefore includes the second of Mario Draghi’s €1 trillion liquidity infusion (LTRO).

The ECB said net demand for loans had fallen "to a significantly lower level than had been expected in the fourth quarter of 2011, with the decline driven in particular by a further sharp drop in financing needs for fixed investment." Demand fell 43pc for household loans, and 30pc for non-bank firms.

This longish AE-P blog was posted in The Telegraph yesterday...and I consider it a must read.  It's Roy Stephens second offering of the day...and the link is here.


That's Not Rain - That's a Lie

There is a famous scene in the 1976 film, The Outlaw Josey Wales, starring Clint Eastwood as the eponymous hero. During a particularly brilliant exchange, the bounty hunter Fletcher, hot on the heels of Wales, comes out with an inspired put-down to the cowardly senator who is trying to pull the wool over his eyes.

Squinting into the sun, saloon door at his back, chewing tobacco, Fletcher disdainfully hisses: “Don’t piss down my back and tell me it’s raining.”

The expression, which is originally from South Carolina, beautifully captures the moment when someone who is being lied to turns the tables on the person who is lying to him.

When it comes to the fiscal compact, the EU is pissing down our backs and telling us that it is raining. And the fact that the government is also going with this line implies that it is party to this falsehood.

This in-your-face story was written by economist, broadcaster and author, David McWilliams and is posted over at his website in Ireland.  Not too many shades of grey in this piece...and it's also worth reading if you have the time.  It's Roy's third contribution to today's column...and the link is here.


Brussels to relax 3pc fiscal targets as revolt spreads

Officials believe they have enough legal leeway to relax budget deficit targets for eurozone states without violating the Stability and Growth Pact, though the plans risk a serious showdown with Germany. "The Stability Pact is not stupid. There are elements of flexibility when growth is lower than expected," said a senior Commission strategist.

Current EU rules stipulate that every state must cut its deficit to 3pc of GDP by next year but this is not written in stone. "So long as a country is doing its homework and taking 'effective action', we can show some flexibility," the strategist said.

The shift in thinking predates the surge of votes for Marine Le Pen's National Front in France's elections and the collapse of the Dutch government over austerity cuts, but the political upheaval has added fresh urgency.

This is another piece from Ambrose Evans-Pritchard...and it was posted on The Telegraph's website yesterday evening.  I thank Roy once again for bringing this story to our attention...and the link is here.


The Secret System that Blew Another Hole in the Euro: Martin Hutchinson

This may sound arcane and boring, but I promise you it's not.

What I've learned will blow yet another hole in the already shaky euro.

It begins with Bernd Schunemann, a law professor at the Ludwig-Maximilian University in Munich. He has sued the German Bundesbank over its participation in the Eurozone "Target-2" settlements system.

Now I'll be the first to admit that yes, my eyes do glaze over when thinking about settlements systems-and I used to be a merchant banker.

But looking at the details of the case I had something of a banker's moment of clarity.

Yes, this article does have a tendency to make your eyes glaze over long before you get to the end, but it's just another brick in the wall for the euro.  I posted a similar piece on this subject several weeks ago out of Martin brings fresh eyes to this issue.  It was posted over at the website yesterday...and I thank reader Carl Lindfors for bringing it to my attention.  The link is here.


Spain and Italy borrowing rates soar in latest auctions

Spain's borrowing rate nearly doubled in a short-term debt auction as investors fretted over the euro zone's determination to deal with its debts. 

And Italy raised nearly €3.5 billion in a short-term bond sale today but at sharply higher interest rates amid fresh concerns over the euro zone outlook, the Bank of Italy said.

The Spanish treasury said it raised €1.933 billion but the timing could hardly have been worse, with financial markets slumping on concern that Europeans are wavering in their commitment to austerity.

This story was posted on the website on Tuesday...and is a story that I 'borrowed' from yesterday's edition of the King Report.  The link is here.


Greek central bank chief warns of euro exit

Greece's central bank governor said his country would have to leave the eurozone if politicians do not stick to the austerity programme after elections due to take place on 6 May.

"What is at stake is the choice between an orderly, albeit painstaking, effort to reconstruct the economy within the euro area, with the support of our partners, or a disorderly economic and social regression, taking the country several decades back, and eventually driving it out of the euro area and the European Union," George Provopoulos said in a speech on Tuesday (24 April).

Meanwhile the economic outlook for 2012 is worse than expected. Instead of a 4.5 percent of GDP recession, the central bank on Tuesday estimated that the economy would shrink by five percent this year, Greece's fifth year of recession.

This story was filed from Brussels yesterday...and was posted over at the website.  I thank Roy Stephens once again...and the link is here.


Alasdair Macleod: A plea for sanity

Economist Alasdair Macleod elaborates on recent observations that gold is working its way back into the international financial system, as both bank collateral and as a trade currency. Macleod writes: "The fly in the ointment is politics. Ever since the Nixon shock in 1971, the U.S. government has tried to convince the world that gold has no monetary role. It would require the U.S. Treasury to accept that gold might be superior to the paper dollar after all. No doubt that U-turn can be performed, but the concern would be that gold being officially recognized as a form of money would disadvantage the dollar and hand substantial power to the Chinese, who have been accumulating gold from their own mines."

I found this short essay in a GATA release yesterday.  It's posted over at the website...and it's worth the read.  The link is here.


Gold Stocks: Where Is The Bottom?

Gold and silver mining stocks have sold off by roughly 30% from their 52-week highs based on the PHLX Gold/Silver Sector Index (XAU) and by roughly 32% based on the Amex Gold Bugs Index (HUI). In comparison, gold is down approximately 14% from its nominal all time high in 2011 while silver is down approximately 37%.

The XAU/Gold ratio suggests that gold and silver miners are oversold. In fact, the shares of some companies are trading below their net asset values.

This essay, along with some most excellent charts, was posted over at the website yesterday...and I thank Roy Stephens for his final contribution in today's column.  It's worth reading...and the link is here.


Gold market riggers don't care about being caught anymore, Embry says

Sprott Asset Management's John Embry today told King World News yesterday that the Western gold price suppression scheme's agents are now so obvious that they don't care anymore about being caught, but the East is on to them and obtaining metal at bargain prices.

I borrowed the headline and the introductory paragraph from a GATA release yesterday...and the link to this must read KWN blog that Eric has headlined "Market Manipulation: More Blatant and There's More of It" is here.



¤ The Funnies

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¤ The Wrap

The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, "the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. ~ Senator Barack H. Obama, March 2006

If there ever was a 'Weird Wednesday"...yesterday would have qualified.  I don't know what to read into yesterday's price action in gold.  Price and volume activity started out as almost non-existent...and by the end of the New York trading session, volume had blown way out, but the price change from Tuesday was only a couple of bucks.  I'd bet that it was mostly of the high-frequency trading variety.  I took a peek at the preliminary open interest change from the SEC website, but I'm not prepared to read anything into that.

Silver was the same old, same old...with JPMorgan et al doing their usual thing.  I'd love to see all this data in Friday's Commitment of Traders Report but, alas, it occurred one day after the cut-off, so we won't know for sure what happened until next Friday...if subsequent trading action may obscure it.

Ted Butler was most likely correct in his assessment of the fact that there was fresh shorting by the technical funds on yesterday's price action.  Ted's comment that "it would be hard for a technical fund to resist going short on this type of silver price pattern" right on the money.

Here's the 1-year silver chart.  It's hard to say if the true bottom is in or not, but as Ted pointed out, we probably won't know until after the fact.

(Click on image to enlarge)

Here's the 1-year gold chart as well...and it beats me whether we've seen the bottom in gold or not.  Ted figures that if they 'da boyz' want to go after more spec longs in silver, they may do it by beating the crap out of the gold price.  We'll see.  But as I said yesterday, if we do go lower from here in either metal, it will have zero to do with supply and demand...and everything to do with JPMorgan et al.

(Click on image to enlarge)

In Far East price action on their Thursday, gold sold off a hair at the beginning of the day...and then had rallied a bit after that...and as of 8:30 a.m. local time in London, the price was up about ten bucks.  Silver traded flat into the afternoon in Far East trading...and began to rally a bit starting around 1:30 p.m. Hong Kong time.  Net volumes in both metals are substantially heavier than this time on Tuesday...although silver's net volume is still pretty light all things considered.

And as I hit the 'send' button at 5:16 a.m. Eastern time, I note that both gold and silver are off their early London highs.  Gold is only up about vie bucks...and silver is up about a dime from Tuesday's New York close.  Volumes remain light...and the dollar index is now trading slightly below the 79.00 mark.

I shan't hazard a guess as to what may happen in New York when it opens today.  I'd like to think that the bottom is in...but I lost the ten bucks I bet in this space yesterday, so I shall remain quiet on the subject, as I hate to be wrong at the top of my do we all.

Of course I'm always hoping for the best...and I was particularly encouraged by the price action of the precious metal shares...but I'm always on the lookout for "in your ear" as well.

I hope your day goes well...and I'll see you here on Friday.