Casey Research Publication
Gold & Silver Daily
"It just feels like the precious metal markets are wound up just about as tight as they can get...especially in silver"
 

¤ Yesterday In Gold & Silver

It was a pretty unexciting day in the gold market on Thursday.  The tiny rally that developed around 3:00 p.m. Hong Kong time, didn't amount to much...and got sold off the moment that Comex trading began in New York.

At that point another tiny rally developed that peaked a few minutes after the 1:30 p.m. Eastern time Comex close...and then sold off a hair into the 5:15 p.m. electronic close.

The gold price closed at $1,725.80 spot...up $6.00 from Wednesday.  There was big gross volume yesterday...and once the last of the December contracts were subtracted out of that total, the net volume showed as 185,000 contracts...most of it in February...the new front month for gold.

The silver price was much more 'volatile'.  After selling off about two bits in Far East trading...it, too, began to rally around 3:00 p.m. Hong Kong time.  And, like gold, it got sold off shortly after Comex trading began.

But the subsequent rally really developed some legs from there, before getting cut off at the knees going into the 10:00 a.m. Eastern time London p.m. gold fix.  From there it more or less traded sideways into the close...although the high tick of the day....$34.52 spot...came about five minutes before the Comex trading session ended.

The silver price closed at $34.27 spot...up 50 cents.  Volume, net of December roll-overs, was pretty decent at 61,500 contracts, most of which was in March...the new front month for silver.

The dollar index opened at 80.30...and traded flat until about 3:30 p.m. in Hong Kong...before rolling over.  The low price tick came at precisely 10:00 a.m. in New York...and the subsequent rally lasted two hours.  About one minute before noon, the index began to sag a bit...and the dollar index closed the day at 80.21...down a whole 9 basis points.

I suppose a case can be made for some co-relation between the dollar index and the gold price up until the 3:00 p.m. London gold fix...10:00 a.m. in New York.  But it's a bit of a stretch after that.

At the moment, it appears that the dollar index is holding onto the 80.00 mark by its proverbial fingernails.

The gold stocks gapped higher right at the open...but by noon [the HUI's nadir] they were down about a percent.  After that they traded mostly sideways, but a late-day rally pulled the stocks higher...and the HUI finished the day up a tiny 0.20%.

Once again the HUI chart over at ino.com was M.I.A....so I had to borrow this one from Kitco.

With silver up 50 cents, most of the silver stocks posted decent gains...but there were more than a few red arrows in the group I track.  Nick Laird's Silver Sentiment Index closed up 1.40%.

(Click on image to enlarge)

The CME Daily Delivery Report for Day One of the December delivery month was a big surprise...at least in gold...as it showed that only 71 gold contracts were posted for delivery on Monday.  I was expecting thousands of contracts...which would be normal.

In silver, there were 571 contracts posted for delivery on Monday within the Comex-approved depositories.  It came as no surprise to me that the two big short/issuers were JPMorgan with 358 from its proprietary in-house account...and the Bank of Nova Scotia with 142 contracts.  The two biggest long/stoppers were JPMorgan in its customer account with 239 contracts...and Barclays with 163 contracts.  The Issuers and Stoppers Report is definitely worth looking over...and the link is here.

There were no reported changes in GLD...but it was the same old story over at SLV, as an authorized participant withdrew 725,937 troy ounces of silver...making it almost 9.5 million ounces withdrawn since the peak on November 9th.

It was another big sales day over at the U.S. Mint...as they reported selling 11,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 75,000 silver eagles.

With this latest sales figure, the U.S. Mint has now surpassed gold eagles sales for January...and that makes November the biggest gold eagles sales month of 2012 so far.

And it was also a busy day at the Comex-approved depositories on Wednesday.  They received 1,655,376 troy ounces of silver...and shipped 624,870 troy ounces of the stuff out the door.  The link to that activity is here.

The chart below is self-explanatory...and comes from a November 26th article by Doug Short over at the advisorperspectives.com Internet site.  The article [with lots of other excellent charts] is headlined Median Household Incomes: The "Real" Story...and I found it in yesterday's edition of the King Report.  The link is here.

(Click on image to enlarge)

Washington state reader S.A. sent me the 1-year Gold:Silver Ratio chart...and as you can see, we're testing new lows for this move down.  Let's all join hands and pray that it continues.

(Click on image to enlarge)

I have the usual number of stories for a weekday...and I hope you find the time to at least skim the parts of each that I've cut and paste below

 

¤ Critical Reads

John Boehner: 'I'm Disappointed In Where We Are' — There's Been 'No Substantive Progress' In Two Weeks

House Speaker John Boehner urged President Barack Obama and Congressional Democrats to put specific spending cuts on the table in negotiations over the fiscal cliff. 

"The Democrats have yet to get serious about real spending cuts"

Boehner took a harsher tone toward the President than he has in recent days, jabbing Obama for scheduling campaign-style fiscal cliff events this instead of working on a deal with Republicans.

This businessinsider.com story was posted on their Internet site just before lunch in New York yesterday...and I thank Roy Stephens for today's first story.  The link is here.

Read more...

Fed's Dudley Sees Unacceptable Joblessness as More QE Weighed

Federal Reserve Bank of New York President William C. Dudley said he is focusing on “unacceptably high” joblessness as he considers whether the central bank should increase its asset purchases.

“I will be assessing the employment and inflation outlook in order to determine whether we should continue Treasury purchases into 2013,” Dudley, 59, said today in a speech at Pace University in New York. “The Fed will promote maximum employment and price stability to the greatest extent our tools permit, and we will stay the course.”

Fed officials are considering whether to step up record accommodation to offset the scheduled expiration next month of Operation Twist, a program swapping short-term Treasuries with longer-term debt. A “number” of Fed officials said at their policy meeting last month that the Fed next year may need to expand its monthly purchases of bonds, according to the minutes of the Federal Open Market Committee’s Oct. 23-24 gathering.

This Bloomberg story was posted on their website mid-morning Mountain Standard time yesterday...and I thank West Virginia reader Elliot Simon for sending it.  The link is here.

Read more...

Starbucks’ new $7 ‘Geisha’ coffee is its priciest ever

Starbucks Corp. has started selling a specialty coffee that costs $7 for a 16-ounce “grande” cup, making it the company’s priciest brew, as customers demand more premium products.

The Costa Rica Finca Palmilera coffee costs $40 for a half- pound bag and $6 for a 12-ounce “tall” cup, Lisa Passe, a Starbucks spokeswoman, said in an e-mail. It’s made from a rare, difficult-to-grow varietal called Geisha. The new coffee is available at only 46 locations in the U.S. Northwest with expensive Clover brewing machines.

“We have loyal reserve customers who are interested in any opportunity to try something as rare and exquisite as the Geisha varietal,” Passe said. “We are now offering more reserve coffees than ever before because of customer demand.”

This story showed up in The Washington Post on Wednesday...and I thank Marshall Angeles for finding it for us.  The link is here.

Read more...

Two-thirds of millionaires left Britain to avoid 50p tax rate

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs.

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.

The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government.

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.

This story was posted on the telegraph.co.uk Internet site early on Tuesday evening...and is another little something I borrowed from yesterday's edition of the King Report.  The link is here.

Read more...

Bank of England Says UK Banks Should Act Now to Raise Capital

British banks need to act now to bolster their defenses against financial shocks, as many have underestimated the cost of loans going sour and future fines for misconduct, the Bank of England said on Thursday.

Underlining a growing sense of urgency about capital defenses, BoE Governor Mervyn King said that while the problem was "manageable", he wanted the banks' regulator to report back by March on what steps banks were taking, and warned that he did not want them to cut lending.

"(Our) primary concern has been to ensure that UK banks have sufficient capital ... so that they are on a solid footing to support economic growth," King told a news conference.

This Reuters story, filed from London, was posted on The New York Times website yesterday morning around 10:00 a.m. Eastern time...and I thank Phil Barlett for bringing it to our attention.  The link is here.

Read more...

Greek deal frays as IMF threatens walk-out on debt buy-back impasse

The International Monetary Fund said on Thursday that it would not disburse funds under its part of the EU-IMF package unless the eurozone delivers on a bond "buy-back" scheme, which is supposed to cut Greece’s burden by 10pc of GDP and is deemed crucial for restoring long-term viability.

If the IMF withdraws, Finland and Holland will also pull out of the programme. "This has become a really big problem," said Raoul Ruparel from Open Europe.

The dispute comes as Moody’s said the EU-IMF deal to unlock €44bn in bail-out payments to Athens merely papers over cracks and does little to alleviate Greece’s "extreme economic and social fragility".

"We believe that the country’s debt burden remains unsustainable," it said. Moody’s warned that there can be so lasting solution until EU states and official creditors agree to write down their holdings, now the lion’s share.

One of these days the bond holders are going to finally realize that they will take a 100% loss on all of Euroland's debt.  This Ambrose Evans-Pritchard commentary was posted on The Telegraph's web site early yesterday evening GMT...and I thank Manitoba reader Ulrike Marx for sending it along.  It's definitely worth your time...and the link is here.

Read more...

Greeks turn to the forests for fuel as winter nears

As austerity tightens its grip, many of the middle class find themselves in a desperate struggle to make ends meet.

It is early Sunday. The sun has barely risen above the chestnut forest that lies somewhere near the crest of Mount Pelion, but loggers' pick-up trucks are already streaming through the muddy slush, their cargo bouncing in the back. Theirs are rich pickings, much in demand as winter envelopes the villages and towns of an increasingly poverty-stricken Greece. As they pass, they do not look up because many do not have permits to do what they have just done.

From their new home a little further on, Yiannis Chadziathanasiou and Natasa Rempati watch the ebb and flow of this traffic. So, too, do the residents of Tsagarada, the picturesque hamlet where the sound of chainsaws pierces the morning air. "Things are getting desperate," says Chadziathanasiou, who clothed Greek celebrities before he moved to the countryside. "You hear all the time of people illegally clearing forests for firewood. It's horrible if you're a green like me."

This story showed up in The Guardian on Wednesday evening GMT...and it's Roy Stephens second contribution to today's column.  The link is here.

Read more...

After a bashing, Bank of Japan weighs 'big bang' war on deflation

Bank of Japan Governor Masaaki Shirakawa was feeling the heat in February when he was summoned to parliament five times to explain what he planned to do to get Japan out of its deflation doldrums.

Shirakawa had been opposed to another round of policy easing, though most members of his policy board were actually arguing for it at that time, according to sources familiar with the bank's internal discussions.

The threat from lawmakers to withdraw the BOJ's charter granting its independence was what changed his mind, the sources said. So the central bank surprised the markets in February by setting an inflation target for the first time of 1 percent and announcing a $122 billion increase in its asset-buying program.

Those five days of intense grilling and the ones that have followed have been among the most intense ever faced by a Japanese central bank governor. Shirakawa has been summoned 29 times so far in 2012, a decade-long record. And the pressure is having a big impact: it was the catalyst for a radical rethink in central bank policy. The full effect of that pivot is expected after April when Shirakawa is due to step down, according to more than a dozen interviews with those involved in the process.

This longish Reuters story, filed from Tokyo yesterday, is a must read...and I plucked it from a GATA release.  The link is here.

Read more...

Four King World News Blogs/Audio Interviews

The first blog is with Dan Norcini...and it's headlined "Fed to Commit to a Staggering $1 Trillion of Q.E. for 2013".  Next comes this blog with Caesar Bryan.  It's entitled "What Japan is Going to Do to Light the Gold Market on Fire".  Lastly is this blog with Citi analyst Tom Fitzpatrick.  It bears the title "Gold & Silver Base Near Completion, Expect Massive Breakouts".  The audio interview is with Dr. Stephen Leeb.

Read more...

Copper Shortage Seen Extending as China Accelerates

Copper supply shortages will extend into the first half of next year as an accelerating Chinese economy more than doubles the pace of growth in global consumption even as mines extract a record amount of metal.

Demand will outpace supply by 316,000 metric tons in the first six months, more than all copper in London Metal Exchange warehouses, before a surplus emerges in the second half, Barclays Plc estimates. Production has lagged behind consumption since 2010, according to the International Copper Study Group. The metal may average $8,300 a ton in the second quarter, 5.1 percent more than now and the most in a year, according to the median of 21 analyst and trader estimates compiled by Bloomberg.

China, which uses 41 percent of the world’s copper, is rebounding from seven quarters of slowing growth after the government approved a $161 billion subways-to-roads construction plan in September. It’s being joined by central banks from the U.S. to Europe to Japan, who also pledged more stimulus. Housing starts in the U.S., the second-largest consumer, reached a four- year high last month and business confidence unexpectedly strengthened in Germany, Europe’s biggest economy.

This Bloomberg story showed up on their website yesterday during the lunch hour Mountain Standard Time...and I thank Elliot Simon for sending it our way.  The link is here.

Read more...

Paul van Eeden says gold is (still) overvalued

Gold is overvalued, market analyst and fund manager Paul van Eeden tells The Gold Report's J.T. Long this week, based on his formula for calculating what he calls "the Actual Money Supply," a measure he created because he found conventional measures of money supply to be inaccurate. By Van Eeden's measure the value of gold is barely half the price reported tonight, $900 per ounce, and gold has been overvalued for five or six years.

Few people in the gold world are likely to argue with van Eeden's criticism of the conventional money supply measures. But there are two problems here.

First is that van Eeden, who for many years wrote a financial letter and market commentaries prior to his retirement from that undertaking in 2008, always argued that gold was overvalued. He has been one of those supposed advocates of gold ownership who, like Kitco's Jon Nadler and CPM Group's Jeff Christian, maintain that everyone should own gold as long as he bought it long ago and that, unlike with real estate, now is never the time to buy.

[Paul stood to be counted with the dark side of The Force...and once his readership discovered that, they backed away...at least that's what I've been told by several of his past subscribers.  Taking the opposite side of the trade in any bull market of this size, is never a good career move. - Ed]

Except for the paragraph directly above, everything else was taken from a GATA release yesterday.  Chris has much more to say on this...and the link to that GATA release...and the embedded Paul Van Eeden interview...is here.

Read more...

Peter Grandich: Space helmets on, Captain Video

Market analyst and mining company consultant Peter Grandich remarks of Wednesday's smashing of the gold price on the New York open, that no one sells that way without a motive to do more than simply liquidate a position. Grandich also shows that there's high fashion in tin-foil hats.

I borrowed "all of the above" from another GATA release yesterday.  Peter's commentary is headlined "Space Helmets On, Captain Video" and it's posted on his website.  It's a short read with an excellent chart...and the link is here.

Read more...

Ned Naylor-Leyland: LBMA smoke signals on silver smell fishy

In a market letter yesterday, Ned Naylor-Leyland of Cheviot Asset Management in London elaborates on remarks made Tuesday to King World News by GoldMoney's James Turk that the London Bullion Market Association is hiding data that would show the silver market in serious backwardation, a sign of shortage.

Naylor-Leyland writes: "It seems to me there are a lot of coincidences layering themselves all over the silver market. ... These backwardation smoke signals are as black as they can be and indicate that a move to much higher ground is imminent."

I thank Chris Powell once again for wordsmithing "all of the above"...as it saves me a lot of work this time of morning.  The Cheviot market letter is titled "LBMA Smoke Signals Smell Fishy" and it's posted on the gata.org Internet site in JPG format linked here.

Read more...

Most Netherlands gold vaulted abroad 'because trading is easier'

"And so is fiddling around with it." - Chris Powell, GATA...29 November 2012

The Christian Democratic Appeal (CDA) and Socialist Party (SP) opposition parties are questioning whether it is desirable for Dutch state gold reserves to be largely stored abroad.

More and more citizens, politicians, and economists in Europe are questioning whether the foreign gold reserves, which their country possesses on paper, are still in fact physically there. Germany decided last month to move to verification.

In the next three years the German Bundesbank is to recall about 4 percent of its gold reserves from America, at the same time looking to see if the ingots are pure. CDA and SP want to know whether the Netherlands will follow the German example and physically check the genuineness of the precious metal.

For now, the answer appears to be no. "Repatriation is not yet on the agenda at the moment," De Nederlandsche Bank spokesman Remko Vellenga said yesterday.

I found this short story embedded in another GATA release.  It was filed from The Hague yesterday...and posted on the nisnew.nl Internet site.  It's a must read...and the link is here.

Read more...

Gold: Solution to the Banking Crisis...Eric Sprott & David Baker

This month's "Markets at a Glance" from Sprott Asset Management is, without doubt, one of the finest essays that these two gentlemen have turned out this year...and it deserves your complete and undivided attention.

"If global banks’ are realistically going to improve their balance sheet diversification and liquidity profiles, gold will have to be part of that process. It is ludicrous to expect the global banking system to regain a sure footing through the increased ownership of government securities. If anything, we are now at a time when banks should do their utmost to diversify away from them, before the biggest “crowded trade” of all time begins to unravel itself. Basel III liquidity rules may be the start of gold’s re-emergence into mainstream commercial banking, although it is still not guaranteed that the US banking cartel will adopt all of the Basel III measures, and they still have years to hammer out the details. If regulators hold firm in applying stricter liquidity rules, however, gold is the only financial asset that can satisfy those liquidity requirements while freeing banks from the constraints of negative-yielding government bonds. And while it strikes us as somewhat ironic that the banking system may be forced to turn to gold out of sheer regulatory necessity, that’s where we see the potential in Basel III. After all – if the banks are ultimately interested in restoring stability and confidence, they could do worse than holding an asset that has gone up by an average of 17% per year for the last 12 years and represented ‘sound money’ throughout history." 

As I said above, Eric and David hit it out of the park with this commentary.  If I had to pick only one story for you to read [and re-read] today, dear reader, this one wins the contest hands down.  It's wonderfully researched...and it's equally obvious that some real hard work went into it.  My congratulations to both of them.

It was posted on the sprott.com Internet site yesterday afternoon...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

Gold was not selected arbitrarily by governments to be the monetary standard.  Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium. - Murray N. Rothbard

With all traders, except those standing for physical delivery, now out of the December contract...we await how the precious metals will react [or be allowed to react] to the upcoming "fiscal cliff".

We've had a lot of strange price activity in the precious metals market over the last week or so...and at least as of this past Tuesday's cut-off, the short positions by JPMorgan Chase/Scotia Mocatta were at multi-year extremes in the Commitment of Traders Report.  But what happened on Wednesday's engineered price decline won't be known until next Friday...a lifetime away.

To go along with that, has been this strange start to the December delivery month in gold...as only 71 gold contracts were posted for delivery.  As I pointed out earlier, normally there would be many thousands on First Day Notice.  Then there has been the huge surge in the sale of gold from the U.S. Mint this week...over 60,000 ounces of eagles and buffaloes in just the last couple of days.  Ted Butler figures that this gold was probably heading overseas...and I didn't argue the point.

It just feels like the precious metal markets are wound up just about as tight as they can get...especially in silver, where the frantic in/out activity on the Comex...and the big draw-downs in SLV during the last two weeks, have been stand out features...along with the recent price activity.

Today we get the weekly Commitment of Traders Report for positions held at the close of Comex trading on Tuesday...and as I've mentioned several times already, the volume and open interest from JPMorgan Chase et al's engineered price decline on Wednesday will not be in that report.

In overnight trading in the Far East on their Friday, both gold and silver have been inching higher...and that has extended into the early morning trading session in London as well.  The dollar hasn't been doing a lot, although it is drifting closer to the 80.00 mark...and is down 11 basis points as of 3:53 a.m. Eastern time.  Volumes are light...and virtually all of it is in the current front months for each metal.  As is usually the case, nothing much of real importance will happen until Comex trading begins at 8:20 a.m. Eastern time this morning...and since it's a Friday...and the last day of the month as well...we should prepare ourselves for any eventuality.

And as I hit the 'send' button on today's column at 5:15 a.m. Eastern time, I see that gold and silver prices have weakened a hair now that London has been open for a bit more than two hours.  The dollar index is still down a bit...and volumes are still light.

Although I hate to beat this to death just about every week at this point, I'd like to remind you one more time that there's still an opportunity to either readjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take out a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

That's more than enough for today.  Enjoy your weekend...and I'll see you here tomorrow.