Gold & Silver Daily
"The other thing that I'm less than enamoured with is the overbought condition that currently exists in gold."

¤ Yesterday In Gold & Silver

The gold price wandered around in a five dollar price range all through Far East and morning trading in London...with the London high coming at 9:00 a.m. GMT...and the London low [and low of the day] coming shortly before 1:00 p.m. GMT, which was about half an hour before the Comex opened in New York.

From that low, gold rallied a bit into the London p.m. gold fix, which was 10:00 a.m. Eastern. After the 'fix' was in, gold rallied up to a bit over $1,760 spot before a not-for-profit seller showed up to sell it off once again. There was talk that that rally at the p.m. gold fix was because Bernanke opened his mouth.  A second rally attempt over $1,760 also got turned back in the electronic market after the Comex close.

Gold finished at $1,758.40 spot...up $15.40 on the day.  Net volume was around 128,000 contracts.

The silver price followed the gold price path right to the minute everywhere on Planet Earth yesterday...except the price was more 'volatile'.  By the time the smoke cleared, silver ended the New York trading session at $34.36 spot...up 65 cents on the day.  Volume was pretty heavy at 41,000 contracts, most of which would have been of the high-frequency trading variety.

The dollar index traded with a slight positive bias yesterday...and basically spent most of Thursday trading in a 20 basis point range of 78.95.  But having said that, there was certainly some co-relation between it and the gold price throughout the entire day.

The gold stocks pretty much followed the gold price during the New York trading day...but even though its price finished virtually on its high of the day, the gold stocks never really recaptured their gains after the one hour sell-off between 11:30 and 12:30 a.m. in New York.  If you check the Kitco gold chart above, you'll see what I mean.  But having said all that, the HUI still managed to finish up 1.79% on the day.

The large cap silver stocks did just OK...although some of juniors did much better.  Nick Laird's Silver Sentiment Index closed up only 0.91%.

(Click on image to enlarge)

For 'Day 3' of the February delivery month in gold, only 54 contracts were posted for delivery on Monday...but another 73 silver contracts were posted for delivery as well.  It was mostly JP Morgan, Bank of Nova Scotia and Deutsche Bank in gold...but in silver it was the same old, same old pattern that started at the beginning of January.  Jefferies was the short/issuer on all 73 contracts...and it was Morgan and the Bank of Nova Scotia as the biggest long/stoppers, although Jefferies stopped 15 of the 73 contracts themselves.  The link to the Issuers and Stoppers Report is here.

As I said a couple of times before, I sure don't know what to make of this 'love triangle'...and even Ted Butler is wondering what's going on under the hood over at Jefferies these days.  Jefferies has delivered almost every one of the 1,600 silver contracts that have been issued since January 3rd.  That's a lot of silver. 

There were additions to both GLD and SLV yesterday.  Authorized participants deposited 194,390 troy ounces of gold, along with 417,507 troy ounces of silver.

The U.S. Mint had a very tiny sales report yesterday.  They sold 1,000 ounces of gold eagles, along with 45,000 silver eagles...and that was it.

It was quite a different story over at the Comex-approved depositories on Wednesday, as they had their busiest in-and-out day in silver that I can remember...and I can remember quite a bit.  They reported receiving a staggering 3,819,280 troy ounces...and shipped a monstrous 2,626,239 troy ounces out the door, for a net gain of 1,193,041 ounces.  Virtually all the action was at Brink's and Scotia Mocatta.  The report is definitely worth looking at...and the link is here.

Well, the data and charts on the London a.m./p.m. gold bias that I have been going on about for the last three weeks or so, was picked up by two of the most respected/well known U.S. gold analysts yesterday...John Brimelow and Dennis Gartman.  Here's what Dennis had to say in yesterday's edition of The Gartman Letter...

"Finally, our friend, John Brimelow, wrote a most interesting piece yesterday that we thought worthy of reporting here this morning. John wrotegiving “aid and comfort” to the conspiratorialist crowd but being interesting nonetheless… that "The recent discussion of the contrast between the systematic selling between the AM and PM fixes (tantamount to selling in the early NY floor session) and the tendency to overnight firmness has been well illustrated by a graph published at Ed Steer’s Casey Research commentary today (see attachment). Steer adds...“For the month of January, the overnight bias showed an increase of $169...or 10.4%. The London intraday bias was -0.02%. So here we have one of the biggest bull market rallies in January in recorded history...and the cumulative move during the 4.5 hour intra-London trading hours during January was actually negative. This is Anglo/American price fixing scheme laid bare.”

"We are not conspiratorialists here at TGL and we find the “energy” expended by those always trying to prove conspiracies to be a great waste of mental capital that could be better used elsewhere. That said, this is interesting nonetheless. As they say, “Timing is everything.”

Neither John nor Dennis would have reprinted this if they didn't know it to be true and, true to his nature, Dennis had to hedge his approval by patronizing all us 'conspiracy theorists'.  But he at least spelled my name right!

I met John Brimelow at the GATA conference in London last August...and he is every inch the reserved English gentleman.  I met Dennis Gartman at a David Tice-sponsored cocktail party at a gold conference in New Orleans several years back...and as long as he's got a couple of drinks in him...and no TV cameras or a microphone nearby, he's a real fun guy to be around.

What I didn't include in my commentary that both John and Dennis referred to, was the actual a.m./p.m. London gold fix data itself.  Nick Laird suggested that I post it for all to see...and here it is.

Before getting around to my usual list of stories, here's a graph that was published by the St. Louis Fed the other day.  It shows the velocity of the M1 money supply.  Until it's very comfortably over the 1.0 mark, the Fed will print with abandon.  The big question is, will they be able to slow it down once it really takes off?  I thank West Virginia reader Elliot Simon for sending this along.

(Click on image to enlarge)


¤ Critical Reads

MF Global Risk Chief Switch Stalled Euro Debt Cut by Six Months

U.S. lawmakers questioned whether MF Global Holding Ltd. decision to replace Michael Roseman as chief risk officer a year ago was driven by his warnings over bets on European debt that helped push the firm to bankruptcy.

Roseman, who said that his concerns were dismissed as “implausible” by then-Chairman and Chief Executive Officer Jon S. Corzine, testified today along with his successor, Michael G. Stockman, at a House Financial Services Investigation subcommittee hearing in Washington.

“It appears Mr. Roseman was the chief risk officer until he stopped telling Mr. Corzine what he wanted to hear,” Representative Michael Capuano of Massachusetts, the panel’s top Democrat, said during a question-and-answer session.

This Bloomberg story, along with the above graph, is also courtesy of Elliot Simon...and the link is here.


Progress on Letting Big Banks Fail: Simon Johnson

The drafters of the Dodd-Frank financial reform law got an important thing right. Despite fierce pushback from the banks — and lackluster support from the White House at critical moments — the legislators communicated a key new intent: megabanks must be able to fail, and the Federal Deposit Insurance Corporation should be in charge of that liquidation process.

The F.D.I.C. was an inspired choice for this role, because it is less captivated by the “magic” of Wall Street and less captured by its money and influence than any other group of officials.

The F.D.I.C. has also long been in the business of shutting down banks while limiting the damage to taxpayers, although it did not previously have complete jurisdiction over the largest banks when they got into trouble. It could only deal with those parts that had federally insured “retail” deposits, and this turns out not to be where the biggest problems have occurred in recent times.

Simon Johnson was the former chief economist at the IMF.  This very interesting [but fairly long] commentary showed up in The New York Times yesterday...and I thank Phil Barlett for sending it along.  The link is here.


China Considers Offering Aid in Europe’s Debt Crisis

Prime Minister Wen Jiabao said Thursday that China would consider working with the IMF to help shore up Europe’s finances. But he left unclear whether China was willing to drop conditions that so far have made its proposed help unappealing to European nations.

One big question, though, is what kind of political or trade concessions China might want in exchange for assistance.

When Mr. Wen suggested last September that the European Union could dismantle its legal protections against low-price Chinese exports, the idea was immediately condemned by European trade officials.

An opinion article Thursday in the official China Daily newspaper raised Mr. Wen’s trade condition again and suggested that the European Union should also make political concessions — like lifting a longstanding ban on arms exports to China. “As a Chinese saying goes, one does not visit the temple for nothing,” the column warned.

This New York Times article from yesterday also comes courtesy of Phil Barlett...and the link is here.


Eurozone bail-out funds not enough, warns OECD

International debt inspectors believe they have found another €15bn (£12.5bn) black hole in Greece’s public finances caused by the deepening recession, delivering the crippled nation another devastating blow.

Sources told news organisations in Brussels that weak growth will make it even more difficult for Greece to resolve its debt problem, leaving the eurozone and the International Monetary Fund with the prospect of an even larger bail-out than the €130bn planned.

The warning came as the Organisation for Economic Co-operation and Development (OECD) said the emergency bail-out funds are not big enough.

Greece, Portugal, Italy, Ireland and Spain need to repay a total of €700bn this year and €400bn next year.

This story was posted in The Telegraph just after midnight GMT...and is Roy Stephens first offering of the day.  The link is here.


IMF official admits austerity is harming Greece

A leading architect of the austerity programme in Greece – one of the harshest ever seen in Europe – has admitted that its emphasis on fiscal consolidation has failed to work, and said economic recovery will only come if the crisis-hit country changes tack and focuses on structural reforms.

Poul Thomsen, a senior International Monetary Fund official who oversees the organisation's mission in Greece, also insists that, contrary to popular belief, Athens has achieved a lot since the eruption of the debt crisis in December 2009.

"We will have to slow down a little as far as fiscal adjustment is concerned and move faster – much faster – with the reforms needed to modernise the economy," he told the Greek daily Kathimerini, adding that the policy shift would be "reflected" in the conditions foreign lenders attached to a new rescue programme for Athens.

This story was posted in The Guardian on Wednesday...and I borrowed it from yesterday's edition of the King Report.  The link is here.


Bundesbank sinks deeper into debt saving Europe

Germany's Bundesbank has entirely exhausted its stock of private assets and run up a quarter of a trillion euros in liabilities propping up the eurozone system, testing the political limits of EMU solidarity in Germany.

The operations are part of the European Central Bank's 'TARGET2' network of automatic payments between the national central banks of the Euroland club. The Bundesbank has already provided €496bn (£413bn) to countries in trouble, chiefly Greece, Ireland, Italy and Spain.

"This is reaching the danger point. It is already one and a half times the total budget of the German government," said Professor Frank Westermann of Osnabrück University. "If any of the crisis countries exits the euro or if there is an EMU break-up, the Bundesbank bears extreme risks."

The Bundesbank - the dominant body in the euro system - used to keep a stock of €270bn of private securities (refinance credit) before the start of the financial crisis. This was depleted last year as it sold assets to meet growing demands on the TARGET2 scheme.

This Ambrose Evans-Pritchard offering from The Telegraph on Wednesday is another story that I lifted from yesterday's King Report...and the link is here.


Destroy markets and you destroy economies, Arnott tells King World News

Fund manager Rob Arnott told King World News yesterday that central bank intervention is destroying markets and thus national economies as well.

Arnott says: "The three major developed economy centers are all pursuing a process of cranking the printing press to suppress natural market response and natural market interest rates. It represents a powerful distortion for the capital markets. It represents a powerful impetus for people to do one of two things: take risks they might not otherwise have been willing to take, creating the risk-on trade, or take their money off the table altogether. Think of gold as an example -- it's a way of taking money out of circulation."

The link to the KWN blog is here...and I thank Chris Powell for wordsmithing the introduction.


Sinclair interviewed on currency market rigging and gold's monetary role

Gold mining entrepreneur, trader, and market analyst Jim Sinclair this week gave two interviews to the German Internet site Metallwoche, one with the freelance journalist Lars Schall, in which he concurs with GATA's view of currency market rigging and gold's role as money, and another in which he argues that China and the Federal Reserve are pretty much managing the value of the euro. Audio of the interviews is posted here.


More indications that official gold data is no good

MineWeb's Lawrence Williams quoted precious metals market analyst Jeff Nichols of American Precious Metals Advisers and Rosland Capital about China's gold production and gold reserves, indicating again the unreliability of official gold production and reserve data, a point long made by GATA.

Williams' report is headlined "China's Gold Output and Demand Could Be Far Greater than 'Official' Data Suggest".  Once again I thank Chris Powell for providing the introduction to this story...and it's posted at the website.  The link is here.


A Gold (And Physical Platinum) Bug At The Fed?

The Fed's FOMC may well have a gold bug within its midst, because we were rather surprised to find that none other than the Dallas Fed's Dick Fisher, who however is no longer a voting Fed president in the 2012 year, is a proud owner of at least $1 million worth of Gold in the form of the GLD ETF....and another up to $250K in physical (not paper) platinum.

This piece was sent to me by reader 'David in California' yesterday...and the link is here.


NYTimes patronizes gold, whitewashes fiat, overlooks the big questions

Last month, Newt Gingrich, seeking to widen his support in the days leading up to the South Carolina primary, promised that he would appoint a new gold commission. "Part of our approach ought to be to re-establish something Ronald Reagan did in 1981 and that is to have a commission on gold to look at the whole concept of how do we get back to hard money," he said in a speech.

"Hard money is a discipline," he added. "It is very important for us to understand in finance that the entire contraption that has been built up over the last 30 or 40 years has so much paper in it, so much debt, so much leverage, that we probably have a fifteen- or twenty-year period of working our way out of it. And yet, the alternative is to get sicker and sicker and sicker."

That call may have helped him in South Carolina, where he scored a victory over Mitt Romney, but it did not do much for him in Florida, where he finished a distant second in this week's primary. His strategy now is to present himself as the only conservative with a chance, and thereby persuade supporters of Rick Santorum and Ron Paul to unite behind him. Support for a gold standard is a major part of Mr. Paul's platform.

As the headline states, this 2-page story was posted in The New York Times yesterday...and I extracted it from a GATA release yesterday.  It's worth running through...and the link is here.


Jean-Marie Eveillard and Peter Schiff Blogs at King World News

Eric sent me both blogs yesterday.  The J-M Eveillard blog is headlined "Central Banks & Investors Crush Gold Technicals"...and the Peter Schiff blog bears the title "Gold Headed Higher as Dollar to Continue Plunge".


Gold will rise against 'heavily debased' currencies

Troy Asset Management began buying gold at $450 an ounce in 2005 and now has 16pc of its £60m Troy Spectrum fund invested in the precious metal. Troy's co-manager Francis Brooke tells Robert Miller why he believes the value of gold will continue to rise.

This 4:42 minute video interview was posted over at The Telegraph yesterday afternoon and I thank Roy Stephens for bringing it to my attention...and the link is here.


Economic woes could push gold to $2,500 - Australia's Newcrest

Newcrest Mining, the world's No.3 gold producer, expects gold to trade as high as $2,500 an ounce and retain its safe harbour status for as long as the world's financial system remains in crisis mode.

Newcrest chief executive Greg Robinson told a business lunch on Thursday [that] gold will remain a hedge against a global financial breakdown, citing risks such as a devaluation of the U.S. dollar, the global currency, European economies in dire shape and persistent political tensions throughout the globe.

I don't exactly agree with Robinson's call for the gold price over the next five years...but I don't expect too much from a company that got absolutely crucified when they got caught with a huge hedge book just as the bull market started in gold over ten years ago.

This short Reuters piece was filed from Melbourne yesterday...and I thank Roy Stephens for sending me this story.  The link is here.


Why Are the Chinese Buying Record Quantities of Gold?

This month, the Hong Kong Census and Statistics Department reported that China imported 102,779 kilograms of gold from Hong Kong in November, an increase from October’s 86,299 kilograms.  Beijing does not release gold trade figures, so for this and other reasons the Hong Kong numbers are considered the best indication of China’s gold imports.

Analysts believe China bought as much as 490 tons of gold in 2011, double the estimated 245 tons in 2010.  “The thing that’s caught people’s minds is the massive increase in Chinese buying,” remarked Ross Norman of Sharps Pixley, a London gold brokerage, this month.

From there, this story posted over at on January 29th goes straight into the toilet.  I can't remember the last time I read such disinformation and drivel about China and gold.  I don't know whether the author is ignorant, or just plain stupid...and the only reason I'm posting it, is because of the photo of the nice stack of gold kilo bars.  I thank Washington state reader S.A. for sending it along...and the link is here.



¤ The Funnies

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Pelangio Exploration Inc. (PX:TSX-V; PGXPF:OTC) announced the results of seven diamond drill holes totaling 1,574 metres from its ongoing drilling program at the Pokukrom East zone on the Manfo Property in Ghana.  Highlights of the results included:

·        1.19 g/t gold over 113 metres, including 9.05 g/t gold over 7 metres;
·        2.60 g/t gold over 64 metres, including 11.94 g/t gold over 10 metres; and
·        16.72 g/t gold over 4 metres.

The results continued to confirm a higher grade, shallow north plunging core of Pokukrom East zone with an open plunge of 600 metres from near surface in previously reported hole SPDD-088 (7.01 g/t gold over 19 metres) to 210 metres depth in the holes reported this week.  Warren Bates, Senior Vice President Exploration, commented: “These are our best holes on the Manfo Property to date. These holes represent the north-plunging core of higher grade mineralization at Pokukrom East, now demonstrating an open plunge length of 600 metres.Please visit our website to learn more about the project and request additional information.


¤ The Wrap

The future is unwritten. - Joe Strummer, The Clash

It's tempting to read something into yesterday's price action...but I won't.  The volume in both metals was more than decent, so I expect that there was the usual amount of high-frequency trading going on.

The preliminary open interest numbers for yesterday showed a decent increase in both gold and silver...and the final o.i. numbers for Wednesday were up a decent amount in gold...and basically unchanged in silver.  None of this will be in today's Commitment of Traders Report.

Today's COT report will be interesting.  Gold and silver prices are up quite a bit since the last report, with the lion's share of that increase occurring last Wednesday, so unless there was a lot of short covering in that rally that was well hidden in the open interest numbers, I'm guessing that we'll see another deterioration in the Commercial trader category when the CFTC posts the report at 3:30 p.m. Eastern time this afternoon.

Here's the 30-day Kitco gold chart...and you can see that big jump in price on January 25th very clearly.

The other thing that I'm less than enamoured with is the overbought condition that currently exists in gold.  Here's the 6-month gold chart. Note the big spike in price on the 25th.  So if the small commercial traders decide to pull the plug and ring the cash register, it could come at any time...or we could remain in overbought territory for a while longer.

(Click on image to enlarge)

If that, in fact, is what happens in the next few days or weeks, I'm not expecting the sell-off to be too bad...just enough to relieve the overbought condition.  Once that's done, I expect both metals to power higher, as the low for this move was on December 29th.  But, having said that, the 50-day moving average in gold is about $100 lower than the current spot price...if that's the target that the Commercial traders decide upon amongst themselves.

Silver is not in overbought territory, but it's right on the edge...and it would certainly get hit in any gold sell off...and silver's 50-day moving average is three dollars lower than the current spot price.  We'll just have to wait and see what JPMorgan et al have planned.

(Click on image to enlarge)

Not much happened in either metal in Far East trading overnight...and gold opened flat in London this morning..and then rallied a few dollars starting around 8:30 a.m. GMT.  Silver got sold off about twenty cents in early Far East trading during their morning...but has since gained some of that back, as the silver price also moved up a bit at the same 8:30 a.m. time in London.  Volumes in both metals are a bit lower this morning than they were this time yesterday morning.  The dollar index is down about 15 basis points as I hit the 'send' button at 5:07 a.m. Eastern time.

There's still time to either re-adjust 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 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] well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well.  And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

That's it for today.  I hope you have a great weekend...and I'll see you here on Saturday sometime.