Gold worked its way slowly higher during the Far East trading day yesterday...with the high of the day [a hair over $1,600 spot] coming around 1:30 p.m. Hong Kong time.
From that point, gold got sold off steadily until its low of that day [$1,584.00 spot] about 9:20 a.m. in New York. It rallied fairly sharply after the London p.m. gold fix...but wasn't allowed another sniff of the $1,600 spot price during the Comex trading session. The New York high was posted as $1,597.00 spot.
Gold closed the electronic trading session at $1,592.40 spot...up 30 cents from Friday's close. Gross volume was pretty chunky...but once the spreads and roll-overs were subtracted out, the net volume was around 107,000 contracts.
The silver price was more 'volatile' than gold during the Monday trading session. It made three attempts to break higher during the Far East trading session...and on the third attempt at 1:30 p.m. Hong Kong time, the sell-off began...and the low for the day came around 9:40 a.m. in New York.
The rally after the London p.m. gold fix ran into a determined seller...just like gold. Silver rallied in fits and starts from there...and closed on Monday at $28.47 spot...down two bits from Friday.
Silver's high of the day was around $28.90 during the Far East trading session...and the New York low was $28.00 spot...and intraday swing of 3.1%. Net volume was pretty decent...around 35,000 contracts.
The dollar index dipped down to 80.95 in mid-morning trading in the Far East...and then rallied to around 81.37 by 9:15 a.m. in New York. That was its high of the day. From there it rolled over and headed lower, with its nadir [80.90] coming shortly before 4:00 p.m. Eastern. The index rallied a hair from there, and closed down about 10 basis points from Friday.
Despite the fact that gold didn't do much of anything pricewise yesterday, the gold shares did very well indeed. They jumped up about two percent at the open...and then slowly climbed from there. The HUI finished almost on its high of the day...up 3.36%.
Despite the fact that the silver price spent the entire trading day in New York well under Friday's closing price. Nick Laird's Silver Sentiment Index closed up an amazing 3.83%. Someone was obviously bottom fishing.
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The CME's Daily Delivery Report showed that only 33 silver contracts were posted for delivery tomorrow. The link to that activity is here.
There were no reported changes in either GLD or SLV.
The U.S. Mint had a decent sales report yesterday. They sold 6,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 477,500 silver eagles. Month-to-date the mint has sold 42,000 ounces of gold eagles...7,000 one-ounce 24K gold buffaloes...and 2,017,500 silver eagles. I do believe we've seen the bottom of the slump in bullion coin sales from the U.S. Mint.
It was a quiet day over at the Comex-approved depositories on Friday. They reported receiving 297,200 ounce of silver...and they shipped 187,664 ounces out the door. The link to that action is here.
Here are a few free paragraphs from silver analyst Ted Butler's weekend commentary...
"This week in gold, the commercials reduced their total net short position by 12,500 contracts, to just under 139,000 contracts. This is another multi-year low number for the total commercial net short position. The big 4 bought back 5700 contracts and the gold raptors about the same amount. The big 4 now hold their lowest net short position in years at close to 95,000 contracts, while the raptors hold a net long position of over 5,000 contracts, the most since Jan 3. On the flip side, the speculators, both large and small, hold their lowest net long positions in years. According to how I and many now evaluate the COT, gold is spectacularly bullish by any historical standard."
"In silver, the total commercial short position was reduced by 2,000 contracts to just under 16,000 contracts, effectively at the low levels of December, which, in turn, were decade extreme readings. The big 4 (read JPM) accounted for about 650 of the 2,000 commercial contracts bought back during the reporting week, with the raptors adding 1,000 contracts to a net long position now totaling 17,800 contracts. New silver COT extremes in this week’s report included the lowest big 4 short position ever in my memory, as well as the lowest net long position ever by the little guys. In terms of a low commercial net short and speculative net long position being considered bullish, then it hasn’t been much better than it is now."
"I would estimate JPMorgan’s concentrated net short position to be around 11,000 contracts at the Tuesday cut-off, the lowest since taking over Bear Stearns in 2008. At its peak, in December 2009, JPMorgan was short more than 40,000 silver contracts; so the reduction is significant. More significant, of course, is what the prime silver manipulator intends to do on the next silver rally. I know I beat it to death, but that will determine the fate of silver prices. That’s what makes JPMorgan the prime silver manipulator."
Nick Laird was on cloud nine when he sent me this chart of the Gold Price Oscillator. Nick's comments reads as follows..."After breaking south, the oscillator has now reversed and broken north. Wowowow!!!!" Take the red pill, Nick...and then call me in the morning.
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I have the usual number of stories for a Tuesday, which means I have quite a few...and the final edit is up to you.
Ever since JPMorgan Chase disclosed a multibillion-dollar trading loss this month, the central mystery has been how a bank known for its skill at risk management could err so badly.
As early as 2010, the senior banker who has been blamed for the debacle, Ina Drew, began to lose her grip on the bank’s chief investment office, according to current and former traders. She had guided the bank through some of the most rugged moments of the 2008 financial crisis, earning the trust of Jamie Dimon, JPMorgan’s chief executive, in the process.
But after contracting Lyme disease in 2010, she was frequently out of the office for a critical period, when her unit was making riskier bets, and her absences allowed long-simmering internal divisions and clashing egos to come to the fore, the traders said.
This story was posted on The New York Times website on Saturday...and I thank Phil Barlett for sending it. It's an interesting read...and the link is here.
JPMorgan reported its first-quarter earnings on April 13. That’s when Mr. Dimon and Mr. Braunstein played down the problem, including with Mr. Dimon’s now-infamous remark that reports about the trades were a “complete tempest in a teapot.”
JPMorgan was clearly executing a strategy. The bank didn’t want its trader to become a wounded zebra on the savanna, attracting predators. Had the bank owned up to the problem right away, the losses could have ballooned as other investors piled in on the other side to force JPMorgan to let go of its positions at fire-sale prices.
JPMorgan executives spread the word, whispering in the ears of reporters and analysts, that hedge funds on the opposite side of the trade were in trouble. JPMorgan signaled that it wasn’t going anywhere. It had a big balance sheet behind these trades and could hold for a very long time. Its message: Hedge funds, you’re in trouble. Sell now.
“As they started to get some scrutiny, the last thing that they wanted was to admit that the journalists had been right,” said David Murphy, a risk management specialist at Rivast Consulting.
Now we realize the bank was bluffing. And it didn’t work.
This very interesting read was posted over at the propublic.org website late last week...and I borrowed it from yesterday's edition of the King Report...and the link is here.
Chief executive Jamie Dimon told investors that the bank was suspending its share buyback programme but would continue its dividend.
The decision came despite Mr Dimon reassuring investors just 10 days ago that it saw no reason to change its capital programme in the wake of the trading problems. Asked about share buybacks in a conference call he said they would not change.
On Monday, he tried to calm investor fears by stating he saw no “disaster scenario” for the bank coming from the trading controversy and was not “worried about the ultimate size of the loss”.
The statement came despite reports suggested the losses could top £4.4bn, more than twice the sum the bank had released.
One has to wonder just how big JPM's losses are going to add up to. Obviously they are going to get lots higher. This story was posted in The Telegraph during the New York lunch hour yesterday...and I thank Roy Stephens for his first offering of the day. The link is here.
JPMorgan Chase & Co. may face even bigger losses on faulty bets in credit markets if Europe’s debt crisis worsens, according to one of the hedge funds that took the other side of the trades.
“They’re not out of those positions,” Michael Platt, co-founder and chief executive officer of BlueCrest Capital Management LLP, said today in an interview on Bloomberg Television’s “Inside Track.” “If we end up with a catastrophe in Europe in the short run, they’re probably not positions that anyone would want to have.”
The bank’s positions were built by Bruno Iksil, a JPMorgan trader nicknamed the “London whale” because his bets had become so large, Bloomberg News reported on April 5. Traders on the other side, known as counterparties, say the market has since moved even further against JPMorgan.
It couldn't happen to a nicer bunch of crooks. This Bloomberg story was posted on their Internet site yesterday morning...and I thank West Virginia reader Elliot Simon for bringing it to our attention. The link is here.
China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn't been necessary.
The documents viewed by Reuters show the U.S. Treasury Department has given the People's Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.
China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market.
The change was not announced publicly or in any message to primary dealers.
While there is been no prohibition on foreign government entities bidding directly, the Treasury's accommodation of China is unique.
This longish Reuters story was posted on their website late yesterday evening. Washington state reader S.A. was the first one through the door with it...and I borrowed the headline from a GATA release. The link is here.
For once Russian President Vladimir Putin got it right; it wasn't worth turning up at Camp David for the G8 summit.
On the most urgent issue of the day, one that has already cost global stock markets $4 trillion and which threatens a recession that could make 2008 look like a bump in the road, they simply agreed to differ. Their bland communiqué concluded with pious hopes that Greece should remain within the euro and an agreement "that the right measures are not the same for each of us"...which is diplomat-speak for German Chancellor Angela Merkel digging in her heels.
Even the combined pressure of the other Western leaders at the G8 summit didn't move her. U.S. President Barack Obama stressed that the eurozone crisis was "of extraordinary importance." Italian Prime Minister Mario Monti, the only trained economist among them and who was asked to lead the discussion Saturday morning on the global economy, stressed the need to restore demand, saying, "I think we should regard it more positively than the most conservative European authorities do."
Grexit, the vogue term for a Greek exit from the euro, is slowly but surely becoming inevitable. The implications, for Europe and the global economy, are deeply alarming.
I consider this UPI story a must read...and it's Roy Stephens second offering of the day. The link is here.
Those readers who have been berating me for years for even considering the possibility of a country leaving the euro have recently fallen silent. (You know who you are.)
This week I want to move on from trying to forecast what even the most purblind of euro-fanatics now recognise as, to put it mildly, a very distinct possibility, to considering the consequences.
You may think this is premature. Personally, I have always thought that if you are going to be a forecaster you should specialise in being early.
So what would happen if Greece were to leave the euro? The short answer is that I don’t know. What’s more, neither does anyone else. Moreover, you should beware anyone who tells you otherwise.
This story appeared in The Telegraph on Sunday evening...and is Roy's third contribution to today's column. The link is here.
Financiers are becoming increasingly concerned that many taxpayer-backed borrowers are losing their ability to access private funding markets. The development raises the prospect of already heavily indebted eurozone national governments being forced to take on hundreds of billions of euros of additional debts.
“Cracks are appearing in the funding markets for these institutions. If you don’t like the sovereign risk, why would you take the risk of buying the debt of the institutions they support,” said one credit banker.
In France, the authorities are racing to avoid having to rescue Caisse Centrale du Crédit Immobilier (3CIF) after Moody’s downgraded the mortgage lender last week, warning it could become totally reliant on taxpayer support within months.
But the troubles at 3CIF are seen as evidence of far wider problems that are likely to face a range of quasi-government borrowers across Europe, as investors become more nervous about exposing themselves to the risk of a break-up of the euro area.
This story was posted over at The Telegraph on Sunday evening...and is another item courtesy of Roy Stephens. The link is here.
When the head of Greece's central bank, George Provopoulos, recently met with his European counterparts, the session turned into a confession. His fellow Greeks had just withdrawn €800 million ($1.022 billion) from their bank accounts, within just a few days. Consequently, at a meeting of the Governing Council of the European Central Bank (ECB) last Tuesday, Provopoulos had to ask for money -- once again.
Most Greek banks are currently cut off from the usual ECB lines of credit. They no longer have sufficient collateral. A number of banks are even currently operating without sufficient capital as a risk buffer for their activities. Indeed, Provopoulos had to accept last week that yet another crop of Greek banks were branded as unfit for ECB refinancing.
These zombie banks are being kept alive with help from the so-called Emergency Liquidity Assistance (ELA) -- a rescue aid program managed by Provopoulos. At every session of the Governing Council, he has to have these special allocations approved.
This story showed up on the German website spiegel.de yesterday...and once again I thank Roy Stephens for bringing it to our attention. The link is here.
Alexis Tsipras, the man who will very likely emerge again as the winner of the upcoming Greek parliamentary election, is campaigning throughout the country primarily under one slogan: "We won't pay any more."
He doesn't say what would replace the "barbarism of the austerity dictates," which he maintains that the European Union partners, above all German Chancellor Angela Merkel, have forced upon his country. He argues that the Europeans are only bluffing -- and he promises that they will continue to help, even if the Greeks no longer service their debts. He says: Elect me and all this misery will come to an end.
Stavros Lygeros, 59, is sitting in a café in the posh Athens neighborhood Neo Psychiko. Lygeros is a political commentator and a bourgeois intellectual. He's endeavoring to explain why the Greeks are following Tsipras in droves, although this young politician is clearly a seductive new star and his successful radical left-wing Radical Left Coalition (Syriza) cannot explain who will pay the future salaries of civil servants, doctors and nurses. Lygeros says that many Syriza voters don't even believe that this party has a solution.
If this isn't a train wreck in the making, I don't know what is. It's another Roy Stephens offering from yesterday's spiegel.de website...and the link is here.
Despite official claims to the contrary, the governments of the euro zone are threatening to kick Greece out of the currency union. At a meeting of euro-zone finance ministers last Monday in Brussels, it was made clear to Greek Finance Minister Filippos Sachinidis just how serious the situation had become.
"If we now held a secret vote about Greece staying in the euro zone," Euro Group Chairman Jean-Claude Juncker warned his Greek colleague, "there would be an overwhelming majority against it." Other participants in the meeting also had harsh words for Sachinidis, with particularly strong criticism towards Athens coming from Portugal and Ireland, countries that have also accepted bailouts in the crisis.
The countries say it is unacceptable that they have made serious efforts to fulfill the European Union's guidelines for consolidating their budgets while Greece incessantly breaks its reform agreements. It was the Greeks, they noted, who poured oil on the flames and repeatedly caused the whole euro zone to catch fire with their repeated negligence, other ministers added.
This story was posted on the spiegel.de website yesterday as well...and is Roy's final offering in today's column. The link is here.
A slowdown in China poses the biggest threat to the global economy and not a Greek exit from the eurozone, says economist and investor Marc Faber, publisher of the Gloom, Boom and Doom Report.
Greece is teetering on abandoning the eurozone, which could roil global markets.
Big deal, Faber says.
"I think the biggest risk is actually China because if you look at Greece, it's an insignificant economy," Faber tells CNBC Asia's "Capital Connection."
"Yes, they owe money, but the market knows that it's bankrupt."
This story was posted over at the moneynews.com website on Friday...and I thank reader 'Chris' for bringing it to my attention. The link is here.
The U.S. Commodity Futures Trading Commission proposed easing part of Dodd-Frank Act regulations limiting speculation in oil, natural gas, wheat and other commodities after industry groups said the original rules were onerous.
The CFTC’s five commissioners voted 5-0 in private to propose changing how companies aggregate trading positions when they have ownership stakes in other firms, the agency said in a statement today. The agency proposed raising to 50 percent from 10 percent the threshold for when a company is considered to have an ownership or equity stake in another firm and must add trading positions.
The proposal, which is open to public comment, would affect so-called position limits that were completed by the CFTC in October as part of an effort to reduce excessive speculation in commodities. The limits, which cap the number of contracts a trader can have in a market, prompted a lawsuit by the International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association.
“I support the commission’s proposed rules that, among other things, expand the exemptions relating to information sharing restrictions, expand the circumstances under which market participants will not be required to aggregate positions,” Jill E. Sommers, a Republican commissioner, said in a statement today.
Quite a number of people weren't happy when this Bloomberg story showed up late on Friday afternoon...and I was one of them. I ran it past Ted Butler...and he says he's rather disturbed by it as well, but he said that it all depends on who has "trading control" of all these futures contracts that will fall under this revised regulation. We'll find out soon enough. I thank Dr. Dave Janda for being the first through the door with story. It's worth reading...and the link is here.
As the Missouri General Assembly pushes toward adjournment, a bill that originally aimed at exempting gold investors from capital gains taxes has now transformed into the Missouri Sound Money Act of 2012, which would make gold and silver legal tender within the state.
The legislation would also eliminate several state taxes on gold and silver, including capital gains and sales taxes.
House Bill 1637 would allow the establishment of sound-money depositories that would allow citizens to deposit precious metals and use debit cards to pay bills out of those accounts. The depositories would be regulated by Missouri's Secretary of State.
This story was posted over at the mineweb.com yesterday...and I thank reader 'David in California' for sending it along. The link is here.
The first is with Egon von Greyerz. It's headlined "Customer Shocked "Allocated" Gold Not in Swiss Bank". The second blog is with Stephen Leeb. It bears the title "Israel Prepping for War, Junior Gold Shares Set to Soar". And lastly is this interview with Agnico Eagle CEO Sean Boyd. It's headlined "Agnico CEO Calls for $3,000+ Gold for the First Time Ever".
I've read articles from more than one analyst claiming that gold stocks are down on low volume, implying there's a lack of interest in precious metals. While on the surface that seems like an obvious statement, their point is that most of the recent volume has been coming from sellers and thus exaggerating the recent decline.
I decided to test this hypothesis, because if correct, it has investment implications, starting with the fact that at some point you run out of sellers; and if and when buyers return, the ensuing rise could be spectacular.
Senior precious metals analyst, Jeff Clark, has this must read piece posted in yesterday's edition of Casey's Daily Dispatch...and the link is here.
MineWeb's Lawrence Williams reports on Sprott Asset Management CEO Eric Sprott's address to the New York Hard Assets Investment Conference last week, which stressed market manipulation by governments and credited GATA for helping to expose it in gold.
I borrowed the headline and the introductory paragraph above from Chris Powell's GATA release yesterday. Williams' report is headlined "Sprott Sees Great Things for Gold and Silver" and it's posted at MineWeb's Internet site here. Anything that Eric has to say is a must read in my opinion...and this piece is no exception.
Gold bushwhacked the bears last week. It's even got gold bugs talking about gold stocks ... again.
After breaking gold bugs' hearts by plunging to a new low for the year on Thursday, gold violently reversed. Measured by the CME floor close, the benchmark gold contract gained $38.30 on the day. It followed up on Friday by adding another $17, for a two-day gain of 3.31%.
The NYSE Arca Gold Bugs Index (HUI) jumped 5.29% in these two days.
Gold stocks' outperforming the metal is significant, because they have been atrocious this year. As of Friday's close, the HUI was down 20.5% on the year, while gold was actually up 1.4% on the year. Just a restoration of late 2011's multiples could produce serious gains.
If gold's reversal sticks, it will be a triumph for the contrary opinion sentiment indicators. Nothing else had been offering any comfort.
This story showed up at the marketwatch.com website yesterday...and is well worth reading. It's another story I pulled from a GATA release...and the link is here.
Interviewed by GoldMoney founder James Turk, Sprott Asset Management's John Embry remarks that "if you're negative on gold, you must be bullish on currency, and I don't see how anyone can make that argument."
The comment is part of a conversation about how the bull market in gold is far from over. Video of the interview is 33 minutes long...and needless to say, I consider it a must watch. It's posted over at the GoldMoney Internet site here.
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There is a difference between knowing the path and walking the path. - Morpheus
It appears, at least for the moment, that the $1,600 price level in gold...and the $29 price level in silver are being defended. But, with pretty low volume yesterday, it wasn't hard for whoever wanted to, to move prices around. It also appears obvious that if a serious buyer showed up, both those prices might fall in pretty short order.
But, as is always the case, when the serious buying does show up...there are no legitimate short sellers in the market at these prices. And as Ted Butler has been continually pointing out for years, will JPMorgan et al show as short sellers of last resort as always...and at what price level will the raptors sell their long positions? Good questions that we'll find out the answers to soon enough I would think.
On the other hand, I'm also wondering if we're going to see a repeat of what happened during the last two weeks of December 2011...where we hit an interim bottom at mid month...and a week later 'da boyz' rolled the price over between Christmas and New Years Day...and gave us our final low for that move down. Here's the 1-year gold chart. The silver chart looks similar.
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Looking at the current price action in both silver and gold, that possibility still exists, so it's something to keep an eye on in the days ahead. I would be just as happy to see gold and silver take off from here and never look back, but that may not be in the cards just yet.
And, as many gold 'experts' point out, we are in the slow summer season for the precious metals...and we could just as easily trade sideways from here for a couple of months, if this year is the same as other years.
But with all the financial and monetary problems the world faces at the moment, one has to wonder if the powers that be can, or will, keep a lid on gold prices going forward. Everything is pure speculation at the moment, so we'll just have to wait it out and see what the 'market' has in store for us.
I note that both gold and silver came under some selling pressure starting at exactly 9:00 a.m. Hong Kong time...and came under further selling pressure about an hour before the London open. This selling pressure increased dramatically once London started to trade. Initially, gold volume was not overly heavy...but silver's volume was pretty high for that time of day and, not surprisingly, the volume in both has jumped dramatically during the last hour. Up until about an hour after the London open, the dollar index was basically unchanged from yesterday's close in New York, but a rally started about 9:20 a.m. in London...so it's more than a stretch to say that this move in gold is currency related, as gold and silver prices were already down considerably before the dollar index took off to the up side. Here's the gold chart as of 5:15 a.m. Eastern time...10:15 a.m. British Summer Time.
As I hit the send button at 5:20 a.m. Eastern time, gold is down about seventeen bucks...and silver is down about 40 cents.
That's all I have for today, which is more than enough...and I'll see you here tomorrow.