Casey Research Publication
Gold & Silver Daily
"Of course the 800-pound gorillas in silver [and probably gold as well] are JPMorgan and the Bank of Nova Scotia."
 

¤ Yesterday In Gold & Silver

The gold price didn't do much of anything until shortly after London began to trade at 3:00 a.m. Eastern time...and even then, the tiny rally that began at that point had only tacked five bucks onto the price by the 3:00 p.m. GMT London gold fix...10 a.m. in New York.

But from that point, the rally became much more pronounced...and at 12:00 noon in New York, a sharp rally began that lasted less than a hour...before the buyer disappeared, or the price got capped.  It had all the hallmarks of a short covering rally, but it's hard to know for sure if that's what it was or not.

The $1,722.10 spot high tick came at 12:50 p.m...and then got sold off about six bucks going into the 1:30 p.m. Comex close, before trading sideways into the 5:15 p.m. electronic close.

The gold price closed the Tuesday trading session at $1,716.90 spot...up $31.90.  Volume was decent...around 160,000 contracts.

It was pretty much the same story in silver...except silver's high in London came around the 12 o'clock noon silver fix...and from there it declined into the London p.m. gold fix at 3:00 p.m. GMT...10 a.m. in New York.

From there, silver followed the same price path as gold.  It finished the day at $32.02 spot...up 84 cents from Monday's close.  Considering the price action, the net volume wasn't overly heavy...around 41,000 contracts.

It's entirely possible that the big silver price rally that began around 11:30 a.m. in New York was short covering as well but, like gold's rally during the same time frame, it's not something you would want to bet the ranch on...and I'll have more on this in 'The Wrap'.

Here are the charts for platinum and palladium as well.  There are similarities between them and gold and silver...but their are important differences as well.

The dollar index opened at 80.71 on Tuesday morning in the Far East...and didn't do a lot until mid-morning in London...and from there drifted quietly lower, hitting its nadir shortly after 2:00 p.m. in New York.  From there it rallied a hair, closing at 80.63.  Nothing to see here...and it's patently obvious that the precious metal prices were driven by other factors yesterday.

The gold stocks didn't trade with much enthusiasm at the open of the New York equity markets yesterday...with the low tick coming at the point where gold began its big rally at 11:30 a.m. Eastern during the Comex trading session.  The stocks shot up into positive territory from there...and then traded more or less sideways into the close.  The HUI finished up only 1.16% on the day.

The HUI would have closed much higher if it hadn't been for CDE and HL...as their Q3 earnings were pretty ugly...and they got sold off hard, especially Coeur d'Alene.  This is a "blood-running-in-the-streets" scenario if there every was one...and you know, dear reader, what most investment advisors say you should do when presented with such a situation.

The silver stocks did OK...with some doing much better than others.  You would have thought [with the exception of CDE and HL, of course] that they would have all been up big...but that was not case.  Nick Laird's Silver Sentiment Index was down 2.95%...as the above two mentioned companies are heavily weighted in this 7-company index.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 25 gold and 3 silver contracts were posted for delivery within the Comex-approved depositories on Thursday.

Considering the engineered price decline that occurred on Friday, I was rather surprised to see that authorized participants added to both GLD and SLV yesterday.  There were 67,829 troy ounces of gold added to GLD...and 387,282 troy ounces of silver were added to SLV.

Over at Switzerland's Zürcher Kantonalbank, they updated their gold and silver ETFs as of the close of business on Monday, November 5th.  They added a tiny 4,410 troy ounces of gold...but a whopping 2,473,260 troy ounces of silver was reported withdrawn since the previous report on October 30th.

There was no sales report from the U.S. Mint.

The Comex-approved depositories reported receiving 600,227 troy ounces of silver on Monday...and shipped 751,055 troy ounces out the door.  The link to that action is here.

Here are a couple of graphs courtesy of Nick Laird.  They are the intraday average price movements for gold and silver for the month of October.  Note that the vast majority of the price pressure in both metal occurred between the London p.m. gold fix at 10:00 a.m. in New York...and 3:00 p.m. Eastern time, in both metals.  These are the footprints of the New York bullion banks...JPMorgan Chase et al.  But you should also note the London low in silver at the noon GMT silver fix.

(Click on image to enlarge)

(Click on image to enlarge)

I have the usual number of stories for a mid-week column...and only the first one is about yesterday's U.S. election.

 

¤ Critical Reads

Election Day Is Finally Here: Tonight Is Going to Suck No Matter What

Warning: Matt Taibbi's "Pity Prose" warning is in effect from the get go...

So it's finally here – the big day. After eighteen months of relentless, ear-splitting propaganda, with thousands, if not tens of thousands, of reporters humping the horse-race (jumping on every single poll like heavily-panting boy-dogs with their little red wieners showing) and day after day swinging the heavy horseshit-hammer of Thor, braining us with one meaningless, made-up non-controversy after another – after all that angst and stress and directionless aggression, it’s finally going to end.

That it's all going to be over finally, thank God for that. But today will still go down as a truly sad day, no matter who wins.

Years from now, when we look back at these last days and weeks before this 2012 election, what we're going to remember is how intensely millions of Americans hated during this time, how many shameless and dishonorable lies were told as the race tightened (we scratched and clawed at each other like sewer rats over every absurd factual dispute, finding ways to shriek at each other even over things that by definition are nobody's fault, even over acts of God like Hurricane Sandy) and how reflexively people on opposite sides of the race disbelieved each other and laid blame at each others' feet over just about every issue, important or (more often) not.

Matt's blog was posted on the Rolling Stone magazine website early yesterday morning...and I thank Roy Stephens for today's first offering.  The link is here.

Read more...

Fed’s Williams Says Bond Buying May Exceed $600 Billion

Federal Reserve Bank of San Francisco President John Williams said the central bank may buy more than $600 billion in bonds by extending its third round of quantitative easing well into next year.

The Federal Open Market Committee last month affirmed its decision in September to buy $40 billion of mortgage-backed securities each month without specifying the total size or duration of the purchases. Williams, who holds a vote on policy this year, was among the first Fed officials to advocate open- ended bond buying.

“It should be at least that big but I would think it would probably be bigger given my view on how slow the economy is going,” Williams said yesterday, referring to his Aug. 31 comment that the Fed should purchase $600 billion in bonds in a third round of asset purchases.

This Bloomberg story was posted on their website late on Monday evening Mountain Time...and I thank West Virginia reader Elliot Simon for sending it along.  The link is here.

Read more...

Million-Dollar Traders Keep Getting Replaced By Machines

Wall Street’s credit-derivatives traders, who before the financial crisis commanded $2 million of annual pay, are being replaced by machines as banks cut costs and heed new regulations.

UBS AG, Switzerland’s biggest bank, fired its head of credit-default swaps index trading, David Gallers, last week, with no plan to fill the position, according to two people familiar with the matter. Instead, the bank replaced Gallers with computer algorithms that trade using mathematical models, said the people, who asked not to be identified because moves are private.

UBS joins Barclays Plc, Credit Suisse Group AG and Goldman Sachs Group Inc. in using computer programs to trade financial instruments that once generated some of their biggest fees. With regulators preparing rules under the 2010 Dodd-Frank financial reform that will push swaps toward exchange-like systems to improve transparency, credit dealers are going digital as automated trading makes humans too expensive.

This story was posted on the businessinsider.com Internet site early yesterday morning as well...and is Roy's second offering a row.  The link is here.

Read more...

Banks struggle to adapt or survive in commodities

Stick, twist or fold? Like card players, the top five banks in global commodities trade have reached the point where they must decide to hold strategy, adapt, or give up and get out.

The boom in resource markets that started 10 years ago attracted many big banks to trade oil, metals and agriculture, but the 2008 financial crisis forced a painful retreat and tighter regulation now means some banks may throw in the towel.

Decisions rest on whether the banks believe their business models can be changed to keep them sufficiently profitable under the rising oversight of regulators, after four years when their revenue from commodities was halved.

"The total wallet back at the peak was about $14 billion for the banking sector in commodities trading. I'd imagine this year it'll be about $7 billion. There were 10-14 banks when it was at $14 billion, now there are really five relevant ones," said David Silbert, who leads commodities trading at Deutsche Bank.

This Reuters story was filed from London early Monday morning Eastern time...and I thank reader Andrew Holland for bringing it to our attention.  It's certainly worth reading if you have the time...and the link is here.

Read more...

François Hollande lurches Right in historic U-Turn to save French economy

Company taxes will fall by €20bn a year equal to 1pc of GDP, to be phased in gradually by 2015 under a convoluted system of rebates.

Premier Jean-Marc Ayrault said it amounted to a 6pc cut in unit labour costs, enough to close the gap with eurozone rivals. "France is not condemned to a spiral of decline, but we need a national jolt to regain control of our destiny," he said.

The mid-rate of VAT for restaurants and services will jump from 7pc to 10pc. The top rate will rise slightly to 20pc. Spending cuts will plug the revenue gap in order to meet the EU’s 3pc deficit target.

Critics call it the most humiliating U-turn in French politics since François Mitterrand abandoned his disastrous experiment of "Socialism in one country" under a D-Mark currency peg in 1983.

Hollande finally blinked...and Ambrose Evans-Pritchard has a field day with this story that was posted on the telegraph.co.uk Internet site early yesterday evening GMT.  It's the first of four in a row from Roy Stephens...and the link is here.

Read more...

Spain 'faces slower growth and bigger deficit'

This year's public deficit - the shortfall between government spending and revenues - will come in at 8.0pc of Gross Domestic Product, well above the target of 6.3pc agreed with Brussels when Spain was given an extra year to put its strained finances in order.

The deficit next year will be 6pc, compared with Madrid's estimate of 4.5pc, a European source told AFP a day before the European Commission unveils its official forecasts for the bloc.

In 2014, when the deficit was supposed to come in at 2.8pc - under the EU ceiling of 3pc - it will be still at 5.8pc, the source said, leaving Spain in dangerous waters.

"This means that Spain finds itself with a real problem - it either gets another extension [to the timetable] agreed in June" or it will have to take additional austerity measures, the source said.

This is the classic debt trap that Greece has already fallen into...and that Portugal, Italy...and someday, France will follow as well. This story from The Telegraph late yesterday afternoon GMT is Roy's second of four in a row...and the link is here.

Read more...

Eve of Austerity Strikes Consume Greece Ahead of New Cuts

Hundreds of thousands of Greeks began a 48-hour nationwide strike on Tuesday, shutting down schools, banks, local government offices and ports to protest the government's latest round of austerity measures.

Transportation in Athens became difficult as subway and taxi services were halted and flights in and out of the country were stopped for three hours early in the day. State hospitals were running on emergency staff.

About 16,000 people gathered at a union-organized protest outside parliament in Athens, where lawmakers on Wednesday will vote on the law, chanting slogans like, "People, don't bow your heads!" and "This strike is only the beginning!" Several thousand more marched in a separate demonstration in Athens, and about 20,000 protested in Greece's second-largest city, Thessaloniki.

This is the now-unstoppable road that Spain will now travel.  Roy's third offering in a row comes from the German website spiegel.de yesterday...and the link is here.

Read more...

Cyprus Bailout Talks Stalled: Money Laundering Accusations Could Delay Aid

Negotiations about the planned bailout for Cyprus from the European Stability Mechanism, the euro zone's permanent bailout fund, will likely not be completed until 2013, a spokesman for the German Finance Ministry said.

Cyprus had applied in June to become the fifth nation to receive a bailout in the euro crisis. But not much has happened since that first call for help. The talks between the Cypriot government and the troika, made up of the European Commission, the European Central Bank and the International Monetary Fund, have been stalled for weeks. There are no signs whatsoever that Cyprus is willing to commit to a serious austerity program, sources in Brussels said.

The talks could now be delayed by accusations that Cyprus is lax on money-laundering. According to information obtained by SPIEGEL and first reported on Monday, an internal study by the German foreign intelligence agency, the Bundesnachrichtendienst (BND), says banks in Cyprus hold $26 billion (€20.33 billion) in deposits by Russian investors. According to the BND, most of this money has been illegally moved abroad to evade Russian tax authorities. By Cypriot standards it's a tremendous sum given that the island's entire annual GDP amounts to €17 billion.

I posted a must read spiegel.de story about Cyprus in yesterday's column...and here's another about Cyprus that falls into the must read category as well..  This situation comes from the top drawer of the  "You Can't Make This Stuff Up" filing cabinet.  It's Roy Stephens' fourth story in a row...and his final offering in today's column.  The link is here.

Read more...

Four King World News Blogs/Audio Interviews

The first blog is with Dan Norcini...and it's headlined "Massive Short Covering & Buy Stops Triggered in Gold & Silver".  Next is Egon von Greyerz...and his blog is entitled "The Gold Train is Picking Up a Head of Steam".  The last blog is with Richard Russell...and it bears the title "I See Catastrophic Insane Bubbles Everywhere".  The audio interview is with John Embry.

Read more...

'The big move' in gold is under way, von Greyerz tells King World News

This GATA release contains the KWN blog with Egon that is posted above...but also links to a few other things of great importance...such as Kitco's Jon Nadler posting a recommendation to sell gold just before it blasted $30+ higher yesterday.  This is worth skimming...and the link is here.

Read more...

RM102m in cash and bank accounts, 142.7kg of gold seized

Government agencies revealed yesterday they had seized 142.7kg of gold as well as RM101.92 million in cash and bank accounts from several companies in the recent crackdown on dodgy investment schemes that are based on gold trading activities.

Based on current prices of RM200/g, the seized gold is worth RM28.6 million.

A joint statement, released by Bank Negara Malaysia, federal police, the Ministry of Domestic Trade, Cooperatives and Consumerism and the Companies Commission of Malaysia (CCM), said the four companies had “poor record-keeping” and did not maintain accurate records of all business and financial transactions.

This short story was filed from Kuala Lumpur on Tuesday...and I thank Manitoba reader Ulrike Marx for sending it our way.  It's posted on the freemalaysiatoday.com Internet site...and the link is here.

Read more...

Gold rush: China jewelers go west for growth

The smart young women and coiffured housewives browsing for rings and necklaces at a shiny new mall in a city on the Yangtze River could breathe fresh life into China's boom in gold consumption.

With jeweler stores already flooding shopping districts in Beijing and Shanghai, retailers are shifting their focus to smaller cities in hope of mining a rich seam of appetite for products which make up the bulk of gold-buying in a nation eclipsing India as the No.1 consumer of the precious metal.

Analysts and industry officials say that increasing wealth and spending power in less developed areas will help reinvigorate Chinese gold consumption, which is growing at a slower pace in 2012 after explosive gains in the past two years, with an economic slowdown making some shoppers think twice before purchasing big-ticket items.

"Third and fourth-tier cities are going to be the main engine of China's jeweler market," said Leon Zhao, a consulting director from research firm Frost & Sullivan's China operations.

This longish Reuters story was filed from Singapore and China...and found a home over at the chicagotribune.com Internet site on Monday.  I thank Marshall Angeles for sending it...and the link is here.

Read more...

India to import more gold this year than earlier thought - World Gold Council

It is not just Indian bullion retailers who are gearing up for the festival of lights in India next week.

The World Gold Council too has noted a significant jump in sales from end-October and early November, in a run-up to the festival.

India's import of the precious metal could be appreciably higher than was earlier envisaged, according to the Council. At a press conference, the global organisation said that India could import around 800 tonnes this year, way more than the 640 odd tonnes that was spoken about earlier this year.

India imported around 933 tonnes during 2011. Despite the fact that the demand for the yellow metal was low for the first half of the year, the Council said it expects the market to pick up momentum in the festival and wedding season, momentum that should continue till the end of the year.

I found this story posted on the mineweb.com Internet site in the wee hours of this morning...and it's a must read in my opinion.  The link is here.

Read more...

Royal Canadian Mint Purchases 3 Million Ounces of Silver

After the Royal Canadian Mint closed its initial public offering of 5 million silver exchange-traded receipts on Monday, the firm announced that it has purchased over 3 million ounces of silver for its Canadian Silver Reserves Program, which allows interested parties to own the white metal in its physical form without requiring them to arrange for delivery or storage of the metal. 

With this program, the RCM aims to provide an exchange-traded investment vehicle that tracks the price of the metal while making it possible for institutional and retail investors in all Canadian provinces and territories to invest in physical silver.

As part of its efforts to achieve this goal, last Monday the RCM reached an agreement with a syndicate of underwriters led by TD Securities and National Bank Financial under which those organizations will purchase ETRs and resell them to the public.

The RCM said the TSX has conditionally approved the listing of ETRs for trade on the exchange. Those denominated in Canadian currency will trade under the symbol MNS and those in US dollars will be under the symbol MNS.U. This listing is subject to the Mint fulfilling certain requirements on or before January 10, 2013.

I thank Elliot Simon for sending us today's last story.  It was posted on the silverinvestingnews.com Internet site at 4:30 p.m. Pacific Standard time yesterday...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

He who casts a vote decides nothing. He who counts the vote decides everything. - Joseph Stalin

Well, I must admit that the precious metals charts that I was confronted with when I switched my computer on yesterday morning were somewhat of a surprise.  I suppose that I was under the impression that "da boyz" would keep everything quiet on election day, but that was obviously not the case.

And as I mentioned at the top of this column, I'm not sure whether the rallies in gold and silver were short covering or not.  Since yesterday was the cut-off for Friday's Commitment of Traders Report...and the November Bank Participation Report...I'll reserve judgment until then.

I'm not exactly sure where we're going from here price wise...at least during the next thirty days.  As I've said before, I could make perfectly valid arguments for a big move in either direction, but I just simply don't know which it's going to be in the very short term...and neither does anyone else.  Complicating matters is the big December delivery month coming up in both silver and gold...and I'll be watching the roll-over process [and the price action associated with it] with great interest.

Of course the 800-pound gorillas in silver [and probably gold as well] are JPMorgan and the Bank of Nova Scotia.  I'd say that between the two of them, they were probably short between 40 and 45 percent of the entire futures market in silver as of the last COT Report...and that will probably be a lower number after Friday's and yesterday's price action...if Tuesday's price action was, in fact, short covering.  We'll have to wait until Friday to find out.

As the Far East digests an Obama win, I note that gold is up about thirteen bucks...and silver is up a bit over 30 cents in the Hong Kong afternoon...with about twenty minutes to go before the 8:00 a.m. GMT London open...3:00 a.m. in New York.  The dollar index did a 40 basis point face plant in the Far East on the election news...and hasn't recovered much since then.  Volumes are absolutely monstrous...50,000 plus contracts in gold...with most of it in December...with no roll-overs worth mentioning.  Silver's net volume is already over 10,000 contracts.  This is unprecedented volume for this time of day.

As I write this paragraph, London has now been open for more than two hours...and as I hit the 'send' button at 5:15 p.m. Eastern time, gold and silver prices have backed off a bit...and the dollar index has recovered somewhat.  Net volumes are still over the moon...with gold north of 67,000 contracts...and silver over 13,000 contracts.  I would guess that most of this is of the high-frequency trading variety, as these volume levels are having no measureable effect on prices.

Based on this activity, I'll stick my neck out and say that the chances are pretty good that the volume/price action could be wild and woolly during the New York trading session.  Stay tuned.

That's all I have for today...and I'll see you here tomorrow.