Gold & Silver Daily
"This sell-off in crude oil has pretty much run its course, and a reversal is imminent"

¤ Yesterday In Gold & Silver

It was another very low volume day in gold on Tuesday, and except for the obvious price shenanigans that started at 1 p.m. GMT in London [8 a.m. in New York] and ended shortly after the London p.m. gold fix, I wouldn't read much into yesterday's price action.

The CME reported the high and low as $1,320.60 and $1,305.20 for December.

Gold closed in New York on Tuesday at $1,311.90 spot, which was down $2.70 from Monday.  Net volume, although a tad higher than Monday's, was only 79,000 contracts.

Here's the New York Spot Gold [Bid] chart.  It shows the high tick, which came a minute or so after 8 a.m. in New York, and also the low after the London p.m. gold fix.

Silver "traded" within a very tight price range everywhere on Planet Earth yesterday, but the HFT boys spiked the price to a new low tick for this move down about 30 minutes before the London open.  The subsequent recovery didn't amount to much.   The highs and lows aren't worth mentioning.

Silver closed at $21.71 spot, up 5.5 cents from Monday.  Like gold, silver volume was a bit higher on Tuesday than it was on Monday.  Yesterday's net volume was 22,000 contracts, which was very light.

Platinum rallied a bit in Far East trading on their Tuesday, but also ran into the HFT crowd going into the London open.  Platinum rallied right at the London open and manged to close in positive territory by a few dollars.  Palladium didn't do much until the 9:30 a.m. EST open of the equity markets in New York, and shortly before lunch the price spiked, but it took the "da boyz" less than an hour to get it back under control, and it closed flat.  Here are the charts.

The dollar index didn't do much yesterday.  It opened on Tuesday morning in Tokyo at 80.57, and by the London open it was higher by a whole 10 basis points.  An hour later it was down by 15 basis point to its 80.52 low of the day.  It's high [80.78] came at 3 p.m. GMT, which was 10 a.m. in New York, the time of the London p.m. gold fix.  After the "fix" was in, the index shed a handful of basis points and closed the trading day at 80.68, up 11 basis points from Monday's close.

The gold stocks gapped down about a percent at the open, and never came close to unchanged during the entire New York trading session, but the gold equities managed to finish well of their lows.  The HUI closed down 1.34%, giving back almost half of Monday's gain.

Nick Laird's Intraday Silver Sentiment Index looks the same as the HUI chart, and the silver stocks closed down 0.80%.

The CME's Daily Delivery Report for Tuesday was another yawner, as only one lonely gold contract was posted for delivery on Thursday.

There were no reported changes in GLD yesterday, and as of 9:52 p.m. EST yesterday evening, there were no reported changes in SLV, either.

The U.S. Mint had another sales report yesterday.  They sold 500,000 silver eagles, and that was all.

There was virtually no in/out action in gold and the Comex-approved depositories on Monday.  They received nothing, and 96 ounces was shipped out of Brink's, Inc.

Of course it was a lot busier in silver, as 890,762 troy ounces were shipped in, and a smallish 51,436 troy ounces were shipped out the door.  The link to that activity is here.

There was no Commitment of Traders Report posted on the CFTC's Web site yesterday.  Maybe today.

I have the usual number of stories for a mid-week column, and the final edit is up to you.


¤ Critical Reads

Matt Taibbi: Chase Isn't the Only Bank in Trouble

I've been away for weeks now on a non-financial assignment (we have something unusual coming out in Rolling Stone in a few weeks) so I've fallen behind on some crazy developments on Wall Street. There are multiple scandals blowing up right now, including a whole set of ominous legal cases that could result in punishments so extreme that they might significantly alter the long-term future of the financial services sector.

As one friend of mine put it, "Whatever those morons put aside for settlements, they'd better double it."

Firstly, there's a huge mess involving possible manipulation of the world currency markets. This scandal is already drawing comparisons to the last biggest-financial-scandal-in-history (the Financial Times wondered about a "repeat Libor scandal"), the manipulation of interest rates via the gaming of the London Interbank Offered Rate, or Libor. The foreign exchange or FX market is the largest financial market in the world, with a daily trading volume of nearly $5 trillion.

This absolute must read Matt Taibbi blog was posted on the Rolling Stone website yesterday...and today's first news item is courtesy of Roy Stephens.


John McAfee reveals details on gadget to thwart NSA

John McAfee lived up to his reputation Saturday as tech's most popular wild child, electrifying an audience with new details of his plan to thwart the NSA's surveillance of ordinary Americans with an inexpensive, pocket-size gadget.

Dubbed "Decentral," the as-yet-unbuilt device will cost less than $100, McAfee promised the enthusiastic crowd of about 300 engineers, musicians and artists at the San Jose McEnery Convention Center.

"There will be no way (for the government) to tell who you are or where you are," he said in an onstage interview with moderator Dan Holden at the inaugural C2SV Technology Conference + Music Festival.

This articled was posted on the website back in late September.  But here it is...better late than never, I suppose.  I thank reader Michael Riedel for bringing it to our attention.


GCHQ intercepts Google, Yahoo cloud data hosted in Britain, feeds info to NSA

The National Security Agency is fed internal information from Google and Yahoo’s private networks by British counterpart GCHQ, which intercepts communications traveling between company data centers based in Britain.

Documents supplied by former NSA contractor Edward Snowden and reported by The Washington Post last Wednesday showed how the NSA and GCHQ work together to intercept private links that connect Google and Yahoo global data centers. On Monday, The Post added new background and details of a program known as “MUSCULAR” to its previous report to paint a more succinct picture of how the spy agencies access these supposedly protected data links.

For instance, The Post begins by pointing out the reaction to the previous story from NSA Director Keith Alexander, who said prior to reading the report that “I can tell you factually we do not have access to Google servers, Yahoo servers.” The Post points out that the previous story did not mention access to servers, but that the NSA intercepts information as it passes between private data centers through private fiber-optic cables.

The rot is deeper, wider and higher than anyone can imagine.  This story was posted on the Russia Today website late Monday evening Moscow time...and it's courtesy of South African reader Bob Visser.


Et Tu, U.K.? Anger Grows over British Spying in Berlin

Reacting to allegations that yet another close ally might be spying on its leaders from an embassy in Berlin, Germany's Foreign Ministry invited Britain's ambassador to a meeting on Tuesday afternoon to discuss the allegations. The invitation had been requested by Foreign Minister Guido Westerwelle.

During the meeting, the head of the ministry's European affairs department informed the ambassador that "eavesdropping on communications inside the offices of a diplomatic mission would violate international law," a Foreign Ministry spokesperson said. The ministry did not provide addition details about the meeting.

The revelations about further alleged spying have rocked the political establishment in Berlin this week. The London-based Independent newspaper revealed Monday that British intelligence had established a "secret listening post" in the British Embassy like the one recently revealed by SPIEGEL to be in the US Embassy on the same large block. The British post, like the American one, is located near the German parliament, the Reichstag, and was disclosed in the trove of data leaked by American intelligence whistleblower Edward Snowden.

No surprises here.  If I were in Germany's shoes, I'd be checking the top of the Canadian and Australian embassies as well.

This story was posted on the German website early yesterday afternoon Europe time...and it should come as no surprise that it's courtesy of Roy Stephens.


Merkel Spying: It's 'Unlikely' White House Didn't Know

President Obama has claimed he didn't know the U.S. was spying on Chancellor Angela Merkel. SPIEGEL asks White House security veteran Michael Allen about whether that's possible -- and how the NSA sets its priorities in the first place.

SPIEGEL: The spying activities of the NSA have led to a great uproar in Europe, where residents have also been taken aback by the unapologetic response of American intelligence officials in Congressional hearings.

Allen: I think because of the United States' experiences since September 11 and the faulty assessment that there was WMD in Iraq, there has been the feeling we needed better intelligence so that our national security leaders could make better decisions on behalf of the country. I think the way the intelligence community sees it, their job is to collect information that the policymakers think is in the national interest.

SPIEGEL: Does that include the tapping of Angela Merkel's cellphone?

Allen: Well, I don't know and can't confirm if we did.

Amazing!  Deny, deny, deny.  If Merkel wants to do some real damage, all she has to do is give the U.S. military its walking papers, as they never left German soil at the end of WWII.  This story from yesterday morning Europe time is another contribution from Roy Stephens.


Why bring up Europe? It will be largely irrelevant five years from now

There is therefore good reason to be suspicious of the CBI’s latest contribution to the debate over British membership of the European Union, which a survey of members has – surprise – found to be overwhelmingly the most effective way of maximising the benefits of global trade.

I don’t necessarily disagree with the conclusion, timed to coincide with Monday’s annual CBI conference: if the UK has a chance for sustainable growth, it is via the openness of its economy. To be pulling back from treaties designed to bring about an economically integrated Europe is an odd way of pursuing the goal of a more international economy, regardless of Europe’s manifest failings and unwanted intrusions.

Yet there is also something faintly irrelevant – given the increasingly global nature of economic activity – about the whole in/out debate. Europe is changing before our eyes. By the time we get to a referendum, much of the present shouting match will be rendered meaningless. Putting numbers on the supposed costs and/or benefits of membership, as the CBI tries to in its call to arms, is a fatuous and largely subjective exercise. It won’t convince anyone.

This commentary by Jeremy Warner was posted on The Telegraph's website on Monday evening GMT...and once again I thank Roy Stephens for sending it along.


Go for broke: Ukraine’s risky E.U. trade deal

Tough admission standards could keep Ukraine’s trade integration with the European Union on hold, and if the process is dragged out long enough, it may be forced back into the arms of its ex-Soviet ally, Russia.

European Union ministers will meet on November 18 ahead of the Vilnius summit and decide if Kiev has met enough criteria to sign the dotted line on its trade association agreement.

The Ukrainian government approved their draft resolution on September 18 and the agreement will either get a ‘yes’ or ‘no’ at the Eastern Partnership Summit in Lithuania on November 28-29.

If European Union officials reject Ukraine from their trade association, Kiev will need to reconsider Moscow's proposal to join the Russia-led Eurasian Customs Union.

This interesting story was posted on the Russia Today website early on Monday morning Moscow time...and I thank Bob Visser for sliding it into my in-box in the wee hours of this morning Edmonton time.  It's certainly a must read for all students of the New Great Game.


The Saudis are engaged in a great gamble

The inhabitants of the desert kingdom of Saudi Arabia are not renowned for their sense of humour. In a country where public executions by beheading are commonplace, and even relatively minor transgressions such as drinking alcohol can be punished by the lash, the kingdom’s all-powerful religious police do not engender an atmosphere of levity.

So the fact that a video poking fun at Saudi Arabia’s long-standing ban on women drivers has gone viral, with nearly seven million hits registered since it was uploaded a few days ago, suggests that profound changes are taking place in the world’s most conservative country.

Called No Woman, No Drive, the pastiche of Bob Marley’s reggae classic was released by a group of Saudi comedians to support a protest by women drivers. Whether or not they succeed, the fact that women have publicly dared to challenge the authority of the all-powerful mutawa, the religious police, by posting videos of themselves driving to the local store provides a rare glimpse of the mounting resentment that many Saudis feel towards the domestic policies of perhaps the world’s last absolute monarchy.

This must read, especially for all serious students of the New Great Game, was posted on the Internet site a week ago...and I thank reader U.D. for bringing it to my attention, and now to yours.


China premier warns against loose money policies

China needs to sustain economic growth of 7.2 percent to ensure a stable job market, Premier Li Keqiang said as he warned the government against further expanding already loose money policies.

In one of the few occasions when a top official has specified the minimum level of growth needed for employment, Li said calculations show China's economy must grow 7.2 percent annually to create 10 million jobs a year.

That would cap the urban unemployment rate at around 4 percent, he said.

"We want to stabilize economic growth because we need to guarantee employment essentially," Li was quoted by the Workers' Daily as saying on Monday. His remarks were made at a union meeting two weeks ago but were only published in full this week, just days before a pivotal Communist Party plenum to set policy opens.

This Reuters story appeared on their website very early on Tuesday morning EST...and I thank Manitoba reader Ulrike Marx for her first offering of the day.


Three King World News Blogs

1. Richard Russell: "The Financial System Has Been Destroyed".  2. Art Cashin: "This Can Cause the Entire Financial System to Collapse".  3. Ron Rosen: "60-Year Market Veteran - People Missed 2 Amazing Charts".

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]



CFTC Commissioner Bart Chilton Calls it Quits

I have mixed feelings about Bart.  Yes, he did yeoman work at the beginning when Ted Butler first brought the silver and gold price management scheme to his attention at the start of his tenure.  After that he was talk only, as it was obvious that Gensler, or someone higher up, had told him to back off.  I'm sure that, if he could have, he would have been more than happy to blow this whole affair sky high.

His comments are in this speech he gave at the Dodd-Frank meeting on position limits...and it was posted on the website yesterday.  The first person through the door with this news item was Washington state reader S.A.  Chris Powell over at GATA also had some thoughts on all this...and his comments were posted on the website yesterday under the headline "Financial interests finally get rid of CFTC's Chilton".  The link is here.


Opening Statement of Chairman Gary Gensler: Open Meeting to Consider Position Limits

Today we will consider two proposed rules on position limits. I support seeking public comment on each of these proposed rules.

The CFTC does not set or regulate prices. The Commission is charged with promoting the integrity of the futures and swaps markets. The Commission is charged with protecting the public from fraud, manipulation and other abuses.

Since the Commodity Exchange Act passed in 1936, position limits have been a tool to curb or prevent excessive speculation that may burden interstate commerce.

This short speech by Gary Gensler preceded the speech by Bart Chilton posted above.  Gensler's comments are worth the read as well.  I thank Ted Butler for sharing this with us...and it, too, was posted on the Internet site yesterday.


Worries Boost Sales of American Eagle Gold Coins

U.S. Mint gold-coin sales are on track to exceed last year's totals as worries about the stability of the federal government have attracted buyers back to the market.

The Mint has sold 752,500 troy ounces of American Eagle gold coins this year, just shy of last year's total sales of 753,000 ounces, according to the Mint's data.

The Mint has struggled to keep up with silver-coin demand for much of 2013. It ran out of the coins in January and imposed limits on coin sales to its authorized dealers. Those limits remain in place.

The Mint sold 3.087 million ounces of American Eagle silver coins, up from 3.013 million in September but below October 2012 sales of 3.153 million ounces.

This story appeared in The Wall Street Journal yesterday...and it's definitely worth reading.  I thank reader Ken Hurt for sending it our way.


Swiss authorities open criminal probe into Swiss gold refiner Argor-Heraeus

Switzerland’s Federal Public Prosecutor opened a criminal investigation into Argor-Heraeus SA to examine allegations the privately-owned company illegally refined gold from the Democratic Republic of Congo from 2004 to 2005.

The investigation was initiated after authorities received a criminal complaint from Trial, a Geneva-based non-governmental organization, on Nov. 1.

The public prosecutor in Bern “has examined such information and decided to initiate criminal proceedings against the company concerned for suspected money laundering in connection with a war crime and complicity in war crimes,” spokeswoman Jacqueline Buehlmann said in an e-mailed statement, adding that the prosecutor’s office is unable to provide more information given the “secrecy of the investigation.”

This Bloomberg story found a home over at the Internet site yesterday...and I thank Ulrike Marx for here second contribution to today's column.  It's worth your time.


Indian gold premiums fall, imports for domestic use resume

Gold premiums in India halved on Tuesday from last week because of unusually muted demand during the festival season and as supply was set to improve after some importing agencies began purchasing for domestic use.

Local prices were US$60-70 an ounce higher than London prices, compared with a record high of US$130 an ounce last week.

India, struggling with a high trade deficit and weak currency, has been trying to curb demand for gold, the second-biggest import item after oil. It has made gold expensive for consumers by setting a record 10 percent import duty and made supplies harder to come.

This Reuters story was posted on the website late yesterday afternoon IST...and I thank Ulrike Marx once again for bringing it to our attention.


India's Demand to Buy Silver Doubles on Gold Ban, Price Drop

Demand to buy silver amongst Indian households has pushed the country's imports of the precious metal to twice last year's level and may set a record in 2013, according to industry experts.

Between January and September, silver imports to India totaled more than 4,000 tonnes, already beating full-year 2012 says the Thomson Reuters GFMS consultancy.

The world's largest end-consumer of silver bullion as well as gold, India's current record demand to buy silver came at just over 5,000 tonnes in 2008.

That figure equals some 16% of total global demand, put around 30,000 tonnes per year. India's demand to buy gold, also the world leader, has been nearer 25%.

This article appeared on the Internet site at noon GMT in London yesterday...and is definitely worth reading.  As I've said before, the last thing that JPMorgan would want is a roaring bull market in silver in India, but they may face that possibility whether they want it or not.  I thank Ulrike Marx for her final contribution to today's column.


Patrick Heller: How Much Gold Does China Buy?

Yesterday, Du Haiqing, the vice general manager of China Gold Group (China’s largest gold producer) told a gold industry conference in China that China’s current gold consumption level cannot be sustained.

According to the China Gold Association, China consumed 832.18 metric tonnes (26.75 million ounces) of gold in 2012. In 2013, Du projected domestic gold production to be 430 metric tonnes for the year, none of which is exported. For the first nine months of 2013, China has imported 855 metric tonnes of gold through Hong Kong. Even if no more gold were imported after Sept. 30, that would still put 2013 demand at 1,285 metric tonnes (41.3 million ounces).

Du not only said that the current level of gold consumption is unsustainable, but that total demand starting in 2014 may fall below 1,000 metric tonnes (32.15 million ounces).

I suspect that not only was Du’s demand forecast wrong, but that he was deliberately lying when he made these statements. Sadly, China’s financial intentions are masked by hiding them behind statements of lesser officials, who are often engaged in misdirection. By having Du say that demand will drop, low gold prices will likely continue longer than they otherwise would. The result would be that China could buy more gold at bargain levels.

This short commentary by Patrick was posted on the Internet site yesterday...and I thank West Virginia reader Elliot Simon for the last story in today's column.



¤ The Funnies

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¤ The Wrap

It is not possible for a single trading entity to hold fully one quarter of any large regulated futures market and for that not to constitute an obvious market corner and manipulation. Please remember, U.S. regulated futures markets are supposed to be open and diverse marts with many hundreds and thousands of participants. It is the wide diversity of many participants meeting in an openly competitive environment that underscores the purpose of futures trading.

In essence, and simply put, the whole thrust of U.S. commodity law is to prevent any one entity from holding more than 3% to 5% of any large futures market. This is what the CFTC staff proposal for position limits advanced. Yet JPMorgan held 25% of the Comex gold futures market on Oct 15. And if anyone suspects that the bank was hedging for clients, please be aware that roughly a year ago, JPMorgan held more than 20% of the Comex gold market on the short side. It is not possible for JPMorgan (alone) to have clients that needed to short hedge that much a year ago and to buy hedge that much today. - Silver analyst Ted Butler:  02 November 2013

It was just another day off the calendar on Tuesday, as nothing much happened in the precious metals, with the exception of the obvious intervention in gold at 1 p.m. GMT in London, which was 8 a.m. in New York.  As I said in this space yesterday, the markets are easy for any entity to move around when volumes are basically fumes and vapours like they were yesterday, and on Monday.

As we sit here twiddling our thumbs waiting for JPMorgan et al to get this current down-move in all four precious metals over and done with, there are a couple of other things that I've been watching for the last little while.  One is the dollar index, and the other is crude oil.

I've been following the antics within the crude oil market ever since Ted mentioned the fact that the Commercial traders [read JPMorgan et al] were skinning the technical fund and small trader longs [for fun and profit] just like they're doing in silver and gold.  Here's the three-year WTIC chart.

As you can see, the overbought condition in WTIC which Ted pointed out over a month ago, has now turned into an oversold situation.  And using the past as prologue on this chart, it's easy to see that this sell-off in crude oil has pretty much run its course, and a reversal is imminent.

In some ways, the same can be said for the dollar index as well, except in reverse.  Here's the three-year chart for that.

As I pointed out in this column a few weeks back, there was some entity with very deep pockets showing up to prevent the dollar index from crashing through the 79.00 level for three days in a row [and almost exactly 24 hours apart] during the thinly-traded afternoon market in the Far East, and that has resulted in a rally back to its 50-day moving average, which is where we're situated right now.

From a technical point of view, it's easy to see that if the dollar index 'failed' at the 50-day moving average, and then broke below the 79.00 mark, there's nothing to stop it from falling all the way down to the 73 to 75 mark in very short order.

But as you may also notice from the chart, the dollar index has been "saved" from that fate many times during the past 18 months.  Will that someone show up to catch a falling knife one more time if it happens again?  Beats me.

The result of a rapidly falling dollar coupled with an equally rapid rise in crude oil prices is a recipe for a major up-move in precious metal prices.  Whether or not it happens is still unknown, but the stars are all aligned for just such an event if the powers that be wish it.  And don't forget the new position limits structure discussed by Gary Gensler and Bart Chilton, as it may play into the mix as well.

Remember, there are no markets anymore, only interventions.

I note now that I've checked back on the precious metals at 4:10 a.m. EST, there have been some spikes in the prices of all four that began about 30 minutes into the London trading day.  Up until the London open, volumes had been very light but, for a change, although volumes have increased, they haven't increased by much.  Gold volume is about "average," and silver volume is still pretty light, so the possibility exists that there is a fair amount of short covering going on at the moment.

Here are the charts as of the above-mentioned time.

Since yesterday was the cut-off for this Friday's Commitment of Traders Report, whatever price action occurs today won't show up until the COT Report on November 15.

And as I hit the send button on today's column at 5:20 a.m. EST, I note that the rallies in all four precious metals weren't allowed to get far, and silver is safely back under the $22 spot price mark once again.  Volumes are up a bit since I last reported, but not by a lot; about average for gold for this time of day, and well below average for silver.  The dollar index, which had shed about 20 basis points between 10 a.m. and 12:30 p.m. in Hong Kong trading, dropped a bit more during the early going in London, and is down 16 basis points at the moment.  These price spikes in the precious metals obviously had nothing to do with the moves in the currency market.

That's all I have for today, and if the action in early London trading is any indication, the Comex trading session could prove interesting.  I'll also be checking on the price action at 1 p.m. GMT, which is 8 a.m. in New York, as JPMorgan et al showed up at that time on both Monday and Tuesday.  Will they put in an appearance at that time again today? We'll find out soon enough.

See you tomorrow.