It was an uneventful trading day in the precious metals in the Far East yesterday...and not much more exciting in London.
But that all changed at 9:30 a.m. in New York...and 125 minutes later, gold hit its low of the day at $1,577.40 spot. The gold price got sold off in two tranches...once at the London p.m. gold fix at 10:00 a.m. Eastern...and the second time exactly an hour later.
From its New York high to its New York low, gold's price move was a hair over $52. Gold closed at $1,588.50 spot...down $31.20 on the day. Net volume was a gargantuan 244,000 contracts.
Here's the New York Spot Gold [Bid] chart on its own, so you can see the shenanigans that went on in greater detail.
Silver's price path had a little more structure to it. It got sold down about two bits around 10:00 a.m. Hong Kong time...and stayed around the $29.25 price range right up until the noon silver fix in London. Then a rally began the took it up to its 9:30 a.m. New York high of the day...$29.79 spot...and at that point it met the same fate as the gold price.
From its high to its low, silver got smacked for $1.47...which works out to 4.93%. From it's $28.32 spot low, silver gained back 27 cents...and closed the electronic trading session in New York at $28.59 spot...down 84 cents on the day.
Platinum got hit pretty hard as well...down 1.58% from Wednesday. Palladium was actually up a buck on the day. You don't need a degree in rocket science to know that very little of what happened in the precious metals had to do with what "Helicopter Ben" had to say.
The dollar index did very little yesterday. It's high of the day, such as it was, came at the London open...and from there it declined about 45 basis points to its low which came a few minutes after 9:30 a.m. in New York. From there it rallied 30 odd basis points...and closed up a handful of basis points from Wednesday.
It's more than a stretch to pin yesterday's bloodbath in the precious metals on the dollar index.
The gold shares opened the trading day in the green for just a few minutes before heading for the nether reaches of the earth...with the low of the day coming around 11:30 a.m. Eastern time. The shares recovered a bit from there, but the HUI still finished down a chunky 3.26%. At the low, the HUI was down over five percent, so I guess we should be thankful for small mercies.
As can be imagined, the silver shares got it in the neck pretty good as well...and Nick Laird's Silver Sentiment Index was down 2.11%.
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The CME's Daily Delivery Report was a yawner, as only 10 gold contracts were posted for delivery on Monday.
There were no reported changes in GLD...but as I mentioned in this space yesterday..."an authorized participant added 970,184 ounces of silver to SLV on Wednesday, which was within twelve ounces of the amount of silver added on Tuesday." Well, the Wednesday deposit was obviously an error, as they reversed the entire amount on Thursday.
Both Ted Butler and I were expecting/hoping for a decline in the short interest in SLV when the new report came out this week. Well, the new report is out, and it showed that the short position in SLV increased another 1,423,800 shares/ounces...or 11.15%. As of the cut-off for this report, which is posted over at shortsqueeze.com, there are currently 14,190,300 SLV shares that have no silver backing them. That's a bit over seven days of world silver production...or 441.3 metric tonnes.
After a monstrous increase in the last report, the GLD ETF showed a small decline in their short position in this report. It declined by 564,900 shares...or 3.16%...or 56,490 troy ounces. As of the report date, GLD now has a short position of 17.33 million shares, or 1.733 million ounces, which is a hair under 54 tonnes.
As I've said at every possible opportunity...I wouldn't touch either of these two ETFs with a 10-foot cattle prod. I'd own physical metal in hand instead. Then you really know you own it.
The U.S. Mint had a small sales report. They sold 500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 100,000 silver eagles.
The Comex-approved depositories reported receiving 560,074 troy ounces of silver on Wednesday...and didn't ship out anything. The link to that action is here.
I have the usual number of stories once again and, as I always like to do, I'll leave the final edit up to you.
Fitch Ratings reiterated on Thursday it would cut its sovereign credit rating for the United States next year if Washington cannot come to grips with its deficits and create a "credible" fiscal consolidation plan.
It also said it would immediately cut the credit ratings on Cyprus, Ireland, Italy, Spain and Portugal if Greece were to exit the eurozone. Additionally, all eurozone nations would have their ratings put on its negative ratings watch list, setting a six-month time frame for a potential downgrade.
Europe's ongoing sovereign credit crisis undermines already below-trend growth seen in the United States, the world's biggest economy.
This story was posted on the moneynews.com Internet site late yesterday morning...and I thank West Virginia reader Elliot Simon for bringing it to our attention. The link is here.
The most impressive Federal Reserve speech this week wasn’t Chairman Ben Bernanke’s guarded remarks today before Congress’s Joint Economic Committee. It was a speech on Wednesday in Boston by Vice Chair Janet Yellen, who warned that things could start to get really bad if the Fed doesn’t stay ahead of the curve.
Here’s what she said, as reported by Caroline Salas Gage of Bloomberg News: “It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.”
That’s been the philosophy of Bernanke’s Fed ever since the financial crisis began in 2008: The risk of a downward spiral is so great that the Fed needs to lean over backward to make sure it doesn’t get started—even to the point of erring on the side of keeping monetary policy too loose for too long.
This story was posted over at the businessweek.com Internet site yesterday...and I thank Washington state reader S.A. for sending it. The link is here.
You may have missed this week's big political news from the United States where conservative Republican Governor of Wisconsin, Scott Walker, was re-elected by a landslide in the teeth of hysterical and well-funded opposition from public sector unions who had sought his early removal from office through a recall ballot.
How do I know it was a landslide? Well, Walker won by a larger share of the vote than Obama did the White House in 2008 and his victory was proclaimed a landslide. What's good for the goose...
Had Walker lost, the BBC and their liberal allies would have made sure that President Obama's victory (as it would surely have been portrayed) led the bulletins. The GOP, we would have been told, was finished - the party's "extremism" and "intolerance" deservedly seeing Governor Walker turfed out of office.
This story was posted on the dailymail.co.uk website during the afternoon in London...and is Washington reader S.A.'s second offering in a row in today's column. The link is here.
The President of Estonia slammed Nobel laureate and New York Times columnist Paul Krugman on Twitter today over Krugman's short blog post pooh-poohing the Eastern European country's economic recovery.
Krugman wrote that defenders of Europe's austerity measures often point to Estonia's economic recovery to defend their policies. He included a chart that showed the country's rising GDP and added: "Better than no recovery at all, obviously—but this is what passes for economic triumph?"
Estonia's president, Toomas Hendrik Ilves, struck back on Twitter. "Let's write about something we know nothing about & be smug, overbearing & patronizing: after all, they're just wogs," Ilves wrote, using the derogatory British slang term for dark-skinned people from Africa or the East.
"Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a 'wasteland'. Must be a Princeton vs. Columbia thing," he added, referencing the university where Krugman teaches and his own alma mater. (It's unclear when and if Krugman actually called Estonia a wasteland, even though Ilves puts the word in quotes.)
You just read the entire 4-paragraph story that was posted over at the news.yahoo.com website on Wednesday...and I thank reader Scott Pluschau for sending it. The link is here.
PIRC, the shareholder advisory group, has analysed the 2011 accounts of the UK's top five banks to calculate how much they expect to write off as bad debt in the coming years but have yet to take against profits.
Royal Bank of Scotland (RBS) was in the worst condition, PIRC found, with £18bn of undeclared losses that would wipe out more than a third of its capital buffer and potentially force the 82pc state-owned lender back to the taxpayer for another rescue.
HSBC had ($16bn) £10bn in undeclared losses, Barclays £6.7bn, Standard Chartered $3.6bn (£2.3bn) and Lloyds Banking Group £2.9bn. PIRC presented its numbers to all the banks and said none disputed them.
Profits at Britain's lenders have been flattered by controversial international accounting standards introduced in 2005 that prevent companies from provisioning against potential losses. The rules have been attacked by the House of Lords, among others, as deeply flawed.
PIRC said the rule was "masking the true position [of the accounts] by including fictional assets and fictional profits".
Really!!!...and it's probably much worse than stated here. As I [along with many others] have said for years, most of the Western banking system is totally insolvent...and this is just more proof. This short story was posted in The Telegraph on Tuesday...and I thank reader Brad Robertson for sharing it with us. It's worth skimming...and the link is here.
The Chancellor spoke as eurozone leaders debate moves towards a deeper political union in response to the crisis affecting the single currency.
Conservative MPs believe that the crisis will mean changes in the way the European Union works, changes that should trigger a referendum in the UK.
The Coalition has promised that any move to transfer more power from Westminster to Brussels will be put to a referendum.
This story was posted in The Telegraph early yesterday morning New York time...and is the first of many stories from Roy Stephens. The link is here.
It would be unkind to say that Spain has capitulated, but that is almost certainly what has happened.
There will be a sovereign bail-out for Spain from the EFSF rescue fund. This is disguised (very slightly) by paying the money into Spain's state restructuring fund for banks FROB rather than the treasury, but that changes little.
It is the Spanish state that will bear the costs of recapitalising the banks, not the EU. Spain's public debt will shoot higher.
The Spanish press understands this perfectly well, as made clear this morning by Bernardo de Miguel in Cinco Dias.
This AE-S blog was posted on telegraph.co.uk Internet site yesterday...and is Roy Stephens second offering of the day. The link is here.
While the Spanish government was able to sell all the bonds it wanted to on Thursday, it mostly sold to the usual buyers: Spain’s increasingly fragile banks.
And so, as Madrid tries to come up with the money to bail out its banks, its main lenders are increasingly becoming many of those same institutions.
If it sounds like the most vicious of circles, it is.
Economists warn that over the long term, Spain will have trouble meeting its substantial financial requirements until foreign investors return to the market as regular buyers, injecting new money into the system. Until late last year, foreign investors were doing just that. But lately, much of the foreign money has been staying away.
This story, filed from London, was posted in The New York Times yesterday...and is the third and final offering from Washington state reader S.A...and the link is here.
The ratings agency Fitch delivered a strong rebuke to Europe's policy elite last night when it sharply downgraded Spain's creditworthiness and moved the eurozone's fourth-biggest economy a step closer to an international financial bailout.
Fitch said mistakes at a European level that had allowed the debt crisis to escalate were in part to blame for its decision to cut Spain's credit rating by three notches to just above junk bond status.
The move – which follows the pattern that led to Greece, Ireland and Portugal needing help from Europe and the International Monetary Fund – makes it harder and more expensive for Spain to borrow money on the world's financial markets.
This story was posted in The Guardian early yesterday evening London time...and is courtesy of Roy Stephens. The link is here.
While the International Monetary Fund thinks Spanish banks require €40bn or so in fresh capital, any loan package may have to be much larger to restore shattered confidence in the country.
Megan Greene from Roubini Global Economics says Spain's banks will need up to €250bn, a claim that no longer looks extreme. New troubles are emerging daily. The Bank of Spain said on Thursday that Catalunya Caixa and Novagalicia will need a total of €9bn in new state funds.
JP Morgan is expecting the final package for Spain to rise above €350bn, while RBS says the rescue will "morph" into a full-blown rescue of €370bn to €450bn over time -- by far the largest in world history.
"Where is the money going to come from?" said Simon Derrick from BNY Mellon. "Half-measures are not going to work at this stage and it is not clear that the funding is available."
This story was posted over at the telegraph.co.uk Internet site yesterday evening London time...and is definitely worth reading. I thank Roy Stephens for sending it...and the link is here.
Greek talk shows are by nature combustible affairs. But rarely have they witnessed anything quite as shocking as the moment when a leading member of the neo-Nazi Golden Dawn party launched a physical assault on two female politicians.
Ten days before the debt-stricken nation goes to the polls in an election that will not only decide Greece's fate but quite possibly the course of Europe too, the attack, captured on live TV, involved Ilias Kasidiaris, a high profile member of Golden Dawn, lashing out at two prominent leftwing MPs – all part of a seven-strong panel attending the popular Good Morning Greece TV show.
The nation that triggered Europe's debt drama is now a boiling cauldron. In the third year of its worst crisis since the second world war, it has reached the point where fury becomes violence.
The first headline reads "5+1 group's dithering puts talks in question: Iran". The second story is entitled "Japan readies bill for sovereign cover of Iran oil imports". Both are courtesy of Roy Stephens.
Thursday morning, the People's Bank of China announced a surprise interest rate cut for the first time since 2008.
More important and much less talked about is China's decision to allow commercial banks to offer up to 10 percent premium to the benchmark deposit rate (compared to 0 percent previously), and the up to 20 percent discount to the lending rates (compared to 10 percent previously), according to Societe Generale analyst Wei Yao.
Deposit growth has continued to slow despite the steady increase in the real deposit rate i.e. the money paid out in interest by a bank on cash deposits and other investment accounts. While this could pressure banks, the deposit rate increase would give the Chinese higher returns and help increase spending.
It sounds like the Chinese government is getting desperate to save their economy from a hard landing. This story was posted on the businessinsider.com website yesterday morning...and is definitely worth reading. It's Roy Stephens final offering in today's column, for which I thank him...and the link is here.
When I talk about the Love Trade, India and China are frequently discussed since the two countries have been dominating world jewelry demand. Turkey’s love for gold, though, cannot be overlooked, as an estimated 5,000 tons have been accumulating in people’s homes for years.
Turkey is now offering incentives for people to store their gold in the bank instead. By acknowledging the hidden wealth of the Eastern European nation, this move will allow banks to lend more money and ultimately improve the country’s current account balance.
Turks’ Love Trade dates back more than 5,000 years ago, when gold jewelry was produced in Anatolia. That city still holds the world’s oldest jewelry art. Istanbul is the center for the production of gold jewelry and is also home to the Grand Bazaar which was constructed in 1461 and remains “the heart of the Turkish gold jewelry sector,” says the World Gold Council (WGC). Similar to India and China, Turks view the precious metal as both an adornment and a traditional form of saving. From a very young age, girls learn that gold is a wealth preservation asset, which helps explain why almost a quarter of those surveyed in Turkey today chose gold as their top investment choice, says the WGC.
This short piece, which includes a most excellent graph, was something I dug up over at the Kitco website in the wee hours of this morning. It's a must read...and the link is here.
Rich Indians, whose numbers have soared in 2011, are keen to buy large quantities of gold, moving assets out of the financial system.
A slowing economy and falling stock markets in India have got consumers veering to gold, which has regained its safe haven status. Traders insist the gloomy equity markets have few takers these days, and the accompanying high interest rates are keeping small-time investors at bay.
On Wednesday, for the fourth day in succession, prices of the yellow metal touched record levels in Mumbai and Kochi, but it did not deter customers who made small purchases. On Thursday, June 7, gold prices rose by $5.13 to hit an all time high of $555.40 per 10 grams in futures trade, after speculators created huge positions.
Despite higher prices in the last four days, gold counters especially in South India reported an estimated 20% to 25% jump in sales.
I found this story over at the Mineweb.com website early this morning...and it's definitely worth reading. The link is here.
The Commodity Futures Trading Commission is charging a South Carolina-based firm with operating a $90 million Ponzi scheme, fraudulently offering contracts on silver sales, but never actually purchasing any metal, the agency said late Wednesday.
The CFTC charged Ronnie Gene Wilson and Atlantic Bullion & Coin, Inc, both of Easley, S.C., with violating the Commodity Exchange Act and CFTC regulations, saying they have operated a Ponzi scheme dating back as far as 2001 and continuing through Feb. 29, 2012. The complaint against Wilson and Atlantic Bullion & Coin was filed Thursday in the U.S. District Court for the Southern District of South Carolina, Anderson Division.
In the suit, the CFTC said Wilson and Atlantic Bullion & Coin fraudulently obtained at least $90.1 million from at least 945 investors. The CFTC said it has jurisdiction over the two from Aug. 11, 2011 to Feb. 29 under new provisions contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The CFTC sure is good at going after the small fish...how about JPMorgan? Or how about GLD and SLV? The story was posted over at Kitco yesterday morning...and I thank reader Jim Rodgers for bringing it to our attention. It's a must read...and the link is here. Do you know where your precious metals are, dear reader?
Writing this week in the Midas Letter, James West observes that the gold futures markets create the illusion of infinite supply of the monetary metal as part of a worldwide campaign of "perception management."
West writes: "CNBC, Bloomberg, The Wall Street Journal et al. refuse to extend their line of inquiry into the factors controlling the price of gold beyond superficial fundamentals such as jewelry demand and store-of-value investor demand. This perception management apparatus has now become so finely tuned that the gold price is rather deftly handled upward and downward in movements that serve the requirements of the two parties operating the scam. For the banks, reliable risk-free profit, and for the government of the United States, the perception that the U.S. dollar is a safer haven than gold."
West's commentary is headlined "Gold Standard, Gold Futures, and Perception Management"...and I borrowed the headline and the story from a GATA release yesterday. It's posted over at the midasletter.com website...and the link is here.
Great Panther Silver Limited, (TSX: GPR NYSE.A: GPL)headquartered in Vancouver, Canada, is a profitable primary silver producer operating two 100% owned mines in Mexico. Over 94% of revenues are derived from unhedged precious metals production with approximately 74% generated from silver sales and 20% from gold. Since entering production in the first quarter of 2006, the Company has seen five consecutive annual increases in revenues and provides strong leverage to future rises in precious metals prices.
The Company has also been growing its resource and reserve base at both 100% owned operations. A new resource/reserve estimate is expected for the Guanajuato Mine Complex and the San Ignacio Project in the second quarter of 2012 and a new resource/reserve estimate for the Topia Mines during the third quarter of 2012. Great Panther continues to replace mined ounces, grow resources and reserves at both operations, and is targeting a 10 year mine live at each.
Plan for the future, because that's where you are going to spend the rest of your life. - Mark Twain
Well, dear reader...there are two possible interpretations of yesterday's price action in New York. It was either all Ben Bernanke's fault...or 'da boyz' used his speech as fig leaf to beat the living snot out of the gold, silver and platinum prices...and then let the main stream gold commentators blame it all on him. It had to be one of the two, because it had nothing to do with the dollar, copper prices, the CRB, or much else for that matter.
Anyway, setting all that aside, the gold and silver price have now been blasted well below their respective 50-day moving averages, so the technicians will see it as a 'failure' at this level...even though it's my opinion that this was all paper trading on the Comex...and as Ted Butler said in the quote in yesterday's column...."A few words on Wednesday’s price action, aside from up feels much better than down. I don’t know how it’s possible to explain silver and gold suddenly trading at multi-week highs in terms other than related to the COT market structure. If there is another explanation to account for the rally, I am not remotely aware of what it might be. As I tried to explain in Saturday’s report, this move has everything to do with technical fund buying (both short-covering and new buying) and commercial selling. The unusually low commercial net short and speculative net long position in COMEX gold and silver set the stage for this rally, which began on Friday. If past is prologue, the move will end, perhaps only temporarily, when the commercials decide they have permitted as much technical fund and speculative buying as the commercials will allow. There is no way of knowing in advance just how much speculative buying will be tolerated by the commercials, particularly in how much JPMorgan will add to existing short positions. All we can do is monitor COT changes as they occur and are reported."
Here are the 6-month charts for gold and silver...note the 'failures' at the 50-day moving averages...and it's entirely up to you if you believe it was free-market forces, or an engineered event by the New York-based bullion banks.
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Not one thing changed in the physical markets in all the precious metals yesterday...it was all paper on the Comex. Of course none of what happened on either Wednesday or Thursday will be in today's Commitment of Traders. JPMorgan et al have a free pass until next Friday's report.
The precious metals came under pressure the moment that trading began in the Far East on their Friday morning. Gold got nailed for thirty bucks...and a not-for-profit seller dropped the price twenty dollars of that amount around 11:30 in Hong Kong. The gold price has since recovered about fifteen dollars...and is down $15 as I hit the 'send' button at 5:20 a.m. Eastern time.
The silver price got blasted below $28 for a few minutes in Far East trading...and got sold off below that mark shortly after 9:00 a.m. in London as well. At the moment, silver is down 51 cents from Thursday's New York close.
Platinum also got it in the neck, too...but the selling pressure began the moment that Hong Kong opened for trading...and was down $27 at the same time as silver dipped below $28 spot. At 5:20 a.m. it's now down only seventeen dollars.
Palladium, which had the audacity to rally at the start, has now been rolled over as well...and traded around $607 spot in early Zurich trading this morning...down $15 from Thursday's New York close. Now it's down only $7 at $615 the ounce.
The dollar index, which hit its nadir shortly after 9:30 a.m. Eastern time Thursday morning, is still rising as I write this paragraph...and is up about 61 basis points from that low yesterday morning...and up about 33 basis points from 6:00 p.m. in New York last night. Looking at the dollar index chart for the last twenty-four hours, it looks more and more like someone hit the "Ramp dollar/Kill precious metals" button to me. One has to wonder what kind of trader[s] can time the bottom of the dollar index move...and the top of the gold/silver/platinum rally...with such exquisite precision.
Net volume in gold is about 45,000 contracts...and silver is just north of 11,000 contracts net. These are big numbers for this time of day...and certainly reflects that fact that all the fresh longs that were placed since last Friday's big spike in both gold and silver, are now being dumped...and JPMorgan et al are covering shorts and/or going long themselves. As Ted Butler has pointed out many times, this is the way it has worked on the Comex for over twenty-five years.
With Friday off to such a bad start in both Hong Kong and now in London, it will be interesting to see what's in store for us once trading begins on the Comex at 8:20 a.m. Eastern time.
See you on Saturday.