Gold & Silver Daily
"With the dollar down sharply during London and New York trading yesterday, I was more than disappointed that both gold and silver did not perform better."
 

¤ Yesterday In Gold & Silver

The gold price was up about ten bucks by the time lunchtime rolled around in London yesterday, but by 9:30 a.m. in New York, all that gain had disappeared.  From that low, gold rallied about fifteen bucks to just above the $1,681 spot level, before selling off a hair into the close of electronic trading at 5:15 p.m. in New York.

Gold closed at $1,676.30 spot...up $9.30 on the day.  Net volume was a very light 91,000 contracts.

Silver's price path was more 'volatile'...and traded within a 40 cent range of $32.30 spot.  Maybe it was just me, but I got the impression that every time silver made a serious attempt to break out to the upside, it ran into a willing seller.

The silver price closed at $32.35 spot...up 15 cents on the day.  Net volume was pretty heavy at 39,000 contracts...a lot of which I would expect was the of the high frequency trading variety.

The dollar index spiked up about 20 basis points right at the open on Sunday night...and then traded sideways until the London open at 8:00 a.m. GMT, which was 3:00 a.m. Eastern time.

From there, the index shed about 70 basis points, with the absolute low of the day coming at 11:30 a.m. in New York.  From there it rallied a bit into the closed.

The precious metals certainly didn't follow the dollar move very well.  Although both began to rally at the London open, both gold and silver got sold off pretty noticeably in the two and a half hour period between 7 and 9:30 a.m. New York time...despite the fact that the dollar was moving strongly lower.

The gold stocks pretty much followed the gold price action during the New York trading session...with the high of the day coming at the 11:30 a.m. Eastern high in gold.  From that high, the stocks got sold off a hair, but rallied a bit into the close...with the HUI finishing the day up 1.46%.

Despite the fact that the silver price only closed up 15 cents, the silver stocks did pretty well for themselves...especially the junior producers.  The big news of the day in the silver world yesterday was the $1.5 billion takeover of Minefinders by Pan American Silver.  Pan Am's stock took a big hit...and because it makes up a very large chunk of Nick Laird's Silver Sentiment Index, the SSI only closed up 0.25% on the day.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 2 gold and 97 silver contracts were posted for delivery tomorrow.  In silver it was, as usual, Jefferies once again as the only short/issuer of note....and the Bank of Nova Scotia and JPMorgan as the long/stoppers.  As I mentioned before, this 3-ring delivery circus has been going on all of January between these companies.  The link to the Issuers and Stoppers Report is here.

Despite the rising gold price recently, there was a withdrawal of 165,246 troy ounces from GLD yesterday, but there were no reported changes in SLV.

The U.S. Mint had a sales report yesterday.  They sold 7,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 250,000 silver eagles.  Month-to-date the mint has sold 113,500 ounces of gold eagles...10,500 one-ounce 24K gold buffaloes...and 5,547,000 silver eagles.

Over at the Comex-approved depositories on Friday, they reported receiving 311,849 ounces of silver...and shipped 499,529 ounces out the door.

Here are three free paragraphs from silver analyst Ted Butler's weekend commentary to his paying subscribers.

"We’ve rallied around $120 in gold from late December on an increase of only 10,000 contracts or so in the commercial net short position. In silver, we’ve rallied a few dollars on about a 6000 contract increase in that commercial position. Considering that we were at historical lows in the commercial short position in each by many measures and still are, that’s not too shabby. This doesn’t mean we won’t experience sell-offs and continued price volatility, but we are not close to bearish COT readings in gold or silver. In COT terms, there is plenty of room to run higher in price in both gold and silver. In percentage terms, of course, the biggest potential to run is in silver, in my opinion.

"Considering the technical clean out we’ve just experienced in both gold and silver over the past few months and the proximity of some key moving averages above current prices in each that threaten to be penetrated, it is not hard to envision strong price rallies. Of course, we are still discussing markets that are manipulated in price, so we must be prepared for anything. The best preparation is not to borrow or deploy margin.

"What next? Was the silver surge on Friday the breakout signaling much higher prices to come or a fake out designed to lead to lower prices and further disappointment? We can’t predict the future with unquestioned accuracy; but we can prepare ourselves for it based upon the probabilities. Silver looks cheap based upon almost any measure except where it was priced 5 or 10 or 20 years ago. The COT set up looks better than I would have guessed several months ago. I never would have imagined in August and September that the commercials could reduce their net short position to the 20,000 contract level or lower. It took the most egregious manipulative sell-off for them to have accomplished that feat amid much damage and consternation to innocent silver investors. But perhaps it’s true that what doesn’t kill you makes you stronger." 

I'm up early in the morning to catch a plane back to Edmonton after the Vancouver conference, so I'm going to cheat once again and only post the linked headline to each story, as I don't want to be up all night doing this column.  I apologize once again that I will not be able to give attributions to all the kind readers who sent me these stories.

 

¤ Critical Reads

Baltic Dry Index Plunging to Near Historic Lows

I have a lot of stories, so I hope you have a lot of time.

1]    Baltic Dry Index Plunging to Near Historic Lows - Silverdoctors.com

2]    Appeals court dismisses suit over new CFTC rule - Yahoo.com

3]    Top Justice officials connected to mortgage banks - Reuters

4]    Thoughts on the Crisis of Capitalism - Doug Noland, Prudentbear.com

5]    Fed would admit devaluation is policy, then keep underestimating it - Reuters

6]    European banks prepare for worst, hoard cash - IFR/Yahoo

7]    Portugal falls victim to Greece’s debt swap ordeal - Reuters

8]    Greek debt deal hits setback as talks suspended - The Telegraph

9]    Eurozone finance ministers reject Greek debt offer - The Telegraph

10]  'Unprecedented Sanctions' - EU Agrees on Tough Oil Embargo Against Iran - spiegel.de

11]  Oil prices rise over sanctions on Iran - The Telegraph

12]  Iran oil sanctions spark war of words between Tehran and Washington - The Guardian

13]  Sheikhs fall in love with renminbi - Asia Times

14]  Currency Wars - Iran Banned From Trading Gold and Silver - Zerohedge.com

15]  Gary North: Auditing the Fed's gold - GATA.org

16]  Intervention in Libya was largely about gold: Jim Rickards - GATA.org

17]  James Turk: Using vaults to store gold and silver - Goldmoney.com

18]  HK$51m in gold and silver is grabbed - South China Morning Post

19]  Gold-market rigging has many whistleblowers; they're just always ignored - GATA.org

20]  'Gold can't be faked,' Mr. Zhang? Ever hear of the LBMA, JPMorgan and the Fed? - FT

21]  Gold to keep rising until real rates go positive: Sprott Asset Management - Mineweb.com

22]  Back-door QE in Europe good for gold, Eveillard tells King World News - KWN

23]  Commodities: gold equities could finally start to perform - The Telegraph

24]  Gold Breaking Out, Will Hit New All-Time Highs: Egon Von Greyerz - KWN

25]  Interview With GATA: No More Tinfoil Hats - Resource Investor

26]  Gold's Happy New Year: Peter Brimelow - Marketwatch.com

Read more...

 

¤ The Funnies

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¤ The Wrap

With the dollar down sharply during London and New York trading yesterday, I was more than disappointed that both gold and silver did not perform better...as both metals got sold off between 11:30 a.m. in London right up until the equity markets opened in New York at 9:30 a.m. Eastern time.

I was quite happy with the preliminary open interest numbers from yesterday, but with delivery coming up on the February gold contract, there's lots of roll-overs and spread trades being removed, so I'm not about to read too much into them.

However, we are now above the 50-day moving average in gold by a few dollars...and have been above silver's 50-day moving average since the big run-up last Friday.  To add to that technical situation, the dollar index is hovering just above its 50-day moving average...and if/when it falls through that, things could get interesting in both gold and silver rather quickly.  We'll find out soon enough, I would think.

Here's one of the chart from my Vancouver presentations over the weekend...and they created a sensation in the audience when they went up on the big screens.  This chart was no exception.  It starts on January 1, 1970...and ends on December 31, 2011...which is 42 years.

(Click on image to enlarge)

The most amazing thing that it shows is that there hasn't been a positive year worth mentioning between the London a.m. and p.m. fixes since 1979...which is 32 years ago.  And you'll also note that the price pressure between the fixes has been increasing just about every year of this 13-year bull market...and there's no chance that this is random market forces at work.  The 'fix' is definitely in.  As always, I thank Nick Laird over at sharelynx.com for his incredible efforts in making all the LBMA data come to life.

Not much happened in either metal in Far East trading.  Both were sold off a bit in the early hours in the Far East, but recovered back to unchanged by the London open at 8:00 a.m. GMT...which is 3:00 a.m. Eastern time.   The dollar is flat as of 3:21 a.m. Eastern time...and volume in both metals is shockingly light.  In gold, the volume is under 8,000 contracts...and in silver it's under 2,000 contracts.  That's amazing for this time of month.

And as I hit the 'send' button at 3:58 a.m. Eastern time, I note that gold and silver hit their respective highs shortly before London opened...and are now heading lower.  However, on this amount of volume, I'm not prepared to read a lot into that.  Volume's have jumped up a bit in both metals, but are still in the 'shockingly light' category, considering the fact that London has been open an hour.

As I mentioned earlier, I have a plane to catch this morning...and I still have to pack and get some sleep, so I'll sign off here.

See you on Wednesday.