Gold & Silver Daily
"It's obvious the $1,400 price mark in gold...and $22 silver is still being vigorously defended."

¤ Yesterday In Gold & Silver

The gold price did nothing in the Far East and most of the London trading day on their Wednesday.  The New York low came at the 9:30 a.m. EDT open of the equity markets, just like it has for the last three days in a row.

The subsequent rally got cut off at the knees shortly before 11:00 a.m. in New York...and a few minutes before the London close...just as it was about to get a sniff of the $1,400 price mark.  The high tick at that point was $1,395.80 spot.  From there it traded sideways into the Comex close...and then got sold down a bit in the New York Access Market.

The gold price closed at $1,388.40 spot...up $10.20 on the day.  Gross volume wasn't overly heavy at 121,000 contracts.

The silver price was much more 'volatile', as it traded in a two percent price range through Far East and London trading.  It also had the New York rally at the same time as gold...and it ended at the same time as gold, just before 11:00 a.m. EDT.

According to Kitco, the high at that point was $22.13 spot, but got sold down back below the $22 spot price almost immediately.

Silver closed at $21.79 spot...up 11 cents from Tuesday's close.  Net volume was very light at only 22,000 contracts.

It was obvious to me that if a willing seller hadn't shown up in the Comex gold and silver markets just before 11:00 a.m. in New York, both metals would have closed materially higher.

The dollar index closed at 81.05 late on Tuesday afternoon...and began to rally slightly right from the open in Far East trading on their Wednesday morning.  The high tick of the day...81.30...came at 8:00 a.m. EDT right on the button. From there it got sold down to its low tick...80.78...which came just before noon in New York.  The subsequent rally didn't make it back above the 81.00 level...and closed at 80.91...down 14 basis points on the day.

The gold stocks rallied right from the open...and at their high of the day, just before noon in New York, they were up 2.5 percent...but then faded [along with the gold price] as the trading day progressed...and the HUI finished up only 0.91%.

But the silver stocks finished slightly in the Nick Laird's Intraday Silver Sentiment Index closed down 0.19%.

(Click on image to enlarge)

The CME's Daily Delivery Report was another non-event on Wednesday, as only 3 gold and 17 silver contracts were posted for delivery within the Comex-approved depositories on Friday. We're getting on in the June delivery month, so unless there are some big surprised between now and June 30th, we shouldn't expect big deliveries, as most are done within the first week of the delivery month.

There were no reported changes in either GLD or SLV yesterday...and there was no sales report from the U.S. Mint, either.

Over at the Comex-approved depositories on Tuesday, they reported receiving 99,690 troy ounces of silver...and didn't ship any out.  The link to that activity is here.

In gold on Tuesday, these same depositories didn't report receiving any, but did ship out 45,371 troy ounces of the stuff...all out of Brink's, Inc.  The link to that activity is here.

No charts or graphs again today...but here's your 'cute quota'...

Another day when there aren't that many stories...and I hope there a few in here that catch your eye.


¤ Critical Reads

Traders Said to Rig Currency Rates to Profit Off Clients

Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter.

So...what else is new?  Today's first story was posted on the Bloomberg website at noon Mountain Daylight Time...and I thank U.A.E. reader Laurent-Patrick Gally for sending it along.


E.U. Urges U.K. to Probe Currency Rigging in Libor’s Wake

Britain should investigate the manipulation of currency rates, European Union officials said after Bloomberg News revealed that traders have been rigging foreign-exchange benchmarks for more than a decade.

“They need to get to the bottom of it,” Sharon Bowles, 60, chairwoman of the European Parliament’s economic and monetary affairs committee and a member of the U.K. Liberal Democrat party, said in an interview. “It’s quite upsetting we have got another bad-news story. It’s time we managed to restore the reputation of our banks.”

The U.K. Financial Conduct Authority, created in April to oversee markets and prosecute financial crime, is looking into potential manipulation in the $4.7 trillion-a-day foreign-exchange market, a person briefed on the matter said. Bloomberg News reported yesterday that traders at some of the world’s biggest banks rigged benchmark WM/Reuters rates, according to five current and former dealers with knowledge of the practice.

One wonders if the precious metals price fixing scheme by JPMorgan et al will every get this sort of scrutiny?  This Bloomberg news item was filed from London...and posted on their website early yesterday evening Denver time.  It's Laurent-Patrick Gally's second of three stories in a row in today's column.


Can Bernanke Avoid a Meltdown in the Bond Market?

The past few weeks have given us a hint of what might happen when the Federal Reserve starts to reverse its super-easy monetary policy. Expect turbulence in financial markets, especially for assets that have moved far above normal or reasonable valuations.

A return to normality eventually implies a benchmark 10-year Treasury yield of 4 percent or more. It won’t happen all at once, but that’s where we’re heading. With yields at roughly 2.2 percent, there’s a long way to go. This transition will mark a recovery of the equity culture and the cooling of investors’ protracted love affair with bonds.

Because of this prospect, markets are sensitive to the merest whiff that Fed Chairman Ben S. Bernanke might be forced by colleagues on the Federal Open Market Committee to reduce the scale of quantitative easing. This nervousness has affected asset prices across the maturity spectrum, not just at the short end of the money market as you might expect.

This Bloomberg story, as I mentioned above, is also courtesy of  Laurent-Patrick Gally...and it was posted on their website late Tuesday afternoon MDT.


German top court 'not interested' in saving euro

The German Constitutional Court is not interested whether the European Central Bank's (ECB) actions in the euro-crisis were successful, but whether they were legal, the court's top judge said on Tuesday (11 June) in a public hearing.

"Otherwise the end alone would justify the means," Andreas Vosskuhle, the presiding judge, noted.

In the run-up to the hearing, ECB chief Mario Draghi had called his bank's bond-buying programme "the most successful monetary policy undertaken in recent time."

This news item, filed from Berlin yesterday, was posted on the Internet site yesterday...and is worth skimming.  I thank Roy Stephens for his first offering in today's column.


Sprott's Thoughts: The Dijssel-Bomb

This past March, Jeroen Dijsselbloem, the head of the finance ministers of the eurozone, shocked the markets with seemingly off-the-cuff comments suggesting that the Cyprus banking solution will, "serve as a model for dealing with future banking crises." Depositors across Europe took a collective gasp of horror – could banks possibly confiscate depositors’ funds in a form of daylight robbery? Indeed they could, and last week the Bank for International Settlements (“BIS”), the Central Bank's Central Bank, published what we have referred to as 'the template'; a blueprint outlining the steps to handle the failure of a major bank and the conditions to be met before ‘bailing-in’ deposits.

In their recently published paper "A Template For Recapitalising Too-Big-To-Fail Banks", authors Paul Melaschenko and Noel Reynolds argue for a “simple” mechanism to recapitalize failed banks without the use of taxpayers' money. They propose a process whereby a bank, if it reached the point of failure, could transfer ownership to a newly created holding company over a weekend and be recapitalized. The bank would then be sold, enabling the market to determine the ultimate losses to previous equity holders and creditors. And, yes, this scenario includes losses for depositors above a guaranteed limit. Presto! A new bank with a clean balance sheet, ready to receive liquidity support from the prevailing central bank, without the need for handouts, bailouts, TARP programs, or any other form of government assistance. Previous debt and equity holders and depositors of this failed bank would be left with an equity position in the new entity. This 'template' would ensure that "shareholders and uninsured private sector creditors (read: depositors and bond holders) of such banks, rather than taxpayers, bear the cost of resolution." While at the moment this framework is only outlined in a discussion paper, it confirms our suspicions. While the old template involved “bailing out” banks through the transfer of toxic assets from the corporate sector to the taxpayer, the new template calls for “bailing in”. In this model the risk is contained within the affected institution at the expense of equity holders, bond holders and finally depositors. Far from being an idle comment, the unscripted 'bomb' that Mr. Dijsselbloem dropped on the market during the Cyprus Banking crisis is on its way to becoming a reality across Europe and other major banking centers.

This must read commentary by Eric Sprott and David Franklin was posted on the Internet site yesterday.


Greece First Developed Market Cut to 'Emerging' at MSCI

Greece became the first developed nation to be cut to emerging-market status by MSCI Inc.  after the local stock index plunged 83 percent since 2007.

Greece failed to meet criteria regarding securities borrowing and lending facilities, short selling and transferability, said MSCI, whose equity indexes are tracked by investors with about $7 trillion in assets. Qatar and the United Arab Emirates were raised to emerging markets, while Morocco was cut to a frontier market. New York-based MSCI kept South Korea and Taiwan as emerging markets, and placed Chinese shares traded on local exchanges on review for inclusion in the emerging category, according to a statement yesterday.

The ASE Index fell 1.4 percent to 882.99 at 1:49 p.m. in Athens. The gauge has dropped 10 percent this week as Greece failed to win any bids in a sale of the country’s gas monopoly. The unsuccessful attempt to sell Depa SA dented Greece’s state-asset sales program, which underpins 240 billion euros ($318 billion) of bailout loans from the euro area and International Monetary Fund.

This rather amazing story was posted on the Bloomberg Internet site in the wee hours of yesterday morning...and it's courtesy of Casey Research's own John Grandits.


World From Berlin: Turks 'Have Simply Had Enough'

With his efforts to quash the protest movement on Taksim Square in Istanbul on Tuesday, German editorialists fear Turkish Prime Minister Erdogan has become an "autocrat." Some argue he is threatening his country's very future.

Istanbul's most important square was clouded in tear gas and drenched by water cannons as police moved to clear it of protesters on Tuesday, escalating tensions that have been brewing since demonstrators began camping out at the site two weeks ago. Dozens of injuries have been reported by demonstrators.

By Wednesday morning, only police and bulldozers could be seen on Taksim Square, and barricades and debris from the protests had already been cleared away. Although local officials had assured they didn't want to clear the protest camp at Gezi Park, activists claimed police surrounded it and pelted it with tear gas canisters during the night. Hundreds remain camped out in the park.

The German press tees off against Turkish P.M. Erdogan in this short piece from yesterday afternoon Europe time...and it's courtesy of Roy Stephens.


'Everyone Is Afraid': Erdogan Regime Cows Embattled Media

There are more journalists in prison in Turkey than in any other country. Prime Minister Erdogan tolerates no criticism, and aggressive prosecution of journalists on often questionable charges has fostered an atmosphere of anxiety and self-censorship.

It was mostly angry office workers from Istanbul's Maslak banking district who appeared on Monday, June 3, during their lunch break at the editorial offices of the NTV news channel. "Stop acting as if nothing were happening," they chanted, as they railed against what they called the "bought media." "We can pay you, too," the roughly 3,000 demonstrators shouted, mocking the NTV employees who had managed to completely ignore the anti-government protests that had already been going on for three days. The protestors had glued Turkish lira bank notes to their banners.

The editors at CNN Türk also fell short of expectations. While CNN International showed live images of the dramatic clashes between police and protesters, the Turkish channel aired a documentary about penguins. Many newspapers complied with the de facto news blackout. Whether the journalists were following government instructions or simply suppressing the news in an act of preemptive obedience is still unclear.

I heard on the news last night that two Canadian journalists with the CBC were arrested in Istanbul yesterday...and their fate remains unknown.  This is another story from the German website I thank Roy Stephens for sending it along late yesterday morning.


Turkey's Gamble: Crackdown Threatens E.U. Accession Talks

The crackdown against protesters in Istanbul by the Turkish government creates a dilemma for the EU. The Europeans don't want to tolerate violence against demonstrators, but they also don't want to lose Erdogan as a partner.Once again, images of violence in Istanbul have been broadcast to living rooms across Europe. They showed Turkish police advancing on Taksim Square during the night with bulldozers and water cannons. For hours, officers in riot gear engaged in street fighting with protesters. On Wednesday morning, the remnants of those clashes could be seen on the cleared square.

The drastic measures taken by the government of Prime Minister Recep Tayyip Erdogan have created a dilemma for Turkey's partners in the European Union. Since the escalation of the civil protests at Gezi Park at the end of May, the Europeans have been helplessly observing as events unfold. Besides an appeal or warning here and there, so far there has been no substantial reaction from Brussels, Berlin, Paris or London.

They are worried that the violent excesses in Turkey could destroy progress made in recent months. After years of stalling, diplomats had worked painstakingly to get talks over Turkey's future European Union accession back on track. On June 26, EU foreign ministers had hoped to open a new chapter in accession talks with Turkey for the first time in three years. It would be the 19th of 35 chapters that must be completed before Ankara can join the European club.

This is another article from the website on Wednesday...and it's worth reading.  I thank Roy Stephens for his final contribution to today's column.


Three King World News Blogs

The first of two interview with James Turk is headlined "A Summer Gold and Silver Explosion That Will Shock the World".  The second James Turk interview bears the title "A Massive Black Swan is Going To Rock World Markets".  The third commentary is by Jeffrey Saut. It's entitled "What We Are Witnessing Right Now is Historic and Unprecedented".


Summarizing The Known Rigged Markets

Following last night's revelation that FX trading is the latest addition to the "rigged" column, here is a summary of the known market manipulation scandals (because it can be problematic keeping track of all by now):

  • Libor - interest rates
  • ISDAfix - swaps
  • Platts - oil prices
  • WM/Reuters - FX
  • High-Frequency Trading - equities

We also know that the Fed and world central banks are engaged in a full blown (and unprecedented) Treasury curve modeling exercise courtesy of both ZIRP (short-end) and QE (long-end), and that courtesy of some $12 trillion in extra liquidity in the past 5 years, stocks are at an artificial "wealth effect" sugar high.

We can therefore deduce that, following the process of elimination, gold and silver are the only markets that are un-manipulated and where transparent price discovery is allowed to take place without intervention from key players.

Sarcasm off.

This is all there is to this short Zero Hedge commentary from yesterday...and I thank Washington state reader S.A. for bringing it to our attention.


James Turk: Saving Real Money

Beginning in the 1970s, countries around the world led by the United States began pursuing monetary policies that no longer encouraged savings. The relatively sound money that had previously prevailed, when it was said that the “dollar was as good as gold”, gave way to deplorable policy that ushered in decades of money debasement. Currency as a consequence has lost purchasing power over time, and the interest that banks pay on savings accounts has not sufficiently compensated the saver. In other words, even though the nominal value of a savings account rose from the interest income being earned, the overall purchasing power of the money being saved was losing value.

How can you save money today when central bank and government policy result in the erosion of your purchasing power when saving any national currency?

The answer lies in the money being saved. Save gold and/or silver instead of any national currency.

This short commentary by James was posted on the Internet site yesterday...and it's worth reading.


This Tiny Nation [Singapore] Could Be a Gold Trading Hub

The tiny Southeast Asian city-state Singapore has transformed itself into one of the world's top financial hubs and has now set its sights on turning the wealthy island into a gold bullion center.

A step in that direction came this week when Deutsche Bank opened its second-largest gold storage facility in the world in Singapore.

"If you look at the existing primary locations of London, Zurich and New York, these are clearly Western-centric," Mark Smallwood, head of APAC wealth planning at Deutsche Asset and Wealth Management said Wednesday. "The launch is really part of the story of Singapore, and about a story of evolving storage facilities for gold bullion."

I posted a story about this a couple of days ago, but this article that showed up on the CNBC website in the wee hours of yesterday morning EDT, expands on it by quite a bit.  It falls into the must read category...and I thank West Virginia reader Elliot Simon for bringing it to our attention.



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¤ The Wrap

[The] gold mining industry, for the most part, is dumber than the rocks it digs out of the ground.  Too dumb to defend itself, purporting to be represented by the World Gold Council, which exists only to make sure that there never is a real world gold council. - Chris Powell, GATA...04 April 2013

It was another day where there wasn't much volume...and not a lot of price action either.  However, it's obvious the $1,400 price mark in gold...and $22 silver is still being vigorously defended.  By whom...and for what unknown.

There's certainly a scarcity of gold and silver-related stories at the moment...and I even checked some of the websites myself and there was nothing.  The only event of any importance coming up is the COT Report tomorrow...a lifetime away at the moment.

I've noted that since the dollar index high/gold-silver low of May 20th, the dollar index has declined from 84.3 down to 80.7...and the gold price has been capped at the $1,400 mark...and every close above that price, no matter how brief, has been sold down to below the $1,400 price ceiling.

During that dollar index decline of 370 basis points...4.4 percent...the gold price has not been allowed to reflect that decline...and is basically trading unchanged from its May 20th price.  Here's the 30-day dollar index chart.

Here's the 30-day gold chart, with the 20 and 50-day moving averages shown.

(Click on image to enlarge)

Maybe the 20-day moving average is being defended...but I'm speculating on that one.

However, as I've mentioned on countless occasions, the dollar index is not much of a factor as far as the precious metals are concerned...and if there is much correlation, it's usually when the index is rallying, as it becomes a cover for "da boyz" as they hit the p.m. prices...and the main stream media is always quick to jump on that particular bandwagon.  And as you can see lately, even though the dollar index is down sharply, the precious metals aren't up at there's always a seller of last resort waiting in the wings the moment that occurs...the last three trading days being a case in point.

I note in overnight trading in the Far East, that the Japanese stock markets got crushed for over 6 percent...and gold and silver's attempts to break above the $1,400 and $22 price ceilings ran into a seller of last resort around 11:00 a.m. Hong Kong time on their Thursday morning.  After that, they both traded flat into the London open. But once London began to trade, all four precious metals got sold down a bit...and all are trading below their New York closes yesterday as I hit the 'send' button on today's column at 5:10 a.m. EDT. Volumes are pretty decent in gold and silver already.  The dollar index is down another 21 basis points.

That's it for another day...and I'll see you here tomorrow.