Gold & Silver Daily
"Yesterday's price action in gold and silver didn't look very free-market to me."

¤ Yesterday In Gold & Silver

The gold price traded basically flat up until about noon Hong Kong time on their Thursday.  From there, the price developed a negative bias which lasted until just before 9:30 a.m. in New York.

The subsequent rally lasted until about 1:00 p.m. Eastern time...and then about ten minutes after the Comex close, down went the price, with the low tick of the day [$1,452.40 spot] coming just moments after 3:00 p.m. in electronic trading.  The rally after that didn't amount to much.

Gold closed at $1,458.50 spot...down $15.90 on the day.  Net volume wasn't overly heavy...about 103,000 contracts.

With some minor variations, the silver price chart looked very similar to the gold chart.  As I pointed out in The Wrap in yesterday's column, the big morning rally attempt in silver in Far East trading got stopped in its tracks and, with some minor variations, the silver price chart looked very similar to the gold chart after that.

The high tick was just above $24.20 spot...and the low tick, which came at 3:01 p.m. in electronic trading in New York [just like gold] checked in at $23.48 spot.

Silver closed at $23.75 spot...down 20 cents from Wednesday's close.  Gross volume was 44,000 contracts.

The dollar index closed on Wednesday at 81.91...and traded pretty flat until lunchtime in London...7:00 a.m. in New York...and then by the 9:30 a.m. equity market open in the U.S., it had jumped 30 basis points to 82.21.  Then, once again, it traded flat until 1:00 p.m. Eastern time...and then away it blasted to the upside, with the high tick [82.80] coming at 3:00 p.m. in New York.  After that, it didn't do much...and the index closed at 82.69...up 78 basis points.

I suppose it's possible to tie part of yesterday's price action on the dollar index activity...the big drop between 1:00 and 3:00 p.m. EDT...being the most obvious.  But as for the rest of the day, it's more than a stretch.

Despite the fact that gold was down by quite a bit at the open of the equity markets, it didn't take long for the stocks to trade in positive territory...and by noon in New York were up well over a percent.  But once the gold price began to head south starting around 1:00 p.m...the stocks headed lower as well...bottoming out at gold's low...3:00 p.m. EDT.  After that they didn't do much, but did close off their lows, however.  The HUI finished down 2.01%.

The silver stocks the comprise Nick Laird's Intraday Silver Sentiment Index got hit pretty hard as well...and it closed down 2.32%.  However, there were a decent number of junior producers that finished in the green.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 8 gold and a rather impressive 220 silver contracts were posted for delivery on Monday.  In silver, the two big short/issuers were Jefferies and Credit Suisse, with 120 and 78 contracts respectively.  The two biggest long/stoppers [and the two biggest short holders in Comex silver] were Canada's Bank of Nova Scotia with 118 contracts...and JPMorgan Chase with 56 contracts.  The link to yesterday's Issuers and Stoppers Report is here.

Guess what!  GLD finally had some gold deposited in it yesterday...the first time in many an authorized participant added 87,028 troy ounces.  Let the bells ring out and the banners fly!  And as of 11:57 p.m. there were no reported changes in SLV.

Joshua Gibbons, the Guru of the SLV Silver Bar List, had this to say about the activity in this ETF as of the close of business on May 8th..."Analysis of the 08 May bar list, and comparison to the previous week's list....1,129,103.8 oz. were added (all to Brinks London), 359,149.6 oz. were removed (all from Brinks London), and 32 had a serial number change (all in Brinks London)."  The rest of his short commentary on the 'week that was' is here.

There was also an update to the short positions in both GLD and SLV posted on the Internet site yesterday evening as well...and I must admit to being surprised by what I saw.  I expected to see big declines in the short position in these ETFs...but the short positions increased by large amounts in both for the end of April reporting period.

The short position in SLV increased by 41.18 percent...from 8.31 million ounces/shares to 11.74 million ounce/shares.  In GLD the short position blew out by 22.39 percent...from 2.29 million ounces to 2.82 million ounces.

Whether this was 'plain vanilla' shorting...or shorting because there was no metal to deposit by authorized the big unknown.  Hopefully the next report in about two weeks time will tell us more.

There was no sales report from the U.S. Mint yesterday, which I found rather strange.  I note that the mint has also begun to ration "American the Beautiful" 5-ounce silver coins.  That story is posted in the Critical Reads section below.

Over at the Comex-approved depositories on Wednesday, they reported receiving 2,408,872 troy ounces of silver...and shipped 17,522 ounces of the stuff out the door.  The biggest deposit was in the vaults of Scotia Mocatta.  The link to this activity is here.

In gold on Wednesday, these same depositories reported receiving only 3,298 troy ounces of the stuff...and didn't ship any out.  The link to that activity is here.

Here's a cartoon that was making the rounds the other day...and I must have received a dozen copies of it...and it's oh-so true...

Here's a FRED chart that Nick Laird was kind enough to extract from yesterday's edition of the King Report...and here's what Bill King had to say about it..."Stocks are in a parabolic rally and a blow-off has commenced. No one knows the magnitude or duration; but this is the most dangerous condition for any asset. The S&P 500 Index is in a crystal clear parabolic blow-off. This used to be called a bubble."

(Click on image to enlarge)

While on the subject of the above chart and Bill King's comments on it...the KWN interview with Jeffrey Saut in the Critical Reads section below is a must read as he talks about this blow-off at length. 

Here's your "Cute Quota" for the day...

I have the usual number of stories for a weekday...and I hope you have the time to read the ones that you find of interest.


¤ Critical Reads

The Number of U.S. Citizens on Disability is Now Larger Than the Population of Greece

The number of people in the U.S. on SSDI now exceeds the entire population of Greece. The aging of the population has nothing to do with the increase. In 1968 there were 51 workers for every person on disability. Today there are 13 workers for every person on disability. Even the most Pollyanna would agree that medical advancements since 1968 have been significant. These medical advancements would argue for less people being on disability and unable to work. Workplace safety measures have been increased exponentially since 1968, so that also argues for less disabled workers. The good old ADA law forced all workplaces to become disabled friendly. That argues for less people on disability. The country has transitioned from a manufacturing society to a service society. Workers don’t work on dangerous assembly lines anymore. Robots do the dangerous stuff. This should have dramatically reduced worker injuries and disabilities.

Everything I’ve pointed out is true. The tremendous increase in people on SSDI is nothing but a gigantic fraud, perpetuated by the Federal government and slimy lawyers.

This interesting Zero Hedge piece from yesterday contains an excellent chart...and I thank Matthew Nel for today's first story.


Air Force Strips 17 Officers of Authority to Control and Launch Nuclear Missiles

The Air Force stripped an unprecedented 17 officers of their authority to control — and, if necessary, launch — nuclear missiles after a string of unpublicized failings, including a remarkably dim review of their unit's launch skills. The group's deputy commander said it is suffering "rot" within its ranks.

"We are, in fact, in a crisis right now," the commander, Lt. Col. Jay Folds, wrote in an internal email obtained by The Associated Press and confirmed by the Air Force.

The tip-off to trouble was a March inspection of the 91st Missile Wing at Minot Air Force Base, N.D., which earned the equivalent of a "D'' grade when tested on its mastery of Minuteman III missile launch operations.

When I first saw this headline, I thought it was from the National Enquirer...but no, it was an AP story from yesterday that was posted on the Internet site.  It's definitely worth reading...and I thank 'David in California' for sending it.


Jim Grant: "Confidence In Bernanke Is Utterly Misplaced"

"Inflation is a state of affairs in which there is too much money," Jim Grant notes in this Bloomberg TV interview, however, "It's not too much money chasing too few goods," he corrects the misnomer, "the thing this money chases is variable." Whether it is Iowa farmland, housing, stocks, or bonds, central banks are stuffing us with it.

Yes, equities are high, but Grant explains, "beneath the surface of things or not so far beneath the surface of things," it is not at all good, adding that, "Central bank 'original sin'," is akin to Revolutionary France, and he shows no concerns over Gold's recent dip, noting "a general fatigue animus towards gold," that seems predicated on more confidence in central bankers; to Grant, "that confidence is utterly misplaced!"

The Bloomberg TV interview runs 6:06 minutes...and is embedded in this Zero Hedge piece from yesterday.  I haven't had the time to watch it myself, but I would guess it's more than worth your time.  I thank Phil Barlett for sharing it with us.


Billionaire investors take aim at Fed's policies at Sohn event

Wealthy money managers bashed Federal Reserve Chairman Ben Bernanke's easy money policies at a closely watched annual investment conference and charitable event on Wednesday.

The Sohn Investment Conference, which raises money for pediatric cancer research, gets big name hedge fund managers to share their "best ideas" with other wealthy investors. This year's conference was sprinkled with criticisms of the Fed's $85 billion in monthly purchases of Treasuries and mortgage securities in an attempt to stoke the economy.

"Ben Bernanke is running the most inappropriate monetary policy in the history" of the developed world, said Stanley Druckenmiller, the retired head of Duquesne Capital Management.

The criticisms of Bernanke come as investors have begun to speculate when the U.S. Federal Reserve could slow or stop its monthly bond purchases, a policy designed to keep long-term interest rates low in order to spur spending and job creation.

This must read Reuters piece from Wednesday is a little something that I found tucked away in yesterday's edition of the King Report.


Argentina: Dollar kept climbing on Wednesday and reached 10.45 Pesos

The blue dollar jumped past the key psychological barrier of 10 Pesos on Tuesday in thin trade, reflecting persistent demand for greenbacks amid tough currency controls.

Meanwhile, the official rate remained unchanged at exchange offices in Buenos Aires at Pesos 5.16 (buying price) and Pesos 5.22 (selling price), with the gap between the two markets over 100%.

In a context of high inflation, negative interest rates or other options to defend the value of the Argentine currency, Argentines are increasingly taking refuge in the US dollar. To this must be added an overall feeling of distrust and uncertainty which can have a greater impact that what stats can present.

This news item was posted on the Internet site early yesterday morning...and I thank Casey Research's own Louis James for sending it around.


Argentina offers tax amnesty to head off devaluation

Argentina's latest effort to tease out billions of U.S. dollars said to be held by citizens through sweeping tax breaks and interest earnings received lukewarm response, though this may change.

Argentine citizens are said to be holding the greenback in illegal stashes as a hedge against the Argentine peso's unstable performance, a runaway inflation and general distrust of the government's fiscal and monetary policies.

Official estimates say at least $160 billion is held in cash at home and abroad by Argentines who have yet to declare their holdings.

This UPI story was filed from Buenos Aires on Wednesday evening local time...and I thank Roy Stephens for his first offering in today's column.


G7 finance chiefs to discuss bank reform push

Some of the world's most powerful finance chiefs will meet in an English stately home on Friday and Saturday to try to speed up banking and finance reforms, with Cyprus' near meltdown fresh in their minds.

Finance ministers and central bank governors from the Group of Seven industrialized economies probably will not break new ground on how to fix the weak world economy as discussions at the International Monetary Fund took place just three weeks ago.

Officials from two of the G7 economies said the talks - on Friday and Saturday at a 17th-century country house 40 miles northwest of London - were likely to focus more on the slow progress of reforms to banking and finance around the world.

"It's very rare for a G7 to focus on financial regulation," one of the officials said, speaking on condition of anonymity.

But some of the officials said they said they did not know why Britain, which is chairing the G7, had called the meeting. "I am really annoyed that I've got to give up my weekend for this," one complained, adding the talks could have taken place on the sidelines of IMF's meetings in Washington in mid-April.

One has to wonder why this meeting was called in such haste. Maybe news will leak out on the weekend once this emergency meeting is done.  This Reuters story was filed from London yesterday morning BST...and I thank reader 'David in California' for his second contribution to today's column.


Europe Inches Closer to Establishing a Banking Union

Europe inched closer Wednesday to establishing a European banking union for the Continent’s largest lenders after the German cabinet approved legislation that would grant to the European Central Bank oversight of such institutions.

The decision by the cabinet of Chancellor Angela Merkel came a day after Finance Minister Wolfgang Schäuble, indicated that he supported moving ahead with efforts to create a banking union, despite Germany’s official stance that the step would ultimately require changes to European treaties.

The legislation, which awaits action by the German Parliament, would grant the E.C.B. the authority to oversee the Continent’s largest lenders: those worth more than €30 billion, or $39.5 billion, or the three largest banks in each of the 17 European Union countries using the euro.

As part of efforts to help resolve the debt crisis in the euro zone, E.U. leaders agreed last year to establish a banking union with the aim of preventing overly indebted states from having to bail out failing banks.

This article was posted on The New York Times website on Thursday...and it's Roy Stephens' second offering of the day.


Britain faces 'sink or swim moment' in global economic race, says David Cameron

The Prime Minister said the Government is driving through tax reductions, welfare reforms, infrastructure investment and trade deals to ensure the UK stays competitive globally.

He vowed to "stand up and defend" the UK's financial services industry, particularly against damaging legislation from Brussels. The City is a "massive advantage" to the UK, he said, and warned that "we shouldn't spend our time in politics bashing banks."

He said that European leaders shouldn't be "surprised" that the UK has opposed efforts to cap bonuses and introduce a financial transaction tax since London hosts 40pc of the EU's financial services sector.

This news item was posted on the Internet site late yesterday morning BST...and I thank Roy Stephens once again for sending it along.


Tax Fraud: Court Upholds Guilty Verdict against Berlusconi

Silvio Berlusconi's legal woes worsened significantly on Wednesday after a Milan appeals court upheld a conviction and four-year prison sentence against the former Italian prime minister on tax fraud charges. The ruling would also ban Berlusconi from holding public office for five years.

A lower court had convicted Berlusconi and his media empire Mediaset of the charges in October, a ruling Berlusconi appealed. In Italy, court decisions do not become valid until all appeal options are exhausted, and the former leader still has one more instance to go before he is threatened with any penalties. Under Italian law, however, it is unlikely he will spend any time in jail. A furlough law would likely be applied to commute three years, and people with one-year sentences aren't normally sent to prison in Italy.

During his time as prime minister, Berlusconi created several laws in an attempt to shield himself and his company Mediaset from several legal proceedings.

This story was posted on the German website during Europe's lunch hour yesterday...and it's also courtesy of Roy Stephens.


China may not overtake America this century after all

Doubts are growing about whether China can pass the US to become the world's biggest economy this century amid warnings that the country’s 30-year miracle is nearing exhaustion. 

The world's tallest tower should have been built by now. Officials said last year that the great edifice with 220 floors would be erected in three months flat in China's inland city of Changsha by March, snatching the crown from Dubai's Burj Khalifa.

The deadline has come and gone, yet the wasteland sits untouched. It now looks as if the fin d'époque project – using prefab blocs – may never be approved. Even China knows its limits.

Prime minister Li Keqiang has asked the State Council to clamp down on the excesses of the regions. Not before time. A top regulator says local government finances are "out of control".

Mr Li aims to cut China's economic growth to a safe speed limit of 7pc next year and rein in rampant investment – still a world record 49pc of GDP – before it traps the country in a boom-bust dynamic of frightening scale.

This longish Ambrose Evans-Pritchard commentary was posted on The Telegraph's website mid-afternoon on Thursday...and is certainly worth reading.  It's Roy Stephens final offering in today's column.


U.S. Mint to limit purchases of "America the Beautiful" silver coins

The U.S. Mint will limit dealers' purchases of its "America the Beautiful" five-ounce silver bullion coins when they go on sale next week because strong demand exceeds the mint's inventory.

The mint has been allocating sales of its more popular American Eagle silver bullion coins to its authorized dealers since late January following a brief suspension.

When "America the Beautiful" coin sales begin on May 13, the mint will distribute half of its inventory equally between its authorized dealers, and the other half based on each dealer's volume of "America the Beautiful" coin sales in the last two years, it said on Wednesday.

That's all there was to this very brief Reuters story that was posted on their website on Wednesday afternoon EDT.  I thank West Virginia reader Elliot Simon for bringing it to my attention...and now to yours


Consumers Snap Up Gold and Silver Jewellery

According to The Telegraph there are rumours that retailers have removed stock from the shelves in order to wait until the value increases.

Since gold bars are in short supply in the UAE investors are purchasing jewellery as a substitute.

Even though cities like Dubai and Qatar are renowned for their vending machines filled with gold bars, one consumer wrote to a Dubai newspaper that they were struggling to find gold.

“When my husband went to the Sharjah Gold Souq, known as Central Souq, the salesmen there said that they don’t have any in stock,” she commented.

This precious metals commentary from yesterday was posted on the Internet site...and my thanks go out to Marshall Angeles for finding it for us.


Jeff Gundlach: Have an Inflation Hedge, But Make it Silver, Not Gold

DoubleLine bond guru Jeff Gundlach was talking bonds on CNBC yesterday afternoon, and as he’s wont to, he’s wading into some other markets too like MLPs and, of course, Apple stock. Notably he says (somewhat begrudgingly) that in this “wacky” era of quantitative easing you need to have some sort of inflation hedge in your portfolio, but that it should be silver, not gold.

“I think silver is the way to do that,” Gundlach says, urging investors to ”avoid gold, don’t short it” and warning that metals yield nothing and are “dead money unless the price goes up.”

This 2-paragraph story is all there is...and it was posted on the Internet site very early Thursday afternoon EDT.  Ted Butler told me that he heard Jeff say these words during the CNBC interview mentioned above, so it's obviously the real deal.  Ted couldn't find the CNBC video clip on this, so he sent this Barron's piece instead, for which I thank him.


What does it take to get gold 'experts' to look at the proof?

In a market letter for his subscribers that has been republished by Casey Research, financial writer Chris Martenson reviews evidence recently reported by Sprott Asset Management that the U.S. government may have secretly leased 4,500 tonnes of gold.

Martenson is inclined to think that there is something to it, and if there is, he writes, then "the gold slam begins to smell like an operation designed to shake as much gold as possible out of weak hands so that the bullion banks can begin to recover it to square up their accounts. GLD, the gold exchange-traded fund that so many small investors participate in, is one large, obvious target, as it was sitting on 1,350 tonnes as of January 2013. The most recent figure I have shows that GLD has coughed up close to 175 tonnes and will certainly lose more in the coming days, as long as the price of gold is held down or even dropped further."

But the preface to Martenson's commentary, written by Dan Steinhart, managing editor of The Casey Report, seems oblivious to the extensive documentation confirming gold market manipulation and published by GATA.

This commentary by Chris Powell was posted on the Internet site yesterday...and is definitely worth reading.


Ted Butler: The Worst Regulator

Sticking with the theme of milestones, we’ve just crossed a few important anniversary dates that relate to silver that taken in proper perspective point to a disturbing conclusion. That conclusion is that the US commodities regulator, the CFTC, has done more public harm than good over the past few years. Simply put, the public and our markets would have been better off had the agency not been run by the commissioners in place, specifically including Chairman Gensler and Commissioner Chilton. In fact, rarely has so much promise for genuine regulatory reform been squandered as badly as has been the case over the past few years.

Just so there is no misunderstanding about the issues involved; it’s really quite simple when viewing the official data. JPMorgan holds such a large concentrated short position in COMEX silver that it is automatically manipulative to the price. Even after a reduction in this concentrated short position of nearly 50% over the past few months, JPMorgan is short 126% of the entire total commercial net short position in COMEX silver futures. In other words, without JPMorgan’s net short position of 18,000 contracts (90 million oz), there would be no commercial net short position in COMEX silver (all data as of COT of April 30). It was precisely JPMorgan’s concentrated short position that caused the CFTC to start the formal silver investigation in September 2008 and it is still JPM’s concentrated short position that backs my allegations to this day.

Throw in the daily HFT trading scam and it’s easy to see that the price of silver is not taking its cue from real supply and demand. Rather it is the crooked COMEX dictating prices to the real world. Of all the regulators around, the CFTC knows this better than anyone, yet they refuse to do anything about it. This is what makes the agency the worst regulator possible.

I quoted part of this commentary by Ted in my column yesterday...and he saw fit to post the entire essay over at the Internet site late yesterday morning MDT.  It's an absolute must read, or course...and I thank Marshall Angeles for being the first one through the door with it.



¤ The Funnies

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The Energy Shortage Most Investors Don't Know About

There’s an energy crisis brewing that’s off virtually everyone’s radar. It will be so severe, so disruptive that it will cause a shocking rise in the cost of power around the world… and at the same time create a contrarian investing opportunity for the history books.

Russia is at the forefront of this budding crisis, which will begin in earnest when the Megatons to Megawatts agreement with the U.S. ends. That happens in just a few short months, giving you very little time to position yourself.  Read more now


¤ The Wrap

I have never understood why it's "greed" to want to keep the money you have earned, but not greed to want to take somebody else's money. - Thomas Sowell

Pardon me for thinking so, but yesterday's price action in gold and silver didn't look very free-market to me.  And the buy the dollar/sell precious metals event between 1:00 and 3:00 p.m. Eastern time in the thinly-traded New York Access market had a peculiar odor to it as well.  But maybe it's just me.

I have nothing much to add to what I've already said further up about gold and silver price action.  What I'm waiting to see is today's Commitment of Traders Report...along with May's Bank Participation Report.  That should tell us quite a bit...and I'll have all the details in my Saturday column.

It was a very interesting trading day in the Far East on their Friday...and both gold and silver got sold down initially, but then attempted to rally, but didn't get far.  The volatility has extended into the London open as well...and all four precious metals are under considerable selling pressure as I hit the 'send' button on this morning's missive at 5:20 a.m. Eastern Daylight Time.  At the moment, gold is down ten bucks...and silver is down 20 cents.  Volumes are quite a bit higher than normal...and, as usual, is mostly of the HFT variety.  The dollar index is up a bit over 30 basis points already...and one has to wonder if we're seeing a blow-off rally in the dollar index as well.

With today being Friday, absolutely nothing will surprise me about precious metal prices when I switch my computer on later this morning.

Enjoy your weekend...or what's left of it if you live west of the International Date Line...and I'll see you here tomorrow.