Gold's high tick of the day came minutes after 1:00 p.m. Hong Kong time during their Tuesday trading day. The price went into a slow decline from there...and by 8:30 a.m. in New York, the gold price was down about six bucks from Monday's close.
Then, in the space of ten minutes, someone sliced ten bucks off the gold price. But by 11:45 a.m. Eastern time, gold had struggled back to break through the $1,700 mark. That was as high as the price got in New York...$1,702.70 spot...and from there it went into a very slow decline right up until 2:15 p.m. in the thinly-traded electronic market.
From that point, gold got sold off about fifteen dollars in the space of fifteen minutes or so. But the real damage came shortly before 3:30 p.m. when the bid disappeared entirely...and by 3:45 or so, the gold price got hit for another twenty-one bucks.
That was the low of the day...$1,660.90 spot...and from there, gold recovered about fourteen dollars going into the 5:15 p.m. New York close.
Gold finished Tuesday at $1,675.10 spot...down $25.70 on the day. With a price drop that size, there was massive speculative long liquidation once again...and net volume was pretty chunky at 180,000 contracts.
The silver price pretty much followed the same pattern as the gold price, which should not come as any big surprise. Like gold, silver rallied in the New York morning to move above Monday's close...but that situation wasn't allowed to stand either, and silver ran into the same not-for-profit selling sequence that gold did.
But once the low tick [$32.90 spot] was in shortly after 3:30 p.m. in New York yesterday afternoon, the price came roaring back. Silver closed at $33.37 spot...down only 20 cents on the day. Silver's net volume was more than decent as well...around 48,000 contracts.
Of course both gold and silver wanted to take off to the upside in late-morning trading in New York...but there was clearly a seller lying in wait when both metals broke into positive price territory.
And, just in case you didn't notice it...I didn't either...platinum closed above the gold price yesterday for the first time since last year. I thank Washington state reader S.A. for pointing this out to me yesterday.
The dollar index rally, which began about 10:00 p.m. on Monday night, continued until precisely 9:00 a.m. Eastern time yesterday morning, which was the moment that the dollar index broke through the 80.30 mark. At that point, the index was up about 60 basis points...and at its high of the day.
Then, it spent just about three hours giving up about 35 basis points of that gain before rallying a bit into the close. The dollar index close up a bit over 40 basis points.
The dollar index pretty much mirrored the gold price action up until 2:15 p.m. in the thinly-traded electronic market. Then the not-for-profit sellers showed up...and that, as they say, was that.
The gold stocks spent most of the day just barely above unchanged, which is surprising considering that gold was down a percent earlier in the trading day. However, the stocks certainly succumbed to selling pressure the moment that gold got hit at 2:15 p.m. Eastern time. But even then, there were buyers for every dip...and the HUI closed down only 0.52%.
Why the gold stocks didn't sell off harder is a mystery. After more than ten years of watching this sort of thing, I'm of two minds when I see counter-intuitive share price behavior on a big price decline: a] the bullish part of me says that someone is buying cheap shares because a huge rally in the gold price is just around the corner; b] the GATA/John Embry side of me sees 'da boyz' buying everything that's obviously falling of the table so they can build up their reserves to keep the HUI in check on days when it want to blow skyward.
But, as I've said many times in the past, maybe I'm looking for black bears in dark rooms that aren't there.
And despite the trashing that silver took, the silver stocks were a mixed bag as well yesterday...and Nick Laird's Silver Sentiment Index closed up an impressive 1.04%.
(Click on image to enlarge)
It was another quiet CME Daily Delivery Report, as only 12 gold and 20 silver contracts were posted for delivery on Thursday.
There was a minor decline in GLD's stockpile yesterday...13,109 troy ounces in total...which was probably a fee payment. There was no reported change in SLV.
The U.S. Mint did not have a sales report.
There was something not right about yesterday's report from the Comex-approved warehouses. They reported exactly the same withdrawal amount from the identical depository [Scotia Mocatta] on both Friday and Monday...with the total silver inventory remaining the same. There was an obvious error made...and hopefully they'll have this straightened out in today's report for Tuesday.
A couple of things from reader Scott Pluschau before I get into my list of stories today. The first deals with the 30-year Treasury note...and it's two charts in one. The first is a daily chart from yesterday...and the second is a nine month chart. Scott's covering sentence was short and to the point..."Long bond is potentially in a world of trouble." Even I have to admit that it's a pretty ugly looking chart.
(Click on image to enlarge)
Scott's second comment involved his blog yesterday in which he spoke about "Dr. Copper". His covering e-mail read as follows..."Keep an eye on copper. Take a look at the chart in this article of copper coiling... this may lift silver on a breakout." The link to Scott's blog is here...and the chart is certainly worth a look.
I have the usual number of stories today...and the final edit is up to you.
The U.S. Commodity Futures Trading Commission has sued two companies for allegedly failing to properly handle customer funds.
Goldman Sachs' will pay $7 million to settle allegations it failed to diligently supervise accounts that it carried from about May 2007 to December 2009, the Commodity Futures Trading Commission said on Tuesday.
The CFTC said the Goldman unit, which provided back-office and other services to some clients who themselves are broker-dealers, did not properly supervise the handling of subaccounts. Goldman declined to comment.
In a separate lawsuit against New York-based futures clearing company MBF Clearing, the CFTC alleged that the company failed to properly segregate customer funds.
If you read the story, I think that MBF Clearing is getting shafted. This CNBC story was sent to me by West Virginia reader Elliot Simon...and the link is here.
The Fed just announced that the latest round of bank stress tests will come out Thursday at 4:30 PM Eastern time. [Note: The Fed was forced to release this data yesterday, following a disclosure by JPMorgan. - Ed]
As a reminder, this is the doom scenario banks will be stress tested against:
The supervisory stress scenario for CCAR 2012, which was designed in November 2011, depicts a severe recession in the United States, including a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices. The supervisory stress scenario is not the Federal Reserve's forecast for the economy, but was designed to represent an outcome that, while unlikely, may occur if the U.S economy were to experience a deep recession at the same time that economic activity in other major economies contracted significantly.
Sooner or later this will all come to pass. This story was posted on the businessinsider.com website yesterday...and I thank reader Brad Robertson for sending it along. The link is here.
JPMorgan Chase & Co., which produced the most trading revenue among Wall Street firms last year, had the highest trading and counterparty losses of the biggest U.S. banks under the Federal Reserve’s stress scenario.
JPMorgan had an estimated $27.7 billion in projected losses from mark-to-market changes, credit valuation adjustments and counterparty default losses, according to the Fed results released yesterday. Goldman Sachs Group Inc. had an estimated $27.1 billion of such losses in the testing.
The Fed’s global financial market shock tested losses from declines in positions held, counterparty defaults and charges related to the deterioration of creditworthiness of trading partners through the end of 2013.
Bank of America Corp. had a projected $21.1 billion of trading and counterparty losses, Citigroup Inc. had $20.9 billion, Morgan Stanley had $12.8 billion and Wells Fargo & Co. had $6.9 billion.
This rather short Bloomberg story, filed late yesterday afternoon from New York, was sent to me by Washington state reader S.A...and is definitely worth the read. The link is here.
According to financial analyst Louis Boulanger out of Auckland, New Zealand..."Something very nasty may be about to happen in the derivatives complex..."
"Why would this latest announcement be important? Because it is the latest in a series since last week’s Greek government default on its sovereign debt and, while the mainstream financial media would have you believe this was a ‘non-event’ or ‘orderly default’ with minimal consequences, the truth of the matter is that we will not know how ‘orderly’ the default will be until the announced auction of the bonds to be swapped takes place next week at the date set by the ISDA. But, irrespective of the outcome next week, please note that last Friday WAS, in fact, the first sovereign debt default from a developed nation since World War II. That alone, makes it a very significant event."
"Since the default, there seems to be a raging wildfire behind the scenes as maybe the entire Credit Default Swap (CDS) market is stressed due to the Greek default. The losses may come fast and furious once the auction is held on March 19th, based on ISDA’s Big Bang Protocol."
Yesterday I ran the story that the CME's chairman was leaving at the end of 2012. One wonders if this turn of events, plus others, is behind it. We'll see.
Here's the press release from the CFTC's website...and I thank reader 'David in California' for bringing this must read story to our attention. The link is here.
It's being greeted as a breakthrough -- but it remains open whether it really is. When the 27 European Union finance ministers meet in Brussels on Tuesday, they plan to discuss the introduction of a financial transaction tax in Europe. It's the first time that the issue has been on the agenda at such a meeting, and supporters of the tax argue that is a sign that the tax is making progress in its long journey through the EU's institutions.
Indeed, a certain amount of progress can be seen in the ongoing battle over a tax on financial transactions -- at least on paper. French President Nicolas Sarkozy and German Chancellor Angela Merkel, the EU's two most powerful leaders, have made the issue a priority. And in September 2011, the European Commission presented a draft directive which foresees a financial transaction tax on all stock, bond and derivative transactions within the EU. The tax could come into force in 2014 -- provided all 27 EU members agree to it.
Therein lies the rub. There is little chance of such an agreement. Officially, supporters of the tax are still hoping for the "comprehensive solution," as the Commission's proposal is dubbed by the German government. But an agreement is already regarded as a pipedream. A whole row of naysayers, led by Britain and Sweden, are opposed to the tax unless it is introduced globally. They consider it to be detrimental to growth and fear that they will become less competitive on the international playing field if they introduce a tax. The unanimity principle applies to tax matters within the EU, so even a single veto would be sufficient to derail the plan.
This story was posted on the German website spiegel.de yesterday...and is Roy Stephens first offering of the day. The link is here.
European Parliament member Nigel Farage told King World News yesterday that the European financial elite is posing as if everything in the financial system has been fixed even as they are planning more bailouts. And Farage acknowledges that Germany and Switzerland are trying to figure out how to get their gold back from the United States.
I borrowed the headline and the introduction from a GATA release...and the link to the KWN blog is here.
There's a general view out there that with private creditors having agreed their 50pc haircut, the "Greek problem" has been solved, at least for now. Unfortunately, it has not.
According to Reuters, an unpublished "Compliance Report" by EU executives has concluded that Greece will have to impose a further fiscal squeeze in 2013/14 amounting to some 5.5pc of GDP in order to meet the targets that underpin the second international bailout. The chances of Greece being able to do this are about zero, though that is my conclusion, not that of the report.
According to the report, the austerity measures already adopted by Athens should be enough to bring the primary deficit down to the agreed 1.5pc this year. However, "current projections reveal large fiscal gaps in 2013-14". The projected shortfall is reckoned to be about 5.5pc of GDP. All this, of course, assumes that Greece achieves the output levels forecast by the Troika, the chances of which are again about zero. So in fact, the required squeeze will be even larger, further undermining growth and digging an even deeper hole.
This story showed up in The Telegraph yesterday...and is another Roy Stephens offering. It's worth skimming...and the link is here.
Top exporter Saudi Arabia and other Persian Gulf producers say surging oil markets are beyond their control and prices could spike higher unless tensions between the West and Iran subside.
Saudi Oil Minister Ali al-Naimi and OPEC Secretary General Abdullah al-Badri are expected to focus on high oil prices in their addresses to the International Energy Forum gathering of oil ministers and executives on Wednesday, several OPEC sources said.
"Volatility is a concern for us and it can only be resolved if the issue with Iran can be resolved," said a Persian Gulf oil industry source.
This Reuters story was posted in the Tehran Times this morning...and is another Roy Stephens offering. The link is here.
Foreign investors have been rushing Australian government bonds with a record three-quarters of the Commonwealth's $232 billion debt on issue now held offshore.
For big foreign investors, Australia has emerged as a relative safe haven in the face of Europe's debt problems and the US last year having its cherished AAA-rating cut by one credit ratings agency.
Adding to the allure of Australian government debt, Canberra is still paying attractive interest rates for its long-term borrowing costs.
These 'attractive interest rates' won't last for long, dear reader, because I'm sure that Australia's central bank wants a zero interest rate policy as fast as they can get there...and the bond junkies are buying everything in sight while the rates are high.
This story was posted over at theage.com.au website earlier today...and I thank Australian reader John Ilmenstein for sharing it with us. The link is here.
Beijing's tough defense of its rare-earths export quotas is expected to escalate trade disputes over the minerals and spur mining investments although China has strengths in the industry that are potentially long-lasting.
The U.S., the European Union and Japan Tuesday filed a complaint against China at the World Trade Organization over Chinese restrictions on shipments of raw materials, including rare earths, a category of 17 mineral elements and alloys essential to high-tech goods from iPads to the Toyota Prius hybrid car. The complaint, which will be ruled on around the end of 2012, demands that China remove its export restrictions or face trade sanctions. Some uses are more esoteric: Europium is an anti-forgery marker in euro banknotes.
Xinhua, China's state-run Chinese news agency, said in a commentary Tuesday the move could "trigger a backlash from China instead of settling the rift." Xinhua said the move "may hurt economic relations between the world's largest and second-largest economies."
This story from yesterday's edition of The Wall Street Journal was posted in the clear in this GATA release...and I thank Casey Research's own Doug Hornig for sending it to me. It's a must read in my opinion...and I can hardly wait for them to add silver to that list. The link is here.
Grant compared gold's performance with that of Coca-Cola's common stock since 1996 (see below) and found that gold has outperformed the stock for a while. And remember, Berkshire Hathaway owns 200 million shares of Coke.
Grant applauded Buffett for investing a company that has improved significantly over the years. But ultimately, returns are returns and gold has crushed coke. Here's what Grant said:
"It's humiliating to the people who own [Coca-Cola] common. This is why valuation is so important. This is why price and the margin of safety is so important. In 1996 Coke was whatever 39 times earnings or something and gold was known to be the refuge of not the fearful but of the idiots. And to be sure I don't fault Mr. Buffett as an investor it would hardly behoove me to do so, but I do observe that over these past not so prosperous dozen or so or more years, the commodities have done better than even the best quality equities."
This must watch 11:10 minute video is posted over at the businessinsider.com website...and is Roy Stephens final offering of the day. The link is here.
On the latest edition of "The Keiser Report" on the Russia Today network, Max Keiser and Stacy Herbert discuss the growing concern in Germany and Switzerland about the vulnerability of their gold reserves in United States custody. GATA's work is cited.
I borrowed the intro and headline from another GATA release yesterday...and the video is posted over at youtube.com...and the applicable part runs for the first 8:50 minutes. It's a must watch...and the link is here.
This 12:36 interview was done in the second half of the above-mentioned 'Keiser Report'. It, too, is a must watch in my opinion...and it's also posted over at the youtube.com website...and the link is here.
South Africa, only a couple of decades ago the world's largest producer of gold by a huge margin, but recently overtaken by China, Australia and the U.S., and in danger of being overtaken by Russia, has seen the decline continuing according to Statistics SA.
The state statistical body's report on South Africa's mine production in January this year sees an overall decline year on year for all metals and minerals of 2.5%, but in the gold sector the decline was a massive 11.3%, more than even that in December when gold output fell by 8.2%
For the country's economy, higher metal prices have mitigated the production fall-off to a major extent, but the continuing output decline as many of the country's biggest gold mining operations have reached the ends of their lives and have closed down, and/or are having to work much lower ore grades, sees no end to the continuing downturn. The country's gold output is nowadays less than a quarter of what it was at its peak in the early 1970s and the fall-off has been the major contributor to at best flat global gold production over the past few years.
This story was posted over at the mineweb.com website yesterday...and I thank reader Bob Fitzwilson for sending it along. The link is here...but the most salient points in the article are cut and paste above.
Bayfield Ventures Corp. (TSX.V: BYV) is exploring for gold in the Rainy River District of NW Ontario. The Company’s “Burns” Block property adjoins the immediate east of Rainy River Resources’ (TSX.V: RR) world-class gold deposit which includes 2.37 million ounces Au at 1.3 g/t indicated in addition to 2.66 million ounces Au at 1.2 g/t inferred. Bayfield is presently exploring the known eastward extension of Rainy River’s main ODM17 gold zone onto the Burns Block. The Company is delineating both lower grade, bulk-tonnage gold mineralization as well as higher grade gold zones with drill results right in line with Rainy River’s. Two of the more notable holes intersected 81 metres of 5.08 g/t Au including 35.93 g/t Au over 10.0 metres, and 31.71 g/t Au over 3.0 metres within 9.0 metres of 12.88 g/t Au. Bayfield also holds a 100% interest in two other properties in the Rainy River District. Claim blocks “B” and “C” are well located to the immediate east and west (respectively) of Rainy River Resources’ #433 and ODM17 gold zones. The early success of the current 50,000+ metre drill program is very encouraging and much more drilling will be carried out on Bayfield’s Rainy River properties. Please visit our website to learn more about the company and request information.
A civil servant is sometimes like a broken cannon: it won't work and you can't fire it. - General George S. Patton
Well, I wasn't happy...but then again I wasn't entirely surprised by yesterday's price action in both silver and gold. And if it hadn't been for the late-day price shenanigans in the thinly-traded electronic market, platinum would have closed in the black. Palladium was the only precious metal that finished up on the day.
And I don't believe for a second that anything Bernanke had to say was material to the precious metals,however that may have been the fig leaf used to blast them lower.
I guess the only surprise would be that JPMorgan et al didn't beat the snot out of silver more than they did. Down 20 cents at the close wasn't much of a drop, but then again, the rally off the lows could just has easily been a short covering rally as well. As a matter of fact, I'd be surprised if it wasn't.
How much of this volume data shows up in Friday's Commitment of Traders Report is anyone's guess. Neither Ted Butler nor I are sure whether the cut-off for the report is at the close of Comex trading at 1:30 p.m. Eastern time, or whether it's at the close of electronic trading at 5:15 p.m. Needless to say, if the cut-off is actually at the close of Comex trading...all the data surrounding the price smash-downs in the New York Access Market won't show up until next Friday's COT report...a trick that 'day boyz' have been using a lot lately when they're trying to cover what they're doing for as long as possible. I've mentioned this many times in this space...and I'm sure you're familiar with the routine by now.
Just out of curiosity, I checked the preliminary volume numbers for yesterday's trading day...and both gold and silvershowed increases in open interest...almost an impossibility in gold's case, considering that the price smash caused huge tech fund long liquidation. Both gold's 50 and 200-day moving averages were taken out with real authority yesterday...and gold closed below its 200-day moving average as well. But, as I've said before, there's lots of ways that JPMorgan et al can hide what they're doing in these daily open interest numbers, which is the primary reason why I stopped posting them in this column.
Here's gold's 6-month chart. Note how yesterday's trading action took out both of the key moving averages.
(Click on image to enlarge)
And here's silver's 6-month chart. The 200-day moving average fell on the first day...February 29th...and we have a bit to go to take out silver's 50-day moving average.
(Click on image to enlarge)
Now the question remains...are we going lower from here or not? Don't know...but anything's possible if you glance back at what happened to both these metals in December. If this sort of buying opportunity presents itself again, I hope you use it to acquire as much physical as you can afford.
Gold traded pretty flat during the morning session in the Far East...and was up a few bucks by shortly before 2:00 p.m. Hong Kong time...and then the selling pressure began...and as of 10:15 a.m. in London, the gold price was down about eight dollars from Monday's close.
Silver pretty much followed the same price path as gold, setting a new low price for this move down...around the $32.85 spot price mark...about two hours after London opened. As I hit the 'send' button, silver is down about 40 cents.
Gold volume, as of 5:15 a.m. Eastern, is already sky high...with surprisingly few roll-overs...and silver's volume is getting up there as well. The dollar index is up a tiny amount.
I haven't a clue what today's price action will be like in either metal when Comex trading begins at 8:20 a.m. in New York...but nothing will surprise me when I turn on my computer later this morning.
See you on Thursday.