Gold & Silver Daily
"As Ted Butler has pointed out countless times, it's what JPMorgan et al do on the next rally that will determine how it unfolds."

¤ Yesterday In Gold & Silver

Gold traded within a five dollar price band through most of the Friday trading day on Planet Earth...exceeding it only briefly between 8:10 a.m. at 9:40 a.m. Eastern time.  Those two times represented the high and low price ticks of the day...such as they were.

I was particularly impressed by the fact that 'free-market forces' were able to thread the needle by closing gold on Friday in the 60 cent price gap between the Wednesday close and the Thursday close.  I hope there was a prize for doing that.

Gold closed on Friday at $1,642.40 spot...down twenty cents from Thursday.  Net volume, at 77,000 contracts, was the lightest since I can't remember when.

Silver's price action was rather similar to gold's, but the price was more 'volatile'...with the high and low price ticks come at approximately the same times as gold.  The silver price actually broke through the $32 price mark on its high tick [$32.01 spot] for the second day in a row but, as you can tell, it wasn't allowed to close anywhere near that price.

Silver closed at $31.70 spot...down a dime from Thursday.  Net volume was a shockingly light 19,000 contracts.

The dollar index hung in around the 79.60 mark until about 10:00 a.m. Hong Kong time on their Friday morning...and then rolled over.  Most of the decline was in by 10:30 a.m. Eastern time in New York...and the index basically traded sideways from there.  The dollar index closed down about 34 basis points at 79.14.

Four out of the five days this week, gold stocks opened in positive territory...and then quickly got sold off into negative territory regardless of the price action in gold that followed...with stock prices continuing to erode all day along.  The Friday trading action was exactly that as well. The HUI closed on its low of the day, down 0.97%.  In my twelve years of watching this market, I've never seen anything like this.  It's unnatural.

Virtually all of the silver stocks finished down on the day as well...including all the stock represented in Nick Laird's Silver Sentiment Index.  It closed down 0.17%...the same amount it closed up on Thursday.

(Click on image to enlarge)

The CME's Daily Delivery Report was a yawner, as only 11 gold contracts were posted for delivery on Tuesday.

There were no reported changes in GLD yesterday, but over at the SLV ETF an authorized participant withdrew 1,262,086 troy ounces of silver.

For the third day in a row there was no sales report from the U.S. Mint.

The Comex-approved depositories reported receiving 732,023 troy ounces of silver on Thursday...and shipped only 4,966 ounces out the door.  Since Wednesday, JPMorgan's precious metals warehouse has added another million ounce of silver to their stash, which now sits at 14.0 million ounces.  The link to that action is here.

The Commitment of Traders Report that came out yesterday [for positions held a the close of Comex trading on Tuesday] was basically a non-event.  There was virtually no change in the Commercial net short position in silver...less than a hundred contracts but, as Ted Butler pointed out to me, the total open interest blew out by almost 7,000 contracts, so a lot of spread trades were put on during the reporting week.

In gold, the Commercial traders increased their net short position by a hair over 5,000 contracts, or 500,000 ounces.  Nothing to see here, folks.

As expected, The Central Bank of the Russian Federation updated their website with the March numbers...and they showed that they had purchased 500,000 ounces of gold to add to the 28.3 million ounces they already held.  I must admit that after seeing nothing added in January...and 100,000 ounces sold in February...I was relieved to see this number.  I thank Nick Laird for his wonderful chart below.

(Click on image to enlarge)

Here's a chart that Washington state reader S.A. sent our way yesterday.  It's entitled "Total Credit Market Debt Owed"...and needs no further embellishment from me.

(Click on image to enlarge)

Here's an interesting story that appeared in an Australian newspaper just the other day.  It includes a photo of the Perth Mint's 10 kilogram "Year of the Dragon" gold and silver 'coins'.  I thank Australian reader Brad Ellett for sending it to me...and Australian reader Wesley Legrand for putting it in a format that I could use in this column.  You'll certainly need the 'click to enlarge' feature for this one.

(Click on image to enlarge)

I have the usual number of stories for a Saturday, including a bunch that I've been saving all week for today's column.  I hope you have the time to run through them all over the weekend.


¤ Critical Reads

Rising Fears That Recovery May Once More Be Faltering

Some of the same spoilers that interrupted the recovery in 2010 and 2011 have emerged again, raising fears that the winter’s economic strength might dissipate in the spring.

In recent weeks, European bond yields have started climbing. In the United States and elsewhere, high oil prices have sapped spending power. American employers remain skittish about hiring new workers, and new claims for unemployment insurance have risen. And stocks have declined.

There is a “light recovery blowing in a spring wind” with “dark clouds on the horizon,” Christine Lagarde, managing director of the International Monetary Fund, said Thursday, at the start of meetings here that will focus on Europe’s troubles and global growth. Ms. Lagarde implored world leaders not to become complacent.

This story was posted over at The New York Times website on Thursday...and I thank reader Phil Barlett for sending it.  The link is here.


IMF to Secure $430 Billion in Crisis Funds

Leading world economies on Friday pledged $430 billion in new funding for the International Monetary Fund, more than doubling its lending power in a bid to protect the global economy from the euro-zone debt crisis.

The promised funds from the Group of 20 advanced and emerging economies aim to ensure the IMF can respond decisively should the debt problems that have engulfed three euro zone countries spread and threaten a fragile global recovery.

"This is extremely important, necessary, an expression of collective resolve," IMF Managing Director Christine Lagarde said. "Given the increase that has just taken place, we are north of a trillion dollars actually. So I was a bit mesmerized by the amount."

This Reuters story was posted on the website shortly after midnight last night...and I thank West Virginia reader Elliot Simon for digging it up on our behalf.  The link is here.


Chris Whalen: The Fallacy of “Too Big To Fail”–Why the Big Banks Will Eventually Break Up

In a riveting interview on the banking industry, Christopher Whalen of Tangent Capital Partners in New York joins Jim on Financial Sense Newshour to discuss the fallacy of "too big to fail," conflicts of interest in the derivatives markets, problems with the 2005 bankruptcy laws, and why politicians let MF Global investors get taken.

The audio interview runs for 24:22...and there's also a transcript if you wish to read it, instead of listen.  It was posted on the website yesterday...and I thank reader Dennis Meredith for sending it my way.  The link is here.


An Eye on France, Italy and the Speculators: Doug Noland

I wanted to dive a little deeper into John Taylor’s March 29, 2012, Wall Street Journal op-ed, “The Dangers of an Interventionist Fed - A century of experience shows that rules lead to prosperity and discretion leads to trouble.”  The monetary policy “rules vs. discretion” debate is near and dear to my analytical heart, and I again tip my hat to Dr. Taylor for adeptly raising this critical issue.  For this Bulletin I’ll shift the focus somewhat.

From John Taylor’s article:  “The Fed's discretion is now virtually unlimited. To pay for mortgages and other large-scale securities purchases, all it has to do is credit banks with electronic deposits—called reserve balances or bank money. The result is the explosion of bank money… Before the 2008 panic, reserve balances were about $10 billion. By the end of 2011 they were about $1,600 billion. If the Fed had stopped with the emergency responses of the 2008 panic, instead of embarking on QE1 and QE2, reserve balances would now be normal.  This large expansion of bank money creates risks. If it is not undone, then the bank money will eventually pour out into the economy, causing inflation. If it is undone too quickly, banks may find it hard to adjust and pull back on loans.  The very existence of quantitative easing as a policy tool creates unpredictability, as traders speculate whether and when the Fed will intervene again. That the Fed can, if it chooses, intervene without limit in any credit market—not only mortgage-backed securities but also securities backed by automobile loans or student loans—creates more uncertainty and raises questions about why an independent agency of government should have such power.”

I've been a huge fan of Doug's ever since I discovered his writings over at David Tice's website over ten years ago.  It's always a must read for me every Friday evening...and this one is worth your while if you have the time.  I thank reader U.D. for sending it our way...and the link is here.


David Galland: Après Moi, le Deluge

This was the title to yesterday's edition of Casey's Daily Dispatch.  I consider David to be one of the top writers on the Internet...and he's certainly at the top of his game in this, his weekly column.  It's an absolute must read from beginning to end...and the video in the "Friday Funnies" is a must watch as well.

If you're not already a subscriber, you can rectify that [for FREE]  when you bring up his commentary on your screen.  The link is here.


Spanish PM: 'We have no money for health or education'

Spain has approved €10 billion of spending cuts and higher fees for education and health in a bid to show investors it is getting its deficit under control.

Speaking on the eve of the cabinet decision on Friday (20 April), centre-right Prime Minister Mariano Rajoy said he does not have enough money.

"It's necessary, imperative because at this moment there is no money to pay for public services ... There's no money because we have spent so much over the last few years. So we have to do this so that in the future we can get out of this situation," he told national media.

This story was posted over at the website back on April 12th...and I thank Roy Stephens for his first offering of the day.  The link is here.


Franco-German Schengen Proposal: A Vote of No Confidence in Europe

Germany and France's joint proposal to allow Schengen-zone countries to temporarily reintroduce border controls as a means of last resort might sound harmless. But doing so would damage one of the strongest symbols of European unity and perhaps even contribute to the EU's demise.

Germany and France are serious this time. During next week's meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as "an ultima ratio" -- that is, measure of last resort -- "and for a limited period of time." They reportedly go on to recommend 30-days for the period.

The proposal is far from harmless and would throw Europe back decades. Since 1995, the citizens of Schengen-zone countries have gotten used to freely traveling within Continental Europe. Next to the euro common currency, free movement is probably the strongest symbol of European unity. Indeed, for many people, it's what makes this abstract idea tangible in the first place.

This story was posted on the German website yesterday...and is Roy's second offering of the day.  The link is here.


Scottish independence: Who'll pay the price?

Scottish nationalists are calling for a boycott of The Economist.  

Words such as "contemptible", "sneering" and "offensive" are being used to describe the front page of its latest edition, which shows a map of Scotland renamed "Skintland".

According to the magazine, the nation consists of places such as "Glasgone", "Edinborrow" and the "Highinterestlands". 

It is followed by a leading article, concluding that Scottish independence from the UK would come at a high price and could leave Scotland as "one of Europe's vulnerable, marginal economies". 

Unsurprisingly, Scotland's first minister Alex Salmond blew his top. The Scottish National Party leader said the front cover displays a sort of "Bullingdon Club humour" of "sneering condescensions".

This very interesting story was posted over at the website on Tuesday...and I've been saving it for today's column.  I thank reader Andrew Holland for digging it up on our behalf...and the link is here.


Three Stories from the Tehran Times

The first is headlined "Japan to insure Iran oil shipments to counter EU sanctions".  The second is entitled "High oil prices shield Iran from sanctions"...and lastly is this very interesting article headlined "156,000 gold coins delivered to customers".  If the Persian/English translation is to be believed, it sounds like customers will be offered paper of one form or another, instead of the physical metal itself.

I thank reader 'David in California' for the first story...and the last two were courtesy of Roy Stephens once again.


China vs. the Philippines: After the storm in the South China Sea

The recent stand-off between Chinese and Philippine vessels in the South China Sea has once again sent the political temperature in this strategic sea lane soaring to worrying heights.

The prospect of a lull in tensions has ebbed and given way to choppy seas. Sparks flew again when the biggest ship in the Philippines' naval fleet, Gregorio del Pilar came across eight Chinese fishing vessels in the disputed waters near the Scarborough shoal.

As the Philippines navy, which claimed that the Chinese vessels were trespassing the Philippines' waters, prepared to board the fishing vessels and arrest the crew, two Chinese surveillance vessels dispatched to the area positioned themselves between the Gregorio del Pilar and the fishing vessels. Each side then traded accusations of trespassing and ordered the other to leave the waters.

The incident triggered a frenzy of diplomatic efforts by Beijing and Manila to prevent the situation from deteriorating further. This however was peppered by volleys of strongly worded condemnations and the exchange of warnings between the two nations. At the point of writing, vessels from both sides are still in a tense face-off.

I haven't heard a peep about this in the main stream press anywhere.  It's certainly worth reading if you have the time...and I thank Roy Stephens for sharing it with us.  It was posted over at the Asia Times website earlier this morning...and the link is here.


Self-immolations shake Tibetan resolve

At 76, the Dalai Lama has announced his retirement as a political leader, but retains his role as spiritual leader of some five million Tibetans.

But he has remained strangely quiet on the subject of the self-immolations - 32 of which have taken place in the past year alone.

"Now this is very, very sensitive political issue," he explains with due solemnity.

"If I get involved in that, then the retirement from political power is meaningless. Whatever I say the Chinese government they immediately manipulate."

This story was posted over at the website on Wednesday...and is another very interesting commentary that was sent to me by reader Andrew Holland.  The link is here.


The World from Berlin: 'The Asian Arms Race Is Starting to Look Ominous'

India added itself to the short list of nuclear-armed countries with ballistic missile capability on Thursday. More importantly, though, the country's successful test marks a new chapter in the developing Asian arms race. German commentators express deep concern on Friday.

Asia's military might appears to be growing by leaps and bounds these days. Just last month, China announced a significant increase to its military spending. Since then, North Korea attempted (and failed) to launch a rocket into space, the United States began a joint military exercise with the Philippines and, on Thursday, South Korea tested a missile whose range includes all of North Korea.

The biggest headlines, however, have been reserved for India's testing on Thursday of a long-range ballistic missile. Indian Prime Minister Manmohan Singh praised the successful launch, saying it was "another milestone" in India's "quest for security, preparedness and to explore the frontiers of science." Many observers, however, noted that it furthered India's goal of becoming a counterweight to China's military dominance in the region.

This story was posted over at yesterday...and is Roy Stephens final offering in today's column, for which I thank him.  The link is here.


Expected easier Chinese monetary policy may boost Gold demand: HSBC

Easier Chinese monetary policies may hold positive implications for gold prices, said HSBC precious-metals analyst Jim Steel.

He cited that, a report from Xinhua news saying a central-bank official indicated that China will increase liquidity through open-market operations and will cut required reserves.

HSBC’s chief China economist, Qu Hongbin, expects China to cut its reserve-ratio requirement by 100 basis points and increase capital injections in open market operations in the second quarter of 2012.

Furthermore, he looks steps to be taken for additional easing through tax breaks for small companies and fiscal spending in the public sector. “Gold historically has performed well in an easy monetary policy environment,” Steel concluded.

This story, posted over at the website, was filed from Beijing yesterday.  It's only four paragraphs long...and you just read them.  I thank reader Richard Craggs for sending me this piece...and the link to the hard copy is here.


Are Taxi Drivers Buying Gold or Apple?

On Wall Street, the taxi driver indicator refers to a mentality that is common at the peak of bubbles in financial markets. The theory is that when everyone from taxi drivers to shoeshine boys are invested in a particular asset, that investment has become too crowded for its own good and is bound to collapse.

[Even today] the taxi driver indicator is still being used to gain a read on financial markets. CNBC recently aired a segment that asked people walking along the Santa Monica Boulevard boardwalk in California which item they would rather have: $600 in cash, one share of Apple stock, an iPad 2 or one-third of an ounce of gold. While it is not a perfect example of the taxi driver indicator, it showed insight to how some, if not most Americans think. All items available to choose from were valued around $600, but the respondents had different views on the best pick.

Despite being called a bubble numerous times in the past few years, very few respondents picked the gold coin. In fact, only one man chose the gold coin and when asked why, he responded, “because gold’s going to $3,000.” The one share of Apple or the iPad 2 was the more popular choice. This simple yet eye-opening segment portrays the typical investment mindset in America. After an 11-year bull market run, the average Joe is still unaware of the benefits that gold offers. To call gold a bubble is not only short-sided, but wrong.

This interesting read was posted on the website...and I thank Casey Research's own Jeff Clark for forwarding it to me.  The link is here.


Frank Holmes: Investor Alert - Weighing the Evidence of Oil and Gold Stocks

West Texas Intermediate (WTI) crude oil has seen a tremendous rise over the past three years. In April 2009, the price of oil was $46; today, it’s $104. The SIG Oil Exploration & Productions Index closely followed the rise of Texas tea from April 2009 until August 2011. That’s when the disparity between oil and oil stocks began to gradually increase.

As we mentioned last week, gold equities continue to lag the price of gold, with the trend accelerating recently. Below, you can see that for most of the last three years, gold stocks have outperformed gold. Recently, though, bullion has surpassed gold stocks while gold companies have significantly declined.

Today’s extreme divergence in oil and gold stocks and their underlying commodities presents a rare opportunity: what these stocks need now are investors to take advantage of it.

This weekly commentary from Frank is posted over at his website.  The imbedded charts are worth the trip alone...and I consider it a must read as well.  I thank West Virginia reader Elliot Simon for sharing this article with us...and the link is here.


Two King World News Blogs

The first is from Art Cashin, who is director of Floor Operations for UBS.  His blog is headlined "A Eurozone Breakup Would Be Cataclysmic"...and this blog by Tocqueville Fund Manager John Hathaway, is a must read of course.  It's entitled "Fed to Print More Money...and Gold to Hit New Highs".


Bart Chilton Talks About Silver on BNN

This 6:56 minute video that was posted on Thursday is headlined about oil...and it's the main subject matter.  But out of clear blue sky Chilton brings up the huge speculative position in the silver market that is held by one trader.  He didn't mention JPMorgan by name, of course, but he did get his shots in.

Ted Butler pointed out to me that Chilton never mentions the fact that the speculator in silver is a short side price manipulation...not a long side one.  This is a fact that would not be noticed by the average viewer unless it was pointed to them, which Bart never does...and I'm sure that's no accident.

I thank reader Brad Robertson for finding this video.  It's posted over at the website...and is definitely a must watch.  It's not the headline video on the page, so you have to look around a bit to find it.  The link is here.  I don't know how long it will remain posted, so I wouldn't wait around too long to view it.


Gold: Precious in All But Recent Perception

In 2009, China announced that it had acquired 454 tons of gold during the previous seven years. Compared to the above figures, this relatively small amount sent shockwaves through the financial markets and made China’s intentions clear. Chinese government officials, just like those of the other gold acquirers, do not want to send the price of gold soaring while they are buying it. Thus they take advantage of price declines to increase China’s holdings. It seems that central banks are now heeding the words of J.P. Morgan who told Congress in 1912: “Gold is money. Everything else is credit.”

The market’s delay in recognizing how much more currency devaluation will need to occur has recently pushed down the prices of precious metals investments. This gives us the chance to buy more of a good thing at an even better price.

The author, Darren C. Pollock, is a portfolio manager and principal at Cheviot Value Management, LLC in Santa Monica, CA.  This short essay was posted over at the website on Thursday...and I thank reader U.D. for bringing it to our attention.  It's a must read...and the link is here.


Central banks rig gold market to ensure orderly rise, Rickards says

This past week, market analyst and hedge fund manager James G. Rickards told Dan Ameduri of Future Money Trends that the U.S. government wants the gold price to rise gradually in an orderly way to devalue the dollar and works with other central banks through the Bank for International Settlements to rig the gold market.

I borrowed the headline, plus the introductory paragraph, from a GATA release yesterday...and the link to the interview, which is posted in two parts, can be found at the website.  The link to these absolute must listen interviews is here.  The two interviews run 19 and 10 minutes respectively.



¤ The Funnies

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¤ The Wrap

Inflation is as violent as a mugger, as frightening as an armed robber...and as deadly as a hit man. - President Ronald Reagan

Today's 'blast from the past' isn't really from the past at all...but a "60 Minutes" video that was sent to me by my father-in-law, Bill Radtke.

Lesley Stahl profiles British musical savant Derek Paravicini, whose computer-like memory for music is matched by his creative abilities to play it in any style. Derek, a musical genius and nephew of Camilla Parker Bowles, plays the piano like you've never heard. Yet, he doesn't know his age, nor does he know how to hold up three fingers! Also, he is blind!

Having taken seven years of classical piano having sat on the Programming Committee of the Edmonton Symphony Orchestra for eleven years...I know greatness when I hear it.

This is one of the most amazing videos that you're ever likely to watch.  It runs 14:22 minutes...and is posted over at the link is here.

Well, it was a very quiet Friday and, for the most part, a very quiet week in both gold and silver.  But it wasn't quiet because that's what the markets in the precious metals wanted to was quiet because, as Jim Rickards pointed out in his commentary above, these markets are managed.

Where we go to from here is the $64,000 question for which I have no answer at the moment.  Of course, if left to their own devices, the precious metals would explode the outer edges of the known universe almost instantly...and the current economic, financial and monetary system would be a smouldering ruin within five business I have pointed out on many occasions.

But since that won't be allowed to happen, at least not while 'da boyz' have any say in the matter, we'll probably get something quite a bit less than that.

I doubt very much that this current oversold condition in the precious metals and their shares will last much longer...and it only remains to be seen how high and fast gold and silver will be allowed to rise once they break through the key moving averages.

And, as Ted Butler has pointed out countless times, it's what JPMorgan et al do on the next rally that will determine how it unfolds.  Will they immediately become the short seller of last resort once again, or will they step aside and let the metals run for a bit?

That, and only that, will be the deciding factor...and all we can do is wait it out.  A lot of investors have already voted with their feet and their wallets and have exited the precious metals market...and as we know, any bull market tries to shake off as many non-believers as it can before making its next big move...price-managed or not.  This is certainly the case here.

I'm still "all in" nothing has changed from my end.

Before signing off for the day and the week, I have this little announcement that the nice ladies over at Casey Research sent my way yesterday...and I'd like you to run through it, if you wouldn't mind.

Next week Casey’s spring summit..."Recovery Reality Check"...will be held in Florida. If you’re not registered to attend, you may want to purchase the complete audio collection (available in a 20-CD set and/or MP3 downloads) so you can listen at home. The faculty presenting includes David Stockman, director of the Office of Management and Budget under President Reagan; resource investing legend Rick Rule; Casey Research Chairman Doug Casey; Harry Dent, best-selling author of The Crash Ahead; Lacy Hunt, executive VP of Hoisington Investment Management...and 26 other financial luminaries. And they are telling me if you order before the show starts on April’ll save $100.  To learn more about the 31 financial experts and what they are presenting, you can click here...and it costs nothing to check it out.

I'm outta here!  Enjoy what's left of your weekend...and I'll see you on Tuesday.