Casey Research Publication
Gold & Silver Daily
"All that matters from this point onwards, is what happens on the next rally in silver and gold. Will JPMorgan et al go short again?"
 

¤ Yesterday In Gold & Silver

The gold price declined about ten bucks by noon Hong Kong time during their Wednesday trading session.  From there, it recovered all that loss by shortly before 1:00 p.m. in London trading.

Then a sell-off began that took gold down to its low of the day...$1,530.10 spot...which was around 9:40 a.m. in New York.  The gold price recovered smartly from there...and around 2:30 p.m. Eastern time, the high was in at $1,570.80 spot.  From that point, the gold price traded quietly lower into the close of electronic trading at 5:15 p.m. Eastern.

Gold close at $1,562.70 spot...up $7.70 on the day.  Net volume was an immense 291,000 contracts.

Silver was under pressure all through Far East and early London trading yesterday, with the London low coming at the noon silver fix.  From there the price jumped about 30 cents, only to get sold down to its absolute low of the day...$27.32 spot...which came at the same 9:40 a.m. time in New York that gold hit its nadir.

And, also like gold, the silver price climbed smartly from there, reaching it's high of the day [$28.29 spot] a few minutes after 2:00 p.m. in the New York electronic market.  From that point, silver got sold off almost 40 cents...and closed below the $28 mark at $27.93 spot...up a whole nickel from Tuesday.  Silver's net trading volume was monstrous as well...around 48,000 contracts.  Once again silver had big intraday price move in New York.  This time it was 97 cents...3.43%.

The dollar index powered ever higher yesterday...and by the time Wednesday was done, it was up a hair over 50 basis points...closing at 83.03.

Here's the 3-year dollar index for your viewing pleasure. It's the most overbought its been in the last three years.  A bubble looking for a pin, perhaps?  Of course U.S. bond yields hit record lows as well.

The gold stocks gapped down at the open, but managed to make it safely into positive territory by about 11:30 a.m. Eastern time...and hit their zenith about 12:15 p.m. before gradually selling off a hair into the close.  The HUI finished up 0.32% on the day.

The silver stocks finished mixed yesterday...and Nick Laird's Silver Sentiment Index closed down 1.20%.

(Click on image to enlarge)

The first CME Daily Delivery Report yesterday showed that there were no new deliveries for the May contract in gold or silver...and the few that were posted on Tuesday will be delivered today sometime.

The contracts for First Day Notice in the June delivery month were posted later yesterday evening.  There were only 24 silver contracts posted for delivery on Friday, June 1st, which is no surprise since June isn't a big delivery month for silver.  But in gold, there were 1,204 contracts posted, with 1,100 of those contracts coming from JPMorgan's proprietary trading [in-house] account.  The biggest long/stoppers were HSBC with 515...and JPMorgan in its client account with 314.  In distant third place was Deutsche Bank with 111 contracts stopped.  There were lots of smaller stoppers as well...and the Issuers and Stoppers Report is definitely worth the look...and the link is here.

There were no reported changes in the GLD ETF...but over at SLV an authorized participant added 776,232 troy ounces of silver.

Switzerland's Zürcher Kantonalbank updated their gold and silver ETFs at the close of business on Wednesday the 29th.  Their gold ETF showed a decline of only 8,867 troy ounces, but their silver ETF showed an increase of 243,136 troy ounces.

The U.S. Mint had no sales report...and the Comex-approved depositories had such a small activity level on Tuesday that it's not worth reporting.

Silver analyst Ted Butler posted his mid-week commentary for his paying subscribers yesterday...and here are a couple of free paragraphs...

"At the low point [yesterday], silver was down by more than a dollar from Friday’s close, while gold was down more than $40, before both came back somewhat. I’d attribute the decline to HFT manipulation and further attempts to induce speculators to sell into collusive commercial buying. Considering the dreadful news from Europe, I wouldn’t know what else to attribute the decline to. In a sense, I feel sorry for those who don’t believe in the manipulation premise, because if it wasn’t manipulation behind this decline, any other reason would sound hollow. Yes, I’m still living in a sort of twilight zone where world financial conditions are more conducive to strong gold and silver prices than at any time in my personal experience, yet those prices are weak instead."

"This has not been an easy time for silver (and gold) investors, mainly due to this counterintuitive and debilitating price action. My own view is that none of this price weakness is accidental or coincidental. I sense the recent takedowns have been designed to break the spirit of silver and gold investors. Sadly, I fear the manipulators, led by JPMorgan, have succeeded in demoralizing some investors, all under the lie of hedging and market-making. I suppose this is as it must be in a manipulated market. I can only speak for myself in that I wouldn’t think of selling here and I know that the ingredients for an explosive rally are in place. I don’t know the timing or circumstances of that explosive rally to come, so I am not going to dwell on that aspect."

On the subject of extreme charts, whether it be gold, silver, the  U.S. dollar, 10-year U.S. bonds...here's the 3-year chart for copper.  Ted mentioned it got pounded pretty good yesterday as well...and it did.

But that's nothing compared to this crude oil chart that reader Dean Acheson sent me yesterday.  It, like a few other commodities, is more oversold than its been in three years.  Extreme conditions like that can't last too long in anything...and they won't.

I have the usual number of stories, for you today...and if you are a John Embry fan, you'll love today's selection of precious metal stories.

 

¤ Critical Reads

The Second Act Of The JPM CIO Fiasco Has Arrived - Mismarking Hundreds Of Billions In Credit Default Swaps

As anyone who has ever traded CDS (or any other OTC, non-exchange traded product) knows, when you have a short risk position, unless compliance tells you to...and they rarely do as they have no idea what CDS is most of the time...you always mark the EOD [end of day] price at the offer, and vice versa...on long risk positions, you always use the bid. That way the P&L always looks better.

And for portfolios in which the DV01 is in the hundreds of thousands of dollars (or much, much more if your name was Bruno Iksil), marking at either side of an illiquid market can result in tens if not hundreds of millions of unrealistic profits booked in advance, simply to make one's book look better, mostly for year end bonus purposes.

This is certainly the second shoe to drop in the JPMorgan fiasco...and without doubt this 'problem' infects every TBTF financial entity on Planet Earth.  It's a long read...and I thank reader 'David in California' for being the first one through the door with it.  The link is here.

Read more...

Small Businesses Hire Fewer Workers in May

Small businesses hired fewer workers in May and cut hours for those on their payrolls, an independent survey showed on Wednesday, raising prospects of another disappointing employment report.

Businesses added 40,000 new jobs, after increasing payrolls by an upwardly revised 60,000 jobs in April, according to Intuit, a payrolls processing firm. April's job count was previously reported as 40,000.

The survey's findings contradict expectations of a pick-up in job gains in the broader economy this month as the weather-related distortions that held back employment growth in March and April dissipate.

This cnbc.com story from yesterday was sent to me by West Virginia reader Elliot Simon...and the link is here.

Read more...

Greg Weldon: Turbulence Is Coming

Even though our recent Recovery Reality Check Summit participants generally agreed that interesting economic times will continue for some time, the details of why they think that are quite varied. Casey Research's Senior Metals Investment Strategist Louis James' interview of Greg Weldon is an excellent example of this; he provides another sobering perspective on the US dollar debasement in explaining why he thinks turbulence is ahead for many nations' economies.

This video interview was posted in yesterday's edition of Casey's Daily Dispatch...and it runs a hair under 20 minutes.  The link is here.

Read more...

Euro Shorts Hit New Record

Last week, when we reported on the then brand new record number of EUR non-commercial short contracts as reported by the CFTC, we said: "with such a massive surge in shorts in a short period of time, this means that the likelihood of major short squeezes is substantial on even the most innocuous of news.

Our advice to FX trading readers: be very careful with EUR/USD stops: it is very likely that in their pursuit of short covering squeezes, (BIS) algos will take the pair substantially into the offer-side stop limit buffer just to force short hands out, which in turn may initiate short-term covering ramps."

More extreme positions!  This zerohedge.com piece was posted on their website on Monday...and the imbedded graph makes the entire article worth the read.  I thank Nitin Agrawal for bringing it to our attention...and the link is here.

Read more...

Europe's money contracts again: Ambrose Evans-Pritchard

Today's ECB data shows that Euroland's money supply is contracting again.

M3 fell by €51bn in April.

M1 fell by €55bn.

Private credit fell €55bn.

I don't yet have the country breakdown. My guess is that the Club Med implosion is grim.

This excellent AE-S blog from yesterday's edition of The Telegraph is an absolute must read...and I thank Roy Stephens for his first offering of the day.  The link is here.

Read more...

Christine Lagarde attack on Greece backfires as she pays no tax

Ms Lagarde was forced to publish an embarrassing climb-down on her Facebook page over the weekend after being bombarded by hundreds of Greek people who felt insulted by her suggestion that the country’s crisis was partly due to “all these people in Greece who are trying to escape tax”.

However, on Tuesday she had to admit that her $467,940 (£300,000) annual salary and $83,760 of additional allowances are entirely tax-free as the IMF is an international organisation.

Ms Lagarde earns more than President Barack Obama and British Prime Minister David Cameron, both of whom pay taxes.

I feel for her, but I can't quite reach her.  This story was posted on The Telegraph's website early yesterday evening BST...and is Roy's second offering in today's column.  The link is here.

Read more...

Spain faces 'total emergency' as fear grips markets

Spain is facing the gravest danger since the end of the Franco dictatorship as the country is frozen out of global capital markets and slides towards an epic showdown with Europe.

“We’re in a situation of total emergency, the worst crisis we have ever lived through” said ex-premier Felipe Gonzalez, the country’s elder statesman.

The warning came as the yields on Spanish 10-year bonds spiked to 6.7pc, pushing the “risk premium” over German Bunds to a post-euro high of 540 basis points. The IBEX index of stocks in Madrid fell 2.6pc, the lowest since the dotcom bust in 2003.

Chaos over the €23.5bn rescue of crippled lender Bankia has led to the abrupt resignation of central bank governor Miguel Ángel Fernández Ordóñez, who testified to the senate that he had been muzzled to avoid enflaming events as confidence in the country drains away.

Here's another Ambrose Evans-Pritchard story that's a must read for sure.  It was posted on The Telegraph's website early yesterday evening as well.  It's another Roy Stephens offering, for which I thank him...and the link is here.

Read more...

Spain May Leave Eurozone Before Greece: Analyst

Market observers should fret more over a "Spexit," one analyst says, as a Spanish withdrawal from the eurozone is more likely as the country is too big to bail out.

"The Spanish are a lot more likely to pull out of the euro than the Greeks, or indeed any of the peripheral countries," says Matthew Lynn of Strategy Economics on Wednesday, according to CNBC.

"They are too big to rescue, they have no political hang-ups about rupturing their relations with the European Union, they are already fed up with austerity, and there is a bigger Spanish-speaking world for them to grow into."

The European Union...and its currency...are toast.  This story was posted over at the moneynews.com website early yesterday morning...and I thank West Virginia reader Elliot Simon for his second contribution in today's column.  The link is here.

Read more...

Eastern Europe rising up against politicians on take

More than two decades after the fall of communism, angry residents in Eastern European democracies are rebelling against a culture of corruption that is making their economic hardships even worse.

Demonstrators recently brought down a corrupt government in Romania and nearly toppled one in the Czech Republic. In Slovenia, the prime minister is under indictment, while Croats are watching a massive corruption trial. Hungarians have taken to the streets to protest a new constitution that centralizes power in the national government.

“We grew up in a culture where petty corruption was almost like a civic virtue - a way to get around the stupid [communist] system we had,” said Miklos Marschall, deputy director of Transparency International, who is from Hungary.  Now graft is reaching beyond the penny-ante levels of the old Iron Curtain, he said.

This Washington Post story was posted on their website on Tuesday.  It's worth reading...and I thank Roy Stephens for bringing it to my attention...and now to yours.  The link is here.

Read more...

China to start direct yuan-yen trading on Friday

China on Tuesday announced that direct trading of its currency against the Japanese yen will begin later this week, bringing the yuan one step closer to becoming a truly global currency.

Authorized by the country's central bank, the trading marks the first time for China to allow a major currency other than the US dollar to be traded directly against the Chinese currency RMB, or the yuan.

As part of the efforts between China and Japan to strengthen cooperation in developing the financial market, the move serves as an important means of promoting direct yuan-yen trading, the People's Bank of China said in a statement on its website.

Yuan-yen trading will start on China's interbank foreign exchange market on Friday, according to the China Foreign Exchange Trade System, the market operator.

This story was posted on the chinadaily.com.cn website on Tuesday...and I thank Hong Kong reader Graham C. for bringing it to my attention.  The link is here.

Read more...

China should not be allowed to buy the LME

Its role in global commodity trading is a key piece of market infrastructure for buyers and sellers and consequently one of the reasons for London's pre-eminence as a trading hub.

But, almost unnoticed, this key institution is about to be sold for more than £1bn (on profits of just £10m).

While many City institutions have ended up in the hands of foreign investors, the fate of the LME is a cause for particular concern.The lead bidder is China, which also happens to be the world's biggest consumer of industrial metals, including 40pc of world copper.

Placing the entity that sets prices for industrial metals globally in the hands of the biggest consumer of industrial metals globally may not be a sensible move for the rest of the world. There are clear conflicts of interest, regardless of the fact that it would be China in control.

This story was posted on the telegraph.co.uk website on Tuesday evening...and I thank reader Brad Robertson for sending it along.  The link is here.

Read more...

Alberta, Canada Premier Redford off to the Bilderberg conference this week

Alberta Premier Alison Redford is travelling to Virginia this week to take part in the Bilderberg conference.

The invitation-only, closed-door meetings brings politicians together with leaders from areas including economics, finance, academia and industry.

According to a government news release, Redford will meet with a number of individuals to discuss topics like monetary policy, ecological challenges and responsible development of natural resources.

This story showed up on the Canadian Broadcasting Corporation website on Tuesday...and I thank Edmonton reader Ray Hay for sending it.  The link is here.

Read more...

Three King World News Blogs/Interviews

The first blog is with Dan Norcini...and it's headlined "This May Accelerate Into a Full-Blown Panic & Collapse".  The second is with Rob Arnott...and it bears the title "Lost Confidence: Stocks to Plunge 20% to 30%".  And lastly is this audio interview with Newmont CEO Richard O'Brien.  I posted his KWN blog in yesterday's column.

Read more...

Currency depreciation will keep driving gold up, Embry tells MineWeb

Interviewed by Geoff Candy at MineWeb, Sprott Asset Management's John Embry says that only market interference has gotten in the way of gold's fundamentals, foremost among which is the growing realization that government currencies soon will be worth a lot less.

I found this mineweb.com story, which they headlined "One of the finest opportunities to buy gold in the whole bull market - Embry" posted in a GATA release...and the above headline and the introductory paragraph are courtesy of Chris Powell.  The link is here.

Read more...

Embry elaborates on counterintuitive moves in gold 'market' at King World News

John Embry of Sprott Asset Management is really getting around today, elaborating for King World News on the "massive manipulation and interference" in the gold market. "They knock gold down when it obviously should be going higher," Embry says, echoing GATA's long-running complaint about the counterintuitive moves in the gold price.

This GATA release from yesterday contains an extensive must read preamble from Chris Powell...and I would think that John's comments over at KWN are worth reading as well.  The link is here.

Read more...

John Embry: Powers that be once again succeed in trashing gold

Gold and silver have had a bumpy ride since both metals got smacked down on February 29th.

On that day, Europe announced a massive long-term refinancing for its beleaguered banks, a move that represented quantitative easing at its finest.

February 29th was also the day that Ben Bernanke, chairman of the U.S. Federal Reserve, made headlines.  He made some remarks about the improving U.S. economy that were meant to indicate the Fed would do no further quantitative easing...at least for the time being.

His comments, as well as the European refinancing, sparked a rout in the gold market, tumbling the metal nearly US$100 an ounce in just one day, while pulling down silver more than US$3 an ounce.

This commentary was posted on May 4th in the Investor's Digest of Canada...and I dug it up at the sprott.com Internet yesterday...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

Everybody, sooner or later, sits down to a banquet of consequences. - Robert Louis Stevenson

Well, all four precious metals got one last swift kick in the teeth from JPMorgan et al...and platinum set a new low for this move down.  With the June contract now off the board, it will be interesting to see what develops going forward from here.

Can 'da boyz' engineer prices lower? Yes, I suppose, but what purpose would it serve?  The number of spec longs left to liquidate in either the Non-Commercial or Nonreportable category is next to nothing...and unless new lows are set in gold and silver for this move down, the technical funds won't be putting on more short positions.  We are done to the downside.  Any more downside price pressure won't mean much in the grand scheme of things.

All that matters from this point onwards, is what happens on the next rally in silver and gold.  Will JPMorgan et al go short again?  That is the long and the short of it...and we'll just have to wait it out.  It's too bad that yesterday's price action won't be included in tomorrow's Commitment of Traders Report...which I'm really looking forward to seeing.

I was quite happy that the precious metals shares did well in the face of the big decline in the rest of the equity markets yesterday...and I'm certainly hoping that trend will continue.

Just to show you how badly the precious metals markets have been beaten up over the last four years or so...here are two charts that Nick Laird just sent me that are worth spending some time on.  The first is the XAU/Gold Ratio...and the second is the Silver 7/Silver Ratio.  The Silver 7 Ratio is another name that Nick uses for the Silver Sentiment Index which I post daily in this column.

(Click on image to enlarge)

(Click on image to enlarge)

Gold did nothing all through Far East trading during their Thursday...but silver got sold down about twenty cents by 1:00 p.m. Hong Kong time.  With June basically off the board, the volume in both gold and silver has fallen dramatically...and as of 4:04 a.m. Eastern time, is pretty light.  As I hit the 'send' button at 4:30 a.m. Eastern time, both gold and silver are pretty much unchanged in early London trading.  The dollar index has rolled over a bit...down 15 basis points as of this writing...and is trading a bit below the 83.00 mark.

As Ted Butler pointed out to me on the phone yesterday, this engineered price decline is now a bit over three months old...and hopefully we've seen the end of it.  I await this morning's Comex open with the usual amount of interest.

See you here on Friday.