Gold & Silver Daily
"We're still 'locked and loaded' for a big run to the upside, if that's what the Commercial traders in the Comex futures market want to see happen."

¤ Yesterday In Gold & Silver

Gold sold off a bit in early Far East trading on Wednesday...and then rallied until shortly after London opened.  Then gold got sold off again, with the low of the New York trading session coming right at the 8:20 a.m. Eastern time Comex open.

From that low, the gold price rallied into the London p.m. gold fix at 10:00 a.m. Eastern...and then didn't do much for the rest of the day.  Gold finished at $1,612.50 spot...up $8.90 on the day.  Volume, net of all roll-overs, was a reasonably brisk 125,000 contracts.

Silver pretty much followed the same price path right up until the London p.m. gold fix at 10:00 a.m. Eastern.  From there it traded sideways...and then got sold off just before Comex trading ended at 1:30 p.m.  Silver's early morning rally during the New York trading day was rather anemic...and never got anywhere near Tuesday's closing price.

Silver closed at $29.16 spot...down 55 cents on the day.  Net volume was decent at 35,000 contracts.

The dollar, which opened around 79.65...hit its absolute low of the day just minutes after London opened...and then rallied up to 80.30 by about 10:30 a.m. Eastern time.  From there the dollar gave away about 20 basis points of that gain...and it closed the New York trading session up about 45 basis points.

It's hard to say whether the gold stocks followed the gold price or the Dow yesterday.  But, despite the ten dollar gain, the stocks themselves ended down a hair on the day, with the HUI closing lower by 0.15%.

Despite the fact that silver was down about two percent on Wednesday, the silver stocks themselves finished mixed on the day...and Nick Laird's Silver Sentiment Index closed basically flat...up 0.06%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 26 gold and 42 silver contracts were posted for delivery on Friday.  And, for the second day in a row, Jefferies was the only short delivering...and the Bank of Nova Scotia and JPMorgan were the only long/stoppers.  The link to the action is here.

There was no reported activity in GLD yesterday...but over at the SLV ETF they reported a fairly large withdrawal of 1,890,444 troy ounces of silver.  Based on the silver price activity of the last four business days, I would suspect that this withdrawal occurred because the silver was needed elsewhere.

There was another sales report from the U.S. Mint yesterday.  They sold an additional 8,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 175,000 silver eagles.  In the first two days of the new year, the mint has sold 45,500 ounces of gold eagles...2,500 one-ounce 24K gold buffaloes...and 3,372,000 silver eagles. It's still my opinion that all the bullion sold in the Tuesday sales report from the mint were actually sales from December that got pushed into January.

There was a lot of activity at the Comex-approved warehouses on Tuesday.  They reported receiving 2,379,923 troy ounces of silver, but only shipped 600,231 ounces of the stuff out the door.  The link to all the action is here.

Silver analyst Ted Butler had his mid-week commentary for his paying subscribers yesterday and, as usual, I have a couple of free paragraphs.

"The big commercial silver shorts had a near death experience when the price approached $50 in April. They were at the end of their rope and needed to do something in a hurry. That’s why they rigged prices lower; so that they could buy and save themselves. These well-connected commercials knew, perhaps for the very first time, just how tight the silver market had become and how close we were to a profound physical shortage. The key is that the silver shortage wasn’t caused by excessive speculative buying or a bubble or a mania. The extreme tightness and near shortage in silver was as a result of the gradual and cumulative impact of normal investment buying over the past five years. There is nothing to suggest that the long term and steady silver investment buying has ended."

"Because there was no bubble or mania in silver, there was no bubble to burst. The orchestrated takedowns of the price by the big commercial interests were simply so that these commercials could buy and rid themselves of silver short positions. That’s done now. That means that the silver market is now in the best possible shape."

"What lies ahead for silver is exciting. While we have not witnessed a bubble in silver yet, we will some day. The silver story and the dynamics of the market are too compelling for an investment mania not to emerge at some point. If anything, speculative sentiment has been completely wrung out from silver, clearing the way for speculators and investors to enter the market with a vengeance. At some point, enough of the world’s industrial silver users will panic as prices climb and attempt to build physical silver inventories. This user buying, something that never kicked in during the run to $50 will create a silver shortage, the likes of which never witnessed before. It seems that the big commercial interests have come to learn the real silver story and they appear to want no part of the short side again. The major pressure of selling has passed...and the way seems clear for higher prices. By the time the next chapter in the silver story plays out, $50 could look cheap."

I don't have quite as many stories for you today...but a lot of them are about gold and silver, so I hope you have to time to read them all.


¤ Critical Reads

Surge in ECB lending perplexes markets

The surge in emergency overnight borrowing by banks from the European Central Bank has continued, prompting market observers to speculate about what may be behind the trend.

A total of €15 billion was drawn from the ECB’s “marginal lending facility” on Tuesday night, on top of €14.8 billion lent on Monday night and the €17.3 billion borrowed last Thursday, the highest since June 2009.

The level of overnight borrowing remains exceptionally high even by the standards of the past few months. Typically banks draw just millions of euro from the overnight facility.

This story was posted over at the website earlier this morning...and it's Roy Stephens first offering of the day.  The link is here.


A depressingly familiar story of denial from the eurozone

Mein Gott! Time to jump from the nearest bridge. The first euro summit of the new year is already in the diary – next Monday in Berlin between Merkel and Sarkozy.

Meanwhile, there's still no sign of a let up in Germany's hard-line opposition to European Central Bank bond buying. Jens Weidmann, head of the Bundesbank, has been rubbing home the point in a new year's commentary for Boesen-Zeitung today. "Financing of governments in the eurozone was forbidden not only for the reason of stability. It was also forbidden to avoid the risk of spreading or socialising the debt of the single eurozone countries", he insists.

The euro crisis rolls on with no letup in sight.

This is another Roy Stephens offering...this one from The Telegraph on Tuesday...and the link is here.


Swiss central banker dumped francs on eve of devaluation

After days of stonewalling, the Swiss National Bank gave in Wednesday to demands that it shed light on currency trades from its chief's personal account that netted fat profits as he led efforts to lower the Swiss franc's value.

The Swiss government, meanwhile, reiterated its support for bank chief Philipp Hildebrand amid growing disquiet over the possibility that the private dollar deals unfairly earned his family tens of thousands of francs or dollars.

The Swiss National Bank decided to publish a report by external auditors PricewaterhouseCoopers and release its previously secret guidelines for senior officials. The move came only hours after the Swiss political weekly Weltwoche claimed that Hildebrand had personally authorized the currency deals previously thought to have been conducted by his wife.

It's the same old, same old.  This AP story was picked up by  I plucked it from a GATA release last evening...and the link is here.


Jim Rickards: China’s Slowdown Will Be Worse Than You Think

This 4:09 video interview with Henry Blodget at The Daily Ticker was a posting over at the website yesterday.  Anything that Jim has to say is worth listening least that's my opinion.  I thank reader Randall Reinwasser for sharing this video with us...and the link is here.


China’s ‘Demographic Tsunami’ Begins

Wang Fuchuan lies in bed wearing a quilted black jacket, with two comforters pulled up to his chin to keep out the chilly November air. The heating at Beijing Songtang Caring Hospice is broken and the 90-year-old’s nostrils are stuffed with toilet paper to stop them dripping.

Cockroaches scurry across the floor of his room, which has no running water or toilet. His possessions, a few articles of clothing, are in a plastic bag under his bed next to a pink wash bowl with a sliver of soap. His only entertainment is a transistor radio...and Wang counts himself lucky. 

Wang is in the vanguard of a looming demographic shift for China, Bloomberg Businessweek reports in its Jan. 9 issue. The latest government census shows 178 million Chinese were over 60 in 2009. That figure could reach 437 million -- one third of the population -- by 2050, the United Nations forecasts. While the elderly were looked after in the past by their children, urbanization and the nation’s one-child policy have eroded the tradition of family care.

This Bloomberg piece was filed from Hong Kong yesterday morning...and I thank West Virginia reader Elliot Simon for sending it along.  The link is here.


Criminals Determine Gold’s Future

"There is no point in arguing whether gold and silver price manipulation exist – even [CFTC Commissioner] Bart Chilton acknowledges that it does. But we are forced now to consider that manipulation as a “fundamental” influence on the future price of gold. The problem is that as a fundamental factor, is not quantifiable like supply and demand metrics, because its intensity is arbitrarily (at least, to public view) decided, and so all we can say for sure is that supply and demand drivers are, in the futures market, seconded to the fundamental influence of futures market manipulation. And since the futures market is exponentially greater than the spot markets, the spot price is determined by such manipulative shenanigans."

This commentary is written by James West...and posted at the website.  I thank reader Charles Thompson for sending it along...and the link is here.


Gold Jumps As Citi Says Gold Sell Off Over, Reiterates $2,400 Target

According to a note just released by Citi analyst Tom Fitzpatrick, the gold correction "has run its course...and a rally is now back on the cards." Granted it is not all smooth sailing - "Gold may drop to $1,550 before turning", but when the turn comes, Fitzpatrick sees it as going all the way up to $2,400.

Australian reader Wesley Legrand sent me this piece from yesterday...and the link is here.


Dow Jones Options Report: Bullish Bets on Junior Gold Miners Hit All-Time High

Here's a story that was on the Dow News Wire yesterday...and there's no link to it. I have cut and paste an excerpt from it...and it's an absolute must read

Wesley Legrand, who sent me this article, had this to say about it..."The “smart money may be getting set.  By buying calls and selling puts, I assume these traders are getting set with big bets without pushing the underlying security higher by buying units of the ETF directly."

NEW YORK [Dow Jones]--A week of bullish activity in the Market Vectors Junior Gold Miners exchange-traded fund [GDXJ] drove up the number of ETF call options to an all-time high as traders wagered the ETF can rebound in 2012.

U.S. options traders are increasingly bullish on the ETF, made up mostly of small-capitalization mining stocks, even as the fund declined 38% in 2011. Beginning last Tuesday, options traders have demonstrated conviction in a turnaround, setting up multiple new positions that profit from gain over the coming months.

Open interest in the GDXJ's call options ended Tuesday at 222,300 contracts, the highest on record, Trade Alert data showed. The seven largest options positions in the ETF are bullish calls.

The ratio of outstanding bearish put options versus bullish calls is near the lowest since the middle of September, another signal of rising demand for bullish options.

"Investors are focusing on gold, and more specifically the GDXJ, where we have seen a surge in what appears to be bullish flow in the May cycle," said Susquehanna Financial Group derivatives strategists Chris Jacobson and Michael Thurow in a note Wednesday.


Gold Newsletter's Lundin credits GATA in Resource Clips interview

Gold Newsletter editor and New Orleans Investment Conference sponsor Brien Lundin has given a comprehensive interview to Kevin Michael Grace of Resource Clips, analyzing the metal's prospects, identifying some of his top mining company recommendations, and giving credit to GATA's work.

The rest of Chris Powell's introduction to this interview is contained in this GATA release. It's worth the read if you have the time...and the link is here.


Is The Gold Bull "For Real?"

For those not following closely, gold just put in its 11th consecutive yearlyprice increase, with an approximately 14% rise on the calendar year. And that wasn’t even nearly a remarkable year — the average price increase over that time span works out to about 16%!

It’s true, there have been some sizeable declines over the last decade plus (such as during the global market collapse of September 2008), but as is obvious from the long-term performance, these declines haven’t broken the back of “the bull” in gold. Plus, calendar-year performance is accorded special significance for various financial reasons, so gold should be granted the kudos it legitimately reserves for this virtually unheard-of feat.

The article may start off quietly, but it doesn't end that way. This very well written piece by Aaron Krowne over at the website, is a must read in my opinion...and the link is here.


John Hathaway - The Decline in Gold & the Shares Has Run its Course

"[We] still maintain, that gold mining equities represent a compelling investment strategy to participate in the secular bull market in gold bullion, and conversely, the secular bear market in paper currencies...We believe that the decline in both the metal and the shares has run its course.  We also believe that this painful correction has set the stage for significant new highs in both the metal and the shares in 2012."

Eric sent me this John Hathaway blog just after midnight lat night.  It's a must read, of course...and it's posted over at the King World News website.  The link is here.



¤ The Funnies

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¤ The Wrap

Never in the history of the world has there been a situation so bad that the government can't make it worse. - Henry Morganthau Jr.

I'm not about to read too much into yesterday's price action in either gold or silver, but it's fun to speculate how high their respective prices would have risen if the not-for-profit selling hadn't shown up both shortly after the London open...and then again once the London p.m. gold 'fix' was in.

Wednesday's preliminary open interest numbers from the CME's website showed small declines in both metals, so there obviously wasn't much [if any] deterioration in the Commercial net short position.  None of this volume and open interest data will be in tomorrow's Commitment of Traders Report.

We're still 'locked and loaded' for a big run to the upside, if that's what the Commercial traders in the Comex futures market want to see happen.  Right now everything is relatively quiet...and it wouldn't surprise me in the slightest if this was the calm before the storm.  I know that Ted Butler is very optimistic...and he says so in his 2-paragraph commentary that's posted further up in this column.  John Hathaway is as well...if you read his KWN blog.

In Far East trading during their Thursday, gold and silver pretty much traded sideways up until about 1:00 p.m. Hong Kong time...and the smallish rallies that developed at that point got sold off the moment that London began to trade at 8:00 a.m. GMT...which is 3:00 a.m. Eastern.  This is very similar to the price patterns that occurred on Tuesday in these precious metals at this time of day.  As of 5:12 a.m. Eastern time, all the gains since Wednesday's New York close have disappeared, plus a bit more...and volume in both metals is getting up there.  Here's the Kitco silver chart as of 5:15 a.m. Eastern time...

I note that the dollar began to rally at precisely 3:00 a.m. Eastern...which was 8:00 a.m. in London...the moment that the markets opened over there. How convenient.

I'll be more than interested to see what further damage 'da boyz' may [or may not] have done when I turn my computer back on later this morning.

That's all I have for today...and I'll see you on Friday.