With the benefit of 20/20 hindsight, the gold price was under pressure right from mid-morning trading in the Far East yesterday morning...and it wasn't until about five minutes after Comex trading began in New York yesterday morning, that the bottom was in. Kitco reported the low as $1,640.50 spot...down twenty-three bucks from Monday's close.
From that low, the subsequent rally got cut off at the knees just minutes after the London close, which came at 11:00 a.m. Eastern time. From there it more or less traded sideways until about fifteen minutes before the Comex close...and then gold got dropped another nine bucks.
From that low, gold rallied about six dollars into the close of electronic trading. Gold closed at $1,650.80 spot...down $12.70 from Monday. Considering the size of the sell-off, I was surprised that net volume wasn't higher. The CME reported it as 126,000 contracts.
Silver's price path was very similar but, as you have come to expect, 'da boyz' really hit it pretty good...especially after the London close...and then the take-down in the last fifteen minutes of Comex trading was quite breathtaking...and on monster volume to boot.
The actual low for silver [$31.67 spot] came about ten minutes after the Comex close. From there, silver rallied back over 50 cents into the close of the New York Access Market.
From the close on Monday, to the absolute low at 1:40 p.m. Eastern on Tuesday afternoon, silver was down $1.25...an intraday swing of 3.8%. Of course there was nothing in the real world of supply and demand that caused this. It was only JPMorgan et al doing what they do in the Comex futures market. Since they hold a short-side corner on the market, they can pretty much set the price wherever they want to...and they do.
Silver closed at $32.16 spot...down 76 cents on the day. Like gold, silver's net volume wasn't overly heavy, either...about 34,000 contracts. About 10% of that came in the last fifteen minutes of the Comex trading session.
The dollar index didn't do much of anything until shortly after London opened. Then a 35 basis point rally commenced that ended at precisely 8:00 a.m. in New York. During the next two hours of trading, the dollar index crashed back within a handful of basis points from its London open starting point...and the decline ended at precisely 10:00 a.m. in New York. How's that for free market forces at work?
From that 10:00 a.m. low, the dollar index added on about ten basis points...and by the close of trading at 5:15 p.m. Eastern, the dollar index showed a net gain of less than 20 basis points.
You will carefully note that despite the fact that dollar didn't do much on a net basis, neither gold nor silver were allowed to gain back all their losses on the day, but would have if not-for-profit sellers hadn't shown up shortly after 11:00 a.m. and 1:15 p.m.
The gold stocks gapped down at the open, with the low coming about 9:45 a.m...and from there it was onward and ever upward. I was amazed to see the HUI finish up on the day...rising 3.0% off it's 9:45 a.m. low.
I'm always of two minds when I see this sort of counterintuitive share price action to the upside when the metals themselves are down. The perma-bull in me says that insiders are buying this dip because the precious metals are going to blast off from here...and they know that and what to make some big bucks. The 'born in Missouri' part of me says that 'da boyz' are loading the boat with these beaten-down shares to sell into any forthcoming rally to keep the HUI from getting out of hand to the upside.
Up until Monday the HUI was down seven days in a row, even though gold and silver prices were up on Thursday, Friday...and Monday. Why was that? After watching the gold market very closely for twelve years, I've come to the above-mentioned conclusion...and so have many others, of which John Embry is one.
Year-to-date the HUI is down about 4.5%...even though the gold price is up 5.6%. This should not be...and wasn't up until the drive-by shooting on February 29th.
The HUI closed at 476.33...up 0.54% on the day.
The silver shares finished mixed as well...and Nick Laird's Silver Sentiment Index closed up 0.15%.
Nick just informed me that even though silver [the metal] is up 15.4% so far this year...the SSI is actually down 3.7%. And the day before the drive-by shooting on February 29th, the SSI was up 15.8% on the year, as silver was up about 33% year-to-date on the February 28th.
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I suppose that with the lousy price action, that a lot of silver and gold stockholders have decided to just throw in the towel and say to hell with it. They may, or may not, be back...and if they are back, it won't be until the shares cost them a lot more than they just sold them for.
The CME's Daily Delivery Report showed that only 14 gold contracts were posted for delivery tomorrow. The CME shows only a handful of gold contracts left open for March delivery...but 330 silver contracts are still open at the moment. They have to be either sold, rolled...or delivered into by next Friday. I have a hunch that all of those silver contracts will stand for delivery...and that Jefferies will be the big short/issuer on virtually all of it.
Only 2,000 ounce of gold eagles, along with 15,000 silver eagles were reported sold by the U.S. Mint on Tuesday.
The GLD ETF reported that an authorized participant withdrew 97,143 troy ounces of gold yesterday...and there were no reported changes in SLV.
The Comex-approved depositories took in 315,817 troy ounces of silver on Monday...and shipped 339,882 ounces out the door. All of the activity was at Brink's Inc. The link to that action is here.
I note that Endeavour Silver just came out with their 2011 year-end earnings...and imbedded in their press release was this little tidbit..."In Q4, 2011, Endeavour elected not to sell a significant portion of its metal production on the basis that the gold and silver prices were experiencing a major correction [This is the company's cute way of saying that they know the silver price is managed to the downside. - Ed] and the Company would be better served [by holding] the unsold metal in inventory until such time as the metal prices rebounded. Therefore the following year-end financial results do not reflect the sale of full 2011 metal production. Metal prices did rebound in Q1, 2012 and management subsequently sold most of the metal held in inventory at prices significantly higher than the December prices."
"Metal held in inventory at 2011 year-end included 980,000 ounces (oz) silver and 5,400 oz gold, compared to 127,000 oz silver and 957 oz gold at 2010 year-end."
I'd like to see them [and every other silver producer] hold onto a portion of their silver production until they break the back of this JPMorgan-sponsored silver price management scheme, but at least it's a move in the right direction. Maybe they [and others] will step up to the plate on the next Sprott PSLV offering, as that's the equivalent of taking silver off the market themselves. They all have the cash to make a huge difference it they decide to go that route.
If they want to be beloved by us shareholders...the real owners of these companies...this is a path they could all choose. Endeavour Silver has found out just how profitable this can be in the short term...and their shareholders love them for it. A bigger win/win/win situation in the short, medium and long term for everyone, I cannot possibly imagine.
I had several e-mails from reader Scott Pluschau yesterday about the silver price action...particularly the 'banging the close' feature at the end of Comex trading yesterday. A more text-book case of that could not be found anywhere. Scott's blog on this issue is a must read...and the graphs are worth the trip all by themselves. The link is here.
Well, The Central Bank of the Russian Federation updated their website for February yesterday, just as I said they would. But I was surprised to see that instead of adding to their gold reserves, they actually sold 100,000 ounces in February...the first time they've done that since way back in 2008. I'm not sure what that means in the grand scheme of things. Here's Nick Laird's most excellent chart.
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Here's a graph that Washington state reader S.A. sent my way yesterday...and I have no idea what the source document was that he 'borrowed' it from. I'd say that the Golden State is in permanent state of financial and economic decline. Not good...but not a surprise, either.
I don't have a lot of stories today...and that suits me just fine.
Do you know why oil and prices are moving sharply higher?
Some blame the oil companies, charging they are manipulating prices. Others cite U.S. sanctions on Iran and the threat of a military encounter that would disrupt the flow of oil from the Middle East.
Speculators too are blamed for ostensibly bidding up the price of oil. In the political arena, President Obama is taking credit for increased domestic oil production even as his critics point out the slow pace of drilling permits issued by his administration soon will hamper additional increases in the U.S. oil production.
Yet the basic reason for higher energy prices is being overlooked, even though it is right before our eyes: Oil prices are up because the value of the dollar is down.
This story was posted over a the forbes.com website on Monday...and I lifted it from a GATA release yesterday. The link is here.
Libya's oil exports have rebounded much faster than expected and will exceed pre-Arab Spring levels as soon as April, plugging a crucial gap in world crude supply as the Iranian crisis comes to the boil.
Despite the soothing words from Mid-East suppliers, the global oil market remains stretched with OECD inventories lower than during the Arab Spring last year. Most analysts believe Saudi spare capacity is below the safety threshold of 2m b/dm, though Mr al-Naimi said the Kingdom still has a 2.5m cushion.
Barclays Capital said it remained "sceptical" about the ability of Saudi Arabia to boost output much beyond 1m b/d quickly and on a sustained basis. It also doubted that Libya will come close to its new target given the depletion rate of aging oil fields and the country's "political backdrop".
This story was posted over at the telegraph.co.uk website early yesterday evening local time...and it's Roy Stephens first [of six] offerings on the day. The link is here.
The case relates to Work and Pensions Secretary Iain Duncan Smith's decision to use the consumer price index (CPI) instead of the normally faster-rising retail price index (RPI) to measure price increases influencing pension upgrades.
The unions say the CPI route will see the value of pensions cut by up to 20pc over a normal retirement, costing every affected worker thousands of pounds.
They accused the Government of unlawfully attempting to reduce pension costs in the battle to cut the UK's financial deficit. The change from RPI to CPI is expected to save almost £6bn a year by 2014.
Get used to it, dear reader...there's no way that any world government can afford to pay all these ridiculous pensions that they've promised their citizens for the last 50-odd years. This is the first step down that road in Britain. It's Roy's second story of the day...and it, too, is from yesterday's edition of The Telegraph. The link is here.
What's going on in Italy? The administration is popular, despite having not been elected. Elected political elites, on the other hand, have little power. Under recently appointed Prime Minister Mario Monti; the tenor of Italian politics has improved considerably. The question is how long the experiment can last.
When it comes to labor laws, even the toughest Italian reformers can lose their courage. For decades the government has tried to change them, but issues like easing stringent legislation that makes it difficult to fire workers hardly lend themselves to fame and honor in Rome. The opposition from the left-wing camp is simply too great.
But now, a decade after Monti's predecessor Silvio Berlusconi backed down in the face of protests, the overhaul of labor laws is back on Italy's political agenda. Monti is conducting talks this week with labor unions and workers. And as with previous rounds of labor market discussions, the issue of loosening employment protection laws will be a key sticking point.
This interesting story showed up on the German website spiegel.de yesterday...and is Roy Stephens' third offering of the day. The link is here.
JPMorgan Chase's Milan branch is shutting down the Vatican bank's account due to concerns about a lack of transparency, Reuters reported citing Italian newspapers.
The Vatican bank, also known as the Institute for Works of Religion (IOR), is having its account phased out and closed by March 30. That's because it apparently "failed to provide sufficient information on money transfers," Reuters reported citing media reports.
This 2-paragraph Reuters story showed up on the businessinsider.com website yesterday...and the first one through the door with it was reader Lou Horner. You've already read the entire story, but the link to the hard copy is here.
The euro zone's central banks have flooded the markets with cheap money in a bid to fight the financial crisis. In a SPIEGEL ONLINE interview, Joachim Nagel, a member of the board of Germany's central bank, the Bundesbank, explains why the banks have to be weaned off the overabundant money supply.
This short, but interesting interview, was posted over at spiegel.de yesterday as well...and is Roy's 4th story of the day. The link is here.
The banking industry is resisting a European Union tax on financial transactions, but Brussels is sticking to its plans. EU officials argue the tax would reduce risks in the capital markets and force the industry to help cover the costs of any future crisis. The idea also has backing in Berlin and Paris.
The big reason that the banking industry is up in arms is that it will pretty much drive a stake through the heart of high-frequency trading...and that can't happen too soon for me.
This story is definitely worth the read...and is that last story from the spiegel.de website...and Roy's 5th contribution to today's column. The link is here.
David Tice, the former chief portfolio strategist for bear markets at Federated Investors, is bearish.
His 18-month target for the S&P 500 is 1,000, and he thinks gold is headed to $2,500 within the next two to three years.
"We feel just like we did in 1999 and 2007," said Tice "[During] both of those periods, people were positive about credit being created, the central banks were easy, everybody was complacent, and we ended up having a big accident."
My good friend David appeared in a 4:26 minute interview on Fox Business News yesterday afternoon. That video, plus everything else he has to say, is imbedded in this businessinsider.com story from last evening. It's Roy's final offering in today's column...and the link to this must read/watch story is here.
Dow Jones Newswires reports how Federal Reserve Chairman Ben Bernanke criticized the gold standard during a lecture yesterday at George Washington University in Washington, D.C. While GATA is not a gold standard advocacy organization, we can only wish that Bernanke would engage this subject where he risked a more informed and critical audience.
This is not just because we'd love the chairman to be asked how he squares the Fed's "transparency" campaign with its refusal to provide public access to the central bank's records involving gold...it's also because some of Bernanke's arguments, as reported below, are so pathetic.
And pathetic they were. This must read Dow Jones story, along with Chris Powell's scathing preamble, is posted in this GATA release...and the link is here.
They came on horseback or by foot, trudging through Lesotho's highlands and clutching tattered identity documents to back their claims that South Africa's gold mining firms ruined their lungs.
On one day in January alone, around 40 former gold miners and widows crowded into a municipal office in Semongkong, 120 km (80 miles) east of Lesotho's capital. They were there to add their thumbprints to the names of nearly 7,000 others who are threatening the biggest class-action suit Africa has ever seen.
In South Africa, a country still grappling with the consequences of apartheid, the case touches on race, politics and history. The implications for its gold mining industry and for its relations with the government -- already strained by past talk of nationalization -- are huge.
As Chris Powell noted at the beginning of the GATA dispatch, which is where I found this story..."A free-market gold price could go far toward redressing the catastrophic injustice described here." That it would.
This very long Reuters essay is headlined "From Gold Dust, a Billion-Dollar Claim". It's well worth the read...and the link is here.
Tocqueville Gold Fund manager John Hathaway told King World News yesterday that he sees gold making an important bottom, along with extraordinary value in the gold mining shares.
Of course he might, as he's a gold fund manager. But there's no arguing with his observation about "rock-bottom sentiment" in the gold sector.
I thank Chris Powell for wordsmithing the above preamble for us...and an excerpt from the interview is posted at the KWN website. The link is here.
Gold price suppression is so aggressive and blatant now, that the world financial system's problems must be far worse than generally understood, Sprott Asset Management's John Embry told King World News on Tuesday.
The market manipulation, Embry adds, "is so transparent now that anybody with the slightest open mind can see what's going on."
This must read blog is posted over at the KWN website...and the link is here.
Foundation Resources is a mineral exploration company focusing its efforts within the Coldstream Gold Property, located 115 Km North West of Thunder Bay, Ontario. The Company has a NI 43-101 resource estimate with 860,000 ounces of gold (763,276 ounces gold inferred and 96,400 ounces gold indicated) on the Osmani deposit, which represents one of five highly prospective targets that expands over a 16 km long gold trend. In addition to its Canadian projects, the Company is also exploring the San Rafael gold-silver property in Mexico which is located approximately 150 km northwest of Durango.
These most recent drill results from Span Lake emphasizes the blue sky potential the Coldstream Property possesses and continues to demonstrate the impact that Foundations management team brings to the project. Over the remainder of the year Foundation plans to aggressively drill and expand the current resource on the Osmani Deposit and explore the numerous gold anomalies previously identified within the Coldstream Property. We look forward to providing our shareholders and the public with an updated NI43-101 in Q4 of 2012, which will include 15 holes and 4000 metres of drilling completed last year on the Osmani Deposit, that wasn't included in the resource calculation. Please visit our website to sign up for continued updates.
I think yesterday's price action in both gold and silver would qualify for a "Be-Careful-What-You-Wish-For" award for your humble scribe. I was sort of hoping that neither metal would do much on Tuesday, not realizing how badly it was going to get hammered starting shortly after I hit the 'send' button early yesterday morning.
From its New York high minutes after the London close, to the close of Comex trading two and a half hours later, silver got nailed for about 90 cents...and gold for less than a percent. So it's obvious that silver was the metal they were after, which is most often the case.
Now it remains to be seen just how much of this 'bang the close' volume in silver will be included in Friday's Commitment of Traders Report. I'm still not sure whether the cut-off is at the close of Comex trading or electronic trading.
Here are yesterday's gold and silver charts which obviously include yesterday's price action.
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We're still well below the critical 50 and 200-day moving averages in both silver and gold. And, as Ted Butler pointed out in our daily phone conversation yesterday, we did not take out the old low from last Wednesday, so he's not sure how much more spec long liquidation there was yesterday...maybe just those that came into the market on Thursday, Friday and Monday.
Volumes in both metals on Tuesday were slightly elevated, but not large by any standard, so nothing much may have happened in either metal. Besides which, the Relative Strength Indicators [RSI] in both metals are still a long way off oversold.
So nothing has been proven one way or another...and it's not possible to figure out whether we've hit a bottom or not. However, the positive price action in the shares was rather counterintuitive. We'll just have to wait it out...and I doubt that much will change until we get past First Notice Day next Friday. But who really knows for sure? I certainly don't.
In overnight trading, the gold price wandered around slightly above Tuesday's closing price for the most part...and is now rallying a bit now that London has been open a couple of hours. Silver is pretty much following the same price path as gold.
Initially, gold and silver volumes reported from the CME [if they are to be believed] were very light...with the emphasis on 'very'...right up until the London open. They've picked up substantially since then, so it's obvious that even these smallish rallies are not going unopposed by the JPMorgan et al...and the dollar index is down 30 basis points from Tuesday's close.
As I hit the 'send' button at 5:16 a.m. Eastern time, gold is up about seven bucks...and silver is up a dime.
Without doubt, I expect it will be another interesting trading day in London...and equally as interesting when the Comex opens at 8:20 a.m. Eastern time.
That's all I have for today. I hope your Wednesday goes well...and I'll see you here tomorrow.