As I mentioned in 'The Wrap' in Friday's column, the initial news out of Brussels early on Friday morning their time, caused a waterfall decline in the dollar...along with a bit of a melt-up in gold and silver prices...and as lunchtime approached in London, gold was up about eighteen bucks.
Then just before 12:00 o'clock noon, another rally began. This lasted until about 12:30 p.m. BST...and then sold off a bit going into the New York open fifty minutes later.
Once Comex trading began, away went the price to the upside...but ran into a not-for-profit seller at the $1,600 spot price level at precisely 9:00 a.m. Eastern...and from there it traded sideways until shortly before 1:00 p.m. Eastern time. Then gold rallied anew...and made it to its high tick of the day [$1,608.60 spot] about five minutes before the Comex close.
From there it was sold off gently...and the price was carefully closed below the $1,600 price market at $1,599.10...up $47.10 on the day. Without doubt, left to its own devices, the gold price would have closed up significantly more than that. Not surprisingly, net volume was very high at around 172,000 contracts.
Here's the New York Gold [Bid] chart for yesterday. I just wanted you to see the precise 9:00 a.m. intervention in the gold price with your own eyes. Nothing free-market about that.
Silver rallied on the news out of Brussels as well...and by 11:45 a.m. BST, silver was up about fifty cents. Then silver blasted higher at what might have been an early London silver fix.
Silver, like gold, also got sold off a hair at 12:30 p.m. in London, but that only lasted thirty minutes...and away it went to the upside again...and the rally accelerated at the Comex open. Within fifteen minutes silver had gained about 80 cents in what had obviously become a 'no ask' market. The silver price was going vertical. But the moment that it broke through the $28 spot price level, a not-for-profit seller showed up...and that, as they say, was that. It took 'da boyz' just over an hour to beat the silver price back to the Comex opening price. The high tick was $28.05 spot.
The silver price wasn't even allowed a sniff of that price level again, although it made every attempt to do so as, like gold, it rallied strongly into the Comex close. Then it got sold down over a percent going into the close of electronic trading Silver finished the Friday trading day at $27.49 spot, up $1.17. Net volume was pretty heavy at around 53,000 contracts.
The dollar index was quite a sight yesterday. To be sure, some of the rallies in the precious metals corresponded roughly to what was going on in the currency markets, but it certainly doesn't explain the big rallies in gold and silver that began at 11:45 a.m. in London...6:45 a.m. Eastern time...as the dollar was trading sideways at that point. The dollar index closed down 107 basis points at 81.63...but was down about 120 basis points at its New York low.
Here's the 3-day dollar index that shows the entire move on Friday.
The gold stocks gapped up about four percent at the open...but then [mysteriously?] got sold off until just before noon in New York before rallying once again to a secondary peak which came about fifteen minutes before the gold price rally ended at the Comex close. From there the stocks more or less traded sideways into the close. The HUI finished up 3.19%. Considering the size of the price move in gold, I was expecting better than this.
I spoke with John Embry yesterday...and he was expecting better as well, as one junior gold producer that we both follow, actually finished unchanged on the day!
The silver stocks did better, but even then, there were some that didn't do particularly well. Nick Laird's Silver Sentiment Index closed up only 3.55%.
The CME's Daily Delivery Report showed that 15 gold and 235 silver contracts were posted for delivery on Tuesday. In silver, the only short/issuer was Jefferies, with all 235 contracts...and the two biggest long/stoppers were JPMorgan with 159...and the Bank of Nova Scotia with 72. The link to the Issuers and Stoppers Report is here.
There were reductions in both GLD and SLV yesterday...as authorized participants withdrew 67,924 troy ounces of gold and 1,745,755 ounces of silver.
The U.S. Mint had no sales report again on Friday, so they finished the month with sales of 54,500 ounces of gold eagles...10,000 one-ounce 24K gold buffaloes...and 2,593,000 silver eagles. Despite the lousy price action in the month just past, June gold and silver eagle sales were the third highest of the year.
My coin guy had his best sales day in June yesterday, as these higher prices brought out the procrastinators in droves.
On Thursday, the Comex-approved depositories reported receiving 609,909 troy ounces of silver...and shipped 473,360 troy ounces out the door. The link to that action is here.
Well, the Commitment of Traders Report in silver was a sight to see. The Commercial net short position declined by 4,943 contracts...and is now down to 12,011 contracts, or 60.0 million ounces. According to reader E.F...this is the smallest Commercial net short position since September 10, 2001...almost eleven years ago! We also have a 9-year low in the Non-Commercial net long position...and almost a 5-year high in the raptor [small Commercial traders other than the 'big 8'] net long position.
All that is just dandy, but here's the ugly news. The four largest Commercial traders are short 151.4 million ounces of silver...and the '5 through 8' largest traders are short an additional 44.8 million ounces. On a net basis the four largest traders are short 30.7% of the entire Comex futures market in silver, once all the Non-Commercial market-neutral spread trades are subtracted out. And once you remove the spread trades that only show up in the Disaggregated COT report, these four traders are short much more of the Comex silver market than that. Most of that is held by JPMorgan.
In gold, the Commercial net short position declined by 19,531 contracts...and now stands at 144,160 contracts, or 14.4 million ounces. The four largest Commercial traders are short 10.0 million ounces...and the '5 through 8' traders are short an additional 4.9 million ounces. On a net basis the four largest Commercial short holders in gold are short 26.1% of the entire Comex gold market.
In gold, the eight largest traders are short 103.5% of the Commercial net short position. But in silver, the eight largest traders are short 327% of the Commercial net short position. Now that's concentration!
Here's Nick Laird's Total PMs Pool chart for the third time this week.
(Click on image to enlarge)
I have quite a few stories for your reading pleasure this weekend...and the final edit is up to you.
Another one bites the dust. The Royal Bank of Scotland is about to be fined $233 million (£150 million pounds) for its role in the Libor-rigging scandal. It joins Barclays as the first banks to walk the plank in what should be, but so far is not, the most sensational financial corruption story since the crash of 2008.
Many of the banks implicated in the Libor mess have also been targeted in the various municipal bond bid-rigging investigations, and RBS is no different – its subsidiary Natwest is also a defendant in the major civil lawsuit in the bid-rigging case. The cases aren't related, except in the sense that they both involve manipulation and anticompetitive cooperation. It's going to be harder and harder to make the case that the major banks do not routinely cooperate at the expense of the public when it serves their purposes to do so.
This very short Matt Taibbi blog was posted over at Rolling Stone magazine yesterday...and it's well worth your time. I thank Roy Stephens for his first offering in today's column...and the link is here.
Sir Mervyn King, the governor of the Bank of England, piled the pressure on the City on Friday when he said something had gone "very wrong" with Britain's banks that needed to be put right.
As Barclays and other high street banks became embroiled in a new mis-selling scandal, King launched his most scathing attack yet on the culture of banking in the five-year-long financial crisis.
King refused to say Bob Diamond was a "fit and proper" person to run Barclays as the reputational damage from an interest rate-fixing fine led to another fall in the bank's shares. More than £4bn has been wiped off the value of the bank since the rate-fixing scandal emerged.
"It is time to do something about the banking system," King said. As he warned that the outlook for financial stability had deteriorated as a result of the eurozone crisis, he dismissed mounting calls for a Leveson-style investigation into banks, saying that enough was already known to implement root and branch reform of the City.
This longish article appeared in The Guardian on Friday...and is Roy's second offering in a row. The link is here.
Two hundred and eighty-nine trillion dollars. An unimaginable amount. That is the total of derivatives outstanding at the top five US bank holding companies as of March 31, 2012, according to the Office of the Comptroller of the Currency (OCC).
The five holding companies are JP Morgan Chase, Bank of America, Citigroup, Morgan Stanley and Goldman Sachs. They hold roughly 45% of all over-the-counter derivatives outstanding in the world, based on the $648 trillion total estimated by the Bank for International Settlements. Others estimate that the total global derivatives outstanding could be as large as $1.2 quadrillion, or $1,200 trillion.
The five banking behemoths are so large in the global derivatives market that they would appear to be the market. According to the OCC, their outstanding holdings constitute some 95% of the US market total of approximately $302 trillion. Over the past decade the amount of outstanding derivatives has exploded. Since the end of 2002 the outstandings of the bank holding companies have grown from $58.2 trillion to $302 trillion an increase of 419%.
This is a fairly long read, but gives you some idea as to just how gargantuan the derivatives market has become. I had something about it in my column earlier this week. This report is rather technical...and my best advice is for you to read until your eyes start to glaze over. It was posted over at the goldseek.com website on Thursday...and I thank reader U.D. for bringing it to my attention. The link is here.
After tough all-night bargaining, European leaders appeared to salvage what had seemed to be a summit teetering toward failure by agreeing early Friday to funnel money directly to struggling banks, and in the longer term to form a tighter union.
The agreements at a European Union summit in Brussels suggested Germany had yielded a bit on its insistence on forcing tough reforms in exchange for rescue money. That was a victory for Italy and Spain, who have argued they have done a lot to clean up their economies yet are facing rising borrowing costs.
The bank decision in Brussels was aimed at helping Spain, which sought a €100 billion rescue to help its troubled banks.
This AP story appeared on the france24.com website yesterday...and is another offering from Roy Stephens. The link is here.
The deal, sealed by leaders in the early hours of Friday morning in Brussels, will allow stricken banks to directly access the region’s rescue fund. The hope is it will enable Ireland to return to international bond markets.
Eamon Gilmore, Ireland’s deputy prime minister, said: “This is a massive breakthrough for Ireland and it changes the game in terms of our bank debt. This deal will allow the country to recover much faster.”
Under previous rules, rescue funds first had to be handed to governments before being passed on to troubled banks. That way countries like Spain ,which has been forced to intervene to help its banks, had to take on additional debt, pushing up borrowing costs.
This is another story courtesy of Roy Stephens. This one is out of The Telegraph yesterday afternoon...and the link is here.
Politicians from both inside and outside Chancellor Angela Merkel's government are calling for the vote on the euro bailout fund scheduled for Friday evening to be pushed back. Too much has changed since the marathon summit in Brussels, they say, and they need time to sort things out.
Jürgen Koppelin, a member of the Free Democratic Party, called for a delay in Friday evening's planned vote to okay funds to shore up the ailing euro, saying his party did not want to see the watering down of the criteria Merkel agreed to Friday morning in Brussels. "The position of the FDP up until now has been that the criteria cannot be eased," he said. "Talks within the coalition are necessary."
"My immediate advice is to postpone the vote until next week and not to hold it now," he said.
This story was posted on the German website spiegel.de yesterday...and I thank Roy Stephens for sending it. The link is here.
German Chancellor Angela Merkel rarely sees these kinds of negative headlines when returning from European Union summits. During her over six years as the head of Germany's government, she has usually been able to put a positive spin on even unpopular compromises.
But at the most recent emergency gathering of European heads of state and government, which was held in Brussels and lasted until the wee hours of Friday morning, she had a hard time doing exactly that. Reactions back home were devastating, and there were even calls for pushing back key parliamentary votes on the permanent euro bailout fund, known as the European Stability Mechanism (ESM), as well as Merkel's fiscal pact scheduled for Friday evening. In fact, the vehemence of the attacks seems to have taken even Merkel's advisers by surprise.
Merkel launched her counterattack on Friday afternoon. In a post-summit press conference, she said one first has to sort things out after such a long night, and she tried to counter the impression that she had been out-maneuvered by Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy.
This is another Roy Stephens offering from spiegel.de yesterday...and the link is here.
Pacific Investment Management Co.’s Bill Gross said a “debt trap” remains in place even after European leaders reached an agreement that alleviated concern the region’s banks will fail.
Pimco continues to avoid the debt of nations including Spain and Portugal in favor of U.S. Treasuries and mortgage securities, Gross, who runs the world’s biggest bond fund, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
“The peripherals and even the core union nations have too much debt,” Gross said. “The marginal cost of that debt is far above nominal GDP growth in respective nations. That continues a debt trap unless the cost of debt can come down.”
This Bloomberg story from yesterday morning is courtesy of Washington state reader S.A...and the link is here.
Even as markets cheered the agreement by European leaders to allow the direct use of the bloc’s bailout funds to recapitalize struggling banks, well-known investor Jim Rogers told CNBC the move does nothing to help solve the region’s biggest problem, which is its high debt levels.
“Just because now you have a way to get them (the banks) to borrow even more money, this is not solving the problem, this is making the problem worse,” Rogers said on Friday.
“People need to stop spending money they don’t have. The solution to too much debt is not more debt. All this little agreement does is give them (banks) a chance to have even more debt for a while longer,” he added.
That pretty much sums it up. This story was posted on the CNBC Asia website early yesterday morning Hong Kong time...and I thank West Virginia reader Elliot Simon for sending it along. The link is here.
Sprott Asset Management CEO Eric Sprott tells King World News today there's no plan to fix the European financial system, that everything from government officials is a lie, and that there's nothing to do but wait for governments to get out of the business of gold price suppression.
I borrowed the headline and the introductory paragraph from a GATA release yesterday. This KWN blog is a must read for sure...and the link is here.
In a last minute call, the White House spares Beijing and Singapore of financial penalties under Iran oil sanctions. The US says the two countries have “significantly reduced” their purchases of the Persian country’s crude.
“Today, I’ve made the determination that two additional countries, China and Singapore, have significantly reduced their volume of crude oil purchases from Iran,” US Secretary of State Hillary Clinton said on Thursday – the day the US sanctions against Iran and its customers took legal effect.
The sanctions, which deny access to US banking systems for Tehran’s oil customers, will no longer apply to China’s and Singapore’s “financial institutions for a potentially renewable period of 180 days,” Hillary Clinton added.
This brings the total number of “cleared” countries to 20. Exemptions for South Korea, Turkey and India – all major importers of Iranian crude – were announced on June 11 and were earlier granted to Japan and countries across Europe.
This story was posted on the Russia Today website yesterday evening...and it's also courtesy of Roy Stephens. The link is here.
Once upon a time, not too long ago, Turkish Foreign Minister Ahmet Davutoglu was the prime proponent of a foreign policy dubbed "zero problems with our neighbors" - derided by many in the West as "new-Ottomanism".
The North Atlantic Treaty Organization (NATO) meets this Tuesday in Brussels not only to craft its response to a Turkish F-4 Phantom jet shot being down by Syria's anti-aircraft artillery but to seal what sort of "new Ottomanism" is emerging from what actually turned into a "big problem with one of our neighbors" policy.
Davutoglu insists the F-4 was shot in international air space - although conceding it had briefly entered Syrian air space. Contradicting Syria's official explanation, he said the jet was clearly marked as Turkish; was on a "training flight" to test Turkey's "national radar system"; and most of all had "no covert mission related to Syria".
This is the first of two stories about the "New Great Game". This one is by Pepe Escobar...and it was posted over at the Asia Times Internet site on Tuesday. Although unsuitable and too long for a weekday column, it fits in the Saturday column perfectly. Roy Stephens sent it to me...and the link is here.
The building blocks of the historic visit by Russian President Vladimir Putin to Pakistan in September have begun arriving in Islamabad. It is a poignant moment in the region's history and politics. This will be the first time a Russian president visits Pakistan since its birth in 1947.
The Russians are fabricating some hardy bricks for the mansion they hope to build in the region which forms a beachhead on the Indian Ocean - a mansion large enough for their friends in Pakistan and in the neighboring countries of India, Iran and Afghanistan to consort with them.
But then, the very sight of the Russian bricks infuriates the United States. The point is, this Russia House will stand bang on the way of the New Silk Road that the US has been planning, which also needs to run through Pakistan. If the access is blocked, it becomes problematic for the US to keep together the body and soul of the tens of thousands of its troops who were hoping to settle down in the Hindu Kush and Central Asia as pioneers in the "Wild West" of China's Xinjiang and on the "soft underbelly" of Russia.
This is the second "New Great Game" story...and it was posted on the Asia Times website earlier today. It is, of course, another offering from Roy Stephens...and the link is here.
With global stock markets on the move, while gold and oil exploded to the upside, today Art Cashin told King World News that for the shorts, “It is a kind of ‘Dear God get me out of here and I promise not to do this again.’ So a general panic along those lines.” Cashin, who is Director of Floor Operations for UBS, which has $612 billion under management, also commented on the spectacular rally in gold and oil. Here is what Art Cashin had to say: “Expectations for this summit were so low that if they came out of it without a fist-fight, we probably would have had a rally. The idea that they may have gotten something moving caused a spectacular short-covering rally in the euro and put pressure on the dollar. You can see oil is up 8%.”
The link to the rest of the Art Cashin blog is here.
California Gov. Jerry Brown has approved the state's newly adopted $92 billion state budget which contains a rider which continues the state's moratorium on suction dredge mining until the state adopts new rules which "fully mitigate all identified significant environmental impacts."
The rider also directs California's Department of Fish and Game, which regulates suction dredge mining, to work with public health, water and tribal authorities in a review of the practice.
Opponents contend the new rider essentially bans the practice in California waters forever.
This story was posted on the mineweb.com Internet site yesterday...and I thank Donald Sinclair for sharing it with us. The link is here.
GATA board member Adrian Douglas, publisher of the Market Force Analysis letter, who has been sidelined in recent months as he has been recovering from illness, returned this week with commentary titled "A Good Time to Buy Gold," posted in PDF format at GATA's Internet site...and the link is here.
Well, I never thought I'd live to hear the day that Wall Street Journal columnist Simon Constable had a lot of positive things to say about gold...but he does in this 4:08 video posted over at the wsj.com website. I thank reader Alan Baer for finding this...and it's certainly worth watching. The link is here.
This interview is with Ron Hera...and was posted over at the safehaven.com website yesterday. I thank Roy Stephens for finding it....and the link is here.
Gold traders are bullish for a sixth week on speculation that Europe’s debt crisis will boost demand from investors seeking to protect their wealth and drive prices higher after moving to within 1 percentage of a bear market.
Sixteen analysts surveyed by Bloomberg said they expect a rally next week and 10 were bearish. Another five were neutral. Investors added almost $2 billion to holdings in gold-backed exchange-traded products this month, the most since November, according to data compiled by Bloomberg. Hedge funds and other speculators have increased bets on a rally for four consecutive weeks, U.S. Commodity Futures Trading Commission data show.
This is another Bloomberg story from yesterday...and Roy Stephens final offering in today's column. The link is here.
Tosca Mining Corporation's goal is to acquire advanced stage projects that can be placed into production quickly. The company's primary asset is the Red Hills Molybdenum/Copper project located in Presidio County, Texas. A program to confirm, and expand the considerable size and potential of the project and evaluate various economic scenarios was completed in 2011.
Tosca recently received results from the 13 remaining holes from its phase two, 16,000 M (4,873 m) diamond drill program. Per Tosca’s Chairman, Dr. Sadek El-Alfy, “the drill program has successfully verified historic drill results of the shallow Copper-Molybdenum cap and confirmed the presence of a deeper, well mineralized Molybdenum Porphyry deposit.” The results of 21 holes drilled through the copper/moly cap in Tosca's 2011 drill program give a weighted average grade of 0.39 % Cu over a core length of 113 feet (34.5 m). Since the copper cap is subhorizontal, the average core length can be interpreted as being approximately equivalent to true width. The copper/moly cap is crescent shaped, approximately 4,000 feet (1220 metres) long and 400 feet (122 m) to 1000 feet (305 m) wide.
The 2011 program encountered numerous thick Molybdenum mineralized intervals including Hole TMC-25 wich intersected 1,189 feet (362.4 m) averaging 0.089 per cent Mo including 830 feet (253 m) of 0.1 per cent Mo from 359 feet (109.8 m) to the bottom of the hole. Hole TMC-29 cut 989 feet (301.4 m) averaging 0.09 per cent Mo including 139 feet (42.4 m) of 0.16 per cent Mo. The molybdenum grades are similar and in some cases higher than those of projects currently considered of potential economic interest."
Aggressive plans are in place for 2012 to conduct metallurgical tests, produce an updated resource estimate and Pre Economic Assesment. Tosca is operated by an experienced mine development team, operates in Texas, a mine-friendly jurisdiction and its property iseasily accessible with infrastructure in place to advance operations. Please visit our website to learn more about the company ad request information.
To consider the [Supreme Court] as the ultimate arbiters of all constitutional questions is a very dangerous doctrine, placing us under the despotism of an oligarchy. Our judges are as honest as other men...and not more so, with the same passions for party, power, and privilege. Their power is extremely dangerous, as they are in office for life and not responsible, as the other functionaries are, to elective control. - Thomas Jefferson.
Here's an American composer whose music you hardly ever hear anymore...except for this one piece during the Christmas holidays. When I was a little boy back in the early to mid 1950s, I grew up on a steady diet of his music...and his most famous composition is linked here. I remember it all too well. When I played it the other day, I'm sure that was the first time I'd heard it in at least fifty years. Roy Stephens brought this composer to my attention once again, as I had pretty much forgotten about him myself. Very sad.
Well, it certainly was an interesting trading day yesterday...and not just in the precious metals, as it was across the board in just about everything. What a way to end the month...and the second quarter. I'm sure that there was some short covering involved as well...especially in West Texas Intermediate and copper. Although all four precious metals joined the party as well, it was obvious from the price action, at least to me, that gold and silver in particular were on a very short leash.
With volumes in gold and silver being what they were, I'm guessing that JPMorgan et al were the short sellers of last resort again yesterday, particularly in early New York trading...although it's entirely possible that the small commercial traders, Ted Butler's raptors, were selling long positions and taking profits as well. This won't be known with any certainty until next Friday's Commitment of Traders report...and anything can happen between now and the Tuesday cut-off to mask what happened yesterday.
And as many commentators have already said in today's column, the world's financial goose is pretty much cooked...and sooner or later the banks and the governments will have to sit down and dine at the table of financial consequences. It won't be pretty...and I can't think of any place I'd rather have my money invested than in gold and silver bullion...and their associated equities.
It could be a long, hot summer...and I close this column by wishing all my fellow Canadians a happy Canada Day.
See you on Tuesday.