Well, it was a nothing sort of day in the gold market yesterday...and with little volume to go with it, I wouldn't read much of anything into Friday's price action. The high of the day...$1,674.90 spot...occurred about fifteen minutes before the close of the Comex trading session and, of course, it got sold off a bit from there.
The gold price closed at $1,670.70 spot...down forty cents from Thursday's close. Volume was around 109,000 contracts, down substantially from Thursday.
Pretty much the same can be said about silver...as both it and gold followed a very similar price path from Thursday's trading session. The only other difference was that silver closed on its absolute high tick of the day...and that's a phenomena that I haven't witnessed too many times over the years.
Silver closed at $30.82 spot...up 24 cents on the day. Net volume, once the September roll-overs were subtracted, was only 25,000 contracts.
The dollar index opened around 81.37...and then traded sideways until shortly before 3:00 p.m. Hong Kong time. It rallied to its high of the day...81.68...which came around 8:45 a.m. in New York...and by 11:15 a.m. Eastern time, had given back all that gain. But it rallied once again...and closed the Friday trading session up about 26 basis points.
The gold stocks followed the gold price around like a shadow yesterday...and the HUI finished up 0.25%.
The silver stocks did mostly OK...but the ones that make up Nick Laird's Silver Sentiment Index did not do as well...and the SSI only finished up 0.05%, despite the strong finish in the silver price.
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For whatever reason, the CME did not update their Daily Delivery Report yesterday, so I have no idea what was posted for delivery on Tuesday. But considering the time of month, it couldn't have been a lot.
But while I was editing today's column at 6:47 a.m. Eastern time, I just checked the CME's website...and they finally got around to updating it. They showed that 7 gold and 16 silver contracts were posted for delivery on Tuesday. As I said above, it wouldn't be much.
There were no changes reported in either GLD or SLV.
Late yesterday evening the updated short positions for GLD and SLV were posted on the shortsqueeze.com Internet site. The short position in SLV declined by 7.34%...or 1,084,700 shares/ounces. There are still 13.7 million troy ounces...426.1 tonnes...required to be deposited in SLV to cover all the outstanding shares that don't have physical metal backing them.
The short position in GLD shares declined by 15.08%...or 3,279,000 shares, which equals 327,900 ounces. GLD is still owed about 1.85 million ounces of gold...57.45 tonnes...to cover all its outstanding shares sold short.
There was a smallish sales report from the U.S. Mint yesterday. They sold another 2,000 ounces of gold eagles, along with another 100,000 silver eagles. Month-to-date the mint has sold 23,500 ounces of gold eagles...6,500 one-ounce 24K gold buffaloes...and 2,121,000 silver eagles. The ratio of silver ounces to gold ounces sold for the month so far, is just under 71:1.
Over at the Comex-approved depositories on Thursday, they reported receiving 598,359 troy ounces of silver...and shipped 653,697 ounces of the stuff out the door. The link to that action is here.
I knew that yesterday's Commitment of Traders Report wasn't going to make for happy reading...and that proved to be an understatement. The 5-day reporting period only covered the first two days of this week's 4-day rally, as the cut-off was at the 1:30 p.m. Comex close on Tuesday.
In silver, the Commercial net short position blew out by an eye-watering 9,075 contracts, or 45.4 million ounces...the biggest one week increase that I can remember. The new Commercial net short position now sits at 162.4 million ounces.
But after spending considerable time on the phone with Ted Butler, what appeared on the surface was totally different than what was going on "under the hood", as about 6,600 contracts of that increase was the raptors selling long positions and taking profits. The '5 through 8' largest traders sat on their hands, as they showed little change. But with the '1 through 4' traders [read JPMorgan] it was a different matter. Ted said that JPMorgan went short around 2,500 additional contracts during the reporting week...and he estimates that JPM's short position in silver is around the 21,500 contract mark. When you do the math, they are short just over 20% of the entire Comex futures market [on a net basis] all by themselves.
The '1 through 4' largest short holders in silver are short 184.0 million ounce ounces...and the '5 through 8' largest traders are short an additional 37.1 million ounces. Adding those two numbers up, you can see that the eight largest traders are short 221.1 million ounces of silver against a Commercial net short position of 162.4 million ounces. The 'Big 8' are short 136.1% of the Commercial net short position.
On a 'net' basis, once all the market-neutral spread trades are subtracted from the Non-Commercial category, the '1 through 4' largest traders are short 35.6% of the entire Comex futures market in silver...and the '5 through 8' largest traders add another 7.2 percentage points to that. On a 'net' basis the 'Big 8' are short 42.8% of the entire Comex futures market in silver...and that's a minimum number...and almost half of that is held by JPMorgan. This short position is held against literally hundreds of other traders that are long the market.
And since JPMorgan et al act together...collusively, as Ted Butler rightly puts it...they have a stranglehold on the silver price.
The Commercial net short position in gold also increased by a huge number as well...27,282 contracts, or 2.73 million ounces. The Commercial net short position now stands at 17.12 million ounces.
The four largest traders in gold are short 8.41 million ounces...and the '5 through 8' largest traders are short 5.06 million ounces of gold. Together these eight large traders are short 13.47 million ounces of gold...and that represents 78.7% of the Commercial net short position.
On a 'net' basis, the '1-4' biggest short holders are short 22.6% of the Comex futures market in gold...and '5-8' biggest short holders are short an additional 13.6 percentage points. In total, the eight largest short holder are short 36.2% of the entire Comex futures market in gold.
Ted Butler's calculations from the Disaggregated COT Report showed that the '1 through 4' largest traders in gold only went short about 3,500 contracts...and the '5 through 8' largest traders added about 3,000 short contracts to their positions. But it was the raptors going massively short around 20,000 contracts that caused the Commercial net short position to blow out as much as it did...and at this point, the raptors are very close to holding a record short position in gold.
Reader E.W.F...who sends me the COT charts every week...had this to say..."The last time the gold raptors held such a large net short position was February 28th...the day before LTRO-2 and the Leap Day Massacre." Let's see how it turns out this time.
The other important thing that Ted mentioned was that despite the horrific numbers in Friday's COT Report, the 'Big 4' Commercial traders hardly did a thing...and are still sitting close to holding record low short positions in both silver and gold. It was the activity of the raptors that made things look as bad as they were.
Here is the chart of the four and eight largest short holder in all physical commodities traded on the Comex using this week's COT data. It's shown in days of world production, not contracts, so you can compare apples to apples.
(Click on image to enlarge)
Note how silver dominates this chart...especially when compared to gold. Gold is a monstrous market in dollar terms compared to silver...and the platinum and palladium markets [compared to gold] are rounding errors. Don't forget that almost 50% of that red bar in silver is JPMorgan's short position...about 45 days of world silver production.
Here are a couple of interesting photos that reader Richard Craggs sent my way in the wee hours of Friday morning. It's from the Duty-Free News International magazine...and they're reporting on what sells the most in the duty-free shops in the Middle East...in this case, Dubai.
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Since it's Saturday, I have more than the usual number of stories, including quite a few that I've been saving for today, so I hope you can find the time over the weekend to read the ones that interest you the most.
Federal Reserve Chairman Ben S. Bernanke said the central bank has the ability to take additional steps to boost the economy.
“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke said in a letter dated Aug. 22 to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee.
Bernanke repeated the statement from the Federal Open Market Committee’s Aug. 1 meeting that the Fed will provide “additional accommodation as needed.” He has an opportunity to expand on his views in an Aug. 31 speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming.
This story was posted on the Bloomberg website yesterday morning...and I thank Manitoba reader Ulrike Marx for sending it. The link is here.
Gartman, publisher of the Gartman Letter, who cut his long position by half earlier this week, has exited stocks entirely.
In his investor note he writes: "Stock prices are weak as our proprietary International Index has fallen 62 “points” or 0.8% in the past twenty four hours. Having traded to 7805 earlier this week, this index is now down sharply from its highs... yet; but we are more and more fearful that it shall be, and having cut our long position in half earlier this week, and further having noted how rather badly the market responded to the belief that QE III was on the way, and noting that far too many individual stocks and one or two important international broad indices posted “reversals” earlier this week, we are exiting the other half of our long positions this morning upon receipt of this commentary."
He didn't mention a thing about gold, but one has to assume that he's out of that as well. This story was posted on the businessinsider.com website yesterday morning Eastern time...and I thank Roy Stephens for sending it. The link is here.
He is credited with earning the fastest $5bn (£3bn) ever made, but John Paulson, the American financier, now appears to be losing money from his famous hedge fund even faster.
Citigroup Private Bank is set to withdraw $410m from Paulson & Co amid heavy losses at the New York-based hedge fund group.
The redemption, which Citi reportedly informed its clients about yesterday, will further erode the total asset base at Paulson & Co which has reportedly shrunk to $19.5bn from $36bn last year.
The private bank, which invests around $2bn in 60 hedge funds on behalf of high-net worth clients, is said to have put Paulson on its “watch list” after the group sustained heavy losses last year.
This story appeared on the telegraph.co.uk Internet site yesterday afternoon BST...and I thank Donald Sinclair for finding it. The link is here.
It took me a few days to work up the nerve to phone William Binney. As someone already a “target” of the United States government, I found it difficult not to worry about the chain of unintended consequences I might unleash by calling Mr. Binney, a 32-year veteran of the National Security Agency turned whistle-blower. He picked up. I nervously explained I was a documentary filmmaker and wanted to speak to him. To my surprise he replied: “I’m tired of my government harassing me and violating the Constitution. Yes, I’ll talk to you.”
“The decision must have been made in September 2001,” Mr. Binney told me and the cinematographer Kirsten Johnson. “That’s when the equipment started coming in.” In this Op-Doc, Mr. Binney explains how the program he created for foreign intelligence gathering was turned inward on this country. He resigned over this in 2001 and began speaking out publicly in the last year. He is among a group of N.S.A. whistle-blowers, including Thomas A. Drake, who have each risked everything — their freedom, livelihoods and personal relationships — to warn Americans about the dangers of N.S.A. domestic spying.
This piece was posted over on The New York Times website on Wednesday. The story is worth the read...and the 8:27 minute imbedded video is worth watching. I thank Donald Sinclair for his second story in a row...and the link is here.
The Gold Report: There will be a Casey Research Summit on "Navigating the Politicized Economy" in Carlsbad, Calif., in September. The thesis behind the summit is that governments have made a Faustian bargain, a pact with the devil, that saves the empire with overspending, but drives it to the brink of collapse by creating fiat currencies. Doug, where in that story is the economy currently?
Doug Casey: It's extremely late in the day. Since World War II, and especially since 1971 when the link between the dollar and gold was broken, governments around the world have accepted the Keynesian theory of economics, which boils down to a belief that printing money can stimulate the economy and create prosperity. The result has been to create huge amounts of individual and government debt. It's become insupportable. All it has done is purchase a few extra years of artificial prosperity, and we're heading deeper into a very real depression as a result.
Let me define the word depression. It's a period of time when most peoples' standard of living declines significantly. It can also be defined as a time when distortions and misallocations of capital—things usually caused by government intervention—are liquidated.
We have been consuming more than we have been producing and living above our means. This has been made possible by 1) borrowing against projected future revenues and 2) using the savings of other people. The whole thing is going to fall apart. A new monetary system of some type is going to have to necessarily rise from the ashes. That's a major theme in the conference that's coming up.
This longish interview with Doug was posted over at The Gold Report website yesterday...and it's well worth reading. The link is here.
This gets to the heart of the issue I have with today’s monetary charlatans: They are content to completely ignore history, including the now 20-year sordid experience with contemporary “activist” central banking and resulting monetary inflations. At this point, there is clearly no end point and certainly no “exit strategy.” They are experts supposedly with solutions, of course unwilling to admit that their policies have directly contributed to losses by millions upon millions of innocent victims around the world. They prescribe more potent doses of what we have already repeatedly witnessed ends in calamity. And somehow they have turned the monetary inflation debate upside down, intimating that it would be immoral and unethical to not keep printing.
There might be some casualties and unfortunate collateral damage, but the increasing stakes associated with the war against recession and deflation justifies a dramatic escalation, we are to believe. This is no time to turn soft – to waiver in the face of great adversity. The backdrop beckons for strong leadership and decisive action. The enemy of humanity must be confronted and terminated. Predictably, the answer is for more and more – more only cheaper money and now even the “nuclear option” of unlimited, costless quantitative easing by resolute central banks the world over. “Do whatever it takes!”
Doug Noland's weekly Credit Bubble Bulletin over at the prudentbear.com Internet site is always a must read for me. This week's rather longish commentary is no exception...as he lays it all out. I thank reader U.D. for bringing it to our attention...and the link is here.
In this 47-minute video from a hedge fund conference in Dubai, Dr. Marc Faber discusses why he thinks a deflationary collapse is unlikely, why currencies will be devalued much further, why gold and equities are an important inflation hedge, rather than sitting in cash, etc.
His view on equities is bullish despite his bearishness on the world economy and currencies.
It was posted over at youtube.com on Wednesday...and I thank Australian reader Wesley Legrand for sharing it with us. It's only been posted for two days...and it has already had over 30,000 hits. The link is here.
German Chancellor Angela Merkel stressed on Friday that she wants Greece to remain in the euro, but made no mention of any concessions Europe was prepared to offer over its austerity targets.
"I am deeply convinced that the new Greek government, under the leadership of Prime Minister Samaras, is doing everything to solve the problems that Greece is facing.
"We know that this requires great sacrifices [...] and Germany has always said that it will support Greece in this," added the chancellor.
Mrs. Merkel admitted that impatience had grown among the German public over Greece's persistent failure to meet its targets, and that Europe would need to work on bridging the gap in perceptions between the two countries.
This story was posted on The Telegraph's website yesterday afternoon BST...and my thanks go out to Roy Stephens once again. The link is here.
European Central Bank President Mario Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds, two central bank officials said.
With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed, according to the officials, who spoke on condition of anonymity because the deliberations are not public. The program is still being worked on and staff may not be able to finalize it by then, said the officials, who are familiar with thinking on the ECB Governing Council. An ECB spokesman in Frankfurt declined to comment.
Draghi announced on Aug. 2 that the ECB may intervene in the secondary market to reduce bond yields in countries such as Spain and Italy if they apply to Europe’s bailout fund for aid and accept the conditions attached. The European Stability Mechanism, intended to replace the temporary European Financial Stability Facility, hasn’t entered into force yet as legal wrangling over its compatibility with the German constitution continues.
This Bloomberg story was filed from Frankfurt yesterday...and was posted on their website early on Friday morning. I thank Donald Sinclair for sending it...and the link is here.
Of all the many striking policy measures taken since the financial crisis, one of the most extraordinary has gone almost unremarked—the introduction of negative official interest rates by Denmark.
In an attempt to maintain its strict currency peg to the euro, the Danish central bank lowered its main deposit rate for banks—the certificate of deposit or CD rate—to -0.2 percent last month.
The Nationalbanken felt it had little choice. Investors flocked to Denmark in search of a haven outside the euro zone—one that has no currency risk with the euro and offers cheap protection against a break-up of the single currency.
This story was posted in the Financial Times of London yesterday, but was posted in the clear at the cnbc.com Internet site. It's worth reading...and I thank Donald Sinclair for digging it up for us. The link is here.
This 1:34 minute Bloomberg video report shows the empty yacht harbours in Italy, which are normally busy during the summer holidays. Everyone with a big boat is getting out of Dodge...or the Italian equivalent...as the tax man cometh.
I thank London reader Iain Doherty for sending this along...and the link is here.
Japan is slowly edging toward its own version of a "fiscal cliff" as legislation needed to sell bonds for this fiscal year's budget languishes in a split parliament, suggesting the government could run out of money by the end of October.
The fate of the bill is in the hands of the opposition, which controls the upper house and used its clout to make Prime Minister Yoshihiko Noda promise an early election in return for the passage of his sales tax hike plan early this month.
Now, a tacit threat that the budget financing bill put on hold during the tax stand-off could get blocked is keeping Noda under pressure to make good on his pledge to call a vote "soon."
Government sources said without the bill, which would allow it to sell 38.3 trillion yen in bonds or more than 40 percent of this year's budget, the economy and Japan's debt ratings could take a hit.
This Reuters piece showed up on their website late on Thursday night...and I thank Donald Sinclair for sending it. The link is here.
After a wave of nationalist, anti-Japanese protests across China, The Economist correspondents discuss whether there is any hope of improved relations between the two countries.
This 6:40 minute video clip was posted on their website on Thursday afternoon BST...and is another offering from Donald Sinclair. The link is here.
After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.
The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.
The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.
This story showed up in The New York Times sometime on Thursday...and I thank Roy Stephens for sending it. It's definitely worth reading...and the link is here.
These are all stories that I've been saving for today's column. They are all courtesy of Roy Stephens...and are absolute must reads for all serious followers of the "New Great Game". This is really what's going on under the hood in the Middle East...none of this pabulum that you get from the main-stream media in the Western world. The first was written by M. K. Bhadrakumar. It's headlined "Egypt thumbs its nose at the U.S.". The second, is a 2-page essay by Pepe Escobar that's entitled "War fever as seen from Iran". The third essay is by Peter Jenkins...and it bears the headline "Will Iran be the U.S.'s Melos?". And lastly is this second essay from Pepe...and it's entitled "Realpolitik blurs US red line on Syria". There is less than an hour's worth of reading here, but well worth your time, if you really want to know what's going on in the Middle East these days.
The first blog is with Eric Sprott...and it bears the headline "We Are Staring At Chaos and Collapse In Front Of Us". The second blog is with Jean-Marie Eveillard. It's entitled "We Will Be Destroyed By Inflation That Paralyzes The Economy". And lastly is this audio interview with John Mauldin. It's headlined "This Is Going To Shock The World, Europe, Energy, Gold & More".
The Brink’s Co., which stores and transports bullion, is set to open one of the world’s largest precious metals vaults in the London area within the next month, at a time when investors’ gold holdings are at a record.
The firm plans to open the facility with a major London clearing company and is considering opening another vault next year, Orit Eyal-Fibeesh, managing director for Brink’s in the U.K., said in an e-mail yesterday. The vault will be able to hold a “very substantial” amount of metal, she said, without being more specific.
Investors are buying more gold as a protection of wealth on speculation central banks will do more to bolster growth and amid Europe’s debt crisis. Holdings in bullion-backed exchange- traded products reached a record 2,447.1 metric tons valued at $131 billion yesterday, data compiled by Bloomberg show. Malca- Amit Global Ltd., Deutsche Bank AG and Barclays Plc are among firms planning to open or increase bullion storage facilities.
This short story showed up on the Bloomberg Internet site sometime yesterday...and I thank West Virginia reader Elliot Simon for sending it our way. The link is here.
India's apex bank, the Reserve Bank of India, has once again turned the spotlight on the citizens craze for gold and, in its inimitable style, has dealt a back-handed compliment to the earning potential of gold. The bank has said there is a need to contain risks in gold prices and housing as they seem to be running way ahead of inflation.
Over the last two years, housing prices have climbed between 16% to 25%, while gold has risen at a faster pace between 14% to 40%. In its Annual Report for 2011-12, released Thursday evening, the bank has said, ``These two markets (housing and gold) have not only provided effective inflation hedges, but also enabled savers to earn good real returns amidst high inflation.''
The central bank's report said India's gold import numbers are estimated to have grown by 39% during 2011-12. According to the World Gold Council, India's quantum of gold imports accounted for a quarter of the world demand in 2011-12.
This story was filed from Mumbai on Friday...and reader Donald Sinclair found it posted over at the mineweb.com Internet site. It's well worth reading...and the link is here.
In the past we have seen Chinese companies begin to make inroads into securing future supplies through investing in and taking over resource companies around the globe, but while the emphasis has so far been in respect of industrial metals to feed the manufacturing behemoth, we are now seeing similar moves into the western gold mining sector - of which the most recent example is China National Gold Corporation's interest in taking over control of African Barrick Gold. And prior to that the Zijin Mining takeover of Norton Goldfields among others. An earlier, but perhaps less well flagged deal was China National Gold's off-take deal with Coeur's Kensington Mine in Alaska whereby the mine's output is processed in China, not in Alaska where the mine is located. It would seem that these deals, or prospective deals, could be the tip of the iceberg if some views on China's gold policy are correct.
These views suggest that China is hugely expanding its own gold reserves, but doing so surreptitiously - a view we have expressed here beforehand. Last time China announced a gold reserve update was in 2009 when it suddenly announced it held 1,054 tonnes of the yellow metal - a 75% rise from its 600 tonnes reported in 2003. If a similar time gap is involved before China reports its reserves again, this will come in 2015 and some feel that the next reserve figure could show that China has accumulated more than a thousand tonnes of gold over the period. Indeed some have suggested a Chinese target of an additional 4-5,000 tonnes to bring it in line with some of the bigger Western gold holders.
It is actually probably too soon for China to take the step of announcing a substantial gold reserve increase yet, but if the basic scenario is correct China will thus continue to support the gold price on dips until such time as it sees fit to upset the global gold apple cart.
This mineweb.com story was written by Lawrence [Lawrie] Williams, their General Manager and Editorial Director. It's a must read...and the link is here.
MIT researchers have created a camera which can take images so fast - one trillion of them in just a second - that it can capture light as it travels across objects.
The team used a laser, flicking it on and off in the space of a femtosecond - or a millionth of a billionth of a second.
In order to get a grip on how short this time is, an oft-quoted example is that a femtosecond is to a second, what a second is to about 32 million years. The laser, turned on and off, sends out a small beam of light, measuring just a millimetre in length.
Being a photographer of sorts myself...and having a scientific background as well...I was totally blown away by this story that was posted on the dailymail.co.uk Internet site on Tuesday. This 11:02 minute TED video that's imbedded in this story is an absolute must watch if this sort of thing turns your crank. I thank reader Carl Lindfors for bringing this story to my attention by a rather indirect means...and the link is here.
The New Cold War
First it was the US against the Soviets in an ideological battle for global influence… now it's a faceoff between two countries you may not expect. The winner will have the upper hand over the loser, while the fallout will affect almost everyone. You, however, can take some simple steps to help you not only survive, but thrive… no matter who wins the war.
Today's 'blast from the past' was an easy choice considering the sad news that came out of the entertainment world earlier this week. This song from 1967, which everyone knows instantly, was written by John Phillips of the Mamas and Papas. Scott Mackenzie sang it...and the rest is history. The song defined my generation...and "stood as an anthem for the 1960s". That it did...and the link is here.
Well, after the surprising news that came out of yesterday's Commitment of Traders Report, I'm sitting here wondering what has happened "under the hood" since the 1:30 p.m. Eastern time Tuesday 'cut-off'.
Could we continue to move higher from here in both metals? The answer was 'yes' in Friday's column...and it's the same today. Could we get it "in the ear". The answer to that is 'yes' as well.
But all four precious metals are now into very overbought territory...and are all above and in some cases, well above their respective 200-day moving averages. So it remains to be see what JPMorgan et al have in store for us next week, as it looks like some sort of interim top has been set...and if ever a set of charts had been 'painted'...the precious metals charts would fit that description nicely. Here's the silver chart as a 'for instance'...
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I certainly don't have a crystal ball as to what might happen in the very short term...but the long term is not...and never has been in doubt. As Richard Russell said many years ago..."It's print, or die!"...and that's precisely the point in history we're at right now. Will gold play a role?
That's it for the day...and the week.
See you on Tuesday...or Wednesday...depending where on Planet Earth you live.