Gold & Silver Daily

¤ Yesterday In Gold & Silver

The gold price, which was up about six dollars by the London open on their Thursday morning, suddenly jumped higher shortly around 8:30 a.m. GMT.  That rally wasn't allowed to get far---and after that, the price chopped lower until 1:00 p.m. in New York---and from there it edged higher into the 5:15 p.m. EST close of electronic trading.

The low and high ticks were reported by the CME Group as $1,218.00 and $1,232.80 in the April contract.

Gold closed in New York yesterday at $1,221.70 spot, up $3.80 from Wednesday's close.  Net volume was very much on the lighter side once again at 96,000 contracts.

The silver price got sold down by about two bits in early morning trading in the Far East on their Thursday morning.  It rallied from there until 8:30 a.m. GMT in London, when it too blasted higher.  But the vertical spike got capped the moment that the $17.00 spot price mark was breached---and from there, followed a similar pattern to gold, which was down until lunch time in New York.

The low and high were recorded as $16.605 and $17.04 in the March contract.

Silver finished the Thursday session at $16.835 spot, up a nickel on the day---and it would have closed materially higher if allowed to do so, which it obviously wasn't.  Net volume was 27,000 contracts, which has been the net daily volume every day this week so far.

Both platinum and palladium had their tiny price spikes at 8:30 a.m. GMT as well---and neither metal did much after that.  Platinum closed up six bucks---and palladium closed up 7 dollars.  Here are the charts.

The dollar index closed late on Wednesday afternoon in New York at 94.92---and made it as high as 94.98 in late morning trading in Hong Kong.  From there it began to slide, but someone was there to catch the proverbial falling knife right at the 94.00 mark around 11:50 a.m. EST in New York.  It rallied about twenty basis points in the next hour and a bit, before chopping sideways into the close.  The index finished the Thursday session at 94.18---down 74 basis points.

As I keep reminding you, please remember that the price of precious metals is mostly determined by what's going on in the COMEX futures market---and not what is going on in the currencies.  If that was the case, we should have had a big up date in both gold and silver as the Thursday session progressed, but we didn't.

The gold stocks gapped up about a percent at the open, before quickly heading into negative territory.  However, that didn't last long---and the shares traded in a wide range---mostly in positive territory---before rallying decisively starting at the 1:30 p.m. EST COMEX close.  The HUI finished up 0.98 percent.

The silver equities spent the entire trading session in positive territory---and clearly outperformed their golden brethren, as Nick Laird's Intraday Silver Sentiment Index closed up 2.29 percent.

The CME Daily Delivery Report showed that 36 gold and zero silver contracts were posted for delivery on Monday within the COMEX-approved depositories. HSBC USA was the short/issuer on all of them---and JPMorgan out of its client account stopped 34 of them.

The CME Daily Delivery Report for the Thursday trading session showed that February gold open interest declined by 5 contracts yesterday, leaving 651 still open.  Of course the 36 contracts posted for Monday delivery in the previous paragraph must be subtracted out to get the true number.  Silver's February open interest is up another 13 contracts---and now sits at 36 contracts still open.

At last there was a withdrawal from GLD, as an authorized participant took out 57,607 troy ounces.  And as of 9:28 p.m. EST yesterday evening, there were no reported changes in SLV.

Since yesterday was Thursday, Joshua Gibbons, the "Guru of the SLV Bar List" updated his website with the goings-on inside the Internet site for their reporting week that ended on Wednesday---and this is what he had to say.

"Analysis of the 11 February 2015 bar list, and comparison to the previous week's list.  No bars were added, removed or had serial number changes.  As of the time that the bar list was produced, it was overallocated 271.9 oz.  All daily changes are reflected on the bar list.  A quiet week!"

There was another sales report from the U.S. Mint yesterday.  They sold 2,500 troy ounces of gold eagles---500 one-ounce 24K gold buffaloes---and another 73,500 silver eagles.

Over at the COMEX-approved depositories on Wednesday, they reported receiving 40,126 troy ounces of gold, but didn't ship anything out.  All the activity was at HSBC USA---and the link is here.

In silver, nothing was reported received, but 643,602 troy ounces were sent out the door.  The link to that activity is here.

I have a decent number of stories for you today---and I'll happily leave the final edit up to you.


¤ Critical Reads

Retail Sales Plunge Twice as Much as Expected. Worst Back-to-Back Drop Since October 2009

Following last month's narrative-crushing drop in retail sales, despite all that low interest rate low gas price stimulus, January was more of the same as hopeful expectations for a modest rebound were denied. Falling 0.8% (against a 0.9% drop in Dec), missing expectations of -0.4%, this is the worst back-to-back drop in retail sales since Oct 2009. Retail sales declined in 6 of the 13 categories.

Clearly it has been a very cold winter, with both December and now January big disappointments.

Finally, none of the above should come to a surprise to those who read our article from Tuesday, previewing not only today's miss but explaining its reason as well: Why Bank Of America Is Stumped: Despite "Lower Gas Prices" U.S. Consumer Spending Has Plunged

One just has to laugh while reading the following hilarious attempt to justify the cognitive dissonance by Bank of America's analysts - and everyone else for that matter - who were oh-so-certain that tumbling (if not any more) gas prices would translate into a "splurge" of spending
on non-gas related goods and instead, when looking at their internal data, are seeing something inexplicable.

This Zero Hedge story showed up on their Internet site at 8:38 a.m. EST Thursday morning---and today's first news item is courtesy of Dan Lazicki.


Foreclosure Activity Rises 5 Percent in January: RealtyTrac

The number of U.S. properties in foreclosure upon rose 5 percent in January, driven by a jump in bank repossessions, real estate data firm RealtyTrac said on Thursday.

A total of 37,292 homes were repossessed in January, a 15-month high. Overall, 119,888 properties were at some stage of the foreclosure process, still down 4 percent from a year earlier.

The unwinding of distressed housing assets, a multi-year legal process in many states, was gathering pace, RealtyTrac said.

A nationwide increase in scheduled foreclosure auctions in 21 states in January reflected that they were "coming off somewhat artificially low levels last year," RealtyTrac Vice President Daren Blomquist said in a statement.

This article appeared on the Internet site at 10:40 a.m. EST yesterday morning---and I thank West Virginia reader Elliot Simon for sending it along.


The "Catastrophic Shutdown of America's Supply Chain" Begins: Stunning Photos of West Coast Port Congestion

As of last night, the choking of the U.S. supply-chain has officially begin, when as the L.A. Times reported, "West Coast ports — including the nation's busiest in Los Angeles and Long Beach — will partially shut down for four days as shipping companies plan to dramatically slash dock work amid an increasingly contentious labor dispute."

Terminal operators and shipping lines said that they would stop the unloading of ships Thursday, Saturday, Sunday and Monday, because they don't want to pay overtime to workers who, they allege, have deliberately slowed operations to the point of causing a massive bottleneck. Thursday is Lincoln's Birthday and Monday is Presidents Day, which are holidays for the workers.

Slowing down work "amounts to a strike with pay, and we will reduce the extent to which we pay premium rates for such a strike," said Wade Gates, spokesman for the Pacific Maritime Assn., the employer group representing the shipping companies. The local union in Los Angeles and Long Beach has denied using slowdown tactics.

According to the L.A. Times, it is not clear if the partial shutdown foreshadows a total closure of the ports. Fears of a lockout of dockworkers, who have been without a contract since July, have risen in the last week and the two sides haven't held talks since Friday. S.F. Gate was far more clear on what the dockworker action means: "West Coast ports to shut down 4 days amid labor dispute."

This longish article, with lots of photos, appeared on the Zero Hedge website at 11:20 a.m. EST on Thursday morning---and the first of many readers through the door with this was Brad Robertson.


Nobel Peace Prize Winner Seeks a Larger War Budget

President Obama proposed a dramatic increase in U.S. defense budget which is already nearing half trillion dollars backtracking on his initial policy of slashing military spending.

The most striking thing about the proposed military budget increase is that the alleged Russian threat would enable the Pentagon to spend an additional $51 billion on military missions in different parts of the world, thousands of miles away from U.S. shores.

While President Obama may have received the Nobel Peace Prize back in 2010, he sure looks like he’s preparing for war. Not only has the President proposed increasing militant spending, which would backtrack on his previous pledges of slashing it, but he also justified it on the grounds of a supposed ‘Russian threat’. Specifically, the President is requesting nearly $170 million dollars to apparently ‘counter Russia’ in Eastern Europe, with an additional $789 million to maintain and expand the U.S. military’s presence in Europe.

This story, complete with eye-opening headline, showed up on the Internet site at noon Moscow time back on February 7---and I thank reader M.A. for sharing it with us.


Sweden cuts rates below zero as currency wars spread

Sweden has cut interest rates below zero and launched quantitative easing to fight deflation, becoming the latest Scandinavian state to join Europe's escalating currency wars.

The Riksbank caught markets by surprise, reducing the benchmark lending rate to minus 0.10 percent and unveiled its first asset purchases, vowing to take further action at any time to stop the country falling into a deflationary trap. The bank presented the move as precautionary step due to rising risks of a "poorer outcome abroad" and the crisis in Greece.

Janet Henry from HSBC said the measures are clearly a "beggar-thy neighbor" manoeuvre to weaken the krone, the latest such action in a global currency war that does little to tackle the deeper problem of deficient world demand.

The move comes as neighboring Denmark takes ever more drastic steps to stop a flood of money overwhelming its exchange rate peg to the euro and tightening the deflationary noose.

This commentary by Ambrose Evans-Pritchard put in an appearance on the Internet site at 4:58 p.m. GMT on their Thursday afternoon, which was 11:58 a.m. EST.   I found it embedded in a GATA release.


Credit Suisse bosses pay price for big fines

Credit Suisse chief executive Brady Dougan has agreed to give up 20% of his bonus after the bank’s $2.8 billion (CHF2.5 billion) tax evasion fine last year. His fellow executives will take the same cut while directors have agreed to slash their pay by a quarter.

But top bosses are not the only staff to feel the consequences of the United States prosecution. Total compensation at the bank fell 9% last year, partly as a result of the financial sanctions, Credit Suisse announced as it released 2014 earnings.

In a pre-recorded video interview, Dougan praised the bank’s staff for “working through this issue”. He added that the voluntary pay cut decision at executive and board level was taken “in order to reflect the impact of the settlement on the overall results of the firm.”

I feel for them, but I can't quite reach them.  This article showed up on the Internet site at 2:38 p.m. Europe time on their Thursday afternoon, which was 8:38 a.m. in New York.  I thank South African reader B.V. for finding it for us.


Greece revives Nazi-era reparation claims amid E.U. debt row

Greece’s new far-left government has promised to seek millions of euros in reparations for the brutal Nazi occupation of Greece during World War II amid a row with Berlin over repaying an EU-IMF bailout. FRANCE 24 reports from the German capital.

The idea that Berlin has an outstanding debt with Athens over World War II crimes and forced loans has been gaining ground in Greece since Prime Minister Alexis Tsipras pledged to make the issue a priority during his first major speech to parliament last week.

Greeks authorities say they are owed around €160 billion in war reparations, a sum that accounts for more than half of Greece’s current €240 billion bailout debt to both public and private creditors.

Germany rejects the claims, saying that all war reparations have been previously settled through European treaties.

This brief news item, showed up on the Internet site on Tuesday---and it's the first offering of the day from Roy Stephens.


IMF announces new $17.5bn bailout package for Ukraine

The International Monetary Fund announced a new $17.5 billion lifeline for Ukraine, which would bring the total bailout package to $40 billion. The new sum would be a four-year program.

Lagarde will propose the $17.5 billion expansion program to the IMF by the end of the month.

"The program is not yet approved by the governing council. I hope to offer it for approval by the end of February," she said Thursday.

"This new four-year arrangement would support immediate economic stabilization in Ukraine as well as a set of bold policy reforms aimed at restoring robust growth over the medium term and improving living standards for the Ukrainian people," Lagarde said in a statement.

This news item was posted on the Russia Today website at 8:11 a.m. Moscow time on their Thursday morning---and it's the second offering in a row from Roy Stephens.


Ukraine’s Latest Peace Plan Inspires Hope and Doubts

The coming days will provide a quick, tangible test of whether a new peace agreement announced Thursday will prove any more effective in calming the nearly year-old war in Ukraine than a similar cease-fire last September that was widely ignored.

Optimists point to the presence and personal imprimatur of Europe’s two most important leaders, as well as President Vladimir V. Putin of Russia and his Ukrainian counterpart, Petro O. Poroshenko, as a sign that this agreement, called Minsk II, would prove more resilient than the version reached here last September, Minsk I.

Pessimists — some would say realists — believe this latest accord only papers over many of the nagging problems that sparked the fighting in the first place.

Critical questions were left ambiguous or kicked down the road, including the status of the breakaway territories, a calendar for Ukraine to regain control over its border with Russia and even the truce line itself.

This commentary appeared on The New York Times website yesterday sometime---and that makes it three in a row from Roy Stephens.  The headline above is new.  The old one read "Leaders in Ukraine Talks Announce Cease-Fire Agreement".


Minsk Talks Cannot Result in Ukraine Federalization

Already there is debate about who has "won" and who has "lost" in the Minsk talks.

The short answer is that as the German foreign minister Steinmeier correctly said there is no breakthrough but the Russians and the NAF have made progress.

One point needs to be explained or reiterated (since I have explained it already and many times).

The agreement does not make provision for federalisation or autonomy for the Donbass but still only refers to the grant of a law according the Donbass temporary special status within the Ukraine.

This commentary showed up on the Internet site early yesterday afternoon Moscow time---and it's the second contribution of the day from reader B.V.


‘Ukraine ceasefire deal is only first step. Now its enforcement is question’

The Ukrainian ceasefire deal reached during the Minsk talks is only a weak beginning, 10 percent of a path to long-term peace, says Jan Oberg, Director of Transnational Foundation for Peace and Future Research. If it fails, it might lead to disaster.

RT: Do the results of the negotiations give grounds to speak about a lasting peace in Ukraine?

Jan Oberg: I wish I could say yes. I think it’s very good they have met; they are basically confirming what they have tried to do before. And every time you meet and you don’t split it’s a good thing. It may be building trust over time. But this is only a very weak beginning. I’ll tell you a ceasefire is just a beginning and the question is how it will be enforced if somebody breaks it in the future, and I’ve argued for United Nations troops to get into the place. And nobody seems to have it on the agenda.

Secondly I might say…it’s not professional and not a very conducive to peace the way in which they met. You meet at 9 o’clock in the evening, you’d sit all night, you’re dead exhausted, you already have had a very tough travel schedule, you meet at a huge palace, in a huge room where you can have no personal contacts. This whole thing is not set up the way a peacemaker, a mediator, would do it. I would meet far away in the countryside without the press; I would have informality, unlimited time to reach a result and etc. But under these circumstances, let’s be hopeful.

This op-edge/interview appeared on the Russia Today Internet site at 5:05 p.m. Moscow time on their Thursday afternoon---and it's another offering from Roy Stephens.


The Terms of the Ukraine Cease-Fire: Presenting "East Ukraine"

Following marathon talks in Minsk that lasted more than 17 hours, the leaders of Germany, France, Russia and Ukraine reached an agreement that appears to align with the Kremlin's demands. The document calls for a cease-fire to begin Feb. 15, the withdrawal of weapons and the enactment of constitutional reforms in Ukraine. Though Ukrainian President Petro Poroshenko has denied that the agreement includes provisions for the creation of autonomous regions or the federalization of Ukraine, the document on the whole does fulfill several of the Kremlin's long-standing demands with regards to the status of Donbas.

The new cease-fire agreement is based largely on the original one that went into effect Sept. 5. It focuses on the withdrawal of heavy artillery systems, which have been prominent throughout the conflict, within 14 days of the cease-fire's implementation. The new cease-fire requires these artillery systems to be withdrawn far beyond their maximum effective ranges, a move that will create a buffer to prevent escalation and heavy artillery fire on the demarcation line. Missing from the agreement, however, is a decision on the fate of the still heavily contested Ukrainian positions in Debaltseve. Because both sides will have to withdraw their artillery systems, the result will be a very deep area without artillery cover in the center of the demarcation line.

This short article originally showed up on the website yesterday, but it found a home over at Zero Hedge at 1:56 p.m. EST yesterday.  This story is courtesy of Dan Lazicki.


Restrained optimism follows Minsk summit, new Russia sanctions off table?

British Prime Minister David Cameron maintained a tougher line, saying he welcomed the second Minsk agreement, but added “Putin has to know sanctions will remain in place without concrete progress on the ground.”

Lithuania President, Dalia Grybauskaite, however, said that the issue of actually changing the current EU sanctions regime against the Russian Federation would not be discussed until March.

However, some representatives of the German business community consider the latest agreement to be a possible precursor for the lifting of sanctions on Russia. “The result achieved in Minsk could be a second step to opening the road to gradually lifting anti-Russian sanctions,” Eckhard Cordes, Chairman of the Committee on Eastern European Economic Relations, told DPA.

A far more contentious issue on whether or not to send lethal defense arms to Kiev is also likely to be struck form the agenda in Brussels, Xavier Bettel, Prime Minister of Luxemburg, said.

This longish, but interesting article appeared on the Russia Today website at 12:31 p.m. Moscow time on their Thursday afternoon---and it's courtesy of Roy Stephens as well.


E.U. warns of more sanctions if Russia flouts ceasefire

EU leaders gave a “cautious” welcome to the Ukraine ceasefire deal on Thursday (12 February) but warned of further sanctions if it isn’t implemented.

“We gave it our cautious approval. But words set down on paper must be accompanied by deeds … If this doesn’t happen we will not hesitate to take further steps”, Council chief Donald Tusk told press after a summit in Brussels.

“This conflict is not just about the territorial integrity of Ukraine. The whole geopolitical order in Europe after 1989 is at stake and we will be ready for any further development, good or bad”.

He noted the leaders didn’t discuss new sanctions in detail.

This news item appeared on the Internet site just after midnight Europe time on their Thursday morning---and once I again I thank Roy Stephens for digging it up for us.


The Minsk Peace Deal: Farce or Sellout? — Paul Craig Roberts

Judging by the report on Russia Today, I conclude that the Ukraine peace deal worked out in Minsk by Putin, Merkel, Hollande, and Poroshenko has little chance of success.

As Washington is not a partner to the Minsk peace deal, how can there be peace when Washington has made policy decisions to escalate the conflict and to use the conflict as a proxy war between the U.S. and Russia?

The Minsk agreement makes no reference to the announcement by Lt. Gen. Ben Hodges, commander of U.S. Army Europe, that Washington is sending a battalion of U.S. troops to Ukraine to train Ukrainian forces how to fight against Russian and rebel forces. The training is scheduled to begin in March, about two weeks from now. Gen. Hodges says that it is very important to recognize that the Donetsk and Luhansk forces “are not separatists, these are proxies for President Putin.”

How is there a peace deal when Washington has plans underway to send arms and training to the U.S. puppet government in Kiev?

This commentary by Paul appeared on his Internet site late yesterday morning EST---and I thank Dan Lazicki for his last offering in today's column.


ETF and central bank buyers storm gold market

The World Gold Council's annual demand trends study for 2014 shows a year of painful readjustment and rebalancing for the gold market after a record-breaking 2013.

Overall demand slipped 4% to 3,923 tonnes last year with jewellery demand falling 10% to 2,253 tonnes compared to 2013. Technology demand continued its long-term decline, dropping to an 11-year low in 2014.

On the flip side central bank purchases jumped close to a 50-year high of 477 tonnes while net investment demand managed to eke out gains of 2% for a total of 904.6 tonnes during the year.

Juan Carlos Artigas, ‎Director of Investment Research at the WGC, cautions however that the positive year-on-year comparison was not necessarily driven by an improvement in investor sentiment, but rather by a slowdown in outflows.

This is a story similar to the Bloomberg article that appeared in this column yesterday---and except for the headline, the spin on it isn't as cheery.  It was posted on the Internet site yesterday sometime---and I thank reader M.A. for his second contribution to today's column.


The Federal Reserve president who owns the most gold

Richard Fisher, the Federal Reserves' inflation hawk, owns platinum, uranium and over $1 million in gold according to annual filings of the 12 Fed presidents for 2010.

The full list of holdings can be found on page 522 of the disclosure documents that The New York Times posted online.

There are no miners amongst Fisher's common stock holdings, but there are a renewable energy companies, such as First Solar and Waterfurnace Energy. Investments are under $50,000.

Precious metals still make up a small amount of Fisher's portfolio. The Texan also owns several millions in property and municipal bonds.

This tiny article is the second one in a row from the Internet site.  This one was posted there on Wednesday---and it's courtesy of Elliot Simon.


25% of physical gold buyers are crazy, Kitco metals executive says

A lot of people who buy bits of physical gold aren't looking to make a bracelet or ring. They buy gold because they believe disaster is imminent.

These investors are convinced gold will spike to $10,000 an ounce (it's currently around $1,225) when the U.S. government implodes, said Peter Hug, an executive at metals retailer Kitco.

Hug calls these people "crazies" and says they form a substantial amount of the U.S. physical gold market -- at least 25%.

It's no secret that gold has long been viewed as a form of insurance against disaster. The thinking is that even if the financial or political system collapses, gold will still hold value.

Kitco is a very reputable company---and after suffering with the likes of Jon Nadler for years, one would think that Bart Kitner wouldn't let any of their company executives anywhere near a microphone or a reporter unless they had something positive to say.  This is obviously not the case, as disparaging a large chunk of your client base in the public press is never a good idea.  This article appeared on the Internet site 10:02 a.m. EST on Thursday morning---and the first person through the door with it yesterday was Howard Brown.


Rattled European consumers buy more gold in January

Physical gold sales in Europe jumped in January, dealers said, as concerns over the euro zone's outlook sparked by central bank action and anti-bailout party Syriza's victory in Greek elections drove consumers to load up on bullion.

Financial markets were roiled last month after the European Central Bank unveiled a new plan to pump billions of euros into the economy, the Swiss National Bank cut the franc's peg to the single currency, and Syriza won a snap election in Athens.

That prompted a 6.7 percent drop in the euro versus the dollar, its worst monthly performance since mid-2012, and sent investors scurrying into other assets, including gold.

German coin dealer Degussa reported a 35 percent year-on-year increase in its gold coin sales in Germany in January.

As I commented yesterday, if there is buying going on, it certainly isn't showing in the gold and silver ETFs at Switzerland's Zürcher Kantonalbank at all this year.  This Reuters article, filed from London, appeared on their Internet site at 11:14 a.m. EST yesterday morning---and it's worth reading.  I thank reader U.D. for passing it around yesterday.


Lawrence Williams: India world’s largest gold ‘consumer’ -- China has biggest total demand

The latest Gold Demand Trends report from the World Gold Council (WGC) does indeed suggest that total ‘consumer’ demand for the precious metal in India last year did exceed that of China after falling behind in the previous year. But the report is careful not to actually state that India’s total gold demand exceeded China’s due to the substantial amount of gold flowing into China’s banks, which falls outside the GFMS calculated ‘consumer demand’ parameters. At last we have an explanation for the huge disparity between the apparent gold demand figures in the GFMS reports, which the WGC utilises, and the continuing huge levels of Chinese demand suggested by the reported withdrawals from the Shanghai Gold Exchange (SGE).

The WGC explains it thus: “The flow of gold into China has far exceeded the amount needed to meet domestic jewellery and investment demand in recent years. The role of the commercial banks in using this gold for financing purposes has been well documented, including in our report, Understanding China’s gold market, and this activity expanded in 2014. To some extent, this helps explain why Shanghai Gold Exchange delivery figures are significantly higher than consumer demand.”

So there are two demand categories here, one of which is recorded in the WGC and GFMS figures and one which is not. Arguably it is the bigger figure of the two which is most relevant as far as flows of physical gold from West to East are concerned and, as we have pointed out before, the circa 2,100 tonnes withdrawn from the SGE in 2014, suggesting a fall in ‘total’ Chinese demand last year of between 2-3%, is indeed compatible with the fall in ‘consumer’ demand of over 30%. So India may have regained its position as the world’s largest gold ‘consumer’, but remains far behind China in terms of actual gold flows into the two countries. So there you have it! The media headlines you see saying India has regained top gold demand position are both correct, and hugely incorrect, depending on how the statistics are interpreted.

Like I and others at GATA have said for over a decade---you can't believe anything that comes out of GFMS or any other precious metal organization when it comes to gold or silver.  They paint whatever supply/demand picture they want. That includes the World Gold Council, the CPM Group and The Silver Institute.  My contempt for them knows no bounds.  Reg Howe had it exactly right about GFMS---and I salute him from this page!  This excellent commentary by Lawrie showed up on the Internet site at 3:07 p.m. GMT on Thursday afternoon---and it's a must read for sure.


Lawrence Williams: Chinese gold demand discrepancy explained?

For some time now there has appeared to be an enormous discrepancy between apparent Chinese estimated demand figures as calculated by bodies like the World Gold Council (WGC) and GFMS and the reality of Chinese gold withdrawals from the Shanghai Gold Exchange (SGE).  And it all seems to be down to the way the statistics are calculated and what is included in the words ‘consumption’ or ‘demand’ by the analysts.  To some extent this has been clarified in part by the latest Gold Demand Trends report from the WGC which comments as follows: “The flow of gold into China has far exceeded the amount needed to meet domestic jewellery and investment demand in recent years. The role of the commercial banks in using this gold for financing purposes has been well documented, including in our report, Understanding China’s gold market, and this activity expanded in 2014. To some extent, this helps explain why Shanghai Gold Exchange delivery figures are significantly higher than consumer demand.”

The apparent difference between what we will describe as Chinese ‘consumption’ and Chinese ‘total demand’ is thus huge.  WGC/GFMS calculates ‘consumption’ as being made up only of jewellery, technology and investment demand and in mainland China’s case this came to around 814 tonnes in 2014, around 38% down from that of 2013.  But with SGE withdrawals coming to a little over 2,100 tonnes in 2014 – which some equate to total Chinese demand – this leaves a tremendous gap of almost 1,300 tonnes in the two different calculations.  The WGC will tell you that there is an element of double counting in the SGE withdrawal figures, but admits this is probably small, only relating to some recycled gold,  and now suggests the balance is held by Chinese banks (which it classifies as stocks and therefore doesn’t include the figures in its demand classification).

This is more commentary by Lawrie on the same issue.  This appeared on his own website yesterday as well---and it's worth reading too!



¤ The Funnies

These four photos were taken in the Painted Desert at the north end of Petrified Forest National Park in Arizona---and just north of Interstate 40/U.S. Route 66---and about 25 miles east of Holbrook.  They were taken about two hours after the photos I took in Snowflake that appeared in yesterday's column.  As usual, the 'click to enlarge' feature really helps here.

The building in the photo below is the historic Painted Desert Inn at Kachina Point---and I was able to get myself in a position where the picture didn't include the associated parking lot!

Part of the famous U.S. Route 66 used to pass through the Painted Desert at this point---and I couldn't resist.  I cropped it a bit to remove some offending power poles.  Here's the link to the original Route 66 song---and the theme from the TV series.

This last photo is just south of Interstate 40, but still in the park---and forms the transition zone between the painted desert and the petrified forest.  Not that they're different, as one is just an extension of the other.  Note the petroglyphs on the rock in the foreground.  There are lots of them in this area.

First Majestic is a mining company focused on silver production in México and is aggressively pursuing the development of its existing mineral property assets. The Company presently owns and operates five producing silver mines; the La Parrilla Silver Mine, the San Martin Silver Mine, the La Encantada Silver Mine, the La Guitarra Silver Mine, and the Del Toro Silver Mine. Production from these five mines is anticipated to be between 11.8 to 13.2 million ounces of pure silver or 15.3 to 17.1 million ounces of silver equivalents in 2015.


¤ The Wrap

Let me make it easy for those who refuse to acknowledge the silver manipulation. Simply explain why 8 traders, mostly domestic and foreign banks, would hold short the equivalent of 40% of the world's annual production---and a third of all the silver bullion that exists---at prices below the average primary cost of production and nearly 70% below the price levels of four years ago.

How could such a concentrated short position be explained in legitimate terms and what would be its purpose? What effect would such a large short position have on the price of any commodity---and how do you see it being resolved if it wasn’t permanent?

I don’t expect any serious answers to such questions, as it appears to be easier to malign the questioner as a conspiracy theorist instead, but I know these questions have never been addressed in a straightforward manner by anyone who denies the silver manipulation. The funny thing about serious questions that can’t be answered is that they can lead to personal epiphanies, such as the type I experienced 30 years ago when Izzy asked me why silver prices were so low in the face of a deficit. One of these days the questions may be asked by someone in position to do something about it. - Silver analyst Ted Butler: 07 February 2015

Except for the sudden rallies, followed by the equally forceful sell-offs shortly after London opened, it was another day where both gold and silver were under quiet selling pressure through all of London trading---and most of New York as well---even though both metals finished up a bit on the day.

And as I pointed out earlier, the face plant in the U.S. dollar index was not a factor in the precious metal prices yesterday, as their prices are set in the COMEX futures market---and whatever the Big 8 short sellers in both gold and silver decide, is where prices go.

Here are the 6-month charts for both gold and silver.

And as I write this paragraph, the London open is about twenty minutes away.  All four precious metals have been creeping higher during Far East trading on their Friday.  Net gold volume is a bit under 17,000 contracts---and silver's net volume is around 3,500 contracts.  The dollar index, which took a 20 basis points nose dive back below the 94.00 level starting around 11:30 a.m. Hong Kong time, is now back above it by a few basis points---and is currently down 13 basis points at the moment.

Today at 3:30 p.m. EST we get the latest Commitment of Traders Report figures from the CFTC---and as both Ted and I have mentioned, we'll see some pretty impressive improvements in the Commercial net short positions in both silver and gold.  But whatever improvements are shown, the report still remains in a major bearish configuration in both silver and gold.

Could we rally from here?  Sure, but the odds aren't in our favour in the medium or long term---and unless "da boyz" get over run, a brutal sell-off still remains in our future.  The only uncertainties are, is will it be quick---death by a single thrust---or the 'slicing of the salami' variety?  Stay tuned.

Of course supply and demand will manifest itself at some point, but when, is the $64,000 question.  I don't know, but the day it does become a factor, we won't have to ask, as the new prices will tell you everything you need to know.

And as I send this out the door at 5:15 a.m. EST, I note that the rallies in all four precious metals were turned lower at, or just before the London open.  Whether this trend continues for the remainder of the Friday trading session is unknown.  Net gold volume is just under 24,000 contracts---and silver's net volume is around 5,100 contracts.  Not a lot to see here---and the dollar index is hanging on to the 94.00 level by its proverbial fingernails.

That's all I have for today.  Enjoy your weekend, or what's left of it if you live west of the International Date Line---and I'll see you here tomorrow.

Ed Steer