Gold & Silver Daily
"The new technical fund longs that rushed into the market on Wednesday got their heads handed to them"

¤ Yesterday In Gold & Silver

Gold's price path during the Far East trading session was pretty much what it's been for the last little while...a tiny rally that tops out in afternoon trading in Hong Kong...and the a gentle sell-off into the London open and beyond.

Such was the case again yesterday.  Gold traded pretty flat in London...dipped, and then went vertical about ten minutes after the Comex open.  That rally lasted about one minute...and that was pretty much it for the day, as the high frequency traders engineered a price decline that took back all of Wednesday's a little bit more.

The low of the day [$1,656.90 spot] came minutes after 12 o'clock noon in New York...and from there it recovered a few dollars going into the close of electronic trading.  The high, about $1,681 spot, was around 2:00 p.m. in Hong Kong.

Gold closed at $1,663.80 spot...down $12.60 from Wednesday.  Net volume was very chunky...around 172,000 contracts.  All the newly-minted long positions that were placed during yesterday's big rally got blown out of their positions during the New York trading session on Thursday, as JPMorgan et al rang the cash register again.

It was precisely the same story in silver...and I'll spare you the gory details, as the chart says it all.

Silver's high [around $32.10 spot] came at gold's high...around 2:00 p.m. in Hong Kong.  Thursday's low [$31.04 spot] came at 12:10 p.m. in New York.

Silver closed at $31.47 spot...down 55 cents on the day.  Net volume was pretty hefty at 51,000 the new silver longs met the same fate as the new gold longs.

Platinum and palladium had totally different chart patterns, but both finished down on the day as well.

The dollar index opened at 79.26...and then traded basically flat the whole day, closing at 79.20.  Nothing to see here.  For the umpteenth time the currencies had nothing to do with the price action on the world's precious metal markets.  It was all paper trading on the Comex that determined the price it is most days.

The HUI dropped over a percent during the first thirty minutes of the trading day...and basically didn't do much for the rest of the day, closing down 1.14%.

Except for a couple of small junior producers, the silver stocks all finished lower on the day...and Nick Laird's Intraday Silver Sentiment Index closed down 0.93%.

(Click on image to enlarge)

The CME's Daily Delivery Report for 'Day 2' of the February delivery month showed that 1,554 gold and 1 lonely silver contract were posted for delivery from within the Comex-approved depository on Monday.  There was no stand-out short/issuer amongst the more that two dozen companies involved...but Morgan Stanley, the Bank of Nova Scotia and Goldman Sachs were four of the most notable.  The two biggest long/stoppers by far were Deutsche Bank and HSBC USA...with 575 and 564 contracts respectively.  JPMorgan Chase was a distant third.  The Issuers and Stoppers Report is definitely worth a quick look...and the link is here.

There were no reported changes in GLD yesterday...but an authorized participant withdrew 2,079,201 troy ounces of silver from SLV.

The U.S. Mint had a tiny sales report to round out the month.  They sold 500 one-ounce 24K gold buffaloes, along with another 78,000 silver eagles.  For the month, the mint sold 150,000 ounces of gold eagles...72,500 one-ounce 24K gold buffaloes...and 7,498,000 silver eagles.  The silver/gold sales ratio for January was almost 37 to 1.

Over at the Comex-approved depositories on Wednesday, they reported receiving 300,964 troy ounces of silver...and shipped only 19,612 ounces of the stuff out the door.  The link to that action is here.

The latest Weekly Analysis of SLV's bar list was posted on the Internet site on Wednesday...and you can read all about the latest internal goings-on by clicking here.

I have three charts courtesy of Nick Laird today.  The first two are the Intraday Average Gold/Silver Price Movements for December 2012.  Note that the average daily high in gold in December came around 9:30 a.m. in London...a bit of a recovery at the noon silver fix...and then the sell-off at the Comex open...with the low of the day shortly before lunch in New York.

(Click on image to enlarge)

The December Intraday Average Price Movement for silver is almost identical to the above gold chart...with the major price changes coming at the same times.

(Click on image to enlarge)

I posted the chart below in Thursday's column...but it only started at the year 2000. This one shows how gold, bonds, stocks and the U.S. dollar index have fared since 1970.

(Click on image to enlarge)

I don't have all that many stories today..and I hope you have the time to at least read the parts of each that I've cut and paste.


¤ Critical Reads

Obama's jobs council shutting down Thursday

As new weekly jobs numbers emerged Thursday showing a jump in unemployment claims and a report released the previous day showed the economy shrinking in late 2012, President Obama is effectively laying off his jobs council. 

The layoff -- which comes in the form of the administration not renewing the council, which sunsets Thursday -- takes off the table a first-term panel set up to field ideas from the business community for spurring growth. But the administration was accused all along of never taking full advantage of the group at a time when the economy desperately needed those ideas. 

The council itself, a group of business and labor leaders, hasn't met officially in more than a year. The group was tasked with making recommendations to Obama to help create jobs, but the 26 members only met four times in two years. 

As the council expires Thursday with no plans to extend it, House Speaker John Boehner's office panned the president's alleged disinterest in the group.

This Fox News article was filed from Washington yesterday...and I thank Washington state reader S.A. for today's first story.  The link is here.


Bill Gross: Investment Banks Have Morphed Markets With 'Ponzi Finance' — and Time is Almost Up

Bill Gross, the PIMCO fund manager known as the "Bond King," is out with his February investment letter, titled "Credit Supernova!"

This month, Gross tackles the relationship between credit expansion and real growth. He channels the late economist Hyman Minsky, saying the economy is now in Minsky's "Ponzi finance" phase, "when additional credit would be required just to cover increasingly burdensome interest payments, with accelerating inflation the end result."

Gross writes that new credit is providing diminishing returns: "Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result."

Gross is starting to sound suspiciously like Doug Noland over at the Prudent Bear.  But if Bill really wants to walk the walk that goes with the talk, he should convert his bond fund into a physical precious metal fund.  This story appeared on the Internet site yesterday morning Eastern time...and I thank Roy Stephens for sending it. The link is here.


Most French people believe country is 'totally bankrupt'

Two thirds of French people agree with their labour minister's controversial claim that the country is a "totally bankrupt state".

In all 63 per cent agree that "in France, the state is bankrupt", with 45 per cent saying the claim was "more or less justified" and 17 per cent feeling it was "totally justified", according to a CSA poll for BFM TV.

France last balanced its budget in 1973. State spending accounts for almost 57 per cent of gross domestic product while public debt has now reached 91 per cent of GDP – some 28,000 euros per inhabitant.

The trade deficit hit a record high of 74 billion euros last year and unemployment has risen constantly over the past two years to above the three million mark.

This story appeared on the Internet site early yesterday afternoon GMT...and the link is here.


Europe "Fixed" Facade Crumbling As German Retail Sales Implode

Remember all those soaring German confidence indices that said ignore the negative GDP print and focus on a future so bright, ze Germans got to wear Zeiss? Appears the confidence may have been a tad massaged upwards because following a spate of weak corporate results out of Europe's growth dynamo, the German HDE retail association said Christmas sales for November and December were down some 0.7% from the prior year. Specifically German retail sales plunged -1.7% from November on expectations of a modest -0.1% decline, while on a year over year basis December imploded a whopping -4.7% vs. expectations of -1.5%. Did the Germans blame the weather of lack of government spending, or maybe say to only focus on the positive aspects of the report (if any)? No. They were not girlie men about it.

This article was posted on the Zero Hedge website yesterday...and I thank 'David in California' for bringing it to our attention.  The link is here.


Italy risks political crisis as MPS bank scandal turns 'explosive'

Italian magistrates investigating losses at Banca Monte dei Paschi say the mushrooming scandal has taken a dramatic turn, with political fallout that threatens to rock the country’s elections next month and upset eurozone plans for a banking union.

“The situation is explosive,” said Tito Salerno, head of the prosecuting team in Siena, describing the fast-moving events at Italy’s third-largest bank as extremely grave.

The Milan bourse tumbled 3.4pc and yields on 10-year Italian bonds spiked 15 basis points to 4.31pc as the political scandal widened.

Monte dei Paschi (MPS), the world’s oldest bank dating back to 1472, is under investigation for covering up losses on derivatives and paying over the odds for its €9bn (£7.8bn) purchase of Banca AntonVeneta in 2007. Italy’s press alleges that the inquiry has unearthed a network of bribes and kickbacks, a claim denied by the bank.

I ran a story about this a few days back...but here's Ambrose Evans-Pritchard's take on it.  It was posted on The Telegraph's website late Wednesday evening...and it's courtesy of Roy Stephens.  The link is here.


Syria Threatens "Surprise" Response To Israel Air Raid; Iran And Russia Pile In

In the aftermath of yesterday's surprising attack by Israel on Syrian soil, an act which any prior justification notwithstanding is a clear act of war sovereign aggression, it was only a matter of time before Syria responded, at least diplomatically at first. And as we also noted yesterday that "Iran has previously warned that any attack on Syria is the same as an attack on Iran" it was safe to assume that Iran would have a thing or two to say in response as well. Earlier today they did just that, with Syria warning that a "surprise" response to the Israel attack is forthcoming, while the "Iranian deputy foreign minister Hossein Amir Abdullahian said the attack "demonstrates the shared goals of terrorists and the Zionist regime...

It is necessary for the sides which take tough stances on Syria to now take serious steps and decisive stances against this aggression by Tel Aviv and uphold criteria for security in the region." Finally yesterday we wondered "how Russia and/or China which have made clear that Syria is a strategic geopolitical center for both in the past will react", and today we know: "Russia, which has blocked Western efforts to put pressure on Syria at the United Nations, said that any Israeli air strike would amount to unacceptable military interference." So far nothing from China, which has in the past let Russia be its proxy on Syrian matters.

And while the rhetoric has soared on all sides, it remains to be seen if Syria will indeed challenge Israel or if it will retain its bluster, an act which will simply invite Bibi to launch ever more offensive sorties until one day something finally does snap.

This article showed up on the Zero Hedge website yesterday...and it's courtesy of Marshall Angeles.  The link is here.


Three King World News Blogs

The first is with Egon von Greyerz...and it's headlined "Key Charts, Propaganda, Gold, Silver and the Ongoing Collapse".  Next is this blog with Paul Brodsky.  It's entitled "QB Asset Management Projects Shadow Gold Price to be $15,000 in One Year!"  And lastly is this interview with Michael Belkin.  It bears the headline "We're Facing A 1987 Selloff and Eventual Hyperinflation".


Risks and Rewards: Deutsche Bank Returns to Commodities Speculation

Many financial institutions and multinational organizations view speculating on food commodities as a dangerous game and a contributor to global hunger. Despite its bruised reputation, Deutsche Bank is leaping back into the business.

In May 2012, shortly before ending his term as CEO of Deutsche Bank, Josef Ackermann realized with some remorse that "no deal is worth risking the good reputation of Deutsche Bank."

But, by then, the reputation of Germany's largest bank was already somewhat battered -- and it's suffered even more since. The latest scratch came on Thursday, when the bank reported a surprise net loss of €2.2 billion ($3 billion), for the fourth quarter of 2012, citing numerous lawsuits and official investigations among the reasons.

This makes it all the more surprising that Jürgen Fitschen, who succeeded Ackermann along with co-CEO Anshu Jain, is now returning to the type of business that could further damage the bank's image: speculation in agricultural commodities.

This story was posted on the German website late yesterday morning European time...and it's worth skimming.  It's courtesy of Roy Stephens...and the link is here.


Jeff Clark: Is Germany preparing for future capital controls?

You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany.

Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits?

You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on?

This new editorial by Casey Research's own Jeff Clark was posted on their website yesterday...and it's definitely worth reading.  The link is here.


Gold price rigging is as old as gold itself

Writing for Forbes yesterday, economist, fund manager, and author Nathan Lewis proves that Harry Truman was right about gold as well as everything else insofar as "the only thing new in the world is the history you don't know."

In an essay headlined "The 10-Minute Gold Standard: It's Much Easier than You Think" -- Lewis quotes the classical economists David Ricardo and John Stuart Mill to argue that, theoretically, at least, a gold standard for currency can be maintained very simply without convertibility or any gold reserves at all if issuance of the currency is tightly controlled.

Quoting Ricardo from 1817: "It will be seen that it is not necessary that the paper money should be payable in specie to secure its value; it is only necessary that its quantity should be regulated according to the value of the metal which is declared to be the standard."

The rest of Chris Powell's commentary, plus the link to the article itself, was posted on the Internet site yesterday...and the link is here.


The Matterhorn interview: Robert Blumen on price formation in gold

Interviewed by Lars Schall for Matterhorn Asset Management's Gold Switzerland Internet site, the economist Robert Blumen explains why gold mine supply is of little relevance to the gold price, gold being largely hoarded and always available to the market rather than consumed or destroyed like other commodities. Blumen also comments favorably about GATA's complaint that Western central banks are surreptitiously active in the gold market to restrain the price.

I borrowed all of this preamble from a GATA release yesterday.  The interview is headlined "What Is Really Key for the Price Formation of Gold?"...and it's posted at Gold Switzerland's Internet site here.


LBMA, IGE urged to end Iran-Turkey Gold trade

Turkey is facing more pressure from global communities to end it's gold-for-gas dealings with Iran.

The latest to join the fray is United Against Nuclear Iran (UANI), which launched its Turkey gold campaign, and called on both the London Bullion Market Association (LBMA) and Istanbul Gold Exchange (IGE) to enact new measures to combat illicit barter agreements, where Iranian crude oil is being exchanged for Turkish gold.

Specifically, UANI is calling for the LBMA to require all of its members, particularly the IGE, to certify that the recipient of their gold products is not Iran. The LBMA should revoke the membership of any member that is unable to do so.

The trade of Turkish gold for Iranian crude oil is enabling the Iranian regime to evade sanctions and continue funding its nuclear program.

This article showed up on the Internet site early yesterday afternoon India Standard Time...and I thank Marshall Angeles for sending it.  It's a must read...and the link is here.


Dubai gold dealers shun Turkish bars on fears of Iran link

Trade in Turkish gold bars to Iran via Dubai is drying up as a growing number of banks and dealers refuse to buy the bullion to avoid the risks associated with Turkey’s gold-for-gas trade with Iran.

U.S. officials say they are concerned the trade between the two countries provides a financial lifeline to the Iran, which is largely frozen out of the global banking system by Western sanctions.

The U.S. State Department said in December that diplomats were in talks with Ankara over the flow of gold to Iran after the Senate approved expanded sanctions on trade with Iran's energy and shipping sectors, which would also restrict trade in precious metals.

This commentary was posted on the Internet site sometime on Wednesday...and I thank Marshall Angeles for sending it along.  It's definitely worth reading...and the link is here.


Lawrence Williams: Consolidation over? Is gold at the turning point?

Maybe I’m reading too much into the latest utterances on likely gold price performance this year and going forward but I do get the feeling in my bones that the yellow metal’s flat performance of the past 15 months or so may be coming to an end – not in a collapse, but in an upwards surge.

There do seem to be some fundamental moves which could suggest a bit of a sea change in sentiment towards precious metals, and gold in particular.

The first of these is the German decision to repatriate half its gold, from vaults in the U.S. and France, over the next seven year. Now while the Bundesbank seems to deem this a satisfactory programme, the German in the street must be asking why can this not be achieved this year, or this month even.

No explanation from the Bundesbank, or the Fed can possibly alleviate the suspicion, long expressed by organisations like GATA, that all the German gold is not, at this time, actually available to be moved.

This wonderful commentary by Lawrie was posted on the Internet site yesterday...and although I've never met the man, I can tell from his picture on the web page, that he'd look pretty spiffy in a tinfoil hat.  It's a must read for sure...and the link is here.



¤ The Funnies

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¤ The Wrap

Wood burns faster when you have to cut and chop it yourself. - Harrison Ford

Well, the new technical fund longs that rushed into the market on Wednesday got their heads handed to them by JPMorgan et al about twenty-four hours later.  I don't know how much the Commercial traders made off that one-day trade, but it wasn't peanuts.  On paper they lose money all the way up during a rally, but ring the cash register during the inevitable engineered price decline that follows.  They've been doing this for decades...and it's flat-our illegal...but who's going to stop them?

The last couple of trading days have not been kind to precious metals investors.  The obvious price intervention in both the metals themselves and their associated equities, shows you just how desperate the powers-that-be have become.  They're doing everything they can to keep the average investor as far away from the precious metals [and salvation] as they possibly can.  The message they sent in the last couple of days is..."stay away, or you'll get burned."

This day-to-day noise is aggravating and, without question, wears down the average investor.  But, underneath the surface in the precious metal markets, there are big changes going on that we just aren't privy to...and it's a good bet that they're tied in with the economic and political changes that are engulfing the entire planet at the moment.

The only thing that is certain, is that this situation can't go on forever...and I'd bet serious money that when the end does come, it will come suddenly...and probably on a weekend or overnight when no one is in a position to take advantage of it.  You will either be all the way in...or all the way out when that moment arrives.

As Lawrie Williams pointed out in today's last story, the charts certainly indicate that an upside breakout is imminent...but as I've gone on about many times in the past, these chart looks the way they do because of JPMorgan and friends.  Chris Powell's now-famous quote..."There are no markets anymore...only interventions"...applies in spades when viewing the 3-year charts in gold and silver posted below.

(Click on image to enlarge)

(Click on image to enlarge)

So we just have to wait it out...and continue to buy the dips if one is in a position to do that.  However, speaking for myself, I've had all the dip-buying opportunities that I could ever want over the last thirteen years...and it's time to get this show on the road for real.

However, if you haven't yet done so, the precious metal stocks have never been this cheap versus the price of gold itself...and it certainly appears to be the time to take the plunge if you haven't already.  So I'd like to remind you one more time that there's still an opportunity to either readjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take out a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] well as the archives. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Today we get the latest Commitment of Traders Report for position held at the close of Comex trading on Tuesday...and based on the price action during the reporting week, there should be decent declines in the Commercial net short positions in both gold and silver.  But whatever the report shows, I'll have all the numbers in tomorrow's column.

Gold and silver prices didn't do much in Far East trading on their Friday...and now that London has been open for a couple of hours, gold is up a dollar or so...and silver is down about 15 cents. Volumes are on the lighter side...and the dollar index isn't doing much, either.

That's it for today.  The job numbers comes out at 8:30 a.m. Eastern time...and we'll find out instantly how the precious metals react to it...or are allowed to react to it.

See you here tomorrow.