Casey Research Publication
Gold & Silver Daily
"So...where do we go from here? A good question for which I have no answer."
 

¤ Yesterday In Gold & Silver

With the gold and silver markets closed in London and New York, there was no activity worthy of the name.  There were some squiggles on the gold chart during the Far East trading day...but that was it.

Kitco's silver chart was a straight line.

Strangely enough, the dollar index showed activity all day, with the 30 basis point drop at 8:20 a.m. in New York being the most prominent feature on the chart.  If this activity is to be believed, the index finished down about 16 basis points.

With no markets, there was no HUI or Silver Sentiment Index.

There was no Daily Delivery Report...nothing from either GLD, SLV...or the U.S Mint...and nothing from the Comex-approved depositories.

But, as Ted Butler pointed out to me on Thursday, the CFTC did post the Commitment of Traders Report and the Bank Participation Report...and their worth spending some time on.

Both of these reports are derived from the same data set...and are for positions held at the close of Comex trading at 1:30 p.m. Eastern time...which was thirty minutes before JPMorgan et al bombed the precious metals market, so none of that trading activity is in these reports.

In silver, there was an increase in the Commercial net short position during the reporting week, as the bullion banks and other Commercial traders increased their short position by 1,658 contracts, or 8.3 million ounces.  The Commercial net short position now sits at 156.68 million ounces.

The '1 through 4' Commercial traders are short 174.65 million ounces...and once you remove the 25,257 market-neutral spread trades from the Non-commercial category, these four traders are short 39.1% of the entire Comex silver futures market.  The lion's share of that amount is held by JPMorgan.  The '5 through 8' Commercial traders are short an additional 44.83 million ounces of silver.  Of the 45 short-side traders in the Commercial category, the 'big 8' traders combined are short 48.9% of the entire Comex silver market.  That's concentration...and this is what the CFTC and the CME Group refuse to deal with.

The Commercial net short position in gold declined by 761,000 ounces...and now sits at 17.75 million ounces.  The '1 through 4' Commercial traders [read bullion banks] are short 11.7 million ounces of gold...and the '5 through 8' commercial traders are short an additional 5.5 million ounces.

Of the 45 short-side traders in the Commercial category, the 'big 8' Commercial traders are short 44.4% of the entire Comex futures market in gold...once the 20,401 market-neutral spread trades are subtracted from the Non-Commercial category.

Of course, thirty minutes after the 1:30 p.m. cut-off for this COT report, everything began to change.  Once 'da boyz' were through bombing the precious metal market 24-hours later, it was a given that the internal structure of both the silver and gold markets had become far stronger...and this already bullish COT report is vastly more so at this point.  But we won't know how much of an improvement there was until next Friday's COT report.

In silver, the April Bank Participation Report showed the 4 U.S. banks were net short 19,896 Comex silver contracts...which is 21.8% of the entire Comex futures market in silver.  I would guess that close to 90% of that position is held by only one U.S. bank...and that would be JPMorgan.  The March BPR showed that these same four U.S. banks were net short 23,665 Comex silver contracts, so it's declined quite a bit over the month.  This should be no surprise since the drive-by shooting that began on February 29th. 

There are 14 non-U.S. banks that hold positions in the Comex futures market in silver.  In the April report these banks were net short 2,275 Comex contracts...which is a decline of 300 contracts since the March report.  That works out to about 163 contracts for each bank...and it's my bet that the vast majority of this net short position is only held by two or three of the 14 reporting banks.  But regardless of that, their positions are immaterial in the grand scheme of things.

In gold, the same 4 U.S. banks are now net short 69,473 Comex contracts...down from 92,052 Comex contracts in March.  These 4 U.S banks are net short 17.9% of the Comex futures market in gold.

The 19 non-U.S. banks are net short 37,802 Comex gold contracts...a smallish increase from March's BPR report where they held 36,257 contracts net short.  This is less than 2,000 Comex gold contracts held short by each bank but, just like silver, I'd guess that three or four banks of the 19 that report holding Comex contracts, hold the lion's share of this non-U.S. bank short position in gold as well.

As you can tell from these numbers for both silver and gold, the biggest changes from the March to April Bank Participation Reports were in the size of the positions held by the 4 U.S. banks.  This engineered price decline that began on February 29th was "Made in the U.S.A."  The changes in the non-U.S. banks in both metals was immaterial, as it almost always is.

And, just like silver, the Bank Participation Report, if it included the price decline of Tuesday and Wednesday, would be a vastly different animal from what it showed as of the Tuesday 1:30 p.m. cut-off.  That applies to all the precious metals...and copper as well.

Here's Nick Laird's Days of World Production to Cover Short Positions that the four and eight largest traders hold short for each Comex-traded commodity.  This is a visual representation of the data in the above COT report.  Note that the four precious metals have the largest total short positions...and that the 4 largest traders/bullion banks hold the bulk of them.

(Click on image to enlarge)

Before I move on to today's list of stories, I'd like to draw your attention to a new 80-page book that reader Randall Reinwasser has published.  It's headlined "The Ultimate Guide to Storing Gold and Silver Overseas: An Inside Look at 10 Offshore Gold & Silver Storage Facilities".  If this is a topic that you would find of interest, the link to the book at the amazon.com website is here.

I've been saving quite a few stories for today's column...and I don't have that many in total, so I hope you have the time to read them all.

 

¤ Critical Reads

Strip Searches: The Supreme Court's Disturbing Decision

It might seem that in the United States, being pulled over for driving without a seat belt should not end with the government ordering you to take off your clothes and "lift your genitals." But there is no guarantee that this is the case -- not since the Supreme Court ruled this week that the Constitution does not prohibit the government from strip searching people charged with even minor offenses. The court's 5-4 ruling turns a deeply humiliating procedure -- one most Americans would very much like to avoid -- into a routine law enforcement tactic.

The U.S. is well down the road towards a police state...and this is just another brick in the wall.  I thank reader Jerome Cherry for bringing this story to my attention...and now to yours.  It was posted over at the TIME magazine website...but was picked up by news.yahoo.com...and the link to the piece is here.

Read more...

Wall Street Math: Doug French

There's plenty of blame for the financial crisis being spread around. Those on the left say Wall Street wasn't regulated enough, while those on the right claim government mandates required lenders to make bad loans. The argument is made that the Federal Reserve was too loose, while the other side says Bernanke wasn't loose enough. Some blame greed. Others blame Wall Street's investment products. And then there's mathematics.

Wall Street has become a numbers game played at high speed by powerful computers trading complex derivatives utilizing even more complex mathematical modeling.

This very well-written article showed up on the mises.org website yesterday...and I thank West Virginia reader Elliot Simon for sending it along.  The link is here.

Read more...

Blythe Masters: The woman who built financial 'weapon of mass destruction'

If Warren Buffett is to be believed in his verdict that derivatives are "financial weapons of mass destruction" then Blythe Masters is one of the destroyers of worlds.

British-born Masters is one of the most powerful women on Wall Street and is widely recognised as one of an elite group dubbed the "JP Morgan mafia" that fostered the creation of the complex credit derivatives at the heart of the current crisis ripping through Wall Street. Many of the highly qualified mathematicians and academics who worked on the credit derivatives market in the early days have gone on to run hedge funds and into high-powered jobs at other investment banks, but most of them started out at JP Morgan.

Masters sees things slightly differently. In a brief email exchange with the Guardian, she said: "I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools."

This article from The Guardian is datelined September 20, 2008...but not a thing has changed since it was written.  It's a must read for sure...especially if you read the lead story by Doug French posted above.  I thank reader Federico Schiavio for digging this one up...and the link is here.

Read more...

How Bernanke May Become von Havenstein: Martin Hutchinson

At the Federal Open Market Committee meeting last week, policy remained unchanged, and the accompanying statement made the extraordinary claim that “measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.” The following day, the March Producer Price Index showed prices rising at 1.6% per month, equivalent to a rate of 21% per annum. Echoes of the German Weimar Republic inflation are getting louder, as do the chances for Ben Bernanke to turn into Reichsbank chairman Rudolf von Havenstein.

Von Havenstein took great pride in his work, bragging repeatedly about the Reichsbank’s success in gearing up physical note production to meet soaring market demand. Rather than practice or urge monetary restraint, he regarded the explosion of physical banknote production as a triumph of German efficiency. Such was the need for speed, in the fall of 1923 when prices were doubling every 3 days that he was forced to resort to airplanes to get the currency to the more distant economic centers.  All he lacked was Ben Bernanke’s helicopter!

If Bernanke persists on his present course, there is thus a significant chance that consumer prices will join producer and import prices on their rapid upward trend, and that by the end of the year we shall be suffering from 10% consumer price inflation. Bernanke and his colleagues will at that stage be in state of deep denial, focusing on “core” consumer price inflation (distorted) or personal consumption expenditure inflation (available only several months after the event.) If by the end of 2011 inflation is running at rate of 10%, even though the year on year figure will not have reached this level, while Bernanke’s current monetary policies and the Obama administration fiscal policies have been little if at all modified, then the outcome is plainly clear: inflation won’t stop at 10%, as it did in the 1970s.

This longish essay was posted over at the prudentbear.com website on March 21st.  I lifted it from the King Report earlier this week.  It's another must read...and the link is here.

Read more...

The Fog of Currency Wars: Jim Rickards

In the first half, Max Keiser and co-host Stacy Herbert discuss Ben Bernanke’s “happy dust” and Angela Merkel’s “red lines” cause ire in BRICS trade partners. In the second half of the show, Max talks to Jim Rickards about a BRICS currency, gold and the fog of currency war.

I didn't listen to the first half...but was all eyes and ears for the Jim Rickards interview, which starts at the 14:50 mark...and runs for about 13 minutes.  Regardless of your opinion of Rickards, I consider what he has to say well worth the listen.  It's posted over at the Russian Today website...and I thank reader Orlando Almodovar for sharing it with us.  The link is here.

Read more...

We want war, and we want it now: Pepe Escobar

No; this was not a Monty Python sketch.

To make sure he was milking the right cow, al-Faisal also said that the Gulf Counter-revolution Club (GCC), also known as Gulf Cooperation Council, wanted to get further into bed with the United States. Translation, if any was needed; the US-GCC tag team, as expressed by the weaponization of the Syrian "rebels", is meant to body slam Iran.

For both the House of Saud and Qatar (the other GCCs are just extras), what's goin' on in Syria is not about Syria; it's always been about Iran.

This especially applies to the Saudi pledge to flood the global oil market with a spare oil production capacity that any self-respecting oil analyst knows they don't have - or rather wouldn't use; after all, the House of Saud badly needs high oil prices to bribe its restive eastern province population into not even thinking about that Arab Spring nonsense.

For any serious student of Middle East politics...and the new "Great Game"...this is essential reading.  Roy Stephens sent it to me on Thursday...and I thought it best to post it on the weekend.  The story can be found over at the Asia Times website...and the link is here.

Read more...

2,500 marines in Australia 'new battlefront for US'?

The first US marines have arrived in Australia, as America boosts its military presence in the Asia-Pacific region. More than 2,000 personnel will be deployed there over the next few years and adds to America's military footprint in such countries as the Philippines and Singapore - all in China's backyard.

This is all about the continuing encirclement of China and Russia by the U.S. and NATO...the new "Great Game".  This 4:45 Russia Today video is posted over at youtube.com...and I thank Australian reader John Ilmenstein for bringing it to my attention.  It's certainly worth watching...and the link is here.

Read more...

Mineral Resources behind US push to Africa

As China maintains a record of consistently strong economic performance, Washington is crusading against China's export restrictions on minerals that are crucial components in the production of consumer electronics such as flat-screen televisions, smart phones, laptop batteries, and a host of other products. As the United States, European Union and Japan project international pressure on the World Trade Organization and the World Bank to block financing for China’s extensive mining projects [6], US Secretary of State Hilary Clinton’s irresponsible accusations of China perpetuating a creeping "new colonialism" of the African continent remain rather telling. As China is predicted to formally emerge as the world’s largest economy in 2016, the successful aggregation of African resources remains a key component to its ongoing rivalry with the United States.

In a 2010 white paper entitled "Critical Raw Materials for the EU," the European Commission cites the immediate need for reserve supplies of tantalum, cobalt, niobium, and tungsten among others [10]; the US Department of Energy 2010 white paper "Critical Mineral Strategy" also acknowledged the strategic importance of these key components. In 1980, Pentagon experts acknowledged dire shortages of cobalt, titanium, chromium, tantalum, beryllium, and nickel, eluding that rebel insurgencies in the Congo (referred to as Zaire) inflated the cost of such materials. Additionally, the US Congressional Budget Office’s 1982 report "Cobalt: Policy Options for a Strategic Mineral" notes that cobalt alloys are critical to the aerospace and weapons industries and that 64% of the world’s cobalt reserves lay in the Katanga Copper Belt, running from southeastern Congo into northern Zambia.

This story was posted over at the uruknet.de website earlier this week.  It, too, falls into the must read category.  Like the previous couple of stories, this is all about the American Empire out to grab the last of the world's untapped resources and deny China its share.  The "Great Game" is now being fought on all continents.  I thank reader Tariq Khan for bringing this story to our attention...and the link is here.

Read more...

Swiss franc 'safe haven' trade is mistake, von Greyerz tells King World News

Fund manager Egon von Greyerz gold King World News yesterday that there's a misguided "safe haven" trade into the Swiss franc again as it strengthens against the euro, but Switzerland is doing no better than the rest of Europe and soon gold will be seen as the only "safe haven" currency.

I borrowed the headline and the introductory paragraph from a GATA release...and the link to the KWN blog is here.

Read more...

Manipulators 'seriously overplaying their hand' - John Embry

Sprott Asset Management's John Embry told King World News that the gold and silver market manipulators "are seriously overplaying their hand" and driving demand for real metal way up as paper prices are forced down.

I borrowed 'all of the above' from another GATA release yesterday...and an excerpt from Embry's interview which is headlined "Gartman Inept, CNBC Wrong, Gold Demand off the Hook" is posted at the KWN website...and the link is here.

Read more...

The Who, How, and Why Behind Silver Price Manipulation

Manipulation is another way of saying someone controls and dominates the market by means of an excessively large position. So, just by holding such a large concentrated position, the manipulation is largely explained. In real terms, whenever a single entity or a few entities come to dominate a market, all sorts of alarms should be sounded. This is at the heart of U.S. antitrust law. It is no different under commodity law.

Price manipulation is the most serious market crime possible under commodity law. In fact, there is a simple and effective and time-proven antidote to manipulation that has existed for almost a century, and that solution is speculative position limits. Currently, the Commodities Futures Trading Commission
(CFTC) is attempting to institute position limits in silver, but the big banks are fighting it tooth and nail.

As far as any benefits the manipulators may reap, it varies with each entity. But if you dominate and control a market by means of a large concentrated position, you can put the price wherever you desire at times, and that's exactly what the silver manipulators do regularly. This explains why we have such wicked sell-offs in silver; because the big shorts pull all sorts of dirty market tricks to send the price lower.

This excellent Ted Butler interview was posted over at the moneymorning.com website on Thursday...and Florida reader Dennis Miller was the first one through the door with it.  It's a must read, of course...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

If you will not fight for the right when you can easily win without bloodshed; if you will not fight when your victory will be sure and not too costly; you may come to the moment when you will have to fight with all the odds against you and only a small chance of survival. There may even be a worse case: you may have to fight when there is no hope of victory, because it is better to perish than to live as slaves. - Winston Churchill

Today's musical selection is not a 'blast from the past' at all.  It's another one of those sublime moments that has come to us courtesy of the hit television show "Britain's Got Talent".  I still continue to watch the Paul Potts, Susan Boyle and Andrew Johnston videos for their inspirational values even now.

Well, I have another name to add to that list...and it will soon be a household name worldwide.  That name is Jonathan Antoine...and he's all of 17 years young.  He appears here on stage with singer Charlotte Jaconelli.  I hate to say it, but Charlotte was totally outclassed...and she knew it.  Nobody had to tell the judges or the studio audience that he was gifted, as they all knew it instinctively.  Saying that he's the reincarnation of Luciano Pavarotti would not be a stretch.

The audition is only spoiled by some of Simon Cowell's comments, which I thought were totally out of line.  If I were the network, I'd make sure that he gave a very profuse and very public apology for what followed after the couple was through singing.  It was inexcusable at best...and unconscionable at worst.

I've listened to it countless times already...and I urge you to listen to it as well.  It's already had over 9 million hits...and I thank Roy Stephens for sending me this youtube.com video clip about ten days ago...and the link is here.

So...where do we go from here?  A good question for which I have no answer.  It's obvious from looking at the 6-month silver and gold charts below, that the flush out from the February 29th drive-by shooting was still ongoing...and the price action on Tuesday and Wednesday was obviously an extension of that trend.

(Click on image to enlarge)

(Click on image to enlarge)

Are we done to the downside now?  And as I said in Friday's column...is it worth the while of JPMorgan et al to go after any more leveraged long positions, as the vast majority have already been flushed out?

We'll just have to wait it out and see what happens.

Enjoy what's left of your Easter weekend...and I'll see you in this space on Tuesday.