With North America shut for the Labour Day long weekend, there wasn't much activity in the gold price yesterday...and volume was non-existent. Gold traded a handful of dollars either side of the $1,690 spot mark...but managed to get as high as $1,697.10 spot just before Globex trading ended at 6:15 p.m. in London. From that high it got sold off a few dollars into the close...and finished at $1,692.60 spot, up a buck from Friday.
The only real signs of life were in the silver market. After not doing much of anything up until 1:00 p.m. in London trading, the price began to develop a positive bias...and was actually up 60 cents at one point, before giving some of that back just before the 6:15 p.m. BST Globex close.
Silver finished at $32.10 spot...up 36 cents from Friday. Volume was very light as well.
Of course the dollar index didn't do much after the 6:00 p.m. Eastern time Sunday night open, either.
With the U.S. shut tight, there was nothing from the CME, SLV, GLD...and the U.S Mint.
However, the report from Switzerland's Zürcher Kantonalbank for the period ending Thursday, August 30th showed that their gold ETF added 30,083 troy ounces and, if this number can be believed, they added an eye-watering 4,001,096 ounces of silver to their silver ETF during the August 22-30 reporting period. I sent an e-mail to ZKB asking for confirmation of that silver number, but Nick Laird told me that it was correct. That's more than two full days of world silver production.
Based on that number, one can only imagine just how much physical metal the SLV authorized participants must owe that ETF...but I would be bet that it's quite a few orders of magnitude more than that.
I've got a couple of charts for you today. The first is from Australian reader Wesley Legrand. It shows the gold price in both US$ dollar terms...the red trace...and non-US$ dollar terms...but blue trace. As Wesley pointed out, there hardly seems to have been a correction at all when one looks at non-US currencies...more like a "sideways consolidation".
(Click on image to enlarge)
The second chart is courtesy of reader Mark Childers...and shows World Gold Production for 2008. It requires no further explanation from me.
And lastly is this eye candy for silver lovers that Nick Laird sent me last night. It's titled "Gold/Silver Ratio: Future Potential Ratios". Please use the 'click to enlarge' feature...and then let your imagination run wild.
(Click on image to enlarge)
The main reason for today's column is the long list of stories that I've accumulated over the weekend...and I hope you have the time to at least read the parts that I've cut and paste. But, as always, the final edit is up to you.
Federal Reserve Chairman Ben S. Bernanke says the U.S. economy is “far from satisfactory.” His colleagues are moving to embrace policies that will stay in place until he’s satisfied.
Four Fed presidents have come out in favor of an open-ended strategy for bond buying, with three calling for the program to begin now. Rather than specify a fixed amount of bonds to purchase by a certain date, such a strategy would leave the Fed able to announce a pace of purchases that it could adjust as the economy gets closer to Bernanke’s goals.
“You would be able to react to the incoming data in an incremental way and not be in a situation where you have to either drop the bomb or do nothing,” St. Louis Fed President James Bullard said in an interview last week during the Fed’s annual monetary policy symposium in Jackson Hole, Wyoming.
This Bloomberg story was posted on their Internet site early yesterday morning...and I thank West Virginia reader Elliot Simon for sending it. The link is here.
It isn’t easy to stand up in an open courtroom and bear witness to the abject wretchedness of your financial situation, but by the time Doug Wallace Jr. was 31 years old, he had little to lose by trying.
Diabetes had rendered him legally blind and unemployed just a few years after graduating from Eastern Kentucky University. He filed for bankruptcy protection and quickly got rid of thousands of dollars of medical and other debt.
But his $89,000 in student loans were another story. Federal bankruptcy law requires those who wish to erase that debt to prove that repaying it will cause an “undue hardship.” And one component of that test is often convincing a federal judge that there is a “certainty of hopelessness” to their financial lives for much of the repayment period, but the gauntlet he has run so far is so forbidding that a large majority of bankrupt people do not attempt it.
This 2-page story showed up on The New York Times website on Friday...and I thank Donald Sinclair for bringing it to our attention. The link is here.
We frequently hear the financial press refer to the U.S. dollar as the "world's reserve currency," implying that our dollar will always retain its value in an ever shifting world economy. But this is a dangerous and mistaken assumption.
Since August 15, 1971, when President Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold, the U.S. dollar has operated as a pure fiat currency. This means the dollar became an article of faith in the continued stability and might of the U.S. government.
In essence, we declared our insolvency in 1971. Everyone recognized some other monetary system had to be devised in order to bring stability to the markets.
This short piece is worth skimming. It was posted over at the safehaven.com Internet site on Monday...and it's the first of many from Roy Stephens today. The link is here.
“We prefer that Argentines remain at home and spend their vacations in Argentina”, admitted Ricardo Echegaray in support of the President Cristina Fernandez administration decision that all purchases overseas with credit cards issued in Argentina will have to pay an additional 15% including purchases online from abroad.
However he did not mention that only last year he purchased a condo in Punta del Este, the Uruguayan sea resort, supposedly where he is planning to spend his vacation.
Credit card companies will have to report all the purchases by credit card holders, including those done in foreign countries and in Argentina. The data will be cross checked with requests to buy foreign currency.
The Buenos Aires media reveals that the 15% charge measure has now been made extensive to debit card purchases abroad and online purchases from foreign websites, according to AFIP sources.
Echegaray had originally assured the new regulation would not affect neither online shopping nor debit card purchases.
This story was posted up on the mercopress.com Internet site on Saturday...and I thank Casey Research's own Louis James for digging it up on our behalf. Things continue to go from bad to worse. The story is worth reading...and the link is here.
Moody's Investors Service has today changed to negative from stable its outlook on the Aaa long-term issuer rating of the European Union (EU). The rating agency has also changed to negative from stable its outlook on the provisional (P)Aaa rating of the EU's medium-term note (MTN) programme.
A provisional rating for a debt facility is an indication of the rating Moody's would likely assign to future draw-downs from the facility, pending the receipt of documentation detailing the terms of the debt issuance. Moody's policy is to assign provisional ratings to all MTN programmes.
The outlook change to negative reflects the negative outlooks now assigned to the Aaa sovereign ratings of key contributors to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45% of the EU's budget revenue. Moody's believes that it is reasonable to assume that the EU's creditworthiness should move in line with the creditworthiness of its strongest key member states considering the significant linkages between member states and the EU, and the likelihood that the large Aaa-rated member states would likely not prioritise their commitment to backstop the EU debt obligations over servicing their own debt obligations. On 23 July 2012, Moody's had changed to negative its outlooks for the Aaa ratings of Germany and the Netherlands.
This businessinsider.com story was posted on their Internet site early yesterday evening...and it's also courtesy of Roy Stephens. The link is here.
"If you have the ECB which can work in the markets in order to bring down maturities then why not?" Angel Gurria told a news conference during an international business and political conference in Slovenia.
"The system is at stake, the euro should not be put at risk ... the EFSF and the ESM are not enough, fast enough, reactive enough," Mr Gurria added.
He was referring to the European Financial Stability Facility and the European Stability Mechanism, the new, permanent euro rescue fund seen as a key fiscal pillar in Europe's efforts to stem the crisis.
Mr Gurria said he "hoped and expected" Germany's Constitutional Court would approve the ESM on September 12, after it was endorsed by parliament in June. Failure to approve it would almost certainly doom the ESM.
This Roy Stephens offering showed up on the telegraph.co.uk Internet site late Sunday morning BST...and the link is here.
Louise Yamada clinched her reputation as America’s oracle of technical analysis with an emphatic sell warning at the top of the Wall Street boom in 2007...and now she is watching the torrid rise on US and European bourses with mounting unease. Retail investors have not taken part. America’s mutual funds hemorrhaged a further $12.7bn in July, the fifth consecutive monthly outflow.
“A lot of this rally is just short-covering by hedge funds. There is underlying weakness creeping into the markets. Volume is low, and going down. You could call it a vacuum rally. New highs against new lows have been deteriorating.”
The US index of transport stocks have lagged the Dow Jones industrials, a time-honoured warning sign. “There is no question that we have a Dow Theory sell signal in place. This is rare and needs to be watched carefully. It tends to accurate, eventually,” she said.
Here's an Ambrose Evans-Pritchard offering from the Sunday edition of The Telegraph that's also courtesy of Roy Stephens...and the link is here.
With Ben Bernanke's deeply inconclusive Jackson Hole missive now behind us, all eyes are firmly fixed on European Central Bank president, Mario Draghi.
Back in early August, Draghi publicly pledged to do "whatever it takes" to prevent the break-up of the single currency.
This statement, which a vacationing Angela Merkel didn't contradict, was taken as a sign that the ECB would soon be buying large quantities of government bonds issued by essentially bankrupt eurozone nations.
As such, Spanish and Italian yields stopped rising and global markets remained calm during the dog days of summer – moving mainly sideways, albeit on very low volumes.
Encouraged, perhaps, by the soothing power of his rhetoric, and certainly by the German chancellor's silence, Draghi then stuck his head another few inches over the parapet. His "whatever it takes" message was followed up with an anonymously sourced statement that the ECB is considering "caps on yields".
Such a policy would force the ECB to buy a nation's bonds if the yield spread on those bonds widened a certain amount compared with its German equivalent.
This story is also from the telegraph.co.uk Internet site...and this one was posted there early on Saturday evening. It's also from Roy Stephens...and the link is here.
Andalusia, the most populated of Spain's regions, reached out for the rescue as it buckles under heavy debts and struggles with a towering 33.9pc unemployment rate.
Spain's government has said it plans to set up within weeks an €18bn liquidity fund for troubled regions, which suffered an explosion of debt after the 2008 property crash.
As interest rates spiral higher, some of the 17 regions are struggling to meet debt repayments, AFP reported.
While waiting for conditions of the regional rescue fund to be established, Andalusia government official Susana Diaz said it would require an "advance" of €1bn so as to provide "liquidity".
This story showed up on The Telegraph's website mid-afternoon BST yesterday...and the offerings from Roy Stephens just keep on coming. The link is here.
Even as Greece desperately tries to avoid defaulting on its debt, American companies are preparing for what was once unthinkable: that Greece could soon be forced to leave the euro zone.
Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone.
This story showed up in The New York Times on Sunday...and I thank Donald Sinclair for sending it. The link is here.
The head of the Swiss National Bank has vowed to continue its policy of halting rises for the franc against the euro and has warned that a stronger currency would be a "substantial threat" to Switzerland's export-dependent economy.
Thomas Jordan, in a speech in Zurich on the challenges for Switzerland as a financial centre, warned of the negative effect of the eurozone crisis and the damage to the Swiss economy that a stronger franc could create.
"In the current situation, a further appreciation of the Swiss franc would constitute a very substantial threat to the Swiss economy and would carry with it the risk of deflationary developments," Mr Jordan said.
This Financial Times story showed up on their Internet site yesterday...and is posted in the clear in this GATA release...and the link is here.
“It just keeps getting worse,” said Alistair Thornton and Xianfang Ren from IHS Global Insight. “The government has underestimated the pace of the slowdown and is behind the curve.”
The HSBC/Markit manufacturing index for China fell to 47.6 in August, the lowest since the onset of Great Recession in late 2008. Inventories are rising. The index for new export orders fell to the lowest since March 2009. “Beijing must step up policy easing to stabilise growth,” said Hongbin Qu from HSBC.
China’s official PMI manufacturing index – weighted to big companies – also fell through the contraction line of 50, though services are holding up better.
Evidence of a hard landing over the summer is becoming clearer. Rail volumes fell 8.2pc in July from a year before. The Japanese group Komatsu said its exports of hydraulic excavators to China – a proxy gauge for Chinese construction – fell 48pc in August from a year before.
This story was posted in The Telegraph late yesterday evening BST...and I thank Manitoba reader Ulrike Marx for bringing it to our attention. The link is here.
The first is with James Turk...and it's headlined "A Remarkable & Historic Breakout in Gold & Silver". The second blog is with Michael Pento...and it bears the title "We are Staring at Economic Destruction & Soaring Inflation". Next is this blog with both Egon von Greyerz and Dan Norcini. It's headlined "Critical Changes Impacting the Gold & Silver Markets". The first of two audio interviews is with Art Cashin...and the second audio interview is with Egon von Greyerz.
Prosecutors provisionally dropped murder charges against the 270 jailed miners who had been accused under an obscure legal doctrine of killing 34 of their own colleagues when the police opened fire on them while engaged in a wildcat strike.
The outrage grew when prosecutors announced last week that under a legal doctrine known as “common purpose,” the miners would be charged with murdering their colleagues. Under the doctrine, which was frequently used in the waning days of apartheid to charge members of protesting crowds with serious crimes committed by a few individuals, people in a mob can be charged as accomplices.
In a hastily arranged news conference Sunday, officials from the National Prosecuting Authority said that they would await the outcome of further investigations into the shootings, but they did not rule out bringing murder charges again.
This story showed up in The New York Times on Sunday...and I thank Donald Sinclair for sending it along. The link is here.
Last night we reported that the troubles for South Africa's metal mining industry, which accounts for 20% of the nation's GDP, have spread, when in the aftermath of the Lonmin Marikana Platinum mine bloodbath which saw 44 miners shot by police another mine - this time Gold Fields' KDC mine - went dark as the bulk of the firm's miners went on strike. Moments ago AP reported that violence has erupted at a third mine, this time the gold mine owned by the nephew of Nelson Mandela, where 4 workers have been shot. So much for an amicable resolution, or for gold production returning to historical levels.
This AP story showed up on the Zero Hedge website yesterday morning Eastern time...and I thank reader Richard Craggs for sending it. The link is here.
Wage demands and labour unrest fuelled by inter-union rivalries and maverick politicians like Julius Malema are putting South Africa's gold and platinum mines in jeopardy.
It can't be a comfortable place to be - running a South African centred gold or platinum mining company at the present time. Serious labour disputes, which can boil over into violent confrontations, when one has workforces the size of those on most of the significant mining operations, has to be very worrying for top management, particularly when a high profile, charismatic, supposedly sidelined politician like Julius Malema - who has long called for mine nationalisation - starts getting involved. Indeed, the Malema factor may prove to be the most disturbing development of all unless the ruling African National Congress (ANC) party can somehow bring him to heel.
This commentary by Lawrence Williams was posted on the mineweb.com Internet site earlier this morning BST...and is well worth reading. The link is here.
Investors are piling pressure on beleaguered platinum miner Lonmin as traders short-selling the stock surged to a record number.
Just over 19pc of the mid-cap group's shares are on loan, the highest proportion of any FTSE 250 company, according to data from Markit, the financial information services company.
The amount of shares borrowed is used as a proxy for the level of short-selling interest and the average for a company in the mid-flight index is 1.8pc, according to trades settled on August 28.
The proportion of Lonmin shares out on loan has climbed 13.6pc in the past month, spurred by a dramatic share price drop amid the violence at its Marikana mine in South Africa, which brought platinum production to a standstill. Investors are wagering the shares have further to fall.
This story showed up on the telegraph.co.uk Internet site very early Sunday morning BST...and I thank Roy Stephens once more. The link is here.
Vietnam's central bank, State Bank of Vietnam (SBV) said it will soon complete reprocessing 1.8 tons of deformed gold.
The central bank said it had reprocessed over 48,000 taels of deformed SJC/ non-SJC and standardized non-SJC gold bullion for local supply.
Analysts said the new supply is expected to quench the thirst of the local market, as rising demand has pushed the gold price over the world price.
They added that the proactive move of the central bank and SJC aims at creating a new supply for the market, thereby curbing expectations for gold speculation for high demand that can affect local gold prices.
With local prices higher than international prices, smuggling is a strong growth industry once again...as the State Bank of Vietnam fights the continuing devaluation of the dong. This story was filed from Hanoi yesterday afternoon India Standard Time...and is posted on the bullionstreet.com Internet site. I thank Richard Craggs for his second offering in today's column. The link is here.
Gold imports from Turkey is most probably ended up with Iran central bank, according to Istanbul Precious Minerals and Jewelry Exporters' Association.
The Association said it was not sure whether it is independent investors buying Turkish gold or the Iranian central bank using middlemen.
However, it agrees that Iran's gold purchases have no direct affect on the local market, as Turkey is a buyer of scrap gold and this trade causes no shortage in supply.
Turkey's gold exports to Iran totaled $4.4 billion in the first half of the year.
Most gold sector representatives in Turkey are still unsure about where a large amount of gold exports to Iran, some $1.83 billion in July alone, have gone.
This is another story from the bullionstreet.com website yesterday. This one was filed from Ankara...and I thank Richard Craggs for his third and final offering in today's column. The link is here.
Unfunded social welfare system liabilities soon may overshadow government budget deficits and start goosing gold and silver, GoldMoney Research Director Alasdair Macleod wrote yesterday.
This was posted on the goldmoney.com website on Sunday...and I borrowed the story, plus the headline and preamble, from a GATA release...and the link is here.
Mining entrepreneur Frank Giustra has given Tommy Humphries of CEO.ca a wide-ranging interview making points that will be of great interest to investors in the monetary metals.
I'll leave the rest of the introduction...and the link to the interview...to Chris Powell in this GATA release. It was posted on the gata.org website early yesterday morning...and the link is here.
Investors with risk appetite may want to look at gold stocks, particularly those of companies ripe for takeover, analysts say.
A gap between the price of bullion and gold-mining stocks has emerged, and history shows that it likely won't last long. Equities should catch up to gold prices and close the valuation gap.
The NYSE Arca Gold Bugs Index, which tracks 16 miners, has underperformed the front-month gold contract on the Comex division of the New York Mercantile Exchange by 16 percentage points since the beginning of the year. This is attributable to a combination of factors, including broader risk aversion toward equity investments, lower gold output among certain miners for various reasons, and the emergence of exchange-traded funds, or ETFs, that have wooed traditional retail investors away from gold-mining stocks and toward direct gold investment.
As the headline states, this story showed up on The Wall Street Journal Internet site on Sunday...and the headline reads "Window of Opportunity in Gold". It's posted in the clear in this GATA release...and the link to this must read article is here.
MineWeb's Lawrence Williams writes about silver market analyst and market manipulation exposer Ted Butler's weekend commentary to his paying subscribers. Ted explains why he thinks the white metal's prospects are even better than the yellow metal's. "It is rarer than gold in investment quantities," Butler says, "yet priced as if it were more than 50 times as plentiful." This must read commentary is headlined "Silver Gives You More -- At Least Potentially" and it's posted at MineWeb.com Internet site...and the link is here.
From Jim Rogers... to Marc Faber... to Congressman Ron Paul, this book is sitting on the desks of some of the world's smartest thinkers...
And for good reason, too.
Inside you'll find 47 ways to protect your wealth from the declining value of the U.S. Dollar
There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt. - John Adams, 1826
Gold did virtually nothing yesterday, but it's attempted foray to almost $1,700 the ounce got turned back shortly before the close of Globex trading in London at 6:15 p.m. BST yesterday. Silver ran into the same seller as well.
The northern hemisphere's summer season is now history...and reality has returned. It sure doesn't look good, does it? There just isn't any good news in sight...and the further the economic, financial and monetary can gets kicked down the road, the worse the disaster is going to be when it finally does blow up...or melt down...or both.
There just isn't any way out of this, except maybe the gold card...and the world's banks and governments don't have a "Plan B"...unless it is precisely that. But, if they are going to play it at some point, then they're keeping that secret awfully well. It will be interesting to see if this new gold commission the Republicans have talked about at their national convention will amount to anything. But one thing it will do, if it does comes to pass, is that will give even more publicity to the fact that fiat currencies always end up at their intrinsic value, which is zero.
And as Alan Greenspan mentioned about a decade ago...and I'm paraphrasing here...fiat currencies, in extremis, may not be accepted as payment, whereas gold always will.
It's going to be a wild ride between now and Christmas...and there's not much any of us can do except sit back and watch the show...all the while hoping that we've prepared for every eventuality as best we can.
Not much happened during Far East trading on their Tuesday...although the gold price made a rather weak-kneed attempt to break above the $1,700 spot price once again, before getting sold down. Nothing much is happening in London trading either, now that trading has been going on for a bit over two hours. Volumes in both metals is reasonably light once again...and the dollar index is down about 10 basis points as I hit the send button at 5:15 a.m. Eastern time.
See you tomorrow.