Gold & Silver Daily
"This is the gold price manipulation scheme laid bare for all to see...and it's equally as obvious that it is, once again, an Anglo-American price fixing operation from start to finish."
 

¤ Yesterday In Gold & Silver

With the United States closed for the Martin Luther King Holiday, there wasn't a lot of excitement in the gold market on Monday.  After selling off a bit at the start of trading in the Far East, gold got up to around the $1,645 spot mark...and then basically traded sideways for what was left of the day.

The gold price finished at $1,642.80 spot...up $3.10 on the day.  Net volume was pretty light...under 40,000 contracts.

Silver hit its low price of the day [around $29.45 spot] shortly before 10:00 a.m. Hong Kong time on Monday morning...and then rallied back to the $30 spot price around 9:30 a.m. in London.  Silver made two more attempts to break through that price, but got sold off both times.

The silver price closed the day at $29.97 spot...up 20 cents.  Without the New York traders around, net volume was an unbelievably light 7,000 contracts.

The dollar index jumped 20 basis points right at the open on Sunday night in New York...and then spent the rest of the Monday trading day giving it all back.  The index finished basically unchanged from Friday's close.

With the New York market closed, there was no HUI...and no Silver Sentiment Index.  The TSX Gold Index here in Canada finished up 0.76%...and the larger cap silver stocks that trade on Toronto put in a pretty decent performance...and the juniors were mixed.

There was no CME Daily Delivery Report, or anything from the GLD and SLV ETFs, the U.S. Mint...nor the Comex-approved depositories.

Here's a free paragraph from silver analyst Ted Butler's weekend commentary on Saturday...

"The total dollar value of the world’s three billion ounces of gold bullion has reached ridiculous levels relative to the dollar value of the world’s one billion ounces of silver bullion. At current prices, the dollar value of gold is 165 times greater than the value of the world’s silver. That’s way too much for two items so closely similar. Here’s another way of looking at it. Last week’s $23 rise in the gold price increased the value of the world’s gold bullion by almost $70 billion. That’s more than twice as much as the total value of what all of the world’s silver bullion is worth. I’m talking about the change for one week in gold being twice the total value of all the silver in the world. That’s crazy...and is due to silver being artificially manipulated in price."

The main reason I have a report today is because of the number of stories that have accumulated over the weekend...and I hope you have time to run through them.  The last gold-related story is barn-burner.

 

¤ Critical Reads

Citigroup: Secrets of a Sales Machine

Back in 1940, a popular book about Wall Street asked, “Where are the customers’ yachts?” Investment firms, it lamented, always seemed to win, even when their customers lost.

True then and, all too often, true now — with rare exceptions. One of them was the case of Gerald D. Hosier and Jerry Murdock Jr., who invested millions with Citigroup, lost big — and came back swinging.

Documents related to the case show how Citigroup pushed exotic investments as safe alternatives to humdrum municipal bonds. The paperwork, which was unsealed recently, makes for fascinating, if disheartening reading.

This 2-page article by written Gretchen Morgenson showed up in the Saturday edition of The New York Times...and I thank reader Phil Barlett for sending it along.  The link is here.

Read more...

S&P downgrades euro zone's EFSF bailout fund

Rating agency Standard & Poor's cut its credit rating of the European Financial Stability Facility, the euro zone's rescue fund, by one notch to AA+ on Monday, three days after it cut the ratings of France and Austria by the same margin.

In a statement, S&P said the decision was all but inevitable following the cuts to the creditworthiness of France and Austria, which were two of the EFSF's guarantors.

"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," the agency said in a statement.

This Reuters piece was picked up by uk.finance.yahoo.com yesterday...and I thank reader Scott Pluschau for sending it along.  The link is here.

Read more...

Portugal's borrowing costs soar as France passes first bond auction test

Portugal's borrowing costs jumped to record highs on Monday, as investors had their first chance to react to a series of downgrades by Standard and Poor's (S&P) that saw the country relegated to "junk".

Yields on benchmark 10-year government bonds rose nearly 2.3pc, or 228 basis points, to 14.198pc in afternoon trade. The difference between Germany and Portugal's borrowing costs also widened to record highs of 1,243 basis points, following S&P's downgrade of Portugal to below investment grade.

The spike in Portugal's borrowing costs came as France sold a range of short term debt in a auction that saw borrowing costs largely fall, although demand waned slightly.

This very short news item, published on The Telegraph's website yesterday afternoon, is well worth running through...and I thank Roy Stephens for sending it along.  The link is here.

Read more...

Der Verkauf Ist Verboten - Germany Considers Ban On Sovereign Bond

As the Financial Times reports in its headline article yesterday, whose gist is simple enough, that Europe is on the verge, it is the tactically-placed final paragraph that is of particular curiosity. It says the following: "Speaking on the fringes of a start-of-year retreat of her Christian Union lawmakers in the city of Kiel, Ms Merkel said she would consider calls from her party colleagues for legislation to bar institutional investors such as insurance companies from selling bonds when ratings were downgraded, or fell below investment grade." Allow us to recopy and re-paste the key part: "legislation to bar institutional investors such as insurance companies form selling bonds."

And there you have it: after everything else has failed, the state, not the politically independent, if at least on paper central bank, is about to formally enter the capital markets. And yes, first it will be a ban of selling on downgrades, then it will be a ban of selling on any downtick, and finally it will be a ban of selling anything and everything.

This story showed up over at the zerohedge.com website on Saturday...and I thank reader 'David in California' for sending it along.  The link is here.

Read more...

Temporary Respite: Why the ECB's Tricks Won't Solve the Crisis

Ever since the European Central Bank began flooding the markets with cheap money, European banks have rediscovered their taste for sovereign bonds. But the crisis is far from over, as Standard and Poor's recent raft of downgrades showed. Some bankers are saying it's just a matter of time before yields on peripheral bonds shoot up again.

Of course, the major unknown is the situation in Greece, now that talks between Greek officials and private-sector creditors about a debt haircut have been indefinitely called off. In a statement released Friday, Charles Dallara and Jean Lemierre of the Institute for International Finance, the bank lobby representing private-sector bond holders in the negotiations, wrote that the discussions with Greece had been "paused for reflection."

Athens is pressuring private-sector creditors to agree to relinquish an even higher proportion of their claims, and the banks are calling for public-sector creditors, such as the ECB, to join in by writing off parts of their own claims. Meanwhile, hedge funds have been sabotaging every deal. With each passing day, there is a growing danger that there will either be no agreement, or that a deal is reached that isn't backed by a sufficient number of creditors.

Eugen Keller, a financial market expert with the Frankfurt-based private bank Metzler, predicts that demand for the sovereign bonds of southern euro-zone members will once again fall dramatically. "It's merely a matter of time," he says, "until we're back where we left off last year."  [And as can be seen from Portugal's bond auction yesterday, we're already there. - Ed]

This story was posted on the German website spiegel.de yesterday...and is another Roy Stephens offering.  The link is here.

Read more...

Greece sends officials to US as default fears grow

Greece has sent top officials to the US for talks with the International Monetary Fund as it returns to centre stage in the eurozone crisis over fears that a debt deal impasse with bondholders could trigger a messy default.

The Greek Prime Minister Lucas Papademos said on Monday he was confident agreement on a debt swap plan would be reached by the time eurozone finance ministers meet next Monday.

Greece has a €14.4bn bond maturing on March 20 that it can’t afford to pay in full.

A crucial second, €130bn rescue loan from the EU, IMF and ECB is dependent on reaching an agreement on a bond swap with creditors that are being asked to take a voluntary 50pc loss on their Greek government bonds.

Greece is in its fifth year of recession and in recent months had been flirting with bankruptcy, with only bailout loans from European partners and the IMF agreed on condition of unpopular austerity measures preventing a default.

This is another story from yesterday's edition of The Telegraph.  It's also another Roy Stephens offering...and the link is here.

Read more...

Irish Banks will shrink and shrink

The European debt crisis is moving swiftly to the next phase following the downgrade of France and the collapse of the Greek negotiations with its creditors last Friday night.

It is becoming increasingly obvious that there will be no deal in Greece. This is good news because it means the end of the pass-the-parcel-ponzi-scheme, whereby the bill for more and more institutional debt was passed on to more and more innocent people who had nothing to do with the debt in the first place.

Greece will default – as it should. The bondholders will get roasted – as they should – for making bad investments. The laws of capitalism will be allowed to do their thing. Debtors and creditors will pay – as they both should – with both parties sharing the cost.

This very interesting short essay was posted over at the Irish website davidmcwilliams.ie yesterday.  It's worth skimming...and I thank reader Declan Barrat for sharing it with us.  The link is here.

Read more...

PM warns violence could destabilize Romania

More than 1,000 demonstrators jeered government austerity measures in downtown Bucharest on Monday as Romania's prime minister warned that violent clashes like those that left 59 injured over the weekend could jeopardize stability and economic growth.

Protesters who gathered in freezing temperatures for a fifth day of demonstrations chanted "Freedom!" and held banners saying "Hunger and poverty have gripped Romania!" They waved flags with the center ripped out, a symbol of the 1989 uprising against former Communist dictator Nicolae Ceausescu. A car parked in the vicinity was set on fire but firefighters put out the blaze.

There were smaller protests in another dozen Romanians cities, but it was not clear how many people had gathered around the country.

This AP story was picked up by the finance.yahoo.com website yesterday...and I thank reader Scott Pluschau for his second offering of the day...and the link is here.

Read more...

Iranian currency and economy collapsing under tighter U.S. trade sanctions

Iranian authorities sent police into the streets of the capital Monday to crack down on informal currency trading and support the rial, signaling Iranians' heightened insecurity over their dwindling buying power and Tehran's increasingly hard-handed efforts to stave off economic panic.

The move follows last week's steep Iranian Central Bank interest-rate increase, a bid to try to stem the growing demand for U.S. dollars in the country as the economy lurches amid fears over a new round of sanctions promised by the U.S. and Europe.

Iran's rial currency has declined 40% to 55% against the dollar on the black market since December. Iranian inflation, meanwhile, now exceeds 20% a month, according to the Central Bank. While the rial has been falling for almost a year, the latest drop appeared to be triggered by a recent U.S. announcement that it would penalize companies that do business with Iran's Central Bank, and a proposed plan to ban Iranian oil purchases in the European Union later this year.

This rather long read showed up in yesterday's edition of The Wall Street Journal...and it's printed in the clear in this GATA release.  I'd say it's a must read...and the link is here.

Read more...

Noda Says Japan Must Heed Lessons From Europe’s Credit-Rating Downgrades

Prime Minister Yoshihiko Noda said containing Japan’s public debt load, the world’s largest, is critical after Standard & Poor’s downgraded credit ratings on France, Austria and seven other European nations.

Europe’s fiscal situation “isn’t a house burning on the other side of the river,” Noda said on TV Tokyo Holdings Corp.’s program on Jan. 14. “We must have a great sense of crisis.”

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015 to trim the soaring debt. S&P said in November Noda’s administration hadn’t made progress in tackling the public debt burden, an indication the credit-rating company may be preparing to lower the nation’s sovereign grade.

This Bloomberg story from Sunday is definitely worth reading...and I thank Roy Stephens once again for sharing it with us.  The link is here.

Read more...

Putin, a thorn in Washington's flesh

Vladimir Putin is one of the few remaining world leaders with the gumption to obstruct Washington’s agenda of full spectrum dominance, as Russia today, in tandem with China and to a significant degree Iran, form the spine, however shaky, of the only effective global axis of resistance to a world dominated by one sole superpower.

The United States today is a de facto bankrupt nuclear superpower. The reserve currency role of the dollar is being challenged as never since Bretton Woods in 1944. That role along with maintaining the United States as the world’s unchallenged military power have been the basis of the American Century hegemony since 1945.

Weakening the role of the dollar in international trade and ultimately as reserve currency, China is now settling trade with Japan in bilateral currencies, side-stepping the dollar. Russia is implementing similar steps with her major trade partners. The primary reason Washington launched a full-scale currency war against the Euro in late 2009 was to preempt a growing threat that China and others would turn away from the dollar to the Euro as reserve currency. That is no small matter. In effect Washington finances its foreign wars in Iraq, Afghanistan, Syria, Libya and elsewhere through the fact that China and other trade surplus nations invest their surplus trade dollars in US government Treasury debt. Were that to shift significantly, US interest rates would rise substantially and the financial pressures on Washington would become immense.

Faced with growing erosion of her unchallenged global status as sole superpower, Washington appears now to be turning increasingly to raw military force to hold that. For that to succeed Russia must be neutralized along with China and Iran. This will be the prime agenda of whoever is next US President.

This very long F. William Engdahl piece showed up posted over at the Salem-News.com website last Thursday...and it's a must read.  I thank reader Tariq Khan for bringing it to my attention...and the link is here.

Read more...

The Next Bubble in China's Economy....Gold?

China's policy makers will now attempt to do what just about every policymaker since the South Sea bubble has done - re-inflate. But as history has shown, you can't re-inflate the same bubble. You just create others.

Where will China's next bubble appear? Hmmm...how about gold?

China's imports of physical gold via Hong Kong have soared in recent months, as the following chart from Reuters shows. In November alone, gold imports totalled nearly 103,000 kg.

Are Chinese citizens trying to protect themselves from falling property and equity markets? With deposit rates less than the inflation rate, there's no respite by placing funds in the banks either. Gold seems like a sensible option.

And judging by the volume of imports, there's a good chance the PBoC is in there buying too.

This most excellent commentary on Chinese monetary policy was posted on the dailyreckoning.com.au website last Friday.  It's definitely a must read in my opinion...and the link is here.  I thank Nitin Agrawal for sending me this story on the weekend.

Read more...

The bubble is in national currencies, Turk tells King World News

GoldMoney founder and GATA consultant James Turk told King World News yesterday that the bubble of the moment is in national currencies, that gold already has seen its lows for the year, and that gold mining shares are as low relative to the gold price as they were during the Lehman-induced market plunge three years ago.

I borrowed the above introduction from Chris Powell...and the link to this very worthwhile KWN blog is here.

Read more...

Jeff Clark: An Even Better Deal than Gold - Platinum

It's a good time to buy gold and silver. But it's a great time to buy platinum.

Platinum has sold off alongside all the other precious metals recently. It's down nearly 30% in just the past four months. Part of that selloff has to do with fears of a global economic slowdown. Part of it is institutions and individuals liquidating positions to raise cash. And it has pushed the shiny, white metal to its lowest price in two years.

Relative to gold, however, platinum is as cheap as it has been in over two decades.

This short, but very excellent commentary by Casey Research's own Jeff Clark is well worth your time...and the graph is terrific.  I thank Nitin Agrawal for this story...and it's posted over at the growthstockwire.com website.  It's a must read...and the link is here.

Read more...

When Will Silver Make a New High?

In last week's Metals, Mining, and Money, Jeff Clark estimated that given the magnitude of the correction that started last September, it may take until May 2012 for gold to reach a new high. This week let's take a look at how long it may take for silver to rebound.

It's a commonly known fact that silver is more volatile than gold. Already in this decade, silver has risen by a factor of 12 from its ten-year low ($48.70 vs. $4.07), while gold has seen about a sevenfold climb ($255.95 vs. $1,895).

This volatility - as you'll see in a minute - holds for corrections as well. On average, silver's retreats have been deeper and longer than gold's. The three big gold corrections we looked at last week averaged 22.8%. Take a look at the three biggest for silver, along with how long it's taken to recover and establish new highs.

All of the above, plus much more, is contained in yesterday's edition of Casey's Daily Dispatch...and it's a top-to-bottom must read as well.  If you're not already a subscriber to this free daily commentary already, you can sign up while you're on that webpage.  The link is here.

Read more...

David Bond: The War Against Us

Just when was it that the United Snakes of America declared war on the Coeur d'Alene Mining District, and why?

Was it just last week, when the federal Mine Safety and Health Administration shuttered the Lucky Friday mine for up to a year on an utterly vacuous claim that is main vertical access way, the Silver Shaft, had miraculously become unsafe – overnight? This is the same MSHA that inspects the shaft every three months, most recently a month ago. What changed in 30 days to render the Silver Shaft unserviceable? According to MSHA, 30 years' accumulation of crud leaking from sand lines that have built up along the mile-deep, 18-foot cylindrical shaft's concrete liner.

This is federal government arrogance at its height. It is brazen and it reeks of ass-covering. It is also ineptitude at its height, to the detriment of some 200 Hecla Mining Co. employees and a like number of Cementation Corp. contract workers who were at work sinking the new No. 4 Shaft internal winze. As of late last week, Hecla miners were barred by MSHA even from maintaining the critical pumps to keep water out of the lower workings of the Lucky Friday, where most of the machinery is. The 4 Shaft is collared on the 4,900-foot level and most of the current ore hauling was being done on the 5,900-level to the Silver Shaft.

David is up in arms over the recent goings-on over at the Lucky Friday mine...and doesn't mince words in this piece posted over at silverseek.com.  It's well worth the read...and I thank Roy Stephens for bringing it to our attention.  The link is here.

Read more...

More traders notice gold's regularly counterintuitive behavior

Here's a piece that Mesa, Arizona reader Jim Word sent to me on early Sunday morning.  Chris Powell posted it as a GATA release the moment that I sent it to him...and within hours it was posted over at zerohedge.com.

The conclusions from this essay are drawn from the work of GATA board member Adrian Douglas...plus the work of German gold analyst, Dimitri Speck.

Chris Powell has written an extensive preamble to this GATA release and I'll leave the rest up to him.  If you only read one precious metals-related story from this column today, this would be it...and the imbedded graphs are remarkable.  It's an absolute must read from start to finish...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

Government is a dangerous servant...and a fearful master. - George Washington

Well, there's not much to talk about regarding yesterday's action in either gold or silver...but the overnight action in the Far East and early London trading is certainly noteworthy...and I'll get into that a little further down.

If you haven't read that last gold-related story posted above, now would be a good time to do it.  What these two New Zealand analysts discovered, was something that was already well known in GATA circles, but put in the graphic form that they chose, it was stunning revelation even to me.

These charts are proof positive that the gold price [along with the silver price] are rigged lower between the London open at 3:00 p.m. Eastern time...and the London p.m. gold fix at 10:00 a.m. Eastern.

Although their research is based on the London a.m. fix...the London open would be a more appropriate measure.  The reason I say that is based on Nick Laird's chart below that I posted in this column on Saturday.

(Click on image to enlarge)

Note the high just moments before the London open...and it's basically all down hill from there into the London p.m. gold fix.  If you look at the scale on the right side, you'll note that the difference is only 50 cents per day on average...but if you expand from one day to 42 years, as Nick Laird did in his work over the last couple of days...this is what the charts look like.

The first one shows what has happened to your investment if you bought the London a.m. fix and sold the London p.m. fix every day going back to 1970.  The negative price movement is in excess of $1,700...as the base line of this graph was the London gold fix on January 1, 1970 of US$35.075 the ounce.  The red trace is the London a.m. gold fix going back to the same year...and is the same on this graph as the one below it.

(Click on image to enlarge)

But the real surprise is in this next graph.  If you'd bought the London p.m. fix...and sold the London a.m. fix the following morning every day since 1970...you would have doubled your gain from the current London a.m. gold fix...and gold would have currently been at $3,345.

(Click on image to enlarge)

So you can see [from the first chart] that between the a.m. and p.m. fixes in London, about $1,700 has slowly been removed from the price over 42 years.  If you add that back in, gold would be over $5,000 the ounce right now...and of course it would be much more than that if gold [and silver] were allowed to trade freely during the fixes...which they obviously aren't.

This is the gold price manipulation scheme laid bare for all to see...and it's equally as obvious that it is, once again, an Anglo-American price fixing operation from start to finish.  I'll ask Nick Laird to provide the same graphs for silver when he has the time...but I'm sure they'll show much the same sort of pattern.

These above three graphs [along with a few others] will figure prominently in my presentation at the Casey Research pavilion at the Cambridge House Resource Conference in Vancouver this coming weekend.

In overnight trading in the Far East it was pretty much right out of the Anglo-American playbook, with the nice rally in both gold and silver getting hit just moments before London trading began...see the first chart above to refresh your memory.  Volume in both metals, once you remove all the roll-over...plus yesterday's volume...is very light.  And, as I hit the 'send' button at 5:20 a.m. Eastern time, I note that gold is up about $23...and silver is up 50 cents.  The dollar is down about 60 basis points at the moment.

I haven't the foggiest as to what will happen during the rest of the trading day today...and nothing will surprise me when I turn on my computer later this morning.

That's more than enough for one day...and I'll see you here tomorrow.