Gold & Silver Daily
"The law of diminishing returns applies in spades at this point...but you just never know what these crooks are going to do next."

¤ Yesterday In Gold & Silver

I was more than happy to see gold spike up at the open of trading in New York on Sunday night...along with another quick jump in the price when trading began in the Far East on their Monday morning.

There was also another tiny rally at the London open...and again shortly before 1:00 p.m.  That last rally ran into a buyer at the $1,720 level [gold's high price tick of the day] just before 9:00 a.m. in New York...and from there, gold drifted gently lower into the close.

The gold price closed at $1,709.90 spot...up $29.60 on the day.  Gross volume was an immense 332,200 contracts.  A lot of it was roll-over and spread related.  Ted Butler said that Monday [not Friday, like I said in my Saturday column] was the last day for the large traders to exit the December contract.  They obviously did...and in droves.

Silver more or less followed the same price path as gold...except silver's high tick of the day [$32.41 spot] came moments after the close of Comex trading...around 1:45 p.m. Eastern time.  From that high, the silver price got sold off a hair over two percent going into the close of electronic trading at 5:15 p.m.

The spot silver price closed at $32.06...up $1.08 on the day.  Gross silver volume was in the neighbourhood of 75,500 contracts.  Like gold, the vast majority of that volume was roll-over or spread related...all of which will be in Friday's Commitment of Traders report.

The dollar gapped down about 60 basis points right of the chute on Sunday night...and then flopped around until just before 3:00 a.m. Eastern time.  Then it fell some more...with the low tick of the day occurring about 5:20 a.m. Eastern.  From there, the dollar spend most of the rest of Monday trying to recover its earlier losses, but still finished down 60 points.

The gap up in gold...and the gap down in the dollar that occurred at the Sunday night open, is just about the only time that there was any co-relation between the dollar and the gold price.  If you can find any other relationship during the Monday trading day, I'd love to hear from you.

The gold stocks peaked shortly after the equity markets opened...and then trended lower until 3:15 p.m. in New York when gold caught a bit of bid in the electronic market...and the stocks rallied a bit into the close.  The HUI finished up 2.44% on the day.  INO's HUI chart is still MIA...and I thank reader Scott Plushau for providing this substitute for our viewing pleasure.  The 'click to enlarge' feature might prove useful here.

(Click on image to enlarge)

The silver stocks did particularly well yesterday but, like their golden cousins, they did not finish on their highs.  But, having said all that, Nick Laird's Silver Sentiment Index was up a very healthy 4.33%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 1 gold and 3 silver contracts were posted for delivery tomorrow.  Except for a small handful of contracts, that should pretty much do it for the November delivery month.  The CME will post November's final the delivery figures for First Day Notice in the December delivery month...on their website later this evening.

Neither GLD nor SLV reported any changes yesterday.

There was another sales report from the U.S. Mint on Monday.  The sold 5,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...along with 300,000 silver eagles.  With only two reporting days left in the month, the U.S. Mint has sold 41,000 ounces of gold eagles...8,500 one-ounce 24K gold buffaloes...and 1,284,000 silver eagles.

Not surprisingly, last Friday was a very slow day over at the Comex-approved depositories.  They reported receiving 4,041 ounces of silver...and shipped 25,917 troy ounces of the stuff out the door.

The Commitment of Traders report, for positions held at the close of trading on Tuesday, November 22nd, was released yesterday.

The silver numbers looked about right.  The Commercial net short position declined by 4,561 contracts.  About two thirds of that was the small Commercial traders [Ted Butler's raptors] going long as the price was engineered lower...and the balance was the '1 through 8' covering short positions.

One thing that I was looking for, was any sign that the technical funds were going short during the reporting week, but the COT put an end to that speculation, as there were no signs of it at all.

As soon as I saw the gold numbers, I knew that something was amiss...and silver analyst Ted Butler confirmed that when I spoke to him on the phone shortly after the report was posted on the CFTC's website.  Rather than me explain are Ted's comments to his paid subscribers...

"In gold, while we did have a reduction in the total commercial net short position of 11,700 contracts to 192,400 contracts, my guess is that it should have been double that. In short, some numbers in this week’s gold report looked “hinkey” or strange and unusual. The big 4 reduced their net short position by a whopping 24,000 contracts to the lowest level in years, while the big 5 thru 8 remained unchanged. In addition, the gold raptors added 12,000 contracts to their short position, making this the first time in memory that they added big to shorts on a big down move in price. I don’t think that occurred. Topping it off, there were also very strange increases in the non-reportable gross short category of 13,000 contracts and a similar size decrease in the gross short category of the other reportable in the disaggregated report. Finally, in the disaggregated report, the decrease in the swap dealers’ gross long position of almost 12,000 contracts looked odd. In short, the gold COT looks off. Maybe it has to do with the MF Global mess; maybe just too much turkey and pumpkin pie over the holiday by the compilers. In any event, there should be a correction offered...or maybe just a snap back in this coming week’s report. And if I'm completely wrong to suggest some kind of data mess-up and the big 4 did reduce their net short position while the gold raptors added big to the short side, it’s a double-cross we can all live with."

Here's an interesting chart that Washington state reader S.A. sent my way yesterday.  If gold and silver aren't your bag, then how about wine?  Win or lose, you can still drink the stuff at the end of the day.  I'm going long six cases of Amarone and ten cases of Châteauneuf-du-Pape as soon as the markets open this morning!

(Click on image to enlarge)

Before heading into today's long list of stories, here's a little tidbit that south London reader "Mel" sent me yesterday about the British silver bullion coin, the "Britannia".  The 2012 bullion coins are now available...and this is what Mel had to say about them...

"The mint's website now shows the UK Royal Mint's 2012 price for a one-ounce silver bullion coin. In previous years, this price has been anywhere from 5-15% higher than the price at which you could purchase a single bullion coin from a coin dealer, and around a 20-30% premium to spot. Now the Royal Mint has priced for 2012 at a 187% premium to the current spot price, and around a 100% premium to the dealer price for a single coin."

And in an e-mail from Mel in the wee hours of this morning, he advised that the premiums on the new British gold sovereigns are just as bad.

Well, they won't be selling many at that least not to me.  I think I'll just stick with what I've always bought...generic rounds and bars...the best value for the money.

It was a busy weekend for stories and, once again, you get to pick and choose.


¤ Critical Reads

Fitch Revises US Outlook To Negative

The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. Fitch will shortly publish its revised economic and fiscal projections for the U.S. and will conduct a further review of its sovereign ratings in 2012. However, in the absence of material adverse shocks, Fitch does not expect to resolve the Negative Outlook until late 2013, taking into account any deficit-reduction strategy that emerges after Congressional and Presidential elections.

Let's call a spade a shovel, here...U.S. bonds should be rated junk, just like everyone else' they're never going to be repaid...ever.  And if they are repaid, it will be in dollars that are only worth a tiny fraction of what they're purchasing power is today.

This story was imbedded in a posting yesterday...and I thank reader Matthew Nel for sending it along.  The link is here.


Secret Fed Loans Undisclosed to Congress Helped Banks Net $13 Billion

The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

This Bloomberg story was posted on their website late Sunday afternoon...and I thank West Virginia reader Elliot Simon for bringing it to my attention.  The link is here.

This story was also posted in a GATA release yesterday as well...and this is what Chris Powell had to say about it in the preamble to the story..."Most of the Federal Reserve's gold records, sought by GATA's federal freedom-of-information lawsuit, remain secret. Outside the Fed itself, only two people claim to know everything the Fed is doing secretly in the gold market -- Kitco gold market analyst Jon Nadler...and CPM Group Managing Director Jeff Christian. And they say the Fed is doing nothing secretly there. We are to believe that the gold market is the only market in which the Fed doesn't intervene secretly."


Citigroup's $285 million SEC settlement rejected

A judge rejected a proposed $285 million mortgage securities fraud settlement between Citigroup and the Securities and Exchange Commission on Monday, saying the deal was "neither fair, nor reasonable, nor adequate, nor in the public interest."

Judge Jed Rakoff said that the settlement announced last month, under which Citi neither admitted nor denied the SEC's allegations, deprived the public "of ever knowing the truth in a matter of obvious public importance." 

He instead ordered Citi to face trial over the allegations in July 2012.

The SEC's pattern of allowing big banks to reach settlements without admitting or denying wrongdoing, Rakoff added, has been "hallowed by history, but not by reason."

I get a warm feeling all over knowing that there's at least one judge out there that's not bought and paid for by Wall Street and the banks.  This story was posted over at yesterday...and I thank Florida reader Donna Badach for sending it.  It's well worth the read...and the link is here.


No free markets anymore, just manipulations, Faber tells King World News

Market analyst and financial letter writer Marc Faber told King World News yesterday that there aren't any free markets anymore, just manipulations by governments, a theme of GATA's for 3 1/2 years.

A summary of Faber's interview has been posted at the King World News blog here...and it's well worth the read.


MF Global Canada forex clients to get money back by Dec. 2nd

Foreign-exchange clients of MF Global Canada Co. will get all their money by Dec. 2 after having been excluded from an earlier agreement, said the trustee for the bankrupt brokerage.

The Ontario Superior Court of Justice has authorized cash payment to MF Global’s 2,500 foreign-exchange clients, KPMG Inc., the court-appointed trustee, said Friday. KPMG had said a week ago that it aimed to make the payment by Nov. 30.

“They’ll be paid within a week,” Richard Harris, the KPMG partner overseeing the transaction, said in an interview. The foreign-exchange clients are “getting a hundred cents on the dollar, which relative to what’s happening with MF Global around the world is a pretty positive story.”

This story was posted in Canada's Globe and Mail on Friday...and I thank reader Brent Flory for bringing it to my attention.  The link is here.


Prepare for riots in euro collapse, Foreign Office warns

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

This story was posted late Friday evening in The Telegraph...and I thank reader U.D. for sending it along.  The link is here.


New German-French treaty planned to give cover to ECB bond buying

German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning more drastic means -- including a quick new Stability Pact -- to fight the euro zone sovereign debt crisis, Welt am Sonntag reported on Sunday.

The Sunday newspaper reported in an advance before publication that if necessary Germany and France were ready to join a number of countries in agreeing to tough budget discipline.

The report, which echoed a Reuters report on Friday from Brussels, quoted German government sources as saying that the crisis fighting plan could possibly be announced by Merkel and Sarkozy in the coming week.

This Reuters story from Saturday was one that I pulled from a GATA release...and the link is here.


Ambrose Evans-Pritchard: Should the Fed save Europe from disaster?

The dam is breaking in Europe. Interbank lending has seized up. Much of the financial system is paralysed, setting off a credit crunch just as Euroland slides back into slump.

The Euribor/OIS spread or "fear gauge" is flashing red warning signals. Dollar funding costs in Europe have spiked to Lehman-crisis levels, leaving lenders struggling frantically to cover their $2 trillion (L1.3 trillion) funding gap.

America's money markets are no longer willing to lend to over-leveraged Euroland banks, or only on drastically short maturities below seven days. Exposure to French banks has been slashed by 69 percent since May.

This story was from The Sunday Telegraph...and the link is here.


Greeks Balk at Paying Steep New Property Tax

Ioannis Chatzis is 86 and lives in a tiny, single room, surviving on a pension that is just enough to pay for food and care for his bedridden wife.

But in its latest push to raise cash, the Greek government sent him a new $372 real estate tax bill, incorporated into his October electric statement.

Mr. Chatzis says he is being asked to choose between lights and paying for his wife’s medicines, since he cannot afford both on his $720-a-month pension.

 “This is how we are treated,” he said recently, his face a mixture of fury and despair. “I have nothing left to give. I will not be paying it.”

This story was posted in The New York Times on Sunday...and I thank Roy Stephens for sending it along.  The link is here.


Euro Zone on the Brink: A Continent Stares into the Abyss

Fear is spreading through the financial markets as investors pull their money out of the crisis-stricken euro-zone countries. With Chancellor Angela Merkel opposed to using the ECB's firepower to solve the crisis, the monetary union appears increasingly in danger of breaking apart. Some economists are even arguing for Germany to reintroduce the deutsche mark.

This Roy Stephens offering was posted over at the German website yesterday...and the link is here.


Bill Buckler Presents The Four Horsemen Of The (Financial) Apocalypse

As usual, "The Privateer" author Bill Buckler does a great job at summarizing a complicated, and quite terminal, situation in a few short sentences. Today is one of those occasions.

Buckler's bi-weekly commentary was sent out to subscribers early Sunday morning in North America...and this is a free snippet.  It's imbedded in this piece...and I thank Australian reader Wesley Legrand for sharing it with us.  It's a short must read...and the link is here.


Credit Bubble Bulletin: Global Contagion - Doug Noland

I don’t believe that the expanding nature of global market illiquidity is garnering the attention it deserves.  And it’s difficult to envisage a scenario where the liquidity backdrop doesn’t deteriorate further.  European banks are likely still in the early innings of their historic retrenchment.  With financial implosion risk seemingly growing by the day, I fear an escalating crisis of confidence with respect to derivatives and counterparty issues.  This is a major issue for global financial institutions and the vulnerable global leveraged speculating community.

Doug Noland's Friday evening missive this past week, is a must read from one end to the other.  I thank reader U.D. for sending me a copy.  The link is here.


Iceland wins in the end: Ambrose Evans-Pritchard

Iceland's policy of drastic devaluation with capital controls has not proved to be the disaster that so many foretold. Its refusal to accept the full burden of private bank losses has not turned the country into leper-land.

The nation has held its social fabric together. Had Iceland been in the eurozone, it would have been forced to pursue the same reactionary polices of "internal devaluation" and debt deflation being inflicted today on the mass ranks of unemployed across the arc of depression.

Sorry I could not resist posting this. Shame on me.

Ambrose Evans-Pritchard is in fine form in this very short blog posted Monday in The Telegraph.  It's worth the read...and is another Roy Stephens offering.  The link is here.


Miners sound warning from engine room of world economy

Marius Kloppers, chief executive of BHP, said the world's biggest miner had noticed a "fairly large change" in bank financing in recent months, as lenders are hampered in providing funds by the turmoil in Europe.

"We really started seeing the European conditions impacting, for example, trade finance, availability of LCs [letters of credit] and so on," he said. "We expect that we'll continue to see an impact."

His note of caution was echoed by his counterpart at rival Rio Tinto, Tom Albanese, who reported continuing stresses in the eurozone and a weaker outlook for the US economy were affecting customer sentiment, which had become "more negative" in recent months.

Roy Stephens sent me this story, which was posted late last night in The Telegraph...and the link is here.


SocGen Sees $600 Billion QE3 Starting In March 2012 Sending Gold Up Between $1900 And $8500/Oz

SocGen has released its much anticipated Multi Asset Portfolio Scenario/Strategy guide titled simply enough "Patience: bad news will become good news".

Here is the key quote for those worried that : "A major liquidity crisis should not occur this time, as we think we are on the eve of major QE in the UK, US and (a bit) later on in the EZ."

SocGen has some simple advice: "Buy gold ahead of QE3 as money creation has a strong impact on prices" - in other words just as we suggested yesterday courtesy of the Don Coxe co-relation chart. Why gold and not BAC? Because, "Gold is highly sensitive to US QE, as every dollar of QE goes into M0, triggering the debasement of the USD. Gold = $ 8500/Oz: to catch up with the increase in the monetary base since 1920 (as it did in the early 80s).

This was imbedded in a story yesterday...and I thank Australian reader Wesley Legrand once again for supplying this story to us.  The link is here.


Rickards vs. Roubini - King World News

Well, this story has been all over the Internet in the last couple of days...and Eric corralled Jim and asked him what the inside scoop was.  Eric sent me the audio interview just after midnight...and I'm more than happy to post it.  I've already listened to it...and it's well worth your time. The link is here.


A crude awakening: Alasdair Macleod

Economist and former banker Alasdair Macleod's new commentary, posted at GoldMoney, argues that world oil demand will start exceeding declining supply so much that a devastating inflation will result, against which gold should be a pretty good hedge. Macleod's commentary is headlined "A Crude Awakening".

This short story, with two excellent graphs, was posted in a GATA release yesterday...and is another must read.  It's not overly long...and I thank Chris Powell for writing the above introduction.  The story is posted over at the website...and the link is here.


Why Your Favorite Gold Stock Will Someday Sell for $200

BIG GOLD editor Jeff Clark has a very long, but very wonderful commentary in yesterday's edition of Casey's Daily Dispatch.  If you're not on the mailing list for this free publication, you should be.  It's an absolute must read...and there's lots of it.  The link is here.


Auerback, Naylor-Leyland cite gold suppression; Turk expects silver blastoff

This GATA release contains three separate links to three different stories.  All of them are worth your time.  But you can decide which ones are of interest to you once you've read Chris Powell's introductions to each.  The link to the GATA release is here.


Collapse of gold and silver points to skullduggery: John Embry

Here's a piece that John wrote for the monthly Canadian publication, Investor's Digest of Canada, which was posted on November 18th. Here are a couple of short paragraphs from his column.

"I've always believed that the real move in gold and silver wouldn't occur until price discovery moved from the fraudulent paper market to the physical market...and now there's abundant evidence that we're on the cusp of just such a development."

"When that happens, I can assure you that many of the current non-believers in gold and silver will increasingly put their saving in these precious metals."

The link to the entire piece, which is posted over at the website, is here.  It's a must read as well..and I thank Wesley Legrand for sending it along.



¤ The Funnies

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¤ The Wrap

I was happy to see both gold and silver do well on the first trading day of the week, as that hasn't been the case as of late.  The preliminary open interest numbers for yesterday's trading in both metals showed big drops in each, but I would suspect that most of that was spread related...and we'll have to wait until Friday's Commitment of Traders Report to see how it has netted out.

Both Ted Butler and myself are of the opinion that most of the price jumps we saw in both silver and gold yesterday was most likely short covering, but that also won't be know with certainty until we see the hard numbers on Friday.

One thing the COT did show, which was no real surprise, was that gold was back in a bullish configuration once again...and silver was even more wildly bullish than it already was.  I think Ted said that we are now back to where we were in the October 18th report.

There was even more improvement since last Tuesday's cut-off...and if we don't blast off in price today, then we should see further improvement in the structure of the COT on Friday.  Both Ted and I were marveling over how cleaned out both the Non-Commercial and Nonreportable categories were.  The net long positions in both are about the lowest I can ever remember seeing.

As I said, today is the cut-off for Friday's COT report, so if both gold and silver behave themselves for just one more day, we'll have another report that will be a snapshot of the bottom of the barrel.  And if we do get a further sell-off from here, the reward for the Commercial traders won't be worth the effort they have to expend to get it.  The law of diminishing returns applies in spades at this point...but you just never know what these crooks are going to do next.

Neither gold nor silver did much in Far East trading earlier today.  Both metals got sold off a bit the moment that London began to trade...and as of 5:01 a.m. Eastern time, the gold price is back to unchanged, but silver is down about 40 cents.  Net volume in gold is pretty light...and silver's volume is still a big unknown, as the CME still has fixed the problem...but I would expect that net volume is pretty light as well.  Today is the last trading day before the December contract goes off the board, so it could get interesting during Comex trading today...or not!  We'll find out soon enough.

I hope your Tuesday goes well...and I'll see you here tomorrow.