Casey Research Publication
Gold & Silver Daily
"I don't know if yesterday's price activity in both silver and gold was the beginning of a new rally in both metals...or just a respite. But I wouldn't be out of this market [or short either metal] for any reason."
 

¤ Yesterday In Gold & Silver

The July 4th holiday in the U.S. resulted in very quiet markets in both gold and silver elsewhere on Planet Earth...with gold up about $10...and silver up the magnificent sum of 30 cents.  Gold volume was around 20,000 contracts net of all roll-overs...and silver's net volume was around 5,000 contracts.

I went to bed in the wee hours of Tuesday morning, just shortly before London opened for trading at 8:00 local time:...and things weren't looking too rosy, so I was delighted to see that the prices for both metals had turned around substantially when I finally fired up the computer yesterday morning.

The rally began right at the London open at 3:00 a.m. Eastern time.  There was a secondary low at the London p.m. gold fix at 3:00 p.m. local time [10:00 a.m. in New York]...and from that point, the gold price trended sideways to down until minutes after noon on the east coast...then worked its way higher through the balance of the Comex session...and the electronic session that followed...closing virtually on its high of the day.  Tuesday's net trading volume [minus Monday's] was around the 100,000 contract mark.

Silver's price path on Tuesday was very similar to gold's, with the exception that silver got sold off a bit after its high tick [$35.79 spot] in the New York Access Market around 3:30 p.m. Eastern time.  Tuesday's net volume [less Monday's] was a very tiny 33,000 contracts.

The dollar was up about 40 basis points over the Tuesday trading day...and it's obvious that its price movement had little affect on either metal once London opened yesterday.

The precious metals stocks gapped up...and stayed up all day long, although they got sold off a hair going into the close.  The HUI closed up a very respectable 2.98%.

With silver up well over a buck yesterday, most junior silver shares did very well for themselves...and lots better than most gold stocks.  Considering the price performance of both metals since the beginning of the rally last August, this should come as no surprise to anyone.  Nick Lairds' Silver Sentiment Index was up a hefty 3.34%

Click here to enlarge.

The CME's Daily Delivery Report showed that zero gold, along with four whole silver contracts, were posted for delivery tomorrow.  We're three days into the July delivery month for silver...and only 143 contracts have been delivered so far.

There were no reported changes in the GLD ETF yesterday...but the silver ETF, SLV, reported a smallish withdrawal of 136,495 troy ounces.

The U.S. Mint had its first sales report of the new month.  They sold 3,500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 386,000 silver eagles.

While on the subject of how much silver the U.S. Mint is using, reader T.B. did some heavy lifting on our behalf over the weekend...and figured out from the published mint production data, that along with the 22,303,500 silver eagles produced up to June 30th, the mint used an additional 3.1 million ounces of silver producing other silver commemoratives during the first half of the year.  If this keeps up, the U.S. Mint will go through 50,000 silver good delivery bars this year.  That's about 20% more than all the silver mined in the U.S.A. in an entire year.

Over at the Comex-approved depositories on Friday, they reported receiving 703,844 ounces of silver...and shipped a smallish 13,675 ounces out the door.

Here are three paragraphs about Friday's Commitment of Traders Report that I stole from silver analyst Ted Butler's weekly commentary on Saturday.

"If there is one word to describe the changes in this week’s COT for gold and silver, it is spectacular. Make that two words, spectacularly bullish. Rarely do we see the reductions in speculative long/commercial short positions witnessed this week. The total commercial net short position was reduced by 6,400 contracts in silver and by 42,500 in gold. Even for someone who believes (me) that the commercials control and manipulate the price of both silver and gold, I stand somewhat in awe of how brazenly and collusively the commercials pulled off this recent sell-off rig job. I don’t use the word collusively loosely. In both gold and silver, all the commercial categories, the big 4, the big 5 thru 8, and the raptors, seemed to divide evenly the speculative selling they were able to induce. I don’t know how that could be accomplished so efficiently without collusion."

"In silver, the total commercial short position dropped to 29,200 contracts, the lowest level since April 2009, when silver traded at $12. The big 4 shorts (JPMorgan) bought back more than 2,200 short contracts, reducing that concentrated short position to the lowest level since October 2006, when silver traded at $11. The raptors (the smaller commercials apart from the big 8) bought 3,400 of the 6,400 commercial contracts bought during the reporting week, increasing their net long position to 12,400, their largest since last November. The 5 thru 8 largest commercial shorts bought the balance, reducing their net short position to among the lowest in years. The obvious takeaway here (aside from all the commercials behaving collusively) is that the commercials are all buying because they expect the price of silver to be higher in time. That’s what you should expect as well."

"As painful as these deliberate sell-offs may be, they are also setting the stage for a rally of monumental proportions in silver. That’s the essence of the COT. I make a point of telling you what the price of silver was the last time the short position was as low as it is now because I believe you should look at silver as if it is $11 or $12. The beauty of the COT is that it does not consider price; all it is concerned with is structure. If the structure indicates a large speculative long/commercial short position, then the danger of a significant sell-off looms large. If there is a small historical speculative long/commercial short position, a large price rally would seem to be in the cards. Currently, there is a small historical speculative long/commercial short silver position."

I have a lot of stories today, as it was a busy weekend...and I had no report yesterday, which didn't help things...and less than half a report on Saturday, which I'm still very unhappy about.

Anyway, there are lots of good stories, audio interviews and video interviews that are more than worth your time in today's column, so I really hope you can fit them all in.  I had to do a hard edit on my list of stories...but the final edit, as always, is up to you.

 

¤ Critical Reads

Most futures trading is just paper speculation, CFTC reports

Here's something else that I'm stealing from a GATA release.  Chris Powell's preamble reads as follows:  Zero Hedge comments on two reports from the U.S. Commodity Futures Trading Commission that find that most commodity futures trading is just speculative day trading and has nothing to do with physical demand. Looks like everything is now easily manipulated by the traders with access to the most cash. As a very perceptive fellow said, "The futures markets aren't manipulated. The futures markets are the manipulation." Zero Hedge's commentary is headlined "Day Traders Account for Over 90% of Volume, Price Formation in ES, Crude, Gold, and Silver Futures" and you can find the link to the zerohedge.com piece here.

Read more...

Greece must sell off assets East German-style

Greece must privatise assets on a scale similar to the sell-off of East German companies at the fall of the Berlin Wall to rebuild its finances, the chairman of the Eurogroup of finance ministers said on Sunday.

"The sovereignty of Greece will be massively limited," Jean-Claude Juncker, who is also prime minister of Luxembourg, told Germany's Focus magazine.

"For the forthcoming wave of privatisations they will need, for example, a solution based on a model of Germany's "Treuhand agency", said Mr Juncker, referring to the body that sold off 14,000 East German firms in 1990-94.

This story from Sunday's edition of The Telegraph is also courtesy of Roy Stephens...and the link is here.

Read more...

China scorned for resisting West's commodities market manipulation

Complaints against China by the U.S., European Union, and Mexico were bolstered by a World Trade Organization finding that the nation's limits on raw-materials exports broke global rules and gave domestic companies an edge.

The ruling yesterday on the Geneva-based trade arbiter's website was after an 18-month investigation of quotas, export duties, and license requirements. China said it was evaluating the report. An appeal is highly likely, Mei Xinyu, a professor at a government trade institute, said today.

The restrictions have stoked tensions between China and its trading partners and boosted raw-material prices. The ruling may encourage the U.S. and the EU to now target Chinese restraints on rare earths, a group of 17 elements used in wind turbines, hybrid cars, and guided missiles.

The must reads are coming fast and furious now...and the link to the Bloomberg piece that I stole from another GATA release, falls into this category...and is here.

Read more...

French See Case Against Strauss-Kahn as American Folly

The stunning reversals in the criminal case against Dominique Strauss-Kahn, a putative French presidential candidate, have reawakened a dormant anti-Americanism here, fueled by a sense that the raw, media-driven culture of the United States has undermined justice and fair play.

There was shock in France after the arrest of Mr. Strauss-Kahn in May and intense criticism of the manner in which he was displayed in handcuffs, pulled unshaven into a televised court session and stuffed into a Rikers Island cell under suicide watch. There was confusion and criticism over the glee with which the New York tabloids in particular highlighted every humiliation and turned to clichés about the French — “Chez Perv” and “Frog Legs It” — in the coverage. And there was a sense that it was not just Mr. Strauss-Kahn who was being so jauntily humiliated, but France itself.

I still insist that this whole episode was what is called a "honey trap"...and it was done deliberately to get him out of his position at the IMF.  This 2-page story, from the Sunday edition of The New York Times is a very interesting read...and is courtesy of reader Roy Stephens.  The link is here.

Read more...

Your humble scribe interviewed on WAAM 1600 on Sunday

Dr. Dave Janda from Ann Arbor, Michigan was kind enough to spend 30 minutes interviewing me for his radio program Operation Freedom on Sunday afternoon.  The program runs just under 30 minutes...and I'll leave it up to you to judge whether it's worth your time or not.

I'd give it 10 minutes, or maybe less...and if it doesn't float your boat, the 'delete' key is the same place on your keyboard as it is on mine.   The link is here.

Read more...

Ben Bernanke is finished! David Stockman

Stockman draws and quarters 'Helicopter' Ben in this 9:52 minute video from MSNBC's The Dyland Raigan Show from about ten days ago.  He literally carves 'Gentle Ben' a new one.  I thank reader 'Tom in Bangkok' for sharing this video with us...and the link is here.

Read more...

$600 purchase reporting requirement repealed

New York entrepreneurs are breathing a collective sigh of relief after President Barack Obama last week signed a bill to repeal a provision of the federal health care reform law. It would have required small business and real estate owners to file 1099 forms with the government for purchases of $600 or more.

There are two stories about this contained in this GATA release...and I'd like to thank reader 'Rocky R' for bringing one of them to my attention, as Chris posted it as soon as I sent it to him.  One or the other is a must read...and the link to both is here.

Read more...

Big Banks Easing Terms on Loans Deemed as Risks

As millions of Americans struggle in foreclosure with little hope of relief, big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked.

Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.

Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.

Potentially troublesome?  How about lethal, dear reader.  The Pay Option ARMs [Adjustable Rate Mortgage] came along a the tail-end of the housing boom and are just starting to come due now, and the big banks are being pro-active...because the foreclose rate on these properties will be 100% if they don't head this situation off at the pass.

I thank reader Mike Smith for sending me this piece out of the Sunday edition of The New York Times.  It's well worth the read...and the link is here.

Read more...

Investment banks tighten stranglehold on metals

About 600 miles from Wall Street, Goldman Sachs Group Inc. employees are busy doing deals.

But instead of a sleek office tower, they work in a rundown warehouse deep in an industrial section of Detroit. And rather than trading in stocks or bonds, they move metal -- lots of metal.

Goldman's warehouse on the banks of the Detroit River is one of more than 100 storage facilities controlled by the giant securities firm around the world. The warehouses are part of Wall Street's effort to forge a new frontier in the commodities markets: warehousing metal.

I found this very worthwhile Wall Street Journal story in a GATA release yesterday...and the link is here.

Read more...

Germany's judges hold the euro's fate in their hands

Whether or not Europe's monetary union survives in its current form, shrinks to a Carolingian core, or shatters, depends as much on abstruse legal arguments put forward on Tuesday in Germany's constitutional court as it does on the parallel drama unfolding on Greek streets.

If the eight judges in Karlsruhe rule that Europe's €500bn bail-out machinery breaches of Germany's Basic Law – or Grundgesetz – in any significant way, they risk knocking away the central prop beneath the debt edifice of Southern Europe.

The judges have distilled a plethora challenges to the Greek, Irish, and Portuguese bail-outs into three complaints. These include one by a group of professors who argue that the Greek loans subvert the Bundestag, violate the "no bail-out" clause of the Lisbon Treaty, and amount to the creation of a fiscal transfer union, by stealth, without the requisite changes in the German Grundgesetz, and "strike a blow at the constitutional foundations of our state and our society".

This story was posted late last night over at The Telegraph...and returning after a six-month hiatus [at least] is the one and only Ambrose Evans-Pritchard.  I thank Chris Powell for sending me this very important story...and the link is here.  There's also a similar story in yesterday's edition of The Guardian that's courtesy of Swiss reader G.B...and the link to that story is here.

Read more...

New Erste Group Bank report makes comprehensive case for gold

Erste Group Bank's new report on gold as an investment and currency, written by Ronald-Peter Stoeferle and published on Monday, July 4th, may be the most comprehensive and profound of its type.

This is another GATA release where Chris has already done the preamble...and I will leave it entirely up to him.  The report itself is 90+ pages...and I found the 'executive summary' all I had time for.  I loath posting anything of this length...and if there was any way I could edit it down by two thirds...I would.  The link to the GATA release is here.

Read more...

Debt Renewal May Trigger Default: Rating Agency Issues Greek Rescue Plan Warning

Rating agency Standard & Poor's has cast fresh doubt on Greece's hopes for an economic rescue by warning that a French bank plan to renew maturing Greek bonds could be classified as a default. The agency has also questioned the country's ability to implement its new austerity program.

This is another Roy Stephens offering...this one from the German website spiegel.de yesterday.  It's a short read...and the link is here.

Read more...

Treasure Worth 'Billions' Found In Hindu Temple In Southern India

A Hindu temple in southern India seems to have delivered the mother lode.

Archeologists have reportedly uncovered over $11 billion in treasure at Sree Padmanabhaswamy Temple, according to AFP. The treasure has been found in at least 5 vaults.

The temple, which is typically known for its statues, is located in the Kerala state, near the southern tip of the country. MSNBC reports that the foundation for the current tower, containing the treasure, was laid in 1566.

I received three stories on this, all courtesy of Nitin Agrawal.  The most comprehensive one is from news.in.msn.com...and is well worth your time.  The link is here.

Read more...

QE2's end didn't strengthen dollar, and QE3 will crash it, Turk says

Here's a GATA release where Chris has already wordsmithed the preamble to this KWN blog with James Turk for us...and the link to the GATA release is here.

Read more...

Deluge: Murray Pollitt

Posted over at the GATA website if the latest market letter from Murray Pollitt of Pollitt & Co. in Toronto predicts that eventually people and the markets will figure out that the world's big financial problems are ever-depreciating currency and unpayable debt. When that happens, Pollitt writes, "good stocks are better than bad money." Pollitt's commentary is titled "Deluge"...and the link is here.

Read more...

High-frequency trading confirmed as big influence on futures markets

Here's a GATA release that has a subscriber-restricted Financial Times story imbedded in it.  The FT headline reads "CFTC Data Reveal Day Traders' Role in Volatile Oil Markets"

The US regulator released data showing that only 5.5 per cent of crude trading volume on the New York Mercantile Exchange involved net changes in large traders' stance on price direction. Changes to net positions also involved a minority of volumes in metals and agriculture and in financial futures on markets such as Treasury notes, stock indices, and exchange rates.

That would included the silver market as well, so Ted Butler's call on this was absolutely right on the money.  The link is here.

Read more...

Paper gold and silver markets are a joke, Eric Sprott tells Chris Martenson

Lastly today is a must read GATA release...and Chris Powell's preamble begins as follows:  "Financial writer Chris Martenson today published a spectacular interview with Sprott Asset Management Chairman Eric Sprott that stresses manipulation of the gold and silver markets. Sprott simply destroys any remaining pretense that they are markets at all."

The Sprott interview bears the headline "Paper Markets Are a Joke: Prepare for Bullion Prices to Go Supernova"...and the link is here.  There's an audio interview [38 minutes]...and a blog...so pick your poison.  My guess is that the audio interview would be more interesting.

Read more...

Erste's Stoeferle interviewed by Lars Schall

GATA's friend the German journalist Lars Schall has interviewed Erste Group Bank analyst Ronald-Peter Stoeferle about his new report on gold's prospects. The interview is headlined "Gold Will Continue to Thrive" and you can find it at Schall's Internet site.

The executive summary from this report...plus this interview...should give you the highlights of the entire 91-page document...and the link to the interview is here.

And if you're a real glutton for punishment...here's a Bloomberg video interview from Europe with the man himself.  It's not quite four minutes long...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

When money is universally based on debt, as it has been for forty years now, any real Independence Day celebration anywhere, [is] nothing more than smoke and mirrors - and fireworks too. The financial machinations necessary to keep the paper system functioning are getting pretty spectacular. The level of hypocrisy necessary to pretend that the system is sustainable, even more so. - Bill Buckler, Gold This Week...July 2, 2011

As I mentioned at the top of this column, gold volume yesterday net of all roll-over was around 100,000 contracts...and on a $20 rise in the gold price, the preliminary open interest number was up only 4,441 contracts...a number that will be much reduced when the final numbers are posted.  I'll bet some serious money that what we saw yesterday was a short-covering rally.

Friday's surprise trashing of the gold price produced a final open interest number of +3,104 contracts.  This could be either the raptors buying long positions, or there might have been some fresh shorting going on.

Silver's net volume yesterday was a very tiny 33,000 contracts...give or take...and, on a price rise of $1.33, the preliminary open interest number was an equally small 2,602 contracts.  That number, too, will be greatly reduced later this morning.  All signs point to a short-covering rally of some significance yesterday...and we'll find that out soon enough.

Friday's final open interest number in silver showed an increase of 628 contracts, even though the price hit new lows for this move.  The reasons for this are probably the same as the ones I gave for gold.

The beauty of all this, is that all of Friday's and Tuesday's price shenanigans will be in Friday's Commitment of Traders report...and it could be another pleasant surprise when it's released.  There will also be a brand new Bank Participation Report as well.  I'm looking forward to this report with great anticipation as well.  I'm just hoping that JPMorgan et al report everything in a 'timely manner'.

I don't know if yesterday's price activity in both silver and gold was the beginning of a new rally in both metals...or just a respite.  But I wouldn't be out of this market [or short either metal] for any reason.

Neither metal did much of anything during Far East trading earlier today...and that trend has continued through the London open.  Volume in gold is very light, but it's obvious that the high frequency traders are out and about in the silver market at the moment, as volume is already pretty chunky.  I also note that the dollar is up about 40 basis points as of 5:05 a.m. Eastern, but so far that rally hasn't had much effect on the prices of either gold or silver.

But, based on the volume, I wouldn't read a whole heck of a lot into this trading action.

It was obvious that the bullion banks were in the London market covering short positions right from the open.  That doesn't appear to be the case at the moment...and we may have to wait until New York opens this morning before we get a feel for what JPMorgan et al have in store for us today.

That's more than enough for one day.  I'm out of here.

See you tomorrow.