Gold & Silver Daily
"It was amazing to watch the bear raid that the bullion banks pulled off in the precious metals yesterday...just ahead of the CFTC hearing on position limits."

¤ Yesterday In Gold & Silver

The gold price spent the first eight hours of trading in the Far East on Tuesday doing precisely nothing.  Then, shortly after 2:00 p.m. Hong Kong time, a seller of some sort showed up...and the price headed gently lower.

This smallish decline came to an end at the London a.m. gold fix around 10:30 a.m. local time...5:30 a.m. Eastern.  From that point gold drifted very gently higher.  This state of affairs lasted until just past half-past lunchtime in London, before a not-for-profit seller showed up and carved twenty bucks off the price in less than thirty minutes.

Gold began to recover from there, but [for the third time in a week] right at the opening of he New York equity markets at 9:30 a.m. Eastern time...the gold price got sold off for another twenty bucks going into the London p.m. gold fix a half-hour later, which was 10:00 a.m. in New York.

The gold price began to rally the moment that the 'fix was in'...and by 4:00 p.m. Eastern had gained back forty of the forty-five dollars it had lost since the close of trading on Monday.  Then gold got sold off another ten dollars going into the close of the New York Access Market.  Gold closed at $1,655.10 spot...down $15.60 from Monday.  As can be imagined, volume was pretty chunky...around 184,000 contracts net.

The silver price action was pretty much the same as gold's...with the only really big difference of note was the fact that silver's low came shortly after 8:00 a.m. in New York...and not at the London p.m. gold fix.

Silver actually closed up 24 cents to $32.04 spot.  Net volume was pretty heavy at 52,000 contracts.

Here's the dollar chart from yesterday.  From its midnight low to its absolute high at the London p.m. gold fix at 3:00 p.m. local time...10:00 a.m. Eastern time...the dollar gained about 50 basis points before giving it all back [plus more] by 3:30 p.m. Eastern time.  The price declines in gold and silver were out of all proportion to the dollar moves associated with them.

As I've said before, there are times when the bullion banks use the dollar as a fig leaf to hide their shenanigans...and yesterday's price action would be a case in point.

It should come as no surprise that the gold shares gapped down at the open...and the low for the gold stocks came at the London p.m. fix at 10:00 a.m. Eastern time.  From that point...and in fits and starts...the share prices continued to rise...and the HUI actually finished in the black, up 0.55% on the day.

The silver shares turned in a rather mixed performance, but Nick Laird's Silver Sentiment Index still managed to finish up 1.11% on the day.

(Click on image to enlarge)

The CME Daily Delivery Report showed that 28 gold, along with 22 silver contracts, were posted for delivery on Thursday.  The link to that action is here.

The GLD ETF did not report any changes yesterday, but over at SLV they showed a withdrawal of 1,946,552 troy ounces.

Over at Switzerland's Zürcher Kantonalbank for the week just past, they reported adding 74,748 ounces to their gold ETF...and 554,983 ounces of silver to their silver ETF.  During the last six weeks, there have been some seriously large additions to both of these ETFs...especially silver.  It seems obvious that the Europeans are exiting the euro and heading for hard assets with a vengeance at the moment.  As always, I thank reader Carl Loeb for sharing these numbers with us.

The U.S. Mint had a smallish sales report.  They sold another 75,000 silver eagles, bringing their monthly sales in this silver bullion coin to 2,507,000.

The Comex-approved depositories reported receiving 580,111 ounces of silver on Monday...and shipped 186,236 troy ounces out the door.  Here's the link to that action.

I decided to steal another paragraph from silver analyst Ted Butler's weekly commentary on Saturday.

"Most disturbing of all of this deliberate day to day manhandling of the silver price, is that it is occurring under the constant watch of the regulators, both the criminal enterprise also known as the CME Group and the federal watchdog, the CFTC. Only they seem to be oblivious to what many can see with their own eyes. The regulators’ failure to perform their most basic mission should not, however, dissuade investors from owning silver. There has been a consistent effort by the commercials for more than a decade or two to discourage outside investors from buying silver. Despite this discouragement, owning silver has been among the very best of investments to own. Instead of fretting about the rotten daily price action, focus on why anyone would go to such lengths to make any investment look bad. The only plausible answer is because the commercials don’t want you to buy silver so that they can buy it in your place. That has been the long-term message from COT data. I wish we could snap our fingers and cause JPMorgan and the CME to cease and desist from their manipulative activities, but the most effective remedy is to do the opposite of what they intend you to do. Look to the real facts surrounding silver and not to the false-flag agenda of the crooked COMEX commercials."

Here's a chart that Washington state reader S.A. sent me yesterday.  Those 'Deficit-as-a-share-of-GDP' numbers for 2009, 2010 and 2011 pretty much means that the U.S. is done for as well.  It's just a matter of how fast it happens.

I was hoping that the number of stories worthy of posting would decline today, but that was not to be.  I've thinned them out as much as I'm going to...and, once again, leaving the final edit up to you.


¤ Critical Reads

Threat to close giant Grasberg copper/gold mine as force majeure looms

Freeport-McMoRan Copper & Gold is considering shutting down its strike-hit Grasberg mine as one of several contingency plans if security does not improve, as it struggles with one of the worst labour disruptions in Indonesia's mining industry.

This comes as the world's second-largest copper mine resumed producing at a reduced rate on Tuesday, after halting output on Monday.

The owner of the mine, which is facing strike action over pay and work conditions, road blockades and possible pipeline sabotage, said in a statement that it "will temporarily suspend and/or curtail concentrate production as conditions warrant".

It said preparations for a controlled shutdown, that could lead to an eventual mothballing of the mine, would begin with the flushing of all remaining materials from its pipelines.

I found this must read story posted over at the website just before I hit the 'send' button...and the link is here.


Newmont Halts Work in Peru

Gold miner Newmont Mining Corp. shut down work at the Yanacocha gold mine in Peru to ensure worker safety as a result of protests in the area.

Newmont took the action at the Yanacocha mine after protesters blocked a road leading to the site and set earth-moving equipment ablaze.

The mine which is also owned by Peruvian precious metals miner Buenaventura stated that the drastic measure to suspend work was taken to ensure the safety of its employees.

The story was posted over at the website yesterday...and I thank Casey Research's own Louis James for sharing this with us.  The link is here.


Thieves, Seeking Quick $$, Steal X-Ray Film From Area Hospitals

In what may be another sign of the tough economy, at least three hospitals in the Delaware Valley are reporting recent thefts of scrap X-ray films that apparently have some cash value.

The thefts were all reported last month, and according to hospital officials and police are consistent with similar thefts that are happening around the country.

Thomas Jefferson Hospital in Philadelphia, Lankenau Hospital in Lower Merion, and Grandview Hospital in upper Bucks County all say thieves stole old patient films, defective films and blank films that can be washed in chemicals to recover the silver, which can be turned into quick cash.

This story filed on Monday was sent to me by reader Scott Pluschau...and the link is here.


Own Gold, The Fed & ECB Have Gone Rogue: Michael Pento

Eric King sent me this Michael Pento interview late last night.  It's very much worth the read...and the link to this KWN blog is here.


Rodman Kills China Stocks Research

Rodman & Renshaw, one of the most active underwriters of Chinese stocks, has killed all China stock coverage.

The move comes after a dozens of Chinese stocks that trade in the U.S., many of them created through reverse mergers, have tumbled in the wake of accounting controversies that has sparked regulatory scrutiny.

In a letter to clients late Friday, the company offered no explanation other than to say, “Effective immediately, we are terminating coverage of the following companies to allocate resources more efficiently within our coverage universe. Upon termination of coverage, any of our prior projections should not be relied upon.”

This short story posted over at on Monday is a must read...and I thank Nitin Agrawal for bringing it to my attention.  The link is here.


Moody's Cuts Spain by 2 Notches, Sees Funding Risks

Moody's Investors Service on Tuesday cut Spain's sovereign ratings by two notches, saying high levels of debt in the banking and corporate sectors leave the country vulnerable to funding stress.

Worsening growth prospects for the euro zone will also make it more challenging for Spain to reach its ambitious fiscal targets, the ratings agency added.

In particular, Moody's said it continues to have serious concerns regarding the funding situation of the regional governments.

This Reuters story was posted over at yesterday...and I thank Elliot Simon once again for sending it along.  The link is here.


Mervyn King: time 'running out' to solve world economy crisis

Despite record low interest rates, printing new money and other emergency measures, governments had not yet addressed the underlying problem of overspending that was at the root of the financial crisis, Sir Mervyn King warned. The consequences threatened to “inflict pain on everyone”, he said.

In a sobering assessment of the world economy, Sir Mervyn warned that even if world leaders managed to agree on emergency moves to support the banking system and debt-stricken economies such as Greece, they would still not have averted the threat to global stability.

Unless overspending by Western economies was curbed it would bring about an ever-larger debt crisis that would mean much lower long-term growth rates, he said.

Worse, he suggested, some of the measures being deployed to counter the short-term situation could actually exacerbate fundamental economic problems.
Merv has a keen grasp of the obvious in this article posted in The Telegraph yesterday...and I thank Roy Stephens for sending it along.  The link is here.


Eurozone crisis could cause collapse of global banking system, warns Citigroup's Willem Buiter

"If things get out of hand in the euro area, no bank in the financial integrated world will stand," he told a parliamentary committee.

Mr. Buiter, a former member of the Bank of England's Monetary Policy Committee, said the recapitalisation of banks and other systemically important institutions should be a priority in the region.

"If they don't, we are setting ourselves up for a financial crisis following the sovereign crisis," he said, giving evidence at a session of the House of Lords EU Economic and Financial Affairs Sub-Committee on the eurozone crisis.

This story out of The Telegraph yesterday is posted over at the website...and, once again, I thank Australian reader Wesley Legrand for sharing it with us.  The link is here.


Follow the Money: Behind Europe's debt crisis lurks another giant bailout of Wall Street

Today Ben Bernanke added his voice to those who are worried about Europe’s debt crisis.

But why exactly should America be so concerned? Yes, we export to Europe – but those exports aren’t going to dry up. And in any event, they’re tiny compared to the size of the U.S. economy.

If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portuguese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in chaos.

This piece by Robert Reich, who was labour secretary under Bill Clinton, is a must read.  I thank Australian reader Wesley Legrand for sending it along...and the link is here.


Chinese Holdings of Treasuries Fall in August

China, the largest-foreign lender to the U.S., reduced its holdings of Treasuries in August by the most in at least a decade as the stripping of America’s AAA credit rating by Standard & Poor's sent yields to record lows.

The world’s second-largest economy cut its position in U.S. government securities by $36.5 billion, or 3.1 percent, to $1.14 trillion, according to Treasury Department data released yesterday in Washington.

This Bloomberg story from yesterday is another offering from West Virginia reader Elliot Simon...and the link is here.


Jeff Berwick interviews Doug Casey

This is mostly a friendly philosophical discussion on anarchy and libertarianism and shows a slightly different Doug than most other videos he has done.  The interview is by Jeff Berwick...and runs a hair over 29 minutes.  It's posted over at the link is here.


Chilton sees new position limits reducing market concentration

"You want speculation or you don't have any markets," said Commissioner Bart Chilton in an interview today on Bloomberg TV. "There's nothing wrong with speculators. It's when it begins to get excessive. We've seen where you can have 30, 35, 40 percent plus in some markets with just one trader holding onto that concentration. That can impact markets."

The commission estimates that the limits will affect 85 energy traders, 12 metals traders, and 84 traders of certain agricultural contracts. The caps will go into effect 60 days after the agency defines the term "swap." The agency declined to estimate when that will be. Limits outside the spot month are likely to go into effect in late 2012.

The limits will apply to 28 physical commodity futures and their financially equivalent swaps including contracts for corn, wheat, soybeans, oats, cotton, oil, heating oil, gasoline, cocoa, milk, sugar, silver, palladium, and platinum.

I ripped this Bloomberg story...and the imbedded video...from another GATA release yesterday.  This is also well worth reading...and the link is here.


Divided CFTC adopts position limits; court challenge likely

The United States pushed through its toughest measures yet to curtail speculation in commodity markets in a tight vote on Tuesday, likely shifting the focus of a fierce four-year debate from the regulators to the courts. In a measure decried by Wall Street and trading companies as a misguided political attempt to cap soaring oil and grain prices, the Commodity Futures Trading Commission voted 3-2 to approve "position limits" that will cap the number of futures and swaps contracts that any single speculator can hold.

I had no chance to talk to Ted Butler about these rulings.  He spent all of his time yesterday glued to his TV set watching the proceedings, so he's in a better position than I [or anyone else for that matter] to comment.  I'm sure he'll have many things to say about it in his mid-week column later today...and I'll steal what I can.

This Reuters story appeared in a GATA release yesterday...and it's well worth your time.  The link is here.


BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit

Bank of America, hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly.

The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

I don't know what the netted out value of these derivatives is, or exactly how much of this $71 trillion is now covered by FDIC insurance, but it's really big money.  I thank West Virginia reader Elliot Simon for sending me this Bloomberg story, which is worth your time, and the link is here.


Goldman Sachs posts surprise $393m loss in third quarter, as pay and bonus pool hits $10bn

Goldman Sachs has slumped to only its second loss since floating in 1999, leaving its bankers facing the prospect of much smaller bonuses this year.

Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter,” said Lloyd Blankfein, the chairman and chief executive, in a statement.

Goldman, which is already cutting 1,000 jobs, has allocated $10bn - 44pc of net revenue of $22.8bn - in the first nine months of the year to compensate staff, including bonuses that are paid at the end of the year. That compares with $13.1bn in the first nine months of last year.

Matt Taibbi's "great vampire squid" is on the ropes.  I feel for them...but I just can't quite reach them.  This story was in yesterday's edition of The Telegraph...and is Roy Stephens first offering of the day.  The link is here.


James Turk Interview at King World News

Yesterday I posted the blog of this interview...and Eric King sent me the link for the entire audio interview late last night.  I haven't had a chance to listen to it yet, but I'm sure it's worth your time...and the link is here.


Paper raids on metals just drive them east faster, Embry tells King World News

Sprott Asset Management's John Embry told King World News yesterday that the price-suppressing raids on the gold futures markets in the West are accomplishing only the transfer of Western gold to the East. Embry adds that it won't work forever and that he thinks the precious metals are close to taking off again.

I 'borrowed' the introduction from a GATA release yesterday...and the link to the blog is here.



¤ The Funnies

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¤ The Wrap

The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life. ~ Theodore Roosevelt

It was amazing to watch the bear raid that the bullion banks pulled off in the precious metals yesterday...just ahead of the CFTC hearing on position limits.  It was almost like they were telling Gary Gensler to shove it.  I don't know how much more 'in-your-face' they can get than that.

There was no negative news about the precious metals to be found fact it was the exact opposite.  And using the tiny rally in the dollar as a reason for gold's performance yesterday would a pretty slender reed to hang one's hat on.

The preliminary open interest numbers for yesterday's trading action...and the final open interest numbers for Monday's trading day...revealed virtually nothing.  My only hope is that JPMorgan et al report all their Tuesday trading activity in a timely manner so that it appears in Friday's Commitment of Traders report.  They're notorious for being tardy when it suits them...and yesterday's action may be one of those times when it does.

I have no idea what happens from here.  We are still sitting at record COT lows...blood-out-of-a-stone both gold and silver.  Whatever speculative longs are left, would require prices in both metals so low that it would seem impossible that JPMorgan would make the attempt to go after them...and what would they get if they got down there?  Not much...and not worth the effort in my opinion.

There's absolutely nothing left to get in silver, as we are four bucks below the 200-day moving average already.  Here's the 1-year chart.

(Click on image to enlarge)

As for gold, the big spike down on September 26th probably came close enough to its 200-day moving average to wipe out virtually all the leveraged tech fund longs...and the small leveraged traders as well.  I supposed they could officially take it below the 200-day moving average...but for what purpose?  I guess they don't a reason, as they can pretty much do what they want without the CFTC or the CME doing a thing to stop them.  Here's the 1-year gold chart.

(Click on image to enlarge)

Not much happened in early Far East trading today....but, starting around 2:00 p.m. Hong Kong time, both metals came under a bit of selling pressure, especially silver.  Volume is already pretty high in that metal, so it appears that the high-frequency traders are lurking about in the silver market...and gold's volume is getting up there as well.

Based on the current price action as of 5:15 a.m. Eastern time, it's impossible to say what the New York trading day will have in store for us when the Comex opens this morning...but we'll find out soon enough.

See you Thursday.