It was deathly quiet in the precious metal markets up until 11:00 a.m. in London on Thursday. Then the dollar index did a major face plant...and the precious metals moved higher. But they didn't move very far.
Gold rose about twenty bucks or so during the next hour and a bit...and the high for the day [around $1,622 spot] was in about 12:45 p.m. BST...which was 7:45 a.m. Eastern time. Even though the dollar index continued to decline, the gold price moved either sideways or down for the rest of the trading session in both London and New York.
The New York low in gold [$1.608.00 spot] came about 12:10 p.m. Eastern time...and then recovered until the 1:30 p.m. close of Comex trading, before moving sideways for the duration of the electronic trading session.
Gold finished Thursday trading at $1,616.10 spot...up $11.30 on the day...and for the third day this week, net trading volume was around 111,000 contracts.
Silver had virtually an identical price path as gold. The high tick in silver [around $27.90 spot] came at the same as gold's high tick...as did the New York low tick at 12:10 p.m. in New York. The absolute low [around $27.25 spot] came in London at 11:00 a.m. BST.
At the high, silver was up about 65 cents from Wednesday's close, but by the time all was said and done, silver closed at $27.54 spot...up only 20 cents on the day. Net volume was in the 38,000 contract range.
I guess it should come as no surprise that platinum and palladium's high price point of the day came at the same times as gold and silver...and the New York lows were the same times as well.
As I said in the opening paragraph of this column, the dollar index, which had basically traded sideways up to that point, took a nose dive beginning at 11:00 a.m. BST right on the button. The absolute low of the day came four hours and a few minutes later, just minutes after 10:00 a.m. in New York.
The index at the start of the sell-off was around 83.67...and the absolute low was 82.60...a drop of about 107 basis points. From there, the dollar index recovered about 24 basis points going into the close...and finished the day around 82.84.
I was underwhelmed at the performance of the precious metals during this dollar index sell-off, especially considering the fact that all four precious metal rallies got halted in their track at the same moment...and a full three hours before the dollar index hit its nadir.
I suppose that one of the things that we should be thankful for is the fact that the dollar index didn't rise that amount, as the precious metals would certainly have been lambasted to the downside with much larger losses than the gains we had yesterday, as JPMorgan et al would certainly have used that opportunity to their advantage.
The gold stocks made several rally attempts during the morning trading session in New York, but every rally ran into a willing seller before it could get very far. The stocks hit their low of the day at the New York low for the gold price, which came about 12:10 p.m. Eastern time. From there it appeared that the gold stocks rallied with virtually no outside interference right into the close. The HUI finished above the 400 mark once again...up 2.22% on the day.
The silver stocks did OK...but there were a few red arrows here and there as well. Nick Laird's Silver Sentiment Index closed up 1.96%.
(Click on image to enlarge)
The CME's Daily Delivery Report showed that 7 gold and 83 silver contracts were posted for delivery over at the Comex-approved warehouses on Monday. The biggest short/issuer was Jefferies once again, with 60 contracts...and also JPMorgan with 23 contracts. The two long/stoppers of note were the Bank of Nova Scotia with 52 contracts...and RJ O'Brien with 26 contracts stopped. There are now only a small handful of silver contracts [7 or so] left to deliver in July. The link to the Issuers and Stoppers Report is here.
There were no reported changes in either GLD or SLV yesterday.
Earlier this week the bi-weekly short position report of both SLV and GLD were updated over at the shortsqueeze.com Internet site. The short position in SLV increased by 273,100 shares/ounces...or 2.46%. SLV's short position now sits at 11,353,300 shares/ounces.
The short position in GLD over the prior two weeks increased by a pretty chunky 20.43%...or 2,867,700 shares. That represents 286,770 ounces of gold. The total short position in GLD now stands at 16,903,300 shares, or 1,690,330 ounces.
Based on this data, it would require deposits of 353.1 tonnes of silver to SLV...and 52.6 tonnes of gold to GLD...to back every share held short that has no physical silver and gold backing it.
The U.S. Mint had another small sales report. They sold 1,000 ounces of gold eagles and 100,000 silver eagles.
Over at the Comex-approved warehouses, they reported receiving 596,365 troy ounces of silver on Wednesday...and shipped 926,356 troy ounces of the stuff out the door. The link to that action is here.
It was a slow news day yesterday, so I hope you can find the time to skim the highlights of all the stories posted below.
David Rosenberg, the bearish economist at Gluskin Sheff, isn't convinced that the U.S. housing market is on the up and up. He points to the number of months it takes to sell a new house.
From his note today: How can it possibly be that the housing market is showing a durable recovery when it is still taking a median of eight months for the builders to find a buyer upon completion of the unit? Up until April 2008 – in the midst of the Great Recession – a number this high was unheard-of, having happened but once previously and that was the peak of the previous housing market meltdown in June 1991.
You've already read all of the article...and what's left to look at is the most excellent graph that accompanied it. This businessinsider.com story was posted on their website early yesterday evening...and the chart is very much worth checking out. The link is here.
JPMorgan Chase & Co. has set up a contingency plan allowing it to resume trading the bonds of any nation exiting the euro area to avoid disruption to its clients.
The largest U.S. bank by assets said while a break-up of the 17-nation currency zone was not its central view, the possibility has convinced it to establish procedures to limit any disruption to its bond-trading activities. The implied probability of a country leaving the monetary union is 59 percent for next year, and 66 percent by the end of 2014, based on bets at Intrade.com. Spain hasn’t ruled out quitting the euro, El Confidencial reported this week.
“We’ve been doing some contingency work to ensure that we have a robust system and ability to absorb shocks if on a Sunday night a sovereign decides to leave the euro,” Carl Norrey, head of European rates securities at JPMorgan in London, said in interview on July 23. “The probability of a country exiting the euro is no longer zero.”
This story was posted on the Bloomberg website on Wednesday morning just before the markets opened in New York. I thank reader Richard Craggs for sending it along...and the link is here.
Food prices will race ahead faster than prices of other goods in the United States this year and next, due to the worst drought in more than a half a century, the government forecast on Wednesday.
Food prices rose 3.7 percent in 2011, and American consumers may pay 3.5 percent more at the grocery store this year, with higher prices for meat, poultry and fruit, as the drought gripping the U.S. farm belt drives up crop prices.
The U.S. Department of Agriculture forecast that food prices would jump between 2.5 percent and 3.5 percent in 2012 and then rise 3-4 percent in 2013.
"The drought is really going to hit food prices next year," said Richard Volpe, a USDA economist, adding the pressure on food prices would start to build later this year.
This Reuters piece from Wednesday is one I borrowed from yesterday's edition of the King Report. It's a very worthwhile read...and the link is here.
We've been looking forward to this all day.
Congressman Barney Frank (D-MA) was just a guest on CNBC's Closing Bell with Maria Bartiromo, and quite frankly, the interview went from zero to ugly in less than two minutes.
Maria started off by asking Barney about the topic du jour, Sandy Weill's complete reversal on the concept of a the 'supermarket' mega bank.
Our favorite moment? Maria asked Barney when the fiscal cliff issue would be resolved in Congress saying: "When are the adults going to enter the room?"
To which Barney replied: I don't take kindly to being called a non-adult. You know, you remind me sometimes of what your colleague Joe Keenan said when I tried to get the conversation more thoughtful... he said 'oh this is cable TV, not C-SPAN...I want to talk seriously about the issues... you keep changing the subject."
And then they exploded.
This businessinsider.com story was posted on their Internet site late Thursday afternoon and has the 12:16 minute Bartiromo vs. Frank interview imbedded. The article is worth reading...and the video clip worth watching...and I thank reader Scott Pluschau for sending it. The link is here.
On yesterday's edition of Russia Today's Capital Account, Lauren Lyster had Jim Rickards as co-host, with guest Rick Rule. The show runs a bit over 28 minutes...and they cover everything from gold, Libor, Glass-Steagall...and all the way to water. When Rick was asked about Black Swans he said, "when I see Black Swans, I see flocks of them."
The show is definitely worth watching if you have the time...and I thank reader Dennis Meredith for sending it along. It's a youtube.com video...and the link is here.
It was the signal investors were waiting for. The European Central Bank "is ready to do whatever it takes to preserve the euro," its president, Mario Draghi said on Thursday. Markets leapt because the statement was a strong signal that the ECB will resume its program to buy the bonds of struggling euro nations.
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," Draghi told an investment conference in London to mark the beginning of the Olympics. "To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate."
The comments, Draghi's strongest to date in the crisis, helped calm nerves after a difficult week in which Spanish 10-year bond yields hit record highs -- well above the 7 percent level seen as unsustainable -- and the euro fell to its lowest level against the dollar in more than two years.
As just about everyone with a brain has already figured out, it's "print, or die" time for the world's central banks...and the ECB was the first one out of the gate. I thank Roy Stephens for sending me this story that was posted over at the spiegel.de website yesterday...and the link is here.
Mario Draghi, the ECB president, vowed to do "whatever it takes" to save the euro within limits of its mandate. "Believe me, it will be enough," he said in London.
Picking code words instantly understood by traders, Mr Draghi said the violent spike in bond yields in recent days was hampering "the functioning of the monetary policy transmission channels" - the exact expression used to justify each of the ECB's previous market interventions.
The euphoria is unlikely to last long unless the ECB comes through with concrete action after its pre-holiday meeting next week. Angel Gurria, head of the OECD, honed in on Mr Draghi's caveat, saying the legal constraints are the nub of problem. The ECB must "explore the flexibility of its mandate", he said.
Others were blunter. Marc Ostwald from Monument Securities said Mr Draghi's words were "cheerleading bluster", while Gary Jenkins from Swordfish called them "a bluff to get through the summer".
"Spain is very close to the precipice, and its pretty much game over already, " said Mr Jenkins. "Today's action was a short-covering rally. The real trick is get bond investors to come in alongside the ECB, and that is much harder."
This is an Ambrose Evans-Pritchard take on yesterday announcement from Mr. Draghi...and he's less than kind in his comments. The blog was posted on the telegraph.co.uk Internet site last evening in London...and I thank reader Mark Childers for bringing it to our attention. It's worth the read...and the link is here.
Spanish borrowing costs have become a major concern for the euro zone. Now, however, help may be on the way. According to a German paper, euro-zone finance ministers may instruct the EFSF bailout fund to begin buying Spanish bonds on the secondary market to push down interest rates.
"If Madrid submits a request we are prepared to act," an unnamed EU diplomat told the paper. Spanish Finance Minister Luis de Guindos has urged EU colleagues to authorize the EFSF to buy Spanish bonds. He met German Finance Minister Wolfgang Schäuble on Tuesday and French Finance Minister Pierre Moscovici on Wednesday.
The bank bailout for Spain is a prerequisite for the EFSF to buy bonds because EFSF rules state that this kind of financial aid is only permitted if the affected country has an unresolved banking problem, Süddeutsche said. "We hope we can calm the markets now," it quoted the EU diplomat said as saying.
This was another story posted on the spiegel.de Internet site yesterday...and Roy Stephens second offering of the day. The link is here.
The economy shrank by 0.7pc in the second quarter – far more than the 0.2pc fall expected, as record rainfall and the Jubilee holiday added to pressure from austerity cuts and the eurozone debt crisis.
It marks the third successive quarter of contraction, leaving Britain in its longest double-dip recession in more than 50 years.
The Office for National Statistics showed broad-based weakness across the private sector, with construction output down 5.2pc, industrial production down 1.3pc and services output – which accounts for 77pc of the economy – falling 0.1pc. Only public-sector services output, and business services registered any growth.
Economists said the data increased the likelihood of an interest rate cut and more quantitative easing in the coming months.
This story was posted in The Telegraph on Wednesday evening...and is another story that I borrowed from yesterday's King Report. It's worth skimming...and the chart alone is worth the trip. The link is here.
The first is with Citi analyst Tom Fitzpatrick...and it's headlined "Special Friday Gold & Silver 'Chart Mania'". The second blog is with Peter Schiff...and it's entitled "Gold Just Broke Out & Is Now Off To The Races". In my opinion, both of these are must reads.
One of South Africa's biggest gold firms has taken the drastic step of banning all food underground to cut supply lines to gangs of illegal miners used to staying deep in the mines for months on end, threatening lives and official production.
With gold mining around Welkom, 200 km (130 miles) south of Johannesburg, dating back to the 1930s, the bedrock is criss-crossed by a myriad network of tunnels that provide perfect cover and multiple entry points for illegal miners.
Bosses of Harmony Gold's 2.4 km deep Phakisa mine - one of the world's deepest - have tried blocking up old shafts and installing stadium-style turnstiles at the top of the main shaft to stop imposters slipping through.
In January this year, they tightened the screw by imposing a total ban on food to prevent official miners bringing in supplies to sell or give to their unofficial counterparts.
This Thomson/Reuters story was posted on the mineweb.com Internet site on Wednesday...and I thank Donald Sinclair for digging it up on our behalf. The link is here.
Freegold Ventures Limited is a North American gold exploration company with three gold projects in Alaska. Current projects include Golden Summit, Vinasale and Rob. Both Vinasale and Golden Summit host NI 43-101 Compliant Resource Calculations.
The 2012 exploration program includes additional drilling on both Golden Summit and Vinasale. An updated NI 43-101 resource was calculated on Golden Summit in December 2011 and using a 0.35 g/t cutoff is 14,840,000 tonnes @0.66 g/t Au - hosts 316,000 ounces in the indicated category and 50,0460,000 tonnes @0.61 g/t Au - hosts 991,000 ounces in the inferred category. Drilling has been underway on this road accessible project since mid January. To date over 36,000 feet have been drilled since January on the project, of which 30,000 feet have been aimed at resource expansion. Drilling remains ongoing. An updated NI 43-101 is expected to be completed in Q3.
Additional drilling is also underway on Vinasale. Vinasale currently hosts recently updated NI 43-101 resource calculation of 49,320,000 mt @1.09 g/t for a total of 1,735,000 contained gold ounces in the inferred category using a 0.5 g/t cutoff. Please visit our website for more information.
All rational action is in the first place individual action. Only the individual thinks. Only the individual reasons. Only the individual acts. ~ Ludwig von Mises
As I mentioned in my commentary further up, both gold and silver prices topped out shortly after 7:00 a.m. Eastern time yesterday morning...and then traded flat to down for the rest of the day. But the dollar index decline continued for another three hours...and didn't hit it's nadir until shortly after 10:00 a.m. in New York. You'll excuse me if I don't think that this passes the smell test.
Gold spent its second day above its 50-day moving average yesterday...but the jury is still out on where we go from here. The news out of Europe is worse than awful...caught between a rock [an EU break up and euro collapse]...or a very hard place [print, or die]...so one would should expect the precious metals to do better in the days and weeks ahead.
But never underestimate the power of the criminal elite that are running the precious metal price management scheme. They are always in a position to engineer a price decline if they decide amongst themselves that this is what they want, or is needed at the time. The flip-side to that is the fact that if a higher price is required, that's equally easy for them to arrange.
Certainly the Commitment of Traders Report is structured to have gold and silver move higher...perhaps sharply higher. But for me, the jury is still out...and I await developments, hopefully to the upside.
Talking about the COT report, the new one is due out today at 3:30 p.m. Eastern time and, since the rallies in silver and gold did not really develop any legs until Thursday, there's a better than even chance that there will be an improvement in the Commercial net short position in both metals in today's report, as the cut-off for the report was at the 1:30 p.m. close of Comex trading on Tuesday. It's what has happened since then that has me concerned.
I'd love to see the CFTC adopt the TOCOM's Commitment of Traders Report. It comes out daily at the close of trading...and shows the names of all the traders, plus their associated long and short positions in all commodities. They are bare naked in Tokyo...but there's no chance that they'll be doing the 'full monty' anytime soon in New York.
Not much happened price-wise in gold and silver in Far East trading...but both metals are back in positive territory after getting sold off a hair earlier on Friday morning. Gold's net volume is shockingly light at the moment...and silver's net volume is very light as well. Based on that, I wouldn't read a thing into the current early morning price action in London. The dollar, which had been comatose up until shortly before the London open, is now up about 30 basis points off its low, which came just about fifteen minutes before London began to trade...but it's only up 14 basis points from its New York close on Thursday.
Today...and maybe Monday...are the last days for traders to roll out of the August delivery month for gold, so I expect gold volume to pick up quite a bit once New York begins to trade, regardless of what the price action is. That was certainly the case yesterday...and I expect that again today.
First Day Notice for delivery into the August gold contract will be posted on the CME's website on Monday evening...and I'll have the numbers for you in my Tuesday column.
There's still the opportunity to either readjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best (and current) recommendations...as well as the archives. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.
Enjoy your weekend...and I'll see you here on Saturday sometime.