The gold price showed signs of life in early morning trading in the Far East on their Tuesday---and was up more than ten bucks by around 12:45 p.m. Hong Kong time. Then about an hour and a half after that, the price looked like it was about to run away to the upside until JPMorgan et al showed up with their HFT algorithms and, as I mentioned in The Wrap on Tuesday, the high of the day was in at the London open. And except for a capped rally at the Comex open, the gold price slid down hill for the remainder of the day.
The low and high ticks were recorded as $1,275.70 and $1,291.90 in the December contract.
Gold closed on Tuesday in New York at $1,280.60 spot, up only $4.40 on the day after "da boyz" got through with it. Net volume was 97,000 contracts, which wasn't overly heavy, but a good chunk of that was used to put out the rally fires at the London and New York opens.
Silver followed a similar path to gold, but the rally at the London open was much more anemic, with the real fireworks starting shortly before 1 p.m. BST---and within ten minutes of the Comex open, JPMorgan et al had capped the price and, like gold, it was all down hill from there.
The low and high ticks in silver were reported by the CME Group as $19.305 and $19.66 in the September contract.
Silver closed yesterday at $19.355 spot, up 1 cent from Monday. Only the willfully blind wouldn't admit the price management that was self evident in the silver market yesterday. One wonders how much more egregious it can get before they do.
Platinum and palladium both had rally attempts at the London and New York opens---and they, too, got dealt with in a similar fashion. Both finished down on the day---platinum by 6 bucks and palladium by five. Here are the charts.
The dollar index closed late on Monday afternoon in New York at 82.58---and then chopped around in a 25 basis point range for the entire Tuesday trading session. The 80.45 low came at 2:30 p.m. Hong Kong time---and the 82.69 high came around 2:40 p.m. in New York. It closed at 82.67---up 9 basis points on the day. Here's the 3-day chart so you can see the action.
The gold stocks gapped up a percent and change at the open---and then began to work their way higher starting around 10 p.m. EDT. Then from 3 p.m. onward, they traded flat. The HUI finished up 2.28%.
The silver equities had a very similar price path as the gold stocks---and Nick Laird's Intraday Silver Sentiment Index closed up 2.45%.
I was rather amazed to see the gold and silver equities rise for most of the trading session, while the underlying metals headed south at the same time.
The CME Daily Delivery Report showed that 46 gold and 1 silver contract were posted for delivery within the Comex-approved depositories on Thursday. Morgan Stanley and ABN Amro issued---and HSBC USA and Scotiabank stopped. The link to yesterday's Issuers and Stopper Report is here.
The CME Preliminary Report for Tuesday's trading action showed that only 55 gold and 2 silver contracts are left for delivery in the August contract---and after you subtract the deliveries mentioned in the previous paragraph, the August delivery month is pretty much done.
The good folks over at Switzerland's Zürcher Kantonalbank updated their gold and silver ETF holdings as of the close of business on Friday, August 22. Their gold ETF declined by 12,475 troy ounces---and their silver ETF shed 96,838 troy ounces.
The good folks over at the shortsqueeze.com Internet site updated their short position data for both SLV and GLD [as of the July 15 cut-off] late last night. Their new report showed that the short position in SLV declined by 8.97 percent---from 17.37 million shares/troy ounces, down to 15.81 million shares/troy ounces. I was expecting/hoping for more than that, but the numbers are what they are---and that's if all the deposits made during the reporting period were included. There should be another big decline in the next report in two weeks from now, as 4.5 million ounces of silver have been reported added to SLV since the July 15 cut-off.
The short position in GLD went the other direction, increasing by 16.95 percent, from 1.15 million troy ounces, up to 1.35 million troy ounces. This increase was probably of the 'plain vanilla' variety. Regardless, the short position in GLD remains very low on an historic basis.
The U.S. Mint had another sales report yesterday. They sold 3,500 troy ounces of gold eagles---1,000 one-ounce 24K gold buffaloes---and 105,000 silver eagles.
It was very quiet in gold over at the Comex-approved depositories on Monday, as nothing was reported received---and only 321 troy ounces were shipped out.
Of course it was an entirely different kettle of fish for silver, as 890,790 troy ounces were reported received---and 600,040 troy ounces were reported shipped out. The link to that action is here.
At the moment, I have a lot less stories for you than I did on Tuesday. However, that could change as the evening progresses.
One can debate whether or not margin debt as reported by the NYSE has any relevance in a world in which the retail investor is long gone, and where the marginal buyer are hedge funds (and primary dealers who use excess reserves as collateral for marginable derivatives and futures) who fund themselves using far more arcane "shadow" repo conduits as we have explained previously, it is indisputable that the leverage statistics disclosed monthly by New York Stock Exchange provide a useful glimpse into how the broader market is obtaining "dry powder" to keep BTFATH.
And while in July margin debt did dip modestly from near all time highs hit back in June when total margin debt was virtually tied with the previous record, at $464 billion, it was that other metric tracked by the NYSE, namely Investor Net Worth, calculated by subtracting margin debt from the notional represented in free credit cash accounts and credit balances in margin accounts, that was the notable highlight in the July report: at a negative $182.1 billion, a decline of $6.3 billion from the prior month, investor Net Worth has never been lower.
This happens to be a deficit which is more than twice as large as the net worth shortfall reached during the last market bubble, which hit ($79) billion, peaking during the quant freakout in the summer of 2007 and subsequently surging to a record high of $184.6 billion in August 2008, as repo desks closed all margin positions with virtually any and every counterparty, leaving everyone in a position of record high "net worth."
This short, but very interesting article, with a 'must see' chart, appeared on the Zero Hedge website at 3:25 p.m. EDT yesterday afternoon---and today's first story is courtesy of reader M.A.
This 39:21 minute audio interview conducted by Geoff Rutherford---along with a transcript---was posted on the sprottmoney.com Internet site yesterday.
Moments ago a stunning article appearing in the "Foreign Affairs" publication of the influential and policy-setting Council of Foreign Relations, titled "Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People."
In it we read the now conventional admission of failure by Keynesians, who however, unwilling to actually admit they have been wrong, urge the even more conventional solution: do more of the same that has lead to the current financial cataclysm, only in this case the authors advocate no longer pretending that the traditional monetary channels work but to, literally, para-drop money. To wit:
To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.
Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
This is the first of two absolutely positively must reads today---and this one is the second contribution of the day from reader M.A.
The Daily Reckoning presents… Steve Forbes' Intelligent Investing with Jim Grant, editor of Grant’s Interest Rate Observer
Forbes: Tell us, what is going on? We’ve had the worst recovery from a sharp downturn in U.S. history. Yet the monetary base has exploded far in excess of what it did in the ’70s and yet we haven’t had an explosion, at least in the Consumer Price Index. Gold is down from its highs of three years ago. Stocks are at a record high. What you call the taper tantrum, now the markets are in seeming calm about that. So what in the world is happening?
Grant: Well, I think first and foremost the patient is over-medicated. That is, the economic patient. Stimulus, by the bottle full, by the prescription fill, gradually and by degree are (and I guess not so gradually) the Federal Reserve has moved to substitute price administration for price discovery. And it seems to me that the Fed’s kind of full-court pressed (to switch metaphors) on financial markets and pricing thereof has induced a deep complacency with respect to financial assets and has also introduced a sharp degree of optimism or what we might call even inflation in the financial markets.
I certainly can’t explain why, to date, no such inflation has been visible or very little has been visible in the consumer realm. But you know one would almost expect that in this day and age of miraculous digital enhancements to everything we do and the related improvements and the efficiency of production that prices would, in the absence of these monetary insertions, actually fall, or at least dwindle a little bit. So I suppose that a little bit of inflation is itself an anomaly one ought to have seen, kind of a dividend for the working guy in the shape of low and everyday lower prices.
The video interview runs for 34:26 minutes---and there's a transcript as well. It was posted on the dailyreckoning.com Internet site on Monday---and I thank West Virginia reader Elliot Simon for sending it our way.
The government is very good at making things overly complicated for the purpose of obscuring what’s really going on from the public,” observed hedge fund manager Erik Townsend during our interview in May.
He was making a point about the 2008 bailouts. The Federal Reserve played a leading role, applying trillions in paper-clip and rubber-band solutions. The Fed’s balance sheet swelled from $900 billion in September 2008 to $4.4 trillion as we go to press.
Luckily for you, our friend Jim Rickards is just as good at elucidating the muddled world of finance as the government is at obscuring them.
“Since Federal Reserve resources were barely able to prevent complete collapse in 2008,” Jim writes in his recent New York Times best-seller, The Death of Money, “it should be expected that an even larger collapse will overwhelm the Fed’s balance sheet.”
Simply put, next time, printing another $3 trillion-plus won’t be politically feasible. “The specter of the sovereign debt crisis suggests the urgency for new liquidity sources, bigger than those that central banks can provide, the next time a liquidity crisis strikes. The logic leads quickly from one world to one bank to one currency for the planet.”
This interview/commentary by Jim Rickards was done by The Daily Reckoning's Addison Wiggin---and it was posted on their website a week ago today. I thank Carl Lindfors for sharing this item with us.
This fascinating video interview runs for 29:05 minutes---and it was posted on the goldswitzerland.com Internet site yesterday. Even though I've been posting his columns from The Telegraph for almost a decade, it's the first time I've ever seen him "in the flesh" so to speak, or even heard what his voice sounded like.
I've just watched the first bit---and will watch the rest after I get out of bed later this morning. From what I've heard so far, it's definitely worth watching.
Scotland's pro-independence leader Alex Salmond on Monday (25 August) was seen as the winner of a final TV debate before a referendum which could lead to the creation of a new EU member state.
The BBC debate, spiced up by heckling from the audience, saw Salmond continuously interrupting and contradicting Alistair Darling, a former British minister who is head of the "Better Together" campaign to keep Scotland in the U.K.
"If we are Better Together, why are we not better together already?" an audience member shouted at one point.
A snap poll by ICM Research found that 71 percent of viewers said Salmond had won the debate, which took place in Glasgow, Scotland's largest city. Darling, the winner of the previous TV debate, only convinced 29 percent of the polled viewers.
This article appeared on the euobserver.com Internet site at 9:30 a.m. Europe time on Tuesday---and it's courtesy of Roy Stephens.
France's prime minister reshuffled his Cabinet on Tuesday to silence ministers who had openly criticized Socialist President Francois Hollande's economic policies as he tries to pull the nation out of stagnation and steer it toward growth.
Emmanuel Macron, who had earlier served as top adviser in charge of the economy, took over the Economy Ministry, replacing Arnaud Montebourg, who had publicly railed against government policies as being too austere and unjust to the French.
Macron, a 36-year-old former banker who advised Hollande until June 2014, is known for his pro-business stance and is sure to send a positive signal to the European Union, which is pressuring France to get its finances in order.
Education Minister Benoit Hamon and Culture Minister Aurelie Filippetti, who supported Montebourg in his criticism, also lost their jobs.
This AP story, filed from Paris, showed up on their website at 4:10 p.m. EDT on Tuesday---and it's also courtesy of Roy Stephens.
Business confidence in Germany, which has led the E.U. economic revival over the last year, declined for a fourth month in August, which further clouded prospects of a broader recovery across the E.U.
Germany’s Ifo Business Climate Index in manufacturing, which looks at the confidence of the country’s 7,000 firms, fell to 106.3 in August from 108 in July.
It’s the lowest figure since last July, marking the longest successive monthly decline since 2012, the report said.
Monday’s figures come after frustrating economic data for the second quarter. It showed Europe’s biggest economy contracted 0.2 percent during the period, after it grew 0.7 percent in the first quarter. Much of the unexpected drop is attributed to the effects of the crisis in Ukraine that has led to a tough 'sanctions war.' Even after the disappointing second quarter, Germany believes it will achieve 1.8 percent growth this year. By contrast, the UK, which is not part of the euro currency zone, showed its strongest quarterly economic growth in 6 years, with 0.8 percent in the second quarter.
This article appeared on the Russia Today website at 3:01 p.m. Moscow time on their Tuesday afternoon, which was 7:01 a.m. EDT. It's another offering courtesy of Roy Stephens.
The European Union is not concerned by the possibility of Kiev halting Russian gas transit via Ukraine, the vice-president of the European Commission responsible for energy, Gunther Oettinger, said in Minsk Tuesday.
There is no actual concern,” he said on the sidelines of the Customs Union-Ukraine-EU meeting in the Belarusian capital.
Last month, the Ukrainian parliament passed a bill allowing to impose restrictive measures on Russia, including the possibility of halting transit of Russian oil and gas via the territory of Ukraine.
This RIA Novosti news item, filed from Minsk, put in an appearance on their Internet site at 11:28 p.m. Moscow time on their Tuesday night---and once again I thank Roy Stephens for sending it our way.
Russia, Ukraine and the European Union agreed to continue the three-party talks on gas issues that stalled this summer, Russian Energy Minister Alexander Novak said Tuesday.
The three-party consultations continued from mid-April to June, but produced no result. Kiev insisted on a sharp reduction in the gas price refusing otherwise to pay its debt that had reached at the moment $4.5 billion. Russia later offered a discount, which however, failed to satisfy Kiev’s demands. After that the Russian side announced it would continue negotiation only after Kiev cleared its debt. On June 16, Gazprom introduced a prepayment system for gas deliveries to the country.
The European Commission has repeatedly called for the consultations to be resumed.
This article, also filed from Minsk, was posted on the RIA Novosti website at 7:40 p.m. Moscow time on their Tuesday evening---and I thank Roy Stephens for sending it.
Goods embargoed by Moscow in response to Western economic sanctions are being actively shipped to Moscow via Belarus, Russian President Vladimir Putin said Tuesday.
"Even within the Customs Union framework, embargoed goods are being actively re-imported to the Russian Federation from the European Union countries, namely via Belarus," Putin said.
"I know that the leadership of Belarus and its president are trying to prevent this negative practice."
The Russian leader added that exporters often replace an E.U. label with a new one and send the goods to Russia.
This RIA Novosti news item, also filed from Minsk, showed up on their website at 7:39 p.m. Moscow time yesterday---and the stories from Roy just keep on coming.
The meeting between Russian President Vladimir Putin and his Ukrainian counterpart Petro Poroshenko came to an end in the Belarusian capital Minsk; the private conversation of the two leaders lasted for about two hours.
“The meeting is over,” the Russian leader’s spokesman Dmitry Peskov said withholding though any further comments on the results of the talks.
Following the Customs Union-Ukraine-E.U. meeting, Belarusian President Alexander Lukashenko told journalists that Russia and Ukraine “had agreed on a private meeting between the presidents of the two countries to discuss urgent issues.”
Earlier Spokesman Peskov said that the two leaders may discuss the crisis in Ukraine, humanitarian aid to the country’s eastern regions, the flow of refugees to Russia, and the possibility of an internal dialogue between Kiev and eastern Ukraine. Apart from that, during the talks the Kremlin was expected to discuss the bilateral cooperation between Moscow and Kiev following Ukraine’s signing the Association Agreement with the European Union.
Another RIA Novosti news item, also filed from Minsk yesterday afternoon---but this one is courtesy of reader M.A. for a change.
Switching over to E.U. trade standards and nixing duty-free trade with Russia will cost Ukraine €165 billion over the next 10 years, President Putin warned at a meeting with President Petro Poroshenko in Minsk on Tuesday.
Russia will be forced to cancel all preferential trade agreements for Ukraine’s imports and switch to a standard regime when it ratifies its E.U. trade association agreement in September, the President said.
“In full accordance with the terms of agreement with the CIS free trade zone and WTO standards, we will be forced to cancel preferential imports from Ukraine,” Putin said.
Russia will cancel its duty-free relationship with Ukraine, which will lead to import tariffs of up to 8 percent affecting 98 percent of commodities.
This article was posted on the Russia Today website at 12:42 p.m. Moscow time on their Tuesday afternoon, which was 4:32 a.m. EDT. I thank Roy Stephens for sending it our way.
The New York Times has taken deep umbrage over an unseemly parade staged by ethnic Russian rebels in eastern Ukraine featuring captured Ukrainian soldiers. The Times noted that the Geneva Conventions prohibit humiliation of POWs, surely a valid point.
But the Times – in its profoundly biased coverage of the Ukraine crisis – apparently feels that other aspects of this nasty civil war are less newsworthy, such as the Kiev government’s bombardment of eastern Ukrainian cities sending the death toll into the thousands, including children and other non-combatants. Also downplayed has been Kiev’s dispatch of neo-Nazi storm troopers to spearhead the urban combat in ethnic Russian towns and cities in the east.
When the Times finally noticed this street-fighting role of neo-Nazi militias, that remarkable fact – the first time armed Nazis were dispatched by any government to kill people in Europe since World War II – was consigned to the last three paragraphs of a long article on a different topic, essentially a throwaway reference.
Similarly, the Kiev regime’s artillery fire on residential areas – killing many civilians and, over the weekend, damaging a hospital – has been treated by the Times as a minor afterthought. But Times’ readers are supposed to get worked up over the tasteless demonstration in Donetsk, all the better to justify more killing of ethnic Russians.
This commentary by Robert Parry was posted on David Stockman's website yesterday sometime---and it's another contribution from Roy Stephens.
Foreign rating agencies may need to set up subsidiaries in Russia instead of branches or representative offices, so their operations could be subject to Russian legislation. It is seen as another attempt by Russia to better control its domestic finances.
The Central Bank of Russia has proposed a bill that would regulate operations of rating agencies in Russia, Kommersant reports.
Moody`s, S&P and Fitch acknowledged the receipt of the draft law but declined to comment. If the bill becomes law it would be the first regulation of the sort in Russia.
Central to the bill is that the international rating agencies will have to create Russian subsidiaries, which will be Russian legal entities.
This Russia Today article appeared on their Internet site at 12:54 p.m. Moscow time on their Tuesday afternoon---and my thanks go out to Roy Stephens once again.
NATO is to deploy its forces at new bases in eastern Europe for the first time, in response to the Ukraine crisis and in an attempt to deter Vladimir Putin from causing trouble in the former Soviet Baltic republics, according to its secretary general.
Anders Fogh Rasmussen said the organisations' summit in Cardiff next week would overcome divisions within the alliance and agree to new deployments on Russia's borders – a move certain to trigger a strong reaction from Moscow.
He also outlined moves to boost Ukraine's security, "modernise" its armed forces and help the country counter the threat from Russia.
This story appeared on The Guardian Internet site at 9:04 p.m. BST on Tuesday evening---and it's the final offering of the day from Roy Stephens.
In my essay "Why they are making an enemy of Russia?," we looked at two of the key reasons why the U.S. is making an enemy of Russia, namely the promotion of conflict by the powerful Defense industry lobby in order to keep its order books full, and the value of conjuring up an external enemy as a hate figure for the masses, in order to take the heat off the government. In this article we are going to look at what is arguably an even bigger reason, that was largely omitted in the earlier article, which is that Russia, in alliance with China, is threatening to bring an end to the dollar as the global reserve currency, which would mean the end of the American empire.
We are witness to the greatest struggle of our age – the battle to maintain global dollar hegemony, and with it U.S. economic, military and political dominance of the entire planet – and this struggle is now coming to a head.
Notwithstanding its undeniably great accomplishments of the past hundred years, the relationship of the United States to the rest of the world is parasitic. This is because it creates money and debt instruments out of nothing, requiring virtually no effort, which it then swaps for goods and services with other countries. Because the U.S. dollar is the global reserve currency, it is able to rack up astronomic deficits that would be untenable for any other country. U.S. debts are now at such levels that if the U.S. dollar loses its reserve currency status, the United States economy will implode and it will quickly be reduced to the status of a banana republic – hence the sense of urgency in the face of growing threats.
I'd never seen Clyde write a thing except about gold and silver as long as I've been following his work. So when this piece showed up on the gata.org Internet site yesterday, I was more than skeptical about it. That all changed after just two paragraphs. This rather long essay is the second absolutely positively must read commentary in today's column, as it describes the end game of the New Great Game perfectly.
The U.S. has started flying surveillance drones over Syria after President Obama authorized the missions, two senior Defense officials told Fox News, in a move that could pave the way for eventual airstrikes against Islamic State targets in the country.
A decision still has not been made, at least publicly, to launch airstrikes in Syria. But the Obama administration would likely need additional intelligence on possible targets should the president take that step.
Sources told Fox News that Obama approved surveillance missions in Syria for the first time over the weekend; they have since begun.
It remains to be seen whether the Syrian government will raise any objections to the move. On Monday, the Syrian regime demanded that the U.S. seek permission before launching any airstrikes on its territory against Islamic State targets, but did not discuss its position on surveillance drones.
This news item, including at 6:21 minute embedded video clip, showed up on the foxnews.com Internet site on Tuesday---and it's the final offering of the day from reader M.A.
1. Jeffrey Saut: "People Forget One of Jesse Livermore's Greatest Trades Ever" 2. Stephen Leeb: "Expect Skyrocketing Gold as China and Russia Continue Buying" 3. Jean-Marie Eveillard: "Legend Warns More Shocking Global Chaos on the Horizon"
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]
Three years ago GATA more or less won its freedom-of-information lawsuit in U.S. District Court for the District of Columbia against the Board of Governors of the Federal Reserve System, in which GATA sought access to the Fed's records involving gold swaps.
While the court found that most of the Fed's records involving gold swaps were exempt from disclosure under the law, GATA's initial inquiry to the Fed produced an admission that the Fed indeed has secret gold swap arrangements with foreign banks and the court ordered disclosure of one record, the minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, at which Western treasury and central bank officials conspired to coordinate their policies in the gold market.
And a few days ago GATA's law firm, William J. Olson P.C. in Vienna, Virginia, received from the State Department a notice that the department has granted GATA's appeal and indeed will reopen its search for gold-related records.
Of course this whole process is silly and ridiculously slow, deliberately so to discourage embarrassing disclosures about the U.S. government's secret involvement in the gold market. But the process establishes, if with great difficulty, that something is going on here and that the government is so desperate to conceal it as to risk looking ridiculous.
This process also establishes again that the crucial prerequisite of the Western gold price suppression scheme is the cooperation of the mainstream financial news media, their agreement not to commit ordinary journalism when it comes to surreptitious intervention by Western governments and central banks in the gold and currency markets.
This commentary by Chris Powell showed up in a GATA release yesterday---and it's definitely worth your while if you have the time.
By all accounts in the mainstream media, gold demand in Asia, and in particular in China and India, has been slipping dramatically this year which some see as the principal reason behind current price weakness. But all may not be as the reports suggest. Is Chinese demand, as suggested by the enormous slippage in gold imports though Hong Kong really as bad as the figures appear to show?
Reuters reports Hong Kong net gold exports to mainland China in July as falling to the lowest level since June 2011 at 22 tonnes (Bloomberg reports the figure as 21 tonnes). Compare this with the heady days last year when such gold imports exceeded 100 tonnes monthly for 6 months in a row from May to October. If this is an accurate indication of Chinese gold demand weakness then this is indeed something of a blow for gold bulls.
But, China has moved the goalposts. While Hong Kong was very much the primary routing for gold entering the Chinese mainland in the past, indications are that this may no longer be the case as China has now designated a number of other points as import points for gold – notably Shanghai and Beijing. But as it does not publish statistics for these, overall import figures are much more opaque.
This commentary by Lawrie showed up on the mineweb.com Internet site in the wee hours of Tuesday morning MDT. I saw it in time to post it in Tuesday's column, but I was already full up, so here it is now. It's certainly worth reading. [Note: when I was editing today's column at 4:45 a.m. EDT, the mineweb.com Internet site was down]
The conclusion is simple – the asset requiring the least amount of buying to create a bubble is, automatically, the best candidate for developing into the biggest bubble. The fuel for any bubble is total (world) buying power versus the actual amount of an asset available for purchase. Previous, as well as prospective, bubbles in stocks, bonds and real estate grew to many trillions of dollars of total valuation. At $200 an ounce, all the silver in the world (bullion plus coins) would “only” amount to $400 billion, not even a rounding error to the total valuation of stocks, bonds, real estate and, even, gold. In other words, due to silver’s current undervaluation and its shockingly small amount in existence, it has more room to the upside than any other asset class.
But I’m not done. Silver’s unique dual role as a vital industrial material and primary investment asset creates a setup for something happening that has never occurred in any previous bubble. As and when sufficient physical investment buying develops in silver to drive prices significantly higher, the industrial consumers of silver, in everything from electrical and solar applications to medical and chemical applications, will likely be subject to delays in the customary delivery timelines of the metal. As is almost always the case, whenever industrial consumers of a commodity are deprived of timely deliveries, they resort to stockpiling that commodity as a remedy, further exacerbating delivery delays to other users.
Thus, the stage is set for something the world has never experienced previously – an asset bubble accompanied with an industrial shortage. The two greatest upward price forces known to man, an asset bubble and a genuine commodity shortage, appear set to combine in silver. Either one, alone, would have a profound impact on the price, but the combination seems both inevitable and almost impossible to contemplate in terms of how high the price of silver could be driven. And it’s hard to see how intense investment buying wouldn’t trip off industrial user attempted inventory stockpiling or vice versa; it doesn’t matter which comes first.
I've already borrowed many paragraphs from this 20 August 2014 Ted Butler commentary as my 'Quote of the Day.' Now I don't have to steal it in bite-sized chunks, as Taki Tsaklanos has published the entire article over on the goldsilverworlds.com Internet site. It is, of course, an absolute must read.
Drilling Intersects 102 Meters of 1.97 gpt Gold at Columbus Gold’s Paul Isnard Gold Project; Drilling Confirms Depth Extension of Gold Mineralization
Columbus Gold Corporation (CGT: TSX-V) (“Columbus Gold”) is pleased to announce results of the initial five (5) core drill holes at its Paul Isnard gold project in French Guiana. The holes confirm depth extension of gold mineralization below shallow holes drilled on the 43-101 compliant 1.9 million ounce Montagne d’Or inferred gold deposit at Paul Isnard in the 1990’s and support the current program of resource expansion through offsetting open-ended gold mineralization indicated by the earlier holes.
Robert Giustra, CEO of Columbus Gold, commented: “These drill results validate Columbus Gold’s approach to adding ounces with a lower-risk drilling program designed to infill and to extend the mineralized zones to 200 m vertical depth from surface; a depth amenable to open pit mining.”
Fourteen (14) holes have been completed (assays pending) by Columbus Gold in the current program and drilling is progressing at the rate of about 3,000 meters per month with one drill-rig on a 24 hour basis. Columbus Gold plans to accelerate the current program by engaging a second drill-rig as soon as one can be obtained.
Thanks to a heavy 2.7 million oz turnover [on Friday], the physical movement of metal into and out from the COMEX-approved silver warehouses exploded [last] week to 6.25 million oz, well above the torrid 4.5 million oz average turnover this year. Total inventories rose 2 million oz to 178.2 million oz, but total inventories are not the key story; this is all about the remarkable turnover over the past 3.5 years.
We have seen an increase in COMEX silver stocks of almost 80 million oz to current levels since 2011 and much of that might be explained by the liquidation of 60 million oz from the SLV starting in May 2011. But increases or decreases in total COMEX inventories are much less important to me today than the phenomenal turnover since April 2011. Since we’re no longer in a silver deficit, I expect total inventories to grow, all things being equal. But I never expected this frantic turnover, nor did I expect it to continue for as long as it has. - Silver analyst Ted Butler: 23 August 2014
Yesterday's blatant capping of gold and silver prices was obvious to most---and it's important to remember that if JPMorgan et al, along with their HFT algorithms, weren't standing in the way, we would have a market clearing even of biblical proportions not only in those two metals, but in platinum, palladium---and copper as well.
As Jim Rickards said so succinctly, the price management scheme is now so obvious, that the price manipulators should be absolutely embarrassed by what they're doing. He would be right about that.
Here are the 6-month charts for both gold and silver, updated with Tuesday's price/volume data.
Gold and silver prices haven't been allowed to do much in the last four trading days, but as I said in this space yesterday, the Commitment of Traders Report is an ugly looking document, even factoring in the improvement over the trading week just past---which we won't see until Friday's report. But as I've also said on many occasions, there will come a day when the COT Report doesn't matter.
As I write this paragraph, the London open is just under twenty minutes away. The gold price has been sneaking higher all day in Far East trading---and is up about 4 bucks as of this writing. Silver is up a few pennies, platinum up 9 dollars---and palladium a couple of bucks. Gold volume is extremely light, under 10,000 contracts---and silver's net volume is microscopic at 1,000 contracts. The dollar index, which hadn't done much for most of the Hong Kong session, is down 10 basis points in the last hour.
Taking a look at the CME Preliminary Report once again, I note that there are a bit over 500 contracts left to roll out of the September delivery month, but it's a reasonable assumption that a decent chunk of these will be standing for delivery. I'll have a clearer picture in a couple of days.
In silver, September open interest is still way up there at 27,253 contracts---and except those future contracts holders standing for delivery on Friday's first notice day, the remainder of these contact holders have to sell or roll over into future months before the close of Comex trading on Thursday. So there has to be decent volume during the next 48 hours to get that all done in time, but so far, the Wednesday volume is off to a real slow start. All the large traders have to be out of their positions by the end of Comex trading today, so it's pretty much a given that volumes will increase significantly as the trading day progresses.
And as I hit the send button on today's effort, not much has changed in the first 90 minutes of the London trading session, as prices in all four precious metals have changed very little. Gold volume is a bit over 14,000 contracts, which is very light for this time of day---and silver's net volume is now around 1,500 contracts, however there is decent roll-over activity now. The dollar index is now down 15 basis points.
While on the subject of the dollar index, here's the 3-year chart---and as you can tell at a glance, the overbought condition is now extreme. Sooner or later this condition has to reverse itself---and now it's only a matter of how soon we see some sort of sell-off to alleviate this overbought condition---and how low it goes when it does.
That's all I have for today---and I'll see you here tomorrow.