Gold & Silver Daily
 

¤ Yesterday In Gold & Silver

Every attempt by gold to break above the $1,200 spot price mark during the Wednesday trading session was quickly sold off---and even the sharp rally after the FOMC meeting wasn't allowed to infringe on that price point.  After that attempt, the price got sold down to its low of the day, which came a minute or so after 3:00 p.m. EST in electronic trading.  The price rallied a bit after that, but still closed down on the day.

The high and low ticks were reported by the CME Group as $1,203.10 and $1,182.00 in the February contract.

Gold closed in New York on Wednesday at $1,188.90 spot, down $6.10 from Tuesday's close.  Volume, net of December and January, was 180,000 contracts.

It was more or less the same type of price activity in silver as well, but its attempt to break above the $16 spot price mark on the FOMC news wasn't allowed to get anywhere, either---and silver got sold down to just above Tuesday's closing price.

The high and low ticks were recorded as $16.06 and $15.615 in the March contract.

Silver was closed at $15.75 spot, up 3 whole cents from Tuesday.  Volume, net of December and January, was an even 50,000 contracts.

Platinum hugged the $1,200 spot price mark for most of the Wednesday trading session, before succumbing to the same post-FOMC meeting selling pressure that gold and silver went through.  Platinum closed at $1,186 spot, down 6 bucks from Tuesday.

Palladium rallied to its high of the day around 10 a.m. Zurich time---and then it gold sold down to its low just before lunch in New York.  It recovered a few dollars from there---and the FOMC news barely affected this metal.  Palladium was closed down 4 dollars on the day at $776 spot.

The dollar index closed late on Tuesday afternoon at 87.97---and never looked back in what was one of its most volatile trading sessions in my memory.  After initially selling off at 2 p.m. EST on the FOMC news, there was obviously someone there to run the dollar index up, as it closed at 89.075---up an eye-watering 107 basis points.

And while I'm at it, here's the 6-month intraday.

The gold stocks gapped up a bit at the open---and then proceeded to chop higher in a very wide range.  The HUI came to close to finishing on its high tick---up 5.27% on the day.

The silver equities opened down slightly, but finally broke into positive territory to stay shortly before 11 a.m. EST.  But they didn't do that with much conviction---and they chopped sideways until a late-day rally began shortly after 3 p.m. that took the shares up to their highs of the day---and that's where they closed, as Nick Laird's Intraday Silver Sentiment Index finished up 3.70%.

The CME Daily Delivery Report was a bust, as no gold or silver contracts were posted for delivery within the COMEX-approved depositories on Friday.  The only metal posted for delivery was 35 copper contracts.

The CME Preliminary Report for the Wednesday trading session showed that December gold open interest declined by 6 contracts, leaving the December o.i. balance at 765 contracts.  Glancing at the silver numbers, December open interest declined by 79 contracts, most of which was the 72 deliveries posted for today that were reported in yesterday's column.  The December o.i. in silver is now down to 101 contracts.

There were no reported changes in GLD yesterday---but there was a big withdrawal from SLV, as an authorized participant took out 2,011,401 troy ounces.

There was no sales report from the U.S. Mint yesterday.

Over at the COMEX-approved depositories on Tuesday, there was 20,736 troy ounces of gold reported received, but only 908 troy ounces shipped out.  The link to that activity is here.  In silver, only 963 troy ounces were received---and only 151,592 ounces were shipped out the door.  The link to that activity is here.

I have a decent number of stories again today, so I hope you find some in the list below that you like.  A lot of these news items have to do with Russia, oil, the U.S. dollar, etc---and with Putin's press conference at noon Moscow time today [4 a.m. EST this morning]---some, or all, what's in these stories may no longer hold true.

 

¤ Critical Reads

Meet your newest legislator -- Citigroup

Citigroup is the Wall Street mega-bank that forced the repeal of the Glass-Steagall Act in 1999; blew itself up as a result of the repeal in 2008; was propped back up with the largest taxpayer bailout in the history of the world even though it was insolvent and didn't qualify for a bailout; has now written its own legislation to deregulate itself; got the president of the United States to lobby for its passage; and received an up vote from both houses of Congress in less than a week.

And there is one more thing you should know at the outset about Citigroup: It didn't just have a hand in bringing the country to its knees in 2008; it was a key participant in the 1929 collapse under the moniker National City Bank. Both the U.S. Senate's investigation of the collapse of the financial system in 1929 and the Financial Crisis Inquiry Commission that investigated the 2008 collapse cited this bank as a key culprit.

The FCIC wrote:  “…we do not accept the view that regulators lacked the power to protect the financial system. They had ample power in many arenas and they chose not to use it. To give just three examples: the Securities and Exchange Commission could have required more capital and halted risky practices at the big investment banks. It did not. The Federal Reserve Bank of New York and other regulators could have clamped down on Citigroup’s excesses in the run-up to the crisis. They did not. Policy makers and regulators could have stopped the runaway mortgage securitization train. They did not…Too often, they lacked the political will – in a political and ideological environment that constrained it – as well as the fortitude to critically challenge the institutions and the entire system they were entrusted to oversee.

This longish, but very interesting commentary appeared on the wallstreetonparade.com Internet site on Tuesday---and I found it in a GATA release yesterday.

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Jim Rickards: Fed Will Implement QE4 in Early 2016

On today’s “The Roundup,” James Rickards, author of “Currency Wars,” Bloomberg's Trish Regan, Lisa Abramowicz and Douglas Lavanture break down some of the day’s top market stories on “Street Smart.”  The most interesting part is in the first 5:20 minutes---and you can skip the rest if you wish to.  I thank Harold Jacobsen for sending this.

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WTI Crude Spikes Over $59, Up 9% From Lows: Biggest Intraday Swing Since April 2009

Lifting WTI over $59 and Brent over $63. In fact, the $9 surge from the lows is the biggest move in crude since April 2009!

As Bloomberg reports, Russia Government Supported Ruble Ahead of Putin Conference.

"They want to reduce volatility and strengthen the ruble, and they are preparing the ground for Putin’s speech tomorrow,” Per Hammarlund, the chief emerging- markets strategist at Skandinaviska Enskilda Banken AB, says by e-mail today.

“It’s the ruble’s ‘P-Day.’”

President Vladimir Putin will hold an annual media conference tomorrow.

The media conference begins at noon Moscow time on Thursday, which is 4 a.m. EST this morning in New York, so it will be over by the time that North America wakes up today.  This Zero Hedge story, with some excellent charts, appeared on their website at 12:02 p.m. EST on Wednesday---and I thank Dan Lazicki for sharing it with us.

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British PM Cameron: Russia not fit to be part of international financial system

The combined effect produced by Western sanctions and low oil prices proves that there’s no place for Russia in the international financial system, believes British prime minister David Cameron, urging for more pressure on Moscow.

“We should stand up very firmly against the Russian aggression that’s taking place,” Cameron said before the Parliament on Wednesday.

The PM reminded that it’s the U.K., which “led the way in Europe in making sure there were sanctions” imposed against Russia over its 'annexation' of Crimea in March and Moscow’s alleged involvement in the Ukrainian crisis.

“And what the combination of the lower oil price and the sanctions are showing that I think it isn’t possible for Russia to be part of the international financial system, but try and opt out of the rules-based international legal system,” Cameron said.

Can you believe this guy?  How does a leader of a country get away with saying crap like this?  This article was posted on the Russia Today website at ten minutes to midnight on Wednesday evening Moscow time, which was 3:50 p.m. in New York.  I thank Roy Stephens for his first contribution to today's column.

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Russians training on Mistral warship ‘to leave France’

Some 400 Russian sailors training on a Mistral-class warship France controversially built for their navy will be returning home for an unspecified amount of time, the ship’s French builder has said.

"I can confirm that the Russian sailors will return (to Russia) before the end of year," a spokesman for shipbuilder DCNS told AFP news agency on Wednesday.

The spokesman did not give a date for the sailors' departure and could not say whether they would return to the port city of Saint-Nazaire, where the ship was built.

The sailors have been training since June on board the “Vladivostok”, one of two Mistral-class helicopter carriers destined for the Russian navy according to the terms of a €1.2 billion ($1.58 billion) deal signed in 2011.

This news item showed up on the france24.com Internet site yesterday sometime---and I thank South African reader B.V. for sending it our way.

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Russia Tries Emergency Steps for Second Day to Stem Ruble Plunge

Russian authorities eased accounting rules to curb banks’ need for dollars, seeking to ease concern the ruble’s plunge will lead to a full-blown financial crisis.

The ruble and stocks rallied after the Bank of Russia announced the measures. They came a day after the central bank’s 1 a.m. interest-rate increase and a free-fall of as much as 19 percent in the currency, prompting speculation of a potential meltdown in emerging markets.

The package of measures allows banks to use the third-quarter exchange rate in valuing risk-weighted assets and imposes a moratorium on mark-to-market accounting. Russian companies face about $20.3 billion in non-ruble loan and debt repayments before the end of March, according to data compiled by Bloomberg. The ruble has dived 35 percent this quarter.

“The most important measure is this use of third-quarter valuation for risk-weighted assets,” Natalia Berezina, banking analyst at UralSib Capital, said by phone. “This is a big boost as some banks would fail to meet central bank regulatory capital ratios at their current levels.”

This Bloomberg article, filed from Moscow, put in an appearance on their website at 10:02 a.m. Denver time yesterday morning---and I thank reader Howard Wiener for finding it for us.

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Jim Rickards: Ruble Crisis -- Is Russia's Economy in a Tailspin?

James Rickards, author of "Currency Wars," UBS Wealth Management's Jorge Mariscal and Bloomberg economist Carl Riccadonna discuss Russia's efforts to stem the ruble crisis. They speak with Bloomberg's Trish Regan on "Street Smart."

This 6:47 minute Bloomberg video clip from Tuesday falls into the absolute must watch category---and it's another offering from Harold Jacobsen.

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We Are Headed For a Major Dis-location and It Revolves Around the Dollar

The United States declared economic war on Russia. It is hard to pinpoint the why of the matter but in this author’s opinion it always comes back to U.S. dollar dominance. Russia has made no secret of its disdain for the global pricing mechanism of oil. The chart below shows what matters in the pricing of oil and it has zero to do with shale miracles or over supply.

It is the dollar and only the dollar that matters in the pricing of oil with an exception being an act of nature.  The West has attacked the currency of a sovereign nation for UNECONOMIC reasons.

Russian debt to GDP is roughly 14%. Their debt to GDP is pristine. Japan’s is 227%, Greece 175%, Italy 132%, and the U.S. 105%. Now can someone kindly explain why a currency would implode like the Ruble when their financial condition relative to the West and Japan looks like a Ferrari among a bunch of Ford Pintos?

This guest post appeared under Koos Jansen's name over at the bullionstar.com Internet site yesterday---and I'm breaking my own rule of posting an unaccredited source, because the author, whoever he is, has it exactly right.  It's certainly worth reading.

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Russia's sinking economy becoming a global threat

Russia's suddenly escalating financial crisis risks spilling beyond its borders and endangering parts of the global economy.

With economies in Europe, Japan, China and Latin America already ailing, fresh threats have emerged from Russia's shriveled currency, its move to dramatically boost interest rates, the damage from plummeting oil prices and Western sanctions over Russia's action in Ukraine.

"Our deepest fear has been - and still is - that putting Mr. Putin in a `nothing-to-lose' situation removes any constraint he might have had against reneging on his foreign debt obligations, which Russian borrowers probably cannot pay off or service now," writes Carl Weinberg, chief economist at High Frequency Economics. Foreign lenders would have to brace for $670 billion in losses.

This possibility has sparked an investor retreat from Russia. But that pullback has also caused investors to flee other emerging market currencies that are deemed risky. They include Turkey, Brazil, South Africa and Indonesia, noted John Higgins, chief markets economist at Capital Economics.

Doug Noland will have a field day with all this in his Friday evening Credit Bubble Bulletin.  This AP story, filed from Washington, showed up on their Internet site at 5:27 p.m. EST on Tuesday afternoon---and I found it in yesterday's edition of the King Report.

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Russia makes knock-off European cheese as embargo bites

The Camembert made near Moscow might look -- or even smell -- like the famous French fromage, but it's part of a booming knock-off market in Russia as stocks of banned European cheeses disappear.

Mozzarella made in the Russian region of Bryansk and Roquefort from Altai in Siberia are also part of the flourishing trade that has popped up since Russia decreed a food embargo in response to Western sanctions in the summer.

The names Roquefort and Mozzarella cannot be used in the European Union, and increasingly abroad, unless the products are made in a particular place or in a certain way.

However, since Soviet times, Russians have been swilling local Champagne and Cognac -- although both names are protected under E.U. rules -- without too much concern.

This interesting article showed up on the france24.com Internet site at 5:06 p.m. Europe time on their Wednesday afternoon---and it's another contribution from reader B.V.

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Little cheer for Greece's government in first presidential ballot as Dimas draws 160 votes

The government garnered 160 votes in the first round of crucial presidential elections on Wednesday, performing slightly worse than anticipated and increasing speculation about snap polls.

In addition to the 155 coalition MPs, five independents backed the government’s candidate, former European commissioner Stavros Dimas. Another 135 voted “present” while five were absent. The result was far short of the 200 votes required in the first round, a target that the government is also certain to miss in next week’s second round. However, ahead of the critical third vote on December 29 when the threshold drops to 180, the government had hoped to gain between 161 and 165 in the first round in a bid to build momentum for the votes to come.

There were some surprises, including the decision by independent Panayiotis Melas to vote “present” rather than backing Dimas (Melas later suggested he might change his stance in the coming votes). Also two former MPs of neofascist Golden Dawn, Chrysovalantis Alexopoulos and Stathis Boukouras, who was released from prison earlier on Wednesday, did not turn up for the vote.

Meanwhile seven Golden Dawn lawmakers were granted day release from Korydallos Prison to attend the vote. They were subdued for the most part despite fears of upheaval.

You couldn't make this stuff up.  This news item appeared on the ekathimerini.com Internet site at 8:53 p.m. Europe time last night---and my thanks go out to Harry Grant for bringing it to our attention.

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China Prepares to Bailout Russia?

Earlier this evening China's State Administration of Foreign Exchange's (SAFE) Wang Yungui noted "the impact of the Russian Ruble depreciation was unclear yet, and, as Bloomberg reported, "SAFE is closely watching Ruble's depreciation and encouraging companies to hedge ruble risks."

His comments also echoed the ongoing FX reform agenda aimed at increasing Yuan flexibility which The South China Morning Post then hinted in a story entitled "Russia may seek China help to deal with crisis," which which noted that Russia could fall back on its 150 billion yuan ($24 billion) currency swap agreement with China if the ruble continues to plunge, that was signed in October. Furthermore, two bankers close to the PBOC reportedly said the swap-line was meant to reduce the role of the U.S. dollar if China and Russia need to help each other overcome a liquidity squeeze.

This Zero Hedge article showed up on their website at 11:17 p.m. EST late last night---and I thank Casey Research's own Bud Conrad for passing it around.

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Yuan Has Real Shot at IMF Blessing on Reserve Status

For the first time, China has a real shot at getting the International Monetary Fund to endorse the yuan as a global reserve currency alongside the dollar and euro.

In late 2015, the IMF will conduct its next twice-a-decade review of the basket of currencies its members can count toward their official reserves. Including the yuan in this so-called Special Drawing Rights system would allow the IMF to recognize the ascent of the world’s second-biggest economy while aiding China’s attempts to diminish the dollar’s dominance in global trade and finance.

China would need to satisfy the Washington-based lender’s economic benchmarks and get the support of most of the other 187 member countries. The Asian nation is likely to pass both tests, said Eswar Prasad, who until 2006 worked at the IMF, including spells as heads of its financial studies and China divisions.

This very interesting Bloomberg article showed up on their website a week ago---and it's worth reading.

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Strange rock containing 30,000 diamonds baffles scientists

When Russian miners pulled a strange red and green stone out of the ground, they immediately knew it was different to the thousands of tons of ore they process every day.

In fact, what workers at Alrosa's Udachnaya diamond mine had unearthed was a 30mm rock that contained 30,000 diamonds - a concentration 1m times higher than normal.

However, despite the rare find the company donated the rock to the Russian Academy of Sciences, as the diamonds are so small that they cannot be used as gems.

After scanning the rock with X-rays, scientists found that the diamonds inside measure just 1mm and are octahedral in shape - similar to two pyramids stuck together at the base. The red and green colouring comes from larger crystals of garnet, olivine and pyroxene.

This interesting news item appeared on the telegraph.co.uk Internet site at 5:20 p.m. GMT yesterday afternoon---and it's the final offering of the day from South African reader B.V.

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The Gold Chronicles: Dec 9, 2014 Interview with Jim Rickards

This 49:17 minute audio interview appeared on the physicalgoldfund.com Internet site on Tuesday sometime---and it's the final contribution of the day from Harold Jacobsen.  There's no transcript---and I must admit that I haven't had time to listen to it all, but what I have heard makes it worth your while, although some of what he says, you've certainly heard before.

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Lawrence Williams: Have gold and silver really bottomed this time?

At the recent Mines & Money conference and exhibition In London there was a perhaps surprisingly upbeat feel given the poor performance of metals prices over the preceding two to three years.

While this optimistic mood seemed to apply to precious and base metals producers alike, as is the norm nowadays it was the gold companies which were looking for the biggest upside. Perhaps this was because those that can nowadays afford to participate in an event like this – it is expensive to exhibit and to attend – are those who are going to survive in the current price environment come what may. But perhaps even more prevalent was the perceived view that things were at last truly bumping along the bottom and that the only way forward was up.

There are a lot of factors supporting this latter viewpoint, but it’s probably just as well for the bulls out there not to get too carried away as many of these bullish factors have been around before and still prices have continued to be driven down. But this time perhaps the optimists do have a point.

On gold and silver demand, this appears to be riding high. Chinese Q4 demand as represented by Shanghai Gold Exchange withdrawals has been just as strong as it was in the 2013 record year. True demand had slipped pretty badly in Q2 and Q3 compared with a year earlier, but it has staged a huge pick up since the end of September. But perhaps even more significant has been India’s return to the gold buying spree with November gold imports officially put at 150 tonnes, although some assessments had even suggested it might have been as high as 200 tonnes.

This commentary by Lawrie, which was posted on the mineweb.com Internet site on Wednesday, is certainly worth reading--and I thank him for sliding it into my in-box early yesterday morning.

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¤ The Funnies

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. 

Please visit our website for more information about the project.

 

¤ The Wrap

A standout feature to the gold and silver market on the COMEX has always been the concentrated short position of the 4 and 8 largest traders which are invariably in the commercial category. The concentrated short position is more pronounced and manipulative in silver, but both markets are characterized by the fact that the 8 largest shorts in each market usually comprise a larger net short position than the total commercial net short position. In other words, if the 8 largest shorts in COMEX silver and gold didn’t exist, there would be no total commercial net short position at all – there would be no headline number as we know it. Stated differently, without the 8 largest shorts in COMEX gold and silver, there would be a commercial net long position in each market.

What’s interesting in COMEX gold (as I remarked about last week) is that the 8 largest shorts have not added to their dominant short position either this week or over the past 4 weeks even as the total commercial net short position has grown by 27,220 contracts and 66,600 contracts respectively. In fact, despite the pronounced increase in the headline number, the concentrated short position of the eight largest traders is lower than it has been in 4 or 5 years or longer. I admit that this could be a temporary aberration and the big 8 in gold may resume shorting gold on higher prices, but usually all the commercial categories trade in unison and if the new pattern of commercial discord is more than temporary, it might signal change is afoot. - Silver analyst Ted Butler:  13 December 2014

The lack of price action around the FOMC news was a bit of a surprise, but it is what it is---and I was quite amazed to see that the powers-that-be managed to keep gold under the $1,200 spot price mark, all things considered in the world today.  And, with the exception of silver, the other precious metals were all closed below their Tuesday closing prices in new York as well.

Here are the 6-month charts for all four precious metals, along with crude oil.  Just eye-balling the charts, you can see from the RSI trace that WTIC is grossly oversold---and none of the four precious metals are anywhere near that condition.

I was happy to the precious metals equities do well yesterday---in spite of the lousy price action of the underlying metals.  But with the counterintuitive price action that we've seen so much of in these shares lately, I'm not prepared to read too much into yesterday's positive closes.

I guess my main concern is still the Commercial net short positions in both gold and silver.  Even though we've certainly had improvement after Monday and Tuesday's price action, I doubt very much from looking at the charts that we're done to the downside, although I'll reserve judgement on that until I see tomorrow's Commitment of Traders Report.

As I write this paragraph, the London open is about twenty-five minutes away.  All four precious metals rallied starting right at the 6 p.m. EST New York open yesterday evening but, once again, gold wasn't allowed to get far above $1,200 before getting swatted down---and silver has been hugging the $16 spot price for about the past five hours.  Platinum is up $19---and palladium is up $9 bucks.  Net gold volume is just under 20,000 contracts---and silver's net volume is around 6,700 contracts.  The dollar index, which had been down 5 basis points at one time, has really soared---and is now up 23 basis points in the last half hour or so.

And as I hit the 'send' button on today's column at 5:30 a.m. EST, I see that all four precious metals have rallied starting about twenty minutes ago, which may have been an early London a.m. gold fix. Gold has now blasted up to $1,213 spot---and silver is at $16.195. Gold volume is now over 34,000 contracts---and climbing rapidly---as is silver's volume, which is just north of 10,000 contracts. Platinum and palladium are on the rise again as well.  The dollar spike I reported on earlier, has now been whittled down to a 7 basis point loss.  Crude oil is up $1.22.

I have no idea as to what might happen for the remainder of the Thursday session, but considering the price action I can see at the moment, nothing will surprise me when I check the charts after I roll out of bed later this morning.

See you tomorrow.

Ed Steer