Casey Research Publication
Gold & Silver Daily
"There are only three ways out for a short seller. They either cover, deliver...or default, and it's obvious from yesterday's COT report that the bullion banks are covering in gold."
 

¤ Yesterday In Gold & Silver

Gold spent most of the Far East and London trading session within ten dollars of Thursday's closing price in New York.  The tiny rally that had developed at the London open didn't last, as gold got sold off to unchanged by the time that the Comex opened in New York yesterday.

The first rally attempt that developed during early Comex trading ran into a determined seller...but the low that came after that rally...the London p.m. gold fix, which came minutes after 10:00 a.m. Eastern time...proved to be the New York low of the day.  The gold price never looked back from there.

From the p.m. gold fix, until the close of electronic trading, gold rose about sixty-five dollars...and closed on its high tick of the day...up $57.80 from Thursday's close.  Volume was huge once again.

Silver's price path was very similar to gold's...but the price swings were much more pronounced...and the rally from the London p.m. gold fix at 10:00 a.m...was much more subdued.  The silver price only finished up thirty-eight cents from its Thursday close...and, like gold, closed on its high of the day.  Net volume was very light.

The dollar was down about 55 basis points during the Friday trading session...with a wild price spike between 10:00 a.m. and 12:30 p.m. in New York.  As per usual, the dollar's activity had no bearing on the activity in the precious metals again yesterday.

Here's the 5-day dollar chart for the week that was...and it closed virtually unchanged on the week.

The gold stocks got sold off at the open, with the low of the day coming at the London p.m. gold fix...which, coincidentally, also happened to be the low for the Dow as well.  From there, it was onwards and ever upwards...and the HUI finished up 2.53% on the day...and up 4.9% from its absolute low.

The other amazing thing about yesterday's price action in the shares, was the complete lack of volatility in the HUI after 11:30 a.m.  It was a very orderly market once the gold price really began to sail.

Here's the HUI for the week that was.  As I mentioned in this column yesterday, from last Friday's close until the close of trading on Thursday, the HUI was basically unchanged...so the gain we had during Friday's trading day, was the net gain for the entire week.  Not too shabby considering what the gold price did over the last four trading days.

Despite the fact that silver didn't do particularly well on Friday, Nick Laird's Silver Sentiment Index was a healthy 2.78%...which was even better than the HUI did.

(Click on image to enlarge)

The CME Daily Delivery Report showed that 424 gold contracts were posted for delivery on Tuesday.  Barclays [293 contracts] was the big short/issuer, with Jefferies a distant second with 63 contracts delivered.  The big receiver/stoppers were JPMorgan [275 contracts] in its client account...and MF Global with 87 contracts stopped.  There were a lot of other smaller issuers and stoppers...and the report is worth skimming.  The link is here.

The GLD ETF reported a very tiny withdrawal yesterday... only 48,682 ounces...and there were no reported changes over at SLV.

The U.S Mint reported selling another 30,000 silver eagles yesterday...and that was all.

Over at the Comex-approved depositories on Thursday, they reported receiving 623,386 troy ounces of silver...and shipped a smallish 62,872 troy ounces out the door.

I must admit that I was ready for anything when I checked the Commitment of Traders Report [for positions held at the close of trading on Tuesday, August 23rd] yesterday afternoon...and it was a surprise in both metals.

In silver, the Commercial traders increased their net short position by a very chunky 5,870 contracts...or 29.4 million ounces.  Ted Butler said that half of that number came from the smaller commercial traders selling long positions and taking profits...and the balance of the shorts were most likely put on by JPMorgan in an attempt to prevent the price from running away to the upside during the reporting week.

Don't forget that the 'correction' didn't start until this past Tuesday...and before that, silver was really moving to the upside with some authority, so it's obvious that JPMorgan had to go short that rally to prevent it from getting away on them.  That's obviously why silver performed so poorly relative to gold.

It would be a good bet that JPMorgan covered that entire short position [and maybe a bit more] during the 'correction' that began on Tuesday...but none of this data will show up until next Friday's COT report.

Armed with that knowledge, Ted thinks that silver is still all cleaned out to the downside...and that we saw the bottom on Thursday morning in London.  I agree with that analysis.

But the real shocker was in gold, as the Commercial traders/bullion banks reduced their net short position by another 18,411 contracts...or 1.84 million ounces.  Add into that all the short covering that took place during this week's 'correction'...and it appears that the gold bottom was in on Thursday morning in London as well...and the subsequent price action certainly appears to confirm that.

In a nutshell, most of the price appreciation in gold during the prior week's trading was again caused by Commercial traders covering their short positions...not new tech fund long buying...and that's precisely what yesterday's COT report indicated.

I'd give a day's pay to know what the COT report looked like at the close of trading yesterday.  Was the rally off the lows this week more short covering?  Probably, but that won't be known for sure until next Friday.  As you know, 'da boyz' are very good at covering their tracks.

As Ted has said on several occasions over the years, the CME is there to protect the positions of their largest customers...and that would certainly include all the '8 or less' traders, the bullion banks, with JPMorgan at the top of the list.

Here's an interesting graph that shows all the margin hikes in silver going back to the beginning of 2009.  But it's the margin increases that began when the silver rally started last August that really caught my eye.  Note the margin increase in silver as the price 'fell' after the drive-by shooting on May 1st.  The CME continued to increase margins even as the price declined...which was of huge benefit to the shorts, as it forced more margined longs to puke up their positions.

(Click on image to enlarge)

I have lots of stories, videos and interviews for you today...enough to keep you in front of your computer screen for the rest of the weekend if you've got nothing better to do.

 

¤ Critical Reads

Obama Goes All Out For Dirty Banker Deal

Here's a Matt Taibbi blog that was posted over at Rolling Stone magazine on Wednesday.

A power play is underway in the foreclosure arena, according to the New York Times.

On the one side is Eric Schneiderman, the New York Attorney General, who is conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008.

On the other side is the Obama administration, the banks, and all the other state attorneys general.

This is a must read from start to finish...and I thank reader Randall Reinwasser for sending it along.  The link is here.

Read more...

Taibbi on Olbermann: SEC Covering Up Wall Street Crimes

Last weekend I ran Matt's big essay on this subject...and here he is in a 4-minute video segment with Keith Olbermann.  It's certainly worth four minutes of your time...and I thank Roy Stephens for sending it along.  The link is here.

Read more...

Germany fires cannon shot across Europe's bows

German President Christian Wulff has accused the European Central Bank of violating its treaty mandate with the mass purchase of southern European bonds.

He warned that Germany is reaching bailout exhaustion and cannot allow its own democracy to be undermined by EU mayhem.

“I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence,” he said.

This story was posted over at The Telegraph on Wednesday...and is a must read in my opinion.  I thank reader John Bastian for sharing it with us...and the link is here.

Read more...

Letter from Berlin: Blast from the Past Has Merkel on the Defensive

Criticism of Angela Merkel is nothing new. This week, though, it was ex-Chancellor Helmut Kohl who found sharp words for his erstwhile protégé. With her foreign minister also under fire, things are not looking good for Merkel in upcoming state elections.

Kohl, who originally plucked Merkel out of obscurity to make her a cabinet minister in 1991, was referring primarily to trans-Atlantic relations and to concerns that the US no longer sees Germany as a vital foreign partner. But his comments hit the headlines just as Libyan rebels entered Tripoli, an event which made Berlin's March refusal to support NATO's bombing campaign in Libya appear all the more misguided.

This is a Roy Stephens offering of a Friday posting over at spiegel.de...and the link is here.

Read more...

Technology Keeping Internet Freedom Ahead of Censorship

Here's a story that I picked up from reader Julius Adams earlier this week.

Efforts by the Federal Communication Commission (FCC) to regulate the Internet may become irrelevant if the new technology being developed succeeds as expected. When the U.S. Court of Appeals for the District of Columbia ruled against the FCC last December, the FCC rewrote its rules to allow them to regulate the Internet anyway through the whitewash called “net neutrality.” Verizon immediately filed suit to overrule the new attempt, and a House subcommittee in March voted to invalidate the actions of the FCC. But the new rules remain in place until the issue is decided.

This is a very interesting...and very worthwhile story.  It was posted over at thenewamerican.com website on Wednesday...and the link is here.

Read more...

Russia Green Lights $65 Billion Siberia-Alaska Rail and Tunnel to Bridge the Bering Strait

Here's another story that I found intriguing...this one from Washington state reader S.A.

In what could certainly be one of the boldest infrastructure developments ever announced, the Russian Government has given the go-ahead to build a transcontinental railway linking Siberia with North America. The massive undertaking would traverse the Bering Strait with the world’s longest tunnel – a project twice the length of the Chunnel between England and France. The $65 billion project aims to feed North America with raw goods from the Siberian interior and beyond, linking a railway network across 3/4 of the Northern Hemisphere.

This very short essay runs a couple of pages, but has some interesting photos and maps to go with it.  It's posted over inhabitat.com...and the link is here.

Read more...

Ron Paul: Candidate of Doom and Gloom

Barrons takes great delight in trashing Ron Paul...and his investment portfolio...all the while proving the case for owning precious metals...as they also posted the 3-year return on the S&P 500 right below the 3-year return on all his precious metal stocks.  How stupid can you get?

Say this for him: Ron Paul puts his money where his mouth is. Over the past 16 years, the dollar-doom-and-gloom prophet has invested heavily in gold-mining stocks. It's his hedge against what the Texas Republican congressman and perennial presidential candidate calls "The Great Inflation," which he has long preached is inevitable, given the profligacy of the federal government and the easy monetary policies of the Federal Reserve. Fortunately for Ron Paul and his army of gold-bug disciples, the "stopped clock" investment strategy finally seems to be paying off. Gold and gold futures prices have been hitting record highs.

This story appeared in last Saturday's edition...and I thank reader Richard Sypher for sharing it with us.  The link is here.

Read more...

"Brief History of the Gold Standard in the United States"

Here's a piece that was published by the Congressional Research Service that's worth your time.  I'll let GATA's Chris Powell do the rest of the introduction...and he provides the link as well.  The introduction that Chris provides, is just as important as the document itself...and the link to both is here.

Read more...

Gold Coins: The Mystery of the Double Eagle

How did a Philadelphia family get hold of $40 million in gold coins, and why has the Secret Service been chasing them for 70 years?

The most valuable coin in the world sits in the lobby of the Federal Reserve Bank of New York in lower Manhattan. It’s Exhibit 18E, secured in a bulletproof glass case with an alarm system and an armed guard nearby. The 1933 Double Eagle, considered one of the rarest and most beautiful coins in America, has a face value of $20—and a market value of $7.6 million. It was among the last batch of gold coins ever minted by the U.S. government. The coins were never issued; most of the nearly 500,000 cast were melted down to bullion in 1937.

Most, but not all. Some of the coins slipped out of the Philadelphia Mint before then. No one knows for sure exactly how they got out or even how many got out. The U.S. Secret Service, responsible for protecting the nation’s currency, has been pursuing them for nearly 70 years, through 13 Administrations and 12 different directors.

This is a very long...but very intriguing 5-page essay that was posted over at businessweek.com on Wednesday.  I thank reader Charley Orr for sending it my way...and the link is here.

Read more...

Russian central bank to offer gold-backed loans at 7 pct

Russia's central bank will offer gold-backed loans for up to 90 days at an interest rate of 7 percent, it said in a statement on Friday, expanding its lending facilities for dealing with any future liquidity crunch in the banking system.

The gold-backed lending was approved by the board of directors at a meeting on Friday. The rate on the facility is in line with the central bank's Lombard rate on borrowing secured against high-quality bonds.

This short Reuters story was filed from Moscow yesterday...and I thank reader 'David in California' for sending it.  The link is here.

Read more...

Ben Davies Interview at King World News

Here's an audio interview with Ben Davies, the CEO of Hinde Capital.  Eric King just sent it to me moments ago...and I haven't had the time to listen to it yet...but I'll get around to it later today I'm sure.  The link is here.

Read more...

Physical market overpowers gold cartel, GATA's Bill Murphy tells Resource Clips

Also predicting a quick resumption of gold's rise this week [along with Peter Grandich] was GATA Chairman Bill Murphy when interviewed Wednesday by Kevin Michael Grace for Resource Clips. Asked about the smashing down of gold, Murphy said:

"My guess is that this will be very brief because the physical market will catch on fire again. This has been GATA's whole premise, and why we've been right since gold was at $250 to $300 and all the way up. We said that the key to the future is the physical market overpowering the gold cartel. Years ago you may recall that everyone said the key to gold was what the dollar did. GATA said no; that's not correct. It is the physical market's ability to overpower the gold cartel."

I stole all of the above from a GATA release yesterday...and the link to the interview is here.

Read more...

Goldsmiths struggle in soaring market for precious metals

Demand for jewellery dries up as people become sellers of gold rather than buyers.

With its genteel Georgian square and cobbled pavements, Birmingham's 250-year-old jewellery quarter is a world away from the high-octane trading desks of the Square Mile in London.

But investors in the City and elsewhere are playing God with the district's 400 manufacturers and goldsmiths, whose livelihoods are threatened by the unprecedented march of the gold price, which has surged nearly 500% in the last decade and touched a record high of $1,911 (£1,176) this month.

This is another fascinating look into a part of the gold world that most of us know nothing about.  The story was in The Guardian yesterday...and is Roy Stephens last offering of the day.  The link is here.

Read more...

Hint of more Fed stimulus goosed gold today, Michael Pento tells King World News

Interviewed by King World News, Euro-Pacific Capital's senior economist, Michael Pento, argued that gold exploded this afternoon because Federal Reserve Chairman Ben Bernanke's remarks in Wyoming implied a lot more money printing and stimulus after the Federal Open Market Committee's meeting next month.

I stole the above preamble from a GATA release...and the link to the short blog is here.

Read more...

Real metal is beating paper in the gold market: Ned Naylor-Leyland

Here's a GATA release from yesterday afternoon.  I'll let Chris Powell do all the talking here, as his introduction is rather extensive.  The link to that...and the brief essay by Ned Naylor-Leyland...is here.

Read more...

Expect spectacular short-covering rally in gold, Turk tells King World News

GoldMoney founder James Turk told King World News last night that short covering well may send gold back to $1,900 very quickly, that silver likely will follow to $44, and that he is very impressed by the strength of the mining shares.  The link to the KWN blog is here.

Read more...

Audio Interview with Pierre Lassonde

In my Friday column I ran two KWN blogs with Pierre Lassonde.  Eric just sent me the audio interview of the whole thing...and the link to that is here.

Read more...

Debt Collapse - $20,000 Gold - Mike Maloney

Mike Maloney is the author of the world's best selling book on precious metals investing. Since 2003 he has been advocating gold and silver as the ultimate means of protecting wealth from the games played by our governments and banking sector. In this 90 minute presentation he lays down his 'most likely' scenario for the global economy over the next decade...short term deflation, followed by big or even hyperinflation. Here you will learn the true definitions of inflation/deflation, the difference between currency and money, price vs. value, 'Wealth Cycles', gold and silver accounting for the expansion of fiat currency, gold and silver supply and demand, the differences between the today's bull market and that of the 1970s, The Debt Collapse, and more.

This 90-minute youtube.com video is well worth your time, if you have it...and the link is here.

Read more...

 

¤ The Funnies

Sponsor Advertisement

Columbus Gold Closes Transaction to Acquire Paul Isnard, 1.9 Million Inferred Oz. Gold Project; Plans Drilling

On June 30, 2011, Vancouver, Canada based, Columbus Gold (CGT: TSX-V) announced that it had closed its previously-announced transaction with Auplata SA, gaining the exclusive right to obtain up to a 100% interest in the Paul Isnard gold project in French Guiana, which includes the 43-101 compliant 1.9 million Inferred gold resource in the Montagne d'Or gold deposit. Columbus Gold now has fully satisfied the share issuances required to earn into the project, and can earn its initial 51% interest in the project by incurring $7 million in exploration expenditures, which it expects to complete by early 2012.  Upon Columbus Gold earning a 51% interest in the project, it will have an option to increase its interest to 100% (subject to an underlying royalty) by completing a bankable feasibility study. Drilling is planned to commence in August 2011.

For additional information, please see Columbus Gold news release dated June 30, 2011, or contact the company at:

Investor Relations
604-634-0970 or
1-888-818-1364
info@columbusgoldcorp.com


 

¤ The Wrap

It is to be regretted that the rich and powerful too often bend the acts of government to their own selfish purposes. - Andrew Jackson

Today's 'blast from the past' is an Aerosmith classic...and lead singer Steven Tyler is now a television star on American Idol.  A terrific piece, so turn up your speakers and enjoy.  The link is here.

Although much reduced from the mid-week record numbers, gold volume net of what few roll-overs there were, was still a huge 359,000 contracts...and silver's net volume was a very tiny 25,000 contracts.  Total silver volume was much larger than that, but the lion's share was all roll-overs out of the September delivery month and into future months...mostly December.

I must admit that I was dazzled by gold's price performance yesterday...and the Commercial short covering by the bullion banks in yesterday's COT report was more icing on the cake, as it appears that they are heading for the hills.  And the gold stocks themselves turned on a dime on Wednesday in the middle of the biggest down-day in gold that any of us can remember.  Who would have thought that?

Has the tide turned?  Lots of people think so...and based on the above evidence, I'm more than happy to jump on the bandwagon.  However, being from Missouri in another life, I'm still wary of 'in your ear'...and I'm not about to throw all caution to the wind, as the bullion banks still have massive short positions in both silver and gold.  Nothing is more dangerous than a cornered animal...and that's what they are at the moment.

But, as my bullion dealer pointed out, here we are at the end of summer in North America...and we're only about seventy bucks away from a record high price that was just set on Monday.  This bodes well for the balance of the year.

As I've said before, there are only three ways out for a short seller.  They either cover, deliver...or default, and it's obvious from yesterday's COT report that the bullion banks are covering in gold...and that's what's been driving the price...up in gold and down in silver.  This runaway rally all started the Monday after the GATA conference in London...and this certainly isn't the first time that a GATA conference has spawned a massive rally in the gold price.

Even thought the COT wasn't terrific for silver, I'm very confident of the fact that this big increase in short positions by the Commercial traders has already been dealt with in the subsequent decline in the silver price that began on Tuesday.

Although the charts for both gold and silver don't even so much as hint at it, we are most likely in bullish COT territory in both metals...and there's lots of room to run to the upside after this week's clean-out...especially if the short covering continues.

I have no idea whether prices will blast off when the New York Access Market opens on Sunday night.  All I know is that as the North American summer fades into the September long weekend, the real fireworks still lay dead ahead.

Before I head out the door for the day...and the week...I'd like to remind you one more time of this FREE on-line Casey Research sponsored event happening on September 14th at 2:00 p.m. Eastern time.  It's entitled "The American Debt Crisis"...and it's posted over at the americandebtcrisis.com website.  The introductory trailer runs 8:33...and if you want to register for this FREE webinar, you can just type in your e-mail address in the spot indicated in the right sidebar.  The link to all of the above, is here.

Next week should prove interesting...and I await the Sunday night open in New York with great interest.

Enjoy the rest of your weekend...and I'll see you here on Tuesday.