The gold price made a rather feeble attempt to break through the $1,700 spot price mark early in the afternoon Hong Kong time on Tuesday. When that got turned back, the price slowly sank to its 12 o'clock noon London low.
From that low, gold made another run at $1,700...and that ran into a not-for-profit seller ten minutes after the Comex open. The low of the day [$1,687.10 spot] came ten minutes after the equity markets began trading in New York.
Gold began to rally once again...and the moment the London p.m. fix was in at 10:00 a.m. Eastern time, the gold price blasted higher, hitting its high tick of the day...$1,700.30 spot...about fifteen minutes later.
That rally also met with another not-for-profit seller...most likely the same one that showed up at 8:30 a.m. Once that rally was squashed, gold began to move higher once again, even gaining ground in the electronic market, before getting sold off a bit once it got a sniff of the $1,700 price mark once again.
Gold closed on Tuesday in New York at $1,696.20 spot...up $3.60 from Monday's holiday-shortened trading session. Volume was pretty chunky, even once Monday's volume was subtracted. Both days combined was around 190,000 contracts.
Here's the New York Spot Gold [Bid] chart so you can see the New York shenanigans in more detail.
Silver traded in a reasonably tight price range yesterday but, it obviously had some help doing that, as every serious attempt to move higher got sold off. Silver's last rally of the New York trading session [during electronic trading] took it to its high of the day...$32.53 spot...around 3:20 p.m. Eastern time, before it got sold down a bit going into the close.
Silver finished the Tuesday session at $32.36 spot...up 26 cents on the day. Net volume, including Monday's volume, was in the neighbourhood of 62,000 contracts...which I thought was pretty heavy.
Here's the New York Spot Silver [Bid] chart for a close up of the New York price action.
It should be obvious that if the usual not-for-profit sellers hadn't been around, both metals would have finished materially higher...with the emphasis on 'materially'.
The dollar index opened around the 81.20 mark on Monday night...and within four hours had hit its low tick of the day around 81.05. The next rally began just before London opened at 8:00 a.m. BST yesterday morning...and then moved higher until 9:00 a.m. in New York...and more or less traded sideways into the 5:30 p.m. Eastern time close. The dollar index closed at 81.34...up a whole 14 basis points.
One would be hard pressed to find much co-relation between the precious metals prices and the currency moves yesterday.
The gold stocks opened lower...and hit their nadir at gold's 9:40 a.m. Eastern time low tick. The subsequent rally didn't get far...and the gold shares more or less traded sideways into the close. It should come as no surprise that it was the poor performance of the South African gold stocks that caused the index to finish in negative territory. The HUI finished down 0.52% yesterday.
However, it was an entirely different story in the silver stocks...as virtually every one finished well into the green yesterday...especially most of the junior producers. Nick Laird's Silver Sentiment Index closed up 2.26%.
(Click on image to enlarge)
The CME's Daily Delivery Report was a yawner yesterday. It showed that 7 gold and only 27 silver contracts were posted for delivery on Thursday within the Comex-approved depositories. Just 348 silver contracts have been posted for delivery in the September delivery month...and according to the CME's preliminary volume report from yesterday, there are still 2,008 silver contracts open in September. What are the short/issuers waiting for? Maybe they're waiting for silver to be shipped in to the Comex-approved depositories so they can deliver it to the long/stoppers.
The GLD ETF reported that an authorized participant added 16,357 troy ounces of gold yesterday. But over at SLV, it was the same old story...instead of silver pouring into the ETF, an authorized participant[s] withdrew a very chunky 2,519,572 ounces and shipped it off to someplace where it was obviously more desperately needed. One has to wonder just how much silver the SLV ETF is owed...and just how many shares have been sold short in lieu of providing the real metal. We'll have some sort of clue when shortsqueeze.com posts that data for the last two weeks of August...and Ted Butler says that will happen around the September 12th. If that's the correct date...then that's next Wednesday, a week from today.
The U.S. Mint had a smallish sales report to start off the month. They sold 2,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 250,000 silver eagles. I sure hope you're getting your share, dear reader!
It was a pretty busy day over at the Comex-approved depositories on Friday. They reported receiving 1,248,363 troy ounces of silver, but only shipped 239,318 troy ounces out the door. The link to that activity is here.
I have the usual number of stories again today...and I hope you have time to read the ones that interest you.
Those receiving benefits through the Supplemental Nutrition Assistance Program numbered 46.37 million, the government said in a report that hit just days ahead of the monthly nonfarm payrolls report, which the Labor Department releases Friday.
The two numbers are inextricably linked as the economy battles its way back from the crippling recession that the National Bureau of Economic Research says ended in 2009.
"The unemployment data is not really telling us the true story of how many people are underemployed," says Peter Cardillo, chief market economist at Rockwell Global Capital in New York. Food stamps are "a good indication of how the income of the workforce has stagnated and more and more people are applying for food stamps."
With 22.4 million households using food stamps, fully 15 percent of the American population is on the program.
This CNBC story was posted on their website mid-afternoon yesterday...and I thank West Virginia reader Elliot Simon for today's first story. The link is here.
Jeffrey A. Michael, a finance professor in Stockton, Calif., took a hard look at his city’s bankruptcy this summer and thought he saw a smoking gun: a dubious bond deal that bankers had pushed on Stockton just as the local economy was starting to tank in the spring of 2007, he said.
Stockton sold the bonds, about $125 million worth, to obtain cash to close a shortfall in its pension plans for current and retired city workers. The strategy backfired, which is part of the reason the city is now in Chapter 9 bankruptcy. Stockton is trying to walk away from the so-called pension obligation bonds and to renegotiate other debts.
After reviewing an analysis of the bond deal, underwritten by the ill-fated investment bank, Lehman Brothers, and watching a recording of the Stockton City Council meeting where Lehman bankers pitched the deal, Mr. Michael concluded that “Stockton is entitled to some relief, due to deceptive and misleading sales practices that understated the risk.”
“Lehman Brothers just didn’t disclose all the risks of the transaction,” he said. “Their product didn’t work, in the same way as if they had built a marina for the city and then the marina collapsed.”
This sounds like a mini version of Jefferson County, Alabama vs. JPMorgan. This story appeared in The New York Times on Monday...and I thank Donald Sinclair for bringing it to our attention...and the link is here.
France's government plans to intervene to rescue Crédit Immobilier de France after the struggling mortgage lender was hit by a liquidity crisis following a recent downgrade by credit rating agency Moody's, Le Figaro newspaper reported on Saturday.
CIF's board met on Friday night and formally demanded government help, the newspaper said, without naming its sources.
The lender, which has about 300 branches throughout France, did not immediately return a phone call seeking comment. The government was not immediately available for comment.
CIF has been looking for a buyer since at least May after its future was thrown into doubt by the evaporation of once-cheap funding from credit markets, on which it depends to finance its operations.
This Reuters story was filed from Paris...and is one I found in yesterday's edition of the King Report. The link is here.
German exporters suffered their biggest drop in international orders in more than three years in August, according to a survey released on Monday. Retailers too are starting to feel the impact of the euro crisis. Europe's largest economy, it seems, is losing its immunity to Europe's debt problems.
Exports are a major pillar of the German economy, but now the sector is starting to feel the impact of the euro crisis and the global economic slowdown. German export orders fell in August by the highest rate in more than three years, the Markit financial information company announced Monday after conducting a survey of 500 industrial firms.
"Survey respondents commented on a general slowdown in global demand and particular weakness in new business inflows from Southern Europe," the institute said. The firms hardest hit by declines are manufacturers of machinery and other investment goods as well as producers of intermediate goods such as chemicals.
This story was posted on the German website spiegel.de on Monday...and I 'borrowed' it from yesterday's edition of the King Report as well. The link is here.
Jerez de La Frontera, a Spanish town of 214,000 in southern Andalusia, is negotiating with unions to fire 13 percent of the 2,000 government workers who absorb 80 percent of its budget. “It’s not easy because these are people and families,” said deputy mayor Antonio Saldana.
With a quarter of Spain’s workforce already jobless, Prime Minister Mariano Rajoy’s efforts to retain investor confidence by shaving more than two-thirds off the nation’s budget deficit by 2014 will worsen the highest unemployment rate in the European Union. Ten-year yields at 6.86 percent mean “we can’t finance ourselves,” Rajoy said on Sept. 1.
“There’s going to be less hiring and more firing for the spending cuts to be made,” said Ricardo Santos, an economist at BNP Paribas SA in London who sees unemployment climbing to 27 percent next year from 24.6 percent currently. “The more unemployment persists, the more difficult it’ll be for the government to meet budget goals and implement reforms.”
This Bloomberg story, filed from Madrid in the wee hours of yesterday morning, was sent to me by Manitoba reader Ulrike Marx. The link is here.
It is, Julio Vildosola concedes, a very big bet.
After working six years as a senior executive for a multinational payroll-processing company in Barcelona, Spain, Mr. Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge, England, where he will take the reins at a small software company, and he has transferred his savings from Spanish banks to British banks.
“The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.”
This story originally appeared in The New York Times on Monday...and was picked up by CNBC later that evening. Reader Elliot Simon sent it to me on Tuesday morning...and the link is here.
Spain has issued a veiled warning that it will not accept a full bail-out from Europe if the terms are too harsh, a move that would paralyse the European Central Bank and call the euro’s survival into question.
In an escalating game of brinkmanship, Spanish finance minister Luis de Guindos said his country is not yet willing to sign a Memorandum giving up fiscal sovereignty to EU inspectors. “First of all, one must clarify the conditions,” he told German newspaper Handelsblatt.
Mr de Guindos said the crisis engulfing the region is larger than any one country and warned north Europe not to scapegoat Spain.
“My colleagues are aware that the battle for the euro will be fought in Spain. Spain is right now the breakwater for the eurozone,” he said, adding that “solidarity” would be well-advised.
This Ambrose Evans-Pritchard story was posted on the telegraph.co.uk Internet site late last evening...and I thank Ulrike Marx for her second offering in today's column. The link is here.
The miner protest in Sardinia may have resulted in a stay of execution for a doomed coal production facility, but Italy's economy remains in freefall. The country is shedding jobs, production rates are abysmal and the infrastructure is appalling. Prime Minister Monti has vowed to turn things around. But how?
The images shocked the entire country. Over 1,200 feet (370 meters) below the ground, in front of television cameras and a dozen journalists, Stefano Meletti grabbed a knife and cut into his own arm. "It was a gesture of desperation," said Meletti's mining colleagues before bringing the 48-year-old family man up to the surface and taking him to the hospital.
The dramatic scene took place deep in the shafts of the Carbosulcis coal mine on the Italian island of Sardinia, where miners had staged an occupation. During their underground press conference, the miners said they were "prepared for anything." Their goal was to prevent the closure of the mine at the end of the year as planned and to save the jobs of 500 people. Only on Monday did they end their protest after the government in Rome agreed to continue subsidizing the mine for the time being. But, they said, they are determined to continue their fight should it become necessary.
Their resolve is not difficult to understand given the complete lack of other jobs available to them. Sardinia has an unemployment rate of 16 percent, with some 1,800 jobs are lost on average each month. Among Sardinians between the ages of 18 and 24, the jobless rate will soon rise above 40 percent.
This story showed up on the German website spiegel.de yesterday...and I thank Roy Stephens for bringing it to our attention. It's worth reading...and the link is here.
Greece's eurozone creditors are demanding that the government in Athens introduce a six-day working week as part of the stiff terms for the country's second bailout.
The demand is contained in a leaked letter from the "troika" of the country's lenders, the European commission, European Central Bank, and International Monetary Fund. In the letter, the officials policing Greece's compliance with the austerity package imposed in return for the bailout insist on radical labour market reforms, from minimum wages to overtime limits to flexible working hours, that are likely to worsen the standoff between the government and organised labour in Greece.
After a long delay caused by months of political paralysis in Greece, the troika inspectors return to Athens this week to scrutinise Greek observance of its bailout terms. They are expected to deliver a verdict next month that will determine whether Greece is ultimately allowed to remain in the single currency.
This story appeared on the guardian.co.uk website last evening...and I thank reader Ken Metcalfe for sending it along. It's certainly worth skimming...and the link is here.
Protesting pensioners pushed their way into the Health Ministry, during a rally against health care cuts in crisis-hit Greece.
The central Athens protest on Tuesday was organized by a Communist-backed labour union and ended peacefully.
About 200 pensioners took part in the rally, and pushed past police lines to enter the building and occupy the lobby for about 20 minutes.
Private doctors and pharmacists this week refused to accept credit from Greece's largest state-run health care provider, EOPYY, arguing that the government has allowed debts to accumulate, leaving them unpaid for months.
The above few paragraphs is all there is to this short AP story that was filed from Athens yesterday. It was picked up Toronto's Globe and Mail...and the link to the hard copy is here. I thank Donald Sinclair for sending it.
Speaking in an interview with the Wall Street Journal on Monday (3 September) in Sofia, Prime Minister Boyko Borisov and Finance Minister Simeon Djankov said the decision was the result of the debt crisis and the double dip recession facing the eurozone, along with rising public opposition to joining the single currency.
"Right now, I don't see any benefits of entering the euro zone, only costs," Djankov said, adding that disagreement between countries on how best to respond to the debt crisis made the prospect of euro membership "too risky for us and it's also not certain what the rules are and what are they likely to be in one year or two."
In January 2010 Borisov claimed that Bulgaria would take steps to join the eurozone with a target date of 2013.
This story was posted on the euobserver.com Internet site yesterday morning...and I thank Roy Stephens for sending it along. The link is here.
Searching for warning signs in China’s economic slow down? Look at corporate cash flow.
Both at the macro-economic and company level, reports suggest that Chinese companies are increasingly short of cash – and are having to resort to ever more desperate means to get hold of it. The overall picture is hard to grasp, given a scarcity of data, but the evidence is multiplying.
Take for example, short–term lending, which has mushroomed this year, as this chart shows, using official loan growth data.
Machinery makers such as Zoomlion and Sany Heavy have been affected by fears of a cash squeeze in the construction and property development sectors. As the FT reported, Hunan-based Zoomlion, which is listed in Shenzhen and Hong Kong, asked shareholders in June for approval for new borrowing facilities – much bigger than its $12.3bn market value at the time.
The cash shortages now seem to be spreading. Analysts at Jefferies in Hong Kong noted this week that tight working capital, rising cost pressures and increased inventories have undermined earnings and cash-flows.
This Financial Times blog was posted on their website early last Friday morning BST...and is another story from yesterday's edition of the King Report. The link is here.
Exports from Asia, the world's manufacturing hub, are often regarded as a bellwether for the health of the global economy. We estimate that the year-on-year growth rate of Asia's aggregate exports turned negative in July for the first time since the global financial crisis (it was negative in January 2012 but was distorted by the Lunar New Year holiday).
In examining Asian exports by destination, there is little doubt that a synchronized global economic downturn is in train. It also shows that demand from the EU is weakening more than elsewhere. Asia's export growth to the EU fell from -5.0% y-o-y in June to -15.6% in July, and the trajectory is becoming as steep as during the global financial crisis.
The great question is whether China, Japan, India and the rest of Asia are at last bottoming out or whether this is the start of a more menacing Phase III of the global crisis.
That's an easy question to answer, Ambrose...it's Phase III of the global financial crisis. This AE-S blog was posted on the telegraph.co.uk website yesterday...and it's another offering from Roy Stephens...and the link is here.
The first is with James Turk...and it's headlined "Gold & Silver Shorts Trapped As Scramble For Metal Under Way". The second blog is with Rick Rule. It bears the title "Spectacular Home Runs In Gold, Silver & Oil".
For the first time since the age of Reagan, the Republican Party is considering the gold standard. The platform adopted last week at the GOP convention includes a plank in favor of a commission to study the way back to a fixed value for the dollar. Such a commission would jumpstart a national debate on monetary reform, something needed now more than ever. But instead of participating in this, critics have objected with myth after myth about the gold standard...and here are four of the most popular...
This CNBC guest blog is from Rich Danker, economics director at American Principles Project, a public policy organization that concerns itself with the gold standard. I thank reader Scott Pluschau for sending it our way...and the link is here. It's worth the read.
While global gold mine production was at best flat in the first half of 2012, average total cash costs jumped 19% to a new high of $727 per ounce.
According to Thomson Reuters GFMS's Gold Survey 2012 Update 1, some of the reasons behind the hiatus in production are declining grades across the industry, construction and commissioning delays and slower than expected ramp-ups of output at a number of properties. Added to this, the group said, were exogenous factors like geotechnical problems, extreme weather and labour strikes.
But, the consultancy says, "These are not the only headwinds producers have to face. The relative stagnation of the gold price, coupled with further rises in production costs, has seen producers' cash margins eroded by 16% over the past nine months, while upward revisions to capital expenditure forecasts will place additional pressure on free cash flow going forward."
And, while higher gold prices year on year have seen average producer margins rise 11% over the period, GFMS is quick to point out that "on a quarterly basis margins have in fact declined for the last three quarters."
This story was posted on the mineweb.com Internet site yesterday...and I thank Ulrike Marx for her third and final story in today's column. It's a must read...and the link is here.
Interviewed by Daniela Cambone of Kitco News yesterday, GATA Chairman Bill Murphy discussed gold and silver price manipulation, the everlasting investigation by the U.S. Commodity Futures Trading Commission of the silver market, and likely supply shortages in silver.
I borrowed this story from a GATA release yesterday. The video interview is nine minutes long and posted at the kitco.com Internet site...and the link is here.
It’s perhaps no co-incidence that the trend towards persistent deficits started around the final collapse of the last link to a quasi-Gold standard back in August 1971…
So with the shackles off and with nothing backing paper money, the post 1971 period has seen a uniquely long period of fiat currencies globally with a beggar-thy-neighbour rolling period of credit creation. Never before in observable history have so many countries been off a precious metal type currency system for so long. This move in 1971 helped create the conditions (alongside ever looser financial regulation) for almost unlimited credit and debt creation potential that would have been inconceivable through the annuls of economic history.
The developed world in particular went on a 36 year credit/debt binge which probably lasted longer and was more aggressive than it would have been had it not been for China’s globalisation moment 30 years ago. From this point they almost single handedly started a three decade period of suppressing global inflation thus allowing the credit/debt binge to become ever bigger without the inflationary check that would have likely otherwise occurred. So after 41 years of global fiat currencies and an unparalleled amount of debt that is proving very difficult to shift, we really are venturing into the unknown.
As Deutsche Bank's Jim Reid, Nick Burns and Stephen Stakhiv note in the bank’s latest annual long-term asset return study, we may be reaching the limits of what past lessons can tell us about the present.
This absolute must read commentary was posted on the Financial Times blog yesterday...and I thank Nick Laird for sending it our way. The link is here.
Pelangio Exploration Inc. (PX:TSX-V; PGXPF:OTC) announced the results of seven diamond drill holes totaling 1,574 metres from its ongoing drilling program at the Pokukrom East zone on the Manfo Property in Ghana. Highlights of the results included:
· 1.19 g/t gold over 113 metres, including 9.05 g/t gold over 7 metres;
The results continued to confirm a higher grade, shallow north plunging core of Pokukrom East zone with an open plunge of 600 metres from near surface in previously reported hole SPDD-088 (7.01 g/t gold over 19 metres) to 210 metres depth in the holes reported this week. Warren Bates, Senior Vice President Exploration, commented: “These are our best holes on the Manfo Property to date. These holes represent the north-plunging core of higher grade mineralization at Pokukrom East, now demonstrating an open plunge length of 600 metres.” Please visit our website to learn more about the project and request additional information.
It appeared to be a quiet trading day yesterday if you just looked at the price action...but the volume certainly didn't reflect that. Gold's repeated attempts to break through the $1,700 spot mark were met with not-for-profit selling at ever turn...and the same can be said about silver.
The cut-off for Friday's Commitment of Traders Report came at the close of Comex trading yesterday afternoon...so last Friday's big up day...and yesterday's price action will be included in that report when it comes out. Both Ted and I are awaiting that report with great interest, just to see how grotesque the short positions have blown out in both gold and silver...and what JPMorgan et al have been up to. Even more interesting will be the positions taken by the Raptors. Will they have gone even further short in gold...and now be market-neutral in silver?
What is glaringly apparent is that there is no short covering going on by any of the major players in the Commercial category...and what they do 100% determines what happens to precious metals prices. At the moment they are resisting this rally with everything they've got. Are they finally trapped on the short side with not way out? I don't know, but we'll find out soon enough I would think.
We still remain monstrously overbought in the short term...but a quick peek at the 2-year silver chart below shows that we can remain in that position for long periods of time...and the July 2010 through May 2011 rally is a case in point.
(Click on image to enlarge)
If that time period proves to be a blueprint for what is about to happen now over the next six months or so, one has to wonder out loud just how the traders in the Commercial category are going to get through this without getting over run. And if they do get over run, it will be [as Ted Butler has kept telling me over the years] for the first time.
But, as I said in this space yesterday, all we can do is wait it out and hope that we've covered all the bases. That's pretty much my own personal situation. And every dip should be bought.
These are unprecedented times that we are living in...and I, for one, have no idea how it will all turn out in the end, except to say that whatever happens will be one for the history books.
Both silver and gold came under a bit of selling pressure during the Far East trading session...and that's continuing into London trading. A lot of that has to do with the ongoing rally in the dollar index, which is up about 30 basis points as of 5:01 a.m. Eastern time...10:01 a.m. BST in London. Based on that, I wouldn't read much into the price action of either metal at the moment. Gold volume is pretty light...and silver's volume is already decent...over 5,900 contracts at the moment.
Today, hopefully, gold will finally break through the $1,700 price ceiling but, considering yesterday's price action, I don't expect that the attempt will go unopposed. As is almost always the case, the lion's share of the price action...and the volume...comes once Comex trading begins at 8:20 a.m. Eastern time. I don't expect today to be any different.
That's all for today. See you tomorrow.