Casey Research Publication
Gold & Silver Daily
"The really big event of the week was the utter obliteration of gold's 200-day moving average to the downside."
 

¤ Yesterday In Gold & Silver

The gold price climbed slowly but surely through all of Far East and early London trading on Friday.  But the moment that the price touched the $1,600 spot level shortly before 1:00 p.m. in London, there was someone waiting to sell it off to its New York low of the day, which occurred minutes after 9:30 a.m. Eastern time.

The New York low was $1,581.50...and by the time the New York trading day was over at 5:15 p.m. Eastern, gold was back within a dollar of the $1,600 mark...closing at $1,599.20 spot...up $28.60 on the day.  Net volume was around 144,000 contracts.

Silver's price path was more or less similar to gold's.  The only difference in silver was that its New York low [$29.22 spot] came at half-past lunchtime instead of 9:30 a.m.  From that low, silver gained 52 cents to close just under the $30 mark at $29.74 spot...up 46 cents on the day.  Net volume was about 31,000 contracts.

The dollar spent most of Friday barely trading above 80 cents...and dipping below that mark between 7:30 and 8:40 a.m. Eastern time.  The dollar was not a factor in the precious metals market yesterday.

The gold shares mostly followed what the gold price was doing...and finished up about as much as the gold price did in percentage terms...with the HUI closing up 1.80%.

Most of the silver producers, both junior and senior, turned in a stellar performance yesterday...and Nick Laird's Silver Sentiment Index closed up 2.88%.

(Click on image to enlarge)

The CME Daily Delivery Report for Friday showed that 15 gold and 119 silver contracts were posted for delivery on Tuesday.  In silver, the big short/issuer was Jefferies with 114 contracts posted for delivery...and there were fourteen longs/stoppers lined up to take delivery, including all the 'usual suspects'...except for the Bank of Nova Scotia.  The link to the Issuers and Stoppers Report is here.

There were no reported changes in either GLD or SLV yesterday.

The U.S. Mint's daily sales report yesterday showed that they sold another 18,000 ounces of gold eagles...2,000 one-ounce 24K gold buffaloes...and 103,000 silver eagles.  Month-to-date the mint has sold 65,500 ounces of gold eagles...13,500 one-ounce 24K gold buffaloes...and 1,559,000 silver eagles.

It was a reasonably busy day over at the Comex-approved depositories on Thursday, as they reported receiving 866,020 troy ounces of silver...but only shipped 36,444 ounces out the door.  The link to that action is here.

Yesterday's Commitment of Traders Report was more or less what I was expecting to see.

In silver, the Commercial traders reduced their net short position by 2,214 contracts.  The Commercial net short position in silver is now down to 101.5 million ounces.

The four largest commercial traders are short 149.4 million ounces of silver...and the '5 through 8' largest traders are short an additional 36.9 million ounces.  What the other 33 Commercial traders in the short category do with their positions is irrelevant, when the 'big 8' are short this much silver.

Not surprisingly, the biggest declines were in gold.  The Commercial traders reduced their net short position by a rather large 15,283 contracts, or 1.53 million ounces.  The Commercial net short position is now down to 18.6 million ounces.

The four largest commercial traders are short 13.7 million ounces...and the '5 through 8' traders are short an additional 4.3 million ounces.  These eight large commercial traders are short 18.0 million ounces of the 18.6 million ounce Commercial net short position, or almost 100% of the total.

As bad as that is, in silver the eight largest traders are short 183% of the Commercial net short position.

The really big declines in both gold and silver came after the cut-off for yesterday's COT report...and if we make it through next Tuesday without any major rallies, we'll see another monster decline in the Commercial net short position in gold, as gold's 200-day moving average got taken out with real authority.  But how much improvement we'll see in silver is anyone's guess, as we're already at the bottom of the silver barrel.

In an usual turn of events, silver analyst Ted Butler had an essay for his paying subscribers on Friday.  In it, he discussed the new short position numbers for both GLD and SLV that I mentioned very briefly in Thursday's column.  Here are a couple of free paragraphs about the short position in SLV that you might find interesting.

"Starting this year, the short position in SLV had grown dramatically, from around 13 million shares, to a peak of 37 million shares in the spring. Not only is the percentage of shorted shares of total outstanding shares higher in SLV than in any other hard-metal ETF, it is higher for a very unique reason – there is not enough physical silver available to allow for the normal issuance of shares as dictated by the prospectus. Aside from the harm short sellers are having on SLV shareholders, these short sellers are also manipulating the price of silver. If they had to go out and buy 25 or 37 million ounces of silver to issue shares as dictated by the prospectus, the price of silver would have soared. Instead, the SLV short sellers are helping to manipulate the price of the metal itself by defeating the intent of how shares should be issued."

"This is not the first time I have raised this issue. Back in the summer of 2008, when silver was near the $20 mark, I wrote how the short position in SLV had grown to 25 to 50 million equivalent silver ounces, which was unprecedented at that time. This was back when Barclays still owned SLV and naked unreported short selling was prevalent. This naked SLV short selling played a big role in the collapse of silver from $20 to under $9 back then, just like the SLV short selling this year has contributed mightily to the collapse in silver from $49 to under $30. Certainly, the percentage decline in prices is strikingly similar between 2008 and this year. It is no coincidence that the price collapsed in 2008 and 2011 when the short selling in SLV was at an extreme."

Here's the article that Ted wrote about this very thing back on June 16, 2008.  The headline of the essay reads "A Hidden Silver Default?".  This must read commentary is posted over at the investmentrarities.com website...and the link is here.

Here's a graph that Australian reader Wesley Legrand sent my way yesterday.  It's a 3-year chart of the HUI index...with all its significant highs and lows over that period of time.  Wesley commented that "It's amazing that twelve months ago the HUI was about the same as it is today, but gold was around $1,300 back then.  I wonder how many times the HUI can bounce off the 500 level?"

I'm sure that when the gold price breaks out to new highs...or even before then...we'll see new highs in the HUI.

(Click on image to enlarge)

I only have a modest number of stories for you today...as I was very ruthless in my editing for today's column.

 

¤ Critical Reads

Commissioner Jill E. Sommers Responds to Concerned Customers of MF Global, Inc.

Here's her 2-paragraph commentary on this issue.  How concerned she really is, is another matter, as she is one of the Commissioners who has been against position limits in silver since day one.

Her comments were posted over at the cftc.gov website yesterday...and I thank Florida reader Donna Badach for sending it along.  The link is here.

Read more...

Ex-heads of Fannie and Freddie sued by US regulator over sub-prime exposure

Daniel Mudd, who ran Fannie Mae between 2005 and 2008, and Richard Syron, who headed Freddie Mac between 2003 and 2008, were among six senior former executives of the lenders sued in a New York court by the Securities and Exchange Commission.

Fannie Mae and Freddie Mac, which were created to help promote home ownership in the US, were bailed out by the US taxpayer in 2008 after the value of their holdings of mortgage debt collapsed. Together they've received almost $170bn (£109bn) of taxpayers' funds and are now under government control.

"Fannie Mae and Freddie Mac executives told the world that their sub-prime exposure was substantially smaller than it really was," said Robert Khuzami, head of the SEC's enforcement division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to sub-prime loans," he said.

This story appeared in The Telegraph yesterday afternoon...and it's Roy Stephens first offering of the day.  The link is here.

Read more...

Congress to Examine S.E.C. Settlement Policy

The Securities and Exchange Commission’s practice of settling cases while allowing corporations or other defendants to neither admit nor deny the charges will be the subject of a hearing early next year by the House Financial Services Committee.

The committee chairman, Representative Spencer Bachus, Republican of Alabama, said Friday that “the S.E.C.’s practice of using ‘no-contest settlements’ has raised concerns about accountability and transparency.” He said the hearings were supported by both Republican and Democratic lawmakers.

Settlements of enforcement actions using the “neither admit nor deny” construct have been the focus of increased scrutiny, including in the recent Citigroup case, where United States District Court Judge Jed S. Rakoff rejected a $285 million settlement between the financial company and the commission.

This story was posted in The New York Times last evening...and reader Phil Barlett sent it to me in the wee hours of this morning.  The link is here.

Read more...

Fitch says comprehensive solution to eurozone crisis is 'beyond reach'

Fitch placed six eurozone countries on downgrade watch on Friday, in a damning judgment of the crisis which saw the ratings agency declare that a comprehensive solution to the eurozone crisis is "technically and politically beyond reach". Here is its statement in full.

This story is also from The Telegraph...and was posted on their website early in the evening local time.  I thank Australian reader Wesley Legrand for sending it along...and the link is here.

Read more...

Fitch warns Spain and Italy of downgrade as Moody's cuts Belgium by two notches

Spain and Italy were both told to brace for a debt downgrade after a leading rating agency concluded that a "comprehensive solution to the eurozone crisis is technically and politically beyond reach".

It cited the “sustained deterioration” in funding conditions for eurozone countries with relatively high levels of public debt, like Belgium, and new risks stemming from the country's troubled banking sector.

The downgrade and warnings, delivered after the markets closed last night, came as Spain said its debts had soared; talks with Greece’s private bondholders stalled; and Hungary broke off talks with the International Monetary Fund.

This story from The Telegraph was posted minutes before midnight in London last night...and is far more comprehensive that the above story on this subject, which just reprinted the Fitch statement.  They're both worth reading, but if you want to narrow it down to just one...this would be it.  It's another Roy Stephens offering...and the link is here.

Read more...

Greeks fearing collapse of eurozone bailout pulled record sums from bank

An unprecedented exodus of capital from Greece – peaking in a record number of withdrawals from banks in recent months – has exacerbated the liquidity crisis now wracking the recession-hit country.

The latest figures released by the Bank of Greece reveal that in September and October alone investors pulled €12.3bn (£10.3bn) from domestic banks, spurred by fears of political uncertainty and economic collapse.

Theodore Pelagidis, an economics professor at the University of Piraeus, said: "This is part of the death spiral of the recession as a result of austerity measures. People realise that contagion has come to banks and they are very afraid of losing their deposits. On average around €4bn-€5bn in capital flees the banking system every month."

This is another Roy Stephens offering...this one from The Guardian yesterday.  It's worth your time...and the link is here.

Read more...

As Tension Rises in France, Harsh Talk With Britain

A week after the British prime minister, David Cameron, refused to sign a Europe-wide pact that leaders had hoped would stabilize the euro zone, a cross-Channel spat has escalated into a full-blown war of words. Fears in Paris have reached a fever pitch over the prospect that France is about to lose its triple-A credit rating, the highest available.

A downgrade by Standard & Poor’s Ratings Services, which has put France on review with a negative outlook, became more likely last week after a summit meeting of European Union leaders was widely declared a flop.

But in the last two days, French officials have unleashed a diatribe suggesting that Britain, not France, is far more deserving of a downgrade.

The pot calling the kettle black, methinks.  This story from The New York Times yesterday is another offering from reader Phil Barlett...and it's worth skimming.  The link is here.

Read more...

Iceland Recovery: Democracy and the power of the marketplace

In the 2008 economic meltdown, Iceland nearly collapsed. Its three banks failed, it's currency lost 50 per cent of its value and in an unprecedented display of anger, usually peaceful Icelanders took to the streets to protest.

But Iceland defied the orthodox economic wisdom of the time---bailouts and slashing government services---and now is on the road to a recovery that the rest of Europe envies.

The hero of the hour and the man almost solely responsible for this remarkable turnaround is the country's president Olafur Grimmson.

By refusing to go along with conventional thinking and by asking the people themselves what they wanted, he set a course for Iceland's remarkable economic recovery.

This 48:30 minute interview was posted over at the cbc.ca website last Sunday.  Well-know Canadian correspondent, Michael Enright does the honours.  Roy Stephens sent me this interview earlier this week...and the link is here.  You have to scroll down a bit to find the interview.

Read more...

Doug Noland: Credit Bubble Bulletin: Target2

My thesis is that, with the sustainability of euro integration now a pressing issue, capital flight has begun in earnest.  There is evidence that huge flows have left the “periphery” banks in search of the safety of German and other “core” institutions.  A fascinating Bloomberg article yesterday (“Germany’s Hidden Risk” by Peter Coy) introduced the term “Target2.”  “It’s the name for the European Central Bank’s suddenly important interbank payment system, which before the crisis was just a lowly bit of financial plumbing.  The bottom line: Germany’s Bundesbank -- BuBa for short -- has quietly, automatically lent 495 billion euros ($644bn) to the European Central Bank via Target2. That lending has balanced correspondingly huge borrowings from Target2 by the central banks of weaker nations including Greece, Ireland, and Portugal -- and lately Spain, Italy, and even France. They are technically ‘claims,’ not loans.

It is my view that heightened euro disintegration risk has unleashed destabilizing capital flight – within the euro region and without.  I’ll presume the flow out of Italian, Spanish, Greek, Portuguese and other “periphery” banks to Germany will equate to only more astonishing growth in “Target2” balances.

The ballooning of both the ECB balance sheet and claims to the Bundesbank will likely be a source of market worry, weighing further on the euro and creating greater momentum for capital flight out of the European financial system.

These are snippets from Doug's latest Credit Bubble Bulletin over at the prudentbear.com website.  It's a bit of read...and a bit thick in places...but it's worth it if you have the time.  I thank Roy Stephens for his final offering in today's column...and the link is here.

Read more...

Two King World News Audio Interviews

Either yesterday or the day before, I posted two different KWN blogs.  One was with Egon von Greyerz...and the other was Jim Rickards.  Eric King sent me the full audio interviews of both very early this morning.  The link to the von Greyerz interview is here...and the Jim Rickards interview is linked here.

Read more...

Valuable Gold Coin Appears In Pennsylvania Donation Kettle

Someone has dropped a rare coin worth about $1,700 into a Salvation Army kettle in central Pennsylvania. Again.

The valuable currency has appeared in Gettysburg-area kettles for several years. But no one knows who should be thanked for the generosity.

Local Salvation Army unit organizer C.K. Roulette says he's content with the mystery remaining unsolved. He says it sparks people's imaginations and adds excitement during long, cold hours of bell-ringing.

Krugerrands also have turned up in recent years in Salvation Army kettles in Florida, Indiana, Colorado and Washington.

This 4-paragraph story turned up in the Huffington Post on Thursday...and you just read the entire piece.  I thank Florida reader Donna Badach for sending it along...and the link to the hard copy is here.

Read more...

Despite current commodity doldrums, McEwen stands pat on $5,000 gold

As gold bugs get discouraged in the wake of year-end sell offs, über precious metals mining entrepreneur Rob McEwen still is firmly bullish on gold in the long run and stands pat on his $5,000 per ounce gold price prediction.

I found this story posted over at the mineweb.com website just now...and the link is here.

Read more...

Richard Russell - I Will Stay with Gold & Gold Stocks to the End

The Richard Russell blog posted on King World News earlier this week certainly stirred up a lot of controversy from those readers who held stocks in the precious metals...as the 'R' Man said to sell them too.

Well, in his latest commentary from yesterday, Richard has modified that comment with the following...

"My advice -- sell any stocks you still own -- sell into all rallies, or stay out of stocks completely.  I continue to like gold in all its forms, but I'm afraid that gold mining stocks will tend to go with the general market.  Personally, I'm staying with my gold mining stocks until the bitter end.  I continue to believe that we'll see a final hysterical blow-off in gold (the metal) that will carry the mining stocks with it."

Eric King slid this blog into my in-box around 4:30 a.m. Eastern time.  It's a must read...and the link is here.

By the way, I'm still 'all in'.

Read more...

 

¤ The Funnies

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¤ The Wrap

I have a Christmas musical selection for you today.  It's a short video from the small Yupiq Inuit Village of Quinhagak, Alaska.  It's first rate...and really gives a very fine picture of life in an Alaskan Inuit village. This was a school computer project for the 5th grade in the winter of 2010...and was intended for the other Yupiq villages in the area.  Much to the village's shock, over a 1.2 million people have watched this video.

I spent several years in the Canadian Arctic back in the late 1960s...and more gentle, warm-hearted hunter/gatherer culture you could never hope to meet...and this video brought back a lot of personal memories of when I lived in Baker Lake, N.W.T...which is now called Nunavut.

Reader Eldon Johnson sent me this video way back on November 3rd...and I've had it squirreled away on my hard drive for the Christmas season.  The link to the youtube.com video is here...and it's a must watch/listen.

Although it was a reasonably quiet trading day on Friday, I still had the distinct impression that the prices of both gold and silver were being managed, as gold wasn't allowed to break through, or close above, the $1,600 spot price level...and the same can be said about silver and the $30 spot price.  But maybe I'm just imagining things.

The preliminary open interest numbers for yesterday's trading day showed a very small decline in gold's open interest...and a rather large one in silver.  As always, it's impossible to speculate as to what it really means, but in light of the price action in both metals this past week, it should be positive for next Friday's COT report.

The really big event of the week was the utter obliteration of gold's 200-day moving average to the downside.  None of that data was in yesterday's COT report...and despite the big reported increases in open interest numbers for that day, there had to have been massive spec long liquidation.

Both gold and silver have now turned up off their lows for this move down...and it's only a matter of time before the small commercial traders [Ted Butler's raptors] start selling the long positions that they purchased during the big price decline of the last ten days.  I certainly hope that it will be the large Commercial traders buying those long contracts to cover their gargantuan short positions.  We'll find out as the days progress.

Well, I see that Fitch rating services has finally admitted to what has been know by others for many years...that sovereign debt of any nation cannot be repaid.  When they spoke of European debt, they declared that a comprehensive solution to the eurozone crisis is "technically and politically beyond reach"...they might as well have been talking about all nations on earth.

It appears likely that a major low has been set in both gold and silver...plus their respective shares.  As I said in this space a week ago, you should carefully note that JPMorgan et al still have gold and silver bullion on sale, so there's still time to either re-adjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well.  And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Enjoy what's left of your weekend...and I'll see you here on Tuesday.