Gold & Silver Daily
"It was a nothing sort of day on Monday...and virtually all the volume in both metals was of the high-frequency trading variety."

¤ Yesterday In Gold & Silver

It was ultra quiet in the gold world yesterday, as it seemed that all the New York traders were recovering from the Super Bowl parties.  The only activity of note were the two minor sell-offs shortly after London opened.  Whether they were caused by a long holder selling...or new short positions being impossible to tell.

After that, it was a real yawner.

Gold closed at $1,719.90 spot...down $6.00 from Friday's close.  Despite the quiet price activity, net volume was an amazingly high 131,000 contracts...and I would bet that a huge chunk of that would have been of the high-frequency trading variety.

The silver price, as it always is, was far more 'volatile'.  The low of the day [$32.90 spot] came at precisely 8:30 a.m. Eastern time...ten minutes after the Comex opened.  By 11:40 a.m., the price had recovered about 70 cents before trading sideways into the close of the New York Access Market at 5:15 p.m.

The silver price closed at $33.68 spot up one whole penny.  Volume, net of all roll-overs out of the March delivery contract, was only 28,000 contracts.

The dollar index started off just below the 79 cent mark...and rallied about 55 basis points and stayed there between 4:00 a.m. and 9:00 a.m. Eastern time.  Then 50 basis points of those gains disappeared by about 12:15 p.m. New York.  From there the dollar index traded flat into the close.

The gold stocks pretty much followed the gold price yesterday...and the HUI closed down a small fraction of a percent.

Most of the large cap silver stocks also finished a bit lower...and Nick Laird's Silver Sentiment Index closed down a small fraction as well...0.54%.

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The Comex Daily Delivery Report showed that 262 gold and 41 silver contracts were posted for delivery tomorrow.  JP Morgan was the short/issuer of all the gold contracts...and they, along with Deutsche Bank and the Bank of Nova Scotia, were the long/stoppers.

In silver it was the same three players as usual.  Jefferies was the short/issuer of all 41 contracts...and JPMorgan was the biggest stopper, with the Bank of Nova Scotia showing up as a bit player this time.  The Issuers and Stoppers Report is worth a quick peek...and the link is here.

There were no reported changes in GLD yesterday...but over at SLV the 'authorized participants' added 485,925 troy ounces.

The U.S. Mint had a sales report on Monday.  They sold 4,500 ounces of gold eagles...and 375,000 silver eagles.  February is off to a slow start, as only 5,500 ounces of gold eagles...and 470,000 silver eagles have been sold so far.

The Comex-approved depositories only reported receiving 44,163 ounces of silver on Friday...and shipped nothing out the door.  But they also reported a big transfer between depositories as well, with 1,703,557 ounce being shipped out of HSBC USA...and stuck into Scotia Mocatta.  I don't remember the last time that there was a transfer between warehouses.  If there ever was, it was years ago.  The link to Friday's action is here.

In my Saturday column I ran a Daily Mail story about the 4,600 tonnes of gold stored in the Bank of England's vaults.  I mentioned that I would ask James Turk for his opinion on this story...and here's what he had to say:  "There's no way of knowing whether the numbers are accurate. You either believe the BoE or you don't. But I am curious, though...why publish this PR piece now?  I'm sure it was planted by the BoE, but why now?  I don't have any answer."

Technical analyst and long-time contributor to this column, Scott Pluschau, has posted commentary on his blog that's headlined "Volume Indicator in the Dollar Index are Screaming Bearish"...and the link to that blog is here.

Silver analyst Ted Butler had a few things to say in his weekend review to his paying subscribers and, once again, I've stolen three paragraphs...

"In fact, I had predicted, as I have done on prior occasions, that JPMorgan would never again increase its concentrated COMEX silver short position after having successfully reduced it to near 13,000 contracts towards the end of December. I considered that a magnificent and manipulative feat that JPM reduced its position from more than 40,000 contracts at its peak a couple of years ago. Obviously, there can be a big difference between prediction and fact. Not for the first time or the last, I was wrong. My guess is that JPMorgan is now net short around 18,000 COMEX silver contracts, with next week’s release of the monthly Bank Participation Report helping to clarify. If my guess is correct, JPMorgan added 5,000 net silver short contracts, the equivalent of 25 million oz, over the past month and on the $7 increase in price. What gives?"

"The most plausible explanation for JPMorgan increasing its silver short position is that they felt that they had no choice. With silver prices rising strongly, despite strong raptor selling (more than 10,000 net contracts since Dec 27), it doesn’t take a rocket scientist to conclude that prices would have risen much faster and higher were it not for JPM’s short selling of an additional 5,000 contracts. I can only conclude that JPMorgan didn’t want silver prices to rise faster or higher than they did climb. My guess that JPM might aggressively buy from the raptors on higher prices to completely eliminate its short position was particularly wide of the mark. But in my defense, it should be clear that had JPMorgan, instead of selling an additional 5,000 silver contracts short, bought 5,000 or 10,000 contracts in an attempt to close out the entire short position, silver prices would have truly exploded. When a market boils down to the behavior of one participant, it is safe to say that market is manipulated and that participant is the manipulator."

"What is JPMorgan thinking? Perhaps it thinks that if it just ignores the allegations of manipulation, the allegations will disappear. It doesn’t seem to be playing out that way. It is now more than three years since I first revealed that JPMorgan was the big COMEX silver short, having inherited that position from Bear Stearns. It was never my intention to libel or harm JPMorgan in any way, as I was just trying to end what I saw as a serious market crime in progress. Three years after my revelation, I am absolutely amazed at the universal knowledge and contempt on the Internet (definitely not in the mainstream media) that JPMorgan is held as result of being the big COMEX silver short. Reputation is everything to a financial institution and my take is that JPM, in matters related to silver, could not possibly be held in lower esteem."

Nick Laird sent me a chart of the U.S. M3 money supply on Saturday...and it's not the healthiest looking critter, is it?  The next round of QE can't be that far off with a chart that looks like this.

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Here's a chart that Australian reader Wesley Legrand obviously 'borrowed' from the website.  It's titled "America's Vanishing Workforce"...and requires no further embellishment from me.

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Reader Julius Adams sent me this photo off of Jim Rickards' Twitter page...whatever that is.  It shows the back of an airline ticket that has the insurance denominated in SDRs.  The photo is below...and the link to the Twitter page in question, is here.

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And last, but certainly not least, is this little goody that Casey Research's own John Grandits sent around to all the CR writers late last night.  It's a link to a GIF display that chronicles the rise of the HFT Algo Machines from January 2007 through January 2012.  You'll need a pretty fast computer and an up-to-date browser to make this run properly.  ITS AN ABSOLUTE MUST WATCH...and the link is here.

I have a whole stack of stories today...and I'll post as many as I can before I run out of time.


¤ Critical Reads

MF Global Trustee Finds That Company "Did Not Always Record Cash Movements"

The MF Global Trustee has just released their preliminary report on the progress in uncovering where the vaporized cash went. Bloomberg notes that 1] MF Global didn't always record cash movements, 2] Trustee says MF had shortfall in commodities funds starting October 26th. 3] MF brokerage trustee traced $105 billion in cash movement, 4] MF computers couldn't track volume in final days, trustee says.

This very long story showed up posted over at the website yesterday...and I thank reader 'David in California for bringing it to our attention.  The link is here.


Price Instability: Credit Bubble Bulletin - Doug Noland

Doug's weekly column over at Prudent Bear is a must read for me every Friday night.  Last week's report is particularly excellent...and is just about the only must read out of all the stories I have for you today.  The link is here.


Alasdair Macleod: The fallacy of economic growth

Economist and former banker Alasdair Macleod, who spoke at GATA's Gold Rush 2011 conference in London last year, argues in commentary published yesterday that gross domestic product increasingly measures government intervention in an economy rather than actual production of useful goods and services. He makes a compelling case for restoring free markets, which is what GATA is largely about.

I obviously lifted this commentary from a GATA release yesterday...and I thank Chris Powell for wordsmithing the preamble.  It's posted over at the website...and the link is here.


Murray Pollitt's [R.I.P.] final commentary: Money Mountain

GATA has received word of the death on Sunday of our friend, Murray H. Pollitt, president of the Toronto brokerage house Pollitt & Co...and longtime advocate of gold's monetary functions. His final market commentary, distributed last week, "Money Mountain," predicted that infinite money creation by central banks would inevitably flow into equities.

This GATA release, including Murray's last commentary is another must read...and the link is here.


SEC Is Avoiding Tough Sanctions for Large Banks

Even as the Securities and Exchange Commission has stepped up its investigations of Wall Street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishments specifically meant to apply to fraud cases.

By granting exemptions to laws and regulations that act as a deterrent to securities fraud, the S.E.C. has let financial giants like JPMorganChase, Goldman Sachs and Bank of America continue to have advantages reserved for the most dependable companies, making it easier for them to raise money from investors, for example, and to avoid liability from lawsuits if their financial forecasts turn out to be wrong.

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

This story was posted in The New York Times on Friday...and showed up as reprint over at the website yesterday.  It's a real interesting read...and there's not a thing in there that surprises me.  I thank Florida reader Donna Badach for sending this along...and the link is here.


Treasury Ponders Negative Interest Rates

A curious tidbit from a Treasury release on February 1st:

The question was asked if it made sense for Treasury to permit bids and awards at negative interest rates in marketable Treasury bill auctions. [A Treasury employee] noted that there were operational issues associated with such a rule change, but that the hurdles were not insurmountable. It was the unanimous view of the committee that Treasury should modify auction regulations to permit negative rate bidding and awards in Treasury bill auctions as soon as feasible.

Put simply, the Treasury Borrowing Advisory Committee, composed mostly of Wall Street types, is urging that investors be allowed to pay the government for the privilege of lending it money. For example, an investor would be able to bid and then pay the government $101 for a $100 Treasury bill.

Reader Bill Holter sent this item that was posted over at the website on February 1st...and the link is here.


Charles Kadlec: Fed's explicit goal is to devalue dollar 33%

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two-day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.

An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.

But an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the "dollar" in 2032 will be worth one-third less (100/150) than what we call a dollar today.

I plucked this item from a GATA release yesterday.  It's posted over at the website...and the link is here.


Bank of England May Increase Its Asset-Purchase Target to $510 Billion

The Bank of England will raise its target for asset purchases next week as the debt crisis in Europe may have already pushed Britain’s economy into a second recession.

The nine-member Monetary Policy Committee led by Governor Mervyn King will increase its bond-purchase program by 50 billion pounds ($79 billion) to 325 billion pounds, according to 35 of 51 economists in a Bloomberg News survey. Fifteen economists forecast a 75 billion-pound increase, and one no change.

More pretend money out of thin air.  This Bloomberg story from last Friday was sent to me by Australian reader Wesley Legrand...and the link is here.


French socialists’ Latin revolt against Germany

The half-century habits of Franco-German condominium die hard. It is a painful process for French elites to admit that monetary union is asphyxiating their economy and must inevitably trap France in mercantilist subordination to Germany.

The Carolingian union is all that anybody in French public life can really remember. It worked marvellously for two generations, levering French power on the global stage, and the euro was of course their own creation, intended to tie down a reunited Germany with “silken cords”. How can they now face the awful truth that this elegant strategy has blown up in their faces, enthroning Germany as undisputed hegemon?

Ambrose Evans-Pritchard has at it in this column posted in The Telegraph on Sunday.  It's Roy Stephens first offering of the day...and the link is here.


Crisis Desperation Drives Merkel to Campaign for Sarkozy

Chancellor Angela Merkel's move to help President Nicolas Sarkozy in his bid for re-election is unprecedented. But so too is the European debt crisis. Berlin is driven by the fear that a Socialist president in Paris may overturn its strategy to rescue the euro.

One could interpret the bond between Merkel and Sarkozy as a new level in the friendship between Berlin and Paris. What is wrong when two leaders merge to form a kind of ruling duo? Konrad Adenauer and Charles de Gaulle hammered out the Elysée Treaty, also known as the Friendship Treaty. Helmut Kohl and Francois Mitterrand held hands over the graves of Verdun. And "Merkozy" are now making real what the supporters of a united Europe have long dreamed of: European domestic politics, thinking without borders.

That, at least, is the charitable version of the situation, a point of view which both Berlin and Paris have been seeking to promulgate.  In truth, however, Merkel and Sarkozy are being driven by desperation. The president would seem to be hopelessly behind his challenger Francois Hollande in surveys.

This is another very interesting read...and worth your time if you have it.  It's Roy Stephens second offering in today's column.  It was posted over at the German website yesterday...and the link is here.


Stalemate in talks on Greek austerity measures

The three main political parties in Greece's national unity government were reportedly given until 11am to respond to international demands on tougher spending cuts. But the deadline passed with no response - except for politicians claiming there was no deadline.

Sources in Athens said the talks between Greece and its creditor banks were on hold while Lucas Papademos, the Greek prime minister, vacillated between negotiations with his own politicians and the "troika" officials from the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB).

In less than six weeks Greece must repay a €14.5bn (£12bn) bond. It will be unable to meet this without the release of a €130bn international bail-out programme – which will only come when austerity measures are agreed.

This story was posted in The Telegraph late last night...and is another chapter in the saga.  It's a short read...and Roy's third offering of the day.  The link is here.


Romanian prime minister and cabinet resign en masse

The Romanian prime minister and his cabinet have resigned after weeks of sometimes violent protests over widespread corruption and austerity measures.

During his three-year rule, salaries of state employees were cut by a quarter and VAT increased by five percentage points, while the European debt crisis hit Romania's exports hard.

It was a toxic combination in a country that was already the second poorest in the EU, better off only than Bulgaria, which also joined the union in 2007.

This story was posted just after midnight in the U.K...and is posted in The Guardian.  I thank Roy Stephens once again...and the link is here.


Alasdair Macleod: Gold and silver price shakeout

Economist and former banker Alasdair Macleod writes tonight at GoldMoney that gold's price adjusted for the explosion in the money supply is only around $360. "Conventional portfolio managers have missed this point entirely, being hampered by the legacies of portfolio management theory and Keynesian economics," Macleod writes. "But there is a growing band of private individuals around the world who do get it and are accumulating physical gold and silver. They are beginning to understand that paper money is falling rather than gold and silver rising."

This is another story I borrowed from a GATA release yesterday...and it's posted over at the website.  The link is here.


Martenson Interviews Dines: 'Wealth In The Ground' Is Your Best Bet to Surviving the Coming 'Supernova of Inflations'

Amongst other things, Dines says the following..."They are borrowing money with no intention of paying it off. Politicians hope to be safely dead by the time it hits the fan. This year alone America is going to be running a deficit of 1.3 trillion dollars. Most people do not really even grasp how much a trillion dollars is. One trillion dollars. If you spend one million dollars each and every day from now on, back to the time of Jesus’ birth, you could not spend one trillion dollars. Right now America’s debt is approaching 15 trillion dollars, which are numbers used for astronomy. How is America going to earn that? With Facebook and Twitter corporations? Our industrial base is gone. Entitlements of fixed forced payments are a large and growing section of it."

This story was posted over at the website on Saturday...and I thank Wesley Legrand for sending it to me.  The link is here.


The New Reason Gold Stocks Will Soar

There are a number of reasons why many of us believe gold stocks will shoot for the moon before this bull market is over - they've done so many times in the past...the gold price still has a long way to climb... and producers are generating record revenue and profits. But I think there's another reason why gold stocks will soar - one that hasn't dawned on many in the industry yet.

The premise for my theory first lies in how gold itself is viewed. Some investors see gold as strictly a commodity or the infamous "barbarous relic." This group sees no compelling reason to buy the metal and so own little to none. Others view it as a play on a rising asset or because of supply and demand imbalances; they buy while those reasons are positive and sell when they turn negative. Still others view gold as a store of value, an alternative currency, or a hedge against inflation; they tend to buy and hold.

Ask yourself why you own gold. Is it because it's just another asset that offers diversification? Are you buying because it's going up and someone like Doug Casey thinks it will continue doing so? Or is it due to a genuine concern about the dilution of your currency, both now and in the future?

BIG GOLD editor Jeff Clark posted the above commentary, plus more, in yesterday's edition of Casey's Daily Dispatch.  It's certainly worth your time...and the link is here.


Get some assets outside the banking system, von Greyerz tells King World News

Swiss fund manager and gold advocate Egon von Greyerz today told King World News yesterday that central bankers may not be able to save every big bank and that investors should keep a portion of their financial assets outside the banking system.

This is, of course, not news to everyone who is a Doug Casey he's been advocating this for a lot longer than I've know him.  The blog is headlined "Gold Price to Hit $5,000 in 24 Months and Silver $166."  The link to the KWN blog is here.


ANC Study Said to Propose South Africa Mine Resource-Rent Tax

A study into mine nationalization ordered by South Africa’s ruling African National Congress proposes a 50 percent resource-rent tax rather than taking over operations, a party official who has seen the document said.

Previous ANC discussion documents defined resource-rent taxes as a levy triggered once the expected rate of return had been attained on an asset. Nationalizing the country’s mines would be too expensive for the government because it would cost almost 1 trillion rand ($131 billion), according to the study, the official, who declined to be identified because the document hasn’t been made public, said yesterday.

This Bloomberg story was filed from Johannesburg on Friday...and I thank Washington state reader S.A. for sending it along.  The link is here.


GATA London conference DVD sets on sale now

Video of GATA's two-day Gold Rush 2011 conference at the Savoy Hotel in London last August is now available in attractive boxed sets of four DVDs that include every presentation -- and all of them remain immensely relevant to today's market conditions.

Your humble scribe was in attendance...and if you're at all interested, the link to the GATA release is here.


'Confiscation' page added to GATA's Internet site

Because of recurring interest in the issue, GATA has added an indexed page at its Internet site devoted to the possibility of government confiscation of gold and silver. The page is now the first listed in the "Articles" section in the left column of our home page.

You can read more about it in this GATA dispatch from Chris Powell yesterday...and the link is here.


Three King World News Blog/Interviews

In order to save some time, I've got all three KWN items linked under this one heading.  The first is the James Turk audio from an interview he did last Friday...and the link to that is here.  The second one is a Rick Rule blog headlined "Critical Differences Between Gold Bull Today vs. 70s"...and the link to that is here.  And lastly is the Richard Russell offering that reads "Watch Gold, 2012 Fated to be a Monster Year".  Here's the link to that.



¤ The Funnies

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¤ The Wrap

The euro area leadership has been making significant progress in recent days, moving from collective self-delusion to the much less dangerous state of empty posturing. - John Dizard [Financial Times Jan 27, 2012]

It was a nothing sort of day on Monday...and virtually all the volume in both metals was of the high-frequency trading variety.

As far preliminary open interest numbers from Monday...and final open interest numbers from Friday are concerned, it took Ted Butler a couple of sentences in Saturday's note to his paying subscribers to bury the relevance of all these numbers once and for all.  This is what he said...

"A lesson brought home in this week’s gold COT report is the false signal that daily changes in total open interest can sometimes send in anticipating net changes in the COT report. For example, the total gross open interest in COMEX gold futures declined by less than 2,000 contracts week to week, yet the net change was more than 15 times that amount."

He's right. The Commercial net short position in gold was up 30,000 contracts...and the preliminary numbers gave no hint of that.  So, you've heard the last of any talk of open interest numbers, either preliminary or final, in this column for all time.  I stopped the practice about six months ago, only to start up again after a month or so.  I don't know why I Ted was quick to point out at the time.

Not much happened in overnight trading in the Far East.  Both gold and silver had tiny rallies going into the London open, which 'da boyz' dispatched in the usual way...and at the usual time.  Volume in gold is nothing special...and once the roll-overs are subtracted from silver's volume, there isn't much going on there, either.  The dollar index is trying hard to stay above 79.00 as of 9:58 a.m. in London.

Before signing off on today's column, I have a little something for you that the brain trust at Casey Research sent out on Friday.  They've just announced their list of the ten rising stars in the resources industry that they'll be keeping close tabs on in 2012.  If you're interested in learning who these "Top Ten Titans" are, you can read more about them here.

I'm done for the day.  See you tomorrow.