Gold & Silver Daily
"Then the world's central banks will really be up against it...and the run to hard assets will begin anew, but this time with a real vengeance."

¤ Yesterday In Gold & Silver

Well, if you slept the day away yesterday, you didn't miss gold traded within about a five dollar price range for the entire 24-hour time period.  The gold price closed at $1,659.70 spot...down 90 cents.  Net volume was a very quiet 86,000 contracts.

The silver price traded within about a 40 cent price range...twenty cents either side of $31.60 spot all day long on Wednesday.  However, if you look closely enough, the silver price pattern during Comex trading had some structure to it.  The high of the day [$31.95 spot] came at 9:40 a.m. Eastern...and the low price tick [$31.31 spot] came shortly before noon in New York.  From that low, silver recovered about 30 cents going into the close.

Silver closed at $31.16 spot...down 23 cents.  Net volume was an anemic 24,000 contracts.

Here's the New York Spot Silver [Bid] chart on its own.  The price pattern is far more obvious, when you view this 8-hour market segment on its own...and the Comex trading session is the most important part of the day when it comes to pricing.  I would guess that a not-for-profit seller showed up before the silver price was allowed to blast through the $32 price mark...and if you look at the first three days of this week on the Kitco silver chart above, you'll note that this price level appears to be well defended.

The dollar index edged slightly lower during the Wednesday trading day...but only closed down about 10 basis points from Tuesday.  It will be interesting to see which way the dollar index breaks from here.

The gold stocks peaked in positive territory at 9:40 a.m. Eastern time...and pretty much hit their low of the day a few minutes before noon.  From there they basically traded sideways for the rest of the day.  The HUI finished down 1.25%.

The silver stocks also finished in negative territory...and Nick Laird's Silver Sentiment Index closed down 0.88%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 95 gold contracts were posted for delivery on Friday.  Merrill was the short/issuer on all 95 contracts...and JPMorgan stopped 87 of them.  The link to that action, such as it was, is here.

There were no reported changes in either GLD or SLV.

I wasn't impressed with the new short position in SLV that was posted over at the website last night.  It showed that the short interest in SLV increased by 29.92%...from 9.07 million shares/ounces, up to 11.78 million shares/ounces.

The short interest in GLD also 8.98%.  Short interest increased from 1.01 million ounces to 1.10 million ounces.

The U.S. Mint had a sales report worthy of the name yesterday.  They sold 6,000 ounces of gold eagles...3,000 one-ounce 24K gold buffaloes...and 177,000 silver eagles. 

The Comex-approved depositories reported receiving 627,679 troy ounces of silver on Tuesday...and shipped 556,470 ounces out the door.  The link to this action is here.

Silver analyst Ted Butler posted his mid-week commentary on his website yesterday...and here are three questions that he's still look for answers for...questions that can't be answered without concluding that the price of silver [and gold] has been manipulated.

"The first question is one I asked back in August 2008 when the unusual concentration on the short side of COMEX silver by one or two US banks first came to my attention. Looking back at the available data, at that time JPMorgan was short more than 30% of the entire COMEX net open interest and 25% of world annual production. I asked how such levels of concentration could not be manipulative to the price. The CFTC couldn’t answer and instead began a new investigation in silver, even though they ended their second major silver investigation in four years just months earlier. That investigation, now the longest running in US Government history, continues because the question can’t be answered without concluding manipulation. This is a conclusion that the CFTC is, obviously, unwilling to reach. So the question and the investigation remain open."

"The second question is how a world commodity can plunge 35% within days with no noticeable change in real supply and demand in a free market? Silver did this not once, but twice in 2011 and the obvious cause was unusual trading in COMEX futures trading. This means the COMEX set the price with the obvious conclusion that this represents manipulation. What make this question disturbing is that such a decline would never be allowed in any other commodity and if it did occur would be publicly addressed with much fan fare. Not so in silver. Worse, is that the two 35% price smashes occurred while an active silver investigation was ongoing. The Keystone Kops couldn’t perform more ineptly than has the CFTC in this instance. I think, sooner rather than later, this question must be addressed, although I have yet to run across any free-market explanation."

"The last question is how is it possible that the COMEX commercials in gold and silver futures are always the big net buyers on every big sell-off and that not be evidence of collusion and market control? I’ve been studying the Commitment of Trader Reports (COT) for more than 30 years and I can’t come up with an alternative and plausible free market explanation, other than this is clear evidence of a continuing manipulation. Not once have the commercials sold on a net basis in any big price decline; never panicked as a group, never guessed wrong on a sell-off. How is that possible in free market terms? I think if anyone could respond to this question they would have done so by now, but I’m still eager for an answer."

I note that Endeavour Silver reported that it was temporarily taking silver off the market once again.  They stated that "Metal held in inventory at quarter-end included 925,100 oz silver and 3,927 oz. of gold."  They also had this to say...

"In January and February, 2012, gold and silver prices enjoyed a significant rebound from their lows in December 2011. Endeavour therefore elected to sell most of the precious metal inventory it accumulated in Q4 2011 in order to capture the higher gold and silver prices. However, gold and silver prices corrected sharply once again in March 2012 so Endeavour management once again chose to accumulate its precious metal production in Q1, 2012 rather than sell at depressed prices. Management plans to monitor precious metal prices closely and sell some (or all) of the silver and gold inventory at appropriately higher metal prices, or if the need arises for more cash."

This is all well and good for the bottom line and company shareholders...and they should be applauded for this.  But it does nothing to permanently remove physical silver production from the market.

Here's an excellent chart that reader "EWF" sent me in the wee hours of this morning. The Gold/XAU Ratio is now above 10 for the first time since the crisis of 2008.

(Click on image to enlarge)

I have the usual number of stories for you today...and I hope you have the time to at least skim what I've cut and paste from each one.


¤ Critical Reads

Lenders Again Dealing Credit to Risky Clients

Annette Alejandro just emerged from bankruptcy and doesn’t have a job, and her car was repossessed last year. Still, after spending her days job hunting, she returns to her apartment in Brooklyn where, in disbelief, she sorts through the piles of credit card and auto loan offers that have come in the mail. 

“Even I wouldn’t make a loan to me at this point,” Ms. Alejandro said.

But as financial institutions recover from the losses on loans made to troubled borrowers, some of the largest lenders to the less than creditworthy, including Capital One and GM Financial, are trying to woo them back, while HSBC and JPMorgan Chase are among those tiptoeing again into subprime lending.

This story was posted in The New York Times yesterday...and I thank Phil Barlett for sending it along.  The link is here.


Doug Casey on Tax Day

Louis: Doug, the Taxman cometh, at least for most US citizens who file their annual tax papers on April 15. We get a lot of letters from readers who know about your international lifestyle and wonder about the tax advantages they assume it confers. Is this something you care to talk about?

Doug: Yes; something wicked this way comes, indeed. But first, I have to say that as much as I can understand the guy who flew his airplane into an IRS building, as we once discussed, I do not encourage anyone to break the law. That's not for ethical reasons - far from it - but strictly on practical grounds. The Taxman can and will come for you, no matter how great or small the amount of tax he expects to extract from you. The IRS can impound your assets, take your computers, freeze your accounts, and make life just about impossible for you, while you struggle to defend yourself against their claims and keep the rest of your life going. The number of IRS horror stories is beyond counting. As the state goes deeper into insolvency, its enforcement of tax laws will necessarily become more draconian. So you absolutely don't want to become a target.

Louis: So... just bow down and lick the boots of our masters?

Doug: Of course not. People can and should do everything they can to pay as little in taxes as possible. This is an ethical imperative; we must starve the beast. It could even be seen as a patriotic duty - if one believes in such things - to deny revenue to the state any way possible, short of endangering yourself.

These are the opening Q & A in yesterday's edition of Conversations with Casey.  Louis James, the editor of the International Speculator, as usual, does the honours.  It's worth the read...and the link is here.


Pension risks threaten UK finances, IMF warns

Britain is at risk of pensions time bomb that could cost the state as much as £750bn, the International Monetary Fund (IMF) has warned. 

In an analysis of the financial impact of longevity risk, the Bretton Woods institution said the public finances of countries across the western world would become unsustainable if the average lifespan of their citizens rose by just three years more than expected.

For the UK, the fund calculated that on the “not unreasonable” assumption that the entire cost were to fall on taxpayers the country’s public debt would rise from 76pc of gross domestic product to as much as 135pc. In today’s money, that would be about £750bn.

This is just another sign that the welfare state [any welfare state] cannot keep up with the promises that they made to their citizens over the last fifty years.  The bills are now coming due...and there are insufficient funds available now, or in the future.

This story was posted in The Telegraph yesterday...and is Roy Stephens first offering of the day.  The link is here.


Spanish epiphany as depression deepens? - Ambrose Evans-Pritchard

Spain’s industrial output is sliding at an accelerating rate, as is entirely predictable if you enforce draconian fiscal tightening on an economy in deep recession with no offsetting monetary stimulus or exchange rate devaluation.

The latest data show that output fell 5.1% (y/y) in February, after 4.3% in January and 3.5% in December.

Durable goods fell 14.8pc, the sixth successive monthly fall. Capital goods output fell 10.6pc, according to Raj Badiani from IHS Global Insight.

This is politically untenable. Unemployment is already 23.6pc on the Eurostat measure. David Owen from Jefferies Fixed Income expects this to reach 27.5pc by the end of the year (which is roughly 32pc using the old measure from the 1990s, based on a Bank of Spain study).

This story from yesterday's edition of The Telegraph...and is Roy Stephens second offering of the day.  This story is worth skimming...and the link is here.


ECB may buy Spanish bonds over debt fears

The European Central Bank could again intervene in bond markets to try to rectify “unjustified” concern over Spain’s fiscal position, according to a senior official.

The suggestion by Benoît Coeuré, an ECB executive board member, of possible market intervention, helped to ease tension over Spain’s debt yesterday and pushed down the country’s implied cost of borrowing. However the comments could spark renewed disagreement within the central bank over one of its most controversial crisis-fighting tools.

In the past two years the ECB has bought bonds issued by euro zone governments to try to support demand for the debt and drive down yields, which move in the opposite direction to bond prices.

This story, which is worth reading, was posted in the Irish Times earlier this morning...and I thank Roy Stephens for sending it along.  The link is here.


Europe's banks beached as ECB stimulus runs dry: Ambrose Evans-Pritchard

Credit experts say the Spanish and Italian banks are trapped with large losses on sovereign bonds bought with ECB funds under the three-year lending programme, or Long-Term Refinancing Operation (LTRO).

Andrew Roberts, credit chief at RBS, said Spanish banks used ECB funds to purchase five-year Spanish bonds at yields near 3.5pc in February and 4.5pc in December. The same bonds were trading at 4.77pc on Wednesday, implying a large loss on the capital value of the bonds.

It is much the same story for Italian banks pressured into buying Italian debt by their own government. Any further dent to confidence in Italy and Spain over coming weeks – either over fiscal slippage or the depth of economic contraction – could push losses to levels that trigger margin calls on collateral.

"The banks are deeply underwater. This is turning into a disaster for the eurozone periphery now that the liquidity tap has been turned off," said Mr Roberts. "But given the opposition in Germany, the ECB can't easily do another LTRO until there is a major crisis."

This must read story was posted on The Telegraph's website late last night...and the link is here.


Preemptive Move Ahead of Talks: Iran Stops Oil Exports to Germany

Iran halted oil exports to Germany on Wednesday, a day after it stopped crude exports to Spain and Greece, according to Iran's official Press TV news network. The move appears to be an attempt to boost its position ahead of talks with world powers on its nuclear program in Istanbul on Saturday.

The station said the halt of exports was preemptive retaliation for an EU embargo on Iranian oil imports that is due to take effect in July. Iran has already stopped sales to Britain and France.

The West suspects Iran of trying to build a nuclear bomb and this year tightened its sanctions in the long-running dispute. In an indication that Tehran's "counter-sanctions" are having little impact, Spain's biggest refiner said it had already replaced Iranian crude with Saudi Arabian oil months ago.

This story was posted over at the German website yesterday...and is another story that Roy dug up on our behalf.  The link is here.


Two stories from the Tehran Times

The first story is headlined "Iran, 5+1 to meet in Baghdad after Istanbul talks: Iraq".  The second one is titled "Leader's fatwa best guarantee for peaceful nature of Iran's nuclear program: Judiciary chief".  Both stories are courtesy of Roy Stephens...and are his last offerings in today's column.


Risk off? Having sold most of its own, IMF now lauds gold as 'safe asset'

A growing shortage of safe assets poses a new threat to global financial stability, the International Monetary Fund warned on Wednesday.

Sovereign debt crises are reducing the number of governments that investors trust to issue "risk-free" bonds just as new financial regulations are increasing demand for safe securities from banks.

The Fund identified $74.4 trillion of potentially safe assets today, including gold, investment-grade government and corporate debt, and covered bonds. But it warned that 16 per cent of the potential safe government debt supply to 2016 could disappear if governments continued to borrow at current rates and hence made their debt more risky.

This particular story was posted in the Financial Times of London yesterday.  It's posted in the clear in this GATA release...and it's well worth reading.  The link is here.


Gold 'to hit $2,000' on Spain fears: GFMS

Rising fears about the region’s fourth largest economy will send a fresh flood of investment towards the “safe haven” metal, according to the annual report from Thomson Reuters GFMS.

Philip Klapwijk, global head of metals analytics at the consultancy, said: “We could easily see last September’s record high [a closing high of $1,900.23 on September 5] being taken out.

“A push on towards $2,000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year.”

This story was posted in The Telegraph about 1:00 p.m. Eastern time yesterday afternoon...and I think reader Rob Bentley for bringing it to our attention.  This is worth reading as well...and the link is here.


Gold may fall below $1,550 in coming months: GFMS

This is basically the same story as the one in The Telegraph above, except the 'spin' is different...and appeared posted on the Business Standard of India website early on this morning.

Gold is likely to remain bearish in the short term due to lower expectations from the third round of quantitative easing (QE3) in the US and gradual abatement of the euro zone economic crisis. But, the yellow metal may recover and set a new record in the long term.

The latest survey, released on Wednesday by Thomson Reuters GFMS, the global precious metals consultancy, forecast gold prices to fall below $1,550 an ounce in a month or two. The consultancy, however, reaffirmed its previous forecast, made last year, for the metal to hit $2,000 an ounce by the end of the current year. Gold fell below $1,600 early this year, but recovered later to trade currently at $1,658.9 in London.

Advising caution to investors, Philip Klapwijk, global head of metal analytics at Thomson Reuters GFMS, said, “The low price of $1,600 came as a surprise. It is quite possible that the metal falls even lower.”

This story is certainly worth your time...and I thank reader "Lou" for sharing it with us.  The link is here.


Rick Rule Market Commentary

After a reasonably long period of sustained and occasionally dramatic escalations, commodity markets in general, and precious metals markets in particular have declined. This is normal and healthy behavior, even if it is uncomfortable for some market participants. Readers with a long memory will remember the 1970’s gold bull market, where the gold price advanced from $35 per ounce to $850 per ounce, and investors with a good memory may remember 1975, in the middle of that epic bull market, when the gold price DECLINED by 50%! While a 50% decline is a near religious event for many market participants, particularly those on margin, it is instructive to note that at the bottom of the retrenchment the gold price was up three fold from its $35 low, and that gold went on to increase eight fold in price after the bull market resumed. It is important to recognize that cyclical retrenchments are a normal and healthy feature of a secular gold bull market. Readers should consider whether the reasons for the gold market are intact; has gold’s decline made it more likely that sovereign debts can be serviced, or that unfunded obligations can be met? Does it mean that insolvent banks are now healthy? Does it mean that creating trillions of un-backed dollars and euros and renminbi will have no consequence? Of course not, we are simply uncomfortable with volatility.

This commentary must have been written over a week ago, because some of things that he talks about regarding India and Vietnam are no longer valid, so take that into consideration as you read this rather long essay.  It runs five pages...and it's posted over at the website.  I thank reader Randall Reinwasser for sending it along...and the link is here.


Avery Goodman: Morgan Stanley's failure to segregate client assets creates default risk

Securities lawyer Avery Goodman warns about another scheme by Morgan Stanley to lure precious metals investors into buying something less than real metal.

I borrowed this story from a GATA release yesterday...and the essay itself is posted over at the website.  The link is here.


Richard Russell: Crime, Chaos, Collapse & Skyrocketing Gold

This Richard Russell blog was posted over at the King World News website late last evening...and the link is here.


Don't Give Up on Gold

Casual observers of gold typically fall prey to the simplistic notion that fear is the primary motive behind decisions to acquire gold exposure. The only times I have observed fear among gold investors have been during the periodic corrections that test their confidence in the long-term bull market trend, tempting them to sell into weakness.

Because the early 2012 rally that preceded the "Leap-Year Gold Massacre" was so short-lived, following as it did a prolonged period of weakness in the second half of 2011, the latest breakdown is a source of understandable frustration for gold investors. The related mining equities have been underperforming for quite some time, and lately it seems they've been producing more disappointment than gold.

More recently, the charts have turned uglier still, opening the possibility that gold and related equities could be in for a bit more near-term weakness before staging another reversal. Furthermore, as the financial world ebbs and flows with each change in the perceived likelihood of additional quantitative easing by the Federal Reserve, some gold investors will undoubtedly throw in the towel.

This well written piece was posted over at the Motley Fool website yesterday by my friend Christopher Barker.  It's worth reading...and the link is here.



¤ The Funnies

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¤ The Wrap

Fathom the hypocrisy of a government that will require every citizen to prove they are insured...but not everyone must prove they are a citizen. - Author Unknown

There's certainly nothing to talk about with respect to the price activity in gold and silver yesterday...and volumes in both were pretty light.  The only thing worth mentioning was the fact that silver was prevented from climbing through the $32 spot price mark, which it obviously wanted to do.

I note that the financial problems of the some of the PIIGS nations are back in the headlines once again, so it should be patently obvious that nothing was settled with all this free money that was just passed around by the ECB.  The European Union is just lurching from one crisis to another...and it will rapidly reach the point [if we're not already there] that literally everyone publicly admits that these problems can never be solved.  Once that occurs, I wouldn't want to hold the debt paper of any nation, or it's currency, for that matter.

Then the world's central banks will really be up against it...and the run to hard assets will begin anew, but this time with a real vengeance.  There is still the possibility that they made decide to make one last ditch effort to save the system by re-pricing their gold reserves and thereby back their fiat with real money.  The fact that the IMF finally acknowledged yesterday that gold was a 'safe asset' certainly got my attention.

We wouldn't have to go back on any type of gold standard, just re-pricing gold to bring the asset side of their balance sheets back into line with the liability side would do the trick...and I can tell you right now that the gold price that would be required to do that would make your eyes water.

Of course that's all pure speculation, but the central banks of the world are all out of aces...and have been for a long time now.  We've lived with a world-wide fiat currency system for forty-one years...and it's days are definitely numbered.

As I put the finishing touches on today's missive, I note that gold and silver are still range bound like they were this time on Wednesday...and volume, which was light yesterday, is equally as light as of 10:15 a.m. in London trading this Thursday.  Gold is down about three bucks...and silver is up a few pennies as I hit the 'send' button at 5:15 a.m. Eastern time.  The dollar index isn't doing much, either.

That's all I have for today.  I hope your Thursday goes well...and I'll see you here on Friday.