Gold & Silver Daily
"It was more than obvious [at least to me] that a heavy hand showed up in these markets at, or just before, the London p.m. gold fix"

¤ Yesterday In Gold & Silver

Gold didn't do a lot on Tuesday, either.  The rally that developed in early Far East trading, ran into a seller just before 11:00 a.m. Hong Kong time...which was the same thing that happened during the Monday trading session.

From there, the gold price didn't do much until the 8:20 a.m. Eastern Comex open.  At that point the dollar index cratered...and gold took off...running into a not-for-profit seller at the London p.m. gold fix which came shortly after 10:00 a.m. in New York.  The high tick at the 'fix' was $1,739.10 spot.

Despite the fact that the dollar continued to decline, the gold price continued to get sold down until around lunch time on the East coast...and from there traded sideways into the 5:15 p.m. electronic close.

Gold finished the Tuesday session at $1,732.50 spot...up only $7.70 on the day.  Net volume was the same as Monday's...115,000 contracts.

It was basically the same story in silver as well, except for the fact that the rally at the Comex open was so strong, that a not-for-profit seller had to enter the market around 9:35 a.m. Eastern, or silver would have been materially higher [and well above $34 spot] by the London gold fix, which occurred thirty minutes later.  The high tick of the day at that point was $33.95 spot.

And, like gold, despite the fact that the dollar index was declining steadily, silver continued to get sold off to its New York low...$33.30 spot...which came about 3:20 p.m. in electronic trading.  The price recovered a hair into the close.

Silver finished the day at $33.48 spot...up a meager 14 cents from Monday.  Volume, 38,000 contracts, was down quite a bit from Monday's 48,500 contracts...but still very high.

Without doubt, both gold and silver would have finished materially higher if a willing seller hadn't show up at, or just before, the London p.m. gold fix in both metals...and it was precisely the same story in platinum and palladium as well.

The dollar index opened around the 80.40 mark on Monday evening...and chopped around that point until about 3:20 p.m. Hong Kong time, or about forty minutes before the 8:30 a.m. BST London open.  During the next hour, the index dropped a bit over 20 basis points...and then more or less traded sideways until 8:30 a.m. in New York.  Then the index headed south with a vengeance...and by 11:30 a.m. Eastern, the dollar index had shed another 40 odd basis points to its low of the day, which was around 79.82...and then recovered a handful of basis points going into the close.  The dollar closed down 50 points on the day at 79.89.

If you check all four precious metal charts from yesterday, you'll note that all had a very positive reactions to the pre-London open dollar index decline.  And that state of affairs continued in New York when the index did another face plant starting around 8:30 a.m. Eastern.  All the precious metals took off to the upside...and all ran into the same not-for-profit seller at the London p.m. gold fix...except for silver.

As I said further up, its rally was so strong, it had to be dealt with early, or it would have blasted through the $34 spot price like a hot knife through soft butter...and that was obviously not going to be allowed...just like it wasn't allowed in early morning trading in Hong Kong on Monday.  Check the silver chart above for the details.

From the London p.m. gold fix, until the dollar index nadir at 11:30 a.m. Eastern, the dollar index and the precious metals prices all declined together.  That's just too cute for words.

There are no market anymore...only interventions.

Although the gold price hit its zenith shortly after 10:00 a.m. Eastern time, the shares powered a bit higher, hitting their high of the day around 11:30 a.m. Eastern...which was the dollar index low.  After that they went into decline but, like Monday, finished just off their lows...and the HUI closed up 0.55%.  Excuse me for thinking out loud at this point, but the saw-tooth pattern to this chart tells me that someone with a fairly large position appeared to be selling into this rally.

The silver stocks finished mixed...and Nick Laird's Silver Sentiment Index closed up 0.67%.

(Click on image to enlarge)

The CME's Daily Delivery Report was rather interesting.  There was no delivery activity in gold, but there were 270 silver contracts posted for delivery within the Comex-approved warehouse system on Thursday.  The only short/issuer was Jefferies...and the biggest long/stopper was, once again, JPMorgan...with 202 contracts in its in-house [proprietary] trading account...and 23 for their client accounts.  The Issuers and Stoppers Report is worth a quick look...and the link is here.

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

Nick Laird advised me that Sprott added another 40,535 troy ounces of gold to their Physical Gold Trust on Monday.  That should just about cover the entire amount received in their follow-on offering...but I expect there's a bit more when the underwriters exercise their 'Greenshoe Option'.

Over at the U.S Mint, they reported selling another 50,000 silver eagles...and I do hope that you're getting your share, dear reader.

The action at the Comex-approved depositories on Monday is hardly worth mentioning, as only a few thousand ounces of silver were received...and shipped out.

I don't have very many stories today...and that suits me just fine.  I hope you have the time to skim them all.


¤ Critical Reads

U.S. August Budget Deficit Soars to $192 Billion, $1.17 Trillion in Fiscal 2012

While the official number from the FMS is not out yet, according to an advance look by the CBO, the August deficit soared from a modest $70 billion to a whopping $192 billion, the highest August deficit in history, and coming at a time when traditionally the US Treasury does not generate substantial deficits.

It also means that "that" $59 billion budget surplus in April, coming after 42 straight months of deficits, and which surprised so many, was just as we suspected, nothing but a play on the temporal mismatch between treasury receipts and outlays.

This story was posted on the Internet site late on Monday evening...and I thank West Virginia reader Elliot Simon for our first story of the day.  The link is here.


Germany says U.S. debt levels "much too high"

German Finance Minister Wolfgang Schaeuble questioned on Tuesday how the United States could deal with its high levels of government debt after November's presidential election.

In a speech to the Bundestag lower house of parliament to open a debate on the 2013 German budget, Schaeuble said worries about U.S. debt were a burden for the global economy, hitting back at Washington which has criticized Europe for failing to get a grip on its own debt crisis.

In private, German officials often express concern about U.S. debt levels and the inability of politicians there to reach a consensus on how to reduce it, but Schaeuble's public remarks underscore the extent of the worries in Germany.

This Reuters story was filed from Berlin early yesterday morning Eastern time...and is Elliot Simon's second offering of the day.  The link is here.


Ex-Comptroller General Walker: 'Fiscal Cliff,' Here We Come

Former U.S. Comptroller General David Walker said he doubts the White House and Congress will agree by the end of this year to head off across-the-board spending cuts and tax increases set for January.

Congressional committees haven’t “done their work” on realistic plans to overhaul taxes and entitlement programs such as Medicare, and President Barack Obama’s administration has done little to prepare the public for spending cuts and tax increases, Walker said at a luncheon Monday in New York sponsored by the Economic Club of New York and Bloomberg News.

Congressional leaders have said they probably will wait until after the Nov. 6 election to address the George W. Bush-era tax cuts set to expire Dec. 31 and $1.2 trillion in automatic spending cuts set to begin taking effect in January.

Walker said he’s skeptical there will be movement toward a resolution at the end of this year when Congress meets after the election.

This story was posted on the Internet site late Monday afternoon...and is Elliot's third contribution in a row.  The link is here.


Moody's Warns of 1-Notch Downgrade if a Bitterly Divided Congress Does Not Begin to Co-operate

13 months ago, in the aftermath of the debt ceiling fiasco, which we now know was a last minute compromise achieved almost entirely thanks to the market plunging to 2011 lows, S&P had the guts to downgrade the US. Moody's did not.

Now, it's Moody's turn to fire up the threat cannon with a release in which it says that should the inevitable come to pass, i.e. should congressional negotiations not "lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term" then "Moody's would expect to lower the rating, probably to Aa1" or a one notch cut. Moody's also warns that should a repeat of last year's debt ceiling fiasco occur, it will also most likely cut the US.

This story was posted on the Internet site early yesterday morning...and it's Elliot's fourth and final offering in today's column.  The link is here.


Big Banks Hide Risk Transforming Collateral for Traders

JPMorgan Chase & Co. and Bank of America Corp. are helping clients find an extra $2.6 trillion to back derivatives trades amid signs that a shortage of quality collateral will erode efforts to safeguard the financial system.

Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.

The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.

“The dealers look after their own interests, and they won’t necessarily look after the systemic risks that are associated with this,” said Darrell Duffie, a finance professor at Stanford University who has studied the derivatives and securities-lending markets. “Regulators are probably going to become aware of it once the practice gets big enough.”

This story was posted on the Bloomberg website early yesterday morning...and is a little something that I borrowed from yesterday's edition of the King Report.  The link is here.


GM's Volt: The ugly math of low sales, high costs

General Motors Co sold a record number of Chevrolet Volt sedans in August — but that probably isn't a good thing for the automaker's bottom line.

Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts. GM on Monday issued a statement disputing the estimates.

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.

This rather longish, but very interesting Reuters piece was posted on their website early on Monday afternoon...and I thank Scott Pluschau for sending it.  The link is here.


European Stocks Advance After German Court Ruling

European stocks advanced after Germany’s top constitutional court allowed the country to ratify the euro-area bailout fund with certain conditions. U.S. index futures and Asian shares also gained.

Germany’s Federal Constitutional Court delivered its ruling on 500 billion-euro ($640 billion) bailout plan today in Karlsruhe. The court yesterday rejected a last-minute bid to delay a case over the European Stability Mechanism.

The Stoxx 600 climbed in late afternoon trading yesterday as speculation grew that the U.S. Federal Reserve will boost stimulus. The gauge last week surged the most since June as European Central Bank policy makers agreed to an unlimited bond- buying plan to help lower borrowing costs in the region.

This Bloomberg story, filed from London in the wee hours of this morning, was sent to me by Edmonton reader Ray Hay...and the link is here.


1.5 million take to streets of Barcelona in support of independence

Surging unemployment and financial disarray have stoked a fever of separatism in Catalonia, a comparatively prosperous part of Spain whose leaders say their wealth is being sucked dry by the central government.

Crowds waved red and yellow striped Catalan flags – one of the oldest still in use in Europe – and sang the Catalan anthem on a national day marking the conquest of Catalonia by Spain's King Philip V in 1714 after a 13 month siege of Barcelona.

The regional government said the crowd was 600,000 strong. Local police gave figures as high as 1.5 million.

Marchers said the sheer size of the crowd – swollen with people from around the region who descended on its capital in bright sunshine – would at last make Madrid hear their message.

This story was posted on the Internet site late last night BST...and the link is here.


Xi Jinping's disappearance illustrates China's unpredictable nature

The world’s eyes may be focused on the Nov. 6 showdown between Barack Obama and Mitt Romney, but in the larger scheme of things, the U.S. presidential election may not be the most decisive moment for the leadership of a major nation taking place this autumn.

That became abundantly clear when it emerged this week that the man widely believed to the next leader of China, Vice-President Xi Jinping, has not been seen for more than 10 days, during which he has missed important meetings with such figures as U.S. Secretary of State Hillary Clinton. He has not been seen in public since Sept. 1.

Mr. Xi’s disappearance provoked some unpersuasive responses on Tuesday from Beijing officials, who told reporters that the heir apparent had hurt his back while swimming. On China’s lively social-media service, Weibo, there were darker suggestions that he was seriously ill or had been shunted aside in a power struggle – although most experienced observers doubted these suggestions.

But it also drew attention to the magnitude and potential global significance of the once-in-a-decade leadership change that is expected to thrust Mr. Xi into power some time next month.

This story, filed from Toronto yesterday evening, was posted on the Globe and Mail website...and I thank Roy Stephens for sending it.  The link is here.


Four King World News Blogs/Audio Interviews

The first blog is with Rick Rule...and it's headlined "The Big Picture on Gold, Currencies & Key Markets".  Next we have the 'R' man...Richard Russell.  His blog is entitled "Financial Crisis & The Bullish Case For Gold". This next blog is with Louise Yamada...and it bears the headline "Here are the Key Levels to Watch on Gold & Silver".  And lastly is this audio interview with Michael Pento.


Amplats reports intimidation at Rustenburg mine

Anglo American Platinum spokesperson, Mpumi Sithole, has confirmed that the miner is trying to contain an outbreak of intimidation at its Rustenburg mines tonight and had been working 24/7 to try to prevent the unrest.

Sithole said that it was unclear how many people were involved at this stage, although it was suspected that these were not mine employees.

Police services have been deployed to try and assist with the unrest that Sithole likened to that of holding a bag of water with numerous holes in it.

This very short story was filed from Johannesburg yesterday...and I thank Manitoba reader Ulrike Marx for bringing it to our attention.  The link is here.


South Africa's military on high alert

Military bases have been placed on high alert following news that Julius Malema is expected to meet with soldiers at a base south of Johannesburg, a report said on Wednesday.

According to the The Times, Defence Minister Nosiviwe Mapisa-Nqakula issued a strongly worded statement which said, in part, that ill-discipline in the military was a direct threat to the country's security.

Malema's planned address has been slammed by the department as incitement.

This story, filed from Johannesburg, was posted on the Internet site early this morning in South Africa.  I thank Ulrike Marx for sending it just as I was about to hit the 'send' button...and the link is here.


Senegal to review mining code, audit existing contracts

Senegal plans to review its mining code and audit existing mining contracts, the west African nation's prime minister said on Monday.

"On the instruction of head of state, the mining code will be reviewed and reconsidered and existing mining agreements will be audited," Prime Minister Abdoul Mbaye said in parliament during a question and answer session.

It's a good bet that there will be a money grab from all the current mining companies once the 'audit' is done.  You've already read the entire 2-paragraph Reuters story that was posted on the Internet site yesterday...and I thank Donald Sinclair for sending it.  The link to the hard copy is here.


Gold coins on discount in India

With another season of festivals rolling up, India Post has offered a special discount, despite the price of gold continuing on its northward journey and scaling fresh highs at the bullion market.

Gold prices may have ended at a five-month high, marking their biggest monthly gain since January this year, but in India discounts are on offer. India Post has announced a 6.5% discount on the sale of gold coins on the occasion of Pushya Nakshatra which falls on September 12, this year.

The word `Pushya' means to strengthen, to fortify. The word etymologically means `to nourish', and traditionally a person cannot think beyond gold investments on this day. Pushya Nakshatra is considered the most auspicious day to make valuable investments and purchases. It is a customary practice for people to purchase gold and, by observing tradition, increasing their good karma and good efforts.

On the occasion of Pushya Nakshatra, a special discount is being offered, said Chief Postmaster General Poornachandra Rao. Gold coins, sold in association with Reliance Money Infrastructure, are available in denominations ranging from 0.5 grams to 50 gram denomination coins, he added.

This is another story courtesy of Donald Sinclair..and this one, too, was from the Internet site yesterday.  It was filed from Mumbai...and the link is here.


Rob McEwen: gold should be in your portfolio and it's going to $5,000

This year's Denver Gold Forum kicked off yesterday morning and one of the early speakers was Rob McEwen of McEwen Mining.  He has a great name in the industry due to his long term stewardship of Goldcorp, which was largely responsible for building the gold mining major to the strong position it holds today.

But it is perhaps as an avowed believer in gold that McEwen attracts a strong following at a conference of this type, perhaps the most significant annual gold event in the calendar- and he opened his presentation with a strong statement of his beliefs in this respect. 

"Understand This!  Gold is Money" was his opening statement with a strong recommendation that investors should have gold in their portfolios now, before then showing a slide giving his assessment of the loss of purchasing power of all major currencies against gold over the past 11 years of the gold bull market.  According to the slide the best performing currency against gold was the Australian dollar which had only lost 68% of its purchasing power vs. gold over the period - while the joint worst performers were the U.S. dollar and the South African Rand, both of which had lost 85% against gold.  This is one interpretation that can be drawn from the dramatic rise in the gold price over the period  But regardless it did serve to make the point that an investment in gold would have served investors well in virtually any currency.

This is the final story from the Internet site.  It was filed from Denver yesterday...and it's worth reading.  The link is here.



¤ The Funnies

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Drilling Intersects 102 Meters of 1.97 gpt Gold at Columbus Gold’s Paul Isnard Gold Project; Drilling Confirms Depth Extension of Gold Mineralization

Columbus Gold Corporation (CGT: TSX-V) (“Columbus Gold”) is pleased to announce results of the initial five (5) core drill holes at its Paul Isnard gold project in French Guiana. The holes confirm depth extension of gold mineralization below shallow holes drilled on the 43-101 compliant 1.9 million ounce Montagne d’Or inferred gold deposit at Paul Isnard in the 1990’s and support the current program of resource expansion through offsetting open-ended gold mineralization indicated by the earlier holes.

Robert Giustra, CEO of Columbus Gold, commented: “These drill results validate Columbus Gold’s approach to adding ounces with a lower-risk drilling program designed to infill and to extend the mineralized zones to 200 m vertical depth from surface; a depth amenable to open pit mining.” 

Fourteen (14) holes have been completed (assays pending) by Columbus Gold in the current program and drilling is progressing at the rate of about 3,000 meters per month with one drill-rig on a 24 hour basis. Columbus Gold plans to accelerate the current program by engaging a second drill-rig as soon as one can be obtained. 

Please visit our website for more information about the project.


¤ The Wrap

Despite the positive closes in all four precious metals, it was more than obvious [at least to me] that a heavy hand showed up in these markets at, or just before, the London p.m. gold fix at 3:00 p.m. BST...10:00 a.m. in New York.  With the dollar index in free-fall, the precious metals were not allowed to do what they wanted to do...and that is close the day materially higher than they did on Monday.

You're perfectly entitled to your own opinion on this, but that's the way it appeared to me...and if you have some other explanation for yesterday's 180 degree move in the precious metals while the dollar index was falling out of bed, I'd love to hear it.

Yesterday, at the 1:30 p.m. Eastern time Comex close, was the cut-off for this Friday's Commitment of Traders Report...and as I've been stating all along, it will not make for happy reading...especially with the huge volumes [and price increases] we've seen in both gold and silver since last Tuesday's cut-off on September 4th.  JPMorgan et al are still acting as short sellers of last resort and preventing the precious metal prices from blowing sky high.  I'll be curious to know how much larger JPMorgan's short position in silver has become since last Friday's report.  Ted Butler says it's north of 27% of the entire Comex futures market in silver on a net basis.  Will it break 30% on Friday?

I'm still of the opinion that we've seen a short-term top, but would love to be proven wrong.  A quick engineered sell-off by "da boyz" to relieve the current overbought condition wouldn't bother me in the slightest...and would be a buying opportunity that I would take full advantage of.  Of course if/when the sell-off does come, it will allow these short sellers of last resort to harvest all the new long positions that have been placed and ring cash register one more time.

In Far East trading on their Wednesday, both gold and silver prices chopped slowly higher.  For a change, volumes in both metals are significantly lower than they were on either Monday or Tuesday, so I wouldn't read a whole heck of a lot into the price action.  The dollar index is down about 11 basis points as London opens for trading at 8:00 a.m. local time...3:00 a.m. Eastern.

London trading opened quietly, but that all changed around 9:15 a.m. BST, when gold and silver blasted higher in seconds, not minutes.  Gold was up fifteen bucks...and silver shot through $34 spot at warp speed.  The reaction from JPMorgan et al was instantaneous.  Gold volume jumped from 13,000 contracts to 34,000 contracts in a heart beat...and silver's volume went from around 4,800 contracts to 9,500 contracts in the same period of time...seconds.  Then, after that assault, it appears that another rally is underway...and silver is now back at $34.00 spot once again...and gold is struggling higher.  No 'for profit' seller ever sells into a rally like that...EVER!!!  This is in-your-face price management by the bullion banks...and the farthest thing from a free market that one can imagine.  It was obvious that 'da boyz' were lying in wait for this event.

Here's what Kitco's silver chart looked like at 5:14 a.m. Eastern time...

I would guess that this price action was centered around the announcement from the German court...and we'll probably find out more as the day goes along.

Before I sign off today, most of you may already have heard that we have a new writer at Casey Research...and his name is Dennis Miller.  He's been a regular reader of my column for many years...and now, like me, he's working for Doug.  Dennis is retired...and has been working tirelessly to rebuild his nest egg since the crash of 2008, when his CDs were recalled and it was cut by 50%.  He's documented his journey in his book Retirement Reboot...and he thinks highly enough of what I've had to say over the years, to mention my name in a couple of places in it.  The book is priced at a pittance...a mere $9.95...and you can find all about it here.  It costs nothing to check it out.

It could be an interesting day during Comex trading in New York today.

See you tomorrow.