Gold & Silver Daily
"Yes, I'm happy with the current state of affairs, but ever mindful of the fact that this rally is being managed every step of the way."
 

¤ Yesterday In Gold & Silver

Gold's low price print on Tuesday came at precisely 9:00 a.m. in Hong Kong.  From there the gold price began to work its way slowly higher...and by noon in New York it was banging on the $1,790 spot price level.

That proved to be the price ceiling for the day...and at 1:30 p.m. Eastern time, the close of Comex trading in New York, someone came in and sold gold down about ten bucks or so...but the gold price closed well off that low by the close of the New York Access Market at 5:15 p.m. Eastern time.

Gold closed at $1,783.90 spot...up $15.80 on the day.  The spike high of the day was $1,792.40 spot.  Net volume was a heavy 146,000 contracts, so it's my guess that this rally is not going unopposed...and the bullion banks are going short against all comers.  The Kitco price chart tends to confirm that.

Silver basically did nothing all through Far East and early London trading.  But the moment that the London silver fix was in...shortly after 12 o'clock noon in London...away the silver price went.

The high price tick [$37.34 spot] came shortly after 1:00 p.m. in New York...and then got sold off about two bits before flat-lining into the close of electronic trading at 5:15 p.m. Eastern.

Silver closed at $36.93 spot...up $1.47 on the day.  Net volume was a very chunky 46,000 contracts.  If there was any short covering going on, that fact was kept well hidden.

The dollar index opened around 78.60...and was in decline right from the open in New York on Monday night.  The standout feature was the big 30+ basis point price spike that occurred in the 3-hour time period between 8:30 and 11:30 a.m. Eastern.  This anomaly, and the rest of the day's price 'action', made absolutely no difference to what was going on in the precious metals.  The index closed down about 35 basis points on the day.

The gold stocks pretty much followed the gold price...and the 1:30 p.m. sell-off at the Comex close is the most obvious feature on the chart below.  But the moment that the sell-off was done, which was shortly before 2:00 p.m...the shares rallied smartly...and the HUI came very close to finishing on its high of the day, closing up 2.21%.

For the most part, the silver shares really sailed...and it's about time.  Nick Laird's Silver Sentiment Index closed up a chunky 4.15%.

(Click on image to enlarge)

The CME Daily Delivery Report for Tuesday [for Wednesday delivery] didn't show a thing, which is no surprise, considering the fact that the balance of February's deliveries were all posted in Monday's report...and were in my column yesterday.

First Day Notice numbers showed that 335 gold and 513 silver contracts were posted for delivery on Thursday, March 1st.  In gold it was all JPMorgan as the big short/issuer with 334 contracts posted for delivery.  The big long/stopper was the Bank of Nova Scotia with 294 contracts.

In silver, the biggest short/issuer was the Bank of Nova Scotia with 425 contracts.  JPMorgan was a distant second at 67 contracts.  JPMorgan was the big long/stopper...as they are set to receive 371 silver contracts on Thursday.  Of those 371 contracts...367 contracts were for JPMorgan's in-house trading account.  The Issuers and Stoppers Report is well worth looking at...and the link is here.

There were no reported changes in either GLD or SLV.

There may have been no changes in inventory levels in either ETF...but there were more big declines in the short positions of both SLV and GLD.  Silver analyst Ted Butler put out a special report on it yesterday...and in order to save myself some time, I'm just going to steal two paragraphs of what he had to say...

"First, and with the risk of setting up for disappointment down the road, the latest short interest data on SLV was very good news indeed; much better than I had anticipated. Following the historic 9.4 million share decline in the SLV short position as of Jan 31, the new short report indicates a further 4.6 million share reduction as of Feb 15, to a bit over 12.5 million shares. Over the last four weeks, the short position in SLV has dropped by more than 50%, to the lowest level in more than a year. Importantly, I don’t recall a previous time when the short position of SLV declined as prices were rising. Not only is the reduction in the short position notable by size, it is unprecedented under increasing prices."

"From the high-water mark of nearly 37 million shares held short last spring, the short position in SLV is now down a stunning 66%. Even more impressive is that the reduction in terms of the short position relative to total shares outstanding is down from over 12% at the peak to under 4% currently. Last year at the peak, more than 12% of all the SLV shares legitimately purchased had no silver metal backing; the new report indicates the number of shares without proper silver backing is down to 3.9%. That is still too high but, man oh man, we are moving in the right direction."

The GLD ETF also had a huge reduction in their short position during the last couple of weeks.  GLD's short position declined from 1.73 million ounces sold short, to 1.11 million ounces sold short...a reduction of 35.8%.  This is a big decline...and one can only hopes that this trend continues in gold as well.

The U.S. Mint had a small sales report.  They sold 500 ounce of gold eagles...500 one-ounce 24K gold buffaloes...and 40,000 silver eagles.  It will be interesting to see if they have an update for the last day of February.

Over at the Comex-approved depositories on Monday, they reported receiving 1,169,352 troy ounces of silver...and shipped out only 3,079 ounces.  The link to that action is here.

I have cut the stories down to a more reasonable number today, so I hope you have the time for them all.

 

¤ Critical Reads

CME Subpoenaed By Federal Grand Jury, CFTC in Probes of MF Global Collapse

CME Group Inc., the world’s largest futures exchange, said it received a subpoena from a federal grand jury investigating the October collapse of MF Global Holdings Ltd.

CME Group, which had auditing authority over the failed futures broker, has been asked to produce information and witnesses in connection with the investigation by a grand jury in the Northern District of Illinois, the Chicago-based company said in a regulatory filing today. The company also received a subpoena from the U.S. Commodity Futures Trading Commission and a document request from the Securities Investor Protection Corp. trustee handling MF Global’s liquidation, it said.

The CFTC is reviewing CME Group’s audit of MF Global before the broker’s Oct. 31 bankruptcy, when as much as $1.6 billion in client funds went missing, a person familiar with the matter said last month. The CFTC, Securities and Exchange Commission, Justice Department and bankruptcy trustees overseeing MF Global’s liquidation are investigating the possible misuse of client funds.

Ted Butler was tickled pink by this turn of events.  The Wall Street Journal story about this that Washington state reader S.A. sent me was subscriber protected, so I borrowed the Bloomberg story from Ted's note to his clients yesterday.  It's well worth skimming...and the link is here.

Read more...

Goldman gets SEC notice over mortgage securities

Goldman Sachs Group Inc. said it received a Wells notice from the Securities and Exchange Commission related to disclosures in its sales materials for $1.3 billion of subprime mortgage-backed bonds.

Goldman said in its annual securities filing late Tuesday that it received the notice on Feb. 24. Wells Fargo & Co. disclosed earlier Tuesday it had also received a Wells notice related to disclosures in its mortgage-backed securities offering materials.

A Wells notice is the SEC's warning that civil charges may be coming, giving time to the recipient provide documents and state a case for why charges should not be filed. Regulators are examining the disclosures several Wall Street banks made in mortgage-backed securities offerings to see whether they mislead investors about the underlying pool of assets.

This story was filed over at the marketwatch.com website yesterday evening...and I thank Florida reader Donna Badach for sending it along.  The link is here.

Read more...

Gordon Gekko's Insider Trading Public Service Announcement Is Out

The Gordon Gekko PSA against insider trading, as masterminded by the FBI, has been released.

The clip features a scene from the original Wall Street movie and then Michael Douglas, who portrayed Gekko, warning the public that insider trading as a very real issue despite the fact that Gekko is fictional. He then encourages viewers to learn more about securities fraud and to report insider trading through a tip line.

The PSA was developed by the guys behind the FBI's "Perfect Hedge" operation, so there's hope that this may yield some results.

It's a 1-minute must watch...and I thank Casey Research's own Alex Daley for sharing it with us.  The link is here.

Read more...

Former Fed Chief Urges Support for Volcker Rule

Former Federal Reserve Chairman Paul Volcker on Wednesday urged critics of a proposed U.S. rule limiting speculative trading by banks to get behind the measure, saying that opposition to it is not in their interest.

His defense of the so-called Volcker Rule at a financial conference in the Emirati capital Abu Dhabi was the latest in an ongoing fight between Wall Street and Washington over tighter restrictions for banks operating in the United States.

The measure is designed to limit the ability of commercial banks backed by government deposit insurance to trade for their own profit. It was drawn up by regulators as part of a broad-based financial overhaul in 2010 and named after the former Fed chief.

This AP story was filed from Abu Dhabi today...and was posted on The New York Times website at 3:36 a.m. this morning.  I thank reader Phil Barlett for getting it to me in time to make this morning's column.  It's well worth reading...and the link is here.

Read more...

European Investment Bank Said to Share ECB Exemption From Greek Write-downs

The European Investment Bank, the development lender for the 27-member bloc, is getting a similar exemption from Greek debt write-downs to the euro area’s central bank, said two regional officials familiar with the matter.

The European Central Bank negotiated a deal to avoid the 53.5 percent loss on principal that’s costing private investors as much as 106 billion euros ($143 billion). The EIB, which unlike its Frankfurt-based counterpart represents the entire European Union, also owns Greece’s debt and is sidestepping the so-called haircut in the same way, said the officials, who declined to be identified because the plan isn’t public.

“This continues the trend of burden-shifting,” said Gabriel Sterne, an economist at London-based brokerage Exotix Ltd. “This is bad crisis resolution and it’s going to affect things for years to come.”

This Bloomberg story was filed on their website late yesterday afternoon...and I thank Washington state reader S.A. for sending this along.  The link is here.

Read more...

The World from Berlin: Second Bailout for Greece 'Will Not Be the Last'

The German parliament may have passed the second rescue package for Greece, but Chancellor Merkel had to contend with dissenting backbenchers and a loose-lipped cabinet minister who wants Greece out of the euro zone. German commentators, too, warn that Athens will be dependent on European help for years to come.

Many members of the German parliament, the Bundestag, must have felt a sense of déjà vu on Monday. It was, after all, hardly the first time in the last two years that they were voting on a multi-billion rescue package for Greece.

Then, as now, the vote went through by a large majority. On Monday, a total of 496 lawmakers voted in favor of the package, with 90 against and five abstentions. But as doubts grow that Greece can really turn the corner, many Bundestag members felt little enthusiasm for the new €130 billion ($175 billion) bailout. Chancellor Angela Merkel's continues to remind lawmakers that the alternative to providing more aid for Greece -- a disorderly default -- would likely have far worse consequences for the euro zone and Germany.

This story was posted over at the German website spiegel.de yesterday...and I thank Roy Stephens for sending it our way.  The link is here.

Read more...

Irish EU treaty vote threatens chaos: Ambrose Evans-Pritchard

Ireland has shocked Europe with plans for a referendum on the EU's fiscal treaty, a move that risks an unprecedented fragmentation of the eurozone and a major clash with Germany.

Premier Enda Kenny said Dublin was acting on legal advice from Ireland's attorney-general that "on balance" the fiscal compact requires a vote under the country's constitution. "It gives the Irish people the opportunity to reaffirm Ireland's commitment to membership of the euro," he told ashen-faced members of the Dail.

All three major parties back the treaty but analysts say there is a high risk of rejection by angry voters in the current fractious mood. The compact gives the EU intrusive powers to police the budgets of debtor states, and has been denounced as feudal bondage by Sinn Fein and Ireland's vociferous eurosceptics. The Irish voted "No" to both the Nice and Lisbon treaties before being made to vote again. Dublin has ruled out a second vote this time.

Well, the 'New World Order' crowd certainly have their knickers in a twist with this turn of events.  Let's see how it all unfolds...because Ireland's Premier, Enda Kenny, has specified no date for the vote as of yet.  I thank Roy Stephens for digging up this story which was posted on The Telegraph's website late last night.  It's worth the read...and the link is here.

Read more...

Breaking the US's Dominance: Beijing Wants Say in Choice of World Bank Head

Traditionally, the US gets to appoint the president of the World Bank. But China is keen to make its influence felt in the search for a successor to Robert Zoellick, who will step down in June. The next head may still be American, but he or she will need to get Beijing's blessing.

The first person to complain was a Brazilian. He saw "no reason" why the future president of the World Bank had to be of a certain nationality, Brazilian Finance Minister Guido Mantega said recently, speaking in the Brazilian capital Brasilia. Then came an angry outburst from Manila, where the Philippines' Finance Minister Cesar Purisima said that it was time to rethink the selection of the head of the World Bank. They were speaking in the aftermath of World Bank President Robert Zoellick's announcement on Feb. 15 that he would step down when his five-year term comes to an end on June 30.

The Bretton Woods Project, a group of development experts from Africa, Australia, Europe, South America and the United States, had already published an open letter on the Internet, in which it stated that the next president of the World Bank would also have to have the "open support" of the majority of the low and middle-income countries.

This short article, posted over at the spiegel.de website is a must read in my opinion...and I thank Roy Stephens for his third and final offering of the day.  The link is here.

Read more...

Iran considers taking gold as payment for oil

Iran is to consider accepting gold as payment for oil and other commodities in what is seen as a fresh attempt to skirt international sanctions on the country's nuclear programme and ease their impact on Iranian businesses and consumers.

"In addition to the U.S dollar and currencies of the trading countries, Iran could take gold in its commercial transactions with other countries," Mahmoud Bahmani, Iran's central bank governor, told domestic Iranian news agencies.

In recent months, Western powers, notably the U.S. and the European Union, have tightened financial sanctions on the Islamic regime in an attempt to force Iran to scale back or halt its efforts to enrich uranium.

This story showed up in yesterday's edition of the Financial Times...and is printed in the clear in this GATA release.  The link is here.

Read more...

Four King World News Blogs

The first is a Richard Russell blog that I just couldn't make room for in Tuesday's column, as it was already stuffed full of stories, so it had to wait until today.  It's entitled "Gold to Take Out $1,800 as Tangibles Soar".  The second blog is by my friend Robert Fitzwilson...and it's titled "Bull Market Dynamics Explosive for Gold and Silver".  The third one is this Rick Rule interview headlined "Fear Driving Demand, Moving Gold and Silver Higher".  And lastly is this Dan Norcini blog entitled "Silver Shorts Literally Panic, Gold Short Now Worried".

All four blogs are worth your time.

Read more...

Return to gold standard would be damaging, study group says

A return to the gold standard would be impractical and could even be damaging to the financial system, even though it can serve as a hedge against declining values of fiat currencies and plays a role as a reserve asset, a think-tank said on Tuesday.

The price of gold, which last year hit a record high above $1,920 an ounce and on Tuesday traded near $1,780, has been rising for the last 11 years, driven by widespread appetite for the metal including from central banks, whose purchases are at their highest for at least two decades.

Gold has gotten a boost since the financial crisis from Western central banks' attempts to reinvigourate domestic growth with near-zero interest rates and trillions of dollars in government bond purchases.

A return to the gold standard would not be "damaging" to the current fiat money system...it would be lethal.  This Reuters piece, filed from London yesterday, contains the usual main stream media garbage that one would expect.  I borrowed it from a GATA release...and the link is here.

Read more...

Bill Murphy: Russia and China know what GATA discovered about gold

GATA Chairman Bill Murphy, proprietor of LeMetropoleCafe.com, writes that gold continues to rise in large part because Russia and China know what GATA discovered years ago -- the Western central bank gold price suppression scheme and its vulnerabilities. Murphy's commentary is titled "The Russians And Chinese Know What We Know and It Is SO Bullish".

This extremely long blog/rant gives some history into where GATA has been over the last thirteen years...and is a must read for all newbie investors.  It wouldn't hurt even the most seasoned veteran to run through it as well.  It's posted over at the goldseek.com website...and the link is here...and top up your coffee before you get started.

Read more...

 

¤ The Funnies

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¤ The Wrap

The more complicated the forms assumed by civilization, the more restricted the freedom of the individual must become. - Benito Mussolini, Grand Fascist Council Report, 1929

Of course I was delighted to see the big moves in both gold and silver when I turned my computer on yesterday morning.  But, as always, my main concern was the volume numbers...and who might be going short against all the longs pouring into the market...and I was not impressed with the volume figures...as they were very large in both metals.  This is never a good sign that a short covering rally is underway...unless JPMorgan et al are using a lot of spread trades to cover their tracks.  That is a possibility of course, but looking at the price action unfold during the trading day yesterday, that's not the impression I got.

What I saw instead was the same old, same old...the longs piling in...and the commercial traders going short against all comers.  If all of yesterday's data is reported in Friday's Commitment of Traders Report in a timely manner, we'll have a better idea of what really happened yesterday.  But at this particular moment, I'm not optimistic.

If we'd had a true short-covering rally yesterday, the price action would have been much more volatile and disorderly...and open interest would have shown a decrease.  None of that was evident in the CME's preliminary report issued in the wee hours of this morning.  However, as Ted Butler has pointed out before, these daily changes in open interest that the CME reports, can be very deceiving...which is the reason I no longer refer to them.  As I said, Friday's COT report will tell us a lot.

But having said that, we could still run a long way to the upside regardless, so it just remains to be seen how this all plays out over time...or is allowed to play out.

Here's the 1-year silver chart.  We are well above the 200-day moving average now...and the RSI is well into overbought territory.  But if you look back to about one year ago on this chart, you can see that we can remain overbought for long periods of time.

(Click on image to enlarge)

As a point of interest, the CME's preliminary report this morning showed that silver open interest for March dropped by more than 50% yesterday...and is now down to 3,168 contracts.  The 513 silver contracts posted for delivery tomorrow [First Day Notice] will come out of that number as well, so by the end of this week, there won't be much left to deliver in the March contract.

Here's the 1-year gold chart.  We're well above all the moving averages again...and every attempt that gold has made to break through the magic $1,800 price mark has run into 'resistance'...most likely from 'da boyz'...which we saw again yesterday in New York.  If gold is allowed to break through that barrier, then another assault can begin on the old highs...as Richard Russell pointed out in his KWN blog further up.

(Click on image to enlarge)

As for the gold stocks, here's the 1-year HUI chart...and we have quite a ways to go to get back to the 615 level...which is where the HUI was when gold last poked its nose through the $1,800 price during the first week of November.  We're only about fifteen bucks away from that gold price level again...but the HUI will have to tack on another 12% real quick to get back to its high at that price level.

(Click on image to enlarge)

John Embry and I...plus quite a few others...are of the belief that the precious metal shares are being managed as well.

So that's where things stand at the moment...at least from where I'm sitting.  Yes, I'm happy with the current state of affairs, but ever mindful of the fact that this rally is being managed every step of the way...and it's only a matter of time before it ends in the same old way.  Since the lows of late December, the Commitment of Traders Report has made that fact abundantly clear.

Of course, as I and others have mentioned before, it's entirely possible that the bullion banks could get over run, especially if the precious metals market turns into a battleground in Jim Rickards' "Currency Wars".  Then all bets are off.  But, at the moment, nobody knows for sure...and if they say they do, it's pure speculation.

Very little happened in Far East trading earlier today...although gold's attempt to push through the $1,790 price level once again got turned back shortly after 1:00 p.m. Hong Kong time.  Silver has made it above the $37 spot price mark...and has been bouncing off that price level all night...and that pattern has continued into the first two hours of London trading this morning.

Volume in gold is light and, surprisingly enough, silver volume is already very heavy.  The dollar index is down about 15 basis points as I hit the 'send' button at 5:15 a.m. Eastern time.

I was not particularly enthralled with the fact that there was no follow-through price action in either Far East or early London trading earlier today...but maybe all the action will happen after the London silver fix, or during Comex trading, as that's precisely what happened yesterday.  So we wait.

See you tomorrow.