Casey Research Publication
Gold & Silver Daily
"I still have no idea how prices are going to resolve themselves from here."
 

¤ Yesterday In Gold & Silver

Gold had a rather strange day yesterday.  After getting sold down to a new low shortly after 9:00 a.m. in Far East trading, the gold price recovered almost back to unchanged by early afternoon in Hong Kong, only to get sold down to its low of the day [around $1,638 spot] at the morning London gold fix at 10:25 a.m. GMT.

From that point it rallied to its high of the day [$1,654.30 spot] at 12:30 p.m. in New York, before getting sold off going into the Comex close.  From there the price recovered a hair before trading sideways into the 5:15 p.m. electronic close.

Gold closed at $1,651.30 spot...up $3.00 on the day. Volume was pretty decent...around 151,000 contracts.  A lot of the volume would be technical funds being blow out of their long positions by JPMorgan Chase et al 'slicing the price salami' to the down side.

It was pretty much the same story in silver, with the only real difference being the high of the day, as it was set shortly after 4:00 p.m. Eastern time in electronic trading.  The high tick was $31.26 spot.  The low appeared to be around $30.75 spot...also at the London a.m. gold fix.

Silver closed at $31.12 spot...up 17 cents on the day.  Net volume was pretty light once again...around 32,500 contracts.

Both Ted Butler and myself were a bit surprised that "da boyz" didn't press their advantage during the Comex trading session.  They certainly had the opportunity, but passed up on it for whatever reason.

Both platinum and palladium set their lows for the day at the London a.m. gold fix...but then rallied decently...and finished well up on the day.

Gold finished up 0.18%....silver closed up 0.55%....platinum up 1.60%...and palladium was the winner, up 1.72% on the day.

The dollar index opened on Tuesday morning in the Far East at 80.34...and then rallied to its high of the day [80.50] at 10:00 a.m. sharp in London trading...but by 10:50 a.m. in New York, the index had fallen down to 79.92...it's low tick of the day...before rallying a bit into the close.  The dollar index closed down 29 basis points at 80.05.

Like Monday's currency action, there was no correlation between the dollar index and the precious metal prices on Tuesday, either.  Over the entire length of this bull market in precious metals, there has been little or no correlation between the dollar index and the gold price at all

The gold stocks opened in the red, dipped a bit...and then took off into positive territory.  They topped out at 12:30 p.m...gold's high tick of the day...before selling off a bit as the afternoon wore on.  However, they did pop a bit during the last fifteen minutes of trading in New York...and the HUI finished up 0.72%.

The silver shares finished mixed...and Nick Laird's Intraday Silver Sentiment Index finished up 0.33%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 480 gold and 59 silver contracts were posted for delivery within the Comex-approved depositories on Thursday.  In gold, the big short/issuer was Canada's own Bank of Nova Scotia with 465 contracts issued...and the two long/stoppers of note were Deutsche Bank and HSBC USA with 309 and 170 contracts respectively.

In silver, all 59 contracts were issued by Jefferies...and it was mostly "all the usual suspects" on the long/stopper side.  The link to yesterday's Issuers and Stoppers Report is here...and it's worth a quick look.

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

Over at Switzerland's Zürcher Kantonalbank...as of the close of business on February 11th...they reported a decline of 50,793 troy ounces in their gold ETF...but added 40,156 ounces of silver to their silver ETF.

There was a smallish sales report from the U.S. Mint.  They sold 1,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 129,500 silver eagles.

Over at the Comex-approved depositories on Monday, they reported receiving 650,352 troy ounces of silver...and only shipped 1,004 ounces of the stuff [one good delivery bar] out the door.  All of the deposit ended up in the new CNT Depository, which is now up to 4.81 million ounces of silver.  The link to that activity is here.

Yesterday I received an e-mail from Joshua Gibbons, the Guru of the SLV bar list over at the about.ag/SLV/ Internet site.

Ever since silver analyst Ted Butler began to speak up about the naked short positions held in SLV shares...mostly by the large authorized participants, of which JPMorgan Chase is/was the leading suspect...more and more silver commentators are talking about it...including both Joshua and myself...and this is what Joshua had to say about the big reduction in the SLV short position.

Hi Ed,

"You'll probably be hearing all about this soon, but the new SLV short position was just released.  It went down by 17,866,500 to 7,297,500, a drop of 10,569,000 shares (about 10,219,000 oz)."

"My suspicion is that JPM had shorted exactly 10 Moz of SLV shares, to use while collecting 10 Moz of silver in their new New York vault (they deposited 10,000,998.7 oz. in that vault at the time of the 18.4 Moz SLV deposit in January), and the other 219,000 oz. of SLV short covering was just normal SLV short activity.  So over time they accumulated a 10 Moz SLV short position, and also accumulated 10 Moz of silver in New York, and last month deposited the 10 Moz of silver with SLV to create 10 Moz worth of SLV shares to close out their SLV short position (still leaving 7.2 Moz worth of SLV short, some of which could belong to JPM as well)."

"It does come very, very close to proving that JPM had a 10 Moz short position in SLV (and that it either was backed by silver, or they were in the process of backing it by silver).  However, it does not explain the other 8.4 Moz of silver that was deposited that day, nor the 8.9 Moz of silver that was substituted (the 8.9 Moz of SLV silver in the Johnson Matthey vault was removed, and replaced with a different 8.9 Moz of silver in a different vault as part of the 18.4 Moz deposit). And 8.4 Moz deposit by itself would have qualified as one of the largest SLV deposits in several years, so there is still a part of the mystery yet to be solved. - JG"

I know that Ted will have much more to say about this in his mid-week column later today.

I don't have that many stories for a mid-week column...and I hope you have the time to at least skim the parts that I've cut and paste from each article.

 

¤ Critical Reads

Growth in U.S. budget deficit slows in January

The federal government reported a rare surplus for January and is on track to run its smallest annual budget deficit since President Barack Obama took office.

The Treasury Department said Tuesday that the government took in a surplus of $2.9 billion in January. That's the first monthly surplus since April, a month that benefited from income tax payments.

January's budget benefited from an estimated $9 billion in extra revenue from higher Social Security taxes. That helped lowered the deficit through the first four months of the budget year to $290.4 billion — nearly $60 billion lower than the same period a year ago.

I'm underwhelmed...and I hope you are too, dear reader.  This AP story was picked up by the finance.yahoo.com Internet site yesterday...and I thank Scott Pluschau for today's first story.  The link is here.

Read more...

How a Rookie Excel Error Led JPMorgan to Misreport its Value at Risk for Years

Just under a year ago, when JPMorgan's London Whale trading fiasco was exposed as much more than just the proverbial "tempest in a teapot", Morgan watchers were left scratching their heads over another very curious development: the dramatic surge in the company's reported VaR, which as we showed last June nearly doubled, rising by some 93% year over year, a glaring contrast to what the other banks were reporting to be doing.

The increase in CIO average VaR was due to changes in the synthetic credit portfolio held by CIO as part of its management of structural and other risks arising from the Firm's on-going business activities." Keep the bolded sentence in mind, because as it turns out it is nothing but a euphemism for, drum roll, epic, amateur Excel error!

This Zero Hedge story from yesterday is an amazing read...and is another article from the top drawer of the "You Can't Make This Stuff Up" filing cabinet.  It's a must read as well...and it's courtesy of West Virginia reader Elliot Simon.  The link is here.

Read more...

Stocks Are Set for a Possible Repeat of 1987! Says Marc Faber

"Either the market is going to correct more meaningfully now or we have a shallow correction and a continuously rising market until July or August," Faber told me via phone from Thailand. If stocks don't pullback soon, he says we risk a repeat of 1987 when stocks rallied 40% into summer only to collapse 41% in 2 months.

"In March of 2009 everything looked horrible, now nobody can find a reason why stocks could go down," Faber claims. "We ask that you should buy stocks when everything looks horrible, you shouldn't rush to buy them when everything looks perfect."

The problem is that it's hard to find anyone claiming the environment is perfect. Even the theme running under the reports of "the masses" buying stocks is that it's a cue to sell, not buy.

This 3:45 minute telephone interview was posted on the finance.yahoo.com Internet site yesterday...and there's a written transcript as well.  The story is courtesy of David Ball...and the link is here.

Read more...

'American leaders do believe in the invulnerability of the dollar system, but they are misguided' - James Rickards

In an exclusive interview with the Voice of Russia, James Rickards talks about currency wars, critical dynamics of monetary policy and the future of the US dollar. James Rickards is the author of the national bestseller, Currency Wars: The Making of the Next Global Crisis and a partner in Tangent Capital Partners, a merchant bank based in New York.

It's a Q&A in written form...and it was posted on the English version of the ruvr.ru Internet site on Monday...and I thank Harold Jacobsen for digging it up on our behalf.  The link is here.

Read more...

Why America Should Default and You Should Live Abroad: Q&A with Doug Casey

"I recommend defaulting on the debt for several reasons," explains New York Times' best-selling author, investment strategist, and libertarian commentator Doug Casey. "Perhaps the best one is that I don't think it's correct to make the next several generations of Americans indentured servants"

His new book, Totally Incorrect, is a collection of conversations with Louis James that explore the ways in which government policy and centralized power threaten cultural and economic progress. In a series of engaging and wide-ranging dialogues, Casey and James talk about everything from the Great Depression, to drug use, to the Roman Empire. 

Reason TV’s Nick Gillespie sat down with Casey to discuss why America should default on its debt, why he spends most of his time in Argentina these days, and the importance of self-reliance and free-market principles.

This 6:04 minute video interview was posted on the reason.com Internet site yesterday...and it's definitely worth watching.  The link is here.

Read more...

G7 nations pledge to coordinate their currency market rigging

They say they want markets to value currencies but warn against "excessive volatility and disorderly movements in exchange rates" and pledge "to continue to consult closely on exchange markets and cooperate as appropriate." That is, they will let markets work except when markets become inconveniently "excessive" and "disorderly" and then they will coordinate their market rigging. They won't intervene except when they do. This is all doubletalk.

The above commentary was by Chris Powell...and was the preamble to the very short Reuters story on the G7 statement on exchange rates.  It was posted on the gata.org Internet site yesterday...and the link is here.

Read more...

Barclays cuts 3,700 jobs in overhaul to restore reputation

Antony Jenkins, chief executive of Barclays, said the cuts showed his plans for change at the bank were not mere “window dressing or PR” as he pointed to the financial cost of exiting controversial businesses. 

The bank confirmed it would shut its controversial structured capital markets (SCM) unit, responsible for giving tax advice to the bank’s wealthy clients, while all speculative trading in agricultural commodities would be ended. [One has to wonder what sort of Comex positions they hold in the precious metals. - Ed] 

Mr Jenkins said Barclays had taken a decision to close operations it no longer considered “compatible” with its business and ethics.

This story was posted on the telegraph.co.uk Internet site last evening GMT...and the link is here.

Read more...

The Italian Patient: Resisting Berlusconi's Charms

Silvio Berlusconi may be back with his customary bombastic campaign promises. But will the Italians bite? If they do, it could spell doom for the country. If they don't, Italy's tradition of political instability might return anyway.

Berlusconi's return to the political arena is a shock. It would be his sixth candidacy, his "last great political battle," as he calls it. He will be 77 this year and is currently defending himself in two court cases. It's been hardly a year since the rating agencies downgraded Italy's credit rating because of its unstable political situation, and Berlusconi submitted his resignation on Nov. 12, 2011.

But now the mummy has returned, and has rapidly become the most important personality in the pending general election. A remark by Berlusconi, like the one he made on Sunday, is enough to cause the markets to plunge and the risk premiums for Italian sovereign bonds to rise. It is enough to trigger the return of worry about the Italian patient, the fear of contagion, the euro crisis and political self-paralysis -- in short, the fear of the former Italy.

The original title to this article was "Italian election campaign foreshadows return to politics as usual".  It was posted on the German website spiegel.de yesterday...and I thank Roy Stephens for sending it.  The link is here.

Read more...

Prosecuting the Messenger: Chief Greek Statistician Threatened with Jail

He was hired to bring Greece's debt statistics in line with European norms. Now, chief statistician Andreas Georgiou faces jail time for allegedly producing inflated sovereign debt numbers. He says he was merely being honest, and he has plenty of support in Europe.

When Georgiou decided in the summer of 2010 to take over leadership of the revamped, newly independent Greek statistics service ELSTAT, he never imagined that the position could land him a jail sentence. But at the end of January, felony charges were filed against Georgiou and two senior ELSTAT staffers for allegedly inflating the 2009 deficit. In other words, at a time when the rest of the world was furious that Greece had artificially improved the country's budget statistics, Greek prosecutors are accusing Georgiou of doing the opposite. Prosecutors acted after a 15-month investigation into allegations made by a former ELSTAT board member. If found guilty, Georgiou faces five to 10 years in prison.

This is another spiegel.de offering from yesterday...and once again courtesy of Roy Stephens.  The link is here.

Read more...

Timbuktu after the Liberation: Malians Fear Return of Islamists

The French have successfully liberated Timbuktu, but they also intend to withdraw soon. Locals are now sharing their stories about the period of brutal Islamist control, but also their worries that the reign of terror could soon return.

The French combat force, Groupement tactique interarmes, which captured Timbuktu in a surprise attack about two weeks ago, is now withdrawing. The 500-man unit is to be redeployed in the direction of Gao, leaving only a small military outpost behind in Timbuktu.

Colonel Gèze, a muscular man with an angular face, set up his headquarters in a camouflage tent across from the runway. Following the airstrikes by the French Air Force, his men entered Timbuktu without meeting any resistance. It was almost too simple. The colonel still feels a little uneasy about their speedy victory.

Gèze can't say how many people were killed in the air strikes. His soldiers didn't take any prisoners, either. Still, even though the jihadists have left Timbuktu, Gèze hasn't defeated them. Perhaps they have gone to Mauritania or Algeria. The officer shrugs his shoulders. "We're keeping our eyes and ears peeled and are questioning our informants," he says. "The Islamists have to be hiding out somewhere."

This 2-page article is also from the spiegel.de Internet site yesterday afternoon...and my thanks go out to Roy Stephens once again.  It's worth reading if you have the time...and the link is here.

Read more...

Russia will never involve itself in 'another Afghanistan' - Lavrov

The head of the Foreign Ministry said Russia has no intention of deploying its military to the Middle East or North Africa, where social and political crisis is rampant, opting instead to work diplomatically with legitimate governments.

­"This is my answer to those who wonder why we are not fighting for our positions," Foreign Minister Sergey Lavrov said on the "Sunday Night with Solovyov" program. "We will not be fighting for our positions…and creating 'another Afghanistan' for ourselves. Never, under no circumstances!”

While emphasizing the importance of sovereign states being able to resolve their internal problems without outside interference – specifically military interference – the minister emphasized that Russia would work with various opposition groups to consider the discontent against “the lengthy tenure of one family, or the absence of civil liberties – a common occurrence in many countries of the region, including monarchies.”

This story was posted on the Russia Today website sometime on Monday...and I thank Roy Stephens for his final offering in today's column.  The link is here.

Read more...

Japan’s economic minister wants Nikkei to surge 17% to 13,000 by March

Economic and fiscal policy minister Akira Amari said Saturday the government will step up economic recovery efforts so that the benchmark Nikkei index jumps an additional 17 percent to 13,000 points by the end of March.

“It will be important to show our mettle and see the Nikkei reach the 13,000 mark by the end of the fiscal year (March 31),” Amari said in a speech.

The Nikkei 225 stock average, which last week climbed to its highest level since September 2008, finished at 11,153.16 on Friday.

“We want to continue taking (new) steps to help stock prices rise” further, Amari stressed, referring to the core policies of the Liberal Democratic Party administration — the promotion of bold monetary easing, fiscal spending and greater private sector investment.

Wow!  I read what he said...and I still don't believe it.  The free markets are done for.  This story was filed from Yokohama yesterday...and was posted on the japantimes.co.jp Internet site.  I found it yesterday's edition of the King Report.  The link is here.  It a little while to load.

Read more...

Three King World News Blogs

The first is with James Turk...and it's headlined "Last Piece Now in Place to Trigger Hyperinflation".  The second blog is with Michael Pento...and it's entitled "Gold Bears Out of Time and About to Pay the Ultimate Price".  And lastly is Richard Russell.  It bears the title "History About to Repeat - Hang on to Gold".

Read more...

Will Currency Wars End With a Return to the Gold Standard?

Bloomberg’s Trish Regan and Adam Johnson interviewed TCW Group’s Komal Sri-Kumar and Bank of New York Mellon's Michael Woolfolk about the risks from currency wars on Bloomberg Television's "Street Smart."

Trish Regan asks whether there is a danger that “we have massive inflation worldwide for years to come?”

The answer is yes and both agree that inflation is a real risk as is a loss of credibility by central banks.

Komal Sri-Kumar is asked what the solution is and is asked about his Op-Ed in the Financial Times in which he calls for a return to a gold standard.

He replies that a gold standard today would be no different to “how good it was from 1945 to 1971.”

This article was posted on the zerohedge.com Internet site yesterday...and I consider it a must read.  I thank Manitoba reader Ulrike Marx for bringing it to my attention...and now to yours.  The link is here.

Read more...

Russia may become No. 3 gold miner by 2015

Increased output by Russia could see it surpass the United States as the world's third largest gold miner by 2015, Sergei Kashuba, head of the Russian Gold Industrialists' Union, said on Tuesday.

Russia has the world's second largest gold reserves after South Africa, an estimated 10 percent of global reserves, and production is nipping at the heels of China, Australia and the United States.

"If gold prices remain at a high level, gold output in Russia will continue to grow by 4-5 percent per year, which will allow it to become the third largest producer in the world in 2015," Kashuba told a conference in Moscow.

This Reuters story was filed from Moscow yesterday...and it found a home over at the mineweb.com Internet site.  I thank Ulrike Marx for her second offering in a row...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

Men trained in arms from their infancy, and animated by the love of liberty, will afford neither a cheap or easy conquest. -- from the Declaration of the Continental Congress, July 1775.

With both gold and silver hitting new lows for this move down, there was obvious tech fund long liquidation...and that certainly accounted for the increase in gold volume Monday and yesterday.  But despite the new lows in silver, the volumes there remain strangely muted...and both Ted and I are trying to make some sense of it.

Unfortunately, there will be no clarity brought to the situation until we have a look at the Commitment of Traders Report this Friday.  Yesterday, at the close of Comex trading, was the cut-off for it.  I would guess that, because of the volume, there was more improvement in the Commercial net short position in gold...and I'm really not sure what to expect in silver, but if I had to bet ten bucks, I'd have to put my money on a decline as well, even though the volume numbers were very low.

Here are the 6-month charts for both gold and silver with yesterday's price action included.  Note that yesterday's London low in silver took out its 200-day moving average.

(Click on image to enlarge)

(Click on image to enlarge)

As I said yesterday...and again today...I still have no idea how prices are going to resolve themselves from here.  I could make a compelling case for a move in either direction.  Gold is now well below its 200-day moving average...however the RSI trace is neutral at best.  And even though the silver price went through its 200-day moving average, the foray below that price didn't last long...and was one of the reasons that I was surprised that there was no follow-through to the downside during Comex trading yesterday.  Normally there would be pretty big volume after such an event.  That was certainly not the case yesterday...or Monday.

Gold and silver prices were down a hair going into the 8:00 a.m. GMT London open...and volumes were virtually nonexistent in both metals...and the dollar index was dead.

As I hit the 'send' button at 4:40 a.m. Eastern time...about an hour and forty minutes into the London trading day...gold is down five dollars and silver about 15 cents...and the dollar index is a bit lower as well.  Volumes are light, especially in silver.

I await the Comex open with some interest...and I'll see you here tomorrow.