Gold & Silver Daily
"So, are we done to the downside yet? Beats the hell out of me."

¤ Yesterday In Gold & Silver

The gold price was under pressure  starting shortly after 9 a.m. Hong Kong time in Far East trading.  The low tick was in shortly before 9 a.m. GMT in London---and the subsequent saw-toothed rally ended at the London p.m. gold fix.  The New York low came thirty minutes before the Comex close---and the price chopped a bit higher into the 5:15 p.m. electronic close.

The low and high ticks were reported by the CME Group as $1,153.80 and $1,169.60 in the April contract.

Gold finished the Tuesday session in new York at $1,161.50 spot, down another $5.40 on the day.  Gross volume was around 220,000 contracts, but after roll-over were netted out, the volume fell all the way down to 136,000 contracts.

Here's the 5-minute gold tick chart.  It starts on the left at the Monday Comex close.  Tuesday trading starts at 16:00 on this chart.  That's Denver time, so you have to add two hours for EST.  I thank Brad Robertson for sending it---and the 'click to enlarge' feature is a must.

Silver followed a very similar price pattern as gold---and that's certainly reflected in the Kitco chart below.

The low and high ticks were recorded as $15.58 and $15.825 in the May contract.

Silver finished the Tuesday session at $15.62 spot, down 11 cents from Monday's close.  Net volume wasn't overly heavy at 26,000 contracts.

The platinum chart looks suspiciously like the gold and silver charts as well.  Platinum was closed at $1,128 spot, down 17 bucks from Monday.

The palladium chart looked somewhat similar---and the HFT boyz clocked it for 19 dollars.

The dollar index closed at 97.66 late on Monday afternoon in New York---and spent all of the Tuesday chopping higher in fits and starts, closing at  98.67---up 101 basis points.  The short squeeze continues.  But as I mentioned yesterday, the index is hugely overbought.

Here's the 1-year U.S. dollar chart once again.

The gold stocks topped out at gold's high, the London p.m. gold fix---and it was all down hill until about 3:20 p.m. EDT---and from there they popped a bit into the close.  The HUI finished down another 1.75 percent.

The silver equities got crucified once again---and their chart pattern was very similar to gold's, but they started from a much lower base.  Nick Laird's Intraday Silver Sentiment Index finished the Tuesday session down another 3.06 percent.

The CME Daily Delivery Report showed that zero gold and one lonely silver contract was posted for delivery within the COMEX-approved depositories on Thursday.  But it was JPMorgan as the long/stopper in its in-house [proprietary] trading account once again.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Tuesday trading session showed that 3 gold contracts were added to March open interest, bringing the total up 120 contracts.  There have been no gold deliveries so far this month.  The March silver o.i. fell 51 contracts, most of which were delivery related---and the new March o.i. in silver is now down to 884 contracts.

There were obvious issues with the GLD website yesterday---and for that reason I don't have any deposit/withdrawal information.  I expect they'll have that fixed sometime today.  And as of 9:44 p.m. EDT yesterday evening, there were no reported changes in SLV.

I was underwhelmed by what the folks over at the Internet site had to report regarding the updated short positions for both GLD and SLV as of the end of February.  After huge declines for the mid-February report, the current one for the end of the month did not make for happy reading.

The short position in GLD increased by 207,700 troy ounces, or 22.21 percent.  The new short position in GLD stands 1.14 million troy ounces.

In SLV, the short position blew out by 3.20 million ounces/shares, an increase of 23.44 percent from the mid-February report two weeks earlier.

Ted was rather surprised by the huge declines reported for mid February---and I'm already wondering what he's going to make of these end-of-February numbers when he sees them this morning.  He may or may not have something to say about them in his mid-week commentary to his paying subscribers this afternoon.

There was another sales report from the U.S. Mint.  They sold 7,000 troy ounces of gold eagles---500 one-ounce 24K gold buffaloes---and another 304,000 silver eagles.

There was a very decent amount of in/out movement in gold over at the COMEX-approved depositories on Monday, as 16,075.000 troy ounces were reported received---500 kilobars---and 96,450.000 troy ounces shipped out---3,000 kilobars.  The link to that activity is here.

In silver, nothing was reported received---and 593,470 troy ounces were shipped out.  The link to that action is here.

I have somewhat fewer stories for you today, which suits me just fine---and you too, I would imagine.


¤ Critical Reads

David Stockman: Corporate America Is Cannibalizing Itself

American businesses are borrowing at historic high levels, but the only thing growing as a result is how fast their equity capital is vanishing, according to David Stockman, White House budget chief during the Reagan administration.

"Once upon a time businesses borrowed long term money — if they borrowed at all — in order to fund plant, equipment and other long-lived productive assets," Stockman wrote.

"Today American businesses are borrowing like never before — but the only thing being liquidated is their own equity capital. That's because trillions of debt is being issued to fund financial engineering maneuvers such as stock buybacks, M&A [mergers and acquisitions] and LBOs [leveraged buyouts], not the acquisition of productive assets that can actually fuel future output and productivity."

In Stockman's view, central bank "financial repression" — in the form of artificially low interest rates that have been orchestrated to provide a false prop to the economy — is responsible for fueling stock market bubbles that makes stock repurchases and other short-term financial engineering maneuvers profitable.

The above four paragraphs pretty much sum up the whole article which appeared on their website at 6:20 a.m. EDT on Monday morning---and today's first story is courtesy of West Virginia reader Elliot Simon.


Next Mega-Bailout on Deck: White House Studying "New Bankruptcy Options" For Student-Loan Borrowers

Why is this a problem? Because as the TBAC revealed a few months back, the default risk from the $1 trillions in student loans is several orders of magnitude above the 9% student loans which the Fed has revealed as currently "in default", as one has to add those 12% of loans in deferment and 11% in forbearance to the entire risk pool. In short: a third of all student loans are likely to end up unpaid!

And, the punchline: according to the TBAC's worst case scenario of the future of student debt, this gargantuan load will triple over the next decade, to as much as $3.3 trillion by 2024.

This means that up to $1 trillion, and likely more, in household debt will go "bad" over the next decade. The problem: student debt is not dischargeable in a personal bankruptcy.

That is about to change.

It appears that just as the administration is finally figuring out what HFT is, it also decided to take a look at the charts above and has made a decision: the next bailout is about to be unveiled, and it will involve a "streamlined" bankruptcy law allowing students to discharge their student debt.

This Zero Hedge article,along with a couple of excellent charts, appeared on their Internet site at 7:18 p.m. EDT yesterday evening---and I thank reader M.A. for sending it our way.


Currency Wars Continue as IMF Concedes End to Dollar Hegemony

- Dollar has declined as reserve currency over past decade from 70% of global reserves to 61%

- Chinese yuan is growing in stature as international currency

- IMF deputy director calls for de-dollarization in emerging markets

- Many countries have begun de-dollarizing

- BRICS development bank – rivaling the IMF and World Bank – is now operational

Currency wars and the growing trend away from dollar dominance in international finance, particularly in emerging markets, was highlighted in an interesting CNBC article Monday morning entitled “Is the Dollar Losing its Clout Among EMs?”

This commentary by Mark O'Byrne appeared on the Internet site on Monday---and I thank Dan Lazicki for sending it our way.


Bill Bonner: The End of the Debt Cycle

It’s the end of the great debt cycle,” says hedge fund manager Ray Dalio of Bridgewater Associates, taking the words out of our mouth.

Bond fund manager Bill Gross adds context:

In the past 20 to 30 years, credit has grown to such an extreme globally that debt levels and the ability to service that debt are at risk. […] Why doesn’t the debt supercycle keep expanding? Because there are limits.

In Europe, bond yields are lower than they’ve ever been. Between $2 trillion and $3 trillion in sovereign and corporate bonds now trade at negative nominal yields.Neither Mr. Dalio nor Mr. Gross nor we know precisely where those limits are. But the Europeans and the Japanese are rushing toward them.

This worthwhile read showed up on the Internet site yesterday sometime---and it's the second contribution in a row from Dan Lazicki.


Jim Rickards -- Avalanche Ahead: How to Survive the Monetary Collapse

I say the snowflake’s irrelevant. If it wasn’t that one, it could have been the one before or the one after or the one tomorrow.

The same goes for the collapse of the monetary system. It’s the instability of the financial system as a whole. So, when I think about the risks, I don’t focus so much on the snowflake, it could be a lot of things that trigger the event. It could be a failure to deliver physical gold because gold’s getting scarce. It could be a Lehman type of collapse of a financial firm or another MF Global. It could be a prominent suicide. It could be a natural disaster.

It could be a lot of things, but my point is, it doesn’t matter. It will be something that causes the system to collapse. What matters is that the monetary system is so unstable. The blunders have already been made. It’s not as if we’re going to do some bad things that’s going to create risks. The risk is already there. It’s embedded. We’re just waiting for that catalyst.

So as to what will cause the global monetary system collapse, my answer is it could be a lot of things, but it doesn’t matter. What matters — and what investors need to be concerned about — is the instability is already baked in the pie.

Here's your second must read article in a row.  This one is from the Daily Reckoning website yesterday as well---and that makes it three in a row from Dan.


Jim Rickards: Three Ways “Old Money” Hangs Onto Its’ Riches

The Astor family have been wealthy for over 200 years and practically define old money in America.

Yet as one goes abroad, there is an even older kind of money, true dynastic wealth that has existed in some families for 300 years or longer.

This type of wealth has survived not only business cycles but also war, invasion, the collapse of empires, revolution, and natural disaster.

In order for family wealth to persist through so many centuries and through such adversity, something more is needed than ordinary investment skill.

This rare kind of success in wealth preservation requires a longer view, infused with a sense of history and a keen appreciation for worst-case scenarios that too frequently become real.

This is another must read from Jim.  This one also came from the Internet site, this one was posted there on Monday.  It's another offering from Dan Lazicki.


Stop Spying on Wikipedia Users

TODAY, we’re filing a lawsuit against the National Security Agency to protect the rights of the 500 million people who use Wikipedia every month. We’re doing so because a fundamental pillar of democracy is at stake: the free exchange of knowledge and ideas.

Our lawsuit says that the N.S.A.’s mass surveillance of Internet traffic on American soil — often called “upstream” surveillance — violates the Fourth Amendment, which protects the right to privacy, as well as the First Amendment, which protects the freedoms of expression and association. We also argue that this agency activity exceeds the authority granted by the Foreign Intelligence Surveillance Act that Congress amended in 2008.

Most people search and read Wikipedia anonymously, since you don’t need an account to view its tens of millions of articles in hundreds of languages. Every month, at least 75,000 volunteers in the United States and around the world contribute their time and passion to writing those articles and keeping the site going — and growing.

This opinion piece, filed from San Francisco, appeared on The New York Times website on Tuesday sometime---and it's the second contribution of the day from reader M.A.


Dollar at 12-year peak vs. euro, emerging markets spooked

The U.S. dollar rallied across the board on Tuesday as the prospect of the first rise in U.S. interest rates in almost a decade stoked global volatility, hitting stocks and oil prices.

A resetting of the likely timing of the first Federal Reserve Funds Rate hike since June 2006 was the main driver for Tuesday's selling in equities, analysts said.

"Expectations for the Fed to begin raising rates were being pushed out to the fourth quarter and what we are seeing is a temporary adjustment to the fact they may come as soon as June," said Michael Arone, chief investment strategist for State Street Global Advisors’ U.S. Intermediary Business in Boston.

A Reuters poll after an unexpectedly strong February U.S. jobs report Friday showed many of Wall Street's top firms were now more convinced the Fed will raise rates in June.

The U.S won't be raising rates in any way that can be described as meaningful anytime soon.  This Reuters article, filed from New York, showed up there at 4:41 P.M. EDT yesterday---and it's the second contribution of the day from Elliot Simon.  The article now sports a new and a less ominous sounding headline.  It reads "Dollar rallies on Fed rate views; stocks, oil slide".


Pound breaks through €1.40 to hit seven year high

British holidaymakers heading to Europe received a boost on Tuesday as the pound rose to its highest level against the euro in more than seven years.

The pound broke through the psychologically important €1.40 barrier on Tuesday morning, its strongest since December 2007.

Experts said renewed fears over Greece's position in the eurozone and the launch of quantitative easing by the European Central Bank (ECB) continued to put downward pressure on the single currency.

"Greek debt talks resume [on Wednesday] and fewer market participants believe that the can [will] be kicked more than a short distance down the Troika's road," said Kit Juckes, an economist at Societe Generale. "It would take good news from Athens to trigger a move. Jeroen Dijsselbloem [head of the Eurogroup] continuing his spat with the Greek Government hardly helps."

This worthwhile story put in an appearance on the Internet site at 4:30 p.m. GMT yesterday afternoon---and I thank Roy Stephens for his first article of the day.


Euro slides and stocks sell off in the U.S. as global financial system adjusts to changes

The euro slid closer to parity with the dollar, long-term bond yields in the eurozone nudged closer to zero and U.S. stocks tumbled—a stark demonstration of the reordering of the world’s financial system by its central banks.

The U.S. Federal Reserve appears poised to raise interest rates, making the dollar more attractive, just as the European Central Bank begins printing euros to buy government bonds.

That the world’s two biggest economic blocs would eventually head in different directions has long been apparent, but the ferocity of the market moves suggests investors are quickly accepting that it is happening now.

This rather unusual story was posted on The Wall Street Journal website at 8:07 EDT yesterday evening---and the first person through the door with this article was reader G. Roberts.


U.S. diplomat warns Europe of 'dangerous' defence spending cuts

A senior U.S. diplomat has warned of a "dangerous" gulf emerging between U.S. and European defence spending.

Samantha Power, the U.S. ambassador to the United Nations, has appealed to European governments to spend more.

She told BBC Radio 4's Today programme that cuts to defence budgets in Europe were "concerning".

Ms Power said that in "most cases" defence spending in Europe was shrinking, despite a growth in defence threats.

You couldn't make this stuff up.  This news item appeared on the Internet site at 11:45 a.m. EDT on Tuesday---and it's the first contribution of the day from South African reader B.V.


German Government Backs End-to-End Encryption for E-mail

Users of an e-mail service backed by the German government will soon be able to rely on strong encryption of the kind that used to be the preserve of geeks and hackers, officials said Monday.

From April onward De-Mail, an email service available to anyone in Germany, will feature end-to-end encryption based on the Pretty Good Privacy system.

PGP is considered one of the safest encryption standards for secure email, but it's notoriously complicated. De-Mail, which is also used by German government agencies, will use a browser plug-in to encrypt messages while they're in transit, according to a statement by the Interior Ministry.

"Germany wants to take a leading role in the use of digital services," Interior Minister Thomas de Maiziere said. "Encryption is an important precondition for this."

This interesting AP news item, filed from Berlin, appeared on the website at 5:26 p.m. EDT on Monday---and it's a story that had to wait for today's column, because I was already 'full up' yesterday.  I thank Elliot Simon for bringing it to our attention.


Spain says suffering 'big losses' from Russian sanctions

Spain said Tuesday its economy had taken a significant hit as a result of tit-for-tat EU and Russian sanctions over Moscow's backing of separatist rebels in eastern Ukraine.

Foreign Minister Jose Manuel Garcia-Margallo said his country had racked up "big losses" from the sanctions, after a meeting with his Russian counterpart Sergei Lavrov in Moscow.

"No one is benefiting from these sanctions which are causing significant prejudice to the Spanish economy," he said during a joint news conference.

This AFP story, filed from Moscow, showed up on the Internet site at 3:45 p.m. Europe time yesterday---and it's another item from reader B.V.


Greece's defence minister threatens to send migrants including jihadists to Western Europe

Greece will unleash a “wave of millions of economic migrants” and jihadists on Europe unless the eurozone backs down on austerity demands, the country's defence and foreign ministers have threatened.

The threat comes as Greece struggles to convince the eurozone and International Monetery Fund to continue payments on a £172billion bailout of Greek finances.

Without the funding, Greece will go bust later this month forcing the recession-ravaged and highly indebted country out of the E.U.’s single currency.

Greece’s border with Turkey is the E.U.’s front-line against illegal immigration and European measures to stop extremists travelling to and from Islamic State of Iraq and the Levant (Isil) bases in Syria and Iraq.

This sensational news item was posted on The Telegraph's website at 5:19 p.m. GMT on their Monday afternoon---and I found it in yesterday's edition of the King Report.


Once one of Africa’s richest countries, oil-dependent Libya spirals towards bankruptcy

Libya will “run out of money” in 18 months despite once being one of Africa’s richest countries, officials have told The Daily Telegraph as internecine fighting grinds its oil and gas industry to a halt.

In an interview with this newspaper, Mashala Zwai, the oil minister for one of Libya’s two rival governments, warned that the country was becoming “a second Somalia”. “This is a critical time in a critical situation,” said Mr Zwai, speaking from the Tripoli offices of the National Oil Corporation, which manages Libya’s energy sector. “By next year the state will not be able to pay Libyans’ salaries.”

With the government split into two rival authorities, Libya’s oil installations are becoming battlefields where affiliated militias vie for power. They are also the focus of attacks by Islamist extremists, including a local branch of Islamic State of Iraq and the Levant, who are thriving in the country’s state of lawlessness.

We can thank Hillary, amongst others, for this.  This news story, originally from The Telegraph, appeared on the website on Monday evening---and I thank Roy Stephens for bringing it to our attention.


'We’ll buy reverse gas supplies at $245’- Ukraine’s president

Ukraine has significantly reduced its energy dependence on Russia, and will buy Russian gas through reverse flows from Europe at $245 per 1,000 cubic meters, Ukrainian President Petro Poroshenko said in a TV interview Monday.

"We have lived through the winter; we bought only 2 billion cubic meters of gas with the last purchase at a price of less than $300 per 1,000 cubic meter. As a result, it all came down to the Russian Federation having had to apply for a pumping volume increase of 68 percent, which crashed the gas market. And today we will buy gas for $245 under reverse deliveries," Poroshenko said.

Ukraine has increased the amount of gas collecting in its underground storage facilities to 23 million cubic meters per day compared with 8 million cubic meters in February, according to the data provided by the GSE association on Tuesday. Currently the country is accepting 10 million cubic meters of Russian gas daily at a price of $329 per 1,000 cubic meters. Ukraine claims it pays 15 percent more for Russian gas than Europe.

This Russia Today article appeared on their Internet site at 2:16 p.m. Moscow time on their Tuesday afternoon, which was 7:16 a.m. EDT in Washington.  I thank Jim Skinner for sending it along.


‘We did what we had to do’: Putin opens up on Crimea reunification plan

The decision to give Crimea an opportunity to choose if it wants to be a part of Russia again was made after an unofficial survey showed the majority of Crimeans would back reunification, Vladimir Putin revealed in an interview to a Russian TV channel.

The interview is part of a documentary, “Crimea. The Road Back Home,” scheduled to be aired by the Rossiya One TV channel. In the film, the Russian president has given new insights into the events leading up to last year's referendum in Crimea.

The vote took place after days of violence on the streets of Kiev, which came to be known as the Maidan revolution. The government was overthrown in February 2014, and the Ukrainian president fled the capital.

The highly volatile situation prompted President Putin to convene an urgent meeting with his national security and defense chiefs, during which a crucial decision was taken.

This absolute must read commentary showed up on the Russia Today Internet site at 12:01 p.m. Moscow time yesterday afternoon---and I thank reader M.A. for bringing it to my attention---and now to yours.


Russia Completely Withdraws From Conventional Armed Forces in Europe Treaty

Moscow has halted its participation in a consulting group on the Treaty on Conventional Armed Forces in Europe (CFE), a statement on the Russian Foreign Ministry's site says.

The suspension finalizes Moscow's unilateral moratorium on the implementation of the CFE treaty declared in a decree issued by President Vladimir Putin in 2007.

"Russia made a decision to halt its participation in meetings of the consulting group from March 11, 2015. Thus, suspension of actions in the CFE declared by Russia in 2007 becomes full," the statement reads.

The Russian Foreign Ministry added that "NATO countries actually prefer to bypass the provisions of the CFE Treaty by expanding the alliance."

This very interesting article was posted on the Internet site at 7:30 p.m. Moscow time on their Tuesday evening---and once again I thank South African reader B.V. for sharing it with us.


International Space Station 'Lost' without Russia - NASA Chief

NASA Administrator Charles Bolden’s frank admission of U.S. dependence on Russia for the ISS’ continued existence follows his reluctance to address the issue head on, the Houston Chronicle reported. 

“We would make an orderly evacuation," Bolden said at a U.S. House Appropriations subcommittee, acknowledging that both countries are heavily reliant on one another, and should that agreement deteriorate, it would mean curtains for the $140 billion dollar space station.

The new chairman of the space and science subcommittee, Texas Republican Rep. John Culberson, pressured Bolden into giving a direct answer.

"You are forcing me into this answer, and I like to give you real answers," Bolden finally said. "I don't want to try and BS anybody."

This amazing news item appeared on the Internet site on Monday sometime---and it's another contribution from reader B.V.


China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" as Soon as September

There were two clear implications from this use of money as a means of waging covert war: i) unless someone else followed Russia out of SWIFT, its action, while notable and valiant, would be pointless - after all, if everyone else is still using SWIFT by default, then anything Russia implements for processing foreign payments is irrelevant and ii) if indeed the Russian example of exiting a western-mediated payment system was successful and copied, it would accelerate the demise of the Dollar's status as reserve currency, which is thus by default since there are no alternatives. Provide alternatives, and the entire reserve system begins to crack.

Today, we got proof that it is the second outcome that is about to prevail following a Reuters report that China's international payment system, known simply enough as China International Payment System (CIPS), which serves to process cross-border yuan transactions is ready, and may be launched as early as September or October.

According to Reuters, the launch of the will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.

This longish, but very interesting article appeared on the Zero Hedge website at 11:16 p.m. on Monday evening EDT---and I thank reader 'David in California' for finding it for us.  The Reuters story that the ZH piece refers to is headlined "China's international payments system ready, could launch by end-2015 - sources"---and I found it embedded in a GATA release yesterday.


Chinese Factory Data Shows Weakest Start in Six Years

China’s economy is already behind target as monetary easing shows few signs of traction.

Industrial output, investment and retail sales growth missed analysts’ estimates in January and February, suggesting more stimulus is needed to boost the world’s second-largest economy. Bloomberg’s gross domestic product tracker, which draws on that data as well as measures such as electricity production, shows economic growth slowing to 6.28 percent in the period, the weakest pace since the start of 2009.

Premier Li Keqiang last week set the nation’s 2015 expansion target at about 7 percent, the slowest in more than 15 years, as China’s leaders grapple with the debt, pollution and corruption spurred in a three-decade-long economic boom. The central bank has sought to cushion the slowdown with two interest rate cuts and one reduction to banks’ reserve requirements in the past four months.

“The mix of the real activity indicators suggests the effects of monetary policy easing effort so far has remained limited,” Liu Li-Gang, chief economist for greater China at Australia & New Zealand Banking Group Ltd. in Hong Kong, wrote in a note. “Further easing effort or even targeted ‘fiscal stimulus’ is needed in order to arrest the downside risk.”

This Bloomberg story appeared on their website at 11:41 p.m. Denver time last night---and I thank Roy Stephens for sliding it into my in-box in the wee hours of this morning.


Venezuela sanctions don't extend to oil

While an official in Caracas said sanctions are an act of war, a top U.S official said the measures will have no direct impact on oil revenue for Venezuela. 

The United States and Venezuela are regional adversaries whose economies are linked nonetheless through oil. Venezuela is the No. 4 crude oil exporter to the United States, though the level of exports is down about 15 percent from 2014.

The International Monetary Fund last month said the low price of crude oil is creating fiscal pressures for countries that rely heavily on revenue from exports. The economic situation in Venezuela was described by the IMF as "precarious."

The Central Bank of Venezuela in December said the collapse in oil prices was in part to blame for a 2.3 percent drop in third quarter gross domestic product, sending the country into a formal recession.

This UPI story, filed from Washington, put in an appearance on their website at 9:16 a.m. EDT on Tuesday morning---and I thank Roy Stephens for digging it up for us.


Banking, currency risks argue for monetary metals, Sprott tells Future Money Trends

In an interview with Dan Ameduri of Future Money Trends, Sprott Asset Management founder Eric Sprott says banking system risk and currency volatility risk argue strongly for owning hard assets like the monetary metals.

Gold demand has increased so much, Sprott adds, that only central banks can be filling it. But he acknowledges that big investment houses with access to essentially infinite money can push all futures markets around at will in the short term. GATA's work is cited.

The interview runs for 30:08 minutes---and was posted on the Internet site on Sunday.  It's another item I saved for today, as it would have got lost in my Tuesday column.  I found it on the Internet site.


Lawrence Williams: All is not well on the metals commodities front

The world of metalliferous mining – for the most part at least – is suffering, and suffering badly. No more China-driven super cycle (at least for the short to medium term). More of a China-driven down cycle seems to be in place as Asia’s biggest economy ceases to grow at its recent pace, and there are suggestions too that the Chinese, who look at these things with a rather longer-term viewpoint than most Western governments and businessmen, may even be actively driving down some commodity prices through de-stocking and reducing imports. No matter that this impacts on the country’s own mining operations – there has been something of an ongoing programme anyway to rein in some of that nation’s more inefficient and most-polluting mining operations. Air quality in most Chinese cities remains below the standards acceptable in much of the West, but this is all changing, slowly, as the nation restructures. This could be a painful process.

While precious metals prices seem to engender most media coverage, there is little real evidence that China is actively driving these prices downwards – indeed this may be one of the few areas where Chinese demand is supporting prices, albeit obviously not very effectively.

Of course the question that needs to be asked, dear reader, is not only what the price of the precious metals would be if JPMorgan et al weren't sitting on them---it leads directly to what the prices of other commodities would become if the precious metals were allowed to trade freely.  A lot higher would be my guess---and that's precisely why the powers-that-be are doing what they're doing.

This commentary by Lawrie appeared on the Internet site at 2:42 p.m. GMT on their Tuesday afternoon---and it's the final offering of the day from reader Dan Lazicki.


Allied Nevada Gold Files For Bankruptcy Protection

Just as in the case of oil currently, the problem with gold (and countless other commodities) trading where it does, is that as we have shown repeatedly on previous occasions, it is at or below the marginal production cost of various gold producers.

And with miners losing money on every incremental ounce (or barrel) they pull out of the ground, there is only so much capital they can burn before they have not choice but to file for bankruptcy. Which is precisely what happened to Allied Nevada Gold, the operator of the gaming state’s Hycroft mine, which earlier today filed for bankruptcy in Delaware.

The company blamed its deteriorating financial condition on the drop in gold and silver prices in recent years, an overleveraged capital structure, delays in a key expansion project, and currency swap exposure.

Yes, this is that Allied Nevada whose stock price traded as high as $45 when gold hit its all time high of over $1,900 hours before the SNB imposed its first, and now failed, currency floor which translated into a market cap of just about $4.5 billion.

This must read Zero Hedge article appeared on their Internet site at 1:54 p.m. EDT yesterday---and I thank Washington state reader S.A. for digging it up for us.  There was also a Bloomberg article on this courtesy of reader U.D.---and it's headlined "Gold Miner Allied Nevada Files for Chapter 11 Bankruptcy".


Silver marks record Indian imports in 2014

Silver usually keeps its sheen even when gold prices drop. However, in the past two years, silver prices have fallen sharply compared with the yellow metal.

Traders have used this as an opportunity to stock up silver. In 2014, silver imports reached a record high of 6,842 tonnes, an 18 per cent increase over the previous year, according to GFMS Thomson Reuters data. In value, however, the import bill fell, owing to the decline in silver prices. Silver imports in 2014 were worth $3.46 billion compared with $3.64 billion in the previous year.

“The surge of this magnitude in volume terms was attributed to higher investment demand and to risk-free returns in the cash-futures arbitrage. Silver jewellery and article fabricators re-stocked in high volumes as the price had declined sharply,” said Sudheesh Nambiath, senior analyst, GFMS Thomson Reuters, a precious metals analytical company.

The silver trade, too, has changed, with imports — especially those by sea — now concentrated in Ahmedabad. Sixty per cent of imports happen via the sea route and 40 per cent by air.

This very interesting silver-related story appeared on the Internet site at 10:36 p.m. IST on their Tuesday evening---and I thank India-based reader Danny Carroll for bringing it to our attention.  It's worth reading as well.


Carbon crash, solar dawn: Deutsche Bank on why solar has already won

Deutsche Bank has produced another major report that suggests solar will become the dominant electricity source around the world as it beats conventional fuels, generates $5 trillion in revenue over the next 15 years, and displaces large amounts of fossil fuels.

In a detailed, 175-page report, the Deutsche analysts led by Vishal Shah say the market potential for solar is massive. Even now, with 130GW of solar installed, it accounts for just 1 per cent of the 6,000GW, or $2 trillion electricity market (that is an annual figure).

But by 2030, the solar market will increase 10-fold, as more than 100 million customers are added, and solar’s share of the electricity market jumps to 10 per cent. By 2050, it suggests, solar’s share will be 30 per cent of the market, and developing markets will see the greatest growth.

More solar panels, more silver.  Where's it going to come from?  JPMorgan's got lots of it now---hmmm!  This must read article showed up on the website back on March 3---and it's courtesy of Roy Stephens.



¤ The Funnies

After leaving Sedona, we headed back towards Phoenix, but continued on State Highway 69A, as I much prefer the side/back roads to the Interstates.  It was cold, overcast and raining/snowing---just like the weather at Grand Canyon.  It was miserable.  The squiggles on the road map weren't another up/down canyon experience, but a climb high into what we discovered were the Black Hills where came across a place called Jerome built right on the side of the mountain.  We were informed at the first cafe we found open, that it was an all-but-abandoned copper mining town that now sports a thriving arts community.  We ended spending most of the day there.  It's impossible to describe---and the photos don't do it justice.  Here are four---and I'll have a few more tomorrow.

The first two are a left/right 2-photo collage---and you can see that we were above cloud base in the third photo, however the weather improved as the day went on as you can tell from the last photo.  Don't forget the 'click to enlarge' feature.

Here's one more photo from reader Mark O'Brien.  It looks like a blue heron to me---and since he took it from an elevated position, you get to see it's back while flying, which is a unique view that few of us ever get, including me.

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¤ The Wrap

In a nutshell, gold prices rose $125 from the end of December to the end of January because 100,000 net COMEX contracts (10 million oz) were bought by technical funds and other speculators---and prices have now fallen $140 from the end of January because 100,000 net COMEX contracts were sold by those same technical funds and other speculators. In silver, prices ran up $2.80 because of the buying of 28,000 net contracts (140 million oz) by technical funds and other speculators---and have now fallen $2.50 on the net sale of close to the same amount of technical fund selling. See the connection?

Not only is the connection between net contracts bought and sold on the COMEX in precise lockstep with price changes in gold and silver, there is no other rigid connection that lines up with gold and silver price change; or at least none which I have uncovered. Because the connection between position changes on the COMEX is so rigidly connected to gold and silver price change, it has become like asking which came first, the chicken or the egg. Of course, the answer in gold and silver is that it is one and the same – COMEX position change is price change. One problem with that is that it is also the definition of price manipulation, since real world producers and consumers are not part of the equation. - Silver analyst Ted Butler: 07 March 2015

After new lows were made in gold, silver, platinum and palladium at the London open on Tuesday, it was obvious from the price action that all three wanted to rally despite what the currencies were doing.  But it was just as obvious from the sawtooth price pattern, that there were not-for-profit sellers at the ready to retard the upward trends from the London open until the COMEX close in New York.

Here are the 6-month charts for all four precious metals.

So, are we done to the downside yet?  Beats the hell out of me.  I mentioned yesterday that we would probably see the bottom sometime this week.  But as U.K. reader Alex Parker pointed out to me yesterday, there's an FOMC meeting next Tuesday and Wednesday---and it's a given that we'll see some price action on Wednesday when, or minutes before, Yellen opens her mouth.

And as I type this paragraph, the London open is fifteen minutes away.  Gold and silver are chopping unsteadily higher---and I'd guess from looking at their respective charts, that each 'rally' attempt is being met by not-for-profit selling.  Platinum got spiked to a new low for this move down---and palladium has traded unchanged all through the Wednesday session in the Far East.  Net gold volume is around 16,500 contracts---and net silver volume is 3,500 contracts.  Not a lot to see here.  The dollar index is up, but only by 8 basis points at the moment.

Yesterday, at the close of COMEX trading, was the cut-off for this Friday's Commitment of Traders Report and, hopefully, all the relevant price/volume data will be in it.  But after last week's big COT surprise, I must admit that my bulls hit meter will be on high gain when I check the numbers.

And as I send today's column off into cyberspace at 5:15 a.m. EDT, I see that very little happened in the first ninety minutes of the Wednesday trading session in London.  The tiny gains in gold and silver are basically gone---and there isn't much happening from a price perspective in any of the four precious metals.  Net gold volume is 19,500 contracts---and silver's net volume is 4,400 contracts.  These are only a few thousand contracts higher than they were just before the London open, so the market is deathly quiet. The dollar index is now up 25 basis points and knocking on the 99.00 door.  At this rate, parity with the Euro is a given---and it might happen much faster than most people think.

I don't have much of an idea as to how prices will perform today, or even for the rest of week.  I would say that not much will happen between now and the FOMC meeting next week but, if I am wrong, the surprise should be to the upside.

So we wait.

See you tomorrow.

Ed Steer