Gold & Silver Daily
"For the second day in a row it was obvious that a seller of last resort appeared in the precious metal markets"

¤ Yesterday In Gold & Silver

As I mentioned in The Wrap in yesterday's column, the gold price sort of flopped and chopped around without much direction for most of the Far East trading day.  But at 2 p.m. Hong Kong time, all four precious metals headed higher, and all were dealt with in the usual manner the moment that London opened at 8 a.m. BST in London, 3 a.m. EDT.  Volume by 10 a.m. BST was very heavy, around 36,000 contracts.

It was pretty much all down hill from there, except for the rally between 12:30 p.m. in London and and 9 a.m. in New York.  The low tick, .$1,317.80 spot, came a minute or so after 11:30 a.m. EDT.  The price didn't do much after that.  The high tick at the London open was a bit over the $1,340 spot mark.

Gold closed the Tuesday trading session at $1,321.40 spot, down $15.90 from Monday's close.  Volume, net of August and September, was around 157,000 contracts, with a big chunk of that used up in early London trading to kill the rally that began in Hong Kong an hour earlier.

It was more or less the same chart pattern for silver as it was for gold, except the high in London [around $21.85 spot] came shortly before 10 a.m. local time and not at the London open.  The low tick [$21.22 spot] occurred at the same time as gold's in New York, minutes after 11:30 a.m. EDT.  Silver did rally off its low, however, and managed to finish in positive territory, but just barely.

Silver closed at $21.46 spot, up 3.5 cents.  Net volume was around 49,000 contracts, with 18,000 contracts of that total occurring between 2 p.m. in Hong Kong and 10:15 a.m. in London.  That's close to three times the normal volume for that time of day, .so you can see that "da boyz" had to throw a lot of paper silver at the rally in order to prevent it from blowing sky high for the second day in a row.

The platinum chart looks similar to gold and silver's charts, and palladium's rally attempt was very weak.  Here are the charts.

The dollar index closed on Monday at 81.48, and then rallied unsteadily all through Far East and London trading, hitting its 81.85 high at 11 a.m. EDT, the moment that London trading ended for the day.  From there, the index sagged a few basis points into the New York close, finishing the day at 81.77, up 29 basis points from Monday.

If anyone feels that there was any correlation between the currencies and the precious metal prices yesterday, I'd like to hear their explanation for the big rallies that occurred between 2 and 3 a.m. EDT.

The gold stocks opened in the red, and then rallied very briefly into positive territory on the short rally after the 10 a.m. EDT London p.m. gold fix.  It was all down hill from there.  Although the gold price hit its nadir at 11:30 a.m. EDT, the stocks didn't hit their low of the day until about 12:40 p.m.  After that they trimmed their loses by a bit over a percent going into the close.  The HUI finished down 2.70%.

Despite the fact that a lot of the junior silver stocks finished in the green, every stock that makes up Nick Laird's Intraday Silver Sentiment Index finished in the red, and it closed down 1.35%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 76 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Thursday.  Canada's Bank of Nova Scotia was the only short/issuer of note, with 75 contracts.  JPMorgan Chase gobbled up 70 of them for its in-house [proprietary] trading account.  The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD yesterday, but very late last night Eastern Daylight Time, the folks over at SLV saw fit to update their website, and it showed that an authorized participant added 1,832,345 troy ounces.

The U.S. Mint had a tiny sales report yesterday.  They sold 1,000 ounces of gold eagles, and that was all.

Over at the Comex-approved depositories on Monday, they reported receiving 4,728 troy ounces of gold, and shipped out 4,829 ounces of the stuff.  JPMorgan Chase received 4,631 troy ounces of that amount.  The link to that activity is here.

In silver, these same depositories reported receiving 791,438 troy ounces, and shipped out 797,340 troy ounces.  Virtually all of this in/out movement was a transfer of 791,438 troy ounces out of the Bank of Nova Scotia's depository, and into the depository of JPMorgan Chase.  The link to that action is here.

I have the usual number of stories for a mid-week column, and the final edit is, as usual, up to you.


¤ Critical Reads

Rogoff: Next Fed Chief Must Have 'Tolerance for Inflation'

The economist whose research foreshadowed the unusually long slog back from the 2008 financial crash is calling for the unlikeliest kind of central banker to lead the Federal Reserve: one who welcomes some inflation.

Harvard University Professor Kenneth Rogoff, whose influential 1985 paper endorsed central bankers focused more on securing low inflation than on spurring employment, is highlighting the benefits of a Fed led by either Janet Yellen or Lawrence Summers precisely because they fail his old litmus test. President Barack Obama said Aug. 9 that they are “outstanding” and “highly qualified” candidates to replace Ben S. Bernanke, whose term as chairman runs out in January.

What qualifies them in Rogoff’s view is their dovishness, a refusal to place too much weight on stable inflation at a time when unemployment is far above its longer-run level. Rogoff is espousing aggressive monetary stimulus, even at the cost of moderate price increases. At a time of weak global inflation, higher prices may even help the U.S. economy by lowering real interest rates and reducing debt burdens, he said.

This is another fancy way of saying "Print, or die."  This news item was posted on their website very early Monday evening EDT...and I thank West Virginia reader Elliot Simon for today's first story.


Too early to lay out asset-buying exit: Fed's Lockhart

U.S. economic performance remains too mixed for Federal Reserve policymakers to lay out a detailed path for reducing and eventually halting their asset-purchase stimulus plan at their September meeting, a top Fed official said on Tuesday.

Still, Atlanta Fed President Dennis Lockhart did not rule out some kind of decrease next month in the $85 billion monthly pace of bond buys currently under way. He simply suggested this would be a decision to be adjusted over time, not the beginning of a preordained pullback.

"As I see it, a decision to proceed—whether it is in September, October, or December—ought to be thought of as a cautious first step," Lockhart told a meeting of the Kiwanis Club of Atlanta.

What is this?  Print or die, Lite?  The moment they let up, the entire U.S. financial system will begin to implode.  Once a nation starts down this monetary path, there is no way out other than cold turkey...and that's not about to happen. This story was posted on the CNBC website during the New York lunch hour yesterday...and it's the second offering in a row from Elliot Simon.


Investors euphoric as US margin debt reaches 'danger' levels

Bank of America’s monthly survey of investors showed a dramatic rise in confidence in August, with a net 72pc expecting growth to accelerate over the next year. It is the highest in reading since 2009.

Almost everybody expects bond yields to rise as deflation fears evaporate, with just 3pc still worried about the risk of an economic relapse. Managers have slashed their bond allocation to a 28-month low.

The survey is watched by veterans as a "contrarian indicator", tracking herd mentality at key moments. Michael Hartnett, the bank’s investment strategist, advised clients to take the opposite trade and buy US Treasury bonds.

The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis.

I posted a story about this about a week ago, but here is something similar by Ambrose Evans-Pritchard.  It was posted on the Internet site late yesterday afternoon BST...and my thanks go out to Roy Stephens for sending it our way.  Even if you don't want to read the article, the embedded chart is worth the trip.


'London Whale' Bruno Iksil Won't Be Prosecuted By Justice Department: WSJ

Former JPMorgan Chase employee Bruno Iksil will not be prosecuted by the Justice Department, the Wall Street Journal reports, citing a person close to the situation. Iksil is the so-called "London Whale" at the center of the trading scandal that lost JPMorgan, the country's biggest bank by assets, some $6.2 billion in 2012.

The New York Times reported Friday that U.S. authorities planned to arrest two former JPMorgan employees for their roles in the scandal, and Iksil will need to play a role in any arrests related to the trades, Reuters reported Thursday. The Journal reports that criminal charges could be filed as early as Wednesday.

Javier Martin-Artajo, one of two former JPMorgan employees that may be arrested, defended his name Tuesday and said he expects to be cleared of all charges.

You can read the entire story at The Wall Street Journal.

This news item made an appearance on the Internet site early yesterday afternoon EDT...and I thank reader M.A. for sending it.


Gmail users cannot expect privacy while sending mails: Google

In a stunning admission contained in a brief filed recently in federal court, lawyers for Google said people should not expect privacy when they send messages to a Gmail account.

Consumer Watchdog said that people who care about their email correspondents' privacy should not use the Internet giant's service.

Google's brief said: "Just as a sender of a letter to a business colleague cannot be surprised that the recipient's assistant opens the letter, people who use web-based e-mail today cannot be surprised if their emails are processed by the recipient's [e-mail provider] in the course of delivery. Indeed, 'a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties."

This article was posted on the Internet site yesterday...and it's the second offering of the day from reader M.A.


Eurozone set to exit 18-month double-dip recession

The 18-month double-dip recession in the crisis-stricken eurozone is expected to end on Wednesday with the release of official figures in Brussels showing the return of modest growth in the three months to June.

News on Tuesday of a pickup factory production across the 17-nation single currency area during the second quarter left financial markets convinced that a downturn stretching back to the end of 2011 is now over.

Analysts said the 1.2% jump in industrial production coupled with a stronger performance by the construction sector would be enough to produce growth of 0.2% or 0.3% during the spring and early summer. That would reverse a fall of 0.2% in the first three months of 2013.

The last piece of data to be released before Wednesday's growth figures showed that the output of the combined manufacturing and energy sectors expanded for the fourth time in five months, helped by a strong performance from the eurozone's biggest economy, Germany.

You can't make this stuff up.  These four paragraphs are the 'happy' ones...the rest of the story is spent putting caveats on them.  This news item appeared in The Guardian early Tuesday evening BST...and I thank reader Bob Visser for bringing it to our attention.


So you think Europe's debt crisis is finally over? Time to think again

One of the factors underpinning renewed confidence in the UK economy is the belief that the crisis in Europe is now essentially over. The immediate threat of banking and fiscal meltdown in the southern periphery has receded, and after one of the longest recessions on record – six successive quarters of economic contraction – there are even tentative signs of recovery.

Among eurozone policymakers, the relief is palpable. Mario Draghi, president of the European Central Bank, has waved his magic wand and apparently succeeded in calming the economic maelstrom. This is small thanks to the German core, which fought his actions tooth and nail but now seems more than happy to take credit. In any case, with the fear of financial Armageddon removed, European economies can begin the long march back to health. For Britain too, a key uncertainty for the banking and business sectors has been answered.

Or has it? For though it is true that some form of equilibrium seems slowly to be re-establishing itself in the European economy, it is at such a deeply impaired level that it can scarcely be regarded as cause for celebration. Unemployment, already at intolerable levels in some eurozone countries, is still rising and money growth remains exceptionally depressed.

Here's another article from The Telegraph...this one posted early Monday evening BST...and I thank Roy Stephens for his second contribution to today's column.


Russia Today's Editor-In-Chief: 'The West Never Got Over the Cold War Stereotype'

Margarita Simonyan, 33, is the editor-in-chief of the state-funded satellite news network Russia Today. In a SPIEGEL interview, she contends that Western journalists prefer to paint Russia as an evil aggressor and that her station is not an outlet for government propaganda.

Russian President Vladimir Putin has created an anti-CNN for Western audiences with the international satellite news network Russia Today. He commissioned the network in order to "break the monopoly of the Anglo-Saxon mass media." The government seems to be succeeding in its task, with the network gaining more viewers in major cities in the United States that any other foreign broadcaster.

In Washington, 13 times as many viewers tune in to Russia Today than they do its German equivalent Deutsche Welle. A total of 2 million Brits watch the program. On, the Moscow-based broadcaster recently broke the one-billion-hit barrier, becoming the first broadcaster in the world to do so. Editor-in-chief Margarita Simonyan, 33, views the broadcaster as a sort of ministry of media defense for Russia.

This article is well worth your time...and a must read for all students of the New Great Game.  It was posted on the German website late yesterday afternoon EDT.  It's another contribution to today's column from Roy Stephens.


Pro-Mursi protester shot dead as Egypt standoff intensifies

One Muslim Brotherhood member was shot dead and at least 11 people wounded in Egypt on Tuesday, security sources said, with the Islamist group accusing plain clothes police of firing on their march.

The killing could harden the standoff between the Brotherhood, which is demanding the reinstatement of deposed Islamist President Mohamed Mursi, and the army-backed government.

Authorities have held back from clearing two Brotherhood protest camps in Cairo, and a religious authority made some progress in establishing negotiations, but the shootings and other street clashes showed Egypt remained dangerously divided.

Thousands of Mursi supporters marched to the Interior Ministry earlier in the day and were confronted by residents who threw stones and bottles and taunted them as "terrorists". Police fired teargas at the demonstration which had brought Cairo traffic to a standstill.

This Reuters story, filed from Cairo, was posted on their Internet site very early yesterday evening EDT...and I thank Roy Stephens for his final contribution to today's column.


Pepe Escobar: Bandar Bush, 'liberator' of Syria

Talk about The Comeback Spy. Prince Bandar bin Sultan, a.k.a. Bandar Bush (for Dubya he was like family), spectacularly resurfaced after one year in speculation-drenched limbo (was he or was he not dead, following an assassination attempt in July 2012). And he was back in the limelight no less than in a face-to-face with Russian President Vladimir Putin.

Saudi King Abdullah, to quote Bob Dylan, "is not busy being born, he's busy dying". At least he was able to pick up a pen and recently appoint Bandar as head of the Saudi General Intelligence Directorate; thus in charge of the joint US-Saudi master plan for Syria.

The four-hour meeting between Bandar Bush and Vlad the Hammer by now has acquired mythic status. Essentially, according to diplomatic leaks, Bandar asked Vlad to drop Syrian President Bashar al-Assad and forget about blocking a possible UN Security Council resolution on a no-fly zone (as if Moscow would ever allow a replay of UN resolution 1973 against Libya). In return the House of Saud would buy loads of Russian weapons.

Vlad, predictably, was not impressed. Not even when Bandar brazenly insisted that whatever form a post-Assad situation would take, the Saudis will be "completely" in control. Vlad - and Russian intelligence - already knew it. But then Bandar went over the top, promising that Saudi Arabia would not allow any Gulf Cooperation Council member country - as in Qatar - to invest in Pipelineistan across Syria to sell natural gas to Europe and thus damage Russian - as in Gazprom's - interests.

This short essay [less than a five minute read] is another must read for all serious students of the New Great Game.  It was posted on the Asia Times website yesterday sometime...and I thank reader M.A. for his final offering in today's column.


Three King World News Blogs

The first commentary is by Richard Russell...and it bears the headlined "Gold and Some Incredible Surprises Ahead".  The second  blog is with Dr. Stephen Leeb.  It's entitled "China’s Insatiable Demand For Physical Silver to Accelerate".  The last blog is with Grant Williams...and the title reads "Default Fears Escalate as Run on Physical Gold Intensifies".


South African Electricity Concerns Could Lift PGMs – Commerzbank

Platinum group metal production in South Africa is already under forecasts, with up to 750,000 ounces of platinum lost last year alone as a result of strikes and other interruptions to output. More may be coming, Commerzbank says. On Monday, South African electricity producer Eskom said peak demand there could exceed current production capacities. "At the moment, there are unexpected capacity outages of 5.7 GW (gigawatts), yet winter – the current season in the southern hemisphere – often sees demand rising to above 35.5 GW. The blackouts in South Africa in the years 2007/08 triggered a massive increase in the prices of platinum and rhodium, the lion's share of which comes from South Africa. The currently tight power supply situation is likely to lend continued support to PGMs," they say.

This 1-paragraph news item was posted on the Market Nuggets page at 3:18 p.m. EDT on the Kitco website yesterday...and it's courtesy of Manitoba reader Ulrike Marx.


Central Banks Losing Taste for Gold as Buying Power Falls

Central banks, key players in gold's meteoric 12-year rise, are losing enthusiasm for the metal as official sector purchases show signs of decline, with fading emerging market buying power and lower prices expected to see the pace slow further.

Official buying has been a major pillar for gold even when markets have been at their most volatile, with emerging market institutions adding metal to balance portfolios.

Central banks globally became net buyers of gold in 2010 to the tune of 77 tons, compared with net sales of 34 tons and 235 tons in 2009 and 2008, respectively, after a 20-year period of significant sales, characterised famously by Britain's 395-ton disposal between 1999 and 2002, when prices stood around their lowest level for 20 years.

Purchases rose to a 48-year high of 534.6 tons in 2012, but this year buying should decline to 400 tons, according to the World Gold Council.

This is the sort of b.s. article that passes for serious journalism these days...and the only reason I'm posting it in this space is I'm using it as an example of the anti-gold garbage that we see from time to time.  This 'story' was posted on the Internet site just before lunch EDT on Monday...and it's courtesy of Elliot Simon.


Gold, silver to become expensive as import duty hiked to 10%

Customs duty on gold, silver and platinum was today hiked to 10 per cent in third revision this year in a bid to curb the surging imports and burgeoning current account deficit [CAD], a decision that will also rake in an additional Rs 4,830 crore to the exchequer.

While the duty on gold and platinum was raised from 8 per cent to 10 per cent, the levy on silver was hiked by 4 per cent, according to the notifications tabled in Parliament by Finance Minister P Chidambaram.

Revenue Secretary Sumit Bose told reporters later that government was still working on the proposed hike in import duties on non-essential goods, an indication of which was given by Chidambaram yesterday.

He said the basic purpose of enhancing the duty was to curb the import of the precious metals to check the Current Account Deficit and not to raise money.

Considering its historically low price, a 10% tax on silver will make zero difference in sales or imports...and all the higher taxes on the other precious metals will do, will drive more Indians to buy silver, regardless of the tax or the price.  This news item, filed from New Delhi, was posted on the Economic Times of India website early yesterday afternoon IST...and I thank Nitin Agrawal for sending it along.


First Majestic holds back 700,000 oz. in 2Q silver sales, citing low prices

The decision to suspend the sale of 700,000 ounces of silver in the second quarter because of low silver prices was partly responsible for plunging First Majestic Silver’s net income by 99% to $200,000 in the second quarter of the year.

However, First Majestic’s silver production and silver equivalent production soared by 44% and 55%, respectively, during the second quarter.

“The silver price fell 31% during the second quarter which is equal to the largest quarterly drop during the 2008 financial crisis and the third largest quarterly drop in the past 50 years,” said First Majestic Silver CEO Keith Neumeyer. “As such management decided to suspend a portion of silver sales to await a rebound in prices. While the suspension had a negative impact on this quarter’s revenue and earnings, we are confident that the silver price will revert back to the mean in the near future. In the meantime, regular sales are no taking place in order to allow silver inventories to return to normal levels.”

This move is admirable, of course...and First Majestic has done this before.  But it doesn't alter the fact that every silver mining company should hold a decent proportion of their companies ongoing free cash flow in silver bullion...and keep it off the market until this JPMorgan-led price management scheme is finally broken...and Keith Neumeyer is intimately familiar with the situation.  If the ten largest silver producers did that, it would all be over in no time at all...and they'd be selling this silver into the market at a 3-digit price.  Now that would make shareholders happy, but it's not going to happen because it's in the shareholders best interests...and virtually all of the large silver producers are strong with the dark side of The Force.

I found this story posted on the Internet site in the wee hours of this morning...and it's worth the read.


Silver outperforming gold as precious metals prices rise

Weakness in the dollar, together with what appears to be a boost to Chinese industrial growth on the latest data, with a reduction in talk of Fed tapering has led to a mini-surge in the gold price, while silver has done even better living up to its tendency to outperform gold on the up.  For those who follow it, the gold:silver ratio has come back from around 65-66 to closer to 61 and if the silver price rise continues there could be scope for the ratio to fall further still.

Indeed we seem to be seeing a resurgence in momentum in silver buying.  Recent reports point to a huge increase in silver demand in India as the government attempts, only partially successfully, to stem gold imports by implementing sharp tax increases on them.  Silver imports thus appear to be rising sharply as there are no such import tariffs applied to them. Meanwhile outflows from silver ETFs which took place when the prices tanked have also staged a really strong recovery, sales of U.S. silver bullion coins have also remained very high indeed and have been at record levels suggesting investor interest in both East and West is running strong again.

This commentary by Lawrence Williams over at the yesterday should be on your must read list.  There's nothing really new here, but Lawrie summarized everything nicely in one short article.



¤ 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

I’m not given to making outrageous or unverifiable claims about gold or silver, although that seems increasingly to be the norm in some Internet gold and silver circles; one breathless and stunning claim after another. I must tell you that I find such claims and stories distasteful and unprofessional and I try to distance myself from those making them. Even though I am the one making what seems like a breathless and stunning allegation here, I can hardly comprehend the significance of JPMorgan having cornered the COMEX gold market. To my mind, this is the most important development in the gold market in my working career. To put this in proper perspective, the last great gold market corner was about 140 years ago in 1869. - Silver analyst Ted Butler, 10 August 2013

For the second day in a row it was obvious that a seller of last resort appeared in the precious metal markets, particularly in gold and silver.  And if they hadn't done so, one can only imagine what the precious metal prices would be as I write this.

It should also be obvious that these budding rallies in the precious metals are not going unopposed, and both Ted and I are somewhat apprehensive of what Friday's Commitment of Traders Report will reveal.  Is it the raptors selling out their long positions for a profit that are capping these rallies, or are the 'Big 8' back in the saddle going short/selling longs once again, the same old, same old?

I'm hoping for the former, but suspect the latter.  However, all we can do is reserve judgement until the new report makes an appearance on Friday afternoon EDT, as it's impossible to tell what's going on under the hood, as the headline numbers have proven [in the recent past] to be either inaccurate, or deceiving.

Looking at the preliminary open interest numbers for Tuesday on the CME's website at 3:52 a.m. EDT, gold open interest was only up by a couple of hundred contracts, and silver's o.i. actually fell by around 2,200 contracts.  I've learned the hard way that one shouldn't read much into these preliminary numbers, but considering the price action yesterday, especially in silver, these aren't the sort of numbers I was expecting to see.  But all will be revealed on Friday.

By the way, if you haven't read the link in the Ted Butler quote above, the story about Black Friday in the gold market on September 24, 1869 is linked here.  It's very short, and definitely worth the read.

There certainly wasn't much price action in Far East trading on their Wednesday.  But once London opened, both gold and silver began to rally, and both are trading above yesterday's closing price in New York. Gold volume is getting up there, but not nearly as high as it was this time on Tuesday.  Silver's volume is high as well, but quite a bit less than it was yesterday at this point, and it's mostly of the HFT variety.  The dollar index has been trading flat for the entire Wednesday session as I hit the 'send' button at 5:25 a.m. EDT.

Before heading off to bed, I'd like to alert you to another one of Casey Research's FREE on-line video events.  This one is entitled "America's Broken Promise: Strategies for a Retirement Worth Living".

Casey Research has an expert panel, featuring the following speakers: John Stossel: Host and Commentator, FOX Business Network, David M. Walker: Former United States Comptroller General, Jeff White: President and CEO, American Financial Group, Dennis Miller: Editor, Miller's Money Forever, David Galland: Partner, Casey Research.

This free video will air on September 5 at 2 p.m. Eastern Daylight Time, and it will be available for viewing after the initial stream for those who have schedule conflicts.

The sign-up starts today, and as I said, it's F-R-E-E, and you can find out all about it by clicking here.

That's it for another day, and I await the Wednesday trading session in New York with the usual amount of interest.

See you tomorrow.