Gold got sold off about ten bucks during the morning trading session in the Far East. But the bottom was in by 1:00 p.m. Hong Kong time...and the gold price crawled higher from there until the jobs numbers were released at 8:30 a.m. in New York. The rest, as they say, is history.
Gold blasted thirty dollars higher in about fifteen minutes...and this had all the hallmarks of a short-covering rally. Once that was done, the gold price worked its way higher from there until it ran out of gas...or into a not-for-profit seller...about ten minutes before London closed for the weekend. From there it more or less traded sideways into the 5:15 p.m. Eastern close.
Gold finished the Friday trading session at $1,735.50 spot up $34.20 spot. Volume was an absolutely gargantuan 230,000 contracts.
The silver chart looks the same as the gold chart, so I'll spare you the play-by-play on that. Silver's low tick [under $32.00 spot] came during the Hong Kong lunch hour...and the high tick [$33.80 spot] came shortly before the Comex close in New York.
Silver closed up 98 cents at $33.69 spot...but had an intraday move of 5.5%. Volume was way up there at 57,000 contracts.
The dollar index opened at 81.12...and began to slide lower starting at the open of London trading. The real decline began at 8:30 a.m. in New York...and by 10:40 a.m. most of the decline was in...and the dollar more or less traded sideways into the close. The dollar index finished the Friday trading session at 80.17...down 96 basis points, or 1.23%.
Gold and silver prices were almost the inverse of the move in the dollar index...but to say that there was an exact relationship between the two is a bit of a stretch.
The gold stocks gapped higher at the open...moved a bit higher from there...and only sold off a hair into the close. The HUI finished up 2.77%.
Despite the big move in silver yesterday, the stocks didn't do as well as one would expect...and a few actually finished down on the day here in Canada, with Silver Standard Resources being the most prominent...although a few junior producers put in a first-class showing. But, overall, I was underwhelmed. I felt the same with Thursday's silver stock price action as well. But, having said all that, Nick Laird's Silver Sentiment Index closed up 2.99%.
(Click on image to enlarge)
The CME's Daily Delivery Report showed that 23 gold and 3 silver contracts were posted for delivery on Tuesday. Nothing to see here.
For the second day in a row, there were no reported changes in either GLD or SLV. One can only imagine just how much metal is owed to both these ETFs...especially SLV. I'm sure that the authorized participants were forced to short the shares again both Thursday and yesterday.
In an e-mail from Nick Laird in the wee hours of this morning, he informed me that Sprott did an offering on their Physical Gold Trust...and added 172,270 troy ounces of gold to it yesterday...along with another 89,848 troy ounces of silver to PSLV. I have more on Sprott's gold offering in the 'Critical Reads' section further down.
The U.S. Mint had a sales report yesterday. They sold 4,000 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 304,000 silver eagles. For the first four business days of September, the mint has sold 10,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 679,000 silver eagles. The silver/gold ratio based on these sales is just a bit under 57 to 1.
It was a rather quiet day over at the Comex-approved depositories on Thursday. They reported receiving 600,848 troy ounces of silver...and shipped a smallish 30,599 ounces of the stuff out the door. The link to that activity is here.
Here's a rather interesting chart that Nick Laird sent me early this morning...and the chart title says it all. The 'click to enlarge' feature comes in handy here.
(Click on image to enlarge)
For the second week in a row, the Commitment of Traders Report was not happy reading. The Commercial net short position increased by another 6,346 contracts, or 31.7 million ounces. Ted Butler said that JPMorgan went short an additional 4,000 contracts...and the raptors sold another 1,000 long positions...and the rest of the increase was spread related. The Commercial net short position now stands at 224.6 million ounces.
The 'big 4' shorts in the Commercial category are short 210.9 million ounces of silver...and the '5 through 8' big shorts add another 40.6 million ounces. In total, the 'Big 8' are short 251.5 million ounces of silver.
On a net basis, the 'big 4' are short 43.0% of the entire Comex futures market...and the '5 through 8' add another 8.3 percentage points to that total. Adding it up, eight traders are short 51.3% of the entire Comex futures market in silver.
Ted said that JPMorgan's short position is now 26,000 contracts [130 million ounces] at a minimum...and that represents 26.3% of the entire Comex futures market in silver. Ted was incensed...and you should be as well, dear reader. One trader holding such a position is outrageous beyond belief. The CFTC and CME should be doing the perp walk for this...along with Jamie Dimon at JPMorgan.
In gold, the Commercial net short position increased another chunky 15,762 contracts, or 1.56 million ounces. Ted Butler said that all of the increase was the 'Big 4' traders going short against all comers. The Commercial net short position now sits at 21.94 million ounces.
The 'big 4' traders are short 11.51 million ounces of gold...and the '5 through 8' traders are short an additional 5.29 million ounces. The 'big 8' are short 16.8 million ounces of gold, or 76.6% of the Commercial net short position.
On a net basis, once you subtract the market-neutral spread trades out of the Non-Commercial category, the 'big 4' are short 27.7% of the entire Comex futures market in gold...and the '5 through 8' are short an additional 12.7 percentage points. Straight addition shows that the 'Big 8' are short 40.4% of the entire Comex futures market in gold.
Without doubt, the situation has deteriorated significantly once you consider the price action during the Friday trading session in both silver and gold.
Here's Nick Laird's "Days of World Production to Cover Short Contracts". Over two thirds of the red bar in silver is JPMorgan's short position. At 26,000 Comex futures contracts...130 million ounces...that's about 65 days of world silver production. The tiny difference between the red and green bar in silver, is the short position of the '5 through 8' largest traders. It's easy to see that the bulk of the short position in silver is held by only four traders...and almost all of that is held by JPMorgan.
(Click on image to enlarge)
It should come as no surprise, that the September Bank Participation Report, which is derived from the same data set as yesterday's Commitment of Traders Report, was pretty ugly as well. During the prior month, the 4 U.S. banks that hold Comex futures contracts in the silver market, increased their short position by 8,295 Comex futures contracts...and I'm guessing that most of that amount would have been JPMorgan.
The BPR states that these four U.S. banks are now net short 28,760 Comex silver contracts...29.3% of the entire Comex futures market. Don't forget that Ted figures that JPMorgan is short 26,000 Comex silver contracts on its own, so that doesn't leave too many short positions left to be divided up between the other three U.S. banks in this category, now does it?
Reader E.W.F...who sends me a complete set of COT charts based on the Disaggregated Commitment of Traders Report made the following comment..."The U.S. bank net short position in silver hasn't been this large since 11/2/2010, the day before QE2 was announced."
The 13 non-U.S. banks that hold Comex futures positions in the silver market were net long 828 Comex futures contracts in silver in the August report, but in the September report, they now are net short 2,801 contracts...a swing of 3,629 contracts in one month, but only 215 Comex contracts per bank on average, which is a rounding error in the grand scheme of things...especially when JPM is short 26,000 Comex silver contracts on its own.
So, in one month, the world's banks have increased their short position in the Comex silver futures market by 11,924 contracts...or 59.6 million ounces of silver. But it's still a "Made in the U.S.A. by JPMorgan" silver price management scheme from top to bottom.
In gold the situation is just about as egregious. The 4 U.S. banks that hold Comex futures contracts are now net short 84,583 contracts, or 8.46 million ounces...an increase of 26,894 contracts [2.69 million ounces] from the August Bank Participation Report.
The 20 non-U.S. banks are short 53,434 Comex contracts in gold...5.34 million ounces, an increase of 12,861 contracts [1.29 million ounces] since the August BPR.
On a net basis, the 4 U.S. banks are short 20.3% of the entire Comex futures market...and the 20 non-U.S. banks are short 12.8%...making the grand total 33.1% of the entire Comex futures market in gold.
The short positions in gold are much more spread out between all the world's banks...but in silver, it's all U.S.A...and virtually all JPMorgan.
Reader Scott Pluschau has posted commentary over at his Internet site headlined "Bull Pennant" forms as the "Triangle" target gets nailed in Gold...and the link is here.
With some ruthless editing on my part, I managed to keep the number of stories down to a reasonable level, so I hope you have the time to at least skim them all over what's left of the weekend.
The monthly U.S. jobs report generated its usual plethora of data, much of it discouraging.
Fewer jobs than expected were created in August, and the welcome decline in the unemployment rate has to be significantly tempered by its link to the 368,000 people who departed the counted work force.
Leading the pack of the woeful were the numbers on the labor force participation rate. There are a couple of reasons for this view. One, you should pay attention when data are either at the lowest or the highest level in years. In this case, the lowest.
More important, a declining percentage of people in the work force means long-term problems. Too many people discouraged, with atrophying skills. Bad news for them and their families, economically and psychologically. Bad news for the overall economy that loses productive capacity and willing and able consumers. Bad news for the overall spirit and optimism of pretty much everyone.
This commentary showed up as a blog posted on The Wall Street Journal website yesterday just before lunch in New York. I thank Ulrike Marx for providing today's first story...and the link is here.
The move out of the U.S. stock market continued through the final week of summer, as investors remained stuck in a rut and refrained from making any big moves ahead of Federal Reserve chairman Ben Bernanke's big speech in Jackson Hole.
In fact, investors pulled another $3.7 billion from U.S. stock market mutual funds during the week ended Aug. 31, according to the Investment Company Institute, bringing the 2012 outflow total to more than $76 billion. By comparison, those funds lost in the neighborhood of $70 billion during the first eight months of 2011, and just $52 billion during the first eight months of 2010.
This story was posted over at the money.cnn.com Internet site on Thursday...and I borrowed it from yesterday's edition of the King Report. The link is here.
The European Central Bank’s decision to relax bank funding rules to mirror conditions last seen after Lehman Brothers Holdings Inc.’s collapse signals hard times for lenders.
“The soup kitchen for impoverished euro-zone banks is re- opening,” said Simon Maughan, a strategist at Olivetree Securities Ltd. in London. The easing shows “some peripheral banks have run out of collateral and so we need to widen the bounds of acceptability to accommodate them.”
ECB President Mario Draghi said yesterday the central bank will lend against assets in dollars, pounds and Japanese yen, as well as in euros, reopening a program that ran for two years following the September 2008 bankruptcy of the U.S. investment bank. The ECB also eased borrowing against government-issued or guaranteed assets by dropping rating requirements.
Kicking the can down the road...until the currency itself is worthless. That fact is showing up plainly in the precious metals market at the moment. This Bloomberg story, filed from London early yesterday morning Eastern time, was sent to me by reader Ulrike Marx...and the link is here.
The ECB's announcement on Thursday that it is prepared to make unlimited bond purchases in order to lower borrowing costs for countries in crisis could mark a turning point in the euro crisis. German commentators, however, criticize the bank for becoming a hostage to politics.
But the criticism of the ECB's course continued in Germany. Bundesbank President Weidmann reiterated his opposition to the move, saying it was too close to "state financing via the money presses." Alexander Dobrindt, general secretary of Bavaria's conservative Christian Social Union, said that the ECB must be "a stability bank and not an inflation bank".
Jörg Asmussen, a German member of the ECB's Executive Board, defended the decision, however. "We have no inflationary pressure," he said. "Everyone has to do their part to make the euro irreversible."
On Friday, German commentators expressed their considerable doubts about the plan.
This story showed up on the German website spiegel.de yesterday...and I thank Ulrike Marx for her second offering in a row. The link is here.
The European Central Bank's ground-breaking plan for mass purchases of Spanish and Italian bonds is fraught with political risk and may soon be overwhelmed by nationalist anger in the crisis states, leading economists and statesmen warned at a gathering of the European policy elites in Italy.
"The ECB move is helpful but is not a game-changer. The eurozone is still in crisis," said Nouriel Roubini, head of Roubini Global Economics.
"Unless Europe stops the recession and offers people in the peripheral countries some light at the end of the tunnel - not in five years but within 12 months - the political backlash will be overwhelming, with strikes, riots and weak governments collapsing."
Professor Roubini said the German Bundesbank and will insist that "severe" conditions are imposed on Spain once the country requests a rescue from the eurozone EFSF/ESM bail-out funds and signs a memorandum ceding budgetary sovereignty.
This Ambrose Evans-Pritchard story was posted on the telegraph.co.uk Internet site late yesterday afternoon BST...and is another item courtesy of Ulrike Marx. The link is here.
The biggest-ever imports of corn by China, the world’s largest livestock producer, may help sustain a record rally in Chicago that’s been driven by drought across the U.S. Midwest, according to Rabobank International.
Shipments may climb to 7 million metric tons in the year starting Oct. 1 from about 5 million tons this year, Daron Hoffman, Shanghai-based director of research, said in an interview. That compares with a U.S. Department of Agriculture forecast for a 60 percent drop to 2 million tons in 2012-2013.
Record imports by China may spur higher prices, lifting global food costs and forcing rival importers to cut purchases. China’s demand needs to be met by imports no matter what the price, according to Nathan Broders, director of feed ingredients at INTL FCStone Inc. Corn has rallied 24 percent to a record this year as the worst U.S. drought since 1936 slashed output.
This Bloomberg story, filed from Shanghai early yesterday morning local time, is Ulrike Marx final offering in today's column. It's a short read, and well worth your time...and the link is here.
We came across this rather telling chart showing the net petroleum imports of the US and China. We present it on a standalone basis, as the price of oil, and certainly gas, will once again become a key sticking point in the days and weeks ahead, as always happens whenever there is either global coordinated monetary intervention, or relentless jawboning thereof. To present some context to the chart, which forecasts China overtaking the US and becoming the world's largest net oil importer in the world, the official US GDP number presented for public consumption is just under $16 trillion (or 98% of US debt), while China's is, publicly, less than half this number.
You've already read the entire Zero Hedge posting...but it's the chart that's posted below it that's well worth looking at. I thank Washington state reader S.A. for sharing it with us...and the link is here.
Egypt and Iran this week took a giant step toward overcoming their diplomatic estrangement, brought together by the exigencies of a global movement and, even more so, a complex regional calculus that has a long history of being shaped by foreign powers.
In a sign of changing times, the Egyptian President Mohammed Morsi used the opportunity of his participation in the Non-Aligned Movement (NAM) summit in Tehran to put on full display of the delicate yet significant nuances of a "new Egypt" that has unshackled itself from foreign domination and moves according to its own incandescent atmosphere.
At the landmark summit's opening day, the speeches by Morsi and his Iranian hosts such as by Supreme Leader Ayatollah Khamenei and Iran's President Mahmoud Ahmadinejad, reflected a symbiosis that explains why the NAM torch was passed from Morsi's hands to Ahmadinejad, in light of the common themes of decrying unjust global structures, support for Palestinians, a Middle East nuclear weapons-free zone, etc.
This is one of two stories that are must reads for students of the "New Great Game". Roy Stephens sent it to me last weekend...and I've been saving it for today. It was posted on the Asia Times Internet site on Saturday, September 1st...and the link is here.
Afghanistan may turn out to be one of the great misbegotten "stimulus packages" of the modern era, a construction boom in the middle of nowhere with materials largely shipped in at enormous expense to no lasting purpose whatsoever. With the US military officially drawing down its troops there, the Pentagon is now evidently reversing the process and embarking on a major deconstruction program. It's tearing up tarmacs, shutting down outposts, and packing up some of its smaller facilities. Next year, the number of International Security Assistance Force (ISAF) coalition bases in the southwest of the country alone is scheduled to plummet from 214 to 70, according to the New York Times.
But anyone who wanted to know just what the Pentagon built in Afghanistan and what it is now tearing down won't have an easy time of it.
At the height of the American occupation of Iraq, the United States had 505 bases there, ranging from small outposts to mega-sized air bases. Press estimates at the time, however, always put the number at about 300. Only as US troops prepared to leave the country was the actual - startlingly large - total reported. Today, as the US prepares for a long drawdown from Afghanistan, the true number of US and coalition bases in that country is similarly murky, with official sources offering conflicting and imprecise figures. Still, the available numbers for what the Pentagon built since 2001 are nothing short of staggering.
This another 'New Great Game' essay from the Asia Times website...this one from Thursday. It's also from Roy Stephens...and the link is here.
The first of two blogs is with Caesar Bryan of Gabelli & Company. It's headlined "Top Fund Manager - Gold Should Already be Above $1,900". The second blog is with Dr. Stephen Leeb...and it's entitled "Fed to Ease as Fears Continue to Propel Gold & Silver Surge". The audio interview is with James Dines.
Sprott Asset Management LP, announced today that it has priced its follow-on offering of 23,000,000 transferable, redeemable units of the Trust ("Units") at a price of US$14.84 per unit (the "Offering"). As part of the Offering, the Trust has granted the underwriters an over-allotment option to purchase up to 3,450,000 additional Units. The gross proceeds from the Offering will be US$341,320,000 (US$392,518,000 if the underwriters exercise in full the over-allotment option).
The rest of the press release can be found posted on the mining.com Internet site...and I thank Nick Laird for sharing it with us. The link is here.
“We could see a spectacular performance in silver” during the rest of the year, said Julian Phillips, a South Africa-based editor at SilverForecaster.com. “Silver, in addition to its demand [and] supply disjoint, will attract huge investment demand.”
“Investors see precious metals like silver and gold as hedges against the debasement of paper currencies,” said Elliott Orsillo, co-founder and portfolio manager at Season Investments LLC.
The rally in the precious-metals sector finally getting under way is “likely to be a good one,” with a record high in gold above $2,000 this year “a realistic target,” said James Turk, founder and chairman of GoldMoney.
The rest of this marketwatch.com story from yesterday is linked here...and I thank West Virginia reader Elliot Simon for bringing it to our attention.
While the price of gold constantly fluctuates, you would have experienced, on average, no inflation over the last 30 years if you'd used gold to purchase corn. Actually, right now, it'd be on the cheap side.
When you extrapolate this to other food items – and virtually everything else you buy – it's very liberating. Think about it: gold continues its safe-haven role as a reliable hedge against rising inflation.
I believe that those who save in gold will experience, on average, no cost increases in the things they buy and the services they use.
This must read article by Casey Research's own Jeff Clark was posted on the CR website on September 4th...and I thank London, U.K. reader Tariq Khan for bringing it to my attention. The link is here.
Gold prices may reach its all time high of $2,000 an ounce by the end of this year, according to Bank of America Merrill Lynch.
The American Bank expects the yellow metal to climb to new highs as they anticipate a QE-3 announcement by the United States Federal Reserve.
"Loose monetary policies with a scope for more aggressive balance-sheet use in the U.S. and Europe will keep real rates in most reserve currencies low (or negative) in 2012. We continue to believe this will allow investor demand for gold to remain strong," told BofAML analysts Sabine Schels and Michael Widmer to Bloomberg News.
Of course gold would be over $2,000 the ounce during the last week or so, if JPMorgan et al weren't going short against all comers. This mineweb.com posting was sent to me by Donald Sinclair...and the link is here.
The gold bull is still intact but tempered by U.S. Fed spin. The parabolic printing of Dollars leads to a parabolic devaluation of the Dollar and parabolic Gold.
The Fractal Gold chart work is a direct comparison of Gold, today, to the late 70's Gold Parabola. Thus, "timing" is taken directly from the late 70's cycle, with price targets created from a combination of the late 70's Gold price and different technical analysis techniques. We developed a price target back in 2006/ 2007 for Gold to reach the $10,000 to $12,000 range during this Gold Bull. Anything above that range would mean that the "Stagflation" comparison to the late 70's was exceeded and "Hyper-inflation" would become a real possibility.
This very interesting commentary, along with an even more interesting set of charts, was posted on the mineweb.com Internet site yesterday...and is also courtesy of Donald Sinclair. The link is here.
Freegold Ventures Limited is a North American gold exploration company with three gold projects in Alaska. Current projects include Golden Summit, Vinasale and Rob. Both Vinasale and Golden Summit host NI 43-101 Compliant Resource Calculations.
The 2012 exploration program includes additional drilling on both Golden Summit and Vinasale. An updated NI 43-101 resource was calculated on Golden Summit in December 2011 and using a 0.35 g/t cutoff is 14,840,000 tonnes @0.66 g/t Au - hosts 316,000 ounces in the indicated category and 50,0460,000 tonnes @0.61 g/t Au - hosts 991,000 ounces in the inferred category. Drilling has been underway on this road accessible project since mid January. To date over 36,000 feet have been drilled since January on the project, of which 30,000 feet have been aimed at resource expansion. Drilling remains ongoing. An updated NI 43-101 is expected to be completed in Q3.
Additional drilling is also underway on Vinasale. Vinasale currently hosts recently updated NI 43-101 resource calculation of 49,320,000 mt @1.09 g/t for a total of 1,735,000 contained gold ounces in the inferred category using a 0.5 g/t cutoff. Please visit our website for more information.
I have a couple of musical selections for you today. I'm sure you've heard the term 'child prodigy' a few times in your life. Gifted children can be a blessing...and a curse. Having spent eleven years on the board of directors of the Edmonton Symphony Orchestra, I've met quite a few of various ages...and abilities.
But this four year old piano prodigy is something else. His playing skills are only limited by the fact that his hands are too small to play any chord larger than three or four notes...and full octaves are still a long way off in this child's life...but the gift this little boy has should be obvious to anyone...and he's already a little showman to boot!
I ran the video past reader George Miladin, who is a world-class pianist in his own right...and he, like me, was totally blown away. I thank Roy Stephens for sending me this video last night...and it's certainly worth your time. It runs for 3:53 minutes...and the link is here.
Today's 'blast from the past' is a 1970's classic by a group that I'm sure just about everyone on Planet Earth has heard at one time or another in their lives. The story behind the group's name is amazing...and the link to one of their many hits from that era, is here. While I'm at it, here's another.
Well, there weren't too many shades of grey yesterday, as it was up, up, up and away for gold and silver on the jobs report. But, on the flip-side of all that fun, was the fact that except for some early short covering, JPMorgan et al were the not-for-profit sellers again and, without doubt the Commitment of Traders Report will be even uglier when it comes out next Friday.
Of course, there's still that possibility they could be over run this time around...and there's a very long list of people that would love to see that happen. My name is near the top.
There's not a person out there, including this writer, that really knows how this will all unfold in the short term...but one way or another, sooner or later, this will all end up like the London Gold Pool of the 1960s...and that's very badly if your a bullion bank massively short the gold and silver markets. And there's a very special place reserved in hell for the big silver shorts.
But they certainly won't give up without a fight...and there's nothing meaner than a cornered 'junk-yard dog'...and I'm sure that Jamie Dimon and the CME Group will leave no stone unturned in their frantic efforts to avoid a melt-down of their respective companies...and a melt-up in the precious metal prices.
The problems with the mining industry in South Africa have not gone away...and will probably get much worse before they get any better. This is just another straw piled on the camel's back as far as the bullion banks are concerned...along with imminent and ongoing debasement of world currencies as the various central banks try to fix an international solvency problem via the printing press.
As everyone with two synapse to rub together already knows...you can't borrow your way out of debt, or spend your way to prosperity...but this is precisely what they are attempting to do.
Here's a graph the Nick Laird sent me yesterday. You may recall the very recent stories about India trying to curb its citizens' never-ending demand for gold. Well, if you look at the chart of their currency vs. the yellow metal, it's obvious why they prefer it over their central bank's crappy paper...and it won't be too much longer before all the world's currencies have a chart that looks similar.
(Click on image to enlarge)
As I've said a couple of times already this week...all we can hope for is that we've covered all the bases in our own personal efforts to protect ourselves from what lies ahead. I'm still 'all in'...with fingers crossed.
I'm off to bed. See you on Tuesday.