The gold price did little in Far East trading yesterday...and the high tick of the day [around $1,618 spot] came a few minutes after the London open.
From that high, the gold price drifted a few dollars lower...and was sitting at the $1,615 mark about five minutes before trading began on the Comex in New York. Out of the blue, a sell-off began, that by the time it was done, it had all the hallmarks of a JPMorgan-inspired engineered price decline...and gold was down twenty bucks to the $1,595 spot mark.
The sell off ended shortly after the 9:30 open of the New York equity markets. From there, the gold price worked its way slowly back above the $1,600 spot mark...and then traded pretty much ruler flat at $1,605 from around noon Eastern time, right up until the announcement from the FOMC.
Gold was hit again...and got sold down to it's low of that day [$1,591.00 spot] around the 2:20 p.m. mark in New York. From there, it quickly jumped back above the $1,600 spot price mark...and finished the Wednesday trading session at $1,600.10 spot...down $14.80 from Tuesday's close. Not surprisingly, net volume was pretty chunky...around 170,000 contracts.
Here's the New York Spot Gold [Bid] chart, so you can see the only action that counted, up close and personal.
As is always the case, it was silver that really got it in the neck. Like gold, the price did little of anything in Far East trading...and volumes were very light. The high of the day, if one wishes to dignify it with that name, came about thirty minutes after the London open...and that was around the $28.05 spot mark, only about a nickel above Tuesday's New York close.
From there, the silver price drifted lower...and was a few pennies below $27.90 spot mark when the Comex trading session began at 8:40 a.m. Eastern time. The bid vanished...and less than thirty-five minutes later, silver had cratered to its low of the day, which was $27.03 spot.
After that pounding, it took the silver price a little while to find its feet. But once it did, there was a willing seller standing buy to nip that rally in the bud about five minutes before the Comex close...and from there it rolled over and got hit along with gold at the FOMC news.
Silver closed the New York electronic session at $27.44 spot...down 56 cents from Tuesday's closed. Like gold, silver's net volume was real chunky as well...around 49,000 contracts.
Here's the New York Spot Silver [Bid] chart so you can see more price-action detail.
The dollar index did little of anything during the Wednesday session...and was in a tight range around the 82.65 level. Of course all that changed on the joyous FOMC news...and the index blasted up to the 83.13 mark...before settling back and closing right on 83.10.
I'll accept the 'buy the dollar/sell gold' theory on the FOMC news...but I'd love to hear a rational explanation as to what happened before, or at, the Comex open in all four precious metals.
Of course the gold stocks gapped down at the open...and hit their lows the same time as the gold price, but then rebounded sharply. They only sold off a bit at the FOMC news, but then a buyer showed up immediately after that...and the HUI took off to the upside.
The three attempts to break above [and stay above] Tuesday's close all got sold off by a not-for-profit seller. Then the day traders finished the job...and the HUI closed down 1.42%. And you thought that the engineered price decline in the metals themselves was obvious.
Not surprisingly, the silver stocks got hit pretty hard across the board...although there was the odd green arrow here and there. Nick Laird's Silver Sentiment Index closed down 1.97%.
(Click on image to enlarge)
The CME's Daily Delivery Report [for 'Day 3' of the August delivery month] showed that 547 gold and 13 silver contracts were posted for delivery on Friday from the Comex-approved depositories. In gold, the largest short/issuers were the Bank of Nova Scotia, Morgan Stanley and Jefferies, with 249, 200 and 51 contracts respectively. The two biggest long/stoppers were HSBC USA with 299 contracts...and Deutsche Bank with 171 contracts. The link to yesterday's Issuers and Stoppers Report is here.
There were no reported changes in GLD yesterday...but an authorized participant deposited 678,612 troy ounces of silver in SLV.
There was no sales report from the U.S. Mint.
The Comex-approved depositories showed that they received no silver on Tuesday, but they shipped 621,019 troy ounces of the stuff out the door. The link to that activity is here.
I have a lot of stories for a weekday...and I hope you have time to at least skim them all.
The Federal Reserve said it will pump fresh stimulus if necessary into the weakening economic expansion to boost growth and reduce an unemployment rate that’s been stuck at 8 percent or higher for more than three years.
The Federal Open Market Committee “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said today in a statement at the end of a two-day meeting in Washington. “Economic activity decelerated somewhat over the first half of this year.”
Stocks fell on disappointment Fed Chairman Ben S. Bernanke refrained from taking action even as consumer spending flagged, job growth slackened and manufacturing cooled. Before its next meeting Sept. 12-13, the FOMC will assess unemployment reports for July and August, and the European Central Bank may take steps to ease Europe’s debt crisis at a meeting [later today].
This Bloomberg story was posted on their website mid-afternoon yesterday...and I thank West Virginia reader Elliot Simon for sending it. The link is here.
The U.S. Treasury Department said today it is developing a floating-rate note program that could be operational in a year or more, while it is preparing for possible negative-rate bidding.
The Treasury also plans to sell $72 billion in notes and bonds in next week's refunding, it said in a statement. The Treasury intends to auction $32 billion in 3-year notes on Aug. 7, $24 billion in 10-year notes on Aug. 8, and $16 billion in 30-year bonds on Aug. 9.
The floating-rate notes would be the first new U.S. government debt security since Treasury Inflation-Protected Securities, known as TIPS, were introduced in 1997. With a budget deficit estimated at $1.21 trillion this year, the Treasury needs to expand its base of investors, and the notes may appeal to those who are seeking to protect themselves from a possible increase in interest rates or faster inflation stemming from the Federal Reserve's unprecedented stimulus.
I found this Bloomberg story in a GATA release yesterday...and here are Chris Powell's comments that went with it..."The more that real interest rates are negative, the more "financial repression" and gold price suppression are required to keep the currency alive and defend it against competitors that don't depreciate so quickly." The link is here.
A technology breakdown at a major trading firm roiled the prices of 140 stocks listed on the New York Stock Exchange on Wednesday, undermining fragile investor confidence in the stability of U.S. stock markets.
The problems at Knight Capital Group Inc, one of the largest firms that buys and sells stocks to provide liquidity to the markets, emerged at the beginning of trading.
Heavy computer-based trading caused a rush of orders for dozens of stocks, ranging from well-known bellwethers like General Electric to tiny Wizzard Software Corp, whose shares soared to $14.76 after closing the previous day at $3.50. The NYSE has canceled trades in six particularly volatile issues.
The trading glitches are the latest in a series of market snafus that have hurt retail investors’ confidence, including the botched Facebook initial public offering, the 2010 “flash crash” in which nearly $1 trillion in market value disappeared in minutes, and the failed public offering of BATS Global Markets, a rival to the NYSE and the Nasdaq.
This Reuters story was posted on The Vancouver Sun's Internet site yesterday...and I thank Roy Stephens for sending this piece to me very late last night. It's definitely worth reading...and the link is here.
An under-the-hood assessment of what happened at Knight Capital yesterday was served up over at the zerohedge.com website late last night, with Tyler Durden doing the honours himself. It's very technical, but it would be more than worth your while to run through it. I thank Washington state reader S.A. for sending me this piece just before midnight local time last night...and the link is here.
The latest black eye for U.S. equity markets is proving a body blow for Knight Capital Group Inc.
Shares of the Jersey City, New Jersey-based firm plunged 33 percent, the most ever, in record volume yesterday as investors speculated on how much a breakdown that whipsawed owners of 140 stocks will cost the company. Its loss may be as much as $170 million, according to analysts at JPMorgan Chase & Co.
“This isn’t good for the market overall and it’s not good for Knight,” Sang Lee, managing partner at Boston-based research firm Aite Group LLC, said in a phone interview. “They took a beating in their share price. It’s not going to devastate the business of Knight since they’re a major market maker in equities. But when you’re a major player like Knight, mistakes will have a more expanded impact.”
This Bloomberg story was posted on their Internet site late last night...and I thank Roy Stephens for sending it our way. The link is here.
There have been plenty of banking scandals, but none quite like this: Investigators and political leaders believe that the manipulation of the Libor benchmark interest rate was the result of organized fraud. Institutions that participated could face billions in fines and penalties.
Eduard Pomeranz and Rolf Majcen are small fish in the shark tank of international high finance. Their hedge fund, FTC Capital, is headquartered in tranquil Vienna and manages only €150 million ($189 million) in assets. But now Pomeranz, the founder, and Majcen, the head of the legal department, have been able to strike fear in the hearts of the big fish.
"The Libor manipulation is presumably the biggest financial scandal ever," says Majcen, a man with slightly disheveled-looking hair and Viennese sarcasm. Yes, he says, it did shock him that something like this was even possible, namely that a group of international banks had been manipulating interest rates for years. But Majcen takes a matter-of-fact approach to it all. As a financial professional, he is only one of many who want to get back the money that they feel they've been cheated out of.
At the end of June, British and American regulators imposed a $500 million fine on Barclays, the major British bank, and forced its CEO Bob Diamond to resign. Since then, a war of sorts has erupted in the financial sector. Investigators are attacking presumed offenders, banks that are involved are denouncing others in the hope of mitigating their own penalties, and small investors like Majcen are inundating Libor banks with lawsuits.
This longish read showed up on the German website spiegel.de yesterday...and is worth reading. Donald Sinclair was the first reading through door with this story...and the link is here.
The bazooka isn't just the name of a portable American antitank weapon. Recently it has also become the synonym for a financial super weapon that is supposed to end the euro crisis once and for all. There also used to be a chewing gum called Bazooka that was sold in German supermarkets until the 1980s. Once the pink stuff got stuck somewhere, it was hard to get rid of -- not unlike the current discussion about a euro crisis bazooka.
The bazooka debate heated up after a suggestion from some countries, including Italy and France, that the permanent euro rescue fund, the European Stability Mechanism (ESM), should be equipped with "unlimited firepower" through a banking license. In concrete terms, it would enable the ESM to borrow unlimited amounts of money from the European Central Bank and use it to shore up euro-zone member states threatening to buckle under the weight of the crisis.
Given that billions of euros have already been deployed in the euro crisis, the idea of unlimited credit seems risky to say the very least. Not surprisingly, the reactions have been intense. "A banking license for the ESM would mean firing up the money printing machine, which means inflation and nearly unlimited liabilities," Patrick Döring, the general secretary of the business-friendly Free Democratic Party, the junior partner in Chancellor Angela Merkel's government coalition, told SPIEGEL ONLINE. "That is why the FDP cannot and will not allow a banking license to be issued."
This story was also posted on the spiegel.de Internet site yesterday...and is the second contribution in a row from reader Donald Sinclair...and the link is here.
Manufacturing in the world's biggest economy grew at its slowest pace in nearly three years last month, while Chinese factory output grew at its slowest rate in eight months.
Eurozone manufacturing activity contracted for the 11th month in a row as star performer Germany was began to feel the affects.of a two-and-a-half-year debt crisis which has sapped growth and market confidence.
While in Britain the sector shrank at its fastest rate in more than three years in July, as wet weather and the euro crisis hit output, new orders and exports.
The final Markit US Manufacturing Purchasing Managers Index stood at 51.4 in July, below both a preliminary estimate of 51.8 and June's reading of 52.5. It was the lowest reading since September of 2009. A reading above 50 indicates growth.
This story showed up on the telegraph.co.uk Internet site yesterday afternoon BST...and I thank Roy Stephens for sending it along. The link is here.
Europe's largest car market is in recession, but few outside the industry would know it, thanks to a controversial sales practice that inflates official statistics and paints a flattering picture of demand.
Three in every 10 new vehicles in Germany, including luxury BMWs, are sold not to customers, but to carmakers and their dealers - a type of automotive industry pump priming known as "self-registration". At nearly half a million such registrations in the six months through June, the total is greater than the entire new car market in Spain.
So while official figures show a 0.7 percent rise in German car sales for the half year, figures from auto market research firms Dataforce and BDW Automotive show private demand fell 5 percent in the period, which would mean all the growth had been manufactured by the manufacturers.
"Essentially, the carmakers are deceiving their shareholders, since they make it look as if the vehicles were actually sold. They want to pull the wool over their eyes," said Ferdinand Dudenhoeffer, head of automotive think-tank CAR at the University of Duisburg-Essen.
This Reuters story was filed from Frankfurt yesterday...and I borrowed it from yesterday's edition of the King Report. The link is here.
Catalonia, Spain's most indebted region, said Tuesday it could not pay subsidies in July to hospitals, old age homes and other social services already reeling from sharp budget cuts.
"It is due to a problem of liquidity," said a spokeswoman for the Catalan regional government's economy ministry, adding that the situation "will start to return to normal in September."
Catalonia last week said it was considering tapping a new central government fund worth up to 18 billion euros ($22 billion) set up to help regional governments in difficulty.
But it is in conflict with the central government over tough deficit and debt targets imposed on the regions.
In protest, the Catalan government boycotted a meeting with Budget Minister Cristobal Montoro in Madrid Tuesday at which regional finance officials approved the government's debt limits for the regions.
This AFP story from late Tuesday evening was filed on the xin.msn.com Internet site...and is another story that I borrowed from yesterday's King Report. The link is here.
Any halfway sensible reform of the financial world has failed because of opposition from Wall Street, the City of London or political forces like Germany's business-friendly Free Democratic Party. Politicians still believe they can honor their pledge to stop the kind of banking excesses that led to the crisis, but so far nothing has happened.
It may be true that the old dual banking rules wouldn't be able to function today as they were written decades ago, but they could be adjusted to fit with the current financial world. It would require craftsmanship, but it could and must happen quickly.
Incidentally, the Glass-Steagall Act was only made possible because a Senate committee had exposed the dumb, risky and at times criminal behavior of banks in the run-up to the Great Depression. The outrage paved the way for the law. Sometimes history repeats itself. Glass-Steagall served the world well for decades and it would have been better if it had never been repealed.
It is high time to correct this error.
This short editorial was posted on the spiegel.de website yesterday...and I thank Donald Sinclair for sending it along. The link is here.
China's manufacturing sector expanded at its slowest pace in eight months, with the purchasing managers index (PMI) for the sector easing to 50.1 percent in July, down 0.1 percentage points from the previous month, according to official survey results published on Wednesday.
The PMI data released by the China Federation of Logistics and Purchasing and the National Bureau of Statistics suggested the manufacturing sector is still expanding even though the growth has slowed.
A reading of 50 percent demarcates expansion from contraction.
However, July's PMI reading was below market expectations. Analysts have forecast that the official data may inch up from one month earlier as the world's second-largest economy is stabilizing.
I must admit that I don't believe this number for one second, as it's probably far worse than they're reporting. I thank Hong Kong reader 'Graham C' for sending me this story that was posted on the chinadaily.com.cn Internet site early yesterday morning...and the link is here.
The first is with Louise Yamada...and it's headlined "Gold & Silver at Critical Points in This Cycle". The second blog is with James Turk. It's entitled "Gold To Explode Higher As US Debt To Be Downgraded". Lastly is this Richard Russell blog...and it's headlined "Brutal Times, Here Is The Key Going Forward".
Mexican silver output jumped 18.6 percent in May from a year earlier to 420,629 kg, the National Statistics Institute said on Tuesday, as strong prices continued to spur production.
Mexican copper output rose by 4.2 percent to 35,911 tonnes in May as production increased at the massive Buenavista mine -- formerly known as Cananea -- following a three-year strike that ended in 2010, the institute said.
Fresnillo, Mexico and the world's largest primary silver producer, expects to meet its 2012 silver targets thanks to a ramp-up of production at its new Saucito mine.
This Reuters story showed up on the mineweb.com website yesterday...and I thank Donald Sinclair for bringing it to my attention...and now to yours. The link is here.
I was interviewed by Kerry Lutz over at the Financial Survival Network yesterday afternoon...and if you're interested in what I have to say...the link is here. I think the interview runs about twenty minutes or so.
This audio interview was posted on the goldseek.com Internet site on Tuesday. It runs for about 27 minutes...and I thank reader Dennis Meredith for sending it along. The link is here.
Gold has regained its luster as of last week, when ECB chief Mario Draghi told markets "believe me," anything will be done to save the euro. Bullishness has been fed by the belief that Draghi has put himself in a position where he must deliver bold monetary action, which comes coupled with a Federal Reserve meeting where Bernanke & Co. must face a slowing U.S. economy.
Gold has traded sideways this year, explained the World Gold Council’s head of investment research, Juan Carlos Artigas, but fundamentals point to a better story. Artigas told Forbes that global central banks, which have recently become net buyers of the yellow metal after many years supplying the market, are on track to buy at least as much as they purchased last year, when they acquired more than 450 tons of gold.
While “physical players [have been] absent due to elevated prices and a demand lull in Asia,” global central banks bought 80 tons of physical metal in the first quarter, and will probably continue buying through the year. Speculative buyers have been more cautious, Artigas explained, as they have been playing gold in tandem with the U.S. dollar, which in turn has strengthened as a consequence of a weakening global economy and jitters in Europe.
This short story was posted on the forbes.com website on Tuesday afternoon...and it's Donald Sinclair's final offering in today's column. The link is here.
South Korea's central bank said today it bought 16 tonnes of gold in July as easing financial markets after a turbulent June allowed it to push
ahead with efforts to diversify its massive foreign exchange reserves.
It put the total value of the purchase, which was made on multiple occasions during July and boosted its gold holdings to 70.4 tonnes, at $810 million, slightly less than $850 million it spent buying 15 tonnes of gold in November last year.
"The markets were stable in July and we judged the conditions were good for us to make the purchase then," said Lee Jung, head of the Investment Strategy Team at the Bank of Korea's Reserve Investment Division.
Lee declined to provide the exact net purchase price per ounce it paid for the bullion, typical of most central banks, although he said price was not a major factor in the decision to make the purchases.
This Reuters story was filed from Seoul...and was posted on their website early this morning local time. And as Chris Powell said in the GATA dispatch I took this story from..."Real gold or paper gold? And who has actual custody of it? Nobody's asking, so the central bank isn't telling. So much for financial journalism." Excellent points. The link is here.
Great Panther Silver Limited, (TSX: GPR NYSE.A: GPL)headquartered in Vancouver, Canada, is a profitable primary silver producer operating two 100% owned mines in Mexico. Over 94% of revenues are derived from unhedged precious metals production with approximately 74% generated from silver sales and 20% from gold. Since entering production in the first quarter of 2006, the Company has seen five consecutive annual increases in revenues and provides strong leverage to future rises in precious metals prices.
People crushed by law have no hopes but from power. If laws are their enemies, they will be enemies to laws; and those who have much to hope and nothing to lose, will always be dangerous. - Edmund Burke
Precisely three hours after I hit the 'send' button on yesterday's column the engineered price decline by JPMorgan et al began in all four precious metals...and they rang the cash register one more time. Here, reprinted below, is the last paragraph from yesterday's blog...
"Ted Butler mentioned the fact that 'da boyz' may now have accumulated enough short positions to engineer another sell-off and, as I've mentioned on countless occasions in this column over the years, I'm always on the lookout for "in your ear"...and you should be, as well."
How's that for timing?
Silver's break-out above its 50-day moving average got crushed under the boot of JPMorgan yesterday...and since it happened on Wednesday, this price activity missed the cut-off for tomorrow's Commitment of Traders Report. There was no chance that the timing was accidental.
How long can they keep the prices capped, you ask? Well, as long as they are instructed to, would be my guess. You can pretty much rest assured that any major breakout in the price of the precious metals will happen only if 'da boyz' allow it.
As silver analyst Ted Butler pointed out in his comments to clients yesterday, it appears that we've been in some sort of holding pattern in both gold and silver since the take-down in late May...and both metals have only been allowed to trade in a very narrow range...a sort of forced 'summer doldrums'...a phenomena that I've mentioned a few times myself.
But one thing did stand out yesterday...and that was the performance of the precious metal equities...and undoubtedly they would have done much better if they hadn't run into a not-for-profit seller shortly after the press release following the FOMC meeting.
Could we go lower in price from here? Sure, but there's not a lot of speculative long contracts left to flush out. They may get the price lower for psychological effect, but there won't be much volume with it, or big improvements in the Commercial net short positions in either silver or gold.
But since neither the CFTC or the CME Group will stop them, they can do pretty much what they please...and they are. And if you think that the precious metal mining companies that you own are going to do anything, think again. They've conveniently forgotten the meaning of the words 'fiduciary responsibility'.
But they can't keep this up forever...and it's only the timing of the end of these shenanigans that's the big unknown.
Both gold and silver did nothing price-wise in Far East or early London trading on their Thursday. Gold is still trading above the $1,600 spot price mark...but just barely. Trading volume is lighter now than it was on Wednesday at this time but, as we found out, that didn't mean a lot once trading began in New York. The dollar index is currently down about 15 basis points. And as I hit the 'send' button at 5:10 a.m. Eastern time, gold is up a couple of dollars...and silver is up about a dime. As usual, I expect any major price fireworks to occur during the Comex trading session. They certainly did on Wednesday...and I expect that to be the case again today.
I hope your Thursday goes/went well...and I'll see you here tomorrow.