Gold & Silver Daily
"I certainly was not amused with yesterday's Commitment of Traders Report... and I'm not likely to be enthralled with next Friday's report, either."

¤ Yesterday In Gold & Silver

In gold, the high of the day came about 9:20 a.m. in London... and from there the price declined in fits and starts for the rest of the trading day both there... and in New York later in the day. The gold price basically traded in a ten-dollar price range all of Friday. Nothing to see here, folks... please move along.

Gold closed the day at $1,773.60 spot... down $6.50 on the day. Net volume was the lightest all week at 115,000 contracts... give or take.

It was pretty much the same story in silver, with the high of the day coming at the same 9:20 a.m. time in London. Silver traded within two bits of the $35.50 spot price during the entire Friday trading day.

The silver price closed on Friday at $35.41 spot...up a whole 4 cents. Gross volume was well over 90,000 contracts once again... but netted out to a pretty light 26,000 contracts once all the spread and roll-overs out of the March contract were removed.

The dollar index rose a bit once it opened in the Far East on their Friday morning. The high of the day came around 1:20 p.m. Hong Kong time... and then spent almost twelve hours declining about 55 basis points. The index hit its low at precisely 1:00 p.m. in New York... and then proceeded to gain back a bit of that loss. The dollar index closed down about 42 basis points.

This decline obviously didn't have much impact on gold and silver prices yesterday.

The gold stocks pretty much followed the gold price tick for tick yesterday... and the HUI finished down 1.34% on the day. The HUI finished up 4.06% on the week.

The silver stocks obviously suffered from a bout of profit-taking yesterday... and despite the fact that silver finished up a few pennies on the day, Nick Laird's Silver Sentiment Index also closed down 1.34%.

I was eagerly looking forward to yesterday's CME Daily Delivery Report... and I was not disappointed nor surprised by what I saw. In gold, there were 154 contracts posted for delivery on Tuesday... and in silver, it was 180 contracts.

Although there was no prize for getting it right, I was correct in assuming that Jefferies would be the big short/issuer and that the Bank of Nova Scotia and JPMorgan would be the big long/stoppers... but that's almost exactly what happened. Jefferies issued 177 contracts of the total... and the Bank of Nova Scotia received/stopped 176 of those contracts. The link to yesterday's Issuers and Stoppers Report, which is well worth checking out, is here.

The CME's preliminary volume report for Friday showed that another 10 silver contracts were added to the February delivery month, bringing the total up to 185... of which 180 were delivered yesterday. Is there more to come? Beats me, but Jefferies et al. only have two more business days left to get it done, if there is.

So far in February, there have been 946 silver contracts delivered... and we're now at almost 2,200 contracts delivered for January and February combined, which are huge numbers considering the fact that neither month is a delivery month for that particular precious metal. I'll have more to say on this issue in my February 29th column.

With all this silver being delivered in these off months, one has to wonder what kinds of delivery numbers will be posted on First Day Notice in March silver next Tuesday evening.

Gold and silver continued to pour into the two big ETFs yesterday. GLD received another 58,303 ounces from an authorized participant... and SLV took in another big chunk on Friday as well... 1,943,188 troy ounces... almost exactly the same amount as they added on Thursday.

And, for the second day in a row, there was no sales report from the US Mint.

It was another big day over at the Comex-approved depositories on Thursday. Between the Brink's and Delaware depositories, they received 1,125,475 troy ounces of silver... and Scotia Mocatta shipped out 1,250,725 ounces. The link to that action is here.

It was another frantic week at these five depositories once again... and I'm sure that Ted Butler will have something to say about it in his comments to subscribers later today.

I knew that I wouldn't be thrilled with yesterday's Commitment of Traders Report... and I wasn't. However, as Ted pointed out, the increase in the Commercial net short position could have been worse... but it was bad enough... and checked in with an increase of 1,878 contracts. Ted says that it was the '4 or less' traders in the Commercial category who were responsible for all of the increase. Which means that the lion's share of that amount was sold by JPMorgan in order to prevent the price from running away to the upside.

The total Commercial net short position now sits at 39,188 contracts, or 195.9 million ounces. Based on my back-of-the-envelope calculation... and once you remove all the market-neutral spread trades... JPMorgan (all by themselves) is short a bit more than 25% of the entire Comex silver market. The Commercial traders have sold 25,000 silver contracts short (125 million paper ounces) since the late-December lows. One can only imagine what three-digit silver price we would have if JPMorgan et al. hadn't been there.

But as bad as the COT was in silver, it was just plain ugly in gold, as the Commercial net short position rose an eye-watering 19,894 contracts... a hair under 2 million ounces. The Commercial net short position has now blown out to 22.9 million ounces. These are not extreme numbers (extreme is over 30 million ounces), but the danger flags are now flying.

Without doubt, the situation has deteriorated a lot further since the Tuesday cutoff... as both Wednesday and Thursday were big up days. And as Ted pointed out on the phone yesterday, it's been the '4 or less' traders stepping in front of this market on the short side to prevent both gold and silver prices from blasting to the outer edges of the known universe. They are the short sellers of last resort.

Here's Ted Butler's 'Days of World Production to Cover Short Positions' that Nick Laird produces every week. As you can see, the four precious metals are the most rigged markets on the Comex, with silver leading the pack by a goodly margin. You should also note that the largest and most concentrated short positions are held by the '4 or less' traders... and the tallest hog at the trough in all four metals is, without a doubt, JPMorgan.

(Click on image to enlarge)

Here's another chart that Nick Laird sent me last night that's worth looking at it. It's the "Total PMs Pool". As Nick mentioned in his covering email, "There are new highs in ounces... and soon-to-be new highs in value."

(Click on image to enlarge)

This next graph comes courtesy of South African reader Dave Toms. As he said in his email, "Note how we in South Arica are doing with the rand vs. gold. The graph is terrifying! " Yes, it is. But it's also a clarion call to own precious metals in the face of rapidly depreciating fiat currency. In the near future, a lot more countries will have currency charts that look like that.

(Click on image to enlarge)

I have the usual number of stories today, so I hope you'll find time over the weekend to at least skim the parts that I've cut and pasted on each one.


¤ Critical Reads

SEC Joins Running for Worst Rogue Agency

The alphabet-soup federal bureaucracies seem to be engaged in a contest to see who can do the most to steamroll the legitimate legislative process and compromise freedom and economic growth.

To date it has been a neck-and-neck race between the EPA, which is pursuing a head-spinningly aggressive anti-energy and anti-development agenda, and the NLRB, which is rewriting federal labor laws to allow union bosses to force workers into unions and infamously sued Boeing for locating in a right-to-work state. Of course, the FDA, HHS, IRS, FCC, and the rest also have been in on the act.

But the Securities and Exchange Commission (SEC) is now distinguishing itself as a new contender in the top tier of the worst rogue agencies.

This story was posted over at the Fox News website yesterday...and I thank Washington state reader S.A. for bringing it to my attention. The link is here.


Stockton, California, May Ask Bondholders to "Suffer," City Officials Say

Stockton, California, may take the first steps toward becoming the most populous US city to file for bankruptcy next week because of burdensome employee costs, excessive debt, and bookkeeping errors that misrepresented accounts, city officials said yesterday.

The Stockton City Council will meet February 28 to consider a type of mediation that allows creditors to participate, the first move toward a Chapter 9 bankruptcy filing under a new state law. The council will also weigh suspending some payments on long-term debt of about $702 million, according to a 2010 financial statement.

Stockton, a farming center about 80 miles (130 kilometers) east of San Francisco, has fought to avert bankruptcy by shrinking its payroll, including a quarter of the roughly 425-member police force. At 292,000, the city has more than twice as many residents as Vallejo, California, which became a national symbol for distressed municipal finance in 2008 when it sought protection from creditors.

This Bloomberg story, posted on its website late last night, was sent to me by West Virginia reader Elliot Simon...and the link is here.


"America's Per Capita Government Debt Worse than Greece": Senator Jeff Sessions

The office of Senator Jeff Sessions, ranking member on the Senate Budget Committee, sends along this chart, showing that America's per capita government debt is worse than Greece, as well as Ireland, Italy, France, Portugal, and Spain.


This chart was posted over at the website late yesterday morning...and I thank Phil Barlett for sending it along. The link is here.


Stop the Nonsense about the "Falling Dollar" Being the Cause of Rising Gasoline Prices

I ran the Forbes story about this in Friday's column and then received the following story from reader Ian Nunn with the comment..."You chose to reference the Forbes article. Here's the analysis that debunks it." Mish Shedlock was underwhelmed by that Forbes article...and had this to say about it...

Louis Woodhill, Forbes contributor says he applies "unconventional logic to economic issues". He proves it with this headline report Gasoline Prices Are Not Rising, the Dollar Is Falling

Forget the "logic" and skip straight to reality.

Mish's take on things was posted on his website yesterday...and you can read all about it here.


David Rosenberg Presents the Six Pins that Can Pop the Complacency Bubble

The record volatility and 400-point up-and-down days in the DJIA of last summer seem like a lifetime ago, having been replaced by a smooth, unperturbed, 45-degree-inclined sea of stock market appreciation, rising purely on the $2 trillion or so in liquidity pumped into global markets by the central printers, ever since Italy threatened to blow up the Ponzi last fall. In short – we have once again hit peak complacency.

This item was posted over at the website yesterday... and I thank Australian reader Wesley Legrand for sharing it with us. The link is here.


Art Cashin: Bank Run May Accelerate and Short Squeeze in Euro

Art Cashin told King World News yesterday that we are witnessing a slow-motion bank run in Greece. Cashin, who is director of floor operations for UBS (which has $612 billion under management), also said it needs watching because if it accelerates it would be the first sign Greece is going to default.

Here is what Art Cashin had to say: "What you are watching, and people always use the example of a slow-motion train wreck, what we are seeing so far is a slow-motion bank run. If you were a Greek citizen and you thought there was some risk that over the weekend suddenly the euro could be replaced with the drachma you would be worried."

This King World News blog is worth reading... and the link is here.


Bank Deposit Flows Show Money Leaking to Germany From Spain: Euro Credit

Money is leaking out of banks in southern Europe as customers scoop deposits out of Greece, Spain, and Italy to move cash to less-indebted nations such as Germany.

Greece's total deposits plunged 28 percent from the peak in June 2009 to 169 billion euros ($225 billion) at the end of December, according to data compiled by Bloomberg. In Spain, deposits slid 5 percent in the five months through November to 934 billion euros, the least since April 2008. Italian banks held 974 billion euros in November, the lowest in 18 months.

"The biggest systemic risk is if people lose confidence in keeping their euros in Spain, Portugal, or Italy," Perkins said. "It makes sense to put your cash into Germany just to be safe and that's where the real systemic danger lies. That contagion isn't priced in, and bank deposits are the place we'd spot it."

This Bloomberg story, filed from London early yesterday morning, is Roy Stephens' first offering of the day... and the link is here.


Greek Bond Swap Begins as Germany Voices Doubts over Bailout

Athens has launched the biggest sovereign bond restructuring in history to cut its debt by €107bn (£91bn) – amid warnings from Germany that even if it were successful, there were "no guarantees" Greece could be rescued.

The Hellenic Ministry of Finance on Friday released the highly anticipated offer document, firing the starting gun on a colossal effort to find Greek bondholders and persuade them to participate in a €206bn debt swap. Athens needs bondholders to agree to the deal within days as part of its effort to unlock the €130bn bailout funds needed to avert default on March 20.

Wolfgang Schaeuble warned that the bailout, which was agreed late on Monday night, might not work. In a letter to German politicians, the finance minister said: "It may also not be the last time the German Bundestag will have [to] consider financial aid to Greece. However, the chances of success with alternatives appear to me to be significantly lower at the current time."

This story was posted over at The Telegraph yesterday evening...and is Roy's second offering of the day. The link is here.


Two Oil-Related Stories from the Tehran Times

The first one is headlined India Charters New Tanker to Ship More Iranian Crude... and the second one is titled Sanctions Not Affecting Iran's Oil Output. Both were posted in the Tehran Times yesterday... and both are courtesy of Roy Stephens.


Treating China As an Enemy: Ambrose Evans-Pritchard

I have just been sent a copy of Amitai Etzioni's essay China: Making an Adversary, published in International Politics. It has been out for a while but is new to me and will not have been seen by most Telegraph readers.

As you all know, Washington (and the West) is deeply split over how to handle China's spectacular renaissance. This is by far the most important issue in 21st-century geopolitics. It is not one we can afford to get wrong, and errors made today may prove irreversible.

The new term "China hedge" has been coined, used by those who think that the country's growing economic and military might – combined with a new "truculent attitude" – is potentially so menacing that the US must rearm and reorganize its global alliance structure as an insurance policy.

This rather long blog was posted over at The Telegraph yesterday... and I consider it a must read. I thank Roy for sharing this story with us... and the link is here.


Official Statistics: Don't Lie to Me, Argentina

Imagine a world without statistics. Governments would fumble in the dark, investors would waste money, and electorates would struggle to hold their political leaders to account. This is why The Economist publishes more than 1,000 figures each week, on matters such as output, prices, and jobs from a host of countries. We cannot be sure that all these figures are trustworthy. Statistical offices vary in their technical sophistication and ability to resist political pressure. China's numbers, for example, can be dodgy; Greece underreported its deficit, with disastrous consequences. But on the whole, government statisticians arrive at their figures in good faith.

There is one glaring exception. Since 2007 Argentina's government has published inflation figures that almost nobody believes. These show prices as having risen by between 5% and 11% a year. Independent economists, provincial statistical offices, and surveys of inflation expectations have all put the rate at more than double the official number. The government has often granted unions pay rises of that order.

What seems to have started as a desire to avoid bad headlines in a country with a history of hyperinflation has led to the debasement of INDEC, once one of Latin America's best statistical offices. Its premises are now plastered with posters supporting the president, Cristina Fernandez de Kirchner. Independent-minded staff were replaced by self-described "Cristinistas. " In an extraordinary abuse of power by a democratic government, independent economists have been forced to stop publishing their own estimates of inflation by fines and threats of prosecution. Misreported prices have cheated holders of inflation-linked bonds out of billions of dollars... and we see no prospect of a speedy return to credible numbers.

This story was posted in The Economist yesterday. It's pretty short... and if you have the time, it's well worth the read. I thank Washington state reader S.A. for sending it along... and the link is here.


Ancient Plants Back to Life after 30,000 Frozen Years

Scientists in Russia have grown plants from fruit stored away in permafrost by squirrels over 30,000 years ago.

The fruit was found in the banks of the Kolyma River in Siberia, a top site for people looking for mammoth bones.

The Institute of Cell Biophysics team raised plants of Silene stenophylla – of the campion family – from the fruit.

Writing in Proceedings of the National Academy of Sciences, they note this is the oldest plant material by far to have been brought to life.

Prior to this, the record lay with date palm seeds stored for 2,000 years at Masada in Israel.

This enormously interesting read, complete with photos, is well worth your time. It was posted over at the website on Monday...and I thank Swiss reader B.G. for sharing it with us. The link is here.


Ben Davies: Central-Bank Buying Has Gold Shorts Trapped

"A new player came into the market and that caught the market substantially offside. It started on Monday. The market was quiet but a lot of option activity was taking place in the market and then again on Tuesday in the physical (market)."

"A bigger player (and a new player) came into the market and it's a central bank. The fact is people don't get what's happening and that tells me the market is going higher."

This blog was posted over at the King World News website yesterday... and the link is here.


Interview with GATA Secretary-Treasurer Chris Powell

Dan Ameduri of Future Money Trends interviewed Chris this month during Cambridge House's California Investment Conference in Indian Wells. He tried to explain how gold price suppression is not "conspiracy theory" but rather longstanding public policy, much of it on the public record. That interview is 12 minutes long and it's posted at the website... and the link is here.


Now China Is Venezuela's Partner in Developing Las Cristinas Gold Project

Venezuela will develop its huge Las Cristinas gold project in partnership with Chinese state investment company CITIC, President Hugo Chavez announced on Friday.

The government last year canceled Canadian company Crystallex International's permit to develop the long-troubled mine project south of the Orinoco River.

Russian-Canadian miner Rusoro had hoped to partner with Venezuela in what could be Latin America's largest gold deposit. Las Cristinas has estimated reserves of 17 million ounces.

This short Reuters story was posted on their website yesterday... and I snatched it out of a GATA release yesterday... and the link is here.


Sunken Coins Bound for Spain after Legal Battle

A 17-ton trove of silver coins recovered from a Spanish galleon sunk by British warships on a voyage home from South America in 1804 was set to be flown Friday from the US to Spain, concluding a nearly five-year legal struggle with the Florida deep-sea explorers who found and recovered it.

Spain's ambassador to the United States, Jorge Dezcallar de Mazar, was expected to watch when the two Spanish military C-130s take off from MacDill Air Force Base with 594,000 silver coins and other artifacts aboard, packed into the same white plastic buckets in which they were brought to the US by Tampa, Florida-based Odyssey Marine Exploration in May 2007.

The planes were scheduled to depart around 12:30 p.m. Friday. The coins arrived at the base from a secure storage facility in Sarasota and were loaded onto the planes Thursday evening, MacDill authorities said Friday morning.

This AP story was picked up by CBS News yesterday... and I thank reader Scott Pluschau for bringing it to our attention. It's an interesting read... and the link is here.



¤ The Funnies

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¤ The Wrap

The desire of gold is not for gold. It is for the means of freedom and benefit. – Ralph Waldo Emerson

Today's "blast from the past" is another foreign import. This piece originated in Cuba and was purported to be written in 1929... and is perhaps the best-known Cuban song... and that country's most noted patriotic song. The only version I know was sung by the American easy listening/folk-rock trio/quartet, The Sandpipers, back in 1966... which was the year I graduated from high school. I thank reader Jim Kussy for recommending this old chestnut... and the link is here.

Yesterday was pretty much a nothing day in the precious metals market. I'm not sure if the current rally in gold and silver has spent itself or not...or if there is there more room to the upside. As Ted Butler pointed out to me yesterday, and I fully agree, the warning flags are now up... and it remains to be seen whether the commercial traders can or will engineer a sell-off from here.

I certainly was not amused with yesterday's Commitment of Traders Report...and I'm not likely to be enthralled with next Friday's report, either. But that opinion might change if there are major declines in gold and silver prices on Monday or Tuesday.

As of the close of trading yesterday, I note that silver has already fallen back to its 200-day moving average...and the HUI closed below that average yesterday. Gold is still about $100 above its 200-day moving average.

The only question that should be asked now is whether the engineered price decline will come sooner rather than later. "Da Boyz" could peel $100 off the gold price and five bucks off the silver price very easily, considering how loaded up they are on the short side at the moment. However, the possibility still exists that JPMorgan and their merry band of co-conspirators on the Comex may get overrun. If it does happen, it will be for the first time. But at the moment, there's no sign of that.

All we can do is wait until the Sunday night open in New York... watch the overnight trading action... and hope for the best.

That's all I have for today...and for the week. See you on Tuesday.