Gold & Silver Daily
"As last COT Report showed, the precious metals are configured for a major move higher"

¤ Yesterday In Gold & Silver

After an exciting day on Monday, trading in the Far East was very quiet...and the attempt to break through the $1,400 spot mark around 1:30 p.m. Hong Kong time was the start of a long, slow sell-off that ended at the London p.m. gold fix.  The low tick at that point was, according to Kitco...$1,359.00 spot.

The subsequent rally lasted until noon in New York...and that was it for the day.

Gold closed at $1,376.00 spot...down $24.10 from Monday.  Net volume was very heavy...around 195,000 contracts.

Silver was under selling pressure right from the New York open on Monday evening...and was down about 50 cents by 9:00 a.m. Hong Kong time.  It rallied until around 2:00 p.m...and then, like gold, went into a slow decline, with the low also at the London p.m. gold fix...10:00 a.m. EDT in New York.

And also, like gold, rallied until noon before selling off a bit into the close.  The noon low, according to Kitco, printed $22.00 spot.

Silver closed at $22.43 spot...down 49 cents on the day.  Gross volume was a chunky 63,000 contracts.

The platinum and palladium charts looked mostly similar.

The dollar index closed at 83.76 in late-afternoon trading in New York on Monday...and then traded more or less sideways until 2:00 p.m. Hong Kong time...and the subsequent rally peaked out at 84.20 about 10:20 a.m. in New York.  Then, in less than three hours, the index fell to its low of 83.70 at precisely 1:00 p.m. up all of its earlier gains...and a few basis points more.  The index closed at 83.76...unchanged on the day.

The gold price fell $40 as the dollar index rose 41 points between 2:00 p.m. in Hong Kong...and 10:20 a.m. in New York...but when the dollar index declined 52 basis points during the following two and half hours, the gold price only rose by about $15.

The gold shares gapped down almost 4 percent at the open...hit their low at 10:00 a.m. EDT when gold hit its low...and then rallied until around 1:00 p.m. in New York, before selling off into the close as gold did the same.  The HUI finished down 2.75%.

The silver chart looked similar...and Nick Laird's Intraday Silver Sentiment Index closed down 2.37%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 18 gold and 10 silver contracts were posted for delivery tomorrow within the Comex-approved depositories.  The link to yesterday's Issuers and Stoppers Report is here.

GLD had another withdrawal yesterday. This time it was 270,710 troy ounces...and as of 11:38 p.m. last night, there were no reported changes in SLV.

The U.S. Mint had another sales report yesterday.  They sold 5,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 217,500 silver eagles.

Over at the Comex-approved depositories, there was big movement in silver inventories on Monday.  They received 968,451 troy ounces...and shipped 1,119,034 troy ounces out the door.  The link to that activity is here.

In gold on Monday, these depositories didn't receive any, but shipped 32,033 troy ounces out the door...and the link to that activity is here.

Here is today's "cute quota"...

I have the usual number of stories for a mid-week column...but not too many ones related to precious metals...and a couple of them are must reads.


¤ Critical Reads

Moody's: US Faces Downgrade Without Budget Deal

U.S. policymakers must address debt loads projected to rise later this decade to avoid a 2013 downgrade, even as the latest budget projections are “credit positive,” according to Moody’s Investors Service.

The U.S. budget deficit will drop to $378 billion in 2015 from a record $1.4 trillion in 2009, according to Congressional Budget Office data. The federal government will post a $642 billion deficit this year, the first time in five years that the shortfall has been less than $1 trillion. Moody’s said Sept. 11 that the U.S.’s top Aaa rating would likely be cut to Aa1 if an agreement on the debt ratio isn’t reached.

“The fact that it showed much lower debt levels going forward, we view as a positive development,” Steven Hess, senior vice-president at Moody’s and based in New York, said in a telephone interview of the CBO forecast. “More needs to be done on the policy front to address this rising debt ratio.”

This article was posted on their website early Monday afternoon..and today's first story is courtesy of West Virginia reader Elliot Simon.


SAC’s Cohen Said to Mull Deal That Would Shut Hedge Fund

After five years under investigation for insider trading, Steven Cohen is considering proposing a deal to prosecutors that would shut his $15 billion hedge-fund firm to outside investors, according to a person familiar with his thinking.

Cohen has discussed an agreement under which his SAC Capital Advisors LP would admit wrongdoing but wouldn’t be prosecuted unless it broke the law again, said the person, who asked not to be named because the talks are private. As part of the deal, known as a deferred prosecution agreement, Cohen would close the Stamford, Connecticut-based firm to outside investors and make it a family office that manages his personal fortune. SAC Capital probably would also pay a fine.

That Cohen would ponder a deferred prosecution agreement suggests the 56-year-old billionaire sees it as unlikely that he could fight criminal insider-trading charges and continue to run a hedge fund. Prosecutors, who have already linked at least nine current or former employees to insider trading while at SAC Capital, probably wouldn’t accept an agreement that lets Cohen off the hook, said John Coffee a professor at Columbia University School of Law.

"...won't be prosecuted unless it breaks the law again???"  That's saying that you can commit your first murder, bank robbery, or fraud...and get a pass.  You can't make this stuff up.  This story was posted on the Bloomberg website late Monday afternoon...and it's courtesy of U.A.E. reader Laurent-Patrick Gally.


Watch out Watford: Here comes the secretive Bilderberg Group

Whether it’s the shape-shifting group of reptilian descendants from the constellation Draco who control humanity, or the shadowy cabal of powerful financiers and politicians who covertly run all governments, conspiracy theorists are once again preparing for their annual jamboree of protest against those who really rule the world, this year in the highly secretive destination of... Watford.

For three days beginning on 6 June, a five-star hotel in Chandler’s Cross  that normally hosts the England football team before Wembley matches, will turn over its 227 luxury rooms and 300-acre estate grounds to the über-secretive Bilderberg Group.

The Grove, once the home of the earls of Clarendon where prime ministers such as Palmerston and Walpole were guests and where a young Queen Victoria started the fashion for “the weekend break”, will turn back the clock when it welcomes around 140 of Europe and America’s most powerful leaders from banking, finance and politics with a scattering of royalty and aristocracy adding to the elite guest list. 

Due to a tradition that stretches back to 1954 and the first conference held at the Hotel de Bilderberg in Oosterbeek in the Netherlands, nothing that is discussed or agreed at a Bilderberg meeting is reported. Until recently even the names of those who  were invited was kept secret.

This news item appeared on the Internet site on Tuesday...and I thank U.K. reader Tariq Khan for bringing it to our attention.


British P.M. tries to break deadlock on tax havens

EU leaders will make another bid to agree rules on tax evasion after UK Prime Minister David Cameron called on 10 British tax havens to "get their house in order" on secret bank accounts.

In a letter released Monday (20 May) to the leaders of the British islands, including the Channel and Cayman islands, Cameron urged them to disclose details of accounts used for company ownership.

The islands should "provide for fully resourced and properly managed centralised registries, that are freely available to law enforcement and tax collectors, and contain full and accurate details on the true ownership and control of every company," he said.

This story appeared on the Internet site early yesterday morning Europe time...and it's Roy Stephens first offering in today's column.


‘Cameron wants to kick E.U. exit issue into long grass’ – Nigel Farage

Despite the British government’s desire to soft-pedal the country’s possible EU exit, the referendum to decide UK’s future in the Union must be held before the 2015 general election, believes the leader of the UK Independence Party, Nigel Farage.

With a lot of hard feeling swirling around the EU, one thing many seem agreed on is anger at Brussels. Nine European countries are now in recession and, with no end to austerity in sight, EU membership appears to be more trouble than its worth for some.

The leader of the Euroskeptical UKIP party, Nigel Farage, says recent research show that by participating in the EU, Britain is annually losing more than £100 billion due to membership fees and the Union’s regulations.

This story was posted on the Russia Today website late Monday evening Moscow time...and it's another contribution from Roy Stephens.


Farage Bashes Tax-Advantaged Hypocritical European Politicians

With Tim Cook being fried on Capitol Hill, it is perhaps ironic that the issue of taxes is front-and-center in the European parliament today. However, as usual, the always-willing-to-tell-the-truth Nigel Farage points out the gross hypocrisy of a political elite calling for higher taxes (on the wealthy and more broadly in peripheral nations) when the reality is that the higher-ups in the European parliament have their marginal tax rates capped at 12%. Of course, none of that matters because stocks are rising and interest rates are falling; but perhaps the 60% of Greek youth or 57% of Spanish youth might be intrigued at the new normal idea of 'fair share' in Europe.

This 3:56 minute tirade was posted on the Zero Hedge Internet site early yesterday afternoon...and this video clip is courtesy of Marshall Angeles.


Wealthy bank depositors to suffer losses in E.U. law

A draft European Union law voted on Monday would shield small depositors from losing their savings in bank rescues, but customers with over 100,000 euros in savings when a bank failed could suffer losses.

On Monday, a group of European lawmakers in the house's economics committee voted that, from 2016, large depositors in the European Union might suffer losses if a bank gets into serious trouble, echoing a deal in Cyprus where wealthy depositors were hit hard at two banks to save the country from bankruptcy.

Under the EU proposal, a bank would only dip into large deposits of over 100,000 euros once it had exhausted other avenues such as shareholders and bondholders.

This Reuters story, filed from Brussels, was posted on their website late on Monday evening Europe time...and I thank Manitoba reader Ulrike Marx for sending it along.


Corporate Tricks: E.U. Faces Tough Battle to Close Tax Loopholes

Wealthy businesspeople shift millions of euros abroad while profitable companies use accounting tricks to minimize their taxable earnings and assets. The EU finally wants to create effective policies to curb these practices, but faces strong opposition from member states.

BASF, based in Ludwigshafen in southwestern Germany, has a large tax department, whose work consists partly in moving money around between continents. But now the company has discovered a tax haven right at home in Europe

In addition to a large plant, the company operates the BASF Belgium Coordination Center in Antwerp. Some 160 employees at the center spend a portion of their time searching for legal ways to reduce BASF's tax bill. In 2011, the company paid taxes on its many millions in profits at a rate of only 2.6 percent.

BASF is by far not the only company to take advantage of favorable tax conditions in a neighboring EU country to improve its bottom line. Volkswagen, currently the most profitable company in Germany, was even greedier. In 2012, Belgian subsidiary Volkswagen Group Services paid no taxes at all on profits of €153 million, and in the previous year it raked in €141 million in tax-free profits -- and it was all completely legal.

This story was posted on the German website yesterday afternoon Europe time...and I thank Roy Stephens for sharing it with us.


Taxes on some wealthy French top 100 percent of income

More than 8,000 French households' tax bills topped 100 percent of their income last year, the business newspaper Les Echoes reported on Saturday, citing Finance Ministry data.

The newspaper said that the exceptionally high level of taxation was due to a one-off levy last year on 2011 incomes for households with assets of more than 1.3 million euros ($1.67 million).

President Francois Hollande's Socialist government imposed the tax surcharge last year, shortly after taking office, to offset the impact of a rebate scheme created by its conservative predecessor to cap an individual's overall taxation at 50 percent of income.

This Reuters item, filed from Paris, was posted on their Internet site early Saturday afternoon EDT...and I thank U.K. reader Teresa Tannahill for bringing it to our attention.


New Arms Bill in Congress Could Involve Major Sanctions on Russia

The US Senate Foreign Relations Committee voted on Tuesday to pass a bill that will be highly unpopular in Moscow, not to mention Damascus.

The Syrian Transition Support Act would provide arms to Syrian rebels in support of a regime change — a precedent Russia deeply opposes. Moscow has already been overtly sending weapons to Assad (more intensely so as of late), so Washington's move to overtly arm the rebels could easily paint Syria as the battleground of a blossoming proxy war.

Russia won't like that idea, but it also won't like the paragraph in the bill about sanctions on anyone shipping arms or oil to the Syrian regime: Sanctions on arms and oil sales to Assad:  Targeting any person or entity that the President of the United States determines has knowingly participated in or facilitated a transaction related to the sale or transfer of military equipment, arms, petroleum, or petroleum products to the Assad regime.

This very short article appeared on the Internet site yesterday evening EDT...and it's Roy Stephens' final offering in today's column.


Abe’s Resurgent Japan Hurt by Lack of Business Spending

As Japan’s cherry trees bloomed and the stock market soared, Kohetsu Watanabe flew to a blossom-viewing party in Tokyo hosted by Prime Minister Shinzo Abe to tell the premier personally how bad things really are.

When the head of machine-parts maker Daikyo Seiki Co. shook hands with Abe at the 12,000-guest event in Shinjuku Gyoen park, he says he begged the premier to help small- and medium-sized companies that make up 70 percent of Japan’s industry.

“Stocks and the yen may have come back, but the state of the real economy is very different,” said Watanabe, 49, who has no plans to raise wages for his 17 employees and hasn’t paid a bonus since 2008. “It’s impossible for me to be optimistic.”

This Bloomberg story appeared on their website in the wee hours of yesterday morning MDT...and I found it in yesterday's edition of the King Report.


Rubber bullets fired at South African mine strikers, several hurt

Ten striking South African miners were taken to hospital on Tuesday after being hit by rubber bullets, police said, as labour strife swells in mines and factories ahead of mid-year pay negotiations.

"If our demands are not met we will have no option but to go to the streets," NUMSA national treasurer Mphumzi Maqungo told Reuters.

The comments underscored the fragility of labour relations in Africa's biggest economy since last year's bloody mining sector unrest, and pushed the rand beyond 9.50 to the dollar for the first time since early 2009.

The currency extended its two-week slide after police confirmed that security guards had fired rubber bullets at stone-throwing wildcat strikers at a chrome mine near the platinum belt town of Rustenburg, 120 km (70 miles) northwest of Johannesburg.

This Reuters story, filed from Capetown, was picked up by the Internet site yesterday...and I thank Ulrike Marx for digging it up for us.


India's perilous gold stock situation and $40 premiums

India's Finance Minister P. Chidambaram is back to his favourite topic: curbing gold demand. India appears set to take even more steps to curb gold demand if imports continue to rise at the current pace, Chidambaram has said.

Speaking to the media on the sidelines of a conference, he pointed out, as consumers across the country thronged jewellery outlets this past month given the fall in the precious metal's price, that the government has decided not to distance itself from the financial problems caused by the ever rising demand by curbing gold imports yet again, despite the many measures already taken in the last few months.

Last week, India's central bank the RBI restricted, with immediate effect, the import of gold on consignment basis by banks. Even as the move will limit imports to a large extent, the government has said imports can be brought in only to meet the genuine needs of exporters of gold jewellery. However, retailers say the central bank's move is expected to lead to higher forex outgo on each transaction.

This story was filed from Mumbai yesterday...and is well worth reading.  I thank Ulrike Marx for her third and final contribution to today's column.


Hong Kong Police Investigate Failed Mercantile Exchange

Police began probing the Hong Kong Mercantile Exchange Ltd., owner of the failed commodities market set up by a member of the city’s cabinet, after the securities regulator found suspected financial irregularities.

The arrest of three men after the May 18 shuttering of the exchange prompted its Chairman Barry Cheung, who sits on Hong Kong’s Executive Council, to say he is taking a leave of absence from all public positions. Cheung hasn’t been accused of wrongdoing.

HKMEx lost its trading license after failing to attract sufficient volumes as it competed with rivals such as the Chicago Mercantile Exchange and the London Metals Exchange, which was bought by Hong Kong’s stock-exchange operator last year. Cheung, who ran the 2012 election campaign for the city’s Chief Executive Leung Chun-ying, is the latest in a series of prominent Hong Kong government and business figures to be affected by criminal investigations.

This story was posted on their website in the wee hours of this morning...and I thank U.A.E. reader Laurent-Patrick Gally for sending it along just before I hit the 'send' button on today's column.


Implications of Extreme Gold, Silver Price Volatility

In the short term, it is pretty much impossible to tell when prices have bottomed until after the fact. Instead of trying to guess the exact day or the specific price that gold and silver will turn back up, I take the long-term perspective that if gold surpasses $5,000 and silver exceeds $150 (which I consider to be questions of “when” not “if”) it won’t really matter whether someone now pays $1,700 or $1,350 for an ounce of gold or $22 or $35 for an ounce of silver. In other words, I consider today’s prices to be a bargain buying opportunity whether or not we are near the absolute market bottoms.


When markets get ready to turn, they often experience extreme volatility. Yesterday, for instance, the price of silver ranged all the way from $20.20 to $23.30, about at 15 percent swing. Almost no one was a buyer right at the moment that silver was at its daily low, as prices quickly soared. As I write this Tuesday morning, the silver price is about 10 percent above yesterday’s low.

So, did those who bought silver over the past several months when prices were higher than $20.20 overpay? Taking the long-term perspective, I don’t think so. Since most potential buyers didn’t jump in at yesterday’s low, does that mean that it is too late to get into silver? I emphatically say no!

This excellent must read commentary by Patrick Heller was posted on the Internet site yesterday...and the first reader through the door with the story yesterday was Elliot Simon.



Ted Butler: Blockbuster in Gold

I believe that the big buyer of the 10 million ounces of gold liquidated in the GLD was JPMorgan, either alone or with other collusive commercial banks.  The same methodology I’ve previously attributed to a potential Mr. Big in SLV (also probably JPMorgan) is at work in GLD.  If one (or 2 or 3) big buyers in GLD had merely purchased the 100 million shares that were sold in GLD, that would have quickly pushed the big buyer(s) over the 5% SEC reporting threshold thereby revealing their identity.  But by having the gold redeemed out of the trust and the metal being purchased (instead of shares), stock reporting requirements are evaded.  A single holder, perhaps working with a few collusive partners, have come to own what is, effectively, almost a quarter of the world’s largest gold stockpile and no one is the wiser.

This absolute must read is only part of what Ted had to say to his paying subscribers in his Weekend Review on Saturday.  I thank Elliot Simon for today's last story.



¤ 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

What is your "fair Share" of what someone else has worked for? - Thomas Sowell

I was hoping for better price action than we got yesterday, considering the impressive key reversals all four precious metals painted.  But that was not to be...and gold's attempt to break above the $1,400 spot price mark in late afternoon trading in Hong Kong got smacked immediately.  But the moves we actually got in all four precious metals were out of all proportion to the antics of the dollar index...a fact that I wrote about further up.

The only 'good' thing about yesterday's price action was the fact that, if all the data is reported in a timely manner, this Friday's Commitment of Traders Report should be something to see, as yesterday at the close of Comex trading was the cut-off for it.

As Ted pointed out in his commentary above...and as last COT Report showed...the precious metals are configured for a major move higher.  It only remains to be seen if JPMorgan et al will show up as long sellers/short sellers of last resort as prices rise through their critical moving averages.

All we can do is wait it out.

At the moment, gold and silver prices are miles below their current 20-day moving averages...the first moving average of any consequence [according to Ted] as far as the mega-short technical funds are concerned.  But sooner or later it will be pierced, either by price action or the passage of time, and then the technical funds who use this average as a target, will start heading for the exits.

Here are the 6-month charts for both gold and silver with their respective 20 and 50-day moving averages...

(Click on image to enlarge)

(Click on image to enlarge)

Gold chopped around the $1,375 spot mark through most of Far East trading on their Wednesday, but about ten minutes before London opened, the gold price popped for about ten bucks.  It was the same story in silver, but it only moved about 15 cents during that same period.  As I write this paragraph, London has been open ten minutes, so we'll see what happens once the trading day has a couple of hours under its belt.

Volumes are pretty least compared to the volumes we've seen lately at this time of day.  Most of it is still of the HFT variety...but there's not a lot of it. The dollar index is up about 7 basis points.

And as I hit the 'send' button at 4:30 a.m. Eastern time, nothing much has changed since I wrote the above paragraph.  Gold is up about twelve bucks...and silver is up two bits.  The dollar index is flat...and volumes, although understandably higher now, are still pretty light all things considered.

I haven't the foggiest idea how the rest of the trading day will turn out, but we're set up for a rally of biblical proportions if "da boyz" don't show up...and it's just a matter of when, not if, that rally begins.  Then, in very short order, we'll find what their intentions are.

See you on Thursday.