Casey Research Publication
Gold & Silver Daily
"The huge volume associated with the dollar plus sell-off in silver yesterday is proof positive that the short position in silver is still at the center of the '8 or less' Commercial trader's universe."
 

¤ Yesterday In Gold & Silver

Gold's rally over the $1,600 spot price at the open of trading in New York on Sunday night ran into a not-for-profit seller right out of the gate.  Gold's low price tick on Monday came shortly before 1:00 p.m. Hong Kong time...and then the price rallied back to a few dollars below unchanged by half-past lunchtime in London.

At that point, the gold price blasted back through the $1,600 mark...making it up to $1,608 before a willing seller sold it back down to around $1,590 spot.  The subsequent rally attempt at half-past lunchtime in New York got sold off the instant it hit the $1,600 price mark.

Gold closed at $1,539.90 spot...down $5.30 on the day.  Volume was a fairly light 121,000 contracts.

But it was obvious to anyone with two synapse to rub together that JPMorgan et al were after the silver price once again...as it got creamed almost the moment that trading began in New York on Sunday night.

The low of the day came shortly after 2:00 p.m. Hong Kong time.  From that point it regained a bit of ground going into the London open, before losing a bit going into the London silver fix, which occurred minutes after 12 o'clock noon in London.

The silver price, like gold, took off to the upside from that point, but ran into the usual not-for-profit sellers the moment that Comex trading began in New York at 8:20 a.m. Eastern time.  Every subsequent rally attempt after that, also got sold off...and silver closed almost on its low of the day.  The New York low price tick was $28.61...just before the close of electronic trading.

Silver had a trading range of $1.13 since Friday's close...3.8%.  The silver price closed at $28.80 spot...down 94 cents on the day.  Volume was monstrous at 50,000 contracts.  I would guess a lot of that would be high-frequency trading.

The dollar rose about 35 basis points from the open on Sunday night, right up until about 10:00 p.m...and by 9:00 a.m. Eastern time, had lost the entire gain...but then rallied a bit into the close.  The dollar's antics were not a factor in yesterday's precious metal price action.

The gold stocks were in the red all day long...and then got sold off even more...along with the rest of the equity market, starting about 3:00 p.m. Eastern time.  The HUI finished below the 500-mark at 495.67...down 2.89%.

With the silver price down 94 cents on the day, the silver stocks suffered as well.  Nick Laird's Silver Sentiment Index closed down 2.92%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 114 gold and 18 silver contracts were posted for delivery on Wednesday.  It was pretty much 'all the usual suspects' as issuers and stoppers.  The link to that report is here.

There were no changes reported in the GLD ETF on Monday...however, SLV reported a withdrawal of 1,458,705 troy ounces.

The U.S. Mint's sales report on Monday showed that they sold 2,000 one-ounce 24K gold buffaloes...and 350,000 silver eagles.  Month-to-date the U.S. Mint has sold 65,000 ounces of gold eagles...15,500 one-ounce 24K gold buffaloes...and 1,909,000 silver eagles.

The Comex-approved depositories reported receiving 1,225,662 troy ounces of silver on Friday...and only shipped a smallish 80,369 ounces out the door.  The link to that action is here.

Silver analyst Ted Butler posted his weekly review for clients on Saturday...and here are a couple of free paragraphs...

"I think the gold COT structure is back to a bullish set up, especially if the improvements after the cut-off are what I think them to be. As such, gold may also be at a price bottom, especially considering the bullish signals (or lack of bearish signals) coming from the gold physical market (ETF holdings, etc.). But to be fair, while gold is near bullish COT readings over the past year or so, on a much longer historical basis there may still be room for further liquidation. My personal sense is that we probably shouldn’t see big further speculative long liquidation in gold and may, in fact, be good to go to the upside. But if the COT structure in gold is bullish (as I think), then silver’s structure is screamingly, super-duper bullish."

"That doesn’t mean, of course, that we can’t go lower in price on a very short term basis. After all, silver is the most manipulated market in the world. And the crooks at the CME Group have armed the commercial manipulators with powerful anti-free market tools, such as High Frequency Trading. But the greater weight of the evidence suggests that we are at an important silver price bottom regardless of continued dirty market tricks from the commercials. In fact, we appear to be at an almost mirror-image opposite of where we were at the top in April, including price action, sentiment, technical readings, etc. I firmly believe that we had reached the breaking point back in April in terms of physical shortage and the commercials getting overrun on the short side. The crooks managed to save themselves at the very last minute with the blatant and desperate Sunday evening massacre of May 1st that led to these 8 months of downward price manipulation. Unfortunately, there are times when the criminals get what they want, especially when the regulators are negligent and timid. Hopefully, we are at the end of the criminals’ holiday since there appears to be little left for them to steal."

Here's another analysis of Friday's Commitment of Traders Report.  This one is posted over at ewfresearch.com.  Besides excellent analysis, the charts are first rate.

Here's what he has to say about silver..."The silver COT for positions held on 12/13/2011 still shows extreme positions across all classes of traders.  The commercials' bullish stance is currently extreme.  The speculators’ bearish stance is also extreme.  This is exactly the COT configuration that contrarian investors look for."  He also has six new charts on the undervaluation of the gold mining shares.  The link to the gold and silver COT analysis...and the gold shares charts are hereIt's worth a few minutes of your time.

Here's a graph that Washington state reader S.A. sent me yesterday.  The chart covers thirty-six years...and shows the gold price performance, the gold equities performance...and the performance of the ETFs during that period.  The chart is self-explanatory.

(Click on image to enlarge)

Here's another little financial tidbit that's been making the rounds for the last little while...and this illustration certainly adds more clarity.  Once again, no explanation is needed.  I thank reader Dennis Miller for sending it along.

There was a lot of news on just about every front over the weekend...and on Monday.  I hope you have the time to give these stories the attention they deserve.

 

¤ Critical Reads

Slapped Wrists at WaMu

When Washington Mutual collapsed in 2008, it was the largest bank failure in American history. So the $64.7 million settlement struck last week by federal banking regulators and three former WaMu executives seems like small potatoes indeed.

“Pretty soft,” is how Senator Carl Levin, the Michigan Democrat who heads the Senate’s permanent subcommittee on investigations, characterized the settlement in an interview on Friday.

“Washington Mutual Bank epitomizes everything that went wrong with the banking industry and contributed to the financial crisis, so the F.D.I.C. was right to go after the bank’s leadership,” Mr. Levin said in a statement issued on Tuesday. “Former WaMu executives Killinger, Rotella and Schneider are truly the 1 percent: they got bonus upon bonus when the bank did well, but when they led the bank to collapse, insurance and indemnity clauses shielded them from paying any penalty for their wrongdoing.”

This short piece by Gretchen Morgenson came from the Saturday edition of The New York Times.  I thank reader Phil Barlett for sending it along...and the link is here.

Read more...

Here’s One Big Thing MF and Jon Corzine Got Right: Jonathan Weil

If you were stranded on a desert island the past two months and upon your return to civilization tried to learn why MF Global Holdings Ltd.. had collapsed, you might find that some of the standard explanations don’t make much sense.

One scenario is that a catastrophic bet on some European government bonds killed the commodities and derivatives broker. Another story line has it that investors were slow to realize MF had made such a big leveraged wager, and their concerns evolved into fear, leading to a run on the firm.

Neither version of events is satisfactory.

What caused investors to lose confidence in MF in late October? There’s a simple, sensible explanation. Six days before it filed for bankruptcy, MF reported a large quarterly loss, the details of which contained a message: Don’t expect this company ever to be profitable again. The markets responded accordingly.

This op-ed piece by Bloomberg columnist Jonathan Weil was posted over at bloomberg.com last Wednesday.  It's well worth the read...and I thank reader Scott Pluschau for sending it to me on the weekend.  The link is here.

Read more...

Divisions in eurozone over ECB bond-buying

The eurozone was facing fresh splits today after one of the European Central Bank’s most senior figures said the bank should not be used to fund national debts and that if it was forced to, it would mean the end of the single currency.

Executive board member Juergen Stark, who announced his surprise resignation from the ECB earlier this year, said disagreements over the central bank’s bond-buying programme was behind his decision.

In an interview with German weekly WirtschaftsWoche to be published on Tuesday, Mr. Stark said he did not agree with the way the euro crisis has been handled. He particularly criticised the use of monetary measures, or the wholesale purchase of sovereign bonds by the bank, to contain the crisis.

The statement is in contrast to what the Bank said in September to explain his surprise resignation, which was put down to “personal reasons”.

This story appeared in the Saturday edition of The Telegraph...and is Roy Stephens first offering of the day.  The link is here.

Read more...

Psssst France: Here Is Why You May Want To Cool It With The Britain Bashing - The UK's 950% Debt To GDP

The truth is that France is actually 100% correct in telling the world to shift its attention from France and to Britain. So why is this bad. Because as the chart below shows, if there is anything the global financial system needs, is for the rating agencies, bond vigilantes, and lastly, general public itself, to realize that the UK's consolidated debt (non-financial, financial, government and household) to GDP is... just under 1000%. That's right: the UK debt, when one adds to its more tenable sovereign debt tranche all the other debt carried on UK books (and thus making the transfer of private debt to the public balance sheet impossible), is nearly ten times greater than the country's GDP. To call that "game over" is an insult to game overs everywhere.

This story is certainly worth skimming...and the graph is worth the trip all by itself.  I thank Matthew Nel for sending this zerohedge.com story along...and the link is here.

Read more...

Resentments Reawaken: Britain's Mounting Distrust of Germany

In Britain, distrust of Europe goes hand-in-hand with distrust of Germany. Relations between the two countries have cooled following the furore caused by the latest EU summit, and British euroskeptics are once again resorting to old stereotypes.

The London-based Daily Telegraph newspaper has warned its readers against what it calls Berlin's blatant effort to dominate Europe and already sees "a new era of Anglo-German antagonism" on the horizon -- again characterized by two leaders who are bound together in their sincere dislike for each other, like past leaders of the two countries: Helmut Kohl and Margaret Thatcher, or Gerhard Schröder and Tony Blair. Reverend Peter Mullen, the Anglican chaplain to the London Stock Exchange, where he is not popular for his crude views, goes even further. According to Mullen, Germans tried to achieve hegemony in Europe by military force in 1870, 1914 and 1939, and now Merkel is trying to do the same with the weapons of the financial system.

This short essay was posted on the German website spiegel.de yesterday...and I thank Roy Stephens for bringing it to my attention.  It's a must read in my opinion...and the link is here.

Read more...

Ron Paul: Beware the Coming Bailouts of Europe

The economic establishment in this country has come to the conclusion that it is not a matter of "if" the United States must intervene in the bailout of the euro, but simply a question of "when" and "how". Newspaper articles and editorials are full of assertions that the breakup of the euro would result in a worldwide depression, and that economic assistance to Europe is the only way to stave off this calamity. These assertions are yet again more scare-mongering, just as we witnessed during the depths of the 2008 financial crisis. After just a decade of the euro, people have forgotten that Europe functioned for centuries without a common currency.

The euro was built on an unstable foundation. Its creators attempted to establish a dollar-like currency for Europe, while forgetting that it took nearly two centuries for the dollar to devolve from a defined unit of silver to a completely un-backed fiat currency note. The euro had no such history and from the outset was a purely fiat system, thus it is not surprising to followers of Austrian economics that it barely survived a decade and is now completely collapsing. Europe's economic depression is the result of the euro's very structure, a fiat money system that allowed member governments to spend themselves into oblivion and expect that someone else would pick up the tab.

This short "Texas Straight Talk" piece by the good doctor was posted over at the safehaven.com website yesterday...and I thank Roy Stephens for bringing it to our attention.  The link is here.

Read more...

Walker's World: 2012 Looks Grim

The global economy faces a depressing prospect for the year ahead after a recent spate of gloomy results for countries and corporations and the failure of European leaders to convince the markets that the eurozone's debt crisis is close to being resolved.

Forecasts by the International Monetary Fund and leading banks have been revised downcast almost on a monthly basis. A year ago the IMF saw the global economy growing by 4 percent in 2012, cut to 2.7 percent in June and its latest assessment is much worse.

"The world economic outlook at the moment is not particularly rosy. It is quite gloomy," IMF head Christine Lagarde said at the U.S. State Department last week.

Ms. Lagarde has a keen grasp of the obvious...and I thank Roy Stephens once again for bringing this UPI story to my attention.  It was filed from Paris yesterday...and the link is here.

Read more...

The Exchange: Currency Wars with Jim Rickards and Martin Hutchinson

Here's a Reuters piece that was posted over at their Breakingviews.com website on Friday.  They discuss how a global competition to devalue currencies can be avoided.  Gold plays a prominent part in this interview.  This 9:45 minute video is an absolute must watch...and I thank reader "Erik C" or sharing it with us.  The video is posted over at youtube.com...and the link is here.

Read more...

Alasdair Macleod: Money supply explosion will lead to accelerating inflation

Economist and former banker Alasdair Macleod, writing at GoldMoney, reports on a study that finds the U.S. dollar's "true money supply" going parabolic and carrying the price of gold with it. Macleod's commentary is headlined "Money Supply Explosion Will Lead to Accelerating Inflation" and it's posted at GoldMoney Internet site.

I thank Chris Powell for providing the introduction.  I've read Alasdair's short essay.  It's a must read for sure...and the two graphs are worth the trip.  Macleod's commentary is posted at the GoldMoney Internet site...and the link is here.

Read more...

James Turk: More deficits, more debt

GoldMoney founder, Free Gold Money Report editor, and GATA consultant James Turk writes that the U.S. government has long passed its "Havenstein moment," as it now spends 58 percent more than it takes in on a monthly basis, that 58 percent constituting debt monetization and a guarantee of hyperinflation. But we might add -- and Turk probably would agree -- that, in the United States, the imperial power and proprietor of the world reserve currency, the new Havenstein moment also guarantees, even before hyperinflation, more and more repressive interventions to subvert markets from manifesting hyperinflation. That is, for starters, what the gold price suppression scheme long has been about.

Turk's commentary is titled "More Deficits, More Debt," and it's posted at the fgmr.com site. This is also a must read and, once again, I stole the introduction from Chris Powell.  The link is here.

Read more...

Euro Woes May Prompt Return of Gold Standard

Gordon Kerr, founder of consultancy firm Cobden Partners, talks about banking industry risks and the European sovereign-debt crisis. He speaks with Linzie Janis and Elliott Gotkine on Bloomberg Television's "First Look."

Kerr sort of reminds me of a British version of Kyle Bass.  This interview, courtesy of Elliot Simon, runs 6:22...and is posted over at youtube.com. This is worth watching...and the link is here.

Read more...

Gold price forecast to drop

This bear-type story is typical of the main steam media's coverage of this engineered price decline by the Commercial traders in the Comex futures market.

This Reuters piece was posted over at iol.co.za website in South Africa on Saturday.  This drivel is accompanied by a photo of a gold dragon the will knock your socks off.  For that reason alone it's worth the trip.  I thank Matthew Nel for digging it up on our behalf...and the link is here.

Read more...

Lots of gold and silver went missing at MF Global

It's one thing for $1.2 billion to vanish into thin air through a series of complex trades, the well-publicized phenomenon at bankrupt MF Global. It's something else for a bar of silver stashed in a vault to instantly shrink in size by more than 25%.

That, in essence, is what's happening to investors whose bars of silver and gold were held through accounts with MF Global.

The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets -- gold, silver, cash, options, futures, and commodities -- into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver -- and hold "warehouse receipts" to prove it -- they'll have to forfeit 28% of the value.

This short piece showed up in Barron's on Saturday...and the first one through the door with it was West Virginia reader Elliot Simon.  It's certainly worth your time...and the link is here.

Read more...

SILVER MINING / Making Doré Bars - Discovery Channel

Here's a youtube.com video clip about how they make doré bars at silver mines.  It was obviously videotaped at a First Majestic Silver mine, as their privately minted bars figure prominently in this video.  Matthew Nel sent it to me on the weekend.  It runs for a hair over five minutes and is definitely worth watching.  The link is here.

Read more...

Zero Hedge: Did GLD and other gold ETFs kill gold stocks?

Here's a GATA release where Chris Powell has written a preamble that I'm not about to cut and paste.  The title is pretty much self-explanatory...and is a must read.  The link is here.

Read more...

'Bargain' gold spurs buying in Dubai

Physical gold buying saw a significant upsurge last week after prices slumped in the wake of global concerns. “I was resigned to the fact that the physical buying in our market (Dubai and UAE in the wider sense) had finished for the year, and then came Thursday, 15th December. We saw excellent buying from customers which reminded us very strongly of the heydays in August/September,” Gerhard Schubert, Head of Precious Metals at Dubai-based Emirates NBD, said in his weekly precious metals report.

Emirates NBD’s Schubert does not share Gartman’s pessimistic opinion on the future price of bullion. “There are quite a lot of analysts and commentators who are predicting the end of the bull market, but we do not subscribe to this scenario, at least not yet. The situation in the US, and more importantly in the Eurozone, will stay relevant for some time to come. The world economic picture looks a little brighter, but the looming recession in the Eurozone makes it difficult to view this as more than a temporary phenomenon,” said Schubert.

“We saw our second-best single day last Thursday and I am encouraged to applaud our customers, who obviously view the prices under $1,600 as a bargain,” said Schubert.

This story was posted on the emirates247.com website on Sunday...and I thank reader 'David in California' for sending it my way.  The link is here.

Read more...

John Williams - Gold to Prevail as System Falls into Disorder

“My outlook has not changed a bit.  The underlying fundamentals have not changed a bit.  The domestic and global financial systems, however, appear to be on the brink of massive instabilities.  This environment is one where prudent investors—in a U.S. dollar-denominated world—should be looking to preserve their wealth and assets, using assets that are liquid and that preserve the purchasing power of invested funds. 

Accordingly, gold, and related hedges such as silver; and stronger currencies such as the Swiss franc, Australian dollar and Canadian dollar; should be held for the long term.  Irrespective of short-term market instabilities, such assets will prevail as the system falls into disorder.

This is a King World News blog that Eric sent me last night...and the link is here.

Read more...

Jim Rickards - This Will Send the Price of Gold to the Moon

Eric King sent me a Jim Rickards interview yesterday.  It's so long that he's had to post it in two parts.  I haven't had time to listen to either one, but it will be on my 'to do' list when I get up later this morning.

Their both posted over at the King World News website.  I would think that they're both a must listen.  The link to Part I is here...and Part 2 is here.

Read more...

The East Is Gold? Bugs Take Big Hit, but Asia Is Buying

There's wide agreement that gold's charts now do indeed look gruesome. The situation was well summarized on Friday by Pring.com's Weekly InfoMovie report: "Gold has now completed a massive head-and-shoulders top. The share ETF has also completed a smaller distribution pattern. ... Lower prices look likely in the next few weeks. For the record, the head-and-shoulder objective for the gold price calls for an eventual move to the $1,300 area."

But could this be excessive panic? GCRU, the short-term gold-trading service started by gold veteran Harry Schultz and now operated by the Aden Forecast, thinks so.

Very bravely, it issued a special alert on Thursday afternoon overriding its stops: "Our stop loss was triggered today on both gold and silver."

"DO NOT SELL. Instead, we recommend keeping your gold and silver positions. ... The markets are nearing a bottom, and now is not the time to sell."

This story was written by Peter Brimelow over at marketwatch.com yesterday...and I stole it from a GATA release.  It's a must read from start to finish...and the link is here.

Read more...

Ted Butler: Don't stop complaining about shorting of SLV

The 2-paragraph comment that I cut and paste from Ted Butler's Friday missive has now been posted in the clear...along with the entire essay.  Chris Powell has written an extensive preamble to Ted's commentary...and there's no way that I can improve on it...and it's too big to cut and paste, so I'll gladly let Chris do the heavy lifting on this one.

The essay is headlined "SLV Short Position Update"...and the link to the story is posted in this GATA release.  It's a must read, so click here.

Read more...

 

¤ The Funnies

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¤ The Wrap

I supposed that I shouldn't have been entirely surprised that gold wasn't allowed to break above the $1,600 level...but the fact that it wasn't allowed should have been blatantly obvious to anyone.  It was probably the same reason that silver wasn't allowed above the $29 spot level.

The huge volume associated with the dollar plus sell-off in silver yesterday is proof positive that the short position in silver is still at the center of the '8 or less' Commercial trader's universe.  Although they were able to get the price down as much as they did, the question still remains as to how much real spec long liquidation they managed to achieve, as there are few of these contracts left to flush out.

As Ted Butler pointed out in his weekend commentary, the small traders in the Nonreportable category of the COT Report hold the smallest net long position in the thirty years that he's been watching the silver market...and it's almost the same in the Non-Commercial category as well.

The preliminary open interest numbers for Monday's trading day showed a small decline for gold...and an increase in open interest in silver.  Based on the price activity, it's entirely possible that there was a lot of shorting going on in the silver market yesterday.  The increase in open interest could also have been new spread trades as well.  The only comforting thing is that all of Monday's trading data will be in Friday's Commitment of Traders Report...and it will certainly be another one for the record books, especially in silver.  Gold will show a huge improvement as well, since all of the data associated with taking out its 200-day moving average will be in this report.

The gold price was pretty much range bound for most of the Far East trading day during their Tuesday, but now that London has been open a couple of hours, gold is a few dollars above the $1,600 price market...and up about twelve bucks from the Monday close in New York.

Silver hit a new low moments after the New York Access Market opened on Monday night...and has been moving generally higher ever since.  It's above the $29 spot price...and moving higher, up about 40 cents from Monday's close.

I was taken aback by the volume numbers.  As of 5:20 a.m. Eastern time, gold volume was only 18,500 contracts...and silver volume was only 3,300 contracts.  This looks like 'real' volume to me...not a high-frequency trader in sight...and it looks like the beginnings of a short covering rally.  It will be interesting to see how long this continues.

With silver and gold cleaned out to the downside, it will be of interest to see who shows up on the short side of the trade when the next rallies in both metals begin, which they may in as I write this.  After such historic cleanouts, which began on May 1st, I find it really hard to believe that the Commercial traders will be back on the short side of this market...and I wouldn't be at all surprised if the next rally is a short-covering rally instigated by the big Commercial traders themselves...JPMorgan et al.  They may take the prices of both metals as high as the can get them without triggering new buying by the technical funds...and may also be on the buy side of any of the small Commercial traders that are dumping their long positions for a profit.  If I were them, that's what I would be doing.

This is one of Ted Butler's cherished dreams...that this scenario will occur...and the conditions as they exist today are ripe for such an event.  We will find out, as they say, in the fullness of time.

That's more than enough for one day...see you tomorrow.