Casey Research Publication
Gold & Silver Daily
"How much of this price movement has to do with the ongoing dollar rally...or an engineered sell-off...remains to be seen."
 

¤ Yesterday In Gold & Silver

If you check the Kitco chart below, you'll see that the Wednesday trading day in gold was virtually a carbon copy of what happened on Tuesday.  I was tempted to just cut and paste my Tuesday gold commentary in this spot to save time...but I didn't.

Like Tuesday, the prominent feature in Wednesday gold trading was the 'rally' that began at the open of Comex trading in New York.  This rally lasted less than an hour before the selling started...and it was all down hill until about 2:20 p.m. Eastern time.

Gold's low tick of the day [$1,719.70 spot] came at this 2:20 time...and the gold price recovered about eight bucks by the close of the New York Access Market at 5:15 p.m. Eastern.

Gold finished at $1,728.10 spot...up $7.00 on the day.  Net volume was not light...around 131,000 contracts.

Silver's chart was similar, but the price was far more 'volatile'.  Twice in early morning Comex trading silver tried to take off in price, but got sold down both times.  Then, to add insult to injury, a not-for-profit seller showed up at precisely 2:00 p.m. Eastern in the thinly-traded electronic market and sold the silver price down about 45 cents in about ten minutes.  This spike down [$33.02 spot] proved to be the low of the day.

But, by the close of trading, silver had regained all that 'loss'...and closed at $33.50 spot, down 'only' 8 cents on the day.  Volume, net of all roll-overs out of the March delivery month, was in the 35,000 contract range.

The dollar index opened around 79.40...and then hit its nadir [79.12] about 7:20 a.m. in London yesterday morning.  The ensuing rally lasted the rest of the day...and the dollar index closed around 79.65...up 25 basis points.

Despite the dollar rally, it's pretty obvious that gold and silver wanted to take off to the upside the moment that New York opened...and it's equally as obvious that one or more not-for-profit sellers were there to sell whatever amount of futures contracts it took on the short side to kill the rallies stone cold dead.

The gold stocks gapped up over a percent when the equity markets opened at 9:30 a.m. in New York, but that was pretty much all she wrote from that point on.  The stocks held in their pretty good until just before lunch Eastern time...but the ten dollar drop in the price over the next few hours caused the gold stocks to swoon and they never really recovered after that...despite the fact that the gold price then rallied and closed seven bucks in the black.

I'm sure that the poor performance of the general equity markets at the end of the day didn't help the HUI either...as it finished down 0.34% when all was said and done.

The silver stocks finished mixed on the day as well...and Nick Laird's Silver Sentiment Index closed basically unchanged...up 0.03%.

Well, the CME Daily Delivery Report showed that only 2 gold contracts were posted for delivery tomorrow...and no silver contracts for the second day running.  But, having said that, there are nine days left before first day notice for delivery into the March contract for silver...and the CME reported yesterday that there are still 385 gold, and 187 silver contracts open for February delivery...and 56 of those silver contracts were just added to the delivery schedule yesterday.

The GLD ETF did not have a report yesterday...but there was another withdrawal reported from SLV...as authorized participants withdrew another 1,068,875 troy ounces.

The U.S. Mint had its first sales report of the week on Wednesday.  They sold 5,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 100,000 silver eagles.  Month-to-date sales numbers are not impressive.  So far in February the mint has sold 15,000 ounces of gold eagles...3,500 one-ounce 24K gold buffaloes...and 835,000 silver eagles.

It was a rather quiet day at the Comex-approved depositories on Tuesday.  They only reported receiving 303,246 ounces of silver...and shipped 381,430 troy ounces out the door.  The link to that action is here.

Silver analyst Ted Butler had his mid-week commentary to his paying subscribers...and here are three free paragraphs...

"Let me confess one of my greatest fears about a potential future bubble in silver. If a silver bubble does develop, by definition large numbers of uninformed investors will join in the fray, eager to capture sure profits. The concerns for risk will be cast aside, as they are in any bubble. Undoubtedly, many of my former bullish arguments for buying silver will be trotted out as current reasons for buying even as price and risk grow. I doubt very much that I will be pounding the table to buy in a silver bubble and instead will probably be way too early in suggesting its sale. Yet new uniformed buyers will mistakenly view my past pronouncements as reasons to buy after a bubble is formed. The thought that I will inadvertently be responsible for damage to the latecomers is troubling."

"Of course, the risk to latecomers only grows deep into the bubble, should it form. The risk of a silver bubble bursting now is remote, because it hasn’t formed yet. Yes, there is always the risk of short term sell-offs for reasons related to manipulative activities on the COMEX, but those sell-offs should be viewed as buying opportunities as has been the case for the life of the silver bull market to date. In terms of a bubble-like collapse in silver prices, that risk will not exist until a bubble first forms."

"In the meantime, since a bubble has not yet formed in silver, what are the possible effects on the price should a silver bubble form? Certainly, I have not been particularly surprised by the 8 to 10 fold increase in price over the past 5 to 10 years. If anything, the price performance to date in silver, given all the facts, has been somewhat muted. Leaving out a possible bubble forming, it would not surprise me to see eventual long term silver prices at $100 or even $200. That’s without a bubble. If a silver bubble does form, it is hard for me not to imagine some multiple of those prices."

Reader Scott Pluschau, a frequent contributor to this column, sent me this short note yesterday..."Since you mentioned TA and equities the other day, Wednesday was a key reversal day in the Nasdaq 100 on a surge in volume...if you have any interest."  I did...and his blog from yesterday is well worth a look.  The chart is a standout...and the link is here.

Washington state reader S.A. sent me these two charts showing the decline in Chinese and Russian U.S. Treasury holdings...and there are no surprises.

Then a bit more than twelve hours later, the zerohedge.com story that he lifted these graphs from arrived in my in-box courtesy of West Virginia reader Elliot Simon.  The headline reads "Russia Dumps Treasurys For 14 Consecutive Months; China Slashes Holdings To Lowest In Over A Year"...and if you want to run through it, the link is here.

I have the usual number of stories for you today...and I hope you have time to at least skim most of them.

 

¤ Critical Reads

US Retail Sales Disappointment Weighs on Markets

Weaker than expected U.S. retail sales figures dented market confidence Tuesday after another mass downgrade of the creditworthiness of European countries had little impact.

Figures showing that retail sales in the U.S. rose by 0.4 percent in January, half the anticipated amount. That prompted a reverse in stock markets, which had earlier shown resilience to Moody's decision to downgrade six EU countries and its accompanying warning that top-rated Britain, France and Austria could see their ratings cut too.

Following a downwardly revised flat reading for December, the retail sales figures proved a disappointment in the markets, especially in light of the recent run of strong U.S. economic data, most notably relating to the job market.

Well, dear reader, that 'strong economic data' that's mentioned in the above paragraph is all b.s...and that's why sales are weak.  I'm sure the sales data is even worse than the numbers show.  This AP story showed up posted over at abcnews.go.com on Tuesday.  I stole it from yesterday's King Report...and the link is here.

Read more...

The insiders are selling heavily: Mark Hulbert

Corporate insiders are now selling their companies’ stock at a rate not seen since late last July.

That’s a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years.

In early August, as you may recall, the U.S. government lost its triple-A credit rating, and the bottom dropped out of the stock market. Between the last week of July and the second week of August, the Dow Jones Industrial Average dropped 2,000 points.

This marketwatch.com story is from last Thursday...and I thank Nitin Agrawal for sending it along in the wee hours of this morning.  The link is here.

Read more...

JPMorgan, HSBC Among Firms Accused by Informant Bank in Canada Libor Case

JPMorgan Chase & Co., Deutsche Bank AG and HSBC Holdings Plc are among at least seven firms accused by another bank of participating in a conspiracy to manipulate the price of derivatives worldwide for more than three years.

The unnamed bank, seeking immunity, told Canada’s Competition Bureau that traders and cash brokers conspired to influence the Yen London interbank offered rate from 2007 to 2010 to profit on interest-rate derivative positions linked to the benchmark. The bureau spelled out the probe in documents it filed with the Ontario Superior Court in May.

The documents, shown yesterday to Bloomberg News by court clerks, offer one of the most detailed accounts yet as watchdogs in Europe, Asia and the U.S. look into concerns that firms conspired to manipulate interest rates serving as benchmarks for trillions of dollars of financial products. Canada also is investigating Citigroup Inc., Royal Bank of Scotland Group Plc, ICAP Plc and RP Martin Holdings Ltd., the court documents show.

The rot in the financial system is deeper than anyone knows. There are no markets anymore...only interventions.  I thank Washington state reader S.A. for sending me this Bloomberg story that was posted on their website late on Tuesday evening.  The link is here.

Read more...

Single currency's struggle takes its toll on Europe

The diverse nature of the 17 countries brought together in monetary union has never been so apparent.

As Greece stands on the brink of bankruptcy, Germany, its financially disciplined and powerful eurozone peer looks down with disapproval on a country that for years lived beyond its means.

Greece may be in a bad state but it is not alone, and the eurozone's weakest economies have dragged down the strongest with them. As Howard Archer, economist at IHS Global Insight, puts it, the region "stuck one foot back through the recession door" in the fourth quarter of 2011, after the combined economy shrank by 0.3pc. The other foot is expected to join it in the coming months.

"We doubt that the eurozone will be able to avoid further contraction in the first quarter and very possibly the second as well in the face of tighter credit conditions, a further tightening in fiscal policy in many countries, the ongoing pressures facing consumers, and limited global growth," said Mr. Archer.

This story was filed in The Telegraph late last night London time...and I thank Roy Stephens for sending it along.  The link is here.

Read more...

Germany is 'playing with fire' on Greece, warns finance minister

Greek finance minister Evangelos Venizelos accused European leaders of "playing with fire" by trying to oust the beleaguered country from the eurozone amid fears they want to delay releasing the €130bn (£108bn) bail-out until after Greek elections in April. 

The warning came as credit rating agency Moody’s last night put 114 European banks – including nine in the UK – on review for a downgrade, citing the “prolonged” impact of the euro crisis. Royal Bank of Scotland, Barclays, Lloyds Banking Group and HSBC were among those affected.

With less than five weeks to avert bankruptcy and yet more delays and demands from Berlin and Brussels, Mr. Venizelos said: "In the euro area, there are plenty who don't want us anymore. There are some playing with fire, domestically and abroad."

This story was posted in The Telegraph just after midnight local time...and I thank Roy Stephens for his second offering of the day.  The link is here.

Read more...

Nigel Farage - Greece Descending into Total Chaos & Violence

Nigel neither guilds lilies...nor suffers fools gladly.  His interview with Eric King is no exception to that rule...and the blog is posted over at the King World News website...and the link is here.

Read more...

Greece's Model Mayor: Reform Hero Takes on Corruption in Thessaloniki

European Union officials have nothing but praise for the mayor of the Greek city of Thessaloniki. Yiannis Boutaris has been pushing ahead with far-reaching reforms to undo the abuses of his predecessors and has already slashed the city's spending by 30 percent. He's even asking the Germans for advice.

Boutaris is the most unusual politician in Greece, despite his insistence that he is not a politician at all. In fact, he says, he is the opposite of a politician, a businessman who has taken on a new project: running the city of Thessaloniki, where he has been mayor for almost exactly a year.

It's relatively uncommon for the international observers working for the so-called troika of the European Union, the International Monetary Fund (IMF) and the European Central Bank (ECB) in Athens to say something complimentary about a Greek politician. And it's almost unheard of for them to praise a Greek for his penchant for reform, as they are doing with Boutaris. In their reports home, the officials write that, since Boutaris came into office, Thessaloniki has been an "island of hope" and a "model for all of Greece." A member of the European Commission team in Athens says: "Boutaris is the exception, a beacon. Everyone else can learn something from him."

This very interesting read was posted over at the German website spiegel.de yesterday...and is Roy Stephens third offering in today's column.  It's certainly worth your while...and the link is here.

Read more...

Iran Warns 6 Countries in Europe It Will Cut Off Oil

Besieged by international sanctions over the Iranian nuclear program including a planned oil embargo by Europe, Iran warned six European buyers on Wednesday that it might strike first by immediately cutting them off from Iranian oil.

Iran’s official Islamic Republic News Agency said the threat was conveyed to the ambassadors of Italy, Spain, France, the Netherlands, Greece and Portugal in separate meetings at the Foreign Ministry in Tehran. Officials said in an earlier report by Press TV, Iran’s state-financed satellite broadcaster, that Iran had already cut supplies to the six countries was inaccurate — but not before word of the Press TV report sent a brief shudder through the global oil market, sending prices up slightly.

“Iran warns Europe it will find other customers for its oil,” the Islamic Republic News Agency said. “European people should know that if Iran changes destinations of the oil it gives to them, the responsibility will rest with the European governments themselves.”

This story was posted in The New York Times yesterday...and I thank reader Phil Barlett for sharing it with us...and the link is here.

Read more...

Insurance fears see few tankers ready to haul Iran crude

Asian buyers of Iranian crude are struggling to find vessels willing to call at ports in the Islamic Republic as ship-owners fear losing insurance cover for their tankers because of European and US sanctions aimed at curbing Tehran's nuclear ambitions.

Although the EU ban on the import and transportation of Iranian crude does not directly affect Iran's Asian customers, a provision in the sanctions legislation agreed January 23 is having an impact far beyond European shores. "It shall be prohibited to provide, directly or indirectly, financing or financial assistance, including financial derivatives, as well as insurance and reinsurance, related to the import, purchase, or transport of Iranian crude oil and petroleum products," the legislation says.

Chartering and ship owning sources say that tanker operators with protection and indemnity (P&I) insurance cover from mutual clubs based in Europe are not accepting crude cargoes loading from Iran, despite being offered a premium to standard rates.

This rather long story was filed from Singapore late on Tuesday...and was sent to me by reader W. Busser.  The article is posted on the platts.com website...and is well worth skimming.  The link is here.

Read more...

India's support for Iran threatens its US relationship and global leadership role

The Indian government’s ill-advised statement last week that it will continue to purchase oil from Iran is a major setback for the US attempt to isolate the Iranian government over the nuclear issue. The New York Times reported Sunday that Indian authorities are actively aiding Indian firms to avoid current sanctions by advising them to pay for Iranian oil in Indian rupees. It may go even further by agreeing to barter deals with Iran – all to circumvent the sanctions regime carefully constructed by the United States and its friends and allies. According to the Times, India now has the dubious distinction of being the leading importer of Iranian oil.

This is bitterly disappointing news for those of us who have championed a close relationship with India. And it represents a real setback in the attempt by the last three American presidents to establish a close and strategic partnership with successive Indian governments.

I'm happy to see at least one government do what's in its own interest. This story was posted on The Christian Science Monitor website on Tuesday...and is another offering from Washington state reader S.A.  The link is here.

Read more...

How Iran Nuclear Standoff Looks From Russia: Dmitri Trenin

When Russians look at Iran, they see a country that has been their neighbor and rival forever. As the Russian empire advanced, it wrestled the North and South Caucasus from the Shah. Peter the Great annexed, briefly, Iran’s entire Caspian Sea coastline and put his forces just north of Tehran.

In the early 20th century, Russia and the U.K. divided Iran into zones of influence. The Russians got the north and proceeded to occupy Iran twice, during each of the world wars. When Franklin Delano Roosevelt and Winston Churchill met with Josef Stalin in Tehran in 1943, they were protected by the Red Army.

Yet there was never much love lost between the two countries. To Iranians, Russia was too powerful and too threatening. Russians, meanwhile, remembered their own embassy trauma at Iranian hands in 1829. Every schoolchild knows the fate of Alexander Griboyedov, the czar’s ambassador to Persia, who was murdered, with his entire embassy staff, by an angry Tehran mob. Griboyedov was a great Russian author, many of whose lines Russian children -- and grown-ups -- know by heart.

This story is a real education...and is something that you'd never read in any western history book.  For that reason alone it's a must read and, once again, I thank Washington reader S.A. for digging this Bloomberg article up on our behalf...and the link is here.

Read more...

U.S. Supreme Court Rejects Stay in Spanish Sunken Treasure Case

Spain first stole it from Peru...and now steals it from the salvagers.

Last Thursday, the U.S. Supreme Court declined to hear an emergency application for a stay filed by a Florida deep-sea salvage company that wanted to maintain possession of a half billion dollars worth of gold and silver coins until a final decision is made about who owns them.

"Spain has now been victorious at every level in the United States courts, from Tampa to Atlanta to Washington," said Jim Goold, who defended Spain's claim to the treasure. "I am pleased and proud for all of us."

Odyssey Marine Exploration had made an emergency appeal to the high court in an attempt to block a lower court's order last week that it turn over the treasure to Spain.

This story was posted over at the cnn.com website on Thursday, February 9th...and I plucked it from a GATA release yesterday.  The link is here.

Read more...

Soros Raises Gold Fund Stake as Paulson Joins Tudor in Selloff

Paulson & Co., the hedge fund founded by billionaire John Paulson, cut its stake in the SPDR Gold Trust for the second straight quarter, while billionaire investor George Soros increased his holdings.

Paulson held 17.3 million shares in the exchange-traded fund backed by bullion as of Dec. 31, 15 percent less than the 20.3 million on Sept. 30, Securities and Exchange Commission filings showed. His holdings fell 45 percent from end-June, the first reduction in more than two years. He is still the biggest stakeholder. Vinik Asset Management LP, Tudor Investment Corp. and SAC Capital Advisors LP also sold shares. Lone Pine Capital LLC added holdings.

This story was posted over at the moneynews.com website yesterday...and I thank West Virginia reader Elliot Simon for sending it along.  The link is here.

Read more...

World has seen 'peak gold,' Embry tells King World News

Interviewed by King World News yesterday, Sprott Asset Management's chief investment strategist, John Embry, says central banks have put gold in a stranglehold while they stumble around the Greek sovereign debt problem, but no matter how that ends up, the world has already seen "peak gold" and declining production will support the price.

I thank Chris Powell for writing the introductory paragraph above. An excerpt from the interview, headlined "John Embry: Is Greece's Situation Bad for Gold?", is posted at the KWN website...and the link is here.

Read more...

Tune out. Buy gold. Be happy. - Bill Bonner

The Sage of Omaha explained in Fortune magazine why bonds are dangerous.

He went on to explain why he doesn’t like gold either. He points out that since 1965, the total return on gold (not adjusted for inflation) was 4,455%. But the total return on stocks was higher, at 6,072%.

The difference between the two is that gold is a ‘sterile’ investment, says Buffett. Stocks are not.

He’s right. Gold is only useful at protecting purchasing power when the monetary system is in danger. At almost all other times, you’re better off with stocks, businesses, farmland or another productive asset.

That’s why Buffett now prefers stocks. And it is why we now prefer gold.

This rather short Bill Bonner offering was posted over at the moneyweek.com website on Valentine's Day...and it's a must read.  The link to Roy Stephens last offering of the day is here.

Read more...

John Embry: Debt saturation ensures much higher gold and silver

Remarks by John Embry, Chief Investment Strategist, Sprott Asset Management, at the Cambridge House International California Investment Conference at the International Hyatt Grand Champions Resort, Indian Wells, California on Saturday, February 11th.

John is at the top of his game in this speech...and it's an absolute must read.  It's posted on the gata.org website...and the link is here.

Read more...

 

¤ The Funnies

The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin. ~ Mark Twain

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¤ The Wrap

Well, there's nothing new I can say about the Wednesday trading day after my comments on the Tuesday trading day, as they were virtually identical.  This sort of trading action certainly doesn't happen by chance.

I was talking to Eric Sprott yesterday...and asked him how he was making out getting all the silver from his last offering in PSLV.  He told me that they had already received it...and we both agreed that Ted Butler had been right on his call that JPMorgan et al would make sure that the silver purchased for this offering was delivered in a timely manner...as 'da boyz' didn't want to run the gauntlet of negative public opinion by taking ten weeks to deliver this batch, like they did last time.

We also agreed that with options expiry looming for the March delivery month in silver, the Commercial traders are probably going to attempt to take a strip out of both gold and silver between now and then...and it was just a matter of when they started that process.  I've mentioned that possibility a few times so far this month and, with the cut-off for tomorrow's Commitment of Traders Report out of the way at the close of Comex trading on Tuesday, it's possible that the process may have begun yesterday.

Gold and silver were under pressure right from the Thursday open at 6:00 p.m. in New York last night...and I see that the $33 price level in silver got punctured to the downside.  How much of this price movement has to do with the ongoing dollar rally...or an engineered sell-off...remains to be seen.  Blythe Masters would know, but she's not returning my calls.

As I just mentioned, the dollar rally is still ongoing...and about 8:45 a.m. in London this morning, the dollar index managed to break above the psychological 80.00 mark...and is up about 35 basis points as I hit the 'send' button.  We'll see how long this state of affairs lasts.  If we get a sharp dollar reversal from here, that would make a precious metals sell-off of any significant amount very difficult to pull off.

As of 5:18 a.m. Eastern time, gold volume is already way up there...and silver volume is huge as well...so I would guess that there's been quite a bit of speculative long liquidation associated with the price spike below the $33 mark in silver.  At the moment, gold is down ten bucks...and silver is down about 45 cents.  We'll just have to wait and see how this all unfolds as the rest of Thursday progresses, but at the moment, it's all up in the air.

Tomorrow is the date for the next Commitment of Traders Report...and it's too bad that yesterday's trading data won't be in it.

That's all I have for today.  I hope your Thursday goes/went well...depending on what side of the International Date Line you are on.

See you tomorrow.