Gold & Silver Daily
"So what the overnight markets giveth, the London and New York markets working together, make every attempt to taketh away."

¤ Yesterday In Gold & Silver

Gold traded more or less sideways up until about 2:00 p.m. Hong Kong time...and then began a smallish rally that got cut off at the knees shortly after 9:00 a.m. in London about three hours and change later.

After selling off a bit, gold began to rally once again...shortly before the Comex began to trade.  The high of the day came a few minutes after 9:00 a.m. in New York...and it was all down hill from there until minutes before noon Eastern time, which just happened to coincide with the top of a rally in the dollar index which was going on simultaneously.

From the New York high to the New York low, gold was clocked for about $21...but regained about half of that by the close of electronic trading at 5:15 p.m. Eastern time.

The gold price closed at $1,736.70 spot...up $6.40 on the day.  Gross volume was 174,000 contracts, give or take.  The net volume was a tough read looking at yesterday's closing volume numbers from the CME website.

The silver price followed the same basic pattern as the gold price did...with the various highs and lows coming at precisely the same times.  Of course the big difference was the takedown between about 9:15 a.m. and 11:50 a.m. during the New York 'da boyz' really kicked the living snot out of the silver price during that time period.

From its New York high of $ it's low two and a half hours later at $32.87...silver got smacked for $1.37.  That's an intraday price move of 4.00%.

Silver gained back about two bits of that loss during the rest of the New York trading session...and closed the day at $33.13 spot...down 'only' 37 cents from Monday's close.  Net volume [mostly high-frequency trading] was a quite high at 37,000 contracts.

The dollar index declined about 35 basis points between the Far East open on Tuesday...and 9:15 a.m. in London, which was its low of the day, around 78.75.  From that low, the dollar crawled up about 10 basis points before a rally of real substance got underway at 9:00 a.m. in New York...about five hours later.

The rally lasted for just a bit under three hours...and this portion of the dollar rally showed a gain of just under 60 basis points...about three quarters of a percent.  from that high, the dollar index gave back about 20 basis points of that rally.

If you check the Kitco charts above, gold and silver were both in rally mode between 7:00 and 9:20 a.m...even thought the dollar was moving higher at the same time.  It took this major dollar index rally to end it...and it looked very much like a "rally the dollar and kill the precious metals" operation to me.  I've seen many of them...and this looked pretty typical.

The moment the dollar index stopped rising, the gold price turned higher.

The gold shares gapped up at the open in New York at 9:30 a.m. yesterday morning...and that was the high of the day.  From there, they got sold off almost four percentage points before recovering a bit into the close.  Even though gold finished up on the day, the HUI finished in the red by 0.29%.

The silver shares finished mixed...and Nick Laird's Silver Sentiment Index closed the day down only 0.48%.

(Click on image to enlarge)

Yesterday was "Day 2" of the February delivery month in gold.  The CME Daily Delivery Report showed that 1,036 gold contracts [and no silver contracts] were posted for delivery on Thursday.  There were a lot of short/issuers...with the three biggest being JPMorgan, Credit Suisse First Boston and HSBC USA.  The biggest long/stopper was Deutsche Bank with 877 contracts.  The Issuers and Stoppers Report is definitely worth your time...and the link to that is here.

There were no reported changes in either GLD or SLV yesterday.

The U.S. Mint had one last sales report for January.  They sold 4,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 25,000 silver eagles.  For the month of January the mint sold 127,000 ounces of gold buffaloes [4 tonnes]...13,500 one-ounce 24K gold buffaloes...and 6,107,000 silver eagles.  I hope you got your share.

Over at the Comex-approved depositories on Monday, they reported receiving one good delivery bar weighing 996 troy ounces...and shipped 433,762 ounces of the stuff out the door.  The link to that action is here.

Here's an interesting chart that reader Gerry Navarre sent me yesterday. It shows the total of the eight largest central bank balance sheets in dollar terms.  It's only current through October 2011, as that is the latest number from the People's Bank of China. The combined size of these eight central banks’ balance sheets has almost tripled in the last six years from $5.42 trillion to more than $15 trillion and is still on the rise!

(Click on image to enlarge)

This graph is part of a much bigger article headlined "Living In a QE World" that was posted over at the website on January 27th...and the link to the whole essay is here.

I have the usual number of stories today.


¤ Critical Reads

Senators: Get Rid of Dollar Bills

Some U.S. lawmakers want the coin to be the dollar of the realm.

Sens. Tom Harkin (D., Iowa), John McCain (R., Ariz.) and two colleagues Tuesday are introducing legislation that would kill off the dollar bill in favor of dollar coins, touting the move as a way to cut costs over the long run.

“Promoting the dollar coin is a smart investment for our country that saves taxpayer’s money,” Harkin said.

The move is latest in a long-running battle between those who think it is wasteful to print dollar bills, which wear out and have to be replaced frequently, and those who say the $1 coin is the real waste of money because Americans don’t like them.

Let's see if this attempt is successful.  The story appeared in Monday's edition of The Wall Street Journal...and I thank Washington state reader S.A. for sending it along.  The link is here.


CBO: Taxes Will ‘Shoot Up by More Than 30 Percent’ Over Next 2 Years

The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to theBudget and Economic Outlook published today by the CBO.

At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.

“In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent,” said CBO, “mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”

This story was posted on the website yesterday...and I thank reader Scott Pluschau for bringing it to my attention.  The link is here.


California Faces Cash Shortfall by March on Low Receipts, Controller Says

California's cash may be exhausted by March as tax collections trail budgeted amounts, Controller John Chiang said in a letter to lawmakers.

The nation’s most-populous state needs $3.3 billion for March and the first two weeks of April, Chiang said in the letter to state Senator Mark Leno and Assemblyman Bob Blumenfield, who lead the Joint Legislative Budget Committee. The Assembly Budget Committee is holding a hearing today in Sacramento on the state’s spending plan.

State receipts were $2.6 billion lower than forecast through Dec. 31, while expenditures were an equal amount higher, Chiang said. In a previous report, Chiang said the collections shortfall for the fiscal year that began in July was led by corporate and personal-income taxes.

This Bloomberg story from yesterday is also courtesy or reader Scott Pluschau...and the link is here.


Illinois Faces ‘Potentially Paralyzing’ $35 Billion Unpaid Bill Backlog

Illinois’s unpaid bills may more than triple to $34.8 billion by 2017 unless lawmakers and Democratic Governor Pat Quinn immediately bring Medicaid and pension spending under control, said a research group.

The “potentially paralyzing” backlog, projected to reach $9.2 billion when this fiscal year ends June 30, would be fueled by an “unsustainable” increase in Medicaid spending, according to the Civic Federation, which calls itself a nonpartisan government research organization.

“Failure to address unsustainable trends in the state’s pension and Medicaid systems will only result in financial disaster for the state of Illinois,” Laurence Msall, president of the Civic Federation in Chicago, said in a press release on Monday.

I borrowed this Bloomberg story from yesterday's King Report...and the link is here.


Portugal Suffers as Loss of Confidence in Bonds Sends Yields Higher

Investors fled out of bonds of weaker European countries on Monday, sending yields on Portuguese government bonds to a record high over concerns that the euro zone debt troubles were spreading beyond Greece.

The fears of contagion spreading to other periphery countries in the zone that share the euro have grown more intense in recent months, with much of the latest focus on Portugal.

Yields on Portuguese 10-year government bonds closed at 16.58 percent, the highest they have been since the start of the euro currency and up from 14.645 percent on Friday.

This is another story I lifted from yesterday's King Report...and it was posted in The New York Times on Monday.  The link is here.


Investors face more than 70 pct loss in Greek deal

Investors participating in a deal to slash Greece's massive debt would face an overall loss on their bond holdings of more than 70 percent, a person involved in with the negotiations said early Tuesday.

European leaders at a summit in Brussels said a final debt deal could be signed off in the coming days, together with a second multibillion-euro bailout package designed to save the country from a potentially disastrous bankruptcy.

Athens and representatives of investors holding Greek government bonds over the weekend came close to a final agreement designed to bring Greece's debt down to a more manageable level. Without a restructuring, those debts would swell to around double the country's economic output by the end of the year.

This AP story filed on Monday evening was posted over at the website...and I thank reader Brad Robertson for sending it along.  The link is here.


Greece vexed by German demand for 'budget commissioner'

Greek politicians have reacted angrily at a leaked German proposal for a euro-commissioner to control the country's fiscal policy.

"Our partners do know that European integration is based on the institutional parity of member states and the respect of their national identity and dignity,” finance minister Evangelos Venizelos said Sunday (29 January) in a statement.

“Whoever puts before a people the dilemma of choosing between financial assistance and national dignity disregards basic historical lessons," he warned, a veiled reference to the Nazi occupation of Greece during World War II.

This story, filed from Brussels, was posted over at the website on Monday...and is Roy Stephens first offering of the day.  The link is here.


ESM Plus EFSF Plus IMF: Europe May Be Planning 1.5 Trillion Euro Backstop Fund

Europe could have a 'super' €1,500 billion ($1,969 billion) debt firewall by the summer under plans to combine three funds of €500 billion each. The Financial Times Deutschland reported on Tuesday that the plan was discussed at a meeting on the sidelines of the recent World Economic Forum in Davos attended by US Treasury Secretary Timothy Geithner, International Monetary Fund (IMF) chief Christine Lagarde, German Finance Minister Wolfgang Schäuble and his French counterpart Francois Baroin.

The proposal would see the current temporary bailout fund, the European Financial Stability Facility (EFSF), combined with, rather than replaced by, the permanent European Stability Mechanism (ESM). The third €500 billion chunk would be provided by the IMF. In return, euro-zone countries have already agreed to €150 billion in bilateral credit for the fund. The other €350 billion would come from across the world from countries such as Brazil and the UK. The US, however, would not participate -- even though Geithner himself said in Davos that only an extremely large firewall would ensure financial security.

The massive fund will only become reality if Berlin agrees to it, and the IMF and the European Commission are hoping to secure Germany's approval at the next EU summit at the beginning of March.

More money out of thin air that will never be repaid.  This story appeared posted on the German website yesterday...and is Roy's second offering of the day.  The link is here.


The perils of Mario Draghi's €1.5 trillion blitz

The raging debate over Mario Draghi’s credit rescue has refused to die down.

A disturbingly large number of credit experts warn that the ECB life-line is not the "game-changer" that the markets seem to think, cannot in itself can save Euroland, and may prove counter-productive – perhaps soon.

This is not what I suggested in my Monday column.

Since I have a special affection for the monetarist camp, I tilted to their view in that the ECB has indeed carried out a coup and may have pulled Europe of spiralling depression, just in the nick of time. (This does not mean it can ever save monetary union in its current structure, but that is another matter.)

Ambrose Evans-Pritchard, up on his soap box in London, seems to think that what he says really matters.  But he is one of the New World Order's fair-haired boys, so maybe it does.  This was posted at The Telegraph yesterday...and is worth the read.  It's Roy Stephens third offering of the day...and the link is here.


Rippling Impacts of Iran Oil Embargoes

This very interesting article was the headline story in yesterday's edition of Casey's Daily Dispatch.  This short essay is posted at the Casey Research website...and It's definitely worth your time.  The link is here.


Show of Force in Strait of Hormuz: Risk of 'Accidental' Gulf War on the Rise

The concentration of naval power in the Strait of Hormuz is heightening the risk of a fourth Gulf war, even though the show of force may be nothing more than posturing by the West and Iran in the run-up to negotiations. The stretch of water, 34 miles at its narrowest point, is the aorta of the oil trade.

A flotilla of warships is approaching the small emirate of Fujairah at that very moment, made up of the American aircraft carrier USS Abraham Lincoln, a guided missile cruiser, two destroyers, the British frigate HMS Argyll and the French frigate La Motte-Picquet. All of them were sailing west through the Strait of Hormuz toward the Persian Gulf. The US military already refers to this zone as a "theater," a possible scene of combat.

The Persian Gulf hasn't seen this kind of display of naval power since the final campaign against Saddam Hussein. Indeed, its size has prompted many to wonder whether it is merely posturing and bluffing or, rather, a sign of an upcoming fourth war in the Gulf.

If there is an 'accidental' war, it certainly will likely get started by a false-flag operation of some kind.  This story was posted on the website yesterday...and is another Roy Stephens offering.  The link is here.


Venezuela Receives Last Shipment of Repatriated Gold Bars

"Venezuela today received the last shipment of gold bars in an operation that repatriated 160 tons of the South American country’s reserves of the metal held abroad, said Nelson Merentes, president of the country’s central bank.

Fourteen tons of gold arrived at the Caracas airport today on a flight from Europe, Merentes said. The gold bars were transported in a caravan, broadcast on state television, to vaults at the central bank where street banners proclaimed “Mission Complete.”

This Bloomberg story was filed on Monday afternoon...and I thank reader Richard Craggs for being the first one through the door with it.  It's a must read...and the link is here.


Bill Fleckenstein - Get Ready, Public to Enter Gold & Silver Markets

"A gigantic amount of buying in the metals has been from China and India.  The average American has been more concerned about preservation of capital."

"I’m suggesting that’s going to change and if you are going to have Americans buying gold, on top of the Chinese and the Indians, and the Europeans get involved, you are not going to be able to increase supply, so the only thing left to adjust is going to be price.”

Eric sent me this blog yesterday afternoon.  It's posted at the KWN website...and the link is here.


Stephen Leeb - Silver to Break $100 This Year & Gold Bull on the Move

Here's another blog that Eric King sent me yesterday afternoon.  It's posted over at the King World News website as well...and that link is here.


Virtual Silver Investment Conference: 3 Transcripts

I get the impression that the conference, hosted by yesterday, was a success.

Here are three transcripts from it...and there's enough reading linked below to keep you off the streets for a while.  The first is Eric Sprott...and his speech is entitled "Mania, Manipulation, Meltdown."...and the link is here.  The second one is headlined "James Turk reaffirms his $400 long-term silver target"...and the link to that is here.  The third one is titled "David Morgan: Silver in the Next Decade"...and here's the link to that one.

I thank Roy Stephens for sending them along...and they are his last contributions to today's column.



¤ The Funnies

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¤ The Wrap

Gold, unlike all other commodities, is a currency...and the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating. – Alan Greenspan, ex-US Federal Reserve Chairman, August 23, 2011

Well, I wasn't overly enamoured with what happened in the gold and silver markets yesterday...especially the hatchet job on silver. But the Commercial traders can do as they please, as no one is there to stop them.  But they can't do it forever.

The preliminary open interest numbers for the Tuesday trading dayshowed gold up a few hundred contracts...and silver's o.i. down about the same amount.  I was expecting more of an improvement in silver, but maybe the final open interest numbers will be better.

The final open interest numbers for Monday showed gold o.i. down a few thousand contracts...and silver's o.i. was up a few hundred.

Fortunately, all of Monday's data...and yesterday's data as well...will be in Friday's Commitment of Traders Report. Both Ted Butler and myself will be more than interested in what it shows.

Below isa chart that I've posted in this column before...and included in two of my presentations in Vancouver a couple of weekends ago.  There is 42 years of data on this chart...with a green bar and red bar for each year.  The green bar represents the price rise or fall that occurs between the London p.m. fix and the London a.m. fix the following morning.  As is obvious from the chart, this 19.5 hour time period is positive virtually every year going all the way back to 1970...and is particularly noticeable from 1999 to present...the full length of the current bull market.

The red line is the price rise or fall that occurs between the London a.m. fix and the London p.m. fix [5:30 a.m. and 10:00 a.m. Eastern time]...a period of 4.5 hours. And except for a handful of years, it's been showing a negative price bias just about every year for the last 42 years.  It's particularly noticeable during the current bull market.

So what the overnight markets giveth, the London and New York marketsworking together, make every attempt to taketh away.  This is where the name of the chart comes from "LBMA London AM-PM Bias".  Take a minute to familiarize yourself with this chart.

(Click on image to enlarge)

Nick Laird, who made up this chart on my behalf, just computed thedata for the month of January...and has come with the London AM-PM Bias for this past month.  As you know, the gold price has been on a tear since the December 29th bottom...and it's reflected in the numbers below.

For the month of January, the overnight bias showed an increase of $169...or 10.4%. The London intraday bias was -0.02%.  So here we have one of the biggest bull market rallies in January in recorded history...and the cumulative move during the 4.5 hour intra-London trading hours during January was actually negative.  This is Anglo/American price fixing scheme laid bare.

The gold price didn't do much during Far East trading during their Wednesday. The low came around 3:00 p.m. Hong Kong time...about an hour before London opened at 8:00 a.m. GMT. Since then, the price has been rising without interruption...but ran into some resistance about 10:00 a.m. local time.  The gold price is up about nine bucks as I write this paragraph at 5:15 a.m. Eastern.

It was pretty much the same price pattern for silver...and that rallywas going great guns up until the same 10:00 a.m. London time when a not-for-profit seller showed up.  Silver is up about 66 cents as of 5:17 a.m. Eastern.  Volume in both metals is higher than I would like to see.

That's all I have for today...and as I said in my closing paragraph in yesterday's column...I await the New York open with great interest...but always keeping in mind that "there are no markets anymore, only interventions."

See you on Thursday.