Gold & Silver Daily
"All the overseas gains in both gold and silver disappeared under the watchful eye of the New York bullion banks during the Comex trading session yesterday."
 

¤ Yesterday In Gold & Silver

The gold price did very little during Far East trading yesterday...and by 9:00 a.m. in London was up about five bucks from its Thursday close in New York.  Then a rally developed that lasted until the London p.m. fix at 3:00 p.m. local time, which was 10:00 a.m. in New York.

That p.m. fix was the high of the day...and from there it got sold off until the Comex closed at 1:30 p.m. Eastern.  From there, the price traded sideways into the close of the New York Access Market.  Gold closed at $1,648.60 spot...up $5.60 on the day.  Volume was reasonably light 112,000 contracts.

The silver price pattern was pretty much the same, except for the fact that the high tick of the day came at the London silver fix, which was a few minutes after 12 o'clock noon GMT.  There was a secondary high three hours later at the London p.m. gold fix...and from there the price slid back to unchanged by 2:30 p.m. Eastern time in New York.  From that 2:30 p.m. low, silver rallied a bit into the close.

The silver price finished the Thursday trading session at $30.25 spot...up 28 cents on the day.  Volume was pretty decent at 33,000 contracts.

The dollar index didn't do much until precisely 3:00 a.m. Eastern time, which was 8:00 a.m. in London.  Then the dollar headed down, hitting its absolute low at half past lunchtime in New York. From that low, the index recovered about 10 basis points.  The dollar index closed down about 45 basis points on the day.

Yesterday's rally in the gold began shortly after 9:00 a.m. in London...and came to an end about 10:05 a.m. in New York...which is hardly an exact match for the dollar's decline.

I would guess that the dollar index decline had more to do with the rally in the Euro, as the Italian and Spanish bond auctions went off 'better than expected'...and I have a story about that further down.

Gold's Thursday high at London p.m. gold fix is the most prominent feature on this graph.  From there the gold stocks got sold off in fits and starts...and touched the unchanged mark at 2:15 p.m. Eastern time, before rallying a bit into the close, with the HUI finishing up 0.90% on the day.

The silver stocks did just OK yesterday...and all of the stocks that make up Nick Laird's Silver Sentiment Index finished in the green.  The rest of them were a mixed bag.  The SSI finished up 0.95%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 13 gold and 92 silver contracts were posted for delivery on Monday.  Once again in silver it was Jefferies as the only short/issuer...and the Bank of Nova Scotia and JPMorgan as the only long/stoppers.  The link to the action is here.

For the second day in a row there were no reported changes in either GLD or SLV.

Ted Butler mentioned that despite the hopes that the short position in SLV might have declined substantially with the big engineered price decline in silver over the holidays, that did not turn out to be the case.  The good folks over at shortsqueeze.com showed that the number of SLV shares shorted jumped from 22.0 million to 24.9 million...an increase of 13.15%.

It was much the same with GLD shares, as their short position rose by 5.43%...as the number of shorted shares rose from 14.77 million to 15.58 million.

The U.S. Mint had a sales report yesterday.  They sold 3,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 340,000 silver eagles.  Month-to-date the mint has sold 85,500 ounces of gold eagles...8,000 one-ounce 24K gold buffaloes...and 4,597,000 silver eagles.

Silver continues to pour into the five Comex-approved depositories.  On Wednesday they added another 846,864 troy ounces...and shipped a tiny 3,862 ounces out the door.  The link to that action is here.

Here's a very interesting chart that should come as no surprise to anyone...but it's still amazing to see on paper.  It's self-explanatory...and I thank Washington state reader S.A. for sharing it with us.

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

 

¤ Critical Reads

Theft, RICO lawsuit targets MF Global, CME Group, MorganChase

Here's a GATA release from yesterday...

Our friends at the Philadelphia law firm of Berger and Montague this week brought a class-action lawsuit in federal court in New York, charging theft and misappropriation, against people connected with the failed commodity brokerage firm MF Global, including its former CEO, former New Jersey U.S. Sen. and Gov. Jon Corzine; MF Global's enabler and supposed regulator, CME Group; and the investment bank JPMorganChase. The lawsuit is brought under both the Commodity Exchange Act and the Racketeer-Influenced Corrupt Organizations Act -- the famous RICO.

How to participate in this lawsuit...and a pdf copy of the complaint itself...is contained in this GATA release...and the link is here.

Read more...

Bloomberg Suffers, Too, in Collapse of MF Global

The collapse of MF Global has wreaked havoc on farmers, ranchers and other investors who were clients of the brokerage firm, prompting a loud outcry over the disappearance of $1.2 billion in customer cash.

But they are not the only ones to suffer. The financial information giant Bloomberg L.P. lost about 600 subscriptions to its computer terminals — which translates to nearly $1 million in monthly revenue — after MF Global filed for bankruptcy on Oct. 31. The sudden loss of business caused Bloomberg employees to miss their target sales by 12 percent in 2011, people briefed on the matter said, a shortfall that could take a toll on the firm’s bonuses.

While $1 million sounds like a rounding error for Bloomberg, which generates nearly $7 billion in revenue a year, the hit underscores the symbiotic relationship between Wall Street and Bloomberg.

I understand their pain, but somehow I just can't bring myself to feel sorry for them.  Reader Phil Barlett sent me this Bloomberg story at 4:01 a.m. Eastern time this morning...and the link is here.

Read more...

Foreigners Sell Record $85 Billion In Treasuries In 6 Consecutive Weeks - Time To Get Concerned?

As the chart below vividly demonstrates, the traditional diagonal rise in foreign holdings of US paper has not only plateau, but it is in fact declining: a first in the history of the post-globalization world.

Well as of today's H.4.1 update, the outflow has increased by yet another $8 billion to a new all time record of $85 billion, in 6 consecutive weeks, which is also tied for the longest consecutive period of outflows from the Fed's Custody account ever. This week's sale brings the total notional of Treasuries in the Custody account to just $2.66 trillion (down from a record $2.75 trillion) and the same as April of last year.

This zerohedge.com piece from yesterday was sent to me by West Virginia reader Elliot Simon.  The graph is worth a quick look...and the link is here.

Read more...

Fed blew the housing bubble, then sought to pop it, transcripts show

The US Federal Reserve fretted about a slowdown in housing in 2006, but never considered the possibility that it could cause a financial crisis, according to complete transcripts of that year's meetings.

The transcripts, released on Thursday, highlight the failure of the Fed -- one matched by most other central banks, commentators, and economists around the world -- to spot dangers to the financial system from subprime mortgage lending. That complacency set the stage for the devastating crisis that began in the summer of 2007.

Indeed, a number of Fed officials saw the housing slowdown as welcome news that would help resolve a potential threat to the economy.

"As to housing, we are in fact, as all have noted, squeezing out of that sector the speculative excesses that developed with the low interest rates of recent years -- and doing so is unavoidable if we want to correct the sector," said Thomas Hoenig, then president of the Kansas City Fed, at the September 2006 meeting of the FOMC.

This story was filed in the Financial Times yesterday...and is well worth the read.  It's posted in the clear in this GATA release...and the link is here.

Read more...

Bulk Foreclosure Sales Could Cause Bigger Bank Write-Downs

As government, federal regulators and big-money private investors try to figure out a plan for bulk sales of foreclosed properties, big banks are already making deals, but they are few and far between.

The trouble is, they are looking at even bigger write-downs than forecast if they sell these distressed properties in bulk.

"One of the things that might be holding these bulk sales back is that the assets might not have been fully written down by the banks," says Rick Sharga of Carrington Mortgage Holdings, a private equity firm. "The problem for the banks is that in that scenario, when they sell off these assets in bulk, they have to recognize pretty significant losses all at once, rather than spread those losses out over a longer period of time."

This cnbc.com story from yesterday is another Elliot Simon offering...and the link is here.

Read more...

The Financial System is a Farce: Part Three - Eric Sprott & David Baker

2011 was a merry-go-round of more bailouts, more deferrals and more denial. Everyone is tired of the Eurozone. It’s not fixable. There’s too much debt. The politicians don’t know what’s going on. Nothing has structurally changed. We’re still on the wrong path. There’s more global debt than there was a year ago, and it’s the same old song: extend and pretend, extend and pretend,… around and around we go,… and it isn’t fun anymore.

Just as we wrote back in October 2007, and again in September 2008, we feel compelled to state the obvious: that the financial system is a farce. It’s a complete, cyclical farce that defies all efforts to right itself. This past year continued the farcical tradition with some notable scandals, deferrals and interventions that underscored the system’s continuing addiction to government interference. With the glaring exception of US Treasuries and the US dollar (which are admittedly two of our least favourite asset classes), it was not a year that rewarded stock picking or safe-haven assets. Many developments during the year bordered on the ridiculous, and despite some positive news out of the US, we saw little to test our bearish view. If anything, our view was continually re-affirmed.

January's Market's at a Glance commentary is posted over at the sprott.com website...and the link to this must read 4-page pdf file is here.

Read more...

Spain and Italy succeed in selling €22bn of debt

Spain sold nearly €10bn of three and four-year debt - nearly twice the targeted amount - at the cheapest rate for months in a move that was seen as a vote of confidence in new prime minister Mariano Rajoy's austerity efforts.

Italy sold €12bn of bills at a yield of 2.735pc - less that half the rate at a bond auction last month.

Italy's stock market rose more than 2pc, the euro rose against both the dollar and sterling, and the implied borrowing costs for Rome and Madrid fell to their lowest levels since March and September respectively.

Some analysts hailed a turning point in the debt crisis amid claims that the auctions proved that the European Central Bank's (ECB) radical lending programme was working.

This Roy Stephens offering was posted in The Telegraph yesterday...and the link is here.

Read more...

Low-Income Italians Own An Awful Lot Of Supercars, Private Jets And Yachts

Italian Prime Minister Mario Monti has said from the beginning of his seven-week tenure that the government’s efforts to pay down its massive debts would include across-the-board pain that would impact everyone equally.

This month, he turned his bazooka toward the super-rich, where tax evasion appears to be rampant.

The group is an easy target. According to Italian newspapers, people reporting incomes of less than 20,000 euros (about $26,000) per year cumulatively own 188,000 supercars, (such as Ferraris, Lamborghinis, Porsches, or BMW couples), 518 private airplanes or helicopters, and some 42,000 yachts.

All together, 15 million Italians — about 1 out of 4 citizens — declared no income last year. Reports indicate that nearly a fifth of that group own at least three homes.

On Monti’s orders, tax police swooped down on a half a dozen ski resorts and seaside spas, gathering evidence of tax evasion. A single raid on five-star hotels and Michelin-starred restaurants in the Dolomite ski resort of Cortina found 42 so-called supercars with an average price tag of 200,000 euros registered to owners squeaking by on less than 20,000 euros each year.

Needless to say, this businessinsider.com story from yesterday is a very interesting read.  I thank Casey Research's own Alex Daley for sending it along...and the link is here.

Read more...

Europe’s $39 Trillion Pension Risk Grows as Economy Falters

Even before the euro crisis, people were worried about Europe’s pension bomb.

State-funded pension obligations in 19 of the European Union nations were about five times higher than their combined gross debt, according to a study commissioned by the European Central Bank. The countries in the report compiled by the Research Center for Generational Contracts at Freiburg University in 2009 had almost 30 trillion euros ($39.3 trillion) of projected obligations to their existing populations.

Germany accounted for 7.6 trillion euros and France 6.7 trillion euros of the liabilities, authors Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige said in the report.

“This is a totally unsustainable situation that quite clearly has to be reversed,” Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington, said in a telephone interview.

This Bloomberg story was posted over at the businessweek.com website yesterday morning...and is Roy Stephens second offering of the day.  The link is here.

Read more...

Shaking Things Up in the EU: The Struggle to Give the European Parliament Clout

As the weakest of the EU's three major institutions, the European Parliament has often been viewed as little more than a rubber stamp for the others. But Martin Schulz, the German Social Democrat who will become its president next week, plans to change that -- and he's not afraid of ruffling feathers in the process.

Even the boost it was given by the Lisbon Treaty has done nothing to change its relative position. Its weakness already starts with the fact that it isn't marked by the classic division into governing and opposition factions. The parliament has 736 members, known as MEPs, from 27 countries, who are haphazardly divided according to interests, and their political alliances change depending on the issue at hand.

Now more than ever, in the midst of the greatest crisis the EU has ever faced, one would think there would be a need for a strong parliament to make sure the people of Europe are on board. But the fact is that most people are barely aware of the parliament. The most important decisions are made among the heads of state and government comprising the European Council -- provided, of course, they haven't already been decided upon behind the scenes by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

This story showed up on the German website spiegel.de yesterday...and is also courtesy of Roy Stephens.  The link is here.

Read more...

China's skyscraper craze 'may herald economic crash'

China could be the next country to go bust, if its headlong rush to build ever-taller skyscrapers is a guide to its future economic health.

According to a study by Barclays Capital, the mania for skyscrapers over the last 140 years is a sure indicator of an imminent crash.  It points out that the construction boom that threw up New York's Chrysler and Empire State buildings preceded the New York crash of 1929 and Great Depression.

More recently, Dubai built a forest of skyscraping offices, hotels and apartment buildings, including the world's tallest, the Burj Khalifa, before it got into terrible financial difficulties. In 2010 Dubai had to be bailed out by its neighbour, Abu Dhabi, to avoid going bankrupt.

This interesting story out of The Guardian yesterday was sent to me by Swiss reader B.G.  The link is here.

Read more...

U.S. military moves carriers, denies Iran link

The U.S. military said on Wednesday that a new aircraft carrier strike group had arrived in the Arabian Sea and that another was on its way to the region, but denied any link to recent tensions with Iran and portrayed the movements as routine.

The shift in the powerful U.S. naval assets comes at a moment of heightened tensions with Iran, which has threatened to close the Strait of Hormuz - the world's most important oil shipping lane - if U.S. and EU sanctions over its nuclear program cut off its oil exports.

The U.S. military has said it will halt any blockade of the strategic strait and the top U.S. naval officer acknowledged on Tuesday that preparing for a potential conflict there was something that "keeps me awake at night."

This Reuters story showed up in yesterday's King Report...and the link is here.

Read more...

Jim Rickards - War With Iran has Begun, Gold to Break $2,000

Eric King sent me this blog at midnight last night. It's an absolute must read, of course...and it's posted over at the King World News website.  The link is here.

Read more...

Gold-Silver Price Ratio Getting Silly Again

Although both the gold and silver markets have been subjected to extreme manipulation, it is clear that manipulation of the silver market has been much more severe. There are two related numbers which illustrate this point.

Knowledgeable investors know that the long-term price ratio of gold versus silver (i.e. over roughly 5,000 years) has averaged approximately 15:1. This closely coincides with the ratio of the natural occurrence of these two elements in the Earth's crust (approximately 17:1). Not only did this price ratio remain relatively constant over several millennia, but the fact that the price ratio so closely mirrors the rate of occurrence of the two metals shows that (in relative terms) our species has demonstrated a roughly equal preference for the two metals throughout recorded history.

These facts establish beyond any possible contradiction that over the medium or long term the price of silver must remain at close to a 15:1 ratio versus the price of gold. There is only one factor which could alter this arithmetic: if our preference toward the two metals changed. Has any such change in preferences occurred? Yes. Silver has become much more popular.

This short op-ed piece showed up over at thestreet.com website on Wednesday...and I thank reader Phil Barlett for sending it along.  It's worth the read...and the link is here.

Read more...

Silver Coin Sales May Signal Bear-Market End: Chart of the Day

The surge in the U.S. Mint’s sales of American Eagle silver coins in January may signal an end to the bear market in the metal.

The Mint sold 4.60 million ounces of the coins to authorized purchasers Jan. 3 through Jan. 12. At this pace, full-month deliveries may reach 14.2 million ounces, more than twice the record 6.422 million ounces sold in January 2011.

“When people see dips now in silver they are going to get in,” said Terry Hanlon, president of Dillon Gage Metals. The Addison, Texas-based company is one of 11 dealers authorized to purchase silver coins in the U.S. directly from the Mint. “There are more fund managers who are pulling out of the exchange-traded funds and buying physical metals, which is a new trend. They want a product that they can liquidate quickly and in increments they want. People do feel comfortable being in control over storing the product.”

This businessweek.com story was posted on their website yesterday. I thank reader Matthew Nel for bringing it to my attention...and now to yours.  The link is here.

Read more...

Jim Sinclair: Gold downside risk gone

Gold mining entrepreneur and gold advocate Jim Sinclair told King World News yesterday that gold's downside risk is gone and that five big U.S. banks have big derivatives problems.

I borrowed the title and the introduction from a GATA dispatch...and the link to this must read KWN blog, is here.

Read more...

Gold Bar Premiums In Asia Rising Again On Physical Demand

Premiums for gold bullion bars in Asia are rising again and are at their highest since October in Hong Kong and Singapore. Premiums are at $2.15/oz in Hong Kong and $1.65/oz in Singapore.  Bullion’s strength was also attributed to the euro’s 16 month low, with Fitch warning the ECB to purchase assets to try to stabilize the euro.

This story showed up posted over at the goldcore.com website yesterday.  I thank Roy Stephens for his final offering of the day...and the link is here.

Read more...

From Gold Bras to Gold Bars

Like haute couture, gold’s worth is very much in the eye of the beholder. Mix the two and, in valuation terms, you’re into CDS-squared territory.

But Jean-Paul Gaultier, the French fashion designer famous for putting Madonna in a bra that could take your eye out, has done exactly that. Fashionistas with a taste for the flamboyant but more than a little concerned about the side effects of quantitative easing can now buy a one-ounce 24 karat gold bar engraved with a heart, rays and Gaultier’s name on a banner.

Dillon Gage Metals, based in Dallas, TX, is the U.S. distributor. According to them, this is the first time a “fashion icon” has turned his hand to jazzing up gold ingots. The Jean-Paul Gaultier bar carries a slight premium because of its unique design and limited mintage.

Well, dear reader, the article may not interest you, but the photo of the gold bar is well worth looking at.  I thank reader Erik Nelson for sending me this story out of yesterday's edition of The Wall Street Journal...and the link is here.

Read more...

 

¤ The Funnies

Sponsor Advertisement

First Majestic is a producing silver company focused in México and is aggressively pursuing its business plan to become a senior silver producer by developing existing assets and pursuing acquisitions of additional assets that contribute to achieving our growth objectives. First Majestic owns three producing silver mines: La Encantada, La Parrilla and San Martin. The Company has an additional mine under pre-feasibility called the Del Toro Silver Mine which is expected to become First Majestic’s fourth producing mine. In late 2009, the Company acquired the Real de Catorce Silver Project, an old mining district, and plans to launch a drilling and exploration program. With a Management team comprised of proven company and mine builders; shareholders are poised to capitalize on First Majestic's rapid evolution into a world class silver producer. Please visit our website to learn more and contact us for further information.


 

¤ The Wrap

In a time of universal deceit, telling the truth is a revolutionary act. - George Orwell

As has been the case over the years, all the overseas gains in both gold and silver disappeared under the watchful eye of the New York bullion banks during the Comex trading session yesterday, once the London p.m. gold fix was in.

The preliminary open interest number in gold was up a fair bit, but I've seen worse...and silver's o.i from yesterday was only up around 500 contracts.  What this all means won't be known until next Friday's Commitment of Traders report, not the one that comes out today at 3:30 p.m. Eastern time, sharp.

The final open interest numbers for the Wednesday trading day showed a decent decline in gold...and a smallish decline in silver.

In overnight trading, I note that gold got sold off about fifteen bucks starting at precisely 9:00 a.m. Hong Kong time.  The Far East low was in about two hours and fifteen minutes later.  From that low, gold climbed back to virtually unchanged by the London open...but as of 5:12 a.m. Eastern time, the price is down about five bucks.

Silver got sold off about two percent during the same time period that gold got sold down less than one percent.  The silver price rose into the London open as gold did, but hit a brick wall at the open...and is down about 30 cents as of 5:14 a.m. Eastern time.

Volumes in both metals are already enormous for this time of day...and it's pretty much a given that the vast majority of that is of the high-frequency trading type.

As much as I hate to keep beating this story to death, there's still time to either re-adjust your portfolio, or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well.  And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Have a great weekend...and I'll see you here sometime on Saturday.