Casey Research Publication
Gold & Silver Daily
"I was quite happy to see both gold and silver rising on very light volume on Tuesday, as they had all the hallmarks of short-covering rallies."
 

¤ Yesterday In Gold & Silver

Once the gold price broke through the $1,600 level shortly after the London open yesterday morning, it never looked back.  The rally moved along in fits and starts until 11:15 a.m. Eastern time.  Then it more or less traded sideways for the rest of the New York trading session.

Gold closed at $1,615.20 spot...up $21.30 on the day.  Volume was pretty light...around 107,000 contracts.

The silver price basically followed the same type of trading pattern as the gold price.  Silver closed the day at $29.56 spot...up 76 cents.  After a monstrous 50,000 contract volume day on Monday, silver's volume on Tuesday was a much more subdued 23,500 contracts.

For a change, the precious metals prices followed the lead of the dollar...which had developed a negative bias right from the open of Far East trading during their Tuesday.  But the real decline didn't start until 3:00 a.m. Eastern time...which is 8:00 a.m. in London...and the time that the gold price broke through the $1,600 mark.

The gold and silver prices didn't follow the dollar move exactly, but it was close enough.  The dollar index lost about 75 basis points from the top to the bottom...which came around 9:40 a.m. Eastern time.  Then the dollar recovered about 25 basis points of that loss by 11:30 a.m...and then traded flat for the rest of the day.

The gold stocks gapped up more than three percent at the open of trading in New York...and proceeded to trade sideways for the rest of the day.  I found this rather unusual considering the fact that gold continued to climb in price as the morning wore on.  But the Dow chart from yesterday bore a strikingly similar pattern to the HUI, as both gapped up, and then traded mostly flat...so what happened with the gold stocks was only partly related to what was going on with the gold price itself.  The HUI finished up 3.60%...erasing all of Monday's loses.

The silver stocks did very well for themselves yesterday as well...and a lot of the junior producers were on fire.  Nick Laird's Silver Sentiment Index closed up a chunky 5.10%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 96 gold and 17 silver contracts were posted for delivery on Thursday.  It was mostly the 'usual suspects' as issuers and stoppers...and the link to the 'action' is here.

There were no reported changes in either GLD or SLV yesterday...and the U.S. Mint reported selling 1,500 one-ounce 24K gold buffaloes.

The Comex-approved depositories reported receiving 371,077 ounces of silver on Monday...and shipped 598,435 troy ounces out the door.  The link to the action is here.

Here are three charts courtesy of Nick Laird.  The first is a 5-year chart of 5,10 and 30-year U.S. bond yields.  I wouldn't want to be holding this paper when interest rates do finally turn up.

(Click on image to enlarge)

This second chart shows the total precious metals held in all know repositories...plotted against the total value in billions of US dollars.  As Nick pointed out, there's been very little selling so far.

(Click on image to enlarge)

Since yesterday was the 20th of the month, The Central Bank of the Russian Federation updated their website with November's data.  The bank purchased another 100,000 ounces of gold for their reserves, which now sit at 28.1 million ounces.  Nick Laird provides his usual excellent chart.

(Click on image to enlarge)

Reader Scott Pluschau sent me this quick Technical Analysis data on yesterday's gold market.  This is what he had to say in his covering e-mail..."Here is the chart of gold with the rising 200 day moving average.  You can see the price has rallied back to the MA.  Should it re-take it with authority, it is a perfect setup for a squeeze. One cause for concern for me is the "Bear Flag" pattern that is forming as well.  Bulls don't want to see this pattern fulfilled as the target would be about 1450."  The link to Scott's very short commentary [along with an excellent chart] is here.

It was a pretty quiet day in the news department yesterday...and even more quiet after I got through the editing process, as I only have a handful of stories today.

 

¤ Critical Reads

Fed Proposes New Capital Rules for Banks

The Federal Reserve on Tuesday proposed rules that would require the largest American banks to hold more capital — and to keep it more easily accessible — to protect against another financial crisis.

But the Fed, the nation’s chief banking regulator, added that the final capital rules were unlikely to be more stringent than international limits that were still under development.

That is a small victory for banks who warned that they would be severely disadvantaged if capital requirements here were stricter than those governing overseas banks. Bank representatives are still wary about details that remain to be worked out, however, including how much of an extra capital cushion would be imposed on the biggest of the big institutions like Bank of America, JPMorgan Chase and Citigroup.

This story showed up in The New York Times yesterday...and reader Phil Barlett was the first one through the door with it.  The link is here.

Read more...

Britain, the IMF, and the world's richest beggar

Euro rage is reaching new heights over Britain's latest outrage.

Our refusal to pony up a further €31bn we cannot afford, to prop up a monetary union that was created against our wishes and better judgment, and launched with the malevolent purpose of accelerating the great leap forward to a European state that is inherently undemocratic.

It is being presented as treachery, Anglo-Saxon perfidy, and the naked pursuit of national self-interest.

This story was posted in The Telegraph late Monday night...and is Ambrose Evans-Pritchard at his finest.  He takes no prisoners here...and it's a must read from beginning to end.  I thank Roy Stephens for this...and the link is here.

Read more...

Resistance in London: Britain Refuses to Boost IMF Aid for Euro Crisis

EU finance ministers wanted to raise 200 billion euros to boost the International Monetary Fund's firepower in the euro crisis, but they only raised 150 billion on Monday, largely due to resistance from Britain. Germany, meanwhile, will have to rework its 2012 budget to help finance the new permanent euro rescue fund.

This is the story on the same IMF issue as the previous story posted in The Telegraph.  However, this one is through German eyes in Berlin.  It's another Roy Stephens offering...and it's posted over at the spiegel.de website.  The link is here.

Read more...

Expect Bank Holidays in Europe & Higher Gold: Chris Whalen

Here's a King World News blog that Eric sent me yesterday.  Whalen, in part, says this..."Well, I think the dollar continues to muddle along.  So I see the dollar continuing as the means of exchange for global commerce, but it’s definitely not a store of value.  Nor has it ever been.  Hayek wrote this very well in The Road to Serfdom, that in a democracy, no government could resist the temptation of inflation."

The link to this rather short KWN blog is here.

Read more...

Will the Europeans have to sell their gold?

If the Italians can’t persuade the bond markets to keep them in business, they have another card up their sleeve.

Few people realize it, but Italy holds the world’s fourth biggest stockpile of gold, at 2,452 tonnes. That’s even more than France, and more than twice as much as China.

Only the U.S., Germany and the International Monetary Fund hold more.

The question here is whether some of the troubled European countries — such as Italy and France — are going to have to start selling off the national gold pile to meet their bills.

This story was posted over at marketwatch.com...and filed from London yesterday.  I lifted it from a GATA release...and the link is here.

Read more...

We are Witnessing a Historic Bottom in Gold: London Trader

Big gold and silver buyers increasingly are bypassing the rigged futures markets and the bullion banks that rig them...and instead buying metal from the major gold and silver exchange-traded funds and from miners directly, the London trader source of King World News remarked yesterday. These remarks echo those made two weeks ago by AngloGold Ashanti CEO Mark Cutifani to Takoa Da Silva of Bull Market Thinking.

But the London trader told King World News a lot more -- including that the new kind of buying is transforming the precious metals market, cutting off supply from the bullion banks and diminishing their ability to leverage their short positions in the futures market. "We're making an historic bottom right now" in the gold market, he says.

Let's hope he's right...and from my perspective, that's where we are.  I thank Chris Powell for wordsmithing all of the above two paragraphs of introduction...and the link to this must read KWN blog is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

The unvarnished determinant to the future price of silver and the continued existence or not of the silver manipulation itself, is whether JPMorgan increases its short position on the next silver rally. That, and whether the short position in SLV increases on the next silver rally. Rarely does it come down to such a fine line of demarcation, but it’s hard for me to see it otherwise. Don’t misunderstand me – I don’t know what these silver crooks are going to do, but if JPMorgan does not add to their short position...and the short position of SLV does not increase on the next rally, the manipulation should be over. - Silver analyst Ted Butler, 17 December 2011

Since today's column is very short, I thought I'd toss in a Christmas-type song for you.  Casey Research's own Doug Hornig sent me this youtube.com video a few days back...and I thought it worth sharing.

The piece is from Peter I. Tchaikovsky's ballet "The Nutcracker" which premiered in St. Petersburg on December 18, 1892...119 years ago this past Sunday...and is always a holiday tradition in the cultural affairs of any large city around Christmas.  Having been on the board of the Edmonton Symphony Orchestra for eleven years, I've seen the production the odd time.

This is the "Dance of the Sugar Plum Fairy" played by two musicians on a glass harp...an instrument I'd heard of, but never seen.  I was astonished when I finally did see it...and even more impressed when I heard how wonderful it sounded.  The piece runs for 2:45...and the link is here.  Enjoy!  And as wonderful as that piece is, I much prefer their rendition of this Edvard Grieg composition linked here.

I was quite happy to see both gold and silver rising on very light volume on Tuesday, as they had all the hallmarks of short-covering rallies.  The preliminary open interest number in gold showed only a tiny increase...and silver's open interest actually declined a bit.  This is all very encouraging.

If these volume numbers from Tuesday are reported in a timely manner, they should all be included in Friday's Commitment of Traders Report, a report that I'm more than eager to see.

Gold briefly took out its 200-day moving average to the upside yesterday, but closed a few dollars below it...and that might have been a deliberate act.  It will be interesting to see if we break above this moving average with any authority today, or will that attempt 'fail'?  It's too soon to tell.  If we do move above it, then it will be interesting to see if the tech funds show up as buyers on the long side...and even more important, who will be going short against them?  The Ted Butler quote above is just as definitive for gold as it is for silver.  Here's the 6-month gold chart...

(Click on image to enlarge)

In silver, both moving averages are so far above the current spot price that there won't be any activity out of the tech funds until the price is quite a few dollars higher than the current spot price...around $33 the ounce based on yesterday's close.  Here's the 6-month silver chart...

(Click on image to enlarge)

Gold is having a quiet rally during the Far East trading day on Tuesday...and as of 3:30 p.m. Hong Kong time, gold is up about twelve bucks...and silver is just up a few pennies.  Gold volume is very light...and silver volume is microscopic...so there are no high-frequency traders in either market at the moment.

And since I wrote that above paragraph, three hours have gone by.  As of 10:30 a.m. in London...5:30 a.m. Eastern time...gold is up about twenty-two dollars. The gold price is now above its 200-day moving average.

In silver, a smallish rally began at the London open...and then really took off at 10:00 a.m. local time. silver is now up over 60 cents as I hit the 'send' button. Gold and silver volumes are now about double what they were three hours ago, so these rallies are not going unopposed.

All of this happened at the London a.m. gold fix.

With the holiday season almost upon us, it wouldn't surprise me in the slightest if the price action and volume remain subdued for the rest of the holiday season...but I wouldn't bet the ranch on that.

And that's all I have for today...and I look forward to Wednesday's gold and silver price action in New York with great interest.

See you here on Thursday