Gold & Silver Daily
"A declining dollar will add fuel to the fire, but it still boils down to who the not-for-profit short sellers will be on the ensuing rally."

¤ Yesterday In Gold & Silver

The gold price didn't do a whole heck of a lot in the first fourteen hours of trading on it was as quiet as a church mouse during the entire period...varying only a few dollars either side of Friday's closing price in New York.

Then, at precisely 1:00 p.m. British Summer Time in London...8:00 a.m. in New York...the gold price blasted higher...and by the 8:20 a.m. Eastern time Comex open, gold had gained twenty bucks.

Then from the Comex open, the gold price continued to work its way slowly higher, until the high tick of the day [$1,694.80 spot] was in on a tiny price spike about thirty minutes before electronic trading closed at 5:15 p.m. in New York.  From there, gold sold off five bucks into the close.

The gold price finished the day at $1,689.90 spot...up $27.10 from Friday's close. Gross volume was immense, but once all the spreads and roll-overs out of the April delivery month were subtracted out, the net volume wasn't overly heavy at 110,000 contracts.

You could be forgiven for getting the silver and gold chart mixed up visually, they were identical.  The blast-off at 8:00 a.m...with the explosive 55 cent rally ending almost as quickly as it started...twenty minutes later at the Comex open.

The only real difference was the high tick of the day.  As silver took out the $33 price level to the upside at precisely 3:30 p.m. Eastern time, someone stepped in to make sure it didn't get any higher than that.  Silver's high price printed $33.05 spot at that time.

Silver closed on Monday at $32.84 spot...up 60 cents on the day.  Net volume was pretty light at 28,000 contracts.

The dollar index was on the upswing right from the open at 6:00 p.m. in New York on Sunday night...and between precisely 9:00 and 9:30 a.m. in London, the dollar index gained 30 basis points.  Then, between 9:30 a.m. and 1:00 p.m.  British Summer Time, the dollar index gave up virtually the entire 30 basis point gain from earlier in their trading day.

Then, starting a few minutes before 1:00 p.m. in London...8:00 a.m. in New York...the dollar index dropped by a bit more than 30 basis points by the Comex open at 8:20 a.m. Eastern time.  From there, it drifted slowly lower, closing around the 78.90 mark...almost on its low of the day.

From its zenith at 9:30 a.m. in its absolute New York low...about 3:45 p.m. Eastern...the dollar index was down a hair over 80 basis points...but from its Friday close, it was only down about 40 basis points.

The dollar index had 30/40 basis point rises and falls during the morning London and Far East trading sessions that had zero impact on gold and silver prices.  One has to wonder why the precious metals only reacted as they did when the dollar index fell 30 basis points starting at 1:00 p.m. in New York had yet to open.

Despite the fact that gold was up over twenty bucks at the 9:30 a.m. open of the equity markets in New York...and the fact that the gold stocks gapped up over two percent at the open...the gold stocks got sold off during the next thirty-five minutes of trading.

From there, the gold stocks spent the rest of the day trying to get back to their opening highs...and never made it.  One has to wonder what not-for-profit seller would dispose of their gold shares in such a manner as to ensure that they didn't get the best possible price for them?  I can guess.

The HUI finished up 1.83% on the day...but obviously would have done better than that if that not-for-profit seller hadn't shown up at the open.

This silver stocks did pretty well for themselves yesterday...but Nick Laird's Silver Sentiment Index only closed up 1.21%.  However, most of the juniors did much better than that.

(Click on image to enlarge)

The CME's Daily Delivery Report didn't show only 38 gold contracts were posted for delivery tomorrow...and that takes care of virtually every March contract that was left open, so the rest of the week should pretty quiet for gold deliveries.  I'm only guessing here, but I'd say that there are less than 50 March silver contracts left open once today's deliveries from last Friday's report are made.  First Day Notice for delivery into the April contract will be posted on the CME's website on Thursday night...and the numbers will be in my Friday column.

The GLD ETF showed that an authorized participant added 194,274 troy ounces of gold yesterday...and there were no reported changes in SLV.

Well, the new short interest report for both SLV and GLD were posted late last night over at the website.  SLV short interest declined by 13.89%...and is now down 9.07 million shares/troy ounces.  This is 2.9% of the outstanding shares...a far more reasonable number.  We can live with that, although it's still not right, as there are 9.07 million shares of SLV that have no physical silver backing them.

The short interest in GLD increased a hair... but only by 0.07%...about 7,000 shares, or 700 ounces.

There was a smallish sales report from the U.S. Mint.  They reported selling 250,000 silver eagles.

The Comex-approved depositories showed that only 8,528 troy ounces of silver were taken into their collective inventories on Friday...and 514,035 ounces were shipped out.  The link to that action is here.

Here's a free paragraph from silver analyst Ted Butler's weekend review...

"The current gold structure is as bullish as it was back at the late December price lows, namely, very bullish. And please remember that there was a fairly high volume sell-off after the Tuesday COT cut-off in both gold and silver, meaning that the market structure is even more bullish than indicated in the new report. In silver, we are not back to the extreme COT readings of late December (as we are in gold), but those silver readings were so extreme that I doubt we can achieve them again. I suppose the commercials could rig lower prices ahead because you never want to say never. But any objective reading of the COTs now strongly favors the upside. As always, lower prices from here would only make the structure more bullish. That’s where we are right now."

Here are a couple of charts courtesy of Australian reader Wesley Legrand.  The first comes from a piece headlined "TBTF: Top 5 U.S. Banks Hold 95.7% of Oustanding U.S. Derivatives"

And here are the OCC numbers that this chart is derived from...and it's definitely worth a look.

(Click on image to enlarge)

Wesley's second chart needs no embellishment from me...and his spot on comments in the accompanying e-mail were as follows "Great chart below, shows how China is just returning to where it was before Britain knocked them out in the 19th century Opium Wars."

(Click on image to enlarge)

The opium wars had silver as its focal point...but you never hear about that.  If you'd like to learn more, you can check it out here.  And if you were ever curious as to why Britain turned over Hong Kong to mainland China without a whimper...this was the reason.

I have a large number of stories today and, for a change, a lot of them are precious metals related.  The final edit, as always, is up to you.


¤ Critical Reads

Housing Hype: Recovery Turns to Relapse?

Housing was charging back. Spring sprung early. Sentiment among home builders doubled in six months. Any talk that the fundamentals might not be supporting the sentiment was met with harsh criticism. And then suddenly it wasn’t.

A slew of new housing data last week disappointed the analysts and the stock market, and all of a sudden you started to hear concern that maybe housing wasn’t exactly in a robust recovery.

This is no surprise to me.  This 'new dawn' in U.S. real estate will turn out to be a false dawn in a hurry.  The U.S. is years away from a bottom in the housing market...either new or resale.

I thank West Virginia reader Elliot Simon for sending me this story from yesterday...and the link is here.


The First Crack: $270 Billion In Student Loans Are At Least 30 Days Delinquent

Yet one bubble which the Federal Government managed to blow in the meantime to staggering proportions in virtually no time, for no other reason than to give the impression of consumer re-leveraging, was the student debt bubble, which at last check just surpassed $1 trillion, and is growing at $40-50 billion each month. However, just like subprime, the first cracks have now appeared.

It was just last week that I posted a story about this $1 Trillion dollar student debt bubble...and now we find out that quite a significant amount of that is past due.  No surprises here...and it's just a matter of how bad it will end up being.

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


Property Tax Revolution in North Dakota, Minnesota and Michigan

The granddaddy of property tax revolts is now underway in North Dakota.

The North Dakota group, Empower the Taxpayer writes "On June 12, 2012, the voters of North Dakota will have the opportunity to make North Dakota truly 'Legendary', as the first to pass a state constitutional amendment that will abolish the property tax, prioritize spending by the legislature, and finally give local governments something they never had: true local control over spending."

Public unions and proponents of big government are now involved in a major wave of fear mongering because North Dakota counties get about 60 percent of their revenue from property tax.

If the amendment passes, school districts will simply have to get funding from another source, or cut budgets.

This interesting article was posted over at Mish Shedlock's website on Sunday...and is Roy Stephens first offering of the day.  The link is here.


BRICs and South Africa move to unseat dollar as trade currency

South Africa this week will take some initial steps to unseat the US dollar as the preferred worldwide currency for trade and investment in emerging economies.

Thus the nation is expected to become party to endorsing the Chinese currency, the renminbi, as the currency of trade in emerging markets.

This means getting a renminbi-denominated bank account, in addition to a dollar account, could be an advantage for African businesses that seek to do business in the emerging markets.

The move is set to challenge the supremacy of the US dollar. This, experts say, is the latest salvo in the greatest worldwide currency war since the 1930s.

This story was filed from Johannesburg on Sunday...and was posted on the website.  I borrowed it from a GATA release...and the link is here.


Germany Bows to Pressure: Merkel Comes Around to Euro-Zone Firewall Boost

German Chancellor Angela Merkel and her Finance Minister Wolfgang Schäuble have long opposed a further expansion of the euro-zone bailout fund, which would expose German taxpayers to billions in new liabilities. But SPIEGEL has learned that Merkel has given up her opposition and will likely agree to strengthen the firewall later this week.

Government sources said the two politicians, who are both members of the conservative Christian Democratic Union (CDU), no longer plan to oppose the wishes of most of the other member states in the common currency zone to combine the remaining funds of the European Financial Stability Facility (EFSF) with that of its successor, the permanent European Stability Mechanism (ESM), to create a more effective firewall to prevent a contagion effect in the euro crisis.

That pretty much makes it a global clean sweep of "Inflate...or die."  This is Roy's second offering of the day...and it was posted over at the German website yesterday.  The link is here.


Trichet warns of nations’ ‘behavioral contagion’

Speaking to a conference of influential central bankers from around the world and leading academic experts on monetary policy, Trichet said it could still turn out that the bond-buying, asset purchases and liquidity injections by global central banks might go away after the financial system gets back on its feet.

That is the optimistic scenario, he said.

But Trichet said there was a “less flattering conjecture” that the extraordinary actions will be part of a new “permanent regime.”

This is another cute way of saying it's either "Inflate...or die."  This story was posted on their website on Saturday...and I borrowed it from yesterday's King Report.  It's worth reading...and the link is here.


Spanish PM Mariano Rajoy's election defeat fuels bail-out fears

Traders were alarmed by signs that Mariano Rajoy was losing popular support for his programme to reduce Spain’s burgeoning debts, without which the country may need a Greek-style bail-out.

The prime minister’s PP party won 50 seats in the crucial Andalusia elections but failed to win a majority as the opposition leftist PSOE party won 47 seats.

Alastair Newton, political analyst at Nomura, said: “Failure to win in Andalusia, whose regional deficit was more than double its 1.3pc of Spanish GDP target for 2011 and which voted against the central government’s 1.5pc target for this year, represents a potentially serious setback in efforts to rein in the total national deficit to 5.3pc.” He added: “The outcome in Andalusia may also make the challenges PP faces at the national level even more daunting.”

This story was posted in The Telegraph yesterday evening...and I thank Roy Stephens for sending it along.  The link is here.


Godfrey Bloom MEP addresses the European Parliament

And you thought Nigel Farage was vitriolic.  Well, Mr. Bloom is right behind him.  This 3:09 minute video is from ten months ago, but it might as well have been said ten minutes ago, as it's still 100% relevant.  It's posted over at the website...and it's well worth watching.  I thank Roy Stephens once again...and the link is here.


China unveils new legislation on police powers of detention

China has unveiled legislation enshrining police powers to hold people at unknown locations, but has removed a controversial secrecy clause after an outcry.

Experts had warned that the original draft would have legalised disappearances by allowing police to hold some suspects for up to six months without informing their families.

"The real issue is not what the laws say, but how they are enforced," Pu Zhiqiang, a Beijing lawyer who has taken on sensitive cases such as those involving dissidents, said.

"The pattern is that the Communist party can play by rules when there aren't special circumstances – but whenever there are special circumstances, it doesn't have to play by them."

Police later arrived at Pu's office, preventing him from granting further interviews.

This story was posted in The Guardian on March 8th...and I thank reader Eddie Costik for bringing it to our attention.  The link is here.


Crisis closes in on China's inner circle: Asia Times

Zhou Yongkang, a member of China's ruling Politburo Standing Committee (PSC) and head of the country's 1.5 million-strong police force, is the latest and most senior leader to fall in the battle for control of the Chinese Communist Party (CCP) if rumors of his downfall have any substance. It was certainly a fall foretold.

Rumors late last week of Zhou's crash from grace came after talk of an attempted coup in Beijing last Monday night or early on Tuesday, supposedly linked to his protégé Bo Xilai, former party boss of the strategically important Chongqing municipality and until his dismissal this month a contender to succeed Zhou on the PSC when he steps down in November.

Bo's dismissal, announced on March 14, was "the most important political event in China in more than two decades"; that is, since the party schism that opened over the crackdown of Tiananmen Square protests in 1989. He is now reportedly under arrest, though still a member of the 25-strong politburo, the stepping stone to the PSC. Any denunciation of Zhou would overshadow those events by a large margin.

This 3-page story showed up posted on the Asia Times website early on their Tuesday morning...and is another offering from Roy Stephens.  The link is here.


Printing money does not lead to inflation, argues Argentine central bank president

The president of Argentina’s Central Bank (BCRA), Mercedes Marcó del Pont, stressed the importance of the recently approved bank’s charter reform and denied that printing currency leads to the creation of an inflationary state “since inflation is rooted in other causes”.

If I lived in Argentina, I'd be buying precious metals with both hands after a statement like that.  You can't make this stuff up.  I thank Casey Research's own Louis James for sending this along.  It's posted over at the website..and the link is here.


Geithner admitted need for virtually infinite new debt: John Embry says

Interviewed by King World News yesterday, Sprott Asset Management's John Embry points to recent comments by U.S. Treasury Secretary Tim Geithner indicating that virtually infinite new government debt will be necessary to keep the government and the economy going. This, Embry says, will be highly inflationary, against which gold, silver, and their mining shares will provide protection even as they are all very cheap at the moment.

I borrowed the headline and introduction from Chris Powell's GATA release yesterday...and the link to the KWN interview headlined "Massive QE Near as System Moves Closer to Collapse" is here.


Asia's Golden Future: Alasdair Macleod

In his new essay posted over at the website, economist and former banker Alasdair Macleod lays out "Asia's Golden Future," the development of a trade-settlement currency system allowing the continent to escape the West's system.

I thank Chris Powell for wordsmithing the introduction for us...and the link is here.


U.S. commandeering of payments system likely to re-monetize gold, Sinclair says

Trader, mining entrepreneur, and gold advocate Jim Sinclair today told King World News that the U.S. government's use of the international payments system as a weapon of war is likely to prompt the re-monetization of gold throughout the world outside the American empire.

This is another KWN blog that Chris wrote the introduction for...and the link is here.


Bron Suchecki: Fake bars -- the facts

Well, the story about the drilled out gold kilo-bar that was all over the Internet on the weekend resulted in this posting by Bron Suchecki over at The Perth Mint in Australia.

Chris Powell introduction is a must are Bron's comments in this GATA release...and the link is here.


I'm Back Into Gold: Dennis Gartman

Dennis Gartman got out of gold last week, but he's back thanks to an inadvertent push by Federal Reserve Chairman Ben Bernanke.

"I was wrong in standing aside," said the publisher of The Gartman Letter. "Fortunately I didn’t stand aside on much. I got scared. The pros get more frightened than amateurs in this business, and the first rule is to keep your powder dry."

"Sometimes you get lucky" and "Dr. Bernanke got me a little lucky this morning," said Gartman. He said he "got lucky" with Bernanke's easing comments, indicating possibly another round, which would be QE3, is back on the table.

Dennis has been dissing gold just about all the way up in this bull market, so I'm not sure how much of a 'pro' he really is...or thinks he is.  Chris Powell's comment on this news item was as follows..."Time to sell?"  I think not.  This story was posted on their website yesterday...and the first person through the front door with it was reader Eddie Costik with his second offering in today's column.  The link is here.


If Greece ditches the Euro, gold will likely soar: John Embry

In his March contribution to Investor's Digest of Canada, Sprott Asset Management's chief investment strategist, John Embry has a few things to say about that black hole of debt that Greece [and other PIIGS] are being sucked into...and what that may mean for precious metal prices going forward.

The article is posted over at the website...and I thank Australian reader Wesley Legrand for sharing this article with us.  It's a must read of course...and the link is here.


"We Have Entered The Most Favourable Era For Gold Prices In Our Lifetime” - Don Coxe

In Don Coxe's latest and typically excellent letter..."All Clear?"...he highlights the opportunity in precious metals mining companies...

"In our view, we have entered the most favourable era for gold prices in our lifetime, and the share prices of the great mining companies will eventually outperform bullion prices."

Gold remains one of the most widely misunderstood assets in the investible world. Indeed, it may be better to refer to it as a means of saving that does not expose the saver to counterparty or credit risk or to the depredations of the monetary authorities.

As Don Coxe makes clear, governments are running deficits "beyond the forecasts of all but the hardiest gold bugs five years ago; central banks are printing money and creating liquidity beyond the forecasts of all but the most paranoid gold bugs a year ago."

I posted the 30-minute Don Coxe audio commentary about ten days ago...but here is the essence of it in one short column posted over at yesterday.  It's another must read of course...and the first reader I received this from yesterday was Phil Barlett, for which I thank him.  The link is here.



¤ The Funnies

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¤ The Wrap

There was a lot of talk that yesterday's short but sweet 20-minute parabolic rise in gold and silver prices had something to do with what Bernanke had to say.  I suppose that's possible, but the precise blast-off at 8:00 a.m. Eastern time makes me rather skeptical.

What I saw yesterday had all the hallmarks of a short covering rally.  As you may have noticed over the months and years reading this column, that a lot of gold/dollar index events of note have a peculiar habit of occurring on the hour...and I seriously doubt that what 'Helicopter Ben' may have said occurred at precisely 8:00 a.m. Eastern time.

Gold poked its nose above its 200-day moving average yesterday...and managed to close a few dollars above it.  Silver still has more than 50 cents to go to get to its 50-day moving average...and the 200-day moving average is still about two bucks higher than Monday's closing price.  So there is still work to do to the upside in both metals before we can say that this leg of the bull market is on its way.

And always the question is...who are the short sellers going against all the new longs that will come pouring back into the precious metal markets once the moving averages have been broken with some legitimate short sellers are few and far between at these prices.  Will JPMorgan et al be there once again...and if they are, how soon will they show up?  A question with no answer at the moment.

But that...and only that...will determine how and how fast we climb during this price run-up.  Sure, a declining dollar will add fuel to the fire, but it still boils down to who the not-for-profit short sellers will be on the ensuing rally.

Here are the 6-month charts for both gold and silver...

(Click on image to enlarge)

(Click on image to enlarge)

Action in Far East trading on their Tuesday was uneventful...and volume was very light in both metals.  Now that London has been open for a couple of hours, gold and silver prices are showing signs of life, but it's obvious that $1,700 in gold and $33 in silver are being actively defended as of this writing.  It will be interesting to see how quickly these two price levels fall...and when they do, how fast prices will rise from there.

We've only got three trading days left before First Day Notice for delivery into the April gold contract...and I'm expecting that 'da boyz' may want to keep a lid on prices until then...but who knows if they'll be successful or not.

As I hit the 'send' button at 5:20 a.m. Eastern time, gold is still attempting to break through $1,700...and silver has finally made it above $33 spot.  Net volume in both metals is surprisingly low...and very low in gold.

It could be an interesting Tuesday when all is said and done.

See you tomorrow.