Gold & Silver Daily
"Whether we're done to the downside...and where we go from here still very much up in the air."

¤ Yesterday In Gold & Silver

It was pretty quiet in the gold world on Planet Earth on Monday.  The price was up about ten bucks or so about thirty minutes after the London open...and then chopped around five dollars either side of that for the rest of the trading day.

The high, such was it was, came at 3:30 p.m. Eastern time in the electronic market in New York...and Kitco recorded that as $1,598.20 spot...and then it got sold off before it could break through the $1,600 price mark.

Gold closed at $1,593.60 spot...up $12.10 on the day.  Gross volume was around 189,000 contracts.

Silver's price path was about the same, although the high tick of the day [around $29.30 spot] came shortly before the London silver fix at noon GMT.  After that, silver got sold down about 30 cents...and closed at $28.99 spot...up 23 cents on the day.  Volume, net of all the roll-overs out of the March delivery month, was quiet at around 23,500 contracts.

The dollar index closed at 81.46 on Friday evening in New immediately jumped up to 81.63 at the open on Sunday evening in New York.  From that point, it traded sideways until 1:00 p.m. Hong Kong time...and then headed south.  The low price tick [81.09] came at precisely 8:00 a.m in New York...and then took off to the upside.  It closed the Monday trading session at's high of the day...up 43 basis points from it's Friday close.

Once again there was no co-relation between what the dollar index was doing and what was going in the precious metal markets.

The gold stocks gapped up a bit over a percent at the open...and then traded basically flat from there, although there was a bit of a rally going into the high price tick of the day, but that rally got sold down when the gold price got sold down after attempting to break above the $1,600 sport price.  The HUI finished up 1.35% on the day.

With the very odd exception, all the silver stocks I track all finished in the green...and Nick Laird's Silver Sentiment Index closed up 0.68%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 63 gold contracts were posted for delivery on Wednesday...which should just about be all the deliveries for the February month in gold.  There may be a handful more between now and the 28th...but not many.  There were no silver contracts issued for delivery.  The issuers and stoppers in yesterday's report included "all the usual suspects"...and the link to that activity is here.

GLD continues to shed gold, as an authorized participant withdrew another 251,619 troy ounces yesterday.  The big surprise once again was there were no reported changes in of 10:05 p.m. last evening.

The U.S. Mint had a small sales report yesterday.  They didn't sell any gold eagles or gold buffaloes, but they did sell another 485,000 silver eagles.  I know you're getting sick of hearing this, but I do hope that you're getting your share of them...or their equivalent in other silver bullion products.

Over at the Comex-approved depositories on Friday, they reported receiving 710,819 troy ounces of silver...and shipped 198,982 ounces of the stuff out the door.  The link to that activity is here.

Here's gold's 32-year Point & Figure chart...courtesy of Nick Laird...going back to the top of the bull market in 1980.  Because of the price management scheme in all the precious metals, it's hard to take gold's break below its long-term moving average seriously...or anything that comes before it, for that matter.  As I've said more times that I can remember, all the precious metal charts are fabrication jobs by JPMorgan et al.  They can, and they do, print whatever prices they want.  However, no matter what the evidence to the contrary, there are tonnes of T/A people out there that can make up any number of ridiculous reasons why the sky is falling.

(Click on image to enlarge)

Here's another chart...this one courtesy of James Turk.  Not that we need reminding, but here's another self-explanatory chart that shows how badly the precious metal equities are underperforming the metals themselves.  James pointed out that the chart is only current as of the end of January, so it's a safe bet that it looks much worse/better now...depending on your point of view.

Being a Tuesday column, I have a lot of stories for your reading 'pleasure' today.


¤ Critical Reads

Citigroup gave Lew a bonus for getting appointed Treasury secretary

Jack Lew is the nominee for Treasury secretary whose own bonus as an investment banker was bailed out by the Treasury Department when it rescued Citigroup Inc. in 2008. He owes much to America's taxpayers. He should also be grateful to Citigroup for agreeing to let him rejoin the government without suffering much for it financially.

An intriguing revelation from Lew's Senate confirmation hearing last week was that he stood to be paid handsomely by Citigroup if he left the company for a top U.S. government job, under his 2006 employment agreement with the bank. The wording of the pay provisions made it seem, at least to me, as if Citigroup might have agreed to pay Lew some sort of a bounty to seek out, and be appointed to, such a position.

This op-ed by Bloomberg's Jonathan Weil was posted on their website last Thursday...and I lifted it from a GATA release from early yesterday morning.


Why Should Taxpayers Give Big Banks $83 Billion a Year?

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks -- notably JPMorgan Chase & Co. Chief Executive Jamie Dimon -- make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Once shareholders fully recognized how poorly the biggest banks perform without government support, they would be motivated to demand better. This could entail anything from cutting pay packages to breaking down financial juggernauts into more manageable units. The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.

This short, but very interesting read, was posted on the Bloomberg website last Wednesday...and I thank Washington state reader S.A. for sending it to me on Saturday.


There's A Fresh Round Of Layoffs Coming To Goldman Sachs

This just in from Reuters, Goldman Sachs is about to begin a fresh round of job cuts. They could begin as early as next week and will hit the equities business harder than fixed income.

Goldman usually cuts the fat from its firm around this time of year, but that number is usually at around 5%.

According to Reuters, this year's cuts are supposed to be bigger.

I suppose it's too much to ask that Jamie Dimon will go.  How about Blythe Masters?  Just asking.  This story was posted on their Internet site early yesterday afternoon Eastern time...and I thank Roy Stephens for sending it.


Byron Wien...Blackstone Group: Nominal GDP vs. M2 Money Supply Growth [chart]

Will GDP grow faster than money ever again???

Although the chart is only current up to October of last year...and the story that it's embedded in is from December 2012, the chart is still stunning to look at...and definitely worth checking out.  The bonus is that there's only one paragraph of text to read.  I thank Australian reader Wesley Legrand for digging it up on our behalf.


Can Endless Quantitative Easing Ever End?

Three problems present themselves:

1) The bigger our balance sheet gets (currently, $3 trillion and counting), the more difficult it will be to ever load off some of these assets in the future. When we start liquidating, markets will panic. We might end up having absolutely no maneuvering space whatsoever.

2) All this money printing will one day feed into higher headline inflation that no statistical gimmickry will manage to hide. Then some folks may expect us to tighten policy, which we won’t be able to do because of 1).

3) We are persistently manipulating quite a few major asset markets here. Against this backdrop, market participants are not able to price risk properly. We are encouraging financial risk taking and the type of behaviour that has led to the financial crisis in the first place.”

This most excellent commentary was posted on the Zero Hedge website on Sunday...and I thank reader Norman Willis for his first contribution to this column.


Fed is 'nowhere close' to raising rates and tightening, Rickards tells Kitco News

Market analyst and hedge fund manager James G. Rickards, author of the best-selling book "Currency Wars," told Kitco News' Daniela Cambone yesterday that the Federal Reserve is "nowhere close" to raising interest rates and tightening monetary conditions. Rickards adds that gold's volatility lately has been the dollar's and that gold simply should be purchased and socked away because it will do fine over time. The interview is 21 minutes long and is posted at Kitco...and I found it buried in a GATA release yesterday.  This is a must watch.


Sound of silence as new debt woes grow

America has plenty of enemies but they can probably relax. Who among them could do to the U.S. the amount of damage that it is doing to itself?

Terrorists brought down some buildings in New York and punched a hole in the Pentagon. But it was not a terrorist who brought down the US economy at a staggering cost of more than $US20 trillion ($19.4 trillion) in losses in the value of family homes, shares and retirement funds.

It was, of course, poor US policy and weak governance. In other words, it was self-inflicted, man-made and entirely avoidable. The enemies of the US can only dream of inflicting this much damage on the superpower.

Chinese cyber assailants may have caused damage to the US economy valued in the hundreds of billions of dollars, we heard last week. This marks them as serious underachievers compared with the US's legislators, regulators and central bankers.

This hard-hitting op-ed piece appeared in The Sydney Morning Herald early on their Tuesday morning...and it's definitely worth reading.  I thank reader James White for sending it.


Pound falls to two-year low as currency markets lose faith in UK economy

Sterling fell to a two-year low on Monday as currency markets signalled their waning confidence in the UK economy's ability to exit the longest depression in 80 years.

The pound, which has tumbled by 8% in recent weeks, fell to $1.51 as investors digested the loss of Britain's AAA credit status and the increasingly gloomy economic outlook from independent forecasters. As recently as December it was trading at $1.63.

The ratings agency Moody's, which downgraded the UK to the lower AA1, joined many analysts in predicting that the economy will be held back by a longer than expected period of low growth and bigger debt mountain.

This article appeared on The Guardian's website late yesterday afternoon GMT...and I thank Roy Stephens for bringing it to my attention...and now to yours.


Debt crisis: France puts brakes on austerity

The Europe-wide economic slowdown has forced France to delay its target of cutting the state deficit to three percent of GDP this year and the government has said it does not want to impose too much austerity on an economy near recession.

"It would be wrong to take measures that put another brake on consumption and investment," Hollande said at the annual Paris farm show on Saturday. "There is no need to add more austerity in 2013. A lot has already been asked of the taxpayer."

He added that while government efforts to reduce the deficit had until now consisted of more tax increases than spending cuts, that trend would be reversed in 2014.

This story showed up on the Internet site late Saturday afternoon GMT...and it's also courtesy of Roy Stephens.


Euro debt crisis looms again as Italians defy EU austerity demands

The eurozone’s debt crisis strategy was in chaos on Monday night after anti-austerity parties appeared on track to win a majority of seats in the Italian parliament, vastly complicating efforts to forge a government able to carry through EU-imposed reforms.

In an earthquake result, the Five Star protest movement of comedian Beppe Grillo looked likely to emerge as the biggest single party in the lower house. The scourge of bankers and corrupt elites, Mr Grillo has campaigned for a return to the lira and a restructuring of Italy’s €1.9 trillion (£1.64 trillion) public debt.

The conservative bloc of ex-premier Silvio Berlusconi looked poised to win the senate, coming back from the political grave with vows to rip up the EU’s austerity plans and push through tax cuts to pull Italy out of deep slump.

“The majority of Italians have clearly voted against the Brussels consensus. That is a damning indictment,” said Mats Persson from Open Europe.

The Ambrose Evans-Pritchard offering was posted on The Telegraph's website yesterday evening...and it's courtesy of Manitoba reader Ulrike Marx.


High & Low Finance: A Tax That May Change the Trading Game

To the dismay of the United States government — not to mention Wall Street — much of Europe seems poised to begin taxing financial trading as soon as next year.

The idea is hardly new, but until now financial markets and institutions have been able to ward off any such tax in most major markets. The financiers claimed a tax would hurt economic growth and raise the cost of capital for companies. They said it would drive trading to other countries, leaving the country that adopted it with less revenue and fewer jobs.

But those arguments have not proved persuasive in Europe, which thinks it has found a way to keep institutions from avoiding the tax.

I posted a story out of Europe on this issue early last week...but it has now appeared in The New York Times.  It's definitely a must read...and I thank Harold Jacobsen for finding it for us.


Japan seen nominating 'deflation basher' as central bank chief

Japan's prime minister is likely to nominate an advocate of aggressive monetary easing, Asian Development Bank President Haruhiko Kuroda, as the next central bank governor to step up his fight to rid the country of deflation.

Shinzo Abe won a big election victory in December promising to revive the fortunes of an economy stuck in the doldrums for most of the past two decades. He has repeatedly called for a more aggressive central bank willing to take radical steps.

The yen fell on the nomination news to a 33-month low and the yield on five-year government bonds hit a record low as markets moved to factor in bolder monetary policy.

This Reuters piece, filed from Tokyo yesterday, was posted on their website yesterday...and I found it in a GATA release.


Eric Sprott: Is the West Dishoarding Its Sovereign Treasure?

We are well into the financial crisis. Everyone’s trying to keep it together, even though it would appear from the reading of the economy things are not going well at all here. And everyone's ignoring things.

But I think, in their hearts, the Central Bankers must know what they’re doing is totally irresponsible. And the tell of that irresponsibility which is the debasing of the currencies is the fact that real things will go up in value. This should be reflected in the price of gold and silver.

So expresses Eric Sprott, CEO and founder of Sprott Asset Management, and one of the most experienced and vocal advocates for owning precious metals.

This commentary has a 35-minute audio interview embedded in it as well.  It was posted on the Zero Hedge website on Sunday...and I thank Marshall Angeles for sending it.


2012 Chinese gold production up 12%

China’s Ministry of Industry and Information Technology reported Saturday that China’s 2012 total gold production increased 11.66% or by 42.1 tonnes to a total 403.1 metric tonnes of which 341.8 tonnes came from gold mines while 61.3 tonnes were by-products of nonferrous metal smelting.

The top ten gold group produced a total of 198.1 tonnes of gold in 2012, accounting for 49.14% of China’s national production, said the ministry.

The World Gold Council put China’s consumer gold demand at 776.1 tonnes last year, virtually flat from the previous year’s consumer gold consumption.

This short article was posted on the Internet site yesterday...and it's courtesy of Marshall Angeles as well.


Jay Taylor discusses gold market manipulation and Fed propaganda

Newsletter writer Jay Taylor discusses gold market manipulation and propagandizing by the Federal Reserve during an interview with Sound Money Campaign. The interview is 13 minutes long and is posted at the campaign's Internet site.

I found this interview embedded in a GATA release yesterday...and I thank Chris Powell for doing all the heavy lifting for us.


APMEX Reports Sales Spike on eBay Bullion Center

Michael Haynes, CEO of APMEX said the following...

"This was the second largest selling day for the APMEX Bullion Center on eBay since inception about five months ago, beating the next highest selling day by more than 30%. As Gold and Silver prices fell, heavily influenced by the reaction of day traders to the minutes from the recent Federal Reserve Open Market Committee meeting, physical sales of both metals skyrocketed. Buyers of physical Gold and Silver have a moderate to long term view and concluded that with the price movements, the precious metals were on sale and at a discount relative to the expected future values. These investors in physical Gold and Silver apparently see the long term issues faced by the U.S. economy and seek some asset allocation into the non-correlated asset class of precious metals to protect and hedge their investments in paper assets like Stocks and Bonds.”

This commentary was posted on the Internet site yesterday...and I thank West Virginia reader Elliot Simon for sharing it with us.


Seriously, Casey Research, What's Happening to the Gold Market?

I won't beat around the bush: the bear has come out of hibernation and has his claws in our favorite market sector - gold and silver - and he doesn't seem inclined to let go any time soon.

This is unhappy news to those who are long already, especially those who are "all in." We know. And we understand how frustrating it is to those who are fully committed to see lower prices... but that does not change the fact that for those who are not all in, there are some terrific buying opportunities shaping up.

Nor does current market sentiment in any way change the underlying fundamentals our investment strategy rests on. But you'd expect to hear no different from me, so in this issue, we pass the baton around to the leading thinkers in our group to get their takes on the precious-metals correction we're undergoing.

This could be one of the most important Daily Dispatches you read this year, especially if you're unsure about what to do under current circumstances. I strongly urge you to read the thoughts below and give them careful thought.

These words were written by Casey Research's Senior Metals Investment Strategist, Louis James as an introduction to yesterday's edition of the Casey Daily Dispatch.


Goldman beats up on gold

Goldman Sachs has readjusted their 3-, 6-, and 12-month gold price forecasts from $1,825/oz, $1,805/oz and $1,800/oz to $1,615/oz, $1,600/oz and $1,550/oz.

On a day when the gold market shone, a Goldman note to clients highlighted two tailwinds that are problematic for those holding gold: rising real interest rates and ETF dumpings.

Now that real rates have begun to normalize, Goldman analysts Damien Courvalin and Jeffrey Currie believe that gold's bull ride is over.

I remember a similar note that Goldman Sachs sent out to clients at $300...$500 and $1,000. So, just because someone at GS or JPM or UBS says it, doesn't make it gospel.  This was posted on the Internet site yesterday...and I thank Wesley Legrand for sending it.


Why central banks need to hold gold way down or get it up to $10,000

Officials at the US Federal Reserve may be more worried than they have let on about the treacherous task of extricating America from quantitative easing. This is an unsettling twist, with global implications.

A new paper for the US Monetary Policy Forum and published by the Fed warns that the institution's capital base could be wiped out "several times" once borrowing costs start to rise in earnest.

A mere whiff of inflation or more likely stagflation would cause a bond market rout, leaving the Fed nursing escalating losses on its $2.9 trillion holdings. This portfolio is rising by $85 billion each month under QE3. The longer it goes on, the greater the risk. Exit will become much harder by 2014.

Investors have of course been fretting about this for some time. Scott Minerd from Guggenheim Partners thinks the Fed is already trapped and may have to talk up gold to $10,000 an ounce to ensure that its own bullion reserves cover mounting liabilities.

This must read article was posted in The Telegraph on Sunday...and is an offering from Ambrose Evans-Pritchard.  The real headline reads "Trade Protectionism Looms Next as Central Banks Exhaust Q.E."



¤ The Funnies

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¤ The Wrap

The most important point I would make about the unusual metal inflows into SLV this [past] week is that it reconfirms my claim that the price declines in silver these past two weeks were strictly a result of paper trading games and manipulation on the COMEX. I said that there was no evidence of physical metal selling in silver and that was before the big 2 million oz deposit in SLV on Thursday. It’s hard to imagine how anyone paying the slightest attention to what is transpiring in the precious metals, not to see the obvious signs of price manipulation. - Silver analyst Ted Butler...23 February 2013

Based on the volume and price activity, I'm not going to attempt to read much into yesterday's price action in either gold or silver.  The March delivery month is upon us...and last day for delivery into the February contract in gold is tomorrow...and First Day Notice for delivery into the March silver contract will be on Thursday.

Whether we're done to the downside...and where we go from here still very much up in the air.  Ted Butler says that we're pretty much done to the downside in gold, but I wouldn't put a thing past JPMorgan and friends...especially in silver. Today is the cut-off for this Friday's Commitment of Traders Report...and I'm hoping that we have another quiet trading day so we can get a look at the report with the 'bottom' numbers intact.  Wednesday and Thursday of last week were the big capitulation days to the downside, as massive short bets were being placed.  As good as the numbers were in both metals in last Friday's COT Report, they should be pretty much one for the record books when we see them on least in gold.

Not much happened in Far East trading on their Tuesday...and all is pretty quiet going into the London open.  Volumes, as of 1:15 a.m. Eastern time, were pretty heavy in gold already...and silver as well.  But over half of silver's volume was roll-overs, as all future contract holders have to be out of the March delivery month by the close of trading on Wednesday, or stand for delivery on Thursday.

And as I hit the 'send' button at 4:45 a.m. Eastern time, the $15 rally in gold that began shortly before the London open ran into a massive wall of selling by JPMorgan et al just before 9:00 a.m. volume sky-rocketed...and is now north of 55,000 contracts, over double what it would be under normal market conditions at this time of day.  Obviously this rally did not got unopposed.  The gold price made it above the $1,600 spot mark...but that wasn't allowed to least not for the moment.  Silver had a smallish price spike as well, but there was little change in net volume.  The dollar index is down a hair.

I'll be watching today's price activity with great interest.

And before I head out the door, I want to remind you one more time, if you didn't listen the to Jim Rickards interview on Kitco that I posted further up in the 'Critical Reads' section, you should invest twenty-one minutes of your time and do it now.  I've listened to the whole thing...and it's definitely worth it.  The link is here.

See you tomorrow.