Gold & Silver Daily
"One has to wonder if JPMorgan and the other big traders are ever going to get out of this silver corner that they appear to have painted themselves into."
 

¤ Yesterday In Gold & Silver

The gold price wandered around in a ten dollar price range right up until the London open...and then traded just about flat right until the 8:30 a.m. Eastern time job numbers were announced.  From that point, gold's brief rally was capped at precisely 9:30 a.m...and the subsequent sell-off ended at precisely 10:30 a.m. Eastern.

The smallish rally that began after that, wasn't allowed to get too far...and gold closed at $1,616.60 spot...down $4.80 on the day.  Volume, net of roll-overs out of the February contract, were in the neighbourhood of 135,000 contracts.

This is the New York Spot Gold [Bid] price chart...which is the only action that matters.

Silver traded in a twenty cent price range all through Far East and most of the London trading day and, like gold, the real price activity occurred in New York.  At 9:30 a.m...long after the jobs numbers had been released...and thirty minutes after gold had headed south...a not-for-profit seller showed up in the silver market as well.  By 10:20 a.m. Eastern time, they had the silver price down about 80 cents.

The subsequent rally regained seventy cents of that loss by 11:25 a.m...but then silver got sold off once again.  This lasted until about 3:30 p.m...and then traded quietly sideways for the rest of electronic trading in New York.  There were obviously no free-market forces at work in the New York silver market on Friday...nor gold, for that matter.

Silver closed at $28.75 spot...down 62 cents on the day.  Net volume was around 36,000 contracts.

Once again I'm only providing the New York Spot Silver [Bid] chart...as it's the only price action that's relevant.

The dollar index traded sideways up until about 7:30 a.m. Eastern time...and then rose about 30 basis points by about 9:50 a.m.  From there it traded sideways until the markets closed at 5:15 p.m. in New York.

The gold stocks pretty much followed the gold price during the entire New York trading session...and the HUI finished down 0.95% on the day...but up 3.8% on the week.

The silver stocks didn't do particularly well as a group, either...but considering the big hit that the price took yesterday, the damage certainly could have been worse.  Nick Laird's Silver Sentiment Index only closed down 1.16%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that only 10 gold, along with 82 silver contracts, were posted for delivery on Tuesday.  All this week in silver it's been Jefferies as a short/issuer...and the Bank of Nova Scotia and JPMorgan as the long/stoppers.  Friday's report was no different...and the link to that action is here.

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

But the U.S. Mint had another sales report yesterday.  They sold a whopping 30,000 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 175,000 silver eagles.  In the first four business days of 2012, the mint has sold 74,500 ounces of gold eagles...3,500 one-ounce 24K gold buffaloes...and 3,547,000 silver eagles.

It was another big day over at the Comex-approved depositories on Thursday.  They received 1,180,316 ounces of silver...and only shipped a tiny 3,141 ounces out the door.  As of the close of business hours on Thursday, these five Comex warehouses held 122,302,690 ounce of silver.  The link to Thursday's activity is here.

I must admit that I was somewhat taken aback by yesterday's Commitment of Traders Report for silver, as it wasn't what I was expecting at all.  Not  even close.  There was no big increase in tech fund shorting on last week's monster price drop...and no corresponding increase in the Commercial net long position.  What it showed was that Commercial net short position actually increased by about 1,800 contracts because more short positions were added...and the tech funds went long by about 2,400 contracts.

The COT report in gold showed that the Commercial traders decreased their net short position by about 2,000 contracts...the technical funds showed virtually no change...and the Nonreportable [small] trader were the ones that went short the 2,000 contracts.

But on sober second thought, I suppose it's possible that the big declines that were experienced in both gold and silver on December 27, 28 and 29 were all negated by the gains on the 30th...and the big gain on January 3rd.  True, there was pretty big gross volume on those days, but how much net volume was involved once all the b.s. high-frequency trading volume is removed?  Maybe not very much in the middle of holiday-shortened week.  If that's the case, then the big spike down...then up...in silver and gold, was done under very illiquid market conditions...and there may have been little net change in the COT report under those circumstances.

I had no opportunity to talk to Ted Butler yesterday, so I must admit that I wasn't able to pick his brain about what he saw in the Disaggregated COT Report, which is different from the legacy report that I always use.  He can see a lot more under-the-hood detail from this report...and there are no other commentators [at least that I'm aware of] that use it, or even understand it.  As I said in last Saturday's column...I'll wait to see what he has to say later today...and then steal what I can for my Tuesday column.

Well, if the COT report was a surprise in silver, then the January Bank Participation Report in silver was a shock.  Both Ted and I were expecting big improvements in the U.S. banks short position in both silver and gold.  With the big price declines in December, we should have expected nothing else.

That turned out to be the case in gold, but not in silver...not by a long shot.

For many years, there have been only two U.S. banks with short positions in silver that have really mattered.  They are HSBC USA...and JPMorgan...with JPMorgan holding at least 90% of that total short position all by itself.

In the January report, these two U.S. banks were net short 15,757 Comex silver futures contracts.  In the December report they were net short 15,662 futures contracts.  Their net short position since the prior report actually increased 95 contracts!  During the month of December the price of silver was engineered lower by five bucks...and a 95 short contract increase in their net short position on the Comex was the best that JPM and HSBC could do?  Wow!

Yesterday's COT Report and BPR Report all came from the same set of data at the Tuesday cut-off...so we can compare the data directly from one report to the other.  To put the JPM/HSBC Comex silver short position in context, when you remove the Non-Commercial spread trades [long one month, short another] from the total Comex silver open interest, the total open interest in silver drops down to 87,889 contracts.  Divide that number into the JPM/HSBC net short position and you find that these two banks are short 17.9% of the entire Comex futures market in silver.  If you remove the spread trades from the Commercial category [which aren't reported in the COT Report]...these two banks would show that they would be short north of 20% of the Comex silver market.

And those are just two of the 'big 8' short holders in the Comex silver futures market.  If you add in the other six, then these eight large traders are short 34.9% of the Comex silver futures market...and as you can see, well over half of that 34.9% short position is held by JPM/HSBC.

That's concentration!

Now that the U.S. bullion banks short position has been bisected and dissected...here is what the 14 non-U.S. banks did in Comex silver futures contracts since the December report.  They moved from a net short position of 1,204 contracts in the December report, to a net long position of 1,259 contracts in the January report...a swing of 2,463 contracts to the long side.

The '8 or less' traders, led by JPMorgan, have a short-side corner on the Comex futures market in silver...and JPMorgan appears to be trapped on the short side with what remains of its once gargantuan 40,000+ contract short position.  One has to wonder how many other of the 'big 8' short holders are in the same boat.

In gold, it was very straightforward.  The January Bank Participation Report showed that 4 U.S. bullion banks were net short 79,926 Comex gold futures contracts...a decrease of 21,093 contracts since the December report.  The 20 non-U.S. banks that hold Comex futures contracts in gold are also net short the market.  In their case it's 31,102 contracts...which is an 8,439 contract improvement since the December BPR.  Based on the price action during December, there are no surprises here.

The short position in gold, although bad enough in its own right, is not even on the same planet as silver.  In gold the '8 or less' commercial traders are short 105.2% of the total Commercial net short position.  In silver, these same '8 or less' traders are short 234.8% of the Commercial net short position.  The 2 U.S. bullion banks mentioned in the BPR...JPMorgan and HSBC...hold 99.0% of the Commercial net short position all by themselves!  That's concentration!

This is what the CFTC can see as well...but won't raise a finger to stop it.  And the silver companies that you own shares in won't say a word, either.

Here's a real scary chart that Australian reader Wesley Legrand sent my way yesterday.  It tells you all you need to know about what would happen if any or all of the PIIGS defaulted on their debt...or even a portion of it.  I suggest you use the 'click to enlarge' feature...and study this chart carefully.

(Click on image to enlarge)

I have a fair number of stories today, of which quite a few are ones that I've been saving all week for this Saturday column.  I hope you can find the time over the weekend to read them all.

 

¤ Critical Reads

S.E.C. Changes Policy on Firms’ Admission of Guilt

The Securities and Exchange Commission, in a fundamental policy shift, said Friday that it would no longer allow defendants to say they neither admit nor deny civil fraud or insider trading charges when, at the same time, they admit to or have been convicted of criminal violations.

The change is the first time that the S.E.C. has stepped back from its longstanding practice of allowing companies to settle fraud charges by paying a fine without admitting wrongdoing. The new policy will also apply to cases where a company or an individual enters an agreement with criminal authorities to defer prosecution or to not be prosecuted as part of a settlement.

Robert Khuzami, the director of enforcement at the S.E.C., said the agency would continue to use the “neither admit nor deny” settlement process when the agency alone reached a deal with a company in a case of civil securities law violations. Those types of cases make up a large majority of S.E.C. settlements.

At least it's a step in the right direction...but not far enough to suit me.  This story showed up in The New York Times on Friday...and I thank reader Phil Barlett for sending it.  The link is here.

Read more...

Beware: Corporate Psychopaths Still Occupy Positions of Power

Over the years I've met my fair share of monsters – rogue individuals, for the most part. But as regulation in the UK and the US has loosened its restraints, the monsters have proliferated.

In a paper recently published in the Journal of Business Ethics entitled "The Corporate Psychopaths: Theory of the Global Financial Crisis", Clive R. Boddy identifies these people as psychopaths.

"They are," he says, "simply the 1 per cent of people who have no conscience or empathy." And he argues: "Psychopaths, rising to key senior positions within modern financial corporations, where they are able to influence the moral climate of the whole organisation and yield considerable power, have largely caused the [banking] crisis'.

This story was posted in The Independent over in the U.K. on December 31st...and is reprinted over at the readersupportednews.org website.  I thank Casey Research's own Doug Hornig for bringing this must read article to our attention...and the link is here.

Read more...

Did Psychopaths Take Over Wall Street Asylum?: William D. Cohan

It took a relatively obscure former British academic to propagate a theory of the financial crisis that would confirm what many people suspected all along: The “corporate psychopaths” at the helm of our financial institutions are to blame.

Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”

As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”

It's obvious that Bloomberg columnist William D. Cohan read the same report...and here's his take.  It's the same, but it's also very different...and it's a must read as well.  I thank Australian reader Wesley Legrand for sending this along...and the link to this January 2nd Bloomberg story is here.

Read more...

Continuing the analysis on the dollar [Part II] - Scott Pluschau

Dollar futures hit a new 52-week high on Friday.  Prior high was on January 10th, 2011, at 81.635.  Today's high tick was 81.72, and it closed at 81.62.

There didn't appear to be many buy stops being hit or any significant increase in new demand afterward.  Price actually pulled back and closed beneath the prior 52 week high.  Right now from an auction market perspective it appears to me the shorts have very strong hands.

I posted part one in this column on Friday...and you can find that by scrolling down past this blog.  As I said yesterday, when the dollar finally does crater, the precious metals will go in the other direction.  The story is posted over at Scott's website at scottpluschau.blogspot.com...and the link is here.

Read more...

Commentary: The Youth Bulge - Arnaud de Borchgrave

With more than 50 percent of the world's population under age 30, humanity is getting younger and less experienced. E-mail is already passé. Some universities have stopped distributing e-mail accounts. The social gamers have taken center stage.

Facebook now tops Google+. E-readers surpass book readers. If Facebook were a country, it would be the third largest in the world (after China and India).

Now at 93 percent, almost all marketers use social media for business. Eighty percent of companies use Facebook for recruiting. Kindergarten children learn on iPads, not chalk boards.

I hate to admit it, but a lot of things mentioned in this article are already beyond me.  The world of communication is 'advancing' faster than most of us can keep up...and this article certainly proves that.

This UPI story was filed from Washington on Tuesday...and I thank Roy Stephens for his first offering of the day.  It's worth the read...and the link is here.

Read more...

After a Brief Calm, Europe Again Worries Over Debt

Five months after the United States lost its AAA credit rating, buyers are still flocking to bonds issued by Washington. But in Europe, where the euro zone crisis and chronic economic problems may soon erode the credit scores of big countries like France, Italy and Spain, investors are far more wary.

The euro currency fell to its lowest level in more than 15 months on Thursday, below $1.28. And France had to pay slightly more than in recent auctions to find buyers for its government bonds that mature in 10 years. Those were among fresh signs that the late-December market calm that fell over Europe might not last much longer.

Next week, investors will probably force the Italian and Spanish governments to pay higher borrowing costs in exchange for billions of euros in new loans that the countries must obtain to pay down a mountain of other bonds whose payments will come due shortly.

Well, if you check the PIIGS Sovereign Debt chart further up in this column, it's obvious why that is the case.  Of course, when one looks at the situation in the U.S...that PIIGS chart could soon become the 'PIIGS or US'.  This story was posted in The New York Times yesterday...and I thank Phil Barlett for sending it along.  The link is here.

Read more...

Policy Change: China Puts the Brakes on Foreign Automakers

For years, foreign automobile companies have reaped most of the profits to be had in the enormous Chinese market. But at the end of 2011, the Chinese government's National Development and Reform Commission (NDRC) approved a new industrial plan that could have a devastating effect on German car manufacturers like Volkswagen, BMW and Mercedes once it takes effect in late January.

These companies have worked to make China one of their most important and successful foreign markets, while Beijing industrial planning officials looked on in frustration. In the first 11 months of last year, VW alone sold more than 2 million vehicles in there -- up more than 15 percent from 2010.

But this kind of growth could now be over. To protect the "healthy development" of their domestic auto industry, the NDRC said it would remove car manufacturing from the list of industries where it encourages foreign investment. The goal of the change is clear: Beijing wants to help its own carmakers break into the market.

This story was posted over at the German website spiegel.de yesterday...and I thank Roy Stephens for sharing it with us.  The link is here.

Read more...

Gold, Silver, Lost Confidence & Systemic Failure: Paul Brodsky

Fund manager Paul Brodsky told King World News that he expects a confidence-breaking event in the world monetary system this year. An excerpt from the interview is posted at the KWN website...and the link is here.

Read more...

Was George Soros right to buy gold?

Legendary investor George Soros was a major buyer of gold late in 2011.  Even though gold closed the year at a six-month low, Soros and other gold bulls such as Steve Cohen of SAC Capital will be rewarded if Federal Reserve Chairman Ben Bernanke launches into a third round of quantitative easing.

When this happens, all dollar-denominated commodities, including oil, United States Oil, and silver, iShares Silver Trust will rise with gold, just as happened with the last quantitative easing campaign in 2010.

I wasn't aware that Soros was back in the gold market...and I thank West Virginia reader Elliot Simon for sending me this January 5th story that was posted over at the nasdaq.com website.  It's a short read...and very much worth your time.  The link is here.

Read more...

Whenever You See Gold Trading Below Its 200-Day Moving Average, Consider it a Buy Signal!

During the 12 year history of this bull market in gold, only about 5% of the time did we see gold trading below its 200-day MA, and each time it turned out to be a prime buying opportunity.

The last time gold traded below its 200DMA was during the autumn of 2008. As soon as the price climbed back above the 200DMA, it rose from $900 to $1,900. The fundamentals for gold are bullish enough for a repeat performance. Just make sure you are buying gold and not a 'paper or digital substitute' for gold.

This excellent T.A. article was written by Peter Degraff...and was posted over at the safehaven.com website yesterday.  This Roy Stephens offering is worth the read...and the link is here.

Read more...

Tanzanian police foil $30m 'Great Plane Robbery' gold heist

In the latest security incident to hit the country's miners, five masked men raided an airstrip owned by South African group AngloGold Ashanti.

The heavily-armed men emerged from a nearby forest and attempted to steal 587 kilogrammes of gold bars from an aeroplane at the group's Geita mine, Reuters reported.

"Incidents such as these are usually carried out by a syndicate and also involve somebody from the inside who told the robbers that a plane usually flies from the airstrip every Thursday with gold bars," Deusdedit Nsimeki, Mwanza's regional crimes officer, said.

This story was posted in The Telegraph yesterday...and is Roy Stephens final offering of the day, for which I thank him.  The link is here.

Read more...

Nigel Farage: Gold to See Its Biggest Spike in 2012

Eric King sent me this Nigel Farage blog yesterday afternoon.  It's posted over at the King World News website...and the link is here.

Read more...

Why Rising Debt Will Lead to $10,000 Gold: Nick Barisheff

This 13:29 must watch video was recorded on Thursday at the Empire Club in Toronto at their 18th Annual Investment Outlook.  It's also available in text format as well.  Both are posted on the home page over at the Bullion Management Group website...and the link is here.

Read more...

 

¤ The Funnies

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Columbus Gold Closes Transaction to Acquire Paul Isnard, 1.9 Million Inferred Oz. Gold Project; Plans Drilling

On June 30, 2011, Vancouver, Canada based, Columbus Gold (CGT: TSX-V) announced that it had closed its previously-announced transaction with Auplata SA, gaining the exclusive right to obtain up to a 100% interest in the Paul Isnard gold project in French Guiana, which includes the 43-101 compliant 1.9 million Inferred gold resource in the Montagne d'Or gold deposit. Columbus Gold now has fully satisfied the share issuances required to earn into the project, and can earn its initial 51% interest in the project by incurring $7 million in exploration expenditures, which it expects to complete by early 2012.  Upon Columbus Gold earning a 51% interest in the project, it will have an option to increase its interest to 100% (subject to an underlying royalty) by completing a bankable feasibility study. Drilling is planned to commence in August 2011.

For additional information, please see Columbus Gold news release dated June 30, 2011, or contact the company at:

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¤ The Wrap

Even if you are in a minority of one, the truth is still the truth. - Ghandi

Today's 'blast from the past' comes from 1972...and in case you can't do the math, that's now 40 long years ago.  Everyone knows this rock classic, so turn up your speakers...and then click here.  Note the outfits.

With gold down about five bucks...and silver down two percent, there was a small decline in gold's preliminary open interest number...and no change in silver's preliminary o.i. number.  It makes you wonder just how much true volume there is actually being traded in these metals, as it appears that these rises and falls in price as of late, have made very little difference in the open interest numbers.  This is something that Ted Butler has been going on about for many months now.

There was nothing to be read into the final open interest numbers for Thursday's trading day, either.

Not much has changed since gold and silver prices hit rock bottom at the London silver fix at 7:00 a.m. Eastern time last Thursday.  Despite the surprise in the COT report...and even bigger silver surprise in the Bank Participation Report, it appears that nothing has been resolved in JPMorgan's short position in silver over the last month...even though the price declined a bit over five bucks during that period.

One has to wonder if JPMorgan and the other big traders are ever going to get out of this silver corner that they appear to have painted themselves into.  As Ted Butler said a couple of weeks back, they might be able to beat gold down a bit more...and then bash silver at the same time.  But if a five buck decline didn't do the trick in December...what silver price would at this stage of the game?  Just asking.

I have no idea what to expect during next week's trading session...but nothing would surprise me. I look forward to the Sunday evening open in New York with great interest.

I hate to keep beating this story to death, but 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.

That's it for the day...and the week.  See you on Tuesday.