Both gold and silver were under ‘pressure’ the moment that the New York bullion banks began trading early Monday morning in the Far East market. With the dollar in a ‘rally’ mode… and the equity markets around the world heading for the dumpster… it was a good bet that gold and silver were not going to allowed to be the ‘go to’ asset when ‘the West’ began trading in London.
Gold was only down about six buck in Far East trading… but the down-trend accelerated the moment that London opened… with the bottom coming shortly after London closed for the day, a little after 11:00 a.m. Eastern time in New York. From its open [and high of $947.60] on Sunday night, to it’s low on Monday in New York, gold was down $18.80… 2.0%.
At that low, the dollar ‘rally’ stopped, and gold gained back a couple of bucks before the end of trading in New York at 5:15 p.m. yesterday.
Silver, as usual, was the ‘whipping boy de jour‘ yesterday. This should be no surprise to you, dear reader, as silver is the centre of the universe for the bullion banks… especially JPMorgan. In the second of two conversations I had with Ted Butler yesterday, he pointed out that before he hit the sack on Sunday night, silver was down 25 cents on only 300 contracts traded!
As I keep harping on, with some very rare exceptions, all gold and silver trading on the planet before 8:15 a.m. Eastern time in North America; is done on air, fumes and vapours…as around 90-95% of all trading volume in silver [and gold] is done during Comex hours in New York. Plus, the New York bullion banks can enter the market at any time during the night [or early morning] to influence prices… and they do. It used to be called the ‘New York Access Market’ on the Kitco graphs… but now it’s more politely called the ‘New York Globex’.
And, to make a long story short, the silver market got creamed yesterday… with the selling pressure easing shortly after London closed… just like in gold. From Sunday night’s open at $14.71 to it’s New York low of $13.81… silver was down 90 cents… 6.11%!
Anyway, all of yesterday’s carnage in both metals was done on a U.S. dollar rally of well under 1%. As I’ve said ad nauseum… the price of gold and silver are determined by which bullion banks are selling… or buying. And two U.S. bullion banks… JPMorgan and HSBC USA both have grotesque short positions in place on both metals and they [for now] can do as they please… and they are!
It was wall-to-wall ugly in the precious metals stocks as well… too ugly to be repeated here again… as I’m sure you’ve already made careful note of them already.
Friday’s changes in open interest were reported yesterday… and they are as follows: In gold, o.i. fell 3,187 contracts to 385,962…on decent volume of 85,243 contracts. Silver o.i. went in the other direction… up 165 contracts to 109,129…on largish volume of 33,169 contracts. I’m guessing, but I think that the reason why the silver o.i. rose instead of fell, is because the bullion banks, instead of covering their short positions… put on more longs instead… or a combination of both.
Without doubt, we should see a fairly large drop in open interest when Monday’s gold and silver numbers are published. But, as I pointed out above, the bullion banks are pretty good at hiding their tracks if they wish to do so.
The Comex Delivery Report for Monday showed that 205 gold contracts and 5 silver contracts were delivered in the August contract. So far this month, a total of 5,030 gold contracts and 53 silver contracts have been delivered. That’s 503,000 ounces of gold and 265,000 ounces of silver. And, as of yesterday’s report, there are about 700 contracts in gold still to be delivered this month. There were no changes in the alleged inventories at either GLD or SLV. The U.S. Mint updated their eagle numbers once again… this time they added 6,000 more gold eagles and another 100,000 silver eagles…bringing their August totals up to 32,000 gold and 880,000 silver eagles respectively. The weekly report from the Zürcher Kantonalbank in Switzerland showed that there was no change in their gold ETF… however another 190,076 ounces of silver were added to their silver ETF. As usual, I thank Carl Loeb for those numbers. And finally, there was a minor change in Comex-approved silver warehouse stocks, as they reported a very small decline of 12,151 troy ounces.
I couldn’t find any silver or gold news of note… either yesterday… or on the weekend. I suppose that’s as it should be, as it’s summer and all.
To make up for a lack of any gold news, I’ve made it up in the number of stories that I have for your consideration today… six, all told. Anyway, it was the weekend, and that’s the reason I have more than normal.
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The first one is about that gentleman in Las Vegas who paid everyone in gold and silver coins and then tried to use the coin’s face value for tax purposes. It was no surprise he was found guilty. The story is from the Las Vegas Review-Journal and is headlined ‘Las Vegas businessman Kahre guilty of 57 counts’ and the link is here.
The next item is from Bloomberg. It appears that ‘China will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.’ If I had a big stack of U.S. fiat currency, that’s what I would be doing to. The story is linked here.
The next story [courtesy of the King Report] is from Ambrose Evans-Pritchard from The Telegraph in London. The headline reads ‘There’s no quick fix to the global economy’s excess capacity’. His lead-in sentence says ‘There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression’… and the link is here.
The next story is a Bloomberg piece from yesterday. It appears that the British pound is headed for the dumpster. It’s ‘borrow, spend and print’ for central bank Governor, Mervyn King. The story is headlined ‘King Crushing Pound as U.K. ‘Can’t Afford’ Strength’. I thank Craig McCarty for bringing it to my attention… and the link is here.
It’s been a while since Iceland has been in the news, but when it is, it’s always more bad news… and this story is no exception. It’s been almost a year since the Iceland banks went under, and ‘It has now become clear that this was no ordinary crash. Iceland’s special investigation into ‘suspicions of criminal activity’ at the three banks is likely to stretch from Reykjavik to London, Luxembourg and the British Virgin Islands.’ It’s a longish read, but well worth your time. I once again thank the King Report for this piece from The Telegraph headlined ‘Iceland: what ugly secrets are waiting to be exposed in the meltdown?’… and the link is here.
The last piece was published on the weekend, and is a 2-page ‘must read‘ from the German web site spiegel.de. If you have to pick only one… this is the story to spend your time on. ‘During the hyperinflation in Germany of 1920s, the country’s currency, the mark, went crazy. The government of the Weimar Republic may have been able to clear its debts, but it came at the cost of the citizens’ savings. It’s an era that is still part of the national psyche today.’…’At the Junkers plant in Dessau, the company gave its workers the equivalent of the day’s price of three-and-a-half loaves of bread at 9 a.m. every morning. Their wives, who were waiting at the factory gates, took the money and dashed off to the shops before the new dollar exchange rate was published at around midday.’ It’s a bit of a read, but well worth it. I thank Craig McCarty once again for bringing the story to my attention… and now to yours. The headline reads ‘Millions, Billions, Trillions: Germany in the Era of Hyperinflation’… and the link is here.
You can fool some of the people some of the time… and some of the people all of the time. But that’s usually enough. – Uncle Milte
So where to from here? Well, the New York bullion banks are still running the gold and silver show… and despite the improvement in their short positions in both metals… they’re still holding a really big hammer… especially in gold. There’s still lots of room to the downside, but as I’ve mentioned before in this column, we still don’t know whether it will be death by a thousands cuts… or one swift thrust. They can drag the agony out as long as they wish, but if these hoped-for change in position limits that Gensler at the CFTC is going on about are going to be imposed on the bullion banks in silver like they are for every other commodity, then there’s a time-line of some sort.
I note, as I fire this off to Vermont in the wee hours of Tuesday morning, that gold and silver have picked up some small gains in Far East trading [on tiny volume, don’t forget!]… but have appeared to flat-lined in early London trading. Both 50-day moving averages were pierced to the downside yesterday…especially gold, where the close was about $5.50 below it. In silver, the price went below the 200-day m.a. intra-day, but did not close below it. One wonders if the 200-day m.a.’s will be next.
See you on Wednesday.
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