Tuesday’s high price in gold [around $1,158 spot] came quietly at 4:00 p.m. in late afternoon trading in Hong Kong… and from there, gold sold off [in fits and starts] until precisely 9:00 a.m. in New York. Then a smallish rally developed that lasted until moments before the close of London trading at 11:00 a.m. Eastern two hours later. Gold began another decline at that time, but the real selling began at half-past lunchtime in New York when the decline became far more serious… and at 1:15 p.m. the bids disappeared and the gold price fell like a stone. Gold traded sideways for the rest of the session… and it’s absolute low of the day was reported as $1,123.40 spot.
Silver’s price action was similar… but the price was, as they love to say, more volatile. The timing of the price moves [both up and down] were in lock-step with gold. Silver’s high [about $18.78 spot] was also at 4:00 p.m. in Hong Kong… with the absolute low of the day coming moments before the Comex close at $18.14 spot.
Well, if you’re looking for a classic bear raid in the precious metals… this was vintage U.S. bullion bank behavior. The trading action up until minutes before 11:00 a.m. in New York was pretty normal… but the footprint of the usual not-for-profit seller was hard to miss from that point on.
Needless to say, the shares didn’t do well. The fact that the shares recovered a hair while the bullion price was still declining towards the end of the day, was the only positive. If you look at the HUI graph below, you will note that the shares headed south at the same time as the metals did… 11:00 a.m… with no delay at all. Coincidence? There’ve been too many of them lately to suit me.
Well, Monday’s open interest numbers were ugly. As I mentioned in my commentary yesterday, the big rise [almost $20] at the start of Far East trading on Monday morning, ran into an avalanche of selling by the U.S. bullion banks… and the rally topped out in less than two hours. Gold open interest rose a massive 14,477 contracts on volume of 206,862 contracts. Total open interest has now ballooned to 527,821 contracts. Silver was no different, as Monday’s open interest numbers showed an increase of 4,567 contracts… one of the biggest one-day increases that I can remember. Volume was reported at 35,739 contracts… and silver’s total o.i. is now up to 131,939 contracts.
Needless to say, Tuesday’s big sell-off should have decreased open interest by quite a bit. Most of the activity yesterday began at the London close, so it will be of interest to see how much of that data actually makes it into the CME report this morning. These numbers will be the ones that show up in Friday’s Commitment of Traders report as well… so, if there was ever a moment for the bullion banks to withhold data, this would be one of them.
The CME Delivery Notice showed that 15 gold and 14 silver contracts have been put up for delivery tomorrow. There were no reported changes in the SLV yesterday… but another 117,577 ounces were removed from GLD. The U.S. Mint had a report yesterday as well. Another 106,000 silver eagles were sold… but nothing was reported in gold eagle sales. And the Comex-approved depositories showed that another 304,769 ounces of silver were withdrawn from their combined inventories.
The European Central Bank reported that no gold was sold [or bought] by any of their captive central banks last week. And to steal a sentence from the ‘usual New York gold commentator’… ‘The reported absence of the European Union Central Banks from the gold market is deafening.’ As I said last week at this time… the gold and silver prices have ‘Made in the U.S.A.’ stamped all over them.
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The only gold story of any importance that I could find yesterday was a Bloomberg interview with Robert McEwen, chairman and CEO of U.S. Gold Corp. Rob’s been around the track a few times… and when he gets up on national television and says that gold will hit $2,000 this year, [and $5,000 or higher by 2012-2014] one should be paying attention. Craig McCarty sent me the link yesterday, but the video is no longer posted… so you’ll just have to take my word that he said it… which he did!
Here’s an interesting graph that was sent to me by reader Larry G. It, like other graphs I’ve posted in this column recently, needs no explanation. I may have run this graph before, but I just can’t remember doing it.
Today’s first three stories are ones that I didn’t have room for in yesterday’s column. The first is a Bloomberg piece headlined ‘Federal Reserve Seeks to Protect U.S. Bailout Secrets’… ‘The Federal Reserve asked a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.’ The issues that this story deals with are worth your time… and I urge you to read the story which is linked here.
Here’s a story from Tuesday’s The Wall Street Journal. It appears that ‘politicians are taking bolder actions to influence monetary policy, signaling that the global financial crisis may end up reining in the independence of many central banks.’ This can’t happen too soon to suit me. The headline reads ‘Crisis Threatens to Curb Central Banks’. The article is well worth reading… and the link is here.
Here’s a Reuters story from Monday that bears the headline ‘Liquidating firms claim billion in U.S. stimulus’. It appears that ‘a new law may give billions of dollars to bankrupt financial companies that will never make another loan. Instead of allowing lenders to keep credit flowing, these subsidies could mainly help hedge funds that buy distressed debt and equity.’ This is absolutely preposterous! If you don’t believe it, read the story yourself. The link is here.
Reader Brad Robertson sent me this short youtube.com video where CNN commentator, Jack Cafferty, rips Obama a new one on national television. It was bad enough when Fox was in the White House bad books… but CNN??? The link is here… and it’s well worth watching!
Last week I ran a story about California Governor Arnold Schwarzenegger’s request for federal help with his state’s $20 billion budget deficit. But Mark Taylor, from the non-partisan California Legislative Analyst Office, says ‘we believe that the likelihood of Washington agreeing to all of the governor’s requests is almost non-existent.’ Craig McCarty sent me the Bloomberg story about it… and it’s linked here.
Yesterday I ran a Bloomberg story about PIMCO’s Paul McCulley advising Japan ‘to accelerate its already massive money printing activities in order to prevent deflation.’ Well, Ambrose Evans-Pritchard from The Telegraph in London, who actually wrote a story about this very thing a few weeks ago [or was it last month], read that same Bloomberg piece… just like you did, dear reader… and he has a few things to say. The headline reads ‘A global fiasco is brewing in Japan’… and the link to this must read article is here. I also saw something yesterday about Moody’s wagging their finger in Japan’s direction… so this is getting serious… which is why I headlined yesterday’s column with the following… ‘Japan Heads Down the Currency Debasement Highway’. It’s only a matter of time before the rest of the world follows suit… and some countries have already started… with the USA and Great Britain leading the way.
And lastly, in a topic that never seems to go away, is this article about Global Warming. Actually, it’s about the lack of Global Warming. Because of seven years of doing meteorological research in Canada’s high arctic… I have more than a working knowledge of this whole sad affair. I consider global warming to be right up there with the Easter bunny… or maybe the tooth fairy. If I had to bet a dollar on which way the current climatic temperature trend is heading… it would be down… and this story is right up my alley. It’s a long read… but puts global warming/cooling into some sort of 20th century perspective. We’ve been here before… most of us within our own lifetimes… certainly mine. I urge you, dear reader, to find the time to carefully read through this and draw your own conclusions. The story, which was posted in London’s The Daily Mail bears the title ‘The mini ice age starts here’… and the link is
I note that gold has been trading pretty close to it’s New York closing price of yesterday through much of trading in the Far East earlier today. It has shown some signs of life now that London has opened… but it remains to be seen how long this tiny rally will last. The silver price action has been much the same. Gold trading volume [at 4:49 a.m. Eastern] is already a very large 38,966 contracts… quite a bit more than this time yesterday… and silver’s volume is already a chunky 3,424 contracts.
Preliminary volume for Tuesday’s trading in both metals is now posted at the CME’s website. It shows that a very large 269,000 contracts in gold were traded… along with about 38,500 silver contracts. It nearly goes without saying that the final numbers, when posted later this morning, will be substantially higher than the ones that I’ve reported here. But it’s the changes in open interest that I really want to see.
It’s hard to say whether this gift of lower precious metals prices, that was provided by the U.S. bullion banks yesterday, will continue into today’s trading or not. Was this a one-time hit… or is there more to come? I know that the Treasury is pretending to sell more paper this week. The truth of the matter is that the vast majority of it is being monetized by the Fed.
Anyway, today is another day. We’ve had days like yesterday before… and survived. And, as [Sir] Winston Churchill said at the high of the London blitz… ‘we’ll just keep buggering on.’ And that, gentle reader, is exactly what we’ll do.
See you on Thursday.
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