A New Trend in 2010 is the Movement Toward Fully Allocated Physical Gold: UBS
The gold price spent most of Far East and early London trading basically unchanged from Friday's closing price in New York. But, at 10:00 a.m. sharp in London, a seller showed up… and three hours later… at 8:00 a.m. in New York, the gold price hit its low of the day around $1,174 spot.
Once Comex trading began, the gold price rose quickly… and within an hour it was up to $1,190 spot, with it's apparent high of the day [$1,191.60 spot] coming at 10:20 a.m. Eastern… which may have been a later-than-normal London p.m. gold fix.
Once that high was in, the gold price got sold right back down to unchanged on the day… and from there, the gold price flat-lined into the close of electronic trading in New York. Volume was pretty light.
Silver's price pattern was very similar… with the European high [around $18.20 spot] coming around 8:30 a.m. in early London trading… which was up about 23 cents from its Friday close. From there, silver got sold off about 15 cents… with the low of the day [around $18.05 spot] coming late in the lunchtime hour in London… which was moments before 8:00 a.m. in New York.
Shortly after the Comex opened [around 8:40 a.m.] silver caught a bid [JPMorgan covering?]… and by 10:20 a.m. Eastern… the high [like gold's] was in at $18.59 spot. And, like gold, silver wasn't allowed to close near its high of the day… and silver sold off about fifteen cents during the next couple of hours… and then flat-lined for the rest of the trading day. Volume was heavy.
In my daily conversation with Ted yesterday, he pointed out something that I missed totally… and that was the fact that silver's up-move yesterday [and Friday] broke through all the key technical moving averages in silver in two single trading sessions. Those moving averages were the 200, 50, 20 and 10-day moving averages. Ted was hoping that yesterday's rally [like Friday's] was JPMorgan covering short positions… but he also 'fessed up to the fact that it might have been the technical funds sticking their toes back in the water once again. It would be my guess that we'll find out pretty quickly which group it was.
The U.S. dollar was basically unchanged up until 8:00 a.m. in New York where, during the next three to four hours, it lost 60 basis points. That 8:00 a.m. time also coincided with the beginning of gold and silver's rally in New York. The dollar continued to decline well past the high prices of the day in both metals… both of which occurred at 10:20 a.m. Eastern time. As I've said before, there's a co-relation between the precious metals and the U.S. dollar when it suits the bullion banks.
Despite the fact that the general equity markets were on a tear… and gold was moving higher at the 9:30 a.m. Dow open yesterday morning… there was someone there that was only too happy to sell the gold shares off hard… and straight into negative territory, where they stayed for the rest of the day. If you think, dear reader, that something doesn't smell right about this… you would be right about that. I'd be prepared to bet a big wad of cash that what we witnessed in the HUI yesterday was pure price management. The HUI finished down 0.57%… which was off its lows of the day.
Monday's CME Delivery Report showed that 468 gold and zero silver contracts were posted for delivery on Wednesday. The big issuer [432 contracts] was the Bank of Nova Scotia… and the big stopper [355 contracts] was HSBC USA. The report is worth looking at… and the link is here.
Neither the GLD nor SLV had anything to say for themselves yesterday. But the U.S. Mint was quick out of the gate for August… as they filed their first sales report of the month yesterday. They showed that 1,000 ounces of gold was sold in their gold eagle program… along 1,000 24-K gold buffaloes… and 275,000 silver eagles.
There was a lot of activity reported by the Comex-approved depositories on Friday. This was in their report yesterday… and there was activity in all four depositories. By the end of Friday, they had reported receiving 265,384 ounces of silver. The link to yesterday's report is here. For the end of July, the Comex-approved depositories reported holding 110,361,264 troy ounces of silver.
The next item I have today is posted over at mybudget360.com… and was sent to me by reader U.D. over the weekend. The headline reads "FDIC flashes SOS – 1,000 bank failures before recession is over". That number, dear reader, will prove to be wildly on the conservative side… as we are at the beginning of a depression, not a recession… and it will be a decade or more before all this bad debt is written off and has dragged down all the associated banks down with it. It's a bit of a read, but there are lots of great graphs… and I urge you to run through it. The link is here.
Here's a graph that was contained in a story posted over at realpoint.com. It shows [in billions of dollars] the amount of CMBS [Commercial Mortgage Backed Securities] that are delinquent as of the end of June. Right now that total is $60.45 billion… and is currently on track to hit $75+ billion before the year is out. I thank reader 'David' for bringing this chart to my attention.
Here's another chart that was sent to me over the weekend… this one is courtesy of Australian reader Wesley Legrand. He 'borrowed' it from Trend Macrolytics. It shows the current S&P chart starting in July 2009 against the S&P chart starting from May 1936. As you can see… it's shockingly similar.
Late last week, CFTC Commissioner Bart Chilton had a video interview withBloomberg TV on the new financial bill that's now law in the U.S. He spent a lot of time saying all the right words about position limits in all commodities… including 'the metals'. He's talking the talk, dear reader… and it remains to be seen whether he walks the walk as well. We'll find out within 170 days. But it appears that JPMorgan is already heading for the exits in silver. The headline of the interview reads "Chilton Not Concerned New Rules to Push Trading Overseas". It runs just under four minutes… and I thank reader 'David' for bringing it to my attention… and now to yours. It's definitely worth watching… and the link is here.
The next offering is one that I lifted from Monday's edition of the King Report. It's an Ambrose Evans-Pritchard piece about rare earth minerals which is a must read in my opinion. I've written about this before… but when AE-P finds it worth writing about… you know it's got to be a really big deal, which it is. Ambrose states that… "Lack of strategic planning by the West has allowed China to acquire a world monopoly on this family of seventeen metals. Assumptions that Beijing would never risk its reputation as a global team player by abruptly strangling supply have proved naive." The headline reads "Hot political summer as China throttles rare metal supply and claims South China Sea"… and the link is here.
In a story that was filed very last night in London… The Telegraph's U.S. business editor James Quinn posted an article stating that "The Federal Reserve is set to kick-start a new phase of monetary easing when it meets next week in Washington, a leading Wall Street economist claims. The headline reads "Federal Reserve to start the deflation fight next week, expert claims"… and the link is here.
Eric King over at King World News was a busy boy over the weekend. Along with Ted Butler's interview I posted on Saturday… Eric also interviewed Jim Rickardsof Omnis Inc. one more time. The interview, which is a must listen, is imbedded in a GATA release headlined "Fed's inflation experiment may treat Americans as lab rats, Rickards tells King". Chris Powell's short introduction to the interview is very much worth the read as well… and the link to both is here.
Adding to what Jim Rickards had to say is this piece by Paul Craig Roberts. Paul states that… "The world has not witnessed such total failure of government since the final days of the Roman Empire. A handful of American oligarchs are becoming mega-billionaires while the rest of the country goes down the drain… and the American sheeple remain acquiescent." The headline reads "Chelsea's Wedding: Let Them Eat Cake". It's less than a two minute read and it's worth running through… and I thank reader G.G. for sending it along. The link is here.
I have four more stories today… and they're all gold-related in one form or another. The first is another column about this BIS gold swap issue. This one is by economist and former banker Alasdair Macleod… and bears today's date. Macleod writes… "The reason we will never get the truth this plainly is that any such admission would be rocket fuel to the gold price, bring on the bankruptcy of the bullion banks and the concomitant collapse of all paper currencies." That's going to happen anyway, dear reader… and the only questions are… how soon, how fast… and, perhaps, how high? The GATA headline reads "Alasdair Macleod: BIS swaps may be last gamble to suppress gold price". The story, posted over at financeandeconomics.org… and Chris Powell's preamble… aremust reads… and the link to both is here.
The next item is an interview with my good friend Ian Gordon, president ofLongwave Analytics out of Vancouver. Ian says that "We're not going into a double dip. We're going into a depression. I'm convinced of that." The interview, headlined "Ian Gordon: A Cyclical Case for Gold Stocks"… is posted over attheaureport.com… and was sent to me by Australian reader Wesley Legrand… and the link is here.
The next story was the source of today's headline for this column. In an item posted over at the mineweb.com last week, author Dorothy Kosich writes… "In their analysis, UBS noted, 'A new trend in 2010 is the movement toward fully allocated physical gold. In H2 and 2011, we expect this type of gold exposure will deepen as new and existing investors diversify a portion of their gold reserves to purely allocated form. Quite simply, such customers are limiting their weight of paper gold exposure. In essence, this is diversification within diversification.'" The story is imbedded in another GATA release headlined "UBS sees gold investors diversifying into reality". And, as usual, both the story and Chris Powell's preamble to it, are more than worth your time… and the link to both is here.
And lastly [finally] is this 10-minute youtube.com video from Indonesia about the gold dinar and the silver dirham. A few weeks ago I ran a story that several provinces of Malaysia were about to begin using these coins as payment. This included most major companies and some government debt as well. It appears to be slowly catching on… as this video demonstrates. It's certainly worth watching… and I thank reader U.D. for sharing it with us… and the link ishere.
Forget about manning the pumps. It's time to abandon ship. – Doug Casey,International Speculator, July 2010
Well, it remains to be seen what happens to both gold and silver going forward. I wasn't amused by the fact that both metals got stopped cold in their tracks as they made an attempt to break out to the upside going into the London p.m. gold fix yesterday… ditto for the shares. All I can say is that all eyes should be on JPMorgan and the silver market. Ted Butler mentioned in a private letter to clients yesterday that JPMorgan has picked all the low-hanging fruit when it comes to covering their short positions to this point. From now on it will be much more difficult… and much more costly… which should appear in the price as that process continues.
This coming Friday's Commitment of Traders report will tell us a lot… as will the new Bank Participation Report that is due out on the same day. These reports will be for positions held at the close of trading today… as Tuesday is the cut-off for both. Ted is expecting a huge improvement in JPMorgan's short position in the August BPR… and I agree with him.
But the 'four or less' traders are still short around 200 million ounces of silver as of today… and it will be interesting to see how high the price will go as they begin to cover. I've been giving a lot of thought as to how JPM could wiggle out of this without driving the silver price to the moon… but I can't think of anything at the moment.
I suppose that 'da boyz' can still get more blood out of a stone by taking gold down below its 200-day moving average. Anything's possible… but it's a matter of can they, or will they? I'm very optimistic in the short, medium and long term… but this piece of unfinished business is still hanging over the market. At least in my mind it is. Ted wonders about it as well.
Not much is happening in Far East and early London trading at the moment [5:25 a.m. Eastern time]… and volume in gold is respectable… and in silver it's very light. But I'm sure that will change once New York opens for business. They may even start to work on it in London… and by the time you read this, it should be obvious. I also note that the U.S. dollar has taken another header as well.
Earlier in this column I spoke of silver breaking up through all its moving averages during the last two trading days. Here's the 6-month chart that shows that. Do we break out from here… or do we have another engineered take-down? I would suspect that we won't have long to wait to find out.
Please carefully note the heading from today's column one more time. "Fully allocated physical gold [or silver]" does not include GLD or SLV… or worse, pool accounts. It's silver and gold held in hand… or in an instrument where one can prove that the actual physical metal is there backing the account… or is a fully convertible fund. If you own anything less than this, you really don't own the metal at all… and are actually aiding and abetting the gold and silver price suppression schemes by doing so. Think about it.
The August edition of Casey Research's flagship publication, the International Speculator arrived in my in-box yesterday… and my quote today is right from the first page of that publication. If you're interested in seeing all the excellent articles contained in it, you can check out getting a subscription here. And don't forget about CR's 90-day money-back guarantee.
See you tomorrow.