A Strange Options Expiry

For an options expiry day, it was about as different as they come.  Gold set a double bottom just under $1,230 spot… with the absolute bottom coming at the Comex open at $1,227.50 spot.  From that point, gold took off… hitting it's spike-high price of $1,249.60 spot about 11:15 a.m. Eastern time… 15 minutes after the London close.  That was all the excitement for the day, as gold got sold off quietly going into the close.

But, if you examine the chart below, you'll see that the rally did not go unopposed… as an obvious not-for-profit seller showed up three times during gold's rally… just to prevent the rally from gaining as much momentum as it was obviously capable of.

'Da boyz' were certainly after silver yesterday.  The selling pressure began the moment that trading opened in London yesterday morning… with the absolute low [$18.18 spot] coming around 8:32 a.m. in New York.  As Ted Butler said on the phone yesterday… they weren't even trying to be subtle about it.  Then, like gold, the silver price took off to it's high of the day of $18.84 spot at 12:00 noon… before quietly selling off a bit into the close.  There was also a not-for-profit seller checking the upward momentum of silver's rally as well.

Well, it wasn't an overly impressive performance for an options expiry… and one has to wonder why the bullion banks went to all the trouble of hitting the prices of both metals this week… and getting so little out of it when the big day finally came… and then went.  Is this the best they could do?

The world's reserve currency didn't do anything worth mentioning on Thursday… so all the price activity in the both gold and silver was totally unrelated to the currency market yesterday.  However, the dollar's low price of the day came atprecisely 12:00 noon Eastern time.

The shares did reasonably well for themselves… but just couldn't buck the trend of the general equity market rout that started at 2:00 p.m. in New York yesterday afternoon.  However, the HUI was only down 0.59% on the day… and despite all the selling pressure this week, the precious metal shares have performed very well.

Thursday's Comex Delivery Report showed that 40 gold and 5 silver contracts were posted for delivery on Monday.  The link to all the action, such as it was, ishere.  There were no reports from either GLD or SLV on Thursday.

But the U.S. Mint had some more sales to report… and they are as follows.  Another 10,000 ounces of gold disappeared into the gold eagle program… along with 4,000 24-k gold buffaloes.  The also reported selling a smallish 46,000 silver eagles.  Month-to-date… 132,500 ounces of gold has disappeared in the gold eagle program… along with 31,500 24-k gold buffaloes and 2,533,500 silver eagles.

The Comex-approved depositories showed that another 283,669 ounces of silver were withdrawn from their warehouses on Wednesday.  The link to that action is here.

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Today's first story is posted in yesterday's online edition of The Wall Street Journal. The headline reads For Gold Investors Who Want It 'To Go'.  Normally this would require a subscription… but it's posted in the clear over at gata.org… and the link is here.

The next item was filed in the late evening over in London yesterday.  It's another Ambrose Evans-Pritchard offering from The Telegraph.  Federal Reserve chairman Ben Bernanke is waging an epochal battle behind the scenes for control of US monetary policy, struggling to overcome resistance from regional Fed hawks for further possible stimulus to prevent a deflationary spiral.  And, dear reader, this is exactly the 'deflationary implosion' that I've been going on about for the last couple of years.  The headline reads "Ben Bernanke needs fresh monetary blitz as US recovery falters".  This article deserves your undivided attention… and the link is here.

One of the things that makes Bernanke unhappy is the austerity programs that have been launched in most of Europe… especially in Germany.  He [and Obama] are not happy that most European countries are solving their problems the old fashioned way… and not turning on their printing presses.  They have both been on German Chancellor Merkel's case about this recently… and, to her credit, she's told them to shove it.  This next story is from yesterday's English language edition of spiegel.de… and is courtesy of reader Roy Stephens.  The headline reads "Savings Salvoes: Merkel Defends Herself Against Criticism from Washington".  It's a very short story… and I urge you to run through it.  The link is here.

Roy Stephens has another contribution from yesterday's edition of The Telegraph.  This one is about the perilous state of government debt in China.  The headline reads "China's chief auditor warns mounting local government debt a risk to economy".  China's chief auditor has warned that high levels of local government debt could derail the country's economy, with some observers suggesting that a number of Chinese provinces are even more fiscally troubled than Greece.  The link to this rather short story is here.

The next article was one that I dug up on Bloomberg yesterday.  This is living breathing proof that no good dead goes unpunished.  The headline reads "Banker Who Blew Whistle on Secrecy Over Tax Cheats Seeks Pardon".   He told U.S. authorities how UBS bankers came to the U.S. to woo rich Americans, managed $20 billion of their assets, and helped them cheat the Internal Revenue Service.  This is a rather longish article, but well worth the read if you're interested in the backroom dealings in the world of high finance and tax evasion.  The link is here.

The next article is the latest GlobalEurope Anticipation Bulletin.  Normally I publish this the moment that the first copy shows up in my in-box… but this time I didn't put it up right away… and it took until reader Vince Koloski sent it to me yesterday, to change my mind about it.  I'm not happy about the way its written… or the way the data is presented… and it's obviously written by someone for whom English is a second language.  The whole article just doesn't flow smoothly.

But, having said that, there is plenty of good data and facts in it…  but you sure have to work at it to find them all.  However, the graphs are great.  The title reads "Global systemic crisis/Second half of 2010: The global system’s four single points of failure"… and the link to this longish read [posted over atleap2020.eu] is here.

Lastly today, is my second gold-related story worth posting.  'Charlie from Michigan' was the reader who sent it my way… and I'm more than happy to share it with you.  It was written by Graham Summers over at Phoenix Capital Research… and bears the title "Will Gold Miners Act Like Stocks or Gold During the Crash?".  It's a question that everyone asks… and I believe that this writer has the answers.  This is a must read…with lots of good graphs.  It's posted over at gainspainscapital.com… and the link is here.

We're heading towards a double-dip recession. The party is over for fiscal support. These hard-money men are fighting the last war.  They don't recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again. – Chris Whalen, a former Fed official and now head of Institutional Risk Analystics, 24 June 2010

Well, dear reader, the gold and silver price action was not what one would normally get on options expiry… so where we go from here, in the short term, is anyone's guess.  But just reading some of the stories I've got posted in today's column, shows you how close the world economic and financial system is to a meltdown… with the fiat currency systems that lubricate it, following hard on its heels.

As of 4:13 a.m. Eastern time this morning, neither gold nor silver were doing a thing, although there was a little bump upwards at the London open.  Volume in both is virtually non-existent… the lightest volume I've seen in literally years.  The preliminary volume numbers for Thursday's trading have been posted at the CME's website… and they show that gold's volume was reasonably high.  This should be no surprise, as I'm sure that the bullion banks threw a fair number of paper contracts [short positions] at that surprise rally to kill it before it got completely out of hand.  They could have been short covering, I suppose… but the price action doesn't indicate that.

Today is the day for the Commitment of Traders report, which comes out at 3:30 p.m. Eastern time, sharp.  Both Ted Butler and I are rather apprehensive of what the numbers will show.  We'll find out at the appointed time… and the link to that report, when it's published, is here.

I thought that I'd leave you with this rather pleasant looking 10-year gold chart.  Despite the short-term ups and downs… it still looks like gold's in a healthy long-term bull market to me… with lots of room to the upside still to go.  I plan to ride this bull to the end… and that's why I am, and will remain, 'all in'… as I'm just not smart enough [or brave enough] to attempt to trade this market.

As the famous stock trader Jesse Livermore once said:  "It wasn't my trading that made me most of my money… it was the sitting and waiting…"  If that advice was good enough for him… it's certainly good enough for me.  And maybe you, too, dear reader.

That's all for today.  I hope you have a great weekend… and I'll see you here tomorrow.