All's Quiet on the Eastern Front

Thursday was another day when the precious metals basically followed the dollar's lead.  Trading in Hong Kong was quiet up until 4:00 p.m. in their afternoon when the dollar began a gentle decline while gold went the other way.  The high price of the day for gold [around $1,42 spot] was shortly before lunch in London… when the dollar hit its nadir.  From there, the dollar once again headed north while the gold price headed south… with the low for gold [$1,124.90 spot] occurring at 10:45 a.m. in New York… and shortly before London closed for the day.  Although the price recovered a few dollars off its low, gold basically did nothing for the rest of the New York trading session.

Silver's chart looked almost the same as gold's… with the highs and lows occurring at the same times in both London and New York.  Silver's high was a bit north of $17.40… and it's New York low was reported as $17.06 spot.

As I said in my opening sentence, the precious metals pretty much followed the dollar around yesterday.  There's nothing here to see folk… please move along.

The HUI graph looks pretty similar to either the gold or silver price graphs during New York trading yesterday… and it was nice to see the little rally in the last 30 minutes of trading… but I think that had more to do with what was going on in the general equity markets than anything else, as the Dow also rallied into the close.

Wednesday's smallish rally in gold produced an open interest increase of 4,865 contracts on volume of 179,413 contracts.  This seemed like a lot considering the price action… but, as I said yesterday, some of this could have been spill-over from Tuesday.  Silver's price rise was far more substantial on Wednesday, and I was pleased to see that its o.i. only rose 1,670 contracts.  There was probably no spill-over from Tuesday's trading in this number at all.  Volume was a pretty large 43,435 contracts traded.  The Commitment of Traders report is due out at 3:30 Eastern time this afternoon.  I'm expecting to see more deterioration in gold… and hopefully an improvement of some kind in silver.  We'll find out soon enough… and if you want to see the numbers the moment they come out, click here at 3:30 this afternoon, and not a second sooner, as the update won't be there until precisely that time.

One other report that comes out at 3:30 p.m. this afternoon is the monthly Bank Participation report.  That will give us a large clue as to what total changes the U.S. and foreign bullion banks have made in their Comex short positions in both gold and silver during February.  I'll report on that tomorrow.

The CME delivery report for Thursday shows that zero gold contracts and 213 silver contracts are posted for delivery on Monday, March 8th.  There were no changes reported over at GLD yesterday, but there was at the SLV ETF for a change, as a substantial 1,962,096 ounces were withdrawn yesterday.  And this withdrawal, dear reader, probably had nothing to do with current price patterns, as silver is up a bit more than two dollars in the last month… so silver should be moving into the fund, not out.  What is more likely, is that a user who needed the silver, redeemed his shares and took delivery.

The U.S. Mint reported another 4,000 one-ounce gold eagles were sold yesterday… bringing their March total to 16,000.  There were no reported changes in silver eagles.  They've sat there at 425,000 since March 1st.  But, as I said then, I think those silver eagles were actually sold in the last week of February… but not reported until the first working day in March.  It's my guess [and Ted's as well] that the reason they haven't sold any this month is because they have nothing to sell, as the one-ounce silver blank cupboards are bare.  Silver eagles have been severely rationed since the beginning of the year… and none of the primary dealers are getting anything close to what they need to fill all their retail orders.

The Comex-approved depositories indicated that 656,062 ounces of silver were withdrawn from their respective inventories on Wednesday.

Today's first gold-related story is from yesterday's Globe and Mail in Toronto.  Sprott Asset Management said Wednesday that it has raised US$400 million from its initial public offering (IPO) of its Sprott Physical Gold Trust. That was out of the $1 billion that was available.  The headline reads "Sprott raises $400-million from gold fund IPO"… and you can read all about it here.

Here are a couple of more graphs from John Williams' shadowstats.com website.  The first shows what the real Consumer Price Index [CPI] looks like in the U.S.A… and the one below that is for Annual GDP Growth.  These are the real numbers vs. what Washington has been reporting for the past 20 years.  I thank Australian reader Wesley Legrand for this.

The next story is posted over at cnbc.com.  It appears that health insurance companies in the U.S. have increased their rates substantially… and the Obama administration is looking for answers to why that is so.  The story is headlined "Health Insurers Asked to Explain Steep Rate Hikes".  I thank Florida reader Donna Badach for sending it along… and the link is here.

Here's a story, that if it hadn't appeared in such a prestigious publication, I wouldn't have given it a second thought.  It's a story from the February 20th edition of The Telegraph in London.  It's not the content of the story that caught my attention… but the author.  The story [provided by reader Roy Stephens] is definitely worth the read and is headlined "Our world balances on a sea of debt"… and the link is here.

Here's another story from The Telegraph.  This one is datelined February 28th.  Ambrose Evans-Pritchard gets up on his high horse and has a few things to say about the "deflationary quicksand" that the entire planet is quickly sinking into.  His comments are right on the money as far as I'm concerned… and this is a must read.  The headline states "Don't go wobbly on us now, Ben Bernanke".  Once again I thank Wesley Legrand for bringing it to my attention… and now to yours… and the link is here.

And lastly, comes this longish interview over at mcalvany.com with Sprott Asset Management's chief investment strategist, John Embry.  John talks about gold quite a bit in this interview, but his comments are not confined to just that subject… and I thank reader Dennis Meredith for sending it my way.  The headline to the interview reads "An Interview With John Embry: "Expect Gold to Gain More Than 30% This year"… and the link is here.

All you really need to know about structured products is this — it's the 99% of structured products that give the good 1% a really bad name. –  Harry Markopolos [ignored Madoff whistleblower]… from page 63 of his book No One Would Listen

If my memory serves me correctly, the jobs numbers are reported today.  Will JPMorgan et al receive their usual marching orders from the Fed and the U.S. Treasury to hit the gold price when they're released around 8:30 a.m.?  Well, we'll find out pretty quick.

Right now, as I put the finishing touches on this column, I see that neither precious metal is up to much as Hong Kong winds down for the weekend… and London gets ready to open on its Friday morning.  However, their prices are a tad higher than their New York close yesterday afternoon… and the dollar hasn't done much of anything except trade sideways around the 80.55 mark since just before lunchtime in New York yesterday afternoon.

Gold volume in Far East trading [as of 4:08 a.m. Eastern time] is the smallest I can remember seeing in ages, as only 11,421 contracts had changed hands by that time. Silver, on the other hand, has only traded 1,562 contracts.  These are shockingly low numbers… even though trading is well underway in London.  It's just too quiet out there!

The CME has posted preliminary trading volume for Thursday… and they read as follows: gold volume was quite a bit larger then I expected… 172,081 contracts.  There was obviously heavier trading in New York than the price action indicated.  Silver's volume appeared to be to be on the light side at 31,981 contracts.  With this volume dichotomy popping up between these two metals, I'm very much interested in seeing the changes in open interest when they're posted in a few hours.

I hope you have an enjoyable weekend… and I'll see you here tomorrow.