Another Dubai Company Defaults
I wouldn't read a thing into yesterday's gold price action in any market on Planet Earth on Thursday. Volume was monstrous… but roll-overs and switches from the June contract into August and later months accounted for most of it…as Thursday was the last trading day in the May contract before first notice day for June delivery… which is today. Gold's highs and lows… such as they were… are not worth mentioning.
Silver's price activity was, as usual, a little more 'volatile'. The price rose about 30 cents into the London silver fix around noon local time. Then it sold off about 15 cents… with the New York low [$18.16 spot] coming shortly after Comex trading began. Then silver had a decent rally for about ninety minutes… rising to its high of the day [$18.59 spot] before being sold off a hair into the close. Volume in silver trading yesterday was also very low once all the roll-overs and spreads were removed.
Below is the dollar chart for the last couple of days. The high water mark is a hair under 87.4 cents… which occurred when Far East began trading very early on Thursday morning… and, except for a brief spike during the European day, the dollar lost about 130 basis points in the next twenty-one hours of trading. At the same time that the dollar was falling like a rock, someone [or more than one someone] was selling off gold pretty hard, with the net result that the gold price only finished up a buck yesterday. Who would be doing such a thing in the face of falling dollar, you ask? That's a good question… and I don't have any answers.
The precious metals stocks caught a bid yesterday… and the size of the gains were probably more a reflection of the enthusiasm in the general equity markets, then what was going on price wise in either metal. But, with the HUI up a 2.62%, we'll take our gains and not ask any questions.
The CME Delivery Report showed that zero gold and 1 silver contract are to be delivered today… the last delivery day in the May contract. For the month of May… 200,490 ounces of gold were delivered… and for silver it was 21,185,000 ounces. Today is first day notice for delivery into the June contract… and I'll report on those numbers in Saturday's column. June is a big delivery month for gold, but not for silver. But, having said that, if the past couple of years have been any indication, the deliveries in silver in June should be worth watching as well… as noteworthy amounts of silver have been delivered in these off-months recently.
The GLD had another small reported increase yesterday. This time it was 11,874 ounces of gold. The SLV finally had something to report… and it was that they received 881,950 troy ounces. It's my bet that they're owed many times that amount. That's their first receipt of silver since May 13th. In that same time period, the GLD ETF has had seven receipts totaling about 1.8 million ounces.
The U.S. Mint had another report yesterday. They advised selling another 8,000 one-ounce gold eagles and another 111,500 silver eagles. Month-to-date, they have reported 184,000 one-ounce gold eagles sold… and 3,611,500 silver eagles sold. Will they break the 4 million mark today? Good question… and if they don't, look for a huge number to be reported in the first couple of days of June that they've deliberately withheld from reporting in May.
The Comex-approved depositories received a pretty chunky 1,098,991 ounces of silver on Wednesday… and that report is linked here.
Yesterday Nick Laird of sharelynx.com in Australia was kind enough to provide a graph of all the gold held in all the depositories, funds and e-gold accounts. Here's the one for silver [as of Tuesday]. Despite the crushing drop in price during 2008… it barely caused a ripple in the overall silver holdings of the various silver funds. The 630 million ounces held [almost one year of world silver production] has a current value of $11.1 billion. I hope you have your share, dear reader.
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I have three gold-related stories today… and here's the first one. It's posted in yesterday's edition of The Wall Street Journal… and is written by Judy Shelton. Ms. Shelton is the author of Money Meltdown (Free Press, 1994)… and is a senior fellow at the Atlas Economic Research Foundation and co-director of the Atlas Sound Money Project. The headline reads "The Recovery Starts With Sound Money"… and, since the story is meant for WSJ subscriber's only, the article is contained in a GATA release linked here.
My second gold story today arrived in my in-box at 5:07 a.m… just as I was about to hit the send button on today's column. It's courtesy of Russian reader Alex Lvov. It's a Reuters story bearing the headline "Funds seek Midas touch with miners". Among 30 of the largest equity-oriented hedge funds tracked by Thomson Reuters… 12 reported owning substantial plays on gold in regulatory filings that covered portfolios as of March 31st. It's worth the read… and the link is here.
Here's a cute story that was in Tuesday's New York Post. It's about all these new U.S. Census workers that are being hired, then fired, then rehired, then fired… all to make the job statistics look better than they really are. The headline reads "Two more Census workers blow the whistle". I 'borrowed' this story from yesterday's King Report… and the link is here.
The next story is from yesterday's edition of The Telegraph in London. It's written by their economics editor, Edmund Conway. He says, and rightly so, that this financial crisis is worse than the sub-prime crash of 2008 because the sums are so much bigger and it's governments that are in dire straits. The headline reads "Is Europe heading for a meltdown?" It's not an overly long piece… and I urge you to give it the attention it deserves. The link is here.
Here's another Dubai-based company that has just advised its creditors that it will have to postpone payment on a huge pile of debt. This time it's Dubai International Capital… which is totally different than Dubai World that shocked the world six months ago when it announced the need for a 'standstill agreement' on its debts. The story, from yesterday's edition of The Telegraph in London, was sent to me by reader Roy Stephens. The headline reads "Dubai fears reignite on $1.25 billion debt payment delay"… and the link is here.
Here's an interview that's just been posted over at King World News. Eric sent it to me yesterday… and I just got finished listening to it now. It's an exclusive interview with Felix Zulauf. Felix has been a member of Barron's Roundtable for over 20 years. Investors have only read about Felix in Barron's because he simply does not give interviews outside of Barron's… so this one should command your undivided attention. Nothing in the interview surprises me… as I've written about all this sort of thing myself… but coming from someone of his stature, it's a shocker! If this doesn't make you go out an buy more physical metal, I don't know what will. As I said, this is must listen interview… and the link is here. It runs for about 20 minutes.
And lastly comes my third gold story of the day. This GATA release contains an essay by GATA consultant Reg Howe. [And if you don't know who he is… here's the link to his bio.] Analyzing the semi-annual report on gold derivatives published by the Bank for International Settlements, Golden Sextant Internet site proprietor Reg Howe finds evidence that the gold exchange-traded fund, GLD, has replaced direct central bank gold sales and leases as a major mechanism for gold price suppression. I must warn you in advance, dear reader, that some of this report [more than some, actually] will be over your head. Some of it is for me, as well. But, despite that, there's lots of worthwhile information in here that you should be aware of… as it's not covered anywhere else on the Internet… at least not to this degree… and there's lots of great graphs as well. This piece will give you some idea of how deep, dark and secretive the gold world really is. The essay is entitled "Gold Derivatives: GLD and Ass Backwardation"… and the link is here. It's a must read… whether you understand it all, or not.
As I said in my column yesterday morning, Thursday's rally in the equity markets in the U.S. was no surprise to me, as the 'powers that be' certainly didn't want a market melt-down going into the U.S. long weekend. A lot of yesterday's activity was gaming for month-end performances for the fund managers… as May was an absolutely brutal month for all of them. The Dow was 'oversold?' to boot… and, with the futures spun higher, it was a certainty that stocks would end the day in the plus column.
I wouldn't be surprised to see more of the same today… but trading activity will die pretty quickly, as everyone heads out early for the Memorial Day long weekend… and most markets will be closing early.
I'm not expecting a lot of fireworks in the gold or silver market today… but you never know. There can be major price moves even when trading is light… provided that the U.S. bullion banks aren't there to short it.
I'm looking at the CME's preliminary volume numbers for gold and silver trading on Thursday. Total volume in gold was 260,905 contracts… but once you take out all the meaningless roll-overs from the June contract into futures months… mostly August, the next front month… volume was well under 100,000 contracts. This is extraordinarily light volume for month-end activity. Silver's total volume traded yesterday was also pretty light… well under 30,000 contracts net of roll-overs.
As I type these last words for today's column at 5:17 a.m. Eastern time, I see that gold is up a few bucks in early London trading… and silver has just jumped about a dime. Gold volume is the lowest I can recall for this time of day… about 11,500 contracts net of roll-overs. Net volume in silver is around 3,500 contracts. And, unless something comes out of left field in New York trading, I expect volumes to be light in both metals for the rest of Friday trading.
But, with the physical silver market as tight as a drum, and physical gold in huge demand, anything is possible.
I wish all my American readers a safe and happy long weekend… and I'll see you on Saturday.