"Buy Gold, Buy silver… and Have Faith"

Gold's low for Tuesday [around $1,195 spot] occurred within the first fifteen minutes of trading in the Far East on Tuesday morning.  After that, gold didn't do much until the London open when there was a little break-out to the upside… and from there, the gold price continued to work its way slowly higher. 

But the moment that New York opened, a serious buyer showed up and the gold price blasted up to its high of the day [$1,219.10 spot] by 9:00 a.m. Eastern time, before being hammered flat.  After that, the price gently sold off into the close. Volume was around 90,000 contracts net of everything.

Silver's low on Tuesday [around $17.85 spot] was at approximately 4:00 p.m. in Hong Kong… shortly before London opened.  From that low, the silver price advanced in fits and starts until shortly after the London silver fix was in at noon local time.  From that point, the silver price began to really move… and once the Comex opened, silver blasted to its high of the day [$18.36 spot] around 9:00 a.m. Eastern time… the same time as gold.  The silver price then suffered the same fate… as a New York bullion bank threw enough paper at the price to prevent it from breaking through its 50-day moving average to the upside.  After that, silver sold off about a dime going into the close.

Without question the dollar was a factor [of sorts] through part of gold and silver's price action yesterday… but that all vanished after 9:00 a.m. Eastern time when JPMorgan et al stopped gold and silver in their tracks.  From its top around 3:30 a.m. Eastern time yesterday morning… to its absolute bottom around 11:35 a.m. eight hours later… the world's reserve currency lost around 110 basis points.

Gold's big gain started at 3:30 a.m. at the dollar's top… and its zenith was five and a half hours later at 9:00 a.m. Eastern time.  During that time period, the dollar lost about 60 basis points.  After the 'da boyz' had their way with the metals, both silver and gold trended downward… yet the dollar lost another 50 basis points in the next two and a half hours.  So where is the co-relation there, you might ask?  Good question.  There's only co-relation when the bullion banks allow it.

Yesterday was one of those days where I suspected that 'da boyz' were dicking with the precious metals shares. With the dollar cratering… gold and silver up a bunch… and the general equity markets screaming higher… the HUI got sold off right from the open and was not allowed to confirm the precious metals price action all day long.  And the sell-off into the close?  I'm sorry, dear reader, something just does not compute.  The HUI was up a pretty skinny 0.22%.

Needless to say, Ted Butler and I had our usual chat yesterday.  He pointed out [and rightly so] that it was no accident that the prices of both gold and silver got stopped in their tracks where they did yesterday… despite what the dollar was doing… as both were within an eyelash of blasting through their respective 50-day moving averages to the upside… and if that had happened, the tech funds would have come pouring back into the market.  That wasn't allowed to happen yesterday.

Currently gold's 50-day moving average is $1,218… and silver's 50-day moving average is $18.37.  The spike highs [for only a few seconds yesterday] were $1,219.10 in gold ands $18.36 in silver.
Any questions?

So… with that price 'action' yesterday… there are only two ways this is going to turn out.  We either blast off from here… or an interim top was painted by JPMorgan et al yesterday… both in the metal prices and the shares themselves.  What we saw yesterday was the farthest thing from a free market that you can ever get… so we'll see how this turns out.

Yesterday's CME Delivery Report showed that 134 gold and only 9 silver contracts were posted for delivery on Thursday.  Prudential issued all the contracts in gold… and the biggest stoppers were JPMorgan and the Bank of Nova Scotia.  The link to all the action is here.  And there are still 732 silver contracts open for delivery in July.

There was no report from the GLD ETF yesterday… but, wonder of wonders, the SLV finally got some silver delivered on Tuesday.  It was the magnificent sum of 77,255 troy ounces.  If you can believe it, that's the first addition to SLV since May 28th… as everything since then has been a withdrawal.  Contrast that to the relentless upward march of Switzerland's ZKB silver ETF.

The U.S. Mint was busy yesterday.  They reported selling another 10,500 ounces of gold into the gold eagle program… plus another 2,500 24-K gold buffaloes.  There was another big jump in silver eagles sales as well.  This time it was 375,500.  Month-to-date… 54,000 ounces of gold have disappeared into gold eagles… 11,000 into 24-K gold buffaloes… and a whopping 1,476,500 silver eagles have been sold.  Get 'em while supplies last, dear reader!

Over at the Comex-approved depositories, they reported another decline on Monday.  This time it was a more modest 196,148 ounces… most of which came out of Scotia Mocatta.  The link to that action is here.

I got an e-mail yesterday from reader Scott Plushau who pointed out to me that there had been a big increase in IAU iShares Comex Gold Trust over the past few days.  The last thing I wanted to do in this column was report on the goings-on in another gold ETF… so I passed on it.  But, lo and behold, I received an e-mail from Nick Laird over at sharelynx.com in the wee hours of this morning pointing out exactly the same thing.  He said that they had added 13 tonnes or so in the last three months… or 17%… which is a pretty big jump for an ETF that size.  Considering the fact that GLD has done nothing but decline since July 1st… one wonders who's sneaking gold into Comex Gold Trust, hoping not be noticed.  Anyway, here's the graph that Nick sent along, so you can see the action for yourself.

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My first story of the day is courtesy of reader 'verne in ventura'.  On Monday or Tuesday I read that someone in the White House or some branch of the government said that they were not in favour of more 'quantative easing' because the economy was on the rebound.  Well, Federal Reserve Bank of Boston President Eric Rosengren hinted otherwise in this story posted over atThe Wall Street Journal yesterday.  The headline reads "Boston Fed’s Rosengren: Growth Slowing, Deflation Is Emerging Risk"… and the link to the story is here.

My next offering is a story that I dug up early yesterday morning over atbloomberg.com.  It looks like the European banks are going to have the rules changed so they don't look as insolvent as they really are… a little trick that they learned from the FASB in the U.S.A. no doubt.  The headline reads "European Banks Poised to Win Reprieve on Capital Rule".  This action, if it does happen, will have the same effect as putting lipstick on a pig.  For aBloomberg story, it's a long read… and the link is here.

My second story is a story filed late yesterday evening in The Telegraph in London.  It is, of course, by Ambrose Evans-Pritchard.  It appears that a third of Spain's city councils are in dire straits and may be forced to suspend payments by the end of the year, replicating the woes in the US, where many states are bearing the brunt of fiscal tightening.  The headline reads "Spain 'relying on short-term funding' as councils go bust".  I thank reader Roy Stephens for sending it along.  It's a short piece… and I'd put in on your must read list if I were you.  The link is here.

Here's a story about BP and Libya that was sent to me by reader Scott Pluschau.  A U.S. lawmaker is calling on the Senate Committee on Foreign Relations to investigate whether BP influenced the release of Pam Am Flight 103 Lockerbie bomber Abdel Baset al-Megrahi. Democratic Sen. Frank Lautenberg of New Jersey wants to know whether a quid pro quo led to the 2009 decision by U.K. and Scottish lawmakers to set the Libyan terrorist free.  Well, dear reader, do you think that BP would do such a thing to seal a big oil deal with Libya?  Please read this short article posted over at news.yahoo.com headlined "Did BP play a role in the release of a notorious terrorist?"… then decide for yourself.  I've already made up my mind… and the link to the article is here.

Reader Roy Stephens sent me the following story that's posted over at the Swiss website thedailybell.com.  The headline reads "Iran War Even Closer?"  This would not surprise me in the slightest, as I'm expecting it any time.  This is not an overly long story… and it's definitely worth your time… and the link is here.

Lastly today is my only gold-related story in this column today.  It's posted over at drschoon.com… and bears the headline "The End-Game and the Illusionary Gold Bubble".  As Darryl Robert Schoon says in this 6-page essay… "We live in interesting times. We are in the end-game.  Buy gold, buy silver, have faith.".  It's courtesy of reader Craig McCarty… and it's a must read from one end to the other… and the link to the pdf file is here.

Betting against gold is the same as betting on governments. He who bets on governments and government money, bets against 6,000 years of recorded human history. – Charles de Gaulle

As the stories above indicate, there is no way out of this "greater depression" without a massive repudiation of debt at all levels of society.  This will only be possible with a hyperinflationary depression… as the thought of a deflationary depression is not in the cards for the world's banking system.  But, in the end, they may have no say in how it turns out… as the market may decide that for them.

As for gold and silver… I mentioned near the beginning that yesterday's gold and silver price action… along with the share price action… absolutely reeked of bullion bank intervention.  What direction we go from here is unknown.  If we blast off to the upside, I'll understand perfectly.  If there's another down-leg to this 'correction' in gold… I'll understand the reason for that as well.  This is supposed to be the 'summer doldrums' for the precious metals… and so far, it has proved to be anything but.  However, the bullion banks are sure trying to make it look that way.

Both metals didn't do much of anything during Far East and early London trading earlier today.  Volume was light… much lighter than yesterday at this time… 5:32 a.m. Eastern time.  The main reason for that was that there was no rally for the bullion banks to cap at the London open like there was on Tuesday.  Now we wait to see what JPMorgan et al have in store for us today.

I hope your Wednesday goes well… and I'll see you here tomorrow.