"Davos: The Bomb Shelter"

Gold tacked on about $10 during Far East trading yesterday. The top came at 5:00 p.m. in Hong Kong… shortly after London had opened for the day. Half that gain disappeared by the time the London silver fix came at noon in London… 7:00 a.m. in New York. From there, another $10 or so got added to the price in very short order, as the dollar did a mini-swan dive. From the Comex open, gold got sold off just a bit… but then, for whatever reason, the U.S. dollar fell off a 65 basis point cliff at 11:30 a.m. Eastern time. Gold [and silver] responded as one would expect… but the subsequent rise in the dollar after that point, took some of gold's gains back… and gold closed around $1,077 spot, up about $16 on the day. Gold's low was at the beginning of trading in the Far East… around $1,060 spot… and the high tick at the dollars nadir was $1,083.10 spot.

Silver's ride on Tuesday was virtually identical to gold's… and their respective charts indicate that. The main difference was in the size of the rally on the 11:30 a.m. U.S. dollar dive… as silver rose 49 cents… 3.14%. Gold's rise on the dollar's fall was barely one percent. Silver held most of it's gains after the dollar recovered… and closed up 47 cents on the day. Like gold, silver's low was at the opening of trading in the Far East… and the high price was $15.60 spot [12:35 p.m. Eastern] at the dollar's low price of the day.

As the dollar chart indicates, the prices of both precious metals were hyper-sensitive to what the dollar did yesterday… and the 11:30 a.m. dollar face plant in New York stands out like a sore thumb. The 7:00 a.m. mini-crash in the dollar is also plainly visible.

As the HUI chart shows, the gold shares pretty much followed the gold price and dollar antics yesterday… with the index up 4.33% on the day.

Now for Monday's open interest numbers. I was delighted with what the CME had to report… but I can tell you flat out that the huge declines in open interest below were not all from Monday's trading activity… although prices in both metals did decline a bit on that day. These numbers are mostly spill-over from Friday… and I feel that these numbers were deliberately withheld. Gold open interest declined a whopping 20,972 contracts on pretty light volume of 162,375 contracts. Silver's o.i. decline was just as spectacular… down 3,483 contracts on volume of 47,771 contracts.

These final volume numbers for both gold and silver shown above, posted at the CME website, are identical to the preliminary Monday numbers I reported in my column yesterday morning. So, if the bullion banks can report the volume correctly the night before… why can't they report the open interest numbers correctly at the same time? Why do we have to wait an extra day? Just asking.

The CME Delivery Report shows that 66 gold and 41 silver contracts are up for delivery tomorrow. There were no reported changes in GLD, SLV or over at the U.S. Mint. The Comex-approved depositories showed that 400,689 ounces were withdrawn from their collective inventories.

According to the European Central Bank weekly statement of condition, there was no change in consolidated holdings of "gold and gold receivables". This is the fifth week of 2010 weekly statements: three have shown zero sales and the other two precisely cancel each other. Is this a message? [I thank the "usual New York gold commentator" for that]
Today's first story is courtesy of the King Report. It's a Bloomberg piece about real estate. As you know, there is no chance of any improvement as far as the eye can see. This story certainly confirms that. The headline reads "Jumbo Mortgage 'Serious Delinquencies' Rise to 9.6%"… and the link is here.

Right up there in the "I can't believe he said that" category is this piece from Monday's edition of businessweek.com. "Nobel laureate Joseph E. Stiglitz said the prospect of a default by the U.S. or the U.K. is an 'absurd' notion constructed in financial markets." That's the contents of the first paragraph. You need to read the contents of the second paragraph very slowly and very carefully to let the absurdity of it sink in. The whole story is a 90-second read… and I thank California reader Joseph Weiler for bringing it to my attention… and the link ishere.

This next item/video has to do with Crony Capitalism at its most obvious. I could hardly believe what I was watching and hearing. If any Canadian politician, or the leader of any other Western country tried this, he would be hung for it. Not only by the press… but members of his own political party. Only in the U.S.A. I suppose. I thank reader Dave Delve for bringing this youtube.com video to my attention… and the link is here.

Just the other day there was a story that Chinese military officials wanted to "punish" American by selling Treasuries. According to Tyler Durden overzerohedge.com… this has now become fact. I highly recommend that you find the time to read this rather long piece that's entitled "The Dumping Begins: Chinese Reserve Managers Notified That Any Non-USG Guaranteed Securities Must Be Divested". I thank Russian reader Alex Lvov for sending it to me in the wee hours of this morning… and the link is here.

In the ongoing Greek tragedy comes another piece from The Telegraph in London. It is, of course, by their international business editor, Ambrose Evans-Pritchard. The headline reads "Germany backs Greek bail-out as EU creates 'economic government'"… "Germany is preparing to drop its vehement opposition to a rescue package for Greece, fearing that a rapid escalation of the debt crisis in Southern Europe could endanger German banks and damage the euro." The link is here.

No sooner was this [and similar stories] widely disseminated, then there were several official denials within the German government. I'm sure we'll find out pretty quick how this is all going to shake out, as there's some sort of meeting about it tomorrow.

And lastly comes this story courtesy of Quebec reader, Jacques Theberge. It's an 8-page essay entitled "Davos: The Bomb Shelter"… "Predators and parasites recently gathered in Davos to discuss the mounting problems of their prey. All present agreed the problem need urgent attention." I agree with every word he wrote… and it's extremely well written. However, the rather pithy poem near the end is something that the author, Darryl Robert Schoon, could have easily left out. And, except for the poem, this is a must read from start to finish… and the link is here.

There's not much I can add to today's commentary that I didn't say yesterday… or isn't contained in the "Davos: The Bomb Shelter" story above. How soon the end comes, is unknowable. But it's coming… one way or another… and probably sooner rather than later.

I'm still 'all in'… and have a large portion of my net worth in the physical metal itself… or in a bullion fund that I know for sure has the metal [gold, silver and platinum] backing it. As how you wish to invest your funds, dear reader, it's entirely up to you. But, as you can see, I've already placed my bets. If you're considering doing some serious investing in the precious metals… I'm still beating the drum for Casey Research's flagship publication… International Speculator… as it's still the best investment publication on the Internet by far. I urge you to click on either link, as our brand new I.S. home page introduces you to Louis James… "investment analyst, a mining expert, and the senior editor ofCasey’s International Speculator — a monthly publication devoted to identifying companies in the “junior” metal mining sector that have substantial upside potential. While not confined exclusively to precious metals, much of my focus is currently on silver and gold." His introductory essay is entitled Kickin' Rocks, Pickin' Stocks… and I urge you to check it out.

Checking the action in the Far East and early London trading, I see that neither metal has done much… although silver had a tiny breakout that ran into some sort of not-for-profit seller around 4:00 a.m. in Hong Kong. Gold volume [at 5:10 a.m. Eastern] is sitting at at not particularly heavy 20,603 contracts for April… and silver's volume for March is 4,331 contracts.

The CME has posted its preliminary volume figures for Tuesday's trading. In gold it was 193,627 contracts… and in silver it was 58,047 contracts. 'Preliminary' open interest numbers for gold and silver are currently reported as +17,846 and +1,361 respectively. No doubt those numbers will be vastly different when the final figures are posted later this morning.

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