Eton Park Capital Management Goes For Gold

Tuesday's activity in the gold market is hardly worth mentioning.  But, just like Monday, the rally that began in the Far East and London trading was extinguished during the New York trading session.  This should be a very familiar trading pattern to you by now, dear reader.  Volume was extremely light… with emphasis on the word 'extremely'.  Gold's high price tick came shortly before 1:00 p.m. in London trading at $1,228.00 spot.

Silver was the same… but it was obvious that the price wanted to break above $18.60 the ounce… but every attempt that occurred was quickly sold down.  The chart shows how obvious it was.  But it could also have been Ted Butler's 'raptors'… the '9 or more' traders selling their long positions at a profit.  We won't know which it was until Friday's Commitment of Traders report.  The cut-off for that report was at the close of trading yesterday… and, hopefully, all of yesterday's 'action' will be in it.  Silver's high price in New York was $18.64 spot.  The volume in silver was also very light.

The world's reserve currency lost about 45 basis points between the start of trading in the Far East on Tuesday morning… and it's low about eleven hours later shortly after 5:00 a.m. Eastern time yesterday.  From that low, it basically traded flat for the rest of the day.  Not a lot to see here.

The gains in the precious metals stocks probably had more to do with the activity in the general equity markets yesterday… as the gold basically traded unchanged during the New York session on Tuesday.  The HUI gained a smallish 0.93%… but we'll take our gains any way we can get them.

The CME's Daily Delivery report showed no activity whatsoever in either gold or silver.  The only action there was came in copper deliveries.  But the GLD ETF had something to say, as a rather chunky 254,156 ounces of gold were taken into their alleged inventories.  And, it almost goes without saying, but there was no report from SLV yesterday.  The SLV ETF has only shown activity twice in August… and both were withdrawals… 1.1 million ounces in total.

For the second day running, the U.S. Mint didn't have a sales report… but over at the Comex-approved depositories they showed a decline of 566,479 troy ounces, all of it out of HSBC USA warehouse.

As most of you are aware, China has been selling U.S. debt and diversifying into just about any other currency that looks like it might maintain its 'value'… and, behind the scenes, gold bullion.  This time its Korean bonds.  The Bloombergheadline reads "China Doubles Korea Bond Holdings as U.S. Debt Sold"… and the link to the story is here.I don't have a lot of stories today… and except for the first one, they're all gold related in one way or another.

Here's another Bloomberg story from yesterday… this one is courtesy of Casey Research's own John Grandits… for which I thank him.  The opening paragraph reads "Eric Mindich's $13 billion Eton Park Capital Management LP led hedge funds in raising gold investments last quarter, joining billionaire John Paulson's bet that bullion will increase amid inflation concerns."  The headline reads "Mindich Leads Hedge Funds Joining Paulson’s Gold Bet"… The story ranges far and wide about the growing sums of money that are pouring into gold in the world's largest funds.  This is your first must read of the day… and the link ishere.

George Soros' gold holdings were mentioned in passing in the previous article.  Here's a Reuters story [posted at mineweb.com] about what George is up to these days.  Gold now represents the billionaire investor's fund's biggest holding by dollar value and with the sale of so many other holdings, gold ETFs now represent almost 13% of the firms total equities.  I guess he knows what we know, dear reader… and probably a lot more.  The headline reads "Soros favoured gold in Q2, cut US equities"… and I thank Australian reader Wesley Legrand for sharing it with us… and the link to this very worthwhile read, ishere.

Here's a graph that I've posted before… but here it is again, updated as of yesterday.  Nick Laird over at sharelynx.com slid it into my in-box very late last night.  I'm sure you're wondering what will happen when line hits 'overhead resistance' this time.  Well, so am I.

Reader 'David from California' forwarded the following story to me yesterday.  It's also a Bloomberg offering… this one filed out of London yesterday.  It's only one paragraph long… and it will take you about thirty seconds to read the whole thing… which I suggest you do.  The headline reads "Iran Imports 23 Tons of Gold in 4 Months, 22 Tons Previous Year"… and the link is here.

Before I get to my last three gold-related stories, I want to post this 50-year graph of the M3 money supply as provided by John Williams over atshadowstats.com.  If you're wondering why so many people consider an deflationary collapse to be inevitable… this graph pretty much sums up their reasons.  We'll have to wait and see how "Print…or die!" works out in the face of this huge collapse in M3.

John's comments about the graph were as follows… "The signal for a downturn or an intensified downturn is generated when annual growth in real M3 first turns negative in a given cycle; the signal is not dependent on the depth of the downturn or its duration. The current downturn signal was generated in December 2009. The broad economy tends to follow in downturn or intensification roughly six to nine months after the signal."

As I mentioned above… my last three stories are all gold related… and the first two are GATA releases.  I'm not even going to try to wordsmith a preamble to the first one, because Chris Powell has done such an excellent job already.  The second story is from the Tuesday edition of London's Financial Times… and if you don't have a subscription, you may not be able to read it.  The story is printed in the clear in this GATA release.  It's my opinion that all three of these stories are must reads from one end to the other, so I hope you have the time, as they are definitely worth your while.

The first story bears the GATA headline "Chris Weber: How much gold remains in Fort Knox?  Not much".  The headline to the imbedded story [posted over atlewrockwell.com] reads "The Great American Disaster: How Much Gold Remains In Fort Knox?"  The link to Chris Powell's preamble… and Chris Weber's story… can be found by clicking here.

The second GATA dispatch is from yesterday's edition of the Financial Times… and is headlined "Central banks and investors weight in as gold market transforms"… and the link is here.

The last story today is another interview with my good friend John Embry… Sprott Asset Management's chief investment strategist.  This one's with The Gold Report's Brian Sylvester and Karen Roche.  It's about the world economy, the prospects for a new sort of world currency, and gold and silver. It's headlined "Embry Still Burns Bright" and the link to this must read article is here.

The growth in foreign dollar holdings has placed upon the United States a special responsibility–that of maintaining the dollar as the principal reserve currency of the free world. This required that the dollar be considered by many countries to be as good as gold. It is ourresponsibility to sustain this confidence. – President John F. Kennedy days after he took office in January, 1961

Yesterday was certainly a 'nothing day' as far as the precious metals were concerned.  It's obviously still summer out there and the volume in both metals reflects the lack of interest at the moment.  But the fact that gold is above $1,200 the ounce is comforting.

I see that there's a tiny bit of selling pressure on gold going into the London open this morning… but the volume is vanishingly small, even for this time of day… so I'm not going to read too much into it.  Of course, if the bullion banks are going to do something nasty to the downside, they have a habit of waiting until the day after the cut-off for Friday's COT report before making their move.  We'll have to see whether this proves to be the case this time or not.  The price action in New York today will tell us a lot.

Both silver and gold are now above their respective 50-day moving averages once again… so there is certainly some long buying going on by the technical funds… so the bullion banks are undoubtedly taking the short side of these trades.  Ted is hoping that JPMorgan is not one of the bullion banks going short.  We'll find out on Friday.

I noted in John Embry's interview that he's encouraging at least a 25% weighting of the precious metals in everyone's portfolio.  I think that's excellent advice.  I'll be happier when he recommends 100%… because that will make me feel lots better, as that's been my investment position in gold and silver for a very long time.

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