Gold Briefly Pierces $1,300 Spot

Silver ETF SLV hits new high. U.S. Mint stops making 24-K gold buffaloes for 2010.  GLD ETF has third withdrawal this week. North and South Korea on the brink of war. Explosive gold and silver short squeeze coming: James Turk… and much more.


YESTERDAY IN GOLD AND SILVER

Gold didn't do much in Far East trading during their Friday… but the moment that London opened there was a burst of activity to the upside.  But it was obvious [at least to me] that every time that gold made a run for $1,300 spot, it got turned back.  The biggest hit gold took on Friday started about 10:15 a.m. and ended about 11:15 a.m.  The high price tick in New York was $1,301.30 spot, but that price only lasted for a few seconds at most.  Volume was pretty decent… but not overly heavy.

The silver price also ran up at the same time as gold… and by 9:30 a.m. in London, silver was up to $21.37 spot, then spent the rest of Friday struggling to rise another dime to close the New York trading session at $21.46 spot.  The spike high was recorded as $21.49 spot.  Volume was pretty decent.

The world's reserve currency hit another air pocket early Friday morning.  This time it was 9:00 a.m. in London.  By the time the low tick was in at 4:30 p.m. in New York, the U.S. currency was down 90 basis points… 1.12%.  Normally a drop like that would have sent gold and silver soaring to the upside… but that wasn't allowed to happen.

Despite the fact that the general equity markets had a stellar day to the upside, the precious metal stocks did not [or were not allowed] to join the party.  Strangely enough, the shares began to head south about ten minutes before the gold price got smacked around 10:15 a.m.  The HUI finished unchanged on the day.  Here's the 5-day chart of the week that was.  It's up, but not by a lot… and certainly not at its highs.  Despite that, the silver stocks did very well for themselves.  It's a bull market within a bull market that's not showing up in the HUI at all.

Well the CME's Comex Delivery Report on Friday showed that zero gold and 167 silver contracts were posted for delivery on Tuesday.  Triland issued [delivered] the most contracts… and JPMorgan stopped [received] the most.  JPMorgan is still trading in its proprietary trading account.  The silver portion of the report is certainly worth looking through… and the link is here.

It was another unusual day over at the GLD ETF yesterday.  For the third time this week, they reported a withdrawal.  It was only 29,314 ounces, but a withdrawal nonetheless.  On the other hand, the silver ETF is on fire.  They reported taking another 978,390 troy ounces into their inventory.  Since August 24th, the SLV has added a whopping 14.9 million ounces… and is now at a new record high.

The U.S. Mint had another sales report yesterday.  They sold another 3,500 ounces of gold in their gold eagle program and another 125,000 silver eagles.  Month-to-date, gold eagles sales total 61,000 ounces… and silver eagle sales are up to 1,220,000 ounces.  The U.S. Mint has just reported that they have stopped making the one-ounce 24-K gold buffalo bullion coin for the balance of 2010.  So sales have been capped at only 10,000 coins.  I would expect the premium on these to skyrocket immediately.

I'm not going to spend a lot of time on the Commitment of Traders report because it was market neutral in both gold and silver, so the bullion banks' short positions remain basically unchanged from the prior week.  Both Ted and I thought there would be further deterioration, but there wasn't.  But here's Ted Butler's updated "Days to Cover" graph that Nick Laird over at sharelynx.com was kind enough to provide.

Click here to enlarge.

Here's another graph the Nick sent me last night.  It's the current gold/silver 'bubble' compared against fifty historic bubbles from days gone past.  The chart shows that this current bull market in the precious metals is barely off the ground compared to other bubbles.

Click here to enlarge.

Nick also provided a link to all the data that went into these charts.  There's about 10 pages of text and about 70 charts to view.  So if you're interested in pursuing this further, the link for all this information is here.


CRITICAL READS

I have a lot of stories today… and I'll start off with this one from reader 'David in California'.  It's a story posted over at marketwatch.com bearing the headline "U.S. durable-goods orders drop 1.3% for August; stock futures extend gains".  Now why would the stock market go screaming higher on such news, you ask?  Well, Bill King of the King Report fame says that the Fed is monetizing debt like crazy and giving away free money [they never have to pay it back] to the primary dealers, so they are goosing stock futures, just like they did on Friday.  These are called POMOs… which is an acronym for Permanent Open-Market Operation.  King says that "QE 1.0 never ended… and the Fed is on pace to monetize $30+ billion of Treasuries for September… and the question is why?  Economy headed south; Ben supporting market ahead of the November election or retaliation against China and Japan’s currency actions – or all of the above?"

Bill also says that there are POMOs coming next Tuesday and Thursday as well.  But it's obvious that none of the money is being used to support gold or silver… or their shares.  The marketwatch.com story is linked here.

Not to be outdone by the Bank of Japan, I see that both Peru and Brazil were in the currency markets on Friday buying the U.S. dollar.  But judging by the dollar's losses, they threw their money away… just like the BoJ.  The Peru story is here… and the Brazil story is here… and I once again that reader 'David in California' for providing the links to both zerohedge.com stories.  As zerohedge comments "The first global currency wars are now declared fully open."

Here's a story from last night's edition of The Wall Street Journal that I found posted over at etfdigest.com.  The headline is an eye-opener… "Credit Unions Bailed Out: U.S. Backs $30 Billion in Bonds to Stabilize Key Institutions; Subprime Legacy".  Wow!  Two years after the peak of the financial crisis, the federal government swooped in to stabilize a crucial part of the credit-union sector battered by losses on subprime mortgages.  Before this financial crisis is all over, the bill will be in the trillions of dollars for the entire banking system.  The link to the story is here.

Reader Roy Stephens provides the next story.  This one was filed very late last night in The Telegraph out of London.  The headline is ominous… "Risk of trade war rises as key US committee backs tariffs on China".  If the bill passes, it still has to make it through the Senate… and since this is an election year, it could get a lot of support.  If it does pass… look out!  The link to the story is here.

To add to the world's litany of woes, here's a story that I stole from yesterday's King Report.  It's another story from The Telegraph… and this one's filed from Moscow.  The headline reads "North and South Korea on the brink of war, Russian diplomat warns".   In Moscow's bleakest assessment of the situation on the Korean peninsula yet, Russian deputy foreign minister Alexei Borodavkin said tensions between the two countries were running at their highest and most dangerous level in a decade.  This story is worth the read… and the link is here.

My first gold-related story today is an interview with GATA chairman Bill Murphy by Canada's Business News Network.  If you want a quick peek at what GATA is all about, this interview will help.  It runs just under six minutes… and is well worth your time.  The link is here.

The next story is a GATA release from yesterday.  The headline reads "Robert Moore: Selling gold that grows on trees".  Moore aptly describes the fraud of the precious metals futures market… and I'll leave the rest of the excellent preamble up to Chris Powell.  This is a must read story… and the link is here.  There's an excellent graph included that may look a bit familiar to readers of this column!

Today's next item is also a GATA release, as it's a story from the Financial Times out of London… and it's subscriber protected.  The GATA headline reads "Competitive devaluations gain acceptance as justification for higher gold"… and the FT headline states "Few Obstacles in Path of Bullion Bulls"… and the link to the story, which is also a must read, is here.

The next piece is from King World News.  It's 'Part 2' of the interview with senior managing director for market intelligence at Omnis, Inc… Jim Rickards.  Like 'Part 1' of his interview a few days ago, I consider this one a must listen as well… and the link is here.

The next story is one I found over at marketwatch.com late last night.  The headline on this piece reads "Gold's next hurdle is 1980's inflation-adjusted peak".  The graph shows that the January 1980 price of gold has an inflation-adjusted price of about $1,800… even though the writer says in the story that gold would have to reach around $2,300 the ounce in today's dollars to match the $875 back in 1980.  One wonders how the writer could make such an obvious mistake.  Of course John Williams over at shadowstats.com says that if you use real-world inflation numbers [rather than the ones provided by the U.S. government]… gold should be around $7,500/ounce.  Regardless of 'all of the above'… this bull market has miles to go before it breaths its last… and the link to the story is here.

Lastly today, I have another sensational Eric King interview with James Turk that's posted over at King World News.  Turk says: "In the next few weeks, as gold and silver rise, it will be from a short squeeze the likes of which hasn't been seen since Cornelius Vanderbilt took on Daniel Drew in the legendary Erie Railroad short squeeze."  The interview is headlined "James Turk: Explosive Gold and Silver Short Squeeze"… and the link to this must read blog is here.


THE FUNNIES


THE WRAP

There are no markets anymore… only interventions. – Chris Powell, GATA

This week's 'blast from the past' need no introduction… and neither does the band.  So turn up your speakers and click here.

Well, the fight is on for $1,300 gold and a major break-out in silver.  It sure looks to me like the bullion banks are battling this move with everything they've got.  I must admit that the open interest figures for the previous week were a surprise… and I'd gladly give a days pay to know what the bullion banks' short positions were at the end trading yesterday.

I keep pounding away at the fact that the world's economic, financial and monetary systems have already floated off the rails… and are completely beyond repair.  It will all end badly and then the world as we know it will end… and all that will be left is a smouldering ruin where civilization as we knew it, once existed.  It's what comes after that concerns me.  I have my ideas, but I will keep them to myself, as they're pure speculation.

As far as gold and silver are concerned, we are truly in uncharted territory from this moment on… and I can give you a lot of reasons why both metals should explode to the upside… and only one reason why prices might decline.  It's times like this that try investor's souls… even mine.

Regardless of where the short-term price is headed in either metal… the medium to long term is not in doubt.  That's why I deem it prudent to be as fully invested as you wish to be… starting right now. I'm still urging you to put your investment dollars to work. The first place I'd start would be with a subscription to either Casey's Gold and Resource Report… or Casey Research's flagship publication… the International Speculator. Please click on the links, as it costs nothing to check them out… and the subscriptions come complete with CR's usual money-back guarantee.

Enjoy what's left of your weekend… and I'll see you on Tuesday.