'Gold is the New Reserve Currency' – Larry Kudlow, CNBC

That quote was all over the Internet yesterday.  There was another wonderful quote that I found posted in Bill Murphy's MIDAS commentary over at lemetropolecafe.com yesterday as well. This one could be the quote of the week, month, and year.  George Dowd on CNBC described the U.S. dollar as "the best looking horse in the glue factory."  Ain't that the truth, dear reader!

Anyway, the little gold rally in early London trading that I mentioned in my closing comments on Thursday, didn't amount to much.  But, minutes before 9:00 a.m. in New York, that all changed as gold spent the next seven hours moving steadily higher despite heavy selling pressure from the New York bullion banks in electronic trading after the Comex close.  Gold's high price spike came at precisely 4:00 p.m. Eastern time… and was recorded at $1,212.60 spot… and closed very close to that.

Silver remained fast asleep all day long… remaining within about 20 cents of $17.50 spot all day long… right up to, and including, the close at 5:15 p.m. Eastern time.  The fact that silver did not confirm gold's move was something that I found quite alarming… and, in the past, has not bode well for future events in either metal.  But, this time it could be different.  We'll see.

As Europe and the Euro melted down yesterday, the dollar was one of the main beneficiaries… as it's value climbed over 100 basis point for the second day in a row on Thursday… but went sideways after 3:00 p.m. Eastern time.  And, as of this moment [1:19 a.m. Eastern time], it's still trading sideways.  Not that I'm knocking gold as the 'go to' investment of choice yesterday, but gold did nothing until after New York opened. One would have thought that it would have done better in London trading as Europe circled the drain… but it didn't.

Well, considering the slaughter in the equity markets both in the U.S. and Europe, I feel that we should count our blessings once again that the p.m. stocks performed as well as they did.  In times past, a market melt-down of this size would have decimated the precious metals stocks as well… but times have obviously changed.  Even the implosion after 2:00 p.m. Eastern time could not keep the HUI down… and it finished up 1.54%.

Wednesday's o.i. changes shows that gold open interest rose a smallish 1,067 contracts.  Volume was about 172,000 contract with roll-overs removed.  Although gold was up about three bucks during Wednesday's trading, silver got smacked again.  The open interest for silver fell 2,535 contracts… volume was a hair north of 60,000 contracts.  Silver open interest for May is now down to a very tiny 506 contracts… so it's doubtful that there will be any delivery problems in silver.

The Comex Delivery Report showed that 3 gold and 279 silver contracts were put up for delivery on Monday.  The Bank of Nova Scotia and Prudential were the big issuers in silver.  The biggest four stoppers were the '4 or less' traders.  The action is linked here.

Talking about action… there was lots of it at both GLD and SLV yesterday.  The GLD ETF took in a whopping 636,105 ounces of gold… 19.8 tonnes!  That's a big, big number!  Not to be outdone, the good folks over at SLV had a big increase as well… this time to the tune of 2,205,509 troy ounces.  I would guess that they're getting this directly from the refiners… and we may see several more days of big increases like this one.

The U.S. Mint also had some sales to report on Thursday.  One-ounce gold eagles sales were up another 7,000… 24-K gold buffaloes were up another 7,000 as well… and silver eagles were up another 317,500.  Month-to-date, one-ounce gold eagle sales are 24,500, gold buffaloes 20,500… and silver eagles 722,500.

The Comex-approved depositories reported a minor withdrawal of only 2,000 ounces on Wednesday.

For such a big up day in gold yesterday, I only have two gold-related story.  Eric King interviewed the legendary Jim Sinclair about the goings-on in the gold market on Thursday.  The interview is imbedded in a GATA release which gives an executive summary of what's contained in the 12-minute audio interview.  The headline reads "Physical market has smashed gold paper, Sinclair tells King World News"… and the link is here.

The second gold-related story comes from GoldMoney founder and GATA consultant James Turk. He examines housing prices through a gold lens to reclaim, for gold, its historic status as the best measure of prices generally. Turk's commentary is headlined "An Interesting Perspective on House Prices" and you can find it posted at goldmoney.com… and the link is here.

Most of my stories today [and I have a lot of them] are about the ongoing international sovereign debt crisis that's spreading like Ebola… what caused yesterday's market melt-down in the Dow… and the latest on Goldman Sachs.


First, let's talk about the market melt-down yesterday.  There were a lot of stories about a bad trade in Proctor and Gamble… plus a few other speculations that were rather off the wall.  The person most qualified to speak to what happened yesterday is the proprietor over at zerohedge.com.  He knows Wall Street inside out, upside down, and sideways… as he was one of them not that long ago. In a rather longish post headlined "The Day the Market Almost Died: Courtesy of High-Frequency Trading"… Tyler Durden lays it all out. He writes… "Today, we have reached an apex in our quest to prevent the HFT "Black Monday" juggernaut, as absent the last minute intervention of still unknown powers, the market, for all intents and purposes, broke. Liquidity disappeared." This is a must read from one end to the other… and I thank Australian reader Wesley Legrand for bringing it to my attention… and now to yours.  The link is here.

As Tyler Durden mentioned in his post, the NASDAQ's reaction to what happened was rather alarming.  In this Bloomberg story [sent to me by Florida reader P.S.] the headline reads "Nasdaq to Cancel All Trades of Stocks Moving More Than 60%".  Florida reader S.A. was incensed by this… "What?  Exchanges decide what are, and are not, confirmed trades in markets? What may be the ruinous effects on some of those whose trades are cancelled?"  Indeed.  The link to the story is here.

The next story is from Greece… and it's rather disturbing.  It's posted over at france24.com… and the headline reads "President slams protests, warns nation is on 'brink of abyss'".  The Molotov cocktails are flying and three people are dead. I thank reader Roy Stephens for sending the story along… and the link is here.

This next item is one that I 'borrowed' from yesterday's King Report.  It's a story posted over at Bloomberg's businessweek.com.  "Bundesbank President Axel Weber fired the first shot in a brewing debate over how far the European Central Bank should go to defend the euro… rebuffing calls for the ECB to consider buying government bonds."  Buying bonds is monetizing debt and printing money, dear reader.  Germans of Weber's vintage still think about Weimar Germany… and want no part of it.  But, as I keep saying… it's either "print, or die".  Death by a deflationary depression… or death by a hyperinflationary depression… which will he chose?  The story… headlined "Weber Draws Battle Lines as Pressure Mounts on ECB"… is a bit of read, but I think it's worth your while… and the link is here.

This next piece is also about Germany.  It's courtesy of Florida reader P.S… and it's posted over at the Financial Times in London.  All is not well over there… and this story pulls back the curtain a bit for you to see that Germany has its own set of problems that are just as bad.  The headline reads "The message from Berlin that Europe failed to grasp."  Like the previous story about Germany, I think this is also worth the read… and the link is here.

Here's a story that was filed at cnbc.com shortly after the markets closed yesterday.  The headline does not make for happy reading… "US Banks Heavily Exposed to Europe Debt Woes".  "The five biggest banks in the United States have a substantial risk to what's going on in Europe."  How substantial, you ask… try $2.5 trillion!  Dick Bove of Rochdale Securities told CNBC that "Greece will default because it has no other option."  This is a short read, but a must read… and I thank Russian reader Alex Lvov for bringing it to my attention in the wee hours of this morning.  The link is here.

The last two stories are both Goldman Sachs related.  The first is by GATA board member Catherine Austin Fitts.  Catherine has been walked the halls of power in Washington and is more than qualified to comment on "the great vampire squid".  The story is headlined "Thumbing Down on Blankfein"… and it's an interesting read… and the link is here.

The second item about GS was posted over at calculatedrisk.com… and was sent to me by reader Dave Delve.  Imagine the movie A Few Good Men. Imagine Lloyd Blankfein playing the role that Jack Nicholson played.  Then his diatribe against the American people may have sounded like this… "You want the truth? You can't handle the truth. Son, we live in a country with an investment gap. And that gap needs to be filled by men with money. Who's gonna do it? You? You, Middle Class Consumer? Goldman Sachs has a greater responsibility than you can possibly fathom. You weep for Lehman and you curse derivatives. You have that luxury. You have the luxury of not knowing what we know: that Lehman's death, while tragic, probably saved the financial system. And that Goldman's existence, while grotesque and incomprehensible to you, saves pension funds. You don't want the truth. Because deep down, in places you don't talk about at parties, you want us to fill that investment gap. You need us to fill that gap. "We use words like credit default swaps, collateralized debt obligation, and securitization? We use these words as the backbone of a life spent investing in something. You use 'em as a punch line. We have neither the time nor the inclination to explain ourselves to a commoner who rises and sleeps under the blanket of the very credit we provide, and then questions the manner in which we provide it! We'd rather you just said thank you and paid your taxes on time. Otherwise, we suggest you get an account and start trading. Either way, we don't give a damn what you think you're entitled to!"

The danger is not that a particular class is unfit to govern. Every class is unfit to govern. – Lord Acton

Although I was very happy with gold's performance… as well as the shares… the non-confirmation by silver was ominous.  As I mentioned yesterday, the jobs report comes out at 8:30 a.m. this morning… and 'da boyz' have a virtually unblemished record of hitting the gold and silver price at, or shortly before, the jobs numbers are released… either good, or bad.  Will history repeat today?  I don't know… but I'm always wary of the phrase "this time it's different."

To show you how far out of sync gold and silver are… the RSI in gold is pushing into overbought territory at 71.94… and silver's RSI is sucking wind at 46.33… which is closer to being over sold than overbought.  Gold is way above it's 50-day moving average… and silver, for all intents and purposes, is sitting on it's 50-day moving average.  The dichotomy could not be more striking.  How this will resolve itself is unknown… but today's action in New York [which should be something to see] will tell us a lot.

Here's the 6-month gold chart…

And here's the 6-month silver chart…

For whatever reason, the CME has not updated their website [as of 5:37 a.m. Eastern time] with preliminary volume figures for Thursday's trading in either gold or silver.  However, the usual New York gold commentator mentioned that the CME website showed 268,000 gold contracts traded as of 5:15 p.m. yesterday afternoon.  That number does not surprise me… as I'm sure the U.S. bullion banks were all over the gold market yesterday afternoon trying to prevent a melt-up… and only partially succeeding.  So the final volume figures [plus the open interest numbers] will probably be a sight to behold when they're posted later this morning.

London has already been open about three hours as I write this paragraph… and gold volume is already a monstrous 46,000 contracts traded… net of quite a few roll-overs.  Silver has traded a chunky 6,000 contracts.  This is quite amazing considering that the prices of these two metals have done virtually nothing since the close of New York trading at 5:30 p.m. yesterday afternoon… although gold is down about $10 at the moment.  The dollar isn't doing much either.

Now we wait and see what happens in New York trading today.

I hope you have a good weekend… and I'll see you here tomorrow.