Graveyard of Fiat Money: Richard Russell

The gold price sold off a couple of bucks until trading in Hong Kong was through for the day.  Gold's high on Thursday [around $1,258 spot] was in London just after twelve noon local time…

and once the London p.m. gold fix was in less than three hours later [9:45 a.m. Eastern time], the selling really got serious… with the low of the day [$1,242.50 spot] coming around lunch time in New York.  From that low, the gold price recovered a bit, but once floor trading ended and electronic trading began, the selling pressure began anew.

Silver was under some selling pressure early on Thursday morning in Far East trading, but headed upwards once London opened.  The silver price broke through $20 a few times during afternoon London and early morning trading in New York.  The last trip above $20 was close to the London p.m. gold fix… and from there, silver got sold off and closed virtually on its low of the day at the close of electronic trading at 5:15 p.m. Eastern time.  The Kitco highs and lows that were reported for silver yesterday were not correct… and looking at the New York chart, silver's high of the day was a bit north of $20.05 spot… and it's low was around $19.70 spot.

The world's reserve currency opened Thursday morning in the Far East around 82.60… and closed the New York trading day about 10 basis points higher.  So, once again, the dollar was not a factor in yesterday's precious metal markets.

The HUI pretty much followed the gold price tick for tick once the equity markets began to trade yesterday morning.  The high was at 9:45 a.m… the London p.m. gold fix… and the low was at 11:45 a.m… very close to gold's low price of the day.  From there the HUI basically traded sideways for the rest of the New York session… with the HUI closing down 1.57% on the day.

The CME Delivery Report showed that zero gold and 218 silver contracts were posted for delivery on Monday.  The big issuer [with 190 contracts] was R.J. O'Brien… and JPMorgan the biggest stopper, with 137 contracts received in their proprietary trading account… and 15 contracts in their customer account.  The link to that action is here.

Both GLD and SLV ETFs had something to report yesterday.  GLD reported a smallish decline of 29,318 ounces… and over at SLV they reported receiving 978,580 troy ounces.  The U.S. Mint had nothing to say for itself… but over at the Comex-approved depositories they had a busy day on Wednesday, with activity in all four warehouses.  By the time the dust had settled, their total silver inventories had declined 426,919 troy ounces.  The link to all that action ishere.

Here's an item I stole from yesterday's edition of the King Report.  The retail investor continues to flee the markets as domestic equity mutual funds took another big redemption hit last week.  The headline over at reads as follows… "Retail Capitulation: Stock Outflows Surge By Over $7.5 Billion In 18th Consecutive Week Of Record Stock Market Boycott".  This short story [with some excellent graphs] is well worth your time… and the link is here.Today's first story is courtesy of reader 'David from California'.  Yesterday I ran a story about how China has enough vacant real estate to house half the population of the USA.  Here's a real estate story from Hong Kong that shows how crazy the real estate market is there as well.  The headline reads "Someone Just Bought An Old Shoebox Apartment In Hong Kong For A Quarter Million Dollars".  It's a posting over at… and the link to this worthwhile story is here.

The preamble to my next story I 'borrowed' from  Rumors circulating in the market, stoked by a Bloomberg report, that the biggest German bank, the one whose assets are about as large as the GDP of its host country, is considering a share sale of up to €9 billion. Deutsche Bank is rumored to have approached banks about arranging a stock sale, although the firm has still not decided whether to pull the trigger. This development is nothing less than a direct response to Basel III which is expected to require European banks to shore up tens [if not hundreds] of billions in new equity capital. And, as usual, the first one out of the gate loses the least. This means that all the ugly toxic waste accumulated under the rug in Europe's financial institutions is about to emerge.  I thank reader 'David from California' for this piece… and the link to theBloomberg story headlined "Deutsche Bank Said to Weigh EU9 Billion Share Sale" is here.

The following video clip posted over at was sent to me by reader Scott Pluschau.  This is the first I've heard of New Jersey's new Governor, Chris Christie.  He's obviously a man who doesn't gild lilies or suffer fools gladly.  As the preamble to the video states "Christie is known for telling it like he sees it. At a town hall meeting yesterday in Raritan, NJ, he made sure to bolster that reputation."  I was impressed!  The U.S. needs a lot more people like him.  This video is a must watch… and the link is here.  It's easy to see how he beat incumbent Jon Corzine.  Too bad he isn't the president.

The rest of the stories in this column are all gold related.  The first one was sent to me by Casey Research's own Jeff Clark… editor of Casey's Gold Report.  It's a piece from the Dutch website The headline reads "The third largest gold nugget in the world".  The nugget and the photo are impressive to say the least.  The pictures of the nugget are definitely worth looking at, even if you don't read a word of the story.  The link is here.

The next gold-related story is a short Reuters piece from reader Scott Pluschau.  China's gold output was 31.059 tonnes in July, the Ministry of Industry and Information Technology said on Wednesday, a decline of 5.8 percent in average daily output from June.  The headline reads "China's gold output slips 5.8%in July on month".  This story is worth your time… and the link is here.

The next item is one I stole from a GATA dispatch yesterday.  It's anotherReuters article with the self-explanatory headline that reads "IMF sells 10 tonnes of gold to Bangladesh".  The story is very much worth reading, as there's more to it than mentioned in the headline… and the link is here.

Eric King over at King World News sent me another item for your reading pleasure earlier this morning.  This one is headlined "Richard Russell – Graveyard of Fiat Money".  As you might expect, when Richard is discussing gold and fiat money in the same sentence, it's worth the read.  The link to this short blog is here.

My last item is your big read of the day… and to tell you the truth, dear reader… I can't remember whether I've posted this before or not… and I don't have time to check.  It's an 8-page pdf file from Darryl Robert Schoon that's entitled "Hedging Chaos With Gold".  If I have posted it before, it's worth a second read.  I thank Wesley Legrand for sending it along… and the link is here.

When Franklin Roosevelt became president in 1933, the deficit was already running at 4.7% of GDP. It rose to a peak of 5.6% in 1934. The federal debt burden rose only slightly — from 40 to 45% prior to the outbreak of the second world war. It was the war that saw the US [and all the other combatants] embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s, than with the 1940s: it is world war finance without the war. – Niall Ferguson

Well, was Thursday's action the start of something to the downside?  I don't know… and it's too soon to tell.  Hopefully today's trading action in New York will bring more clarity to the situation.

Thursday's volume in both metals was pretty heavy… and, without doubt, there was long liquidation in both gold and silver, as some tech funds certainly pitched their newly placed long positions.  Hopefully the final numbers from the CME this morning will show more.

In Far East trading this Friday morning, there's positive action in both metals heading into the London open.  Volume is extremely light… well under half the volume in gold and only a third of the volume in silver that I reported for this time period yesterday.  With volume this light and the gains so small, it wouldn't take a lot for the U.S. bullion banks to move the price… either up or down.

Today is also the day for the September Bank Participation Report… plus the latest Commitment of Traders report.  I'll certainly have something to say about both of them in my column on Saturday.  The link to the COT report, when it becomes available at 3:30 p.m. Eastern time [sharp] today is here.  The Bank Participation Report for September will probably be issued sooner… and if you're interested in looking at that… the link is here.

I have no idea what to expect in the Comex trading session in New York this morning… so nothing will surprise me when I turn my computer on later this morning.

I hope you have a great weekend… and I'll see you here on Saturday.