If You Build It… BP Will Come
Gold didn't do a heck of a lot on Tuesday until the London p.m. gold fix was in at 10:00 a.m. Eastern time. Then it tacked on about a percent in the ensuing two hours… and showed signs of doing vertical about 11:45 a.m. But, not to worry, at precisely 12:00 noon, a not-for-profit seller showed up and ended the fun. Gold spiked to its high of the day [$1,237.90 spot] in electronic trading atprecisely 4:00 p.m. in New York yesterday afternoon… but got cut off at the knees there as well… and ended up closing within a dollar of it's 12:00 noon price.
Here's the Tuesday New York chart on its own. Note the precision timing of the price capping… precisely noon and 4:00 p.m. Eastern time. What are the chances these are random market-driven events? None whatsoever, dear reader.
One thing I should point out while this graph is posted… and I'm thinking about it… is the London p.m. gold fix. The New York [and sometimes world] low price is often printed at this time of day. The fix occurs around 3:00 p.m. in London [10:00 a.m. in New York]. If it happens precisely on the hour, it's more by good luck than by good management.
There are 9 market-making members of the LBMA… the London Bullion Market Association… and four of them are involved in setting the price at the morning and afternoon London gold fixes. These are 'da boyz'… and it's my opinion that the '4 or less' and '8 or less' traders are all contained within these nine firms. Here's the link to the Market-Making Members' web page… and they're all names that you know well. Looking this page over is worth a minute of your time.
Silver rose a bit in Far East trading… but didn't show much signs of life until a smallish rally that began about two hours after the London open. That little rally got capped at precisely 11:00 a.m. in London… 6:00 a.m. in New York. From there it drifted generally lower into the London p.m. gold fix before rallying strongly along with gold… starting about 11:30 a.m. Eastern time. Silver also ran into a not-for-profit seller during the New York lunch hour… and that was it for the day.
The dollar lost about 95 basis points from its 3:00 a.m. Tuesday high to it's 4:00 p.m. Eastern time low price tick… gold's precise high water mark of the day. Unlike Monday's dollar chart… at least this one made some sense as far as the dollar/gold price action was concerned.
The Dow was in a rally mode… as was the gold price. Therefore the precious metals stocks did well, too. The HUI was up 2.67% on the day. We'll take it.
The CME's Daily Delivery report for Monday was really interesting… and so was Tuesday's. There were 164 gold contracts [and zero silver contracts] put up for delivery on Thursday… and, for the second day in a row, the Bank of Nova Scotia was the big issuer. A lot of the 'usual suspects' were stoppers. If you checked out the LBMA's Market Makers web page linked above, then this list of issuers and stoppers will mean a lot more to you now… and Tuesday's action is well worth looking at, too. The link is here.
Neither GLD nor SLV had anything to say for themselves yesterday… but there's a fair amount to report from the U.S. Mint. For the first time this year, they reported making/selling the fractional gold bullion coins. Up until last Friday the mint had produced 30,500 one-ounce gold eagles for the month of June. With this new report, their gold usage went from 30,500 ounces in June… all the way up to 92,000 ounces… so almost two tonnes of gold disappeared into the gold eagle program in one shot. If you wish to see the breakdown for each size, you can check it out for yourself… and the link is here.
The mint also reported a 50% jump in sales of the 24-k gold buffalo coin for June… up 8,000 in one shot to 23,000 for the month. Silver eagles sales took another jump as well… up 523,000 to 1,662,500 for the month of June so far. I'd say that a lot of this is heading for Europe… except for the fractional gold bullion coins.
The Comex-approved depositories reported receiving 610,673 troy ounces of silver on Monday. Except for 10 good delivery bars… all of it went into Brinks, Inc. The link is here.
Referring back to my paragraphs about the London a.m. and p.m. gold fixes… here's a graph you've seen before. And, considering what I was talking about earlier, this is a perfect time to insert it. It's another fine product from Nick Laird over at sharelynx.com. The chart is entitled "Intraday Average Gold Price Movements". This graph contains 1,000 trading days of data. The London a.m. and p.m. gold 'fixes' stand out like sore thumbs. They don't call them 'fixes' for no reason.
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My first gold-related story today is one that I found posted over at themineweb.com. The headline reads "Million dollar face value gold coin goes on sale by auction June 25th". I've seen one of these 100 kilogram 5-nines fine gold coins up close and personal. Was it impressive? You betcha! It will be of great interest to see how much over its spot price it ends up selling for… and the link to the story is here.
The next gold story was dug up by Russian reader Alex Lvov in the wee hours of this morning. At the close of trading in North America yesterday, Canada'sCentral Gold Trust announced an offering of US$800 million… all that's left of its base shelf prospectus from June 8, 2009. I would hope that it will be fully subscribed… and if it is… that's a lot of gold, dear reader… 20 tonnes of the stuff to be exact. I'll report on how it turned out in my column on Thursday. Here's Central Gold Trust announcement as posted over at finance.yahoo.comyesterday. The link is here.
Here's a really interesting and educational interview from Canada's Business New Network yesterday. It's with two Canadian mining executives about what its like to do business in South Africa. I was pleasantly [and happily] surprised with what they had to say. I must admit that a lot of my fears about investing in South African gold mines went out the window after hearing what was said here. The interview runs a bit over 11 minutes… but it's well worth your time. I thank reader Roy Stephens for sharing it with us… and the link is here.
James Turk, founder of GoldMoney, has posted a short piece over at hisfgmr.com website headlined "No Improvement in the Hyperinflationary Outlook". It was sent out as a GATA release yesterday evening… and I'm stealing Chris Powell's intro almost verbatim… "The gap between U.S. government spending and tax revenue remains large, Freemarket Gold & Money Report editor James Turk writes tonight, and is being filled with ever more borrowing, increasing the chance of hyperinflation in the dollar." The graph is terrific… the [very short] piece is a must read… and the link is here.
Reader Roy Stephens has one last offering for us today… and that's an Ambrose Evans-Pritchard piece that was posted at The Telegraph late yesterday evening. We all know that Spain is having some serious problems… but I had no idea that they were circling the drain as fast as they are. This is an alarming story. The headline reads "Spain plays high-stakes poker game with Germany as borrowing costs surge". It's not overly long… but it's a must read from one end to the other… and the link is here… and I urge you to read it slowly and carefully.
My last four stories are all related to BP's Deepwater Oil Spill in the Gulf of Mexico. Congress wrote a letter to Tony Hayward outlining its concerns that BP took shortcuts and undertook risky practices, in an attempt to keep costs down. This letter was written in preparation for his congressional testimony tomorrow. The letter is imbedded in an essay posted over at theoildrum.com. My best friend here in Edmonton is a 40-year fluids veteran [mud man] in Alberta's oil patch. I know just enough about his line of work to know that not running a cement bond log when the well was 'kicking' as much as it was, was… as an independent expert says… "horribly negligent". That, dear reader, will prove to be one of the understatements of the 21st century. This letter is a fairly long read… but you have to plow through it. I thank reader U.D. for providing it… and the link is here.
Here's another story from theoildrum.com website courtesy of reader U.D. as well. This was posted at their website late yesterday afternoon… and it shows just how out of control the flow rate is becoming… and the reason why it's happening. This is a reasonably technical article… BUT it's not the parts youdon't understand that will scare the hell out of you. Oil and gas loaded with sand at 5,000 lbs/sq. inch is a cutting tool… and the further you read into this article, the more interesting [and terrifying] it gets. The photos towards the end of the essay give you some idea of the effect of high pressure water and sand. Matt Simmons was on Bloomberg again yesterday saying for the second time that a nuclear device may be the only way to seal this well. He may be right! By the way BOP stands for 'blow-out preventer… and ROV is a 'remotely operated vehicle'. The headline reads "BP's Deepwater Oil Spill – Why the Flow Rates are Increasing"… and the link is here.
Reader Doug Beiers sent me this story about BP's efforts to clean up the mess. It's a video interview of actor Kevin Costner posted over at cnn.com. As well as being a fine actor… Kevin has a business side as well. This is a seriousinterview… and should be viewed in that light. The headline reads "BP enlists help from Kevin Costner in cleanup"… and the link is here.
And the last BP story I have is this news item from TV station WDSU in New Orleans… a city I love dearly. The reporter, with camera crew in tow, tried to do an interview with BP employees cleaning up along the coast… and this was how it all ended. I thank reader Brad Robertson for sending along… and the link to this 3 minute and change clip headlined "BP Goons Block News Media" is here.
I see in the future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few and the Republic is destroyed. – Abraham Lincoln letter to Col. William F. Elkins… Nov. 21, 1864
I was encouraged to see the positive activity in both gold and silver yesterday… and, as always, I wondered how the prices of each would have gone if 'da boyz' hadn't shown up to the cap the prices just as they were heading skyward. How long they can keep this charade going before they either give up, or it blows up in their faces, is hard to tell.
Both metals aren't showing much signs of life in early London trading at 5:26 a.m. Eastern time. But, once again, volumes in both metals are microscopic… and it won't take much buying or selling pressure to move these markets when volume is this light. And, as usual, the real price action will occur in New York trading today.
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That's it for today… and I'll see you here on Thursday.