Memo To CFTC Chairman Gary Gensler… From: JPMorgan et al… Subject: UP YOURS!
It was an interesting day yesterday… and it turned out just about as I suggested in my closing comments yesterday. All through Far East and most of London trading, gold had been declining slowly… and by the time that New York opened for business, gold was down about five bucks. Within the next hour or so, gold managed to gain back that loss… and was at it's high of the day [$1,128.10 spot]… which was a bit higher than it's close on Thursday night. Then about 10:20 a.m. the bullion banks either collectively pulled their bids… or a not-for-profit seller showed up.
Either way, stops were tripped… and the tech funds and small traders found themselves unloading their long positions into a no-bid market. In less than 10 minutes, gold was down about $20… and then drifted lower to its absolute low of the day [$1,100.70 spot] at 12:30 p.m. After that, the gold price traded a bit higher into the New York close at 5:15 p.m.
It was almost an identical scenario for silver… except the price never stopped falling after the original waterfall decline that started at 10:20 a.m… and silver closed virtually on its low of the day. Silver's high in New York was at the same time as gold's… around 10:20 a.m… and it's price was $17.41 spot. It's low was recorded as $16.94 spot.
The dollar rally of the last three days was basically a non-event as far as the prices of the precious metals were concerned. There are three days worth of gold and silver prices on the graphs above… and three days worth of dollar rally [about 120 basis points] on the graph below… and until 'da boyz' showed up yesterday morning… gold and silver were basically unchanged in the face of the big dollar gain. I discussed this phenomenon in my column yesterday… and I don't wish to repeat myself here… but here's the link to the archives… and you can read it again if you wish.
Considering the blood bath in gold and silver, the precious metals stocks were surprisingly sanguine about the whole thing. Even the negative close in the Dow didn't seem to make much difference. The HUI was only down 1.69% at the end of the day… and as you know from past experiences, dear reader, it could have been worse… much worse. I'm mildly encouraged by this… but I reserve the right to change my mind.
Thursday's gold open interest was up another 2,590 contracts on smallish volume of 144,509 contracts. Silver open interest was also up… this time by 1,043 contracts. Volume was a pretty light 27,071 contracts.
The CME Delivery Notice yesterday showed that 51 gold and 76 silver contracts are posted for delivery on Tuesday. The action is posted here. There were no changes reported over at GLD… but the SLV reported that 784,680 ounces of silver were withdrawn yesterday. The U.S. Mint also had a report yesterday. They sold another 25,000 one-ounce gold eagles, and another 725,000 silver eagles. Month-to-date they've sold 64,500 one-ounce gold eagles and 1,900,000 silver eagles. The Comex-approved depositories reported that 829,794 ounces of silver were withdrawn on Thursday… almost all from the ScotiaMocatta warehouse. The link to the data is here.
The Commitment of Traders report [for positions held at the close of trading on Tuesday, March 16th] was a disappointment in silver… as it showed that the bullion banks increased their net short position by another 2,209 contracts. The Commercial [bullion bank] net short position is currently 48,008 contracts… 240.0 million ounces of silver. The 'four or less' bullion banks [with JPMorgan and HSBC USA as ringleaders] are short that entire amount all by themselves… plus another 7.8 million ounces on top of that. The '8 or less' bullion banks [which includes the '4 or less'] are short 312.8 million ounces of silver. The '4 or less' bullion banks are short about 52% of the entire Comex silver market… and the '8 or less' traders are short about 68% of the entire Comex silver market. It isn't rocket science that the bullion banks can do just about anything they want with the silver price… and they proved that yesterday.
In gold, the bullion banks actually decreased their net short position by a pretty large amount… 9,492 contracts. The net short position in gold is a pretty chunky 242,295 contracts… 24.2 million ounces. The '4 or less' bullion banks are short 18.0 million ounces of that… and the '8 or less' traders [which includes the '4 or less'] are short 22.7 million ounces. This 22.7 million ounces represents 94% of the entire net short position.
Ted Butler had his usual weekly interview with Eric King over at King World News regarding the COT report… and I urge you to stop reading at this point and listen to what he has to say. The link is here.
Well, the Russian Central Bank bought another 200,000 ounces of gold during February. This makes 300,000 ounces in the first two months of 2010… the best January/February performance on record. I thank Richard Nachbar… and his fearless assistant, Susan McCarthy… for providing these spiffy looking graphs you see below.
Here's a gold-related story. The headline is a bit of a downer… but the article is pretty positive despite that. It's a Bloomberg piece sent to me by reader Scott Pluschau… for which I thank him. The headline reads "Gold 'Panic' Buying Ends, Reducing Austrian Coin Sales by 80%". This is a must read story from top to bottom… and the link is here.
Yesterday I received an e-mail from the good folks over at LimitationsAmendment.org. They told me that they were big fans of my daily column and had linked it to their website. The work they are doing involves an amendment to the U.S. Constitution… and it's obvious that they're trying to make the U.S.A. a better place. So, if you're at all interested, you can click on the link above. I wish them well. God Bless America!
Today's only news story that has an international flavour is this piece from The Telegraph in London. "More than one in four adults in Britain are not working, after a record number left the workforce in recent months, official figures indicated." I think I stole this story from the King Report… but I'm not entirely sure. Anyway, the title is similar to the quoted sentence… "Quarter of adults out of work, official figures show"… and the link is here.
Here's a story about Stephen Friedman… a former board member of Goldman Sachs… the 'giant vampire squid'. It's another fine Bloomberg piece provided by reader Scott Pluschau. "A House committee requested that Federal Reserve Chairman Ben S. Bernanke turn over documents related to Stephen Friedman's purchase of a million dollars worth of Goldman Sachs shares while he was on the boards of both the Wall Street firm and the Federal Reserve Bank of New York." After what's been going on with Wall Street, The Federal Reserve and the banking system… nothing surprises me anymore. The headline reads "Bernanke Asked by Towns on Friedman's Goldman Stake"… and the link is here.
Here's another Bloomberg story. This was sent to me by reader S.A. in Washington State. It was so important, that it ended up as a GATA release yesterday morning. GATA's secretary treasurer, Chris Powell, had the following words as a preamble to the story… "The exemption from freedom-of-information law the Federal Reserve has been claiming against disclosure in the Bloomberg News case cited below is the same exemption the Fed has been claiming against disclosure in GATA's demand for access to the Fed's secret gold swap agreements with foreign banks. Now two courts have rejected the Fed's claim of that exemption." This is a really big deal… and you'll be hearing lots more about it in the days and weeks ahead. That GATA headline reads "Appeals court rejects Fed's bailout secrecy claim"… and the link to the Bloomberg story is here.
Here's another story from reader S.A. in Washington State. This one is from yesterday's edition of The Wall Street Journal… and bears the headline "The Lehman Whistleblower's Letter"… "In May 2008, former Lehman senior Vice President Matthew Lee wrote a letter to senior management warning that the New York securities firm may have been masking the true risks on its balance sheet. A month later, he was ousted." Lehman's been in the news a lot these days… and I ran that video clip on this very thing yesterday. Now this letter shows up in the WSJ as well. It's a must read from one end to the other… and the link is here.
This story is courtesy of Florida reader P.S. It's a piece posted over at finance.yahoo.com. The headline reads "What, or Who, Is Driving Up Prices?" The President's Working Group on Financial Market… commonly known as the Plunge Protection Team… is back in the spotlight once again. The author speculates on the length of the current rally by asking the question… "How long can the markets exhale without inhaling?". That's a very good question. This is another story that deserves your undivided attention… and the link is here.
Here's an article that was published in the March edition of Money Magazine. It's written by Nick Barisheff of Bullion Management Group. The title states… "Gold is Money". It's an excellent read… with lots of charts and graphs… and I urge you to spend the time on it that it deserves. I thank reader Bryan Bishop for sending it my way… and the link is here.
My last offering today is posted over at thedailybell.com… a website based out of Switzerland. This is a story about the world's power elite… mostly those in the United States and Great Britain… and their plans for the world. This is sort of the Reader's Digest version of G. Edward Griffin's book "The Creature from Jekyll Island: A Second Look at the Federal Reserve". And if you haven't read this book yet… I urge you to do so immediately. Although the start of this essay sounds like everything is going in their favour… they are running into some serious problems as they take us all down the proverbial garden path. The headline of this must read piece is "Party Time for Anglo-American Elites?". I once again thank Florida reader, P.S. for sharing it with us… and the link is here.
If you're holding paper currency, you have to have some kind of trust that the country that issued it is not just going to print its way out of its problems. That's a real concern right now. Gold, on the other hand, has real intrinsic value, unlike a paper currency which can be debased by its government. – Sacha Tihanyi, currency strategist, Scotia Capital
Today's 'blast from the past' is actually three of this group's greatest hits all strung together during this live performance. I remember spinning their records on radio station CHAR in Alert, N.W.T back in the early 1970s. Their on-stage 'dance' routine is more than a little hokey… but the music is solid gold. So turn up your speakers and click here.
Yesterday's very light volume in Far East and London trading accelerated to warp speed once the New York bullion banks showed up. Preliminary volume numbers from the CME shows that total volume in gold was a very large 200,736 contracts… and in silver it was 37,201 contracts. There was probably pretty heavy long liquidation yesterday… but that won't be apparent until Friday's open interest numbers are posted in New York late on Monday morning.
Yesterday's trading action on the Comex was all paper, of course. The bullion banks sent a big message to CFTC chairman Gary Gensler yesterday… something along the lines of "Up Yours!". In the light of this blatant bear attack on the precious metals markets, it's hard to be overly optimistic about the outcome of next Thursday's CFTC hearings in Washington. I'm planning on sending a short personal [and very polite] note to Gary Gensler… along with a copy of the Kitco charts for Friday's gold and silver action… asking him how much proof he really needs for this 'crime in progress'. If you wish to do the same or similar, dear reader, his e-mail address is [email protected]v.
As to where the precious metals markets are going to go next week, I must admit that making a prediction might be hazardous to my credibility… so I think I'll pass. We have options expiry and first day notice coming up in the next ten days… so I'm open to anything. Especially after what happened yesterday.
But, dear reader, the gold market has been up every year in U.S. dollars for the last ten years… and I see no reason why the trend shouldn't continue. We all sit around in collective angst when the markets are like this… when the bullion banks are laying waste to gold and silver prices. But this, too, shall pass. Even when everything is quiet, there are still huge opportunities to profit, as the junior mining sector never sleeps… and neither, it seems, does our resident rock kicker… Louis James. I urge you to read what he has to say in the introduction to Casey Research's International Speculator. The time to make the serious investments is when the markets are between rallies… as they are right now. I urge you to click on the link, as his essay is absolutely FREE.
Enjoy the rest of your weekend… and I'll see you here on Tuesday morning.