Pool Accounts: Why You Should 'Get Physical' Instead
I wouldn't read a thing into Thursday's trading activity in the gold market anywhere on planet earth yesterday. The high of the day, if you wish to dignify it with that name, occurred shortly before 10:00 a.m. in Hong Kong yesterday morning. The price was around $1,112 spot. There were some reasonably wild gyrations in the gold price starting at 8:30 a.m. in New York… but, if you check the dollar chart further down, you'll see that this action was almost entirely dollar related. Gold's low for Thursday [$1,099.50 spot] was at the London p.m. gold fix which occurred around 10:00 a.m. Eastern time [3:00 p.m. in London]. Then, from the London p.m. fix onward, gold gained back about $10 as the dollar drifted gently lower.
Silver's price action yesterday was a bit more interesting… but only a bit. Silver drifted lower as trading began in the Far East on Thursday morning… and its low of the day [around $16.80 spot] occurred at the Sydney close… which is noon in Hong Kong. From there, silver gained back about 40 cents during the rest of the trading day… with half that gain coming at the London p.m. gold fix.
The U.S. dollar didn't do much yesterday… and, as I mentioned in the first paragraph of this column, the precious metals pretty much shadowed the dollar's every move.
The HUI pretty much followed the metals prices as well. The low was at the London p.m. fix… which was shortly before 10:00 a.m. in New York. The HUI only finished up 1.10%… but it's better than the alternative. All in all it was a 'watching grass grow' kind of day yesterday… a real yawner.
Well, Wednesday's big smack-down in the precious metals resulted in a decrease in open interest in both gold and silver. Gold o.i. declined 2,645 contracts on monstrous volume of 235,814 contracts… and silver's open interest declined 1,127 contracts on volume of 47,681 contracts. I must admit that I was expecting bigger declines than this… especially on such heavy volume. Maybe some of the trading volume will be spilled over into Thursday's o.i. numbers when they come out later this morning. And it's entirely possible that the bullion banks were purchasing longs in addition to covering shorts… but this sort of nefarious [but perfectly 'legal' for the bullion banks] activity isn't visible in the daily numbers… and won't be until next Friday's Commitment of Traders report. I wish the Comex was like the TOCOM… as they file an updated COT report after every single trading day… so there's nowhere to hide over there.
The CME Daily Delivery report showed that 16 gold and 55 silver contracts were posted for delivery on Monday. There was activity in both ETFs yesterday. The GLD reported that a smallish 19,584 ounces were withdrawn… but over at the SLV, another big chunk was pulled out. This time it was 1,569,529 ounces. Since the beginning of March… 5.5 million ounces of silver have been withdrawn from the SLV ETF. Ted Butler and I both wonder who needs their silver this badly that they have to redeem their shares and pull it out of the SLV. Over at the Comex-approved depositories it was reported that 1,180,667 ounces of silver were taken into inventory on Wednesday… all of it into Brink's, Inc.
I have a lot of stories today… and the first one is gold related. It's a piece by Bill Bonner of dailyreckoning.com. This commentary is posted over at sharecafe.com.au... and bears the title "Gold is in a Real Bull Market". I thank Australian reader Wesley Legrand for sending this story along… and the link is .
The next gold story is a Reuters piece filed from Johannesburg. I lifted this two-paragraph item from the boys over at kitco.com. The headline reads "South Africa Gold output down 18.2% year/year in January "… and the link is .
This story is your daily dose of what's happening in Greece. This item is posted over at france24.com… and is headlined "Nationwide strike brings Greece to a standstill". I thank reader Roy Stephens for sending it along… and the link is .
The following two stories are certainly a sign of things to come in the U.S. this year… and for years into the future. In the last couple of weeks I've run stories about the sad shape that Illinois is in… with their budget deficit of $13 billion dollars. Here's the latest on that saga posted over at The Chicago Tribune. The story is filed from Springfield… and is headlined "Governor Pat Quinn budget proposal: Borrow $4.7 billion". "Quinn aides warned the plan would cost some 13,000 teachers and staff their jobs, and shut down some health care programs. But even after about $2 billion in cuts, the state would still be $11 billion in the hole." I thank reader Scott Pluschau for bringing this story to my attention… and the link is .
Here's another story along the same lines. This is courtesy of the King Report… and is posted in yesterday's edition of The Wall Street Journal. The headline says it all… "School Crisis Rattles Missouri: Kansas City Board Approves Plan to Shutter Nearly Half of its Schools". Reading the entire WSJ article requires a subscription… but the four paragraphs provided tell a pretty ugly tale. This must read article will take less than a minute of your time… and the link is .
This next item is not a very long piece either… but it's also a must read. The title reads "Economic Warfare? Europe versus Wall Street"… and it's posted over at wordpress.com. The first paragraph reads "Wall Street is headed toward international pariah status thanks to two recent actions by the European Union."… and the link is .
Ambrose Evans-Pritchard has another piece in The Telegraph that's also very much worth your time. The headline reads "Europe's banks brace for UK debt crisis"… "UniCredit [Europe's second largest bank] has alerted investors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece." I thank Florida reader Charles Dubelier for bringing this to my attention… and now to yours… and the link is .
Today's last story was sent to me by several readers yesterday… but the first one through the door was Michael Cheverton. This is a very long piece that's posted over at zerohedge.com. The author goes under the pseudonym of Gordon Gekko. It's rather shocking news about the "Metals Select Account" over at Jacksonville, Florida-based EverBank. Part of the notice they recently sent around to holders of this account reads as follows… "We may close your Metals Select Account at anytime upon reasonable notice to you. If we believe that it is necessary to close your account immediately in order to limit losses by you or us [GG: We really don’t give a s**t about you; it’s us that we care about], we may close your account prior to providing notice to you. Notice from us to one of you is notice to all of you [GG: the nerve of these people!]. If we close your account, we reserve the right to convert your Precious Metals to U.S. dollars and tender the balance to you by mail." The headline to this essay reads "It's Going To Implode: Buy Physical Gold – NOW".
As you may already know, dear reader, I have mentioned many times in this column that pool accounts have no physical metal backing them… and if a company [any company] that offers a pool account runs into financial problems… or fails entirely… you become an unsecured creditor of that company, and your chances of seeing your precious metals [or the money you paid] goes out the window. I urge you to read this essay very carefully… and act accordingly. The link is .
Money, when considered as the fruit of many years' industry, as the reward of labor, sweat and toil, as the widow's dowry and children's portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency. – Thomas Paine
As the last story of the day suggests… it's time to "get physical"… either the metal in hand of in a gold/silver fund that actually has the physical metal in it… and I certainly don't mean GLD or SLV. I urge you, dear reader to seriously consider a subscription to either Casey's , or . Including excellent investment advise, these monthly reports show you which physical metal funds that we at Casey Research recommend. This is not the time to be in paper gold… or paper silver! You must own the real deal!!! I urge you to click on these links and check them out for yourself.
There wasn't much activity in either silver or gold in the Far East during their trading day on Friday. However, that all changed around 4:00 p.m. in Hong Kong, as a smallish rally has developed. This has continued into early morning trading in London as well… but prices in both metals backed off a bit once the London a.m. gold fix was in at 10:30 a.m. local time… 5:30 a.m. Eastern. How long these tiny rallys are allowed to last will be up to the U.S. bullion banks. Will they intervene in London trading… or wait until the Comex opens in New York? By the time you read this paragraph, dear reader, you should have the answer to that question.
The CME is reporting current gold volume traded in April [as of 6:03 a.m. Eastern time] as 24,393 contracts… which isn't much, all things considered. Silver is showing 4,279 contracts traded in the May contract so far.
The CME has also posted Thursday's preliminary trading volume in gold at 171,299 contracts. In silver, the number is 32,203 contracts. These preliminary numbers are always pretty close to the final numbers when they're posted later in the morning. Only the preliminary open interest numbers aren't worth the paper they're printed on. I'm not expecting huge changes in o.i. one way or another when they're posted later this morning. However, there may be some spill-over from Wednesday's high-volume trading day that were not reported on Thursday. We'll have to wait and see.
I was expecting more action on Thursday than we got… so I'm not going to stick my neck out and make the attempt at predicting what might happen during the New York trading session today.
I hope you have a great weekend… and I'll see you here tomorrow.