Slicing the Salami

Compared to Tuesday, the gold action everywhere on Planet Earth yesterday was basically a non-event.  However, it's important to note that the bullion banks were able to force a bit more tech long selling, as a slightly new low for this move down [$1,156.90 spot] was set going into the London p.m. gold fix at 10:00 a.m. in New York on Wednesday morning.  Gold managed to finish up a buck or so on the day.  Volume was gargantuan… but most of that was roll-overs and switches.

Today's volume will be pretty chunky as well, as Thursday is the last day of trading in the July contract… and all traders in the gold market must either close out their July contracts, roll them over… or stand for August delivery on Friday.

Silver, the center of the universe for JPMorgan, was down in price once again on Wednesday.  But, up until the London open at 3:30 a.m. Eastern time, silver had been rising slowly but steadily.  From the London open, silver fell slowly but steadily until the Comex open, when the bottom fell out of the price once again… forcing more tech funds to sell their long positions [or go short]… with JPMorgan and their buddies covering their shorts and going long… and only too happy to do it.  The low for silver yesterday was at precisely 9:00 a.m. in New York.  The silver price gained back about a percent after that… but still closed lower on the day… and well below it's 200-day moving average.  Preliminary silver volume figures for Wednesday were monstrous once again.

Here's the New York silver chart.  I'm showing this just so you can see how the low price of the day came at precisely 9:00 a.m.  The chances of that sort of timing being a random market event is zero.

The world's reserve currency was virtually comatose yesterday… and here's the graph to prove it.

For the most part, the precious metals shares followed the gold price.  I was very encouraged by the fact that the HUI finished in positive territory… up 0.44%… despite the fact that the Dow finished down on the day.

The CME Delivery Report showed that 1 gold and 36 silver contracts were posted for delivery on Friday.  Yesterday's action is linked here.  The GLD ETF showed a big drop yesterday… 596,407 troy ounces.  There was no report from the SLV ETF… for the 14th day in a row.

The U.S. Mint had a sales report yesterday as well.  They reported selling another 19,000 ounces of gold in their gold eagle program… plus another 2,000 24-K gold buffaloes.  There were no silver eagle sales reported.  Month-to-date… 146,500 ounces of gold eagles have been sold, along with 22,000 24-K gold buffaloes.  Silver eagles sales are sitting at 2,652,000 for the month so far.  I would expect that the mint will have at least one more update before July is over.

The Comex-approved depositories showed an increase in silver inventories on Wednesday of 202,178 ounces… all of which went into Brink's Inc.  There was a lot of activity yesterday… and the link to that is here.

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My first story today is from Washington state reader S.A.  In a new edition of The Black Swan, author Nassim Nicholas Taleb warns against depending "on financial assets as a repository of value".  No!!!  Really!!!  Who would have thought that, dear reader.  The man has a keen grasp of the obvious.  The story is posted over at businessweek.com… and the headline reads "Taleb: Government Deficits Could Be the Next 'Black Swan'"… and the link is here.

The next story is courtesy of reader 'David'.  The story, posted over atfoxbusiness.com, starts out like this… "So much for transparency.  Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.  The headline reads "SEC Says New Financial Regulation Law Exempts it From Public Disclosure".  Welcome to the U.S.S.A… Komrade!  The link to the video… and the article… is here.  It's worth the listen… and the read.

Here's a story [courtesy of reader Roy Stephens] about China that was posted over at the German website spiegel.de yesterday.  I wasn't seriously considering running with this piece, but changed my mind long before I got through reading this 2-page essay.  I was impressed by the candor of the article… and I'm sure you will be as well, dear reader.  The headline reads "The Dragon's Embrace: China's Soft Power Is a Threat to the West"… and the link is here.

My next story is another offering from reader Roy Stephens… and is your first [and only] must read of the day.  It's an Ambrose Evans-Pritchard piece that was filed very early this morning in London.  It appears that European banks have amassed €30 trillion in liabilities and face a serious funding threat over the next two years as authorities withdraw emergency support, according to a new report by Standard & Poor's.  The headline reads "Europe's €30 trillion headache"… and the link is here.

Here's an interest chart that was sent to me yesterday.  It was imbedded in a story that I decided [for length reasons] not to post in this column.  But the chart is worth looking at… as it's an eye-opener.  Pay particular attention to the GDPs of China and the U.S.A. for the last 500 years.  Amazing, isn't it?

Lastly today is a radio interview with Goldmoney founder and GATA consultant James Turk. It's about the death of government currencies, with emphasis on the experience of Weimar Germany. The interview is posted atradio.goldseek.com… and is about 20 minutes long and the link is here.

The US Constitution – Article 1 Section 10 — No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Yesterday was just another day off the calendar, as the bullion banks picked away at the gold and silver prices.  Silver's 200-day moving average is thoroughly broken to the downside… and we're inching ever closer to the 200-day moving average in gold.  Every 'slice of the salami' [as Ted Butler calls it] strengthens the Commitment of Traders report even further… and here's hoping that all of Tuesday's crucifixion will be in it when the report becomes available tomorrow afternoon.  Wednesday's activity won't show up until the following Friday.

Here's the 6-month gold graph that shows how JPMorgan et al are doing relative to the 200-day moving average.

And here's the silver graph for the same time period.  If the bottom isn't in for silver… it's darn close to it.  I forgot to mention that I purchased more physical silver on Tuesday.  I should have waited until yesterday… but you never know when the final bottom will be in… and Tuesday's low price was close enough for me.

Of course the bullion banks could engineer the price even lower… but there are few leveraged longs left at the current price level… plus the law of diminishing returns starts to set in.

Tuesday's open interest numbers meant nothing when they were posted yesterday morning on the CME's website.  With all the month-end roll-overs and spread trades… plus the tech funds pitching longs and going short… and the bullion banks covering shorts and going long themselves, it was impossible to read anything into them at all.  I stopped discussing open interest changes on a daily basis months ago for that very reason.  Only the weekly COT report can be believed… and only if all the action [especially Tuesday's action] is reported in a timely manner.

Nothing of note happened in Far East… or early Thursday trading in London… as I put the finishing touches on this column at 5:01 a.m. Eastern time.  Volume in gold is very high… as today is the last trading day in the July gold contract.  Silver's volume is under 2,100 contracts because August is not a regular delivery month for silver, so there are few roll-overs or switches to muddy the volume waters.

I await today's Comex activity in New York with great interest… as that's the only trading activity that really matters.

See you on Friday.