The Decade's Best National Currency
The precious metals started on a positive note during Far East trading on Monday morning. Once the London a.m. gold fix was in at 10:30 local time [5:30 a.m. in New York]… the gold price began to rise quickly… which ran into heavy selling almost instantly… plus a dollar 'rally' that began at precisely 6:00 a.m. Eastern time. Funny how that happens, isn't it? Anyway, gold's high was shortly before 6:00 a.m. Eastern… around $1,105 spot… and it's low for day [$1,091.70 spot] appears to have been around the London p.m. fix at 10:00 a.m. New York time… and from there, gold traded sideways for the rest of the session.
Here's the dollar chart for most of yesterday. Note the dollar low at precisely 6:00 a.m. Eastern time. Why is it that these MBA types at JPMorgan et al that are running the precious metals/dollar show, keep calling attention to themselves by picking a market 'turning point' when Mickey's hands are pointed at 'twelve?' It's not all of the time, but enough times that it's easy to tell that it's not natural market forces at work.
Silver's price path was almost the same as gold's… with it's low also coming at the London p.m. gold fix. Kitco's data shows that the low was $16.96 spot at that point. The high, like gold, was at 6:00 a.m. as the dollar 'rally' began… and appears to have been around $17.25 spot.
Despite the fact that gold, silver and the Dow were up yesterday… the shares [for no reason I could fathom] finished down… with the HUI falling 1.45%. This is the exact opposite to what happened on Friday.
Well, the gold open interest changes for Friday were more in line with what one would expect. On Friday's price decline, gold o.i. fell a very respectable 14,776 contracts. Volume was down quite a bit compared Wednesday and Thursday, but still tipped the scales at 261,747 contracts. Silver's down day on Friday showed a drop of only 1,073 contracts. Volume was a decent 51,689 contracts.
But total open interest [and the bullion banks' respective short positions] in both metals is still sky-high… over 510,000 in gold and over 125,000 in silver. Ted Butler and I are both still worried about it and wonder if there's more liquidation to come courtesy of the bullion banks. But can they… or will they? The short answer is… "We don't know." So is the long answer.
We'll, we're getting down to the closing deliveries days in January. The CME's Daily Delivery Notice shows that 62 gold and 2 whole silver contracts were put up for delivery on Wednesday. Neither GLD or SLV showed any changes yesterday… and there's not much to report from Switzerland's Zürcher Kantonalbank, either. For the week that was, they reported that their gold ETF had a withdrawal of 19,656 troy ounces… and their silver ETF was down 31,669 troy ounces. [Thanks Carl] The U.S. Mint had another update yesterday. One-ounce gold eagle sales were up another 4,000 to 85,000 for the month so far… but silver eagles sales soared another 502,000 to 3,592,500 for the month of January so far! This is a new high record for monthly silver eagle sales… and represents very close to 10% of the United States yearly silver output! The Mint still has another four reporting days left in the month… and who knows, maybe they'll break the four million mark. Watch this space! And lastly, the Comex-approved depositories reported that 418,461 ounces of silver were withdrawn last Friday.
While still on the subject of silver eagles, I found the story below posted over at Kitco on Sunday night. The headline [from coinnews.net] reads "US Mint Silver Eagle Sales Top 3 Million, Best Ever January". That story was obviously written before Monday's big update. But it's a very interesting story which gives a lot of insight into the U.S. Mint's production schedule… and the graph is well worth noting. So I urge you to run through it… and the link is here.
Because of the weekend, I have a lot of stories today, and I hope you can find the time to run through them all. The next item is from Michael Kosares, proprietor of Centennial Precious Metals in Denver… and host of its Internet forum at USAGold.com. He speculates that if the Obama administration is serious about restricting the trading activities of federally insured banks such as the monsters MorganChase and Goldman Sachs have become, there may not be any financial institutions big enough to short the commodity markets to the extent necessary to keep prices suppressed. If that happens, watch for exceptions to be quickly drawn. Kosares' commentary is headlined "Obama's Box"… and the link is here.
I see that a Swiss court has upheld an appeal by a US taxpayer in a test case that could jeopardize a landmark deal between Switzerland and the United States settling legal action against Swiss bank UBS. Not only that, the court described the decision as a "pilot ruling" and denied leave for appeal to Switzerland's supreme court! This basically means that Switzerland's bank laws are back to where they were… and leaves Uncle Sam and the IRS back at square one. The story, courtesy of reader Dr. Bittar Gabriel, is well worth the read… and is linked here.
As most readers are aware, the U.S. Supreme Court came down with a hugely controversial decision on Thursday regarding who can donate to political campaigns. It will certainly throw the doors wide open for companies [both national and international] to give mountains of money to buy candidates. Here's an aol.com piece [courtesy of reader Doug Beiers] headlined "Obama unloads on high court over campaign finance"… and the link is here. Keith Olbermann also rips the Supreme Court a new one as well. This 9-minute video is courtesy or reader Dave Delve… and the link is here.
In a Saturday story posted over at Bloomberg comes this piece headlined "SEC May Approve Restrictions on Short Sales When Stocks Plunge" Not content to just manage markets to the upside… 'da boyz' now want to control the downside as well. As GATA's secretary treasurer said… "There are no markets any more… only interventions." The link to the story is here.
In a story that will likely mean the end of 'Little Timmy Geithner' as Treasury Secretary, comes this Reuters offering headlined "SEC mulled national security status for AIG details"… "The request to keep the details secret were made by the New York Federal Reserve." L.T.G… who was Grand Poobah at the New York Fed during the AIG bailout… said "he was not privy to the discussions about what information AIG should or should not release to the public and the SEC." And you, dear reader, believe that… don't you? Read all about it
Only three more stories to go… so hang in there.
Here's a very high-profile commercial real estate story that may give you some inkling of just how bad things are going to get in commercial real estate. And remember, the commercial real estate market is barely coming off the rails now… and it will be many years before it all shakes out and we see anything resembling a bottom. I said in January of 2007 that I wouldn't start talking about a bottom in the residential real estate market until sometime in 2013… and I think you can add five years to that  before we see any kind of bottom in the commercial real estate market. Anyway, the Wall Street Journal posted a story yesterday headlined "Tishman Venture Gives Up Stuyvesant Project". In a nutshell, T.V. gave the keys back to the bank on a project [now worth an estimated $1.8 billion] that they paid $5.4 billion for in 2006. I thank California reader Joe Weiler for sending the story along… and the link is here.
This story is gold-related… and I once again thank Dr. Bittar Gabriel. It's a piece out of Monday's edition of The Guardian in London. The headline reads "Chinese dig deep to join the gold rush". It's definitely worth reading plus the photo is great… and the link is here.
And lastly comes the source of the headline for my column today. GoldMoney founder and Free Gold Money Report editor James Turk laboriously calculates the performance of gold and silver in all major world currencies over the last decade. Turk, a consultant to GATA, finds that every currency declined by at least 10 percent or more per year on average against gold… and by at least 9 percent against silver. [The U.S. dollar's average annual decline against gold was 14.9 percent and 14.4 percent against silver.] Meanwhile, Turk reports that throughout the decade, gold and silver serenely maintained their value against oil. Turk's analysis is headlined "The Decade's Best National Currency" and you can find it linked here.
An artisan makes gold ornaments at a jewelery factory in the eastern Indian city of Kolkata – November 13, 2009 [Reuters/Parth Sanyal]
It's a busy week this week… options expiry, first day notice for delivery into the February gold contract, $166 billion treasury auction, State of the Union Address, Little Timmy Geithner goes to Washington to answer questions regarding AIG… and I'm sure I've forgotten something. Anyway, unless some earth-shattering event occurs, I'm sure that the U.S. bullion banks have already received their marching orders… and will keep both gold and silver in check [or worse] for at least the rest of this week.
As I mentioned earlier on in this commentary, I'm still worried about the huge short positions in the precious metals… especially those held by JPMorgan and HSBC USA Ltd. These two U.S. banks hold the bulk of the Comex gold and silver short positions on the Comex… and [according to the OCC] about 95% of all precious metals derivatives held by all U.S. banks. How much more, if any, short covering is there still to go? Earlier this month I referred to it as "the sword of Damocles"… and it, dear reader, is still hanging over our collective heads.
The CME has reported its preliminary volume numbers for Monday's trading. Gold traded an estimated 210,000 contracts… which isn't overly heavy… at least not compared to what happened during the last three trading days of last week. And silver's estimated volume was a smallish 31,000 contracts. Both of these numbers are subject to revision when the final figures are posted later this morning.
I note in Far East gold and silver action, that the smallish rally that developed early in their trading day, got snuffed out by an equally smallish rally in the dollar. The 'action' looks pretty frantic to me. Silver has dipped below $16.90 again… which looks like a new low for this move down. As of 4:16 a.m. Eastern time, gold volume [for February] is already a fairly large 37,602 contracts… and silver's volume [for March] is a very healthy 5,253 contracts. Gold trading volume will be very high for the rest of this week as traders switch out of the front month [February] and into later months. Of course there's already talk about delivery problems in February… but this sort of talk has happened every delivery month for years… and so far, nothing. But, hey… one of these days they might be right.
London has now opened for trading this morning and it appears that both metals are still under pressure… although the dollar looks like it could be rolling over… and it should be another interesting day in New York when the JPMorgan and HSBC USA show up for work, so hang onto your hats.
See you on Wednesday