The Dow Chart is Ugly

From its Thursday low of $1,195 spot shortly after 4:00 p.m. in New York… gold rose quietly until about 1:00 p.m. in Hong Kong trading on Friday.  From there it only added a few more dollars to its London high of around $1,213 spot shortly before lunch their time.

From that high, the gold price slowly rolled over… and by the time the Comex opened in New York… had given back about $10 of those gains.  This decline ended abruptly at $1,202 spot at precisely 8:30 a.m. Eastern time.  Then, about a half hour after the London p.m. gold fix was in at 10:00 a.m. Eastern time, gold rose in fits and starts to close almost back at its London high.  Gold's New York high of was $1,213.20 spot… with its low of the day occurring at the opening of Far East trading twenty-two hours prior.

It wasn't very exciting trading… but volume was pretty decent… although it really fell off as the day progressed, as traders headed for the exits early, in order to get started on their long weekend.

Silver's path was similar to gold's.  The high of the day [around $18.10 spot] occurred before 10:00 a.m. in London… and, like gold, the silver price began to decline shortly before lunchtime in London as well… with it's absolute low of the day [$17.62 spot] coming about 10:20 a.m. in New York.  This was another low price for this move down… and certainly caused more spec long liquidation yesterday as well.  From that low, silver recovered about two bits… and closed up 11 cents over Thursday's closing price.

The world's reserve currency had a wobbly day yesterday before closing the trading session down another 34 basis points.  I wouldn't read a thing into the dollar's price action on Friday.

Even though the gold stocks started off well into positive territory… despite a falling Dow… they couldn't hold those gains… despite the strong rally in gold and silver prices after the London p.m. fix at 10:00 a.m. Eastern time… and the HUI finished in slightly negative territory.

This is one of those days, dear reader, when I suspect that the tape is being painted in the gold share price action… as the chart below is so counterintuitive to what was happening in the real world.  I mentioned in prior commentaries when gold was down and the shares were up, that maybe 'da boyz' were buying up shares on big down days so they could sell them to influence the HUI on days like we had on Friday.  This is pure speculation on my part… but I'm not the only person who thinks that way.

Friday's CME Delivery report on Friday showed that 82 gold and 198 silver contracts were put up for delivery on Wednesday of next week.  The big issuer in silver was the Bank of Nova Scotia with 190 contracts… and JPMorgan was the big stopper with 133 contracts.  The link to all the action is here.

Both the GLD and SLV ETFs reported minor withdrawals yesterday.  In GLD it was 9,780 ounces… and in SLV it was 120,181 ounces.  The U.S. Mint had its first sales report for the month of July yesterday.  They reported that 20,000 one-ounce gold eagles were sold… along with 1,000 24-K gold buffaloes and 387,000 silver eagles.  The Comex-approved depositories showed that their silver inventories increased by 295,677 ounces on Thursday… with most of it coming into HSBC, USA.  The link to the report is here.

The Commitment of Traders report on Friday was a surprise in silver.  Both Ted and I thought that there might be a little bit of improvement at best… or neutral at worst… but the bullion banks increased their short positions by an eye-watering 2,933 contracts.  The bullion banks, with JPMorgan being the lead player, are net short 292.5 million ounces of silver… with the '4 or less' traders short 270.2 million of that number… and the '8 or less' traders short 336.8 million ounces.  This translates into 146 days and 182 days of world silver production held short by these four and eight traders respectively.  And don't forget that, according to Ted Butler, JPMorgan holds a short position of about 30% of the entire net open interest in Comex silver [about 30,000 contracts] all by itself… which translates into about 81 days of world silver production held short by just one U.S. bank.

It should be obvious to anyone that just a handful of bullion banks [JPMorgan and a couple of others] control the silver price.  Gold, too.

In gold, the COT showed that the bullion banks increased their short position as well… but it was only by 1,040 contracts… 104,000 ounces… which is hardly a rounding error in the bullion banks' net short position… which currently sits at 29.2 million ounces.

Silver analyst Ted Butler has his usual weekly interview with Eric King over atKing World News… and the link to that interview is here.  What Ted has to say is always worth listening to… and this particular commentary is outstanding.

Sponsor Advertisement
On June 24th , SLAM Exploration Ltd. (TSX-V:SXL) announced drilling results from the third hole on its wholly owned Reserve Creek project in the Fort Hope area of Ontario. All 3 holes intersected visible gold and mineralized core intervals containing 10 to 15 % pyrite-pyrrhotite. Visible gold occurs in the third hole near the top of a 41 foot mineralized core interval. Samples with visible gold are included in a total of 368 samples from the 3 Reserve Creek holes being prepared and shipped for gold analysis.

On June 25th, SLAM announced it has signed up Casey Research for a 12 month sponsorship program. A sponsorship profile is posted here . The profile is focused on recent drilling activities for gold and silver. It summarizes recently reported drilling results including visible gold from all 3 holes drilled on the Williamson gold deposit at Reserve Creek, part of a 10 hole diamond drilling program just completed in Ontario. In addition to visible gold, significant zones of pyrite-pyrrhotite mineralization and quartz veining are represented in the drill core. Assays are pending on 1200 gold samples from the 2,000 metre diamond drilling program. The profile also discusses the successful drilling program and high grade results delivered at Silverjack early this year. Please visit our sponsor profile on Casey Research's website to learn more about the company and request information.

I'm happy to report that I don't have a lot of stories today… and only one that's gold related… and that's what I'll present first.  It's a piece by Mark Hulbert that's posted over at marketwatch.com.  The headline reads "Golden wall of worry: Precious few gold timers are bullish right now".  Hulbert states that " Gold's huge drop on Thursday is not the beginning of a new major leg down for the yellow metal."  The story is well worth your time… and I thank reader U.D. for passing it along… and the link is here.

Here's a story from last evening's edition of The Telegraph… which is courtesy of reader Roy Stephens.  Fears that the US is about to drag the rest of the world into a double-dip recession gripped investors by the throat this week, plunging markets into a dark frame of mind.  The headline reads "Double-dip fears as US recovery falters".  The question that I always ask myself when I see this sort of commentary is… what U.S. recovery are they referring to, as I never saw one… regardless of how well the stock market did.  The link to the story is here.

Here's a Bloomberg story courtesy of Washington state reader, S.A.  The headline pretty much says it all… "U.S. Consumer Bankruptcies Rise 14% in First Half".  Wasn't the U.S. consumer in recovery mode for the last year?  One shudders to think what bankruptcies will be like one year from now when the "greater depression" really gets going.  The link to the story is here.

My last two stories of the day are both about Afghanistan.  The first was sent to my by Roy Stephens… and is rather unique, as it's written by Lawrence Sellin, Ph.D… a colonel in the U.S. Army Reserve… and a veteran of the conflicts in Afghanistan and Iraq. He is currently serving his second deployment to Afghanistan. It's obvious that the views expressed in this UPI story are his own… and certainly wouldn't reflect those of the U.S. Army or U.S. government.  The headline reads "Outside View: Balance of power in Afghanistan".  It's certainly worth your time… and the link is here.

My last story is your long read of the day.  If this story hadn't been published inThe Wall Street Journal, I probably wouldn't be posting it.  It's an essay by Matthew Rosenberg and filed from Kabul.  More than $3 billion in cash has beenopenly flown out of Kabul International Airport in the past three years… a sum so large that U.S. investigators believe top Afghan officials and their associates are sending billions of diverted U.S. aid and logistics dollars and drug money to financial safe havens abroad.  The cash—packed into suitcases, piled onto pallets and loaded into airplanes—is declared and legal to move.  You can't make this stuff up, dear reader.  The headline reads "Corruption Suspected in Airlift of Billions in Cash From Kabul".  I thank reader U.D. for sending it along earlier this week… and I urge you to give this story your undivided attention.  The link is here.

John F. Kennedy held a dinner in the White House for a group of the brightest minds in the nation and, at that time, he made this statement: This is perhaps the assembly of the most intelligence ever to gather at one time in the White House with the exception of when Thomas Jefferson dined alone.

Last week's 'blast from the past' was a big hit… that Beethoven piano sonata, if you remember.  Here's another piece from even earlier than that.  It's the Romanze from Mozart's Piano Concerto No. 20 in D Minor, KV 466.  It was written in the first five weeks of 1785… and had its debut performance on February 11th of that year.  The pianist in this youtube.com video is the brilliant Ivan Klánský doing what he was born to do… play Mozart. The chamber orchestra is the Virtuosi Di Praga… and Jiri Belohlavek conducts.  This is my favourite Mozart piano concerto… and I could listen to it all day long… so turn up your speakers and click here.  The other two movements are linked in the right sidebar.

I don't have much to add to this column that I haven't already said… either today, or earlier in the week.  But I'll leave you with this 3-year Dow chart.  It shows that it's currently oversold… but, if you look at most of 2008 and the first quarter of 2009, an oversold condition can last for a long period of time.  This is an ugly chart by any technical consideration… and one must consider the possibility that [barring any major intervention by the President's Working Group] a major world-wide decline in equities is a definite possibility in the very near future.

But, I'm still "all in" with my precious metals… and their associated shares.

Enjoy the rest of your weekend… or long weekend if the case applies… and I'll see you here on Tuesday.