Up, Up and Away?

Up, Up and Away?

Gold did virtually nothing in Far East trading on Tuesday, with its low price of the day, around $1,115 spot, coming during the Hong Kong lunch hour.  But the real action didn't get started until the moment that the London a.m. gold fix was in at 10:30 local time… 5:30 a.m. Eastern.  Once that was out of the way, gold began a slow rise that accelerated to the upside minutes after 9:00 a.m. in New York… with the peak price of the day [$1,139.00 spot] coming moments before the end of floor trading around 1:30 p.m.  Once electronic trading began, gold got sold off about five bucks going into the close.

Silver put on a bit more of a show than gold did yesterday.  The low price spike of the day was [like gold] during the Hong Kong lunch hour, where it may have got a few pennies below $16.30 spot.  But from there, silver never looked back… and accelerated to the upside right from the Hong Kong close… with it's high of the day [$17.11 spot] coming about 1:25 p.m. in New York… about 5 minutes before the close of trading on the Comex.  Then an obvious not-for-profit seller showed up and sold the price back below $17.00 before the close of electronic trading at 5:15 p.m. in New York.

It was crystal clear to me that if JPMorgan hadn't shown up at 1:25 p.m… silver would have been up another couple of dollars in very short order, as the ask had disappeared, and the price had gone vertical.

The dollar peaked at 4:15 a.m. Eastern time… very close to the close of precious metals trading in Hong Kong at 5:00 p.m. in their afternoon.  From it's high to it's low [around 7:30 p.m. Eastern time Tuesday evening] the U.S. dollar lost a bit over 100 basis points.  But the big rally in gold and silver had come to an end around 1:30 p.m. in the New York afternoon… and the continuing decline in the dollar had no further affect on prices once they'd been capped at the close of Comex trading.

The gold and silver stocks did what one would expect… they went up.  But at 2:00 p.m. Eastern time… a good half hour after the metal prices had peaked… the general equity markets rolled over, and the stocks in the HUI followed suit.  The HUI finished up 2.57% on the day… but was up over 4% at one time.

I  was a bit surprised to see that gold open interest actually rose on Monday… 5,449 contracts to be exact.  I thought that was quite a bit considering the price action.  Volume, as I mentioned in my closing commentary yesterday, was light… only 139,772 contracts changed hands.  In silver, o.i. was up a smallish 438 contracts, with total volume traded shown as 27,675 contracts.

The reason that I was surprised at the increase in open interest was because the prices of both metals actually declined on Monday.  However, I must admit that I'm expecting a huge jump in open interest in both gold and silver when the CME posts the final numbers for Tuesday's trading on their website this morning… as these rallies are not going unopposed!  At the moment, it seems that these rallies are following the 'same old, same old' pattern… especially in gold.  But I'll reserve judgment on that until the end of the week.

The CME's Daily Delivery notice posted at their website yesterday evening showed that 123 silver and zero gold contracts are posted for delivery on Thursday.  The GLD ETF showed an increase of 146,894 ounces… and there was a minor reduction of 111,196 ounces in the SLV, which was probably a fee payment.  The good folks over at Switzerland's Zürcher Kantonalbank reported adding another 49,467 ounces of gold and 555,214 ounces of silver to their precious metals ETFs last week… and I thank Carol Loeb for those numbers.  The U.S. Mint reported a smallish sale of 2,000 one-ounce gold eagles yesterday… and nothing for silver eagles.  The Comex-approved depositories increased their silver inventories by 602,335 ounces on Monday.

Yesterday, the European Central Bank weekly statement of condition reported no change in "gold and gold receivables" for the fourth consecutive week.  As the usual N.Y. gold commentator said… "This is unprecedented in the 11 year history of the Central Bank [gold] agreements."

There weren't a lot of hard news stories floating around yesterday.  The first story is an incredible story about Detroit residential real estate.  This piece was dug up by Swiss reader Dr. Bittar Gabriel, who found it in The Guardian in London, England… of all places.  The story shows you just how low things have sunk in the Motor City since the housing crisis began.  "One in five houses left empty as foreclosures mount and property prices drop by 80%… and the average sale price in Detroit last year was $7,500." That's simply unbelievable!  The story is headlined "Detroit homes sell for $1 amid mortgage and car industry crisis"… and is very much worth your time.  The link is here.

This next story is about U.S. real estate as well… commercial real estate.  The CMBS [Commercial Mortgage Backed Security] market is crashing and burning at a frightening rate.  It's a good two years behind the devastation that's occurring in U.S. residential real estate… so it's got a ways to go yet.  This is a piece that's posted over at zerohedge.com… and bears the ungodly title of "January CMBS Delinquencies Hit Record at $46 Billion, 5.8% of Total, a 10.3% Increase Sequentially… and a 325% Increase Year Over Year".  It's not a long read, but it's a must read… and the imbedded graph is worth the trip all by itself.  I thank Russian reader Alex Lvov for bringing it to my attention… and the link is here.

You may remember a story that I posted late last week about Al Gore getting heckled about climate change [or the lack thereof] at an Apple's shareholder meeting.  Al is a director of the company.  Well, he [or rather, the house he lives in] was in the news again yesterday.  Here's an interesting piece posted over at mjperry.blogspot.com bearing the headline "When It Comes to His Own Energy Usage/Carbon Footprint, Al "Bigfoot" Gore Uses 19x U.S. Average".  The story is definitely worth your time… and I thank Casey Research's own Jeff Clark for passing it along… and the link is here.

It's not hard to find at least one story about Greece that's worth posting.  Here's one that I received just minutes ago from reader Roy Stephens.  It was posted earlier this morning over at the French website france24.com and is headlined "Economic crisis is 'wartime situation', PM says".  GFT analyst David Morrison agreed that "the situation is becoming critical — and we are now getting to the stage where the problems cannot be kicked further down the street."  And, dear reader, this problem [in one degree or another] exists in virtually every country on the planet right now.  This story is more than worth your time… and the link is here.

And lastly today, is this very long and wide-ranging audio interview with Lord Christopher Moncton by Eric King over at King World News.  Lord Moncton's pedigree and credentials are impeccable… and this interview is one of the most incredible I've ever heard anywhere on the Internet in the last ten years… and that's saying a lot.  This deserves your complete and undivided attention… and I [once again] thank reader Roy Stephens for bringing it to my attention… and the link is here.

[

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies…What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment. – Alan Greenspan, 9 September 2009

Yesterday's rise in the precious metals was also felt in Europe as well, as the British pound and euro once again closed at record highs.  Here's the 3-year $GOLD/$XEU graph that puts things in a longer term perspective.  It's easy to see from this chart that all fiat currencies are being debased relative to gold and silver.

Despite a budding dollar rally, both gold and silver were basically unchanged in price throughout Far East trading… and now into the London open.  But, at precisely 9:00 a.m. in London… 4:00 a.m. Eastern time… both gold and silver prices quickly spiked to the upside as the smallish dollar rally quickly faded.

Volume in gold [as of 4:38 a.m. Eastern time this morning] is 22,376 contracts for the front month, which is now April… and silver's volume is a pretty decent 3,856 contracts for May.  The CME has now posted volume figures for Tuesday's trading… and it shows a huge 223,933 contracts traded in gold… and 39,250 contracts in silver.  As I mentioned earlier on, I'm bracing myself for big jumps in open interest in both metals as a result of yesterday's price action… and these big volume numbers.

As a side note, I see that silver open interest for March has now dropped down to 760 contracts… which is next to nothing.  So, unless a big buyer shows up out of nowhere during the month demanding delivery of a large amount of silver, there's absolutely no chance of a Comex delivery default in silver during the current month.

Based on what the bullion banks are up to in London already, it could be another interesting day when the Comex opens for business this morning.

See you tomorrow.