U.S. could be solvent again with gold at $5,500: Jim Rickards
U.S. could be solvent again with gold at $5,500: Jim Rickards
Wednesday trading in the Far East and London turned out to be a non-event… and New York opened yesterday just about where it closed on Tuesday afternoon. But that changed at 8:45 a.m. as serious buying showed up and gold rallied for the next four hours… topping out at its high price of the day at $1,154.40 spot at 12:45 p.m. After the high was in, gold drifted down about six bucks into the New York close of electronic trading at 5:15 p.m.
Silver's price action was about the same… but more 'volatile'. And it seemed like every time that silver was really about to break out to the upside…there was an eager seller around to drop it back down again. Silver's high tick of the day [$18.27 spot] came at precisely 2:00 p.m. Eastern time.
The gold price has been rising in the face of a dollar that's been doing more or less the same thing for the last four trading days. That, in and of itself, is encouraging… and it's been happening more and more frequently since gold's high back in the first week of December. One can only wonder where gold and silver might end up if a serious decline in the U.S. dollar got underway. Here's the chart of the last four days of dollar trading.
The HUI put in another very solid performance yesterday… and the stocks gave back very little of their gains once the high of the day for gold was in at 12:45 p.m. The HUI was up 3.12% by the time trading ended at 4:00 p.m. Eastern time yesterday.
The open interest numbers for Tuesday were just about as bad as I expected they would be. Gold o.i. was up a chunky 16,336 contracts on volume of 136,574 contracts. Silver's o.i. was up 1,321 contracts on volume of 35,468 contracts. These numbers should be in tomorrow's Commitment of Traders report. But as bad as Tuesday's numbers were… they will pale in comparison to the open interest increases we'll see for Wednesday when they're posted at the CME's website later this morning. This rally is not going unopposed. Ted Butler's only concern is that JPMorgan is one of those bullion banks that's piling on the short positions against the spec longs pouring into this market. Friday's Commitment of Traders report [and Bank Participation Report] should shine more light on the situation.
The CME Delivery Report showed that 68 gold and 49 silver contracts have been posted for delivery on Friday. The GLD showed an increase of 29,368 ounces… and there were no changes in SLV or the U.S. Mint. But over at the Comex-approved depositories, they reported that 107,168 troy ounces of silver were withdrawn.
Today's first story is one I stole from the usual New York gold commentator. It is clear that the Vietnamese authorities have redoubled their efforts to reduce the extremely high local usage of gold as currency. The story appears at vnnnews.net… and bears the headline "Central Bank Ponders Controversial Halt on Gold"… and the link is .
In this next piece, businessinsider.com's Vince Veneziani has interviewed Sprott Asset Management CEO Eric Sprott about his attempt to purchase gold [that] the International Monetary Fund has been claiming to sell. Sprott remarks that he is convinced that central banks suppress the gold price and that the so-called Plunge Protection Team in the United States intervenes to support the stock market. The interview is headlined "Eric Sprott Talks to Us About Gold, GATA, the IMF, and the Plunge Protection Team" and you can find the story linked .
The next three stories are all GATA releases. I suppose I could just steal the stories and pretend that I made up the preambles to each story myself… but when I've got the likes of Chris Powell to write them for me… I don't see why you, dear reader, shouldn't benefit from his superior writing skills… since he's senior editor at Manchester, Connecticut's Journal Enquirer.
The first story is headlined "GATA Chairman Murphy rebuts defense of gold lending"… "The Huffington Post has posted an essay by GATA Chairman Bill Murphy in reply to an essay by banker Warren Mosler posted there this week asserting that central banks lease gold to earn money rather than to suppress gold's price. The preamble is worth the read… as are all three links. Click .
The next GATA release bears the headline "SEC may be creeping ahead of CFTC toward market transparency". The preamble is to a Bloomberg piece that's well worth the read and is headlined "SEC May Require Identification Codes for High-Frequency Trades". The link is .
And lastly from Chris Powell is this very important story about Jim Rickards that's posted over at the dailycaller.com. Rickards is one of a handful of people that I have all the time in the world for… and his commentary here is no exception. The headline reads "Jim Rickards: U.S. could be solvent again with gold at $5,500". Chris's commentary, and the story itself, are both must reads… and the link is .
Government 'help' to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off. – Ayn Rand
I've been mentioning for the last six months or so that there are only three possible outcomes to the current economic, financial and monetary mess we're in. A deflationary depression, a hyperinflationary depression… or the re-monetization of gold by re-pricing it at a value that would rebalance the asset side of the ledger of the world's central banks and governments.
So I wasn't entirely surprised to see Jim Rickards talk about it in his commentary above. And you can be sure, dear reader, that if he's talking about it… it's on the table in quite a few other places as well. Somewhere down the road we may find that its an idea whose time has finally come.
But if that time does come, the price will have to be considerably higher than Rickards says, because the central banks of the world are flat-out lying about how much unencumbered physical gold they really have in their respective vaults.
I note, as I sign off here at 5:39 a.m. Eastern time, that the dollar is still in rally mode… and gold and silver prices are still hanging right in there… so it will be of great interest to see if the buyers show up in the New York trading arena this morning to drive them higher once again.
But, regardless of that, both metals are putting on quite a strong performance all things considered… and it remains to be seen how long before the headwinds of a rising dollar and the shorting by the U.S. bullion banks, starts to take their toll. At the moment, this rally certainly looks like it has some legs, so let's enjoy the ride. Ted Butler feels that there's still a lot of room to run in this rally… and I'm not going to argue with him, as I end up being wrong most of the time.
It's also time to seriously consider deploying capital into the precious metals market… and there's no better way to do it then to invest in gold and silver stocks that will benefit the most in this environment. You'll find a lot of them inside the pages of either … or Casey Research's flagship publication… the . A subscription to either will pay enormous dividends, both now and in the future… and it costs nothing to click on the links and check them out.
The CME has posted Wednesday's preliminary volume figures… and for gold they show a fairly large 176,000 contracts traded. Silver's volume was right up there, too… a hair over 38,000 contracts. And, as I said earlier in my commentary, it's the open interest numbers that I'm not looking forward to seeing later this morning. I expect them to be pretty ugly.
I hope you have a good day today… and I'll see you here tomorrow.