Vietnam Devalues Dong Again: Gold Premiums Syrocket

Not much happened with gold during Far East trading on Wednesday, with gold's high of the day [around $1,082 spot] coming shortly before 8:00 a.m. in New York. From there, the gold price headed south to the tune of around $20… with half of that coming in the 30 minutes after the London p.m. gold fix at 10:00 a.m. in New York. The absolute low of the day was about 11:20 a.m. when gold touched $1,064.10. This was also the high of the day for the U.S. dollar. From there, a rally started as the dollar began to decline. This gold rally lasted for an about an hour before heading sideways into the New York close at 5:15 p.m.

Silver's ride on Wednesday was, as they say, much more 'volatile'. The low price in Far East trading occurred around 2:00 p.m. in Hong Kong… and from that point, silver tacked on about 24 cents to it's high of the day [around $15.62 spot] which was shortly before 1:00 p.m. in London… 8:00 a.m. in New York. Then, like gold, the roof caved in. In a little over two hours, silver's price dropped 50 cents… with its absolute low of the day [$15.05 spot] corresponding to the dollar high at 11:20 a.m. Eastern time. And, despite the subsequent rally in the U.S. dollar… the silver price didn't benefit much.

Yesterday's smack down in both gold and silver that began shortly before 8:00 a.m. Eastern time had nothing to do with the dollar. The dollar had declined all though Far East trading with the absolute bottom coming shortly after 6:00 a.m. in New York [11:00 a.m. in London]… with the low appearing to be around 79.68 on the dollar chart below. The dollar had a double top… with the last top coming at 11:20 a.m. in New York… the lows for both gold and silver. But, between the absolute low and the start of the 'correction' in both gold and silver less than two hours later at 7:50 a.m., the U.S. dollar index rose 30 basis points… and both gold and silver were silver moving higher… and in the case of silver… sharply higher. It should be obvious to anyone that… left to their own devices… both silver and gold would have performed much differently during New York trading yesterday. And it's equally obvious that someone in a position to do something about it, didn't want that to happen… so it didn't. And they made it so obvious. Here's the dollar chart, which you can compare to the gold and silver charts.

The shares had a vicious not-for-profit seller show up at precisely 10:00 a.m… and the shares got hammered way out of proportion to the minor sell-off that occurred in the Dow at the same time… and there wasn't the slightest indication that what was going on with silver or gold prices, had any bearing on what the precious metal stocks did… as they seemed to follow what the Dow was doing. I've noticed this pattern for most of this week.

Tuesday's open interest numbers were a mixed bag. From its low to its high, gold was up about $20 on Tuesday, so the 5,517 contract increase in open interest makes some sense. Final volume [which, once again, was the same as the preliminary volume number] was 193,627 contracts. Gold's total open interest is down to 466,905 contracts. Silver open interest went the other way. Silver also had a big rise in price on Tuesday… but open interest showed a decline of 2,308 contracts. My guess is that there was a lot of short covering going on. Final volume was the same once again as preliminary volume… 58,047 contracts. Total silver open interest is now down to 118,593 contracts.

This open interest data for Tuesday [the cut-off day] will most certainly be in tomorrow's Commitment of Traders report… and, if the reporting isn't totally screwed up again like last week, we should see massive drops in the net short positions of the bullion banks… especially in gold. As always, it will be very interesting to see how they hid their tracks… by what combination of long purchasing and short covering they used.

The CME Daily Delivery Report showed that 170 gold and 275 silver contracts are up for delivery on Friday. So far this month, a total of 4,937 gold contracts have been delivered into the February contract. And, surprisingly enough, considering it's a non-delivery month for silver… 792 silver contracts [almost 4 million ounces] have already been delivered in February as well. That's a lot. The link to yesterday's CME delivery data is .

Once again, there were no reported changes in the GLD, SLV or U.S. Mint sales… but the Comex-approved depositories reported that a fairly chunky amount of silver was withdrawn from their collective inventories on Tuesday… this time it was 1,571,368 troy ounces. Comex warehouse silver stocks are now down to 109,409,220 ounces… the first time they've been below 110 million ounces since late 2006.

The second gold-related item is this WSJ piece that came out yesterday bearing the headline "Midas touch lost? Paulson hits hurdles in gold fund". Normally you would require a subscription to the WSJ… but GATA has it posted in the clear. It's worth the read… and the link is .

The last gold-related story comes to you from Vietnam. As you are aware, dear reader, this country [along with India and China] is a huge gold consumer. Most real estate transactions within the country are done using gold… and it's a serious contender to the local fiat currency… the dong. Anyway, for the second time in four months, Vietnam has devalued it's currency, and gold premiums in the local market are sky high again… over $50/ounce. The smugglers will be doing a roaring business. This Reuters story [posted at International Investor] on this issue is a must read… and the link is .

Yesterday I brought you the story about the Chinese officially announcing that they were going to divest themselves of all non-U.S. government guaranteed debt instruments they were holding. This story made it onto CNBS, and the discussion about it can be found in this short piece over at zerohedge.com. I thank Russian reader Alex Lvov for sending it along… and the link is .

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Here are a few more stories about the problems in Greece. The first is a fairly longish read over at zerohedge.com. The title to this piece is "Coming To America: The Greek Sovereign Debt Crisis". I would expect, dear reader, that this crisis is not only coming to America… but to just about every Western country on the planet. I thank Craig McCarty for e-mailing the story… and the link is .

In the above zerohedge.com piece, Dr. Marc Faber's name came up. Here's the CNBS story on that. It's headlined "US, Europe Will All Default On Their Debt: Marc Faber". This piece is definitely worth reading… and note his comments regarding precious metals. I've heard Marc speak on several occasions… and he neither gilds lilies, nor suffers fools gladly… and he's certainly at the top of his game here. I thank Florida reader Donna Badach for sharing it with me… and now with you. The link is .

Sooner or later, you just had to know that the "giant vampire squid" would show up in the debt debacle in Greece. Well, here they are in this story posted at the German website spiegel.de. The headline reads "How Goldman Sachs Helped Greece to Mask its True Debt". The story is courtesy of the King Report… and the link is .

And lastly comes this piece by Karl Denninger over at market-ticker.net. It appears that some of the liar-type mortgage loans that were written have been purchased by Freddie Mac and are, someday, going to end up back on the books of the banks that provided the original funding… at least that's what Denninger says. The headline reads "Are You SITTING DOWN Folks?" I once again thank reader Donna Badach for this story… and the link is .

I think the expression "going to hell in a hand basket" is very apropos right now. There is absolutely no way out of this economic, financial and monetary Armageddon that awaits the entire planet.. and I would suspect that all governments and their respective central banks know that. The only thing that's unknown, is the timing. But, judging by the speed with which things are circling the drain, something has to give pretty soon.

As I said the other day, there are only three possible outcomes… or combinations of all three… that are staring 'the powers that be' in the face. One is an outright deflationary collapse, the second a hyperinflationary depression… and the third, a return to a gold standard of some sort. Which will it be?

Not much happened in Far-East trading today… and London is quiet too… so far. Both silver and gold are basically flat… and the U.S. dollar is showing no clear direction. I note that every attempt by gold to break above $1,080 during the last three trading sessions has been rebuffed… and I wonder how long that will last?

Volume in gold is a smallish 19,470 contracts at 4:06 a.m. Eastern time. Silver's volume is a lot more respectable at 4,537 contracts in its front month, which is March. Preliminary volume for Wednesday's trading in the precious metals shows that gold traded 177,940 contracts yesterday… which isn't very much. Silver's volume was 51,892 contracts.

It's obvious that we'll have to wait for the New York bullion market to open before we'll see much action in either precious metal today. The bullion banks intervened yesterday morning shortly before 8:00 a.m… because both metals had the bad taste to rise, while the U.S. dollar was in a rally mode. Can't have that now, can we?

See you tomorrow.