Ed Steer's Gold & Silver Daily

08/07/2009

Gold gained a couple of bucks in Far East trading on Thursday. The top [such as it was] occurred at the London open. From there, the gold price declined five dollars until shortly before lunch in London. From there, a rally took the gold price over $971 shortly after the Comex open...and that was the high of the day...as gold 'declined' about $15 over the next six hours, with the low coming in post-Comex electronic trading. But from there gold popped for about $8...which was a bit of surprise.

In keeping with silver's monetary nature, it mirrored gold's price moves exactly...although it had a wilder ride by far. It's obvious that the silver price ran into a JPMorgan-constructed brick wall at $15.00...and by the time the low was in [along with gold's]...silver had 'fallen' 60 cents from its high. Silver, like gold, also recovered some of its losses in post-Comex trading. The red line is yesterday's action on the Kitco chart posted below.



It should be obvious that despite a sharply rising U.S. dollar, both gold and silver were heading much higher as trading began in New York yesterday...and if the 'usual suspects' hadn't shown up, we would have had a much different day than we ended up with.

Wednesday's gold activity...such as it was...increased open interest by a smallish 361 contracts to 393,195...on volume of 96,818 contracts. Silver o.i. was up a largish 1,330 contracts to 100,807...on decent volume of 22,769 contracts. The open interest numbers for Thursday's wild ride [especially in silver] will be of interest. Today is also Commitment of Traders day...with the numbers being issued at 3:30 Eastern time...and they will be educational.

The Comex Delivery Report showed that only 39 gold and zero silver contracts were delivered yesterday. There are still about 1,900 gold contracts left to deliver in August...and I don't understand what the issuers are waiting for. Why don't they just deliver the stuff and get their money now, instead of waiting until later in the month, as $175 million [approximately what that amount of gold is worth] is a lot of money. As for the GLD and SLV ETFs...there were no changes reported yesterday. But the U.S. Mint had an update...with another 7,500 gold eagles and 180,000 silver eagles added to their August production. And over at the Comex-approved warehouses, a smallish 40,004 ounces of silver were withdrawn.

The usual New York gold commentator [in a report filed just after midnight] had the following to say about yesterday's activity..."Although today's December gold closing loss of $3.40 is commonplace and the intra-day $16.10 range not exceptional, the day was actually one of the most dramatic in recent memory. A fierce buying surge which started at 6:30 a.m. NY time, but extended into the floor session [Comex - Ed] to peak at 9-10 a.m., carried gold up $19.95 to the day's peak of up $7.30 on the day. It was then smashed down $9, rallied over $5...and closed on a sustained down-move which did not stop until gold had lost over $7 on the day...about 2:05 p.m. It then shot up some $10 in less than half an hour, only to spend the rest of the day drifting down."

"Repeated changes of direction of this size are rare in the Comex day...especially in after-hours trading. There is an unusual force in the market. Gold in Euros tracked the US$ gold price quite closely in the session...and the gold shares responded to the experience rather well...but to borrow a favorite concept of The Gartman Letter, there are Elephants fighting in N.Y. The gold-friendly elephant has the comfort that the largest physical buyer [India - Ed] is sympathetic. And if the gold shares are to be given credence, the week's excitement is not yet over."

The really big precious metals news story yesterday was in the silver market. The Central Fund of Canada has entered into another underwriting agreement with CIBC to "market and sell" another 11,040,000 Class A shares. "The offering will be made under a fifth and final prospectus supplement to central Fund's U.S.$750 million base shelf prospectus dated March 31, 2008...Closing is expected to occur on or about August 13, 2009." This transaction, if my back-of-the-envelope calculation is correct, should result in the purchase of around 3.25 million ounces of silver...and approximately 75,000 ounces of gold. All the pertinent details are in a press release over at globeinvestor.com and the link is here.

Talking about physical silver and gold funds...how about a physical copper fund? This story arrived in my in-box just now...in the wee hours of Friday morning. The story is from The Globe and Mail and is headlined "New lustre for copper with first investment fund"...and I thank that perennial night owl, P.S., for sending it along...and the link is here.

I note in a Bloomberg story dispatched at 4:44 a.m. Eastern time this morning that the "European Central Banks have agreed to a third five-year cap on gold sales"...and all the very interesting details can be found at the link here.

Today's first story is from marketwatch.com. The headline reads "Bank of England boosts asset by £50 billion"...Bank of England Governor Mervyn King is betting that he can keep pumping money into the economy without an outbreak of inflation once growth returns. The central bank yesterday added £50 billion (US$84 billion) to its asset purchase plan [Buying worthless bank 'assets' with freshly printed money. - Ed], taking it beyond the previous limit granted by the Treasury. Economists say King’s move risks stoking excessive inflation as the bank pumps a total of 175 billion pounds into the economy, equivalent to 12 percent of GDP. I thank Craig McCarty for the story, which is well worth the read...and the link is here.

The next story is a GATA release entitled "Fed surreptitiously buys half of last week's 7-year bond auction". [More freshly minted money out of thin air. - Ed] There are two related stories imbedded in this link...along with an excellent preamble by GATA's secretary treasurer, Chris Powell. Hopefully some of this will show up in the main-stream press in the days ahead...but in case it doesn't...the link to this 'must read' is here.

I have spoken about the Council on Foreign Relations a few times over the last couple of years...the last time was about six weeks ago. Here's another pertinent story about them that arrived in my in-box yesterday. The story is posted at examiner.com and is headlined "Hillary Clinton admits CFR control over Government Policy." It's not too long...but very disturbing...and I urge you to read it slowly and carefully. I thank Virginia and Dan Zignego for bringing it to my attention...and the link is here.

And lastly, is this rather long read. Normally, I would save such an item for your weekend reading pleasure, but I won't have a Saturday commentary...as I'm not going to be around to write it...as it's difficult to drive and type at the same time. This is a 9-page report put out by Precision Capital Management, LLC of New York City on August 2, 2009. The title to this report is "A Grand Unified Theory of Market Manipulation". I must admit, dear reader, that some of what they talk about is above my pay grade...as it will be for some of you. But it's not the parts you won't understand that will scare the hell out of you! The report, in pdf format, is posted at zerohedge.com and the link is here.



There are no market anymore, only interventions. - Chris Powell, GATA...08 April 2008, Washington, D.C.

Since I won't have a column tomorrow, I'll throw in my 'blast from the past' now. This is a rather somber piece, but perfectly fits my current mood as I look over the economic, financial and monetary wasteland that has been served up to "We, the people..." As a matter of fact, I'll dedicate it to my long-departed grandfather who fought for "King and Country" in the trenches of Belgium and France during "The War to End All Wars". Turn up your speakers and click here.

The U.S. jobs report comes out this morning...and as GATA chairman Bill Murphy, my good friend and fellow gold warrior over at lemetropolecafe.com said in his MIDAS commentary yesterday..."I'm ball-parking it here, but gold has only rallied once around a U.S. jobs report in say...five years. This means gold has gone nowhere 59 out of 60 jobs reports. What are the odds of that in a free market?"
Yes, indeed...what are the odds?

This is my last commentary from this space. I hope you have a great weekend...and I look forward to seeing you on Tuesday morning at my brand new location right here at Casey Research.