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Message: Ed Steer this morning

Ed Steer this morning

posted on Sep 24, 2009 10:20AM

N.Y. Gold Has Closed Over $1,000... Nine Days and Counting?

Gold had an interesting day on Wednesday. Most of the early activity had to do with the small dollar rally that began at 2:00 p.m. during Hong Kong's afternoon yesterday [1:00 a.m. in New York], and the gold price declined slowly until the London close. A short, sharp, 4-hour rally recovered all gold's previous losses, only to have a not-for-profit seller show up at precisely 2:30 p.m. New York time to sell gold back down to its low of the day. Along with gold... silver, the Dow and the precious metals shares all headed south at precisely the same time as the US$ headed north. Coincidence? Don't know... but it all looked so highly orchestrated that it pegged the needle on my B.S. meter.



Silver, like gold, had its high at 2:00 p.m. in Hong Kong trading as well. The price activity was much more 'volatile'... but the price trajectory was similar to gold's... and by the time the London close was in, silver had 'lost' 50 cents. Silver's subsequent rally was somewhat more muted than gold's... but that gain disappeared as well.



Below is the 3-day US$ chart. Maybe it's just me, but it looks like someone caught a falling knife at 2:30 p.m. yesterday afternoon. Am I looking for black bears in dark rooms that aren't there? I don't think so.



Open interest in Tuesday's trading showed that gold o.i. fell 3,534 contracts to 464,408... and silver o.i. dropped 423 contracts to 127,651. Without doubt, there was considerably more liquidation on Wednesday, and I'll report on that tomorrow.

The Comex Delivery Report for Wednesday showed that 144 gold and 117 silver contracts were delivered. There were no reported changes in either the SLV or GLD ETFs, and the U.S. Mint reported making another 6,000 gold eagles and 40,000 silver eagles. And over at the Comex-approved warehouses, there was another rather large withdrawal of silver... this time it was 1,556,514 ounces. Silver warehouse stocks are now down to 114,533,875 ounces in total... the lowest I can remember in at least a couple of years. Does it mean anything? We'll see.

The usual New York gold commentator had the following... "Indian ex-duty premiums: AM $2.52, PM $5.44, with world gold at $1,017.81 and $1,013.12. Quite adequate for legal imports. Today must have been difficult for Indian bullion importers, as the rupee was erratic, initially firming to a 6 week high of R47.85 and then softening to close at $1= R47.98. Unusually, an Indian Barclays analyst attributes the weakening to import purchases of "oil, sugar and gold" – usually only oil is cited. There continues to be every reason to expect India to be a strong buyer on any pull-back in world gold."

"Local gold in Vietnam slipped to a discount of $5.31 on world gold of $1,018.01 (Wednesday Discount 3c/$1111.47). Japan was closed."

"Today gold tried three times to clear $1,018 before bowing to selling pressure as NY opened. Volume is not particularly heavy: estimated at only 43,460 lots by 10AM. Contrary to the casual assertions of several analysts, Eurogold is tracking $US gold very closely today."

"Cheerfully holding to modest positions in Euro and Sterling gold, The Gartman Letter observed today... ' [what] we know with reasonable certainty is that the trend for gold is higher in all currencies, and that there is someone or something with some sense of intent trying to keep gold from plowing upward through $1,020-$1,030... and thus far they’ve succeeded'"

"TGL suggests watching €700 gold as the break out point. Right now gold is at €683."

"Gold shares did not at all like the late sell-off. Both the HUI and XAU had been up slightly on the day prior to the Fed news, but plunged to close at the day's low. Gold, of course, was down too, but only to the mid-morning lows... whereas the shares went down considerably further. Normally late-day action of this type by the gold shares is very ominous. Possibly the generalized sell-off by currencies, equities and commodities weaken the signal."

"The impressive technical website INO.com has posted a video chart analysis of gold's short-term cyclical pattern. It concludes gold will base in early October and then surge until Christmas. This, of course, would be a typical seasonal pattern. The link to the video is here."

Al Korelin of Korelin Economics was kind enough to interview me for a few minutes on Tuesday. If you wish to listen to it, the link is here.

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It was a slow news day yesterday, and [mercifully] I only have three stories for you today.

The first story was sent to me by Casey Research's, John Grandits. It's a posting from calculatedriskblog.com. It's a very short read entitled "Retail Hiring Outlook 'Job Scarce'". It appears that a lot of retailers are going to be cutting back on holiday workforce hirings this Christmas. The graph that accompanies the article is well worth looking at... and the link is here.

The next story is real estate related and was passed along to me by Craig McCarty. It's a Bloomberg piece entitled "Housing Crash to Resume on 7 Million Foreclosures, Amherst Says". The reporter tries to spin the rest of the report in a positive light, but the ugly truth is still there for all to see. It's a short read as well and the link is here.

And lastly is this second real estate related piece written by Ellen Brown, author of Web of Debt. It's a long read, but certainly worth your while. "In a landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. The court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose -- on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound." The story is posted at huffingtonpost.com... and the link is here.



It is investment, i.e. the increased production of material wealth in the shape of capital goods, which alone increases national wealth. - John Maynard Keynes

Well, the closing New York gold price has held above the $1,000 mark for nine days now. That's a big positive in my books. That's the good news! Then there's the record short position in gold by the bullion banks. And, as Ted Butler has pointed out a few times recently, the time will come when the contents of the Commitment of Traders won't matter any more. Has that time arrived? Don't know... but I'm still on the lookout for "in your ear!"

But whether we have a sell off first... or blast off to new highs from here... I'm still "all in"... as this is not the time to get cute by attempting to trade this market... picking up nickels in front of a steam roller. This is a time to be long and strong. If you're still deciding where to put your money in the gold and silver market, I urge you to sign up for Casey's Gold and Resource Report. It's still being offered at half price... $39/year... and your satisfaction is 100% guaranteed as well. You can check it out for yourself... and the link is here.

I note, as I write this last paragraph, that both gold and silver showed signs of life once the Sydney market closed for the day... but both have come under pretty big selling pressure now that London has opened for trading and the New York bullion banks are active. Volume in both metals is pretty heavy. Has a sell-off started? Too soon to say. But if we do get one, dear reader, you will know who is behind it, why they did it... and how.

The trading day in New York should tell us a lot.

See you on Friday.

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