Gold To Hit $1,350 By Late Spring - John Embry

As I mentioned in my closing comments yesterday, the two price rises in both gold and silver in the wee hours of Wednesday morning... one in the Hong Kong afternoon, and the other shortly after the London open... were quietly squashed. I didn't know it at the time, but the spike up in early London trading, turned out to be the high of the day... as another surprise dollar rally began at precisely that time. My guess at the high price would be around $1,128 spot... and from there it was all downhill until the low of the day [$1,105.40 spot] around 12:50 p.m. in New York.... Gold then traded sideways into the close of electronic trading at 5:15 p.m.

Silver's high of the day [around $16.95 spot] was at the same time as gold's high... but JPMorgan et al really went after the price from that point on. The low of the day [also the same time as gold's low of the day at 12:50 p.m. in New York] was $16.25 spot. So, from top to bottom, silver got clocked for 70 cents... 4.1%. Gold 'lost' about 2% from top to bottom.

As I mentioned earlier, the spike highs in gold and silver in early London trading coincided with the end of a decline in the dollar... and the beginning of a new rally. This rally tacked about 70 points onto the U.S. dollar Index... a little less than one percent. The precision of the trend changes in the dollar and the precious metals is exquisite... like someone pushes a 'buy dollar/sell precious metals' button... as there is no time lag at all. Check out the dollar intraday chart below... and then compare it to the silver and gold price spikes shortly after London opened.

Needless to say, the shares were not amused. But, considering the price action, it could have been lots worse... as the HUI was down only 0.93%.

Tuesday's price activity resulted in an increase of 2,284 contracts in gold open interest. Volume was only 169,583 contracts. Silver o.i. rose a smallish 642 contracts. Volume was a very light 34,834 contracts. These changes were as I expected. All these open interest numbers will be in tomorrow's Commitment of Traders report... as Tuesday [at the close of trading] was the cut off for it.

The CME Daily Delivery report showed that 212 gold contracts [zero silver contracts] were put up for delivery on Friday. GLD reported that 50,905 ounces were removed... and there were no changes in the SLV. The U.S. Mint finally had something to say for the first time this month... as they reported another 14,500 one-ounce gold eagles sold... along with 500,000 silver eagles. Silver eagle sales year-to-date stand at 4,092,500... and the years is less than five weeks young! The Comex-approved depositories reported that another 250,135 troy ounces of silver were withdrawn from their collective inventories on Tuesday.

There were a decent number of news yesterday. The first is a piece out of London's Financial Times. It appears that "protesters were handing out leaflets in the streets of Davos on the weekend. But their anger was not directed against world poverty, nuclear power or war; instead they were demanding that banks should put their derivatives business on to exchanges to make the financial system more transparent." That's certainly a switch! The headline reads "Bankers try to fight off wave of controls"... and the link is here.

The next story is courtesy of California reader, Joseph Weiler. It's from the Los Angeles Times and the headline says it all... "[California] Teachers pension fund is $43 billion short". It would be my guess that the vast majority of U.S. pension funds are underfunded to varying degrees. But $43 billion? That's a lot... and the link is here.

Here's an article that's about 6 weeks old. I just received it from Australian reader, Wesley Legrand. And, despite its age, it's still a must read. It's a short interview of John Williams of shadowstats.com fame. The headline, like the interview itself, is short and to the point... "We're Screwed!"... and the link is here.

The next story [from Bloomberg] comes from the land of 'La dolce vita'... Italy. It's a story on how Italy is suing Bank of America (formerly Merrill Lynch) for derivatives losses. In Italy, the financial police, la Guardia di Finanza, tracks money crimes. The store is filed from Milan... and the headline reads "Italy Seizes Bank of America, Dexia Assets Amid Probe". It's not a very long read... but it's a very interesting story... and I urge you to run through it. I thank Croatian reader Mili Kus for sharing it with us... and the link is here.

Here's a gold story that's posted at Bloomberg... datelined today... and filed from Singapore. The headline reads "Gold to Reach $1,500 as Haven Status Restored, Nichols Says". I thank Russian reader Alex Lvov for sending it along in the wee hours of this morning... and the link is here.

The last piece is also a gold-related item that's posted over at mineweb.com. Speaking on the Mineweb Gold Weekly Podcast, John Embry, Sprott Asset Management's chief investment strategist says while the yellow metal is likely to continue to consolidate over the next few weeks, the next major move will be up. I agree with this assessment entirely. The headline reads "Gold to hit $1,350 - $1,400 by late Spring - John Embry" The link to the story is here. [Note to John: From your lips to God's ears, pal... and don't call me that early in the morning ever again...LOL!]

So we sit and wait. I mentioned in my Tuesday commentary [after Monday's big rally] that neither gold nor silver had reached the oversold conditions that I would normally associate with a true bottom... and that I was somewhat concerned that this little rally would run out of gas... and it still might. The U.S. bullion banks are still holding monstrous short positions in both metals... and it's still a matter of whether or not they can... or will use it to hammer gold and silver prices further.

But, once the bottom is in... and the top is in for the dollar... it's my opinion that things will change quickly. All I'm doing right now is watching 'da boyz' toy with all the markets... the Dow, the dollar and the precious metals. There are no markets any more... only interventions.

I note, as I wind this report down for the night/morning, that both metals are under a little pressure in Far East trading... especially silver. This is 'da boyz' problem child as you already know. The dollar is showing signs of resuming its rally as well.

After working for one whole day, the CME website is, once again, not showing any volume data for anything right at the moment. Not only that, but there are no preliminary volume numbers for Wednesday's trading posted at their website, either. Obviously they have some issues at the CME.

Tomorrow the jobs report number is released around 8:30 a.m. There's a lot of unease about it, as the rumours are that it's not going to be very good. We'll have to wait and see, but I'd be surprised if the U.S. bullion banks don't smack the gold and silver prices the moment they're released... regardless of whether they're good or bad.

Today's activity in gold and silver during New York trading could be interesting.

See you on Friday.