'Greece' Is The Word

Gold's absolute high price on Friday was the spike that occurred shortly after the open in Sydney. The price looks like it got pretty close to $1,100 spot before the bullion banks did their thing. From there, it was slow grind down to around $1,087 spot, which occurred shortly before 10:00 a.m. in London... then gold lost a quick ten bucks, which it recovered by 9:00 a.m. in New York before losing that amount once again going into what looked like an early London p.m. gold fix about 9:40 a.m. in New York.

The absolute low for gold yesterday [around $1,074 spot] occurred at the top of yesterday's dollar rally... which was around 11:30 a.m. in London... 6:30 a.m. in New York. The New York low [$1,076.10 spot] occurred at 9:40 a.m. And from there, as has been the case lately, gold rallied right into the New York close at 5:15 p.m... and closed on its [New York] high of the day.

Silver's price, as usual, was more 'volatile'. It's absolute high price [around $15.75 spot] also occurred shortly after the Sydney open. From there, silver was under pressure for most of the trading day... right up until the magic 9:40 a.m. in New York... with the major decline in price beginning shortly after 3:00 p.m. in Hong Kong... and shortly before London opened. The absolute low was at 9:40 a.m. in New York... and the price was reported as $15.16 spot. Silver, too, had it's rally from this point... gaining back over 30 cents before closing on its [New York] high as well.

The precious metals pretty much followed the dollar around yesterday... but the price swings in the metals were much larger than the dollar moves would indicate. This was particularly true for silver... as it always is.

As per usual, the shares pretty much followed the general equity markets again on Friday. As a matter of fact, Bill King of King Report fame, noted in a Broadcast News story that "the correlation coefficient between stocks and commodities wasn't more than 17% until after Lehman Brothers collapsed in September 2008. Now it's 58%"... as more and more money is sloshing around the financial system looking for the next big thing.

The open interest numbers for Thursday were very interesting. Gold o.i. declined a very respectable 5,474 contracts on volume of 202,363 contracts. In silver, open interest also declined, but a much smaller 247 contracts on volume of 50,703 contracts. So it appears that Thursday's decline and subsequent rise in price involved short covering by the bullion banks. Maybe Friday's action was more of the same? We'll know for sure when Friday's open interest numbers are available on Tuesday... as Monday is a U.S. holiday, don't forget.

Despite all the inclement weather on the eastern seaboard this past week, there was a Commitment of Traders report yesterday. As expected, there were big improvements in both metals. As of the cut-off at the end of trading on Tuesday, February 9th... the bullion banks reduced their net short position in silver by 8,763 contracts. This they did by covering 6,505 short positions while going long another 2,258 contracts. They are still net short 37,800 contracts... 189 million ounces of silver. That's a huge improvement... but still not the lowest I've seen. Here's the full colour COT silver chart... and it's linked here.

In gold, the bullion banks decreased their net short position by a very large 31,152 contracts. [I was expecting more] This they did by covering 23,754 short contracts and going long another 7,398 contracts. The bullion banks are still net short 21.3 million ounces of silver... which is down more than 10 million from the absolute top in early December... but still pretty large nonetheless. The full colour COT gold graph is linked here.

However, my back-of-the-envelope calculations at 3:47 a.m. Saturday morning shows that the '4 or less' traders in silver are still short about 60% of the entire Comex silver market, net of all spread trades... and in gold, the '4 or less' traders are short about 45% of the entire Comex gold market on a net basis as well. So, the concentration is still in the hands of a few bullion banks... with JPMorgan, followed by HSBC USA, being the two biggest shorts by far. Nothing much has changed in that department.

Needless to say, Eric King's interview with silver analyst Ted Butler yesterday afternoon, is well worth listening to... and I urge you to stop right here and listen to it. The link is here.

The CME Delivery Report showed that 60 gold and zero silver contracts are up for delivery on Wednesday of next week. The other item of note regarding deliveries is the big jump to 300 contracts in February's silver open interest that I mentioned on Friday morning. Well, that disappeared yesterday, so we can basically forget about any further delivery excitement in silver until we get into the March deliveries in about ten days from now.

There were no reported changes in either the GLD or SLV ETFs on Friday... but the U.S. Mint finally had an update. They reported that another 35,500 one-ounce gold eagles, plus another 750,000 silver eagles had been sold. Month-to-date... 50,000 gold and 1,250,000 silver eagles have been sold by the U.S. Mint. The Comex-approved warehouses reported that another 225,173 ounces of silver were withdrawn on Thursday.

Today's first story is a Bloomberg piece about CFTC chairman, Gary Gensler. Ted Butler was the first one out of the starting gate on this one...and he got his hackles up quite a bit when I spoke to him on the phone yesterday... with me calling it a "puff piece". Regardless of that, it's quite a substantial article, and if he turns out to be the 'fair-haired boy' that Ted thinks he is... well, I could learn to love him too... regardless of his "vampire squid" background. The headline reads "Gensler Turns Back on Wall Street to Push Derivatives Overhaul"... and the link is here.

I promised myself that I would only put up one story about Greece this weekend... and I'll hold myself to that. Reader Roy Stephens was kind enough to provide this story from the france24.com website. It appears [if you believe the spin] that an agreement [of sorts] has been reached to 'save' Greece. There's no money... yet... nor loan guarantees. So far it's all talk. The British and European papers are running all kinds of alarmist stories about it. Europe knows what will happen if the EU cuts Greece a cheque. The final decision is to come next week... and I'm sure they'll be burning the midnight oil in Brussels all weekend long. The story is headlined "EU President says deal has been reached to support Greece"... and the link is here.

However, before leaving this subject entirely, James Turk over at goldmoney.com wades into the Grecian fray with this piece that's posted over at his fgmr.com website. It's headlined "Greece Broke the Rules"... and the link is here. It's definitely worth the read as well.

Lastly today, is another interview from King World News. This time Eric King interviews Pierre Lasssonde... who he calls "one of the living legends of the mining and resource world". I haven't had time to listen to it yet, but I will certainly be doing that sometime this weekend... and I urge you to do the same... and the link to the interview is here.

Today's 'blast from the past' is courtesy of "The Queen of Soul". Here she is singing a Burt Bacharach tune that he originally wrote for Dionne Warwick. You know the song, the music... and the singer; so turn up your speakers and click here.

As Ted Butler said in his interview with Eric King earlier in this column... he feels that the bottom is in, or very close to it. We certainly aren't anywhere near the lows of 2008 when both metals got the living hell pounded out of them... and I must admit that I'm still nervous about that possibility occurring again. But can they... or will they? Don't know.

Options expiry for the March silver contract, a big delivery month, should be on [or around] Tuesday, February 23rd. The CME will start posting delivery notices for March on Thursday, February 25th... so I'll have my fingers and toes crossed until then.

The boys over at the CFTC still haven't announced a date for hearings into position limits for the precious metals yet. It was supposed to be sometime in early March... but with each passing day, it's looking more unlikely. But, if Ted Butler is right [and CFTC chairman Gary Gensler finally gets on stick] we may not need one by then! So we wait.

The CME has posted the preliminary volume numbers for Friday's trading activity in both gold and silver. Gold's volume was a very light 163,772 contracts... and silver only traded 38,383 contracts. I know that the U.S. equity markets aren't open on Monday, but I'm not sure about gold and silver. I guess we'll all find out when that time comes.

So, to all my American readers, I hope you enjoy your President's Day long weekend... and I'll see you back here on Tuesday morning with some sort of commentary if the precious metals market action warrants it. If not, it will be Wednesday morning.

See you Tuesday!