'Greece' is the Word - Chapter II

With Monday being a holiday in the U.S... the activity in the global precious metals market was moribund for the entire trading day. Most of the movement in both gold and silver was dollar related... but once gold broke through $1,100 the ounce around the London a.m. gold fix... every attempt to move about that price was quietly repelled. Gold's low price appeared to be around 2:00 p.m. in Hong Kong trading around $1,091 spot... and the high was around $1,102 spot at half-past lunchtime in London.

Silver didn't appear to do much in early Far East trading... but then, out of the blue, there was a spike down [somewhere below $15.35 spot] in price at precisely 3:00 p.m. in Hong Kong trading... which was precisely the moment that the dollar began to plunge from its 2:00 a.m. New York highs. This turned out to be its low of the day. Silver then rallied to it's high of the day [around $15.62 in London trading] shortly before 6:00 a.m. Eastern time... which was about an hour before the dollar decline bottomed at precisely 7:00 a.m. Eastern time.

As I said in the prior two paragraphs, a lot of the price action in the metals had to do with the dollar. But it's those 'on-the-hour' price changes that tell you that someone is foolin' with the foreign exchange markets... and, by extension, the precious metals market... which, of course, are currencies in their own right.

Since the U.S. equity markets weren't open yesterday, there was no HUI graph... but, across the border in Canada, the Canadian precious metals index was down about one percent on the day.

Because of the holiday yesterday, there are no CME open interest statistics, CME delivery reports, ETF updates, U.S. Mint data... or news from the Comex-approved depositories.

But there is one set of numbers that I do have...and that's Monday's trading volume in both gold and silver. These aren't exact...but they're close enough for you to get some idea of how slow it was yesterday... and how easy it was to keep precious metals markets in line. Gold volume was an ultra-tiny 29,603 contracts for April... and an absolutely microscopic 5,464 contracts in March silver. Ted Butlers says that he has no memory of a one-day volume lower than this.

Here's an interesting chart that I lifted from Bill Murphy's daily commentary over at lemetropolecafe.com... and I thank Nick Laird at sharelynx.com for permission to reprint it here. It's the Baltic Shipping Rates graph. As you can see, the rates have rolled over for the third time in less than three years. It's my guess that we'll see new lows this time.

Because of the long weekend I have so many stories, that I just can't afford to wait until Wednesday. Some of them are a pretty big read... but with economic, financial and monetary events unfolding the way they are... it's really important to keep up with current events. The slippery slope is getting steeper by the week.

Today's first item is a GATA release of a story that was posted over at zerohedge.com on Valentine's Day. The story bears the headline "Exclusive: The Bank Of England Engaged In Flagrant Gold Manipulation in the Interwar Period via the New York Fed; Does History Repeat Itself?" Along with that story, is the preamble by GATA's secretary treasurer, Chris Powell, which is also well worth the read. This is a fairly long article... and the link is here.

The next story is a piece out of The Telegraph in London. The headline reads "Can anyone fix the euro puzzle?" As I suspected last week, there are huge differences of opinion over how to 'save' Greece... and the arguments are turning ugly... and nothing was decided on the weekend. This is a long story, but definitely worth your time... and the link is a here.

The next piece is from the Associated Press and is found in this yahoo.com story. The headline reads "U.S. debt will keep growing even with recovery". It appears that no matter what happens, the U.S. government is going to run deficits forever. The link to the story is here.

The next story is from The New York Times. The headline reads "Battle Over the Bailout". It appears that the news media... "among them The Associated Press, The Wall Street Journal and The New York Times, are now joined together in a Freedom of Information fight. On the other side are the banks — JPMorgan Chase, Citibank, Bank of America and others — which, of course, have fallen in behind the Fed." This, too, is a longish article... and the link is here.

The next two stories, both from The Telegraph in London, are courtesy of Florida reader, Charles Dubelier. Both have dire headlines, with the first reading "Time running out for Dubai to pull itself out of danger, says Lord Mandelson". It appears that Dubai is suffering a relapse... and the cost of credit default swaps on Dubai government debt is soaring. It's a short read, and definitely worth your time. The link is here.

The second story from The Telegraph, also by writer Edmund Conway, is headlined "Most Germans want Greece thrown out of the euro". This should come as no surprise to anyone. The survey also showed that "Two-thirds were adamantly against German money being put towards a bail-out of the troubled country." Moody's says that the write-down of Greek debt would bankrupt the bulk of the European banking system... including Britain. This very short story... is a must read... and the link is here.

Here's yet another story from The Telegraph... the fourth one today. This item is an Ambrose Evans-Pritchard offering entitled "Britain and the PIGS". He's quick to point out that the U.K. is almost in the same financial boat as Greece... and it won't be long before the financial vultures will be circling Britain as well. It's a short read... and I urge you to run through it. The link is here.

The next story is a Bloomberg piece filed from Paris. Goldman Sachs chief economist, Jim O'Neill said that "China may be poised to let its currency strengthen as much as 5 percent to slow the world’s fastest growing major economy". It's not a long story... and the link is here.

And, lastly, is a very long piece posted over at fofoa.blogspot.com. New commentary by the pseudonymous FOFOA (Friend of Friend of Another), headlined "Greece Is the Word," explains the necessity of the Western financial system to revalue its gold upward by a huge amount to cover its otherwise unpayable debt." The whole story is well worth the read... but the really interesting part related to gold starts under the sub-heading "The Nuclear Option". The link to the entire essay is here.

Gold figurines on display in a shop window in Hong Kong on November 17, 2009. (MIKE CLARKE/AFP/Getty Images)

Ted Butler and I spent some time comparing notes on the weekend about Friday's Commitment of Traders report. When we looked at the numbers, it showed that the '4 or less' bullion banks in silver held 50,758 short contracts between them. This represents 134% of the Commercial net short position. The '8 or less' traders hold 58,200 Comex short positions... or 154% of the net short position in the Commercial category. And JPMorgan holds about 85% of the Commercial net short position all by itself!!! If these bullion banks weren't there, the Commercial category would show a huge net long position. So, it's '8 or less' traders against the entire world's silver market... and the CFTC and your mining companies do nothing. I don't see any 'shareholder value' being added here... do you?

And, as Ted mentioned in his interview with Eric King on Saturday, how high gold and silver prices go on the next rally will be 100% determined by whether or not JPMorgan et al take the short side of all the long positions that will be placed as the rally progresses. As I said before, if they do that, it will be a rally just like all the rallies that have preceded it. But if they don't... then pick a very large number for both metals.

At least once a week I mention the fact that there are only three possible outcomes to the economic, financial and monetary problems facing governments and central banks right now... or a combination of all three. One is an outright deflationary collapse... the second, a hyperinflationary depression... and the third, a return to a gold standard of some sort... with gold at some astronomically high price. Which will it be? Whatever outcome it is... it's not, dear reader, very far away.

Starting about 7:00 p.m. Monday evening Eastern time, the dollar began a decline that [as of this writing] is down about 30 basis points... as it just bounced off the 80 price level. In response, both gold and silver are up rather substantially on smallish volume in Far East trading. As of 4:44 a.m. Eastern time, gold volume is up only 28,033 contracts [for April] at this point... and silver volume for March is sitting at 4,362 contracts. These aren't big numbers considering the price moves. It's entirely possible that there could be some short covering going on.

Please don't forget, dear reader, that there's a record short position against the U.S. dollar that's being held by the Commercial traders at the moment. When they pull the plug on this trade, both precious metals will take off to the heavens... and it's possible that this engineered decline is starting now... but it's really too soon to say for sure.

It's my opinion that we're fast running out of time to get our financial and monetary affairs in order. I cannot overemphasize how important it is to be positioned in the right investment vehicles. That's why I feel that a subscription to Casey Research's flagship publication... the International Speculator... is money well spent. I urge you to browse through the link above and read the most excellent essay by Casey Research's geology guru... Louis James. It's entitled "Kickin' Rocks, Pickin' Stocks"... and is definitely worth your time.

And, based on current activity in the Far East [and now early trading in London] at the moment, it could be a really interesting day when the Comex opens this morning.