Citigroup Report Sees Imminent Gold Price Spike

Well, gold's sharp rise at 4:00 p.m. in Hong Kong trading that occurred minutes before London opened in their Thursday morning, was certainly a harbinger of things to come. The rest of London trading [up to the New York open] was uneventful... with the gold price basically trading sideways to down a little. But once the Comex opened, gold tacked on a quick ten bucks before working its way very slowly to it's high of the day of $1,129.30 spot. From that high, gold drifted lower into a quiet close. Volume was light... and that $10 rise had all the earmarks of a short-covering rally... but we'll have to wait until later this morning [or maybe Monday, if the CME is closed] to find out what the open interest numbers look like.

Silver's price action was similar... buts its gains were more impressive. The high price spike for silver was $18.01 spot at the London p.m. gold fix at 3:00 p.m. local time... 10 a.m. in New York. Silver was up about 44 cents on the day.

The dollar and the precious metals prices sort of followed each other in London and New York trading. The dollar declined about 50 basis points... with the decline beginning at precisely 8:15 a.m. yesterday morning... which [probably not coincidentally] was the time that Comex trading in gold and silver began. The dollar rally ended at 12:30 p.m. Eastern time... around the highs of the day in both metals. It looks like 'da boyz' have a 'sell dollar/buy gold' button as well!

The share price action was terrific... and way out of proportion to the rise in the price of gold. The HUI gapped up and stayed up... closing almost on its high of the day... up 5.18%. But here in Canada, the share price action was much more muted, with the TSX Gold Index only up 3.5%. I checked all the Canadian precious metals mutual funds final numbers for Thursday and it was hard to find any of them that were up much more than 2% on the day. Some of the difference can be explained by the US$/CAN$ exchange rate... and the smaller gain in the CAN$ price of gold.

Wednesday's open interest numbers were just about what I was expecting. Gold o.i. rose 4,377 contracts on volume of 118,775 contracts... and silver o.i. was up 1,383 contracts on 33,827 contracts traded. Considering the price activity, these numbers were not much of a surprise.

The CME Delivery Report showed that 553 gold and 1 silver contract were posted for delivery on April 6th. The report also showed the 'usual suspects' as the big issuers and stoppers in gold. The pdf file showing all the action is linked here.

There were no changes in GLD... but the SLV reported another huge withdrawal. This time 1,961,360 ounces were taken out. Obviously one of the 'authorized participants' needed their silver badly... as there's nothing in the recent price action that would indicate that metal should be flowing out of the fund. On the contrary, large amounts should be flowing in... but aren't. Since February 26th... 8.3 million ounces of silver have been withdrawn from SLV. Why, you ask? Well, its probably because large quantities of silver for immediate delivery from the refineries are impossible, so the 'authorized participants' have to pull it from their stash in the SLV. I'm sure that Ted Butler will have more to say about this in his regular Friday interview with Eric King of King World News... and I'll have that in my column tomorrow.

Not surprisingly, there was no report from the U.S. Mint yesterday... not after their huge updates for the end of March that I reported yesterday. And the Comex-approved depositories showed that their silver inventories declined 747,285 troy ounces on Wednesday.

Today's first story about precious metals today is a Bloomberg piece courtesy of reader Scott Pluschau. The headline reads "U.K. Royal Mint First-Quarter Gold Output Slips 50%". One of the items that caught my eye in this story was the fact that the U.K. mint only used 104,007 ounces of silver during the first quarter. The reason that their 1-ounce silver coin is not popular, is its price... which costs a fortune [even more than Chinese pandas] compared to the U.S. silver eagle or the Canadian maple leaf. They're pretty enough... but if you're buying silver bullion, Britain's silver bullion coin would be your last choice. This is a short, but very interesting read... and the link is here.

GoldMoney founder James Turk, editor of the Free Gold Money Report and consultant to GATA, writes that the revelations prompted by GATA at last week's hearing of the U.S. Commodity Futures Trading Commission have brought a "new dynamic" to the gold market. That's what the headline says as well... and the link to this must read piece is here.

It's a double-header from James Turk today... as he also has the following report on silver. Encouraged by last week's CFTC hearing, James charts the silver price, sees a huge accumulation pattern, and writes "Silver Looks Ready to Soar"... which you can find posted at the fgmr.com Internet site. It's short, sweet... and to the point. The graph is excellent as well... and the link is here.

In the ongoing cyber-space issues that King World News has been having of late, comes this updated story on what's happening over there. And it's not just Eric's site that was attacked. Trace Mayer, proprietor of runtogold.com also reported that his website was attacked as well. The GATA headline reads "Attack on King World News site meant to shut it down". It will take you about a minute to run through the story... and the link is here.

Here's another Bloomberg story that's also courtesy of reader Scott Pluschau. This is the Fed trying to 'make nice' and show how 'transparent' they can be... in an attempt to ward of various media lawsuits and a congressional bill sponsored by Ron Paul. It just makes them look worse. The headline reads "Fed Reveals Bear Stearns Assets It Swallowed in Firm's Rescue"... and the link is here.

Next is a piece from yesterday's edition of The Washington Post... and reader Bryan Bishop was kind enough to bring it to my attention. The first paragraph sets the tone... "The nation's commodities regulator is proposing to limit the vast amounts of oil, natural gas and other vital goods the world's biggest investment firms can buy and sell, seeking to eliminate the unfettered access these companies have had to energy markets for 20 years. The rule would also force this highly lucrative trading into daylight, requiring for the first time that the public be told which companies have special permission to trade commodities with virtually no constraints." The headline reads "Regulator seeks to rein in energy market trading by big Wall Street firms". It's a longish read, but well worth your time, and the link is here.

As the headline to my column today states... "Next move higher in Gold looks imminent" In a short report from CitiFX yesterday, the analysts state the following... "We continue to believe that this leg in the bull market in Gold can take us above $1,300 and that eventually we can see levels above $2,000. To us, the present set up looks like it is poised to accelerate to the [upside]. A break of $1,135-1,145 would strongly support this view and suggest a quick move to re-test the December 2009 high at $1,226." There's no link to this, as it was obviously meant for some of Citigroup's private clients... as it's not posted anywhere I can get at it. Citigroup has a very minor short position in the precious metals market... a few percent at most... and are not one of 'da boyz'.

Our contemporary brand of socialism has one fatal flaw. It's too expensive. When you try to shower benefits on so many recipients, you eventually must resort to subterfuge. Foremost among those tricks is money and credit expansion. Inevitably, you debase your currency - James Cook

As I mentioned a few days ago... with options expiry and first day notice now safely out of the way, and the chart pattern for gold showing an ever-narrowing wedge-shaped formation which has to be resolved to either the upside... or downside... all indicators that I see [especially with what happened in yesterday's trading] point to an upside break-out. Even Citigroup's analysts can see it. Here's the 1-year gold chart again.

But as to when it starts... and how high we go and how fast we get there... is entirely up to 'da boyz' and their masters at the U.S. Treasury and Federal Reserve. All that matters is... who is [or is not] going to short this rally when it really builds up a head of steam. The only willing shorts left out there are the not-for-profit sellers... the U.S. bullion banks. Every other group of traders is very much net long both gold and silver.

And, without a doubt, last Thursday's CFTC hearings into position limits for the precious metals... allowed GATA, Ted Butler and others, the public platform to alert the world that all was not well. CFTC chairman Gary Gensler may not [or cannot] do anything about these grotesque short positions... but by putting the whole sordid mess on the record... it may have been his way of telling the world that it was now 'open season' for major financial players world-wide [and some governments] to go after these financial entities who are now seen to be very vulnerable in this area. If Gensler can't end it one way... he'll try to end it another. At least that's my take on it at the moment.

And, as James Turk said above, there's a "new dynamic" in the precious metals market now that whistle-blower Andrew Maguire has come in from the cold and finally spilled the beans on JPMorgan's antics in the silver market. Even though the main-stream media in the United States has not picked up this story... you can rest assured, dear reader, that there isn't a single person associated with the precious metals market in any capacity... whether it be producer, user, regulator, or investor... that doesn't know that the game is now on. It's just a matter of how it manifest itself... and when.

I'm still "all in"... and I'm only speculating here, but my feeling is that Thursday's price activity in the precious metals... and the associated price reaction by their respective equities... is a foreshock to the main event... whatever that may be. Therefore, I suggest that this might be a good time to place your bets in the precious metals arena... and a subscription to either Casey Research's flagship publication, the International Speculator... or Casey's Gold & Resource Report is something that you should seriously consider to help you make a decision about which are the best stocks to buy.

With the Western world basically shut down for Easter, neither Hong Kong or London were open for Friday trading... and I'm not sure about New York at the moment. Ted Butler pointed out that the COT schedule says that there will be a Commitment of Traders report issued, as usual, at 3:30 p.m. Eastern time today. If that's the case, then I'll have some comments on it in my Saturday column... as will Ted, I'm sure.

The CME has updated their website with Thursday's preliminary trading numbers. Gold volume was a pretty decent 126,124 contracts... and silver's volume was reported as 33,522 contracts. Open interest for gold in April is now down to 4,208 contracts... and it's shrinking by the day. It will be interesting to see how many more contracts will be left standing to take delivery this month. As of yesterday... 11,234 gold contracts had already been delivered. That's 1.1 million ounces. April is a non-delivery month for silver, but in the first three days of the month... 274 silver contracts have been delivered... which is about 1.4 million ounces. And the month of April has just started.

That's it for now. See you tomorrow.