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Message: Ed Steer this morning

Ed Steer this morning

posted on Apr 27, 2010 09:43AM

'If Someone is Rich, They Should Buy a Ton of Gold Every Month' - Marc Faber

Well, Monday was a yawner in the gold market. Volume was extremely light... and even though the dollar sold off about 50 basis points yesterday, there was no sign of it the gold price, as gold lost five bucks from Friday's close.

Silver had a slight upward price bias until exactly 9:00 a.m. in London trading... and from that point these gains, such as they were, got whittled away and silver closed exactly unchanged from Friday... right to the penny.

As I mentioned in my brief gold commentary above, the dollar lost about 50 basis points on Monday... with most of the losses coming between 10:00 a.m. and 5:00 p.m. Eastern time. It mattered not one little bit to the price of either silver or gold.

The HUI pretty much reflected the gold price action yesterday and closed down a smallish 0.27%. Nothing to see here, folks. Please move along.

Well, the open interest numbers for Friday's big gains in both gold and silver were a surprise... as the open interest went in entirely different directions for each metal. Gold's o.i. was up 9,673 contracts on decent volume of 152,501 contracts. Silver's o.i. was down 1,246 contracts. Volume was a chunky 52,493 contracts, of which about 25% were roll-overs. This dichotomy is strange... and neither Ted Butler nor myself had any kind of explanation that we'd bet any money on.

Today is options expiry... plus all the switching has to be done by the end of trading on Thursday... as Friday is first notice day in the May delivery contract for silver... so trading action between now and then will be even more fast and furious than it has been lately.

The CME Delivery Report on Monday showed that 14 gold and one whole silver contract are up for delivery on Wednesday. So far in April... 13,264 gold contracts and 473 silver contracts were delivered. Gold's delivery numbers are pretty normal... but for silver, the 473 contracts in a non-delivery month is quite a bit. Several years ago, this sort of activity in a non-delivery month was unheard of. Now it happens all the time.

The GLD ETF had another big addition yesterday. This time it was 195,744 troy ounces. Since February 23rd... 1,261,260 troy ounces of gold have been added to GLD... about 3.5%. All of this gold has been added because of the rally in the gold price in the last few months. But over at the SLV ETF since February 26th, there have been 18.1 million ounces of silver withdrawn. All this silver was most likely withdrawn by authorized participants because the silver was needed elsewhere. If the SLV ETF had been adding silver at the same rate as they were adding gold to the GLD... then the SLV should have another 13 million ounces in it by now. Not one ounce has been added to SLV since February 26th. The reason, you ask? There isn't any available in this quantity.

Over at the Zürcher Kantonalbank in Switzerland, they reported that 11,736 ounces of gold and 181,677 ounces of silver were added to their ETFs last week. The U.S. Mint reported that another 6,000 one-ounce gold eagles and 414,000 silver eagles were sold. Month-to-date... 53,500 one-ounce gold and 2,170,000 silver eagles have been sold. It was a busy day over at the Comex-approved depositories on Friday, as every warehouse saw activity. By the time the smoke had cleared the depositories had recorded a gain of 135,231 troy ounces of silver. But that small amount belies the underlying the activity level. The in-and-out movements are worth looking at... and the link to Friday's action is here.

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I have a lot of stories today... so many in fact, that I've left a couple of them for tomorrow. I have one story on Greece and another on Goldman Sachs. The story on Greece was a Saturday posting over at france24.com. It was sent to me by reader Roy Stephens and bears the headline "Merkel says Greek bailout should proceed only if euro in jeopardy". It's obvious that German Chancellor Angela Merkel is really dragging her feet on this one... and I can't say as I blame her. It's not a long story... but there are a couple of video clips if you wish to watch them... and the link is here.

Needless to say, that along with a pile of stories about Greece, I also received a plethora of Goldman Sachs stories as well. I've narrowed it down to only one. This offering, too, is from reader Roy Stephens. It was originally posted in the Saturday edition of The Guardian out of London. It's another Matt Taibbi piece bearing the headline "Will Goldman Sachs prove greed is God?". Taibbi writes "The investment bank's cult of self-interest is on trial against the whole idea of civilization – the collective decision by all of us not to screw each other over even if we can." It's a longish piece, but it's also a must read... and the link is here.

This next item is an Associated Press release from this past weekend... and was posted in Illinois' Daily Chronicle. The headline reads "FDIC shuts down 7 banks in Illinois". Total bank failures this year is now 57... and these 7 will cost the FDIC just under $1 billion dollars. I thank reader Scott Pluschau for sharing this story... and the link is here.

My first gold-related story... of which I have four... was also sent to me by reader Scott Pluschau. I'd seen it posted at Kitco on the weekend... and was ambivalent about posting it here, as I've seen this all before over the last few years. But, I can't assume that everyone has, so here it is. It's a marketwatch.com story filed from Los Angeles headlined "Venezuela eyes gold mines nationalization". Any long-time gold enthusiast knows that President Hugo Chavez has threatened to do this several times in the past. You can read all about the current threat... and past threats... in the article that's linked here.

Here's another story from marketwatch.com... and this one's from their Monday edition. The article is by Peter Brimelow and is headlined "Gold Survives Goldman: Radical gold bugs jubilant, if jaundiced". It's a short read... and I think it's worth your time. The link is here.

The next gold story is from Kitco News. The dateline says April 22nd... but the first time I saw it posted was on the weekend. It's a Marc Faber interview that's a must read from one end to the other. The headline states "Gold Run Not Over: Marc Faber"... and the link is here.

The last gold story is a Reuters piece that's imbedded in a GATA dispatch... as Chris Powell's preamble to the story is a must read... as is the article itself. The headline reads "Apparently, without announcement, IMF sold 5.6 tonnes of gold in February". The link is here.

The King World News Internet site, which for months has been functioning as a sort of Radio Free America, with its many compelling audio interviews with market skeptics, has begun adding text commentary in a Web log section. Today the KWN blog leads off with commentary by James G. Rickards, senior managing director of market intelligence for McLean, Virginia-based research firm Omnis Inc. Rickards' commentary is headlined "Trust in Free Markets Is Dead". As you know, dear reader, I have all the time in the world for what Rickards has to say... and you should, too. It's not a long read... and the link is here.

Here's an excellent story for all you U.S. expats... or about to be U.S. expats. This is from the Sunday edition of The New York Times. The headline says it all... and needs no further embellishment from me... "More American Expatriates Give Up Citizenship"... and the link is here.

And lastly is this wonderful commentary from Murray Pollitt of Pollitt & Co. in Toronto. Having lived the last half century of it, there's nobody better to put the current gold market into the perspective of history as well as he has done in his latest client letter. The current market, Pollitt writes, reminds him of the market in 1972, the eve of its explosion... and back then there were no derivatives, mine production wasn't struggling as it is now, and there was no developing world making huge new demands for commodities. Pollitt's letter is headlined "Lessons of History". If you only read one story in my column today... this is the one to pick... and the link is here.

When half of the people get the idea that they don't have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for... that, my dear friend, is the beginning of the end of any nation. - Author Unknown

As I said before, it was a quiet trading day on Monday. The CME's preliminary volume figures show that only 95,250 contracts in gold were traded... and about 3,000 contracts of that were roll-overs. In silver, the volume was a pretty chunky 49,327 contracts... and a good third of that was roll-overs into future months, mostly July. May open interest in silver plunged 9,108 contracts and is already down to 21,876 contracts. As I mentioned earlier in this column... options expiry is today, final day of trading in the April contract is on Thursday, and first notice day for delivery into the May silver contract is Friday... so the action will be fast and furious between now and the close of trading on Friday afternoon.

Although I'm sure hoping that gold and silver will blow up this week, please don't forget that the U.S. Treasury has a record $128 billion worth of paper to sell to foreign buyers... and those that aren't, will be trotted over to the Federal Reserve to be monetized. I'm sure that 'da boyz' have received their orders to sit on the prices of all precious metals until the April contract is off the boards. We'll just have to wait and see if they can hold it all together.

Nothing much is happened in Far East trading... or early trading in London. The dollar is attempting to rally a bit... but it's far too soon to say if it will amount to anything. Volumes in both gold and silver are on the light side as of 5:02 a.m. Eastern time... but I expect that to change quite dramatically during New York trading.

After seeing Friday's strange open interest numbers, I'm really curious as to what the CME will have to say for itself in that regard when they post Monday's final o.i. numbers later this morning.

See you tomorrow.

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