Watching Grass Grow

Gold traded within a $10 range all of Wednesday. Volume was, once again, very low... and the highs and lows of the day were irrelevant... although they were both set in New York. Just another day off the calendar.

Silver was much the same... but the high of the day was at the London open at 3:00 a.m. Eastern time. From that point, the price drifted lower through the rest of London and all of Comex trading in New York... with the low tick of $18.40 coming minutes before 10:30 a.m. Eastern time.

The dollar tacked on a quick third of a cent starting shortly before 3:00 a.m. Eastern time... the opening of the London gold market. The dollar rally ended at precisely 4:00 a.m. Eastern time... and the price stayed up there until moments after the Comex opened in New York... and from that point, lost about 40 basis points... with the low of the day coming at precisely 12:00 noon Eastern Daylight time. How's that for natural market forces?

With the gold price doing nothing, I was impressed that the gold stocks bucked the general equity markets [for 30 minutes or so] at the open yesterday morning... with the precious metals stocks heading north, while the Dow et al headed south. But I also wondered who would be buying precious metals stocks under such circumstances. From there, the HUI pretty much followed the equity markets for the rest of the day... and even managed to finish in positive territory by about a percent... despite the fact that gold was down on the day.

The CME Delivery Report showed that only 8 gold and zero silver contracts were posted for delivery on Friday. The GLD and SLV ETFs showed no change... but there were some small sales reported by the U.S. Mint. They sold another 2,000 ounces worth of gold eagles... 2,000 24-k gold buffaloes...and another 62,000 silver eagles. The Comex-approved warehouses reported receiving another 827,448 ounces of silver on Tuesday. All depositories reported activity... and the link to that is here.

Here's another graph courtesy of Nick Laird of sharelynx.com. This one shows the ounces and dollar amounts of all the physical gold funds in the world. It shows that 80.0 million ounces of gold worth US$98.0 billion is now held by these funds. In the last four weeks, all these physical gold funds have collectively increased their gold holdings by 5.81%. The graph is current as of Wednesday.

Here's the same graph for silver. It shows that the world's physical silver funds hold 635 million ounces of silver worth US$1.17 billion. In the last four weeks, all these physical silver funds have collectively increased their silver holdings by only 1.03%. If the silver funds had kept up to the gold ETFs in percentage terms, they would need to get their hands on another 40 million ounces of the stuff. And, quite frankly, dear reader... the reason they aren't adding it faster is because there probably isn't any to add. That much silver is equivalent to 3 weeks of world silver production. This graph is also current as of Wednesday.

I only have one gold-related story today... and that's concerning the offering by Central GoldTrust that I mentioned in this column yesterday. Of the $800 million on offer... $280 million was taken up. But this is subject to change to the upside, as the underwriters have been granted the right to increase the size of the offering by up to an additional 1,000,000 Units, exercisable in whole or in part, at any point prior to 4:00 p.m. (EST) on June 16, 2010. And that, dear reader, is a potential increase of 17.5%. The final amount gold involved here ranges from 6.6 tonnes all the way up to about 8 tonnes if the underwriters can sell the additional million units. Whatever the final amount is... we won't know until the whole thing closes on or about June 23, 2010. The link to the story... posted at finance.yahoo.com... is here.

My first story is one that I stole from yesterday's edition of the King Report. Unless something goes 'bump' in the night between now and then... this item pretty much sums up my thinking on U.S. interest rates for the short, medium and long term. The headline in The New York Times says it all... "Fed Study Suggests Rates Will Stay at Record Lows Until ’12". It's not a particularly long read... but it's definitely worth your time... and the link is here.

My next story is from the timesonline.co.uk website. It's a story that was posted this past weekend... and sent to me by Casey Research's own Jeff Clark. I haven't posted it until now, as there have been other more pressing stories... and this one would have gotten lost. The headline reads "Saudi Arabia gives Israel clear skies to attack Iranian nuclear sites". It's definitely worth the read... and the link is here.

I have a couple of excellent stories regarding the current woes over in Europe... particularly those of Spain. The first two are from reader Roy Stephens... and the first one is from The Telegraph in London... and is the second story in as many days on this issue from Ambrose Evans-Pritchard. I ran the first one in this column yesterday. European debt markets remain under high stress on persistent reports that Spain is in secret talks with EU officials and the International Monetary Fund for a support package of up to €250bn (£208bn), the largest rescue in history. The headline reads "Spanish debt wilts amid €250bn rescue plan confusion"... and it's a must read. The link is here.

The next story on this issue is from yesterday's English language edition of spiegel.de in Germany. The headline reads "The World from Berlin: 'The Hounding of Spain Is Absurd'. Absurd it may [or may not] be, dear reader... but Germany [and France] has the most to lose if Spain gets flushed down the toilet... as Spain is an entirely different creature than Greece. This, too, is worth the read... and the link is here.

My last story today is one that was sent to me a couple of days ago... but I zapped it for lack of space. But today I have room... and when Australian reader Wesley Legrand sent it to me, I thought it fit in rather nicely with the previous two stories. It's a story posted at London's Daily Mail... and bears the rather apocalyptic headline "Nightmare vision for Europe as EU chief warns 'democracy could disappear' in Greece, Spain and Portugal". I'm sure there's some fear mongering in this story... but it's still worth the read... and the link is here.

Wednesday was, as I said in the title to this column, like watching grass grow... and so far this Thursday morning [4:52 a.m. Eastern time] with London now open... it looks like today might be a 'watching paint dry' sort of day. Trading volumes are light... but slightly higher than yesterday... and prices are doing nothing.

Maybe today's action in New York will give me something more to write about in my Friday column... and we'll find out soon enough.

I'm off to bed.

See you tomorrow.