Goldman Sachs Turns Bullish on Gold

Despite the fact that the U.S. dollar gained about 150 basis points during Wednesday's trading day... there was little sign of it in the gold price activity yesterday. Yes, gold came under a bit of selling pressure at 2:00 a.m. Eastern time... just like Tuesday... but that all ended at exactly 11:00 a.m. in London trading [6:00 a.m. in New York]. From that point, a rally began that really gathered some legs once the Comex opened... and if a not-for-profit seller hadn't shown up around 8:50 a.m. Eastern, there's no telling how high gold would have gone. Then, around 11:15 a.m. in New York, the bullion dealers collusively pulled their bids... and gold was down $13 in minutes. Every attempt after that to break above $1,200 was rebuffed.

Gold's high and low for Wednesday both occurred during New York trading. The high [$1,209.10 spot] was at the 08:50 a.m. price spike... and the low was $1,191.40 spot, shortly after the bullion banks pulled their bids at 11:15 a.m. Volume was pretty heavy.

Silver, as you already know, dear reader... was far more 'volatile'. You can tell by the price action that it's at the centre of the bullion bank's universe... as it got beaten up pretty good for the second day running. The silver price pretty much followed the gold price action... right to the minute... and probably to the second. Silver's high of the day was at the Far East open at $18.31 spot... and the low [$17.80 spot] was minutes after the bullion banks pulled their bids around 11:15 a.m. Eastern. Volume was pretty decent.

Well, if you're looking for a prime example of price management by the U.S. bullion banks... you got it in spades yesterday... and the regulators say and do nothing. But it's obvious that JPMorgan et al are shaking the silver tree as hard as they can to force the tech funds [that came back into the market last week] to liquidate their new leveraged long positions.

Here's the 3-day dollar chart. Starting at 2:00 a.m. Eastern time on Monday morning, the world's reserve currency has been in a major rally mode... with a brief setback at the FOMC announcement at 2:15 p.m. on Tuesday afternoon.

The precious metals shares did rather well for themselves... all things considered... as most of the selling had to do with what was happening in the general equity markets at the time. Although the HUI was down 2.25%... it was mostly the large cap companies that suffered... as most of the junior sector didn't do much... and quite a few were actually up on the day.

Wednesday's CME Delivery Report showed that only 87 gold contracts were posted for delivery on Friday... with the lion's share of the action between the Bank of Nova Scotia and HSBC USA once again. Here's the link.

The GLD ETF showed an increase in their gold holdings yesterday. This time it was 97,758 ounces. SLV showed no change.

Over at the U.S. Mint, they reported selling another 13,500 ounces of gold into their gold eagle program... along with another 4,000 24-K gold buffaloes... plus a smallish 25,000 silver eagles. Month-to-date... 27,500 ounces of gold have been sold in gold eagles... 8,500 24-K gold buffaloes... and 867,500 silver eagles. I hope you're getting your share at these fire-sale prices, dear reader. I'm buying more silver today.

Yesterday, the Comex-approved depositories reported receiving a rather chunky 722,479 ounces of silver on Tuesday... and the link to the action is here.

I have a fair number of stories for you today. It didn't start out that way, but by the time I got around to posting them in the wee hours of this morning, more had shown up.

The first story is courtesy of reader Scott Pluschau. It's posted over at finance.yahoo.com... and its about June's U.S. trade deficit, which was $49.9 billion, the worst since October 2008. Imports hit an all-time high... but U.S. exports faltered... making things worse. This is more bad news... and the link to the story headlined "Trade gap likely points to slower economic growth" is here.

In a similar vein, Scott also sent the following story from yesterday's edition of The Wall Street Journal about the U.S.A.'s current account deficit which totaled $165 billion in July. Federal spending eclipsed revenue for the 22nd month in a row! The headline reads "Deficit in July Totals $165.04 Billion"... and the link is here.

Reader Bill Drake alerted me to the story about the 30,000 people that showed up in East Point, Georgia yesterday... a lot of them trying to meet a deadline to get an application for public housing. The scene was ugly... and if it made you feel real uneasy, dear reader... it should. The video clips were disturbing to say the least. Although Bill sent me a story... I'm going to use the one that reader 'David' sent me from the huffingtonpost.com website... as it has video clips... and they're worth watching. The headline reads "Thousands Crowd Housing Authority for Section 8 Waiting List... Fights Break Out"... and the link is here.

Talk about perfect timing... here's an op-ed piece posted over at Bloomberg yesterday that I received from an anonymous reader. It's headlined "U.S. Is Bankrupt and We Don't Even Know It". As you know by now, dear reader... this is all very true. The author of this piece is Laurence J. Kotlikoff, who is a professor of economics at Boston University... and the link is here.

Here's another item sent to me courtesy of reader 'David'. This one is posted over at zerohedge.com. I haven't seen any other items about this in the main-stream press... although the Zero Hedge article does quote several. As usual, the title is a long one... and reads as follows... "In Stunning Decision, EU Orders Germany To Start Onboarding "Bad Debt" To Sovereign Balance Sheet: RBS, Fannie, Freddie Next?". The world is going mad, is it not? The link is here.

Here's David's last offering of the day... and this is a must read. It's a story posted over at businessinsider.com... and it bears the headline "Morgan Stanley: There's A Massive Short Position In The Dollar Right Now". I'm wondering whether or not the big dollar rally that began on Monday is the beginning of an equally massive short-covering rally? I spoke of that in yesterday's column... and I'll have more on it my closing remarks. The link to this 2-paragraph must read story is here... and check out the graph very carefully.

My first gold-related story is one that was sent to me by Russian reader Alex Lvov. Alex just returned from a rather smoke-filled vacation near Moscow... as the record heat wave is still on. He also mentioned that... "As far as the economy is concerned, the economic experts forecast 15%-20% inflation [driven by food prices primarily] despite the governments mumbling about slower inflation rates. This is another piece that's posted over at zerohedge.com... and the headline reads "Goldman Goes Goo-Goo For Gold: "Gold Market Poised For A Rally As US Real Rates Head Lower". It's a very short must read piece... but Goldman's 9-page report will make it a much longer read if you choose to run through it... and the link is here.

Eric King slipped this next gold-related piece into my in-box yesterday... and it's definitely worth your time as well. The headline reads "Richard Russell - Fiat Money In Retreat All Over The World". This very short read is posted over at the kingworldnews.com website... and the link is here.

Lastly today, is a piece from the 'grand old man' of the gold world in Canada... Murray Pollitt. Murray is to gold in Canada as Richard Russell is to the U.S. stock market. They both stand alone... as they have no peers. His latest monthly essay is headlined "Pravda"... and the link is imbedded in a GATA release entitled "Murray Pollitt: When it comes to gold, The Economist and FT are like Pravda". Chris Powell's preamble, along with the story itself, are both must reads... and the link is here.

If you will not fight for right when you can easily win without bloodshed; if you will not fight when your victory is sure and not too costly; you may come to the moment when you will have to fight with all the odds against you and only a precarious chance of survival. There may even be a worse case. You may have to fight when there in no hope of victory, because it is better to perish than to live as slaves. - Winston Churchill

As I mentioned yesterday... and also in a couple of places in this column... the dollar rally that we've been experiencing since early Monday morning may be short covering. I wasn't aware [until I read the Morgan Stanley story posted above] that such a huge short position in the world's reserve currency was in place... but it obviously is. As I said yesterday, if there's any way that the bullion banks can arrange for a big dollar rally, they will do it. So far, it all seems to be going according to plan... as the 6-month US$ graph below indicates.

But, despite their best efforts, the gold price is not reacting the way it should under these sorts of conditions... and I would say that the bullion banks aren't amused by gold's response so far... especially in the early going yesterday morning.

Silver is another matter, of course. As Ted Butler mentioned in his radio interview on Saturday on King World News... silver could get smacked for another dollar or so to the down-side... allowing the bullion banks to eliminate all the new tech fund longs that had been placed during the previous week. It's obvious they're having a much easier time of it in silver than they are in gold. Silver came within a dime of its 200-day moving average yesterday... but Ted feels that there may not be too many contracts left to liquidate, even if they punch the price down another two bits or so. Here's the 6-month silver chart.

We're both still concerned about gold's 200-day moving average... and if the bullion banks can manufacture a dollar rally, they may be able to manufacture a decline in the gold price as well. As you know, dear reader, they're awfully good at that... but can they... or will they?

Not a lot happened in Far East trading during their Thursday... and nothing much is going on now that London is open. Volume is about the same in both metals as it was this time on Wednesday morning.

After yesterday's blatant rigging of the gold and silver prices... I await this morning's New York open with great interest.

I hope your Thursday goes well... and I'll see you on Friday.