Future Gold Hysteria: Richard Russell

Gold lost all its small Far East gains beginning at the London a.m. gold fix yesterday morning [10:30 a.m. local time/5:30 a.m. Eastern time]. But from that point, gold climbed slowly... hitting its high of the day [$1,254.50 spot] around 9:30 a.m. in New York... before dropping to its New York low price [$1,245.70 spot] at the London p.m. gold fix at 10:00 a.m. Eastern... 3:00 p.m. local time in London. Gold tested the $1,253 spot level several times during the rest of the trading day [including once in electronic trading]... but got turned back at every attempt.

Here's the New York market on its own. It shows a lot more detail of what goes on in the only gold market that really matters.

Silver developed an upward price bias by 3:00 p.m. Hong Kong time during their Thursday afternoon trading session. Seven hours later, at 9:00 a.m. in New York, silver spiked up a further 15 cents to $19.65 spot... and, after meandering around a bit, closed at that price. The New York high in silver [$19.73 spot] occurred around 2:10 p.m. during electronic trading.

The dollar flat-lined all day long... and was not a factor in gold's Thursday's price action. It's been many, many months since there was much [if any] relationship between precious metals prices and the 'value' of the world's reserve currency. There's the odd day that the relationship returns, but one has to presume that's more by good luck than by good management.

The HUI double-bottomed at the London p.m. gold fix at 10:00 a.m. Eastern. That point is very visible on the chart below. After the 'fix' was in, the HUI rallied along with the gold stocks and closed almost on its high of the day... up 1.37%... but not quite gaining back everything that was lost on Wednesday.

Thursday's CME Delivery Report showed that 20 gold and 83 palladium and zero silver contracts were posted for delivery on Tuesday. That's really strange for silver, as only 709 contracts have been posted for delivery in September so far. September is normally a big delivery month... and, according to the CME's latest report, it shows that there are still 1,804 contracts left to deliver in September. What are the issuers waiting for, one wonders?

Over at the GLD ETF yesterday, there was a big surprise, as 293,206 ounces of gold were reported withdrawn! That's almost every ounce that's been deposited in GLD going all the way back to August 17th. There's been absolutely nothing in the gold price action that would indicate why that withdrawal happened. Maybe it was an error. I'll update you on this in my Saturday column. There were no changes reported in the SLV ETF.

The U.S. Mint had nothing to say on Thursday... and over at the Comex-approved depositories they showed that 90,433 ounces of silver [net] were withdrawn on Wednesday. The link to that action is here.

I don't have a lot of reading for you today, which is fine by me.

Today's first story is about another bank run. This one is in Afghanistan. "As depositors thronged branches of Afghanistan’s biggest bank, Mahmoud Karzai, the brother of the Afghan president and a major shareholder in beleaguered Kabul Bank called on Thursday for intervention by the United States to head off a financial meltdown." The Federal Reserve rescuing the Afghan banking system? Why not... it wouldn't be the first foreign bank they bailed out... and it certainly won't be the last. You can't make this stuff up... and I thank Florida reader Donna Badach for sharing it with us. It's a story in yesterday's edition of The Washington Post that was filed from Dubai... and the headline reads "Karzai urges Afghans not to panic as bank withdrawals accelerate". It's a longish story, but definitely worth the read... and the link is here.

The next item is a short AFP story filed from Maputo in Mozambique... and posted at news.yahoo.com. The headline reads "Mozambique riots toll: 7 killed, 288 hurt: government". Apparently there were riots over rising prices in Maputo... and things got pretty ugly. This certainly isn't the first time this has happened somewhere in the world in the last year or so... and won't be the last. The story is only three paragraphs long... and I thank reader Scott Pluschau for sending it along... and the link is here.

The next story is a Bloomberg offering that I managed to dig up on my own. The headline reads "SEC Said to Probe Role of Canceled Orders in Crash"... The U.S. Securities and Exchange Commission is examining whether high-speed traders helped destabilize equity markets during the May 6th crash by repeatedly placing and canceling orders in an attempt to manipulate share prices. Isn't manipulating share prices illegal, dear reader? Anyway, high frequency trading and 'quote stuffing' as it's called, gets a fair amount of ink in this story. It's a longish read, but I think it's worth your while. Try a few paragraphs and see for yourself. The link is here.

Reader 'David from California' sent me this next piece. It's a posting over at zerohedge.com... where the very long headline says it all... "Can You Hear Me Now? 17th Weekly Fund Outflow As Equity Fund Redemptions Accelerate". The story, which has an excellent graph, is very short... and is a must read. The link is here.

Here's your big read [3 pages] of the day... and is courtesy of Australian reader Wesley Legrand. It's a posting from Ian Gordon's website longwavegroup.com. The story is dated July 26th, so it's about six weeks old, but still very relevant... and about to become more relevant in the months ahead. The title reads "Winter Warning: In One Hell of a State [2]"... "From the smallest to the greatest in size, many American states are seeking direct and immediate financial assistance of an historic magnitude, from the Federal Government." The situation is almost beyond desperate... and will get several orders of magnitude worse... with no end in sight. The link is here.

Lastly today is this very short blog over at King World News that Eric slid into my in-box in the wee hours of this morning. The headline reads "Russell - Future Gold Hysteria... Williams - Job Loss 150,000+" Richard Russell has some excellent gold commentary... and John Williams of shadowstats.com fame, talks about this morning's jobs numbers. It's a must read... and the link is here.

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain. - Napoleon Bonaparte

Yesterday was an OK day... but nothing to write home about... although better than the alternative. There wasn't a lot of volume in gold... but silver volume was pretty decent. Without question there was more deterioration in the Commercial net short position in both metals, as the bullion banks went short against all long positions that were placed.

We are now back into overbought territory... especially in silver... and it remains to be seen whether we power higher from here... or get a 'correction' courtesy of 'da boyz'. We have a double top from May's high... so if JPMorgan et al are setting the markets up for a fall based on chart patterns... they're doing a pretty nifty job. Here's the 1-year silver chart that makes my point.

As John Williams alluded to in his King World News commentary above... the jobs report will come out tomorrow around 8:30 a.m. Eastern time. For years the New York bullion banks have pounded the gold price at that time, regardless of whether the numbers were good or bad. They haven't been pulling that stunt lately... and we'll find out shortly whether they're going to pull it today.

Neither gold nor silver did very much during the Friday trading session in the Far East. London is now open... and not much is happening there, either. Volume in both metals is tiny... but that will change once New York opens.

I wouldn't want to bet a lot of money on which way the precious metal prices will go tomorrow. With the jobs report and a 3-day long weekend dead ahead, anything is possible, so be ready for it.

I hope you have a safe Labour Day long weekend... and, hopefully, I'll see you here on Saturday morning.