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Golden Minerals is a junior silver producer with a strong growth profile, listed on both the NYSE Amex and TSX.
Message: Ed Steer this morning
Margins on Silver Increased for the Second Time in a Week
Europe in crisis! Will the European Union [or the Euro] survive? China eyes price controls. More on QE2 as Bernanke looks for "URGENT BUSINESS RELATIONSHIP". An interview with gold legend Pierre Lassonde... and much more."
Yesterday in Gold and Silver
Not a lot happened in Far East trading on Tuesday... but gold's high price tick of the day [around $1,365 spot] occurred shortly after 1:00 p.m. Hong Kong time... which was also the dollar's low for the day. By the time the morning gold fix was set at 10:30 a.m. local time in London... 5:30 a.m. in New York... gold was back to pretty much unchanged from the previous afternoon's close in New York.
But once the London a.m. gold 'fix' was in, the gold price began to roll over... and shortly after the London p.m. gold fix was in at 3:00 p.m. local time [10:00 a.m. in New York], the price really began to accelerated to the downside... with the absolute low of the day [$1,328.80 spot] appearing to come shortly before noon Eastern time.
Once the big sellers retreated to the sidelines, the price began to recover somewhat... and gold closed the New York session about $12 off its absolute low.
The silver price pretty much mirrored the gold price. Silver's high price [around $25.90 spot] also occurred shortly after 1:00 p.m. Hong Kong time... with its absolute low [$25.00 spot] coming at the same time as gold's... around 11:45 a.m. in New York.
Once the selling pressure stopped, silver recovered a big chunk of its Tuesday losses, closing at $25.43 spot... only down a thin dime from its Monday close.
As I mentioned in my gold commentary, the dollar's low came about midnight in New York [1:00 p.m. in the afternoon in Hong Kong]. From that low, the world's reserve currency gained about 105 basis points... with its high of the day coming around 1:00 p.m. in New York yesterday afternoon. From there the dollar gave back about 20 basis points of those gains going into the New York close.
The precious metals shares gapped down at the open, with the HUI bouncing off 525 for a few hours either side of gold and silver's low price tick of the day... which was shortly before noon Eastern time. Although both metals recovered rather nicely from their lows, there was certainly no indication of that in the precious metals shares. The HUI finished down 2.84% on the day.
Considering the beating that the general equity markets took yesterday, I guess it shouldn't be a surprise that the HUI did so poorly. But the silver shares really got it in the neck for no reason that I could fathom. If I had any money left to invest in silver equities, I would have been a buyer yesterday.
The CME Delivery Report showed that 62 gold and 7 silver contracts were posted for delivery on Thursday. JPMorgan traded only for its client account once again. Looking at the report, I'd say that only the Bank of Nova Scotia is still trading for its proprietary [house] account. Only time will tell whether this is a permanent change, but I sure hope that it is. The link to yesterday's action is here.
There was no change in the GLD ETF yesterday... but the SLV ETF reported receiving another big chunk of silver. This time it was 1,759,899 troy ounces. That's almost one full day of world silver production.
The U.S. Mint had its second sales report of the week on Wednesday. This time they sold 3,000 ounces of gold eagles... and 252,000 silver eagles. Month-to-date... 52,000 ounces of gold eagles have been sold, along with 2,715,000 silver eagles.
Over at the Comex-approved depositories, they put a net 530,717 troy ounces of silver into their inventories yesterday. There was a lot of in-and-out activity... and the link to all of that is here.
The last few days I've mentioned the disaster that the municipal bond market has become. Tuesday's action was no different. Here's a graph that shows the action as of 12:45 p.m. yesterday afternoon in New York... and it's as ugly as they come. Where the bottom is, nobody is quite sure. But unless the Fed is prepared to bail everybody out, it's a long way down from where it is now.
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¤ Critical Reads
SubscribeHow Finished Goods Prices are up 4.3% Over Last 12 Month; Gasoline Price are up 9.8% in October, and the BLS Reports Declining Inflation
Today's first story is courtesy of 'David in California'. It's a piece that's posted over at the economicpolicy journal.com website. The longish headline reads "How Finished Goods Prices are up 4.3% Over Last 12 Month; Gasoline Price are up 9.8% in October, and the BLS Reports Declining Inflation". It's easy to do when you're cooking the books. This will take three minutes to read... and it's very much worth your time... and the link is here.
China eyes price controls to fight inflation
While we're talking about inflation. Here's a GATA release of a Financial Times story from yesterday that bears the headline "China eyes price controls to fight inflation". The last time I remember what happened with price controls in the U.S. was in the Nixon/Carter era... and we all know how that turned out. The link to the story is here.
Gap, Wal-Mart Clothing Cost Rise on 'Terrifying' Cotton Prices
This story won't help inflation either. I ripped this item from yesterday's edition of the King Report. Gap Inc., J.C. Penney Co. and other U.S. retailers may have to pay Chinese suppliers as much as 30% more for clothes as surging cotton prices boost costs. The Bloomberg headline reads "Gap, Wal-Mart Clothing Cost Rise on 'Terrifying' Cotton Prices"... and the link is here.
Does QE really stimulate economic activity?
GoldMoney founder and GATA consultant James Turk steps into the quantitative easing issue with a short piece of his own. It's only a half-dozen paragraphs... but it explains things in very simple terms... and I found it very informative. The headline reads "Does QE really stimulate economic activity?". It's posted over at the fgmr.com website... and the link is here.
REQUEST FOR URGENT BUSINESS RELATIONSHIP
Not to be outdone in the QE2 department, here is "Helicopter" Ben Bernanke's Letter to the World. It's headlined "REQUEST FOR URGENT BUSINESS RELATIONSHIP". It's a hoot... and is posted over at the Financial Times website ftalphaville.com.ft.com. I thank reader U.D. for sharing it with us... and the link is here.
CME Raises Gold Futures Margins By 6%, Hikes Silver Margins For Second Time In Under A Week
I only have few gold/silver-related stories for you today. The most important one is the news about the increase in margin requirements for both gold and silver by the CME at the close of business on Monday. The first I heard of it was from Ted Butler when I was talking to him yesterday morning. As Ted pointed out, there's only one reason that the CME would hike margin requirements during a price decline... and that would be to force as many spec longs to liquidate their positions as possible. Here's the zerohedge.com take on this. It bears the longish headline "CME Raises Gold Futures Margins By 6%, Hikes Silver Margins For Second Time In Under A Week"... and the link to this must read story is here.
Gold and Silver Graph
Nick Laird over at sharelynx.com was kind enough to provide the following price graphs of both gold and silver since JPMorgan et al began their work late in the day on Tuesday, November 9th. It's the 1-minute tick graph for gold and silver. All dates and times are New York-based. Notice the descending wedges in both metals... particularly silver. It will be of great interest to everyone [your humble scribe included] to see if these patterns break to the upside... or the downside.
Hugo Salinas-Price Comments on Kitco and Nadler
Hugo Salinas-Price... one of the richest men in Mexico... and GATA supporter to boot, had this to say about the Tokyo Rose of the gold world yesterday... and it's posted over at Mike Shedlock's website. It's a very short read that's worth your time... and the link is here. I thank reader 'David in California' for sliding that into my in-box at 4:40 a.m. Eastern time.
Interview with gold giant Pierre Lassonde
Eric King over at King World News provided the following interview with gold giant Pierre Lassonde. This is certainly worth listening to. It runs about 20 minutes... and the link is here.
Euro Dominos Will Fall Until Currency Is Split
My last three stories are of the unfolding nightmare within the European Union. Things just are going from bad to worse at breathtaking speed. The first story on this is from Bloomberg... and it's an op-ed piece from yesterday by Bloomberg columnist Matthew Lynn. It's headlined "Euro Dominos Will Fall Until Currency Is Split". I thank reader Thorsten Winkler for sharing it with us. It's not overly long... and it's well worth the read. The link is here.
'In a Survival Crisis': Irish Debt Woes Make German Banks Uneasy
The next story on this issue is courtesy of reader Roy Stephens. It's a posting from the German website spiegel.de. The headline states 'In a Survival Crisis': Irish Debt Woes Make German Banks Uneasy. This is a must read... especially the last paragraph... and the link is here.
The horrible truth starts to dawn on Europe's leaders
Up on his high horse over at The Telegraph in London yesterday evening, was their International Business Editor, Ambrose Evans-Pritchard. The headline says it all... "The horrible truth starts to dawn on Europe's leaders". Ambrose starts off the column by stating that "The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict." If you read nothing else in my column today, this is the story to pick... and the link is here.
¤ The Wrap
The big drop in both gold and silver prices on Monday certainly caused the open interest numbers to decline in both metals. In gold, open interest fell 10,183 contracts... and in silver, o.i. was down 2,269 contracts. All this was the result of tech funds pitching longs... and the bullion banks covering shorts or going long themselves.
Tuesday was another huge volume day in both metals. The CME's preliminary report issued in the wee hours of this morning shows that gold traded pretty close to 300,000 contracts net of all roll-overs... and silver was right up there once again with a net volume of just under 100,000 contracts. It will be interesting to see what the declines in open interest are when the final figures are posted later this morning. It will be the first thing I check once I've perused the gold and silver prices.
Whatever those declines in open interest are in today's report, they will all show up in Friday's Commitment of Traders report... and it should show massive tech fund long liquidation and equally massive short covering by the bullion banks. That's what Ted thinks... and I agree with him.
I received an interesting comment from Reed Larsen, the General Manger of the Old Glory Mint out of West Jordan, Utah early yesterday morning. Unfortunately it arrived too late for my Tuesday commentary, but I'm more than happy to post it here, now. Apparently they're seeing a little tightness in the physical market... and I'll let Reed do the honours from this point...
"I thought you might like to know that late last week we started to see some shortages in physical silver. Here's what happened:
"On Tuesday of last week, we experienced the largest volume day in the history of the Old Glory Mint. When the dust settled, we had taken orders totaling more than 2 metric tons of silver. We had no problem buying silver to fill those orders. However, the next day, and through the end of the week, a few of our suppliers started warning us that they were running low on physical silver, and a couple of them had sold out."
"Although our mint is well prepared to meet demand during short-term market squeezes like this one, we did start checking around with some of the major refineries, other suppliers and even some of the larger dealers around the country to see if a widespread shortage was developing. Everyone we talked with at both the wholesale and retail levels had seen a dramatic increase in demand at about the same time we did. We found that many refiners were experiencing heavy order volumes and production backlogs. Many dealers were sold out of most or all of their larger silver bullion bars, while others had no silver product available at all except for the ones that carry the highest premiums."
"The last time this sort of thing happened was approximately two years ago, when supplies dwindled to the point that almost nobody had anything available to sell (you might recall that even Kitco had nothing available for sale on their website for quite a while). Even though the price of silver itself didn't seem to move much during the shortage, the real price (the "premiums" on the street) that we and others had to pay went through the roof because of the lack of availability of physical silver. In my mind, the fact that the "market" price of silver didn't go into orbit back then is only attributable to the lid that 'da boyz' kept on the market."
"This time, I don't know that they will be able to keep the lid on. If they can't, then silver prices (and premiums) might be headed "to the moon" sooner than many of us think. Since typical turn-around times for mints are 3-13 weeks, when situations like this occur, it could be weeks or months before dealers are able to restock. In the interim, the squeeze will be on, and silver prices and premiums may head much, much higher than what we are seeing right now."
"Thanks for everything, Ed, and keep up the great work!"
Reed Larsen, General Manager
Old Glory Mint
Both gold and silver were under pressure again very early this morning... with the selling starting around 2:30 p.m. Hong Kong time... but both have shown a little bit of life now that London is open. Volume is already pretty chunky in both metals as of 4:55 a.m. Eastern time. Whatever happens today, won't be in this Friday's COT report.
Without doubt, today will be another interesting day when the Comex opens for business at 8:20 a.m. Eastern time... so be ready.
I hope your day goes well... and I'll see you tomorrow.
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