JPMorgan et al Hammer the Silver Price Again

Well, it's pretty obvious, at least to me...that neither gold nor silver was going to be allowed to go anywhere during the Wednesday trading day. The first clue to how the day was going to unfold, was what happened at the London open at precisely 8:00 a.m. GMT...3:00 a.m. Eastern...which I mentioned in my closing comments in yesterday's column.

From that interim high, the gold price sagged about five bucks, with the interim low coming at the London a.m. gold fix at 10:30 local time. Then gold rallied a bit through the New York open, but at 9:05 a.m...it's high tick of the day at $1,380.40 spot...and for no reason I could see, gold got sold off $10 before trading sideways for the rest of the New York session.

Silver was really hot to trot yesterday...and was up about 65 cents by the same 9:05 a.m. Eastern time in New York...before an obvious not-for-profit seller hammered the price back to unchanged by 10:45 a.m. From there, the silver price drifted lower...and actually closed down eleven cents on the day. Silver's high was $19.51 spot.

Yesterday's price move in silver, in technical parlance, is called a key reversal to the downside. But, there was nothing natural about it. This was entirely manufactured by one or more of the '4 or less' bullion banks. Free markets do not act like this. One can only imagine how high the silver price would have risen if it hadn't been for malignant New York bullion bank intervention.

The dollar continued its slide in early Far East trading, with its low of the day coming at 8:30 a.m. Eastern time...on the button. That was a decline of about 65 basis points...and, from that low, the dollar struggled back about 25 basis points...closing the trading day around 78.57. The gold price sort of followed the dollar...but that certainly doesn't explain the pounding that silver took between 9:40 and 10:45 a.m. in New York.

The gold stocks started in positive territory, because the real sell-off in gold and silver didn't really get going until 9:40 a.m. Eastern time. It only took about fourty minutes from the open for the HUI to dip into negative territory...and it stayed there for the rest of the day. Gold had a tiny rally that started at precisely 3:00 p.m...and the shares responded instantly, so the HUI did not close on its low of the day. It was only down 1.21%. Needless to say, the silver shares did not do well.

Yesterday's CME Delivery Report was not very exciting, as only 17 gold and 3 silver contracts were posted for delivery.

Once again there were declines in both GLD and SLV. The GLD ETF shed another 175,661 ounces of gold...and the SLV ETF reported a 341,920 troy ounce withdrawal.

After Tuesday's big sales report, the U.S. Mint had nothing to say for itself on Wednesday.

There was decent activity over at the Comex-approved warehouses yesterday...and by the end of the day their silver stocks showed a small 51,976 ounce increase. The link to the action is here.

¤ Critical Reads

Debt ceiling: Geithner won't let us default

Reader Scott Pluschau provides today's first story...and it's posted over at money.cnn.com. The headline reads "Debt ceiling: Geithner won't let us default". Scott was incensed at the contents of this piece...and had this to say about it: "This quote just makes me want to scream at the walls:Geithner is correct that the debt limit must increase. With monthly deficits running more than $100 billion, it's simply unthinkable that Congress could cut spending or increase revenue enough to avoid borrowing more. Hello, do they not realize the game is up when you have to borrow more in order to avoid default? What individual or corporation is going to think this is a good idea, and what bank would lend them the money? What is the sense in borrowing more, we are digging a deeper hole." [That's a big 10-4 good buddy! - Ed] It's worth the read...and the link is here.

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The Eight States Running Out of Homebuyers

Scott's second offering today is this item posted over at finance.yahoo.com...and it's all about real estate. The headline reads "The Eight States Running Out of Homebuyers". The author writes that "The devastation in some regions will never be repaired. Parts of Oregon, Georgia and Arizona have become progressively more deserted. Since jobless rates may never recover, there is little reason to hope that the populations in these areas will ever rebound." It's a fairly long [and very depressing] read...and the link is here.

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America's economic recovery

Yesterday I posted a piece on gold by Alasdair Macleod. Today I have another short essay that's authored by him...and it's courtesy of Australian reader Wesley Legrand. It's posted over at Alasdair's website financeandeconomics.org...and the headline reads "America's economic recovery". The article starts off like this..."According to official statistics, there has been positive GDP growth for the five quarters to Q3 in 2010, averaging 2.9%. Unemployment, which we are told is a lagging indicator, hovers between nine and ten per cent, but according to some, is actually showing faint signs of improvement. These figures are so misleading that they are valueless, and one has the impression that the authorities’ only hope is to bull them up and pray that a spark of confidence reignites true recovery." Not too many shades of gray in this piece...and the link is here.

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Central Bank steps up its cash support to Irish banks financed by institution printing own money

The following story is one that I just didn't have room for in Tuesday's column, so here it is now...and it's courtesy of reader 'David in California'. It's a piece out of the Saturday edition of The Irish Independent...and is headlined "Central Bank steps up its cash support to Irish banks financed by institution printing own money". [€51 billion to be precise - Ed] Bill King of the King Report made this comment on the story..."we noted that the Bank of Ireland is now straight out printing money." Take the blue pill before you read this...and the link is here.

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World needs $100 trillion more credit, says World Economic Forum

Here's another story that you should read before the effects of that pill wear off. This was posted in The Telegraph late on Tuesday evening...and was sent to me by reader Richard Di Nucci. The headline reads "World needs $100 trillion more credit, says World Economic Forum". It's only five short paragraphs...and, as you read, if you start getting the feeling that you're not in Kansas anymore...you would be right about that. The link is here.

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The World from Berlin: 'Obama Can Not Afford a Rift with China'

Roy Stephens has three stories today. The first is this piece from the German website spiegel.de...and is headlined The World from Berlin: 'Obama Can Not Afford a Rift with China'. It will take you less than five minutes to run through this...and I feel that it's worth your while. The link is here.

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Keeping the Euro: Merkel Rules Out Return to Deutsche Mark

Here's Roy's second offering...and it's also a posting from over at spiegel.de. The headline reads "Keeping the Euro: Merkel Rules Out Return to Deutsche Mark". Chancellor Angela Merkel has categorically stated that Germany will not abandon the euro and reintroduce the deutsche mark. Her comments are intended to quell speculation that Germany's love of the common currency is flagging in the wake of expensive bailouts of troubled euro-zone members Greece and Ireland. It's a very short piece...and the link is here.

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Brazil slams brakes to curb inflation, risking hot money tsunami

Roy's last story is a posting from very late last night in The Telegraph. It's an Ambrose Evans-Pritchard offering that's headlined "Brazil slams brakes to curb inflation, risking hot money tsunami". Brazil has raised interest rates sharply, following China, India and host of countries across the emerging world in acting to curb inflation and counter the flood of dollar liquidity from the US. It's worth reading...and the link is here.

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Silver May Drop 20% as Coins Signal ‘Crowd’: Technical Analysis

Just as I was about to hit the 'send' button on this morning's column, reader Scott Pluschau sent me the follow Bloomberg piece that was posted at midnight last night...and I decided to stick it my column here, as it dovetails nicely with my last story of the day. The headline reads "Silver May Drop 20% as Coins Signal ‘Crowd’: Technical Analysis". If silver does fall 20%...then it will be JPMorgan's doing...and nothing to do with supply or demand. And if it does get that low, it certainly won't be at that price level for long. The link is here.

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A Beautiful Idea

Lastly today, is my only precious metals-related story...and it's one that was written several years back that started the rush into U.S. silver eagles, which has now become a sales phenomena. It was a piece written by silver analyst Ted Butler's mentor, Izzy Friedman back on December 4, 2007. As Ted points out..."If you check the U.S. Mint's website [from December 2007 and onwards], you'll see [that] the pace for Silver Eagles exploded precisely after Izzy published the article. The low February 2008 numbers were due to the mint running out [of blanks]." The article is headlined "A Beautiful Idea"...and the rest, as they say, is history. The link is here.

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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

I was not thrilled by yesterday's price action in either metal...especially silver, as it had all the earmarks of a bear raid by the bullion banks, with JPMorgan probably the leading culprit. I have noted in the past that anytime that the bullion banks intervene in the gold and silver markets at the London open...and then again in New York, it's not a good sign.

As I mentioned in this column yesterday, the London open on Wednesday morning was $1.40+ above silver's low price print on Monday morning...and it would be interesting to see if that was the bottom or not. I was optimistic then...but less than enthused now.

Wednesday's volume in gold was average at best...and from the looks of the preliminary open interest number, there might be quite a drop in gold's open interest when the final numbers are posted on the CME's website later this morning.

Silver's volume yesterday was huge...totaling almost 50% of gold's total volume...and the first time I've seen silver's total volume this large compared to gold's total volume. Silver's open interest should also have declined sharply yesterday...but the bullion banks probably hid their tracks once again. I'll report on that in Friday's column.

Today is the day that the Central Bank of the Russian Federation updates its website with their December numbers. I'm looking forward to seeing how much bullion they added to their stash during the month. As of the end of November, they held 25.2 million fine troy ounces of gold. I'll have the new number, plus Nick Laird's excellent updated graph, in tomorrow's column as well.

Also on Friday is the new Commitment of Traders report. With a new low price for this move down set in silver in early London trading on Monday, I'm expecting open interest improvements in both metals.

I'm not amused by what happened during the Far East trading day on Thursday...as both metals are lower. Gold is only down about five bucks at the moment...but, for a while, silver was down over fifty cents from Wednesday's close...and over $1.25 from its New York high yesterday morning...but has reversed course to the upside for the moment now that the dollar is heading south once again. As of 4:59 a.m. Eastern time, both metals are recovering nicely...at least for the moment.

I suppose we shouldn't be too surprised by any of the price action we've seen in silver these days. It's obvious that JPMorgan is making every attempt to cover its short position by means both fair and foul. They covered as much as they could by buying back part of their short position starting in August...and, since the beginning of the year, they have precipitated this sell-off in order to shake out all the technical fund longs that they can. And, as I've said before...this too, shall pass.

It could be a really interesting session in New York when their trading day begins a few hours from now.

See you on Friday.