China to raise gold, silver reserves in 2011

The gold price declined about eight bucks in fits and starts all through Far East and most of London trading yesterday. It then caught a bid at the Comex open...rising ten bucks in less than an hour...and then got sold off to its low of the day around 10:15 a.m. Eastern time...which was probably the London p.m. gold fix.

From that spike low, gold rose about twelve bucks over the next hour and fourty-five minutes. Then, only minutes before noon in New York, gold spiked up over fifteen dollars in about ten minutes before basically trading sideways for the rest of the New York session. The high of the day was $1,356.60 spot...a price that gold bounced off of several times, but never penetrated.

Reader Scott Pluschau sent me the 10-minute bar chart for gold volume in New York yesterday. Needless to say, the volume spike [23,139 contracts] that went with the big noon price jump, stands out like a sore thumb. Scott said that "this is the most volume I have seen in a ten minute bar in a while. I don't even think that the first ten minutes of the Comex open has seen that many contracts in the past month."

It's hard to tell whether this was short covering, or a brand new buyer showing up on the scene. Maybe the open interest numbers will shed some light on this when the CME posts them later this a.m.

Silver's price pattern was very similar to gold's. After the 10:15 a.m. New York low, silver went on a tear as well...with the high tick around $29.02 spot coming around 3:30 p.m. Eastern during electronic trading. The price backed off a few pennies going into the close, but finished close to its high of the day. Scott didn't send the volume chart for silver, but one can assume that the volume pattern would look similar. Once again the final open interest numbers will be of great interest...at least to Ted and myself.

The dollar was flat at the beginning of Far East trading on Thursday morning. It re-tested the 77.00 cent level around 8:00 a.m. in London...and then began a rally that went vertical at the Comex open at 8:20 a.m. Eastern. The dollar topped out minutes after 12:00 noon in New York...and then traded sideways for the rest of the day.

It's been a very long while since the dollar and the gold price rose together. We had a very long stretch of that early last year. Let's hope that this is the beginning of a repeat performance.

The HUI followed the precious metal prices like a shadow yesterday...with the low of the day coming at the London p.m. gold fix at 10:15 a.m. Eastern...the only time the gold stocks were in negative territory on Thursday. From that low, the stocks added about 3%...with the interim high coming after the big price spike in New York at noon local time. From there, the gold stocks gained about another percent going into the close of the equity markets. When all was said and done, the HUI was up 3.09% from Wednesday's close. Most, but not all, silver stocks did appreciably better than that.

The strange thing about this graph, is that there was no spike in the share prices when gold and silver blasted to their highs of the day at lunchtime in New York. All there was, was a gentle rise from 10:15 a.m. until the secondary top at noon. It's almost like this price jump was not a surprise for the people who were buying shares after the low. It may be nothing...but it seemed like a strange reaction [or lack of it] for such a big spike in the price.

The CME Delivery Report for Thursday showed that 418 gold and 3 silver contracts were posted for delivery on Monday. In gold, the big issuer was the Bank of Nova Scotia...and the big stopper was HSBC USA, with Goldman Sachs a very distant second. The action is worth a look...and the link is here.

For a change, the GLD ETF showed an increase yesterday. This time they added a smallish 68,301 troy ounces. It was an entirely different story over at the SLV ETF...as they had a big withdrawal of 976,714 ounces. Someone needed a chunk of silver in a hurry.

The U.S. Mint had no sales report again yesterday.

The frantic activity continues over at the Comex-approved depositories...as more silver got shipped out of there on Wednesday. They reported receiving 7,046 troy ounces...but ended up shipping out 674,414 ounces of the stuff. It's been quite a number of years since the Comex's silver inventory is as low as it is now. As of their Wednesday report, they held 102,926,720 troy ounces...and almost all of it is very tightly held...and only for sale at far higher prices...if at all. The link to yesterday's delivery action is here.

I'm delighted to report that I don't have a lot of reading material for you today. But I'm saving a lot for my Saturday column because I have some rather large reads that I don't wish to post until I feel that you might have time to give them the attention they deserve.

¤ Critical Reads

Madoff Trustee Finds JPM Was Complicit in Ponzi Fraud

My first story today is from Washington state reader S.A. It's a posting over at zerohedge.com that's headlined "Madoff Trustee Finds JPM Was Complicit in Ponzi Fraud" [Why am I not surprised! They can add this lawsuit to the 25+ they have against them for rigging the gold and silver prices as well. - Ed] It's not a long read...but very much worth your while. The link is here.

View full GSD edition

JPMorgan 'ignored Bernard Madoff red flags'

The next story is exactly the same as the first one...but this one was filed in The Telegraph in London very late last night. The headline here reads JPMorgan 'ignored Bernard Madoff red flags': One of JP Morgan Chase’s London operations ignored a series of red flags over fraudster Bernard Madoff, according to a series of allegations made against the bank in a lawsuit that was unsealed in New York on Thursday. It's only three paragraphs...and the link is here.

View full GSD edition

The Real Reason for Rising Commodity Prices

GoldMoney founder and GATA consultant James Turk over at his Free Gold Money Report website, has something for us today. It's headlined "The Real Reason for Rising Commodity Prices". It's a great read...the graph is terrific...and the link is here.

View full GSD edition

ECB president Jean-Claude Trichet's rate retreat on commodity spike

While we're talking about commodity prices, here's a piece from The Telegraph that was also posted last night...and sent to me by reader Roy Stephens. It's an Ambrose Evans-Pritchard offering headlined "ECB president Jean-Claude Trichet's rate retreat on commodity spike". The European Central Bank (ECB) has taken a strategic gamble that the current surge in food and commodity prices is not a repeat of the inflation virus of the 1970s and will subside without the need for a monetary squeeze. If this isn't a classic case of 'whistling past the graveyard'...I don't know what is. The link is here.

View full GSD edition

Senate votes to repeal 1099 provision

Here's a story that I've been waiting patiently for, for quite some time now. Congress is one step closer to repealing the IRS 1099 reporting requirement that small-business owners were finding such a burdensome part of health care reform. Now we just have to wait and see what the house is going to do with it. The headline of the GATA release reads "Senate votes to repeal 1099 provision"...and the link is here.

View full GSD edition

Newmont pays 37% premium to acquire Fronteer Gold

My first gold related story today is a GATA release that was posted yesterday morning. Chris Powell's headline reads "Newmont pays 37% premium to acquire Fronteer Gold". The cash and stock transaction -- the latest in a string of deals targeting Canadian miners -- adds 4.2 million ounces of gold resource to the portfolio of the world's second-largest gold producer. This short read is well worth you time...and the link is here.

View full GSD edition

Gold Mining Acquisitions to Continue in 2011 & 2012

Eric King over at King World News posted a blog that will certainly be of interest after reading the previous story about the Newmont buyout of Fronteer. His blog is headlined "Gold Mining Acquisitions to Continue in 2011 & 2012". It, too, is worth the read...and the link is here.

View full GSD edition

China to raise gold, silver reserves in 2011

Casey Research's BIG GOLD editor, Jeff Clark, sent me the following piece last night that was posted over at commodityonline.com. It was filed from Beijing on Wednesday...and bears the headline "China to raise gold, silver reserves in 2011". I ran a story similar to this a few days ago, along with the comment that I would "believe it when I saw it." Buying more gold is one thing, but purchasing silver in size is a different kettle of fish entirely. If China decides to add silver to its list of 'rare elements'... it will be a day to remember in the silver market.

As you are aware, buying silver in size is becoming more than problematic. China mines a lot of silver on its own, but imports and refines a lot of silver concentrate from many mines in Central and South America. The moment they start hoarding that...well, I'll just leave it to your more-than-vivid imagination as to where the silver price might end up. The story is worth your while...and the link is here.

View full GSD edition

Fed can keep most gold secrets but must yield one, judge rules

Here's another news story that's exclusive to GATA. Chris Powell's headline pretty much says it all..."Fed can keep most gold secrets but must yield one, judge rules". Judge Huvelle ruled that most of the Fed's documents [pertaining to gold] were exempt from disclosure under the U.S. Freedom of Information Act for being "pre-decisional or deliberative" or for containing privileged or confidential commercial or financial information obtained from a person or corporation.

But the judge, Ellen Segal Huvelle of U.S. District Court for the District of Columbia, ordered the Fed to disclose to GATA a potentially crucial document by February 18th. Once it's in our hands, I'm sure there will be more information forthcoming. In my opinion, this is a must read...and the link is here.

View full GSD edition

Pensions Need Gold, the Currency of Hard Assets

Writing exclusively for King World News, Hinde Capital CEO and gold advocate Ben Davies details why gold has become indispensable to pension funds as government pension schemes collapse into insolvency. Davies' essay is headlined "Pensions Need Gold, the Currency of Hard Assets". This is another interesting read...and the link is here.

View full GSD edition

Go Global, Before It's Too Late

Lastly today is this essay by Casey Research's own David Galland. It bears the headline "Go Global, Before It's Too Late". For the most part, this article is directed to CR's American readership...but it's worthwhile for each of us to spend time on. David states, as he talks about his favourite movie...The Matrix..."In the United States and elsewhere, the reality is that while we are not raised in pods – but rather allowed to live our lives as free-range humanoids – the net result is much the same. In the eyes of officialdom, our best and highest purpose as individuals is to provide the fuel that keeps the bloated state operating." So, take the red pill...then click here. I thank reader U.D. for sharing it with us.

View full GSD edition

An Australian university student studying economics and finance was being interviewed by a major bank for a summer internship...and one of the managers jokingly [?] said: "We're a bank. Aside from academic achievement, we look for two qualities in a person...Honesty and integrity. The first sign of either and you'll be out the door."- courtesy of reader Michael Cheverton

With the structure of the Commitment of Traders Report as wildly bullish as Ted Butler can remember, I guess I shouldn't have been surprised to see the big jump in silver and gold prices during the New York trading session yesterday. But, to see it jump like that in the face of a sharply rising U.S. dollar, was something that I wasn't really expecting. Will this trend continue, you ask? The short answer is...I don't know...and the long answer is the same.

We did penetrate [and close above] the 50-day moving average in silver...but not by a lot. I'm curious to see whether this budding rally 'fails' at this juncture...or will the tech funds come pouring in on the long side and the rally continues. But it's the reaction of the bullion banks that will ultimately determine what happens. Are they prepared to go short against them...or will they put their hands in their pockets and let the silver price sail? Today's trading action should clarify things.

At the moment, the gold price is about $30 below its 50-day moving average...but, considering yesterday's price action, that's not a lot.

The CME's preliminary volume numbers show that gold traded around 195,000 contracts net of all roll-overs yesterday...and, if the preliminary open interest numbers are any guide, we're going to see a rather large increase in gold o.i. when the final numbers are posted later this morning. If that turns out to be the case, then yesterday's big run-up in the New York gold price was not short covering, but new long positions being put on...with the bullion banks taking the short side.

Silver's open interest, net of all roll-overs, was a pretty chunky 70,000 contracts...and I'm not a happy camper as I look at the preliminary open interest numbers there, either.

Today is the day when the new COT report is released. As you are aware, both Ted and I are more than curious as to what this report will show. The cut-off for this report was Tuesday at the close of trading, so nothing that happened on Wednesday or Thursday will be in it. If you follow the COT report...click here at 3:30 p.m. Eastern time, sharp.

London has been open for about two hours as I write this paragraph...and I note that gold is down about seven dollars...and silver is down about 15 cents. Volume is very thin in gold...and in silver, the volume numbers are microscopic. With volumes like that, I wouldn't read a thing into the price action. I would assume that we'll see all the major action occur during the New York trading session once again.

With the precious metals on the rise once more, there's still time to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Enjoy your weekend...and I'll see you here tomorrow.