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Message: Ed Steer this morning
Smell a Rat? Then Buy Some Gold.
China gold buying "stuns" precious metals traders - demand unbelievable. Another 415,538 ounces of silver depart the Comex. Bank Participation Report shows bullion banks fleeing the short side...and much more.
¤ Yesterday in Gold and Silver
Starting from the opening bell in the Far East on Friday, gold began a gentle decline...and by the Comex open at 8:20 a.m. Eastern yesterday morning in New York, the yellow metal was down about nine bucks. From there, the price turned on a dime and began to head higher, but ran into selling every step of the way...as the jobs report did not impress anyone, despite the spin from the White House.
The gold price peaked about 10:35 a.m. when the seller became real serious...and drove the price down twelve bucks...and into negative territory on the day...and that was basically it for the rest of the New York trading session. Gold finished down an even seven dollars from Thursday's close.
If you look at the New York Spot Gold chart on its own, you can see that gold really wanted to fly once the jobs numbers were reported at 8:30 a.m. Eastern. But it's just as obvious that there was a not-for-profit seller there to make sure that didn't happen. And, since plan 'A' wasn't working too well, the not-for-profit seller went to plan 'B' at 10:35 a.m...and that was that.
Silver suffered the same fate, of course...but did recover somewhat after its 10:35 a.m. whipping...and managed to close up 19 cents on the day.
But the 10:35 a.m. New York pounding didn't stop with silver and gold. Even more breathtaking were the vicious attacks on platinum and palladium, as their prices went vertical before a New York bullion bank beat both of them into submission.
Both these markets are very thinly traded, of course...and it doesn't take many contracts to affect the price one way or another. But it should be obvious to anyone that the price of both of these metals would have been materially higher if the New York bullion banks [read JPMorgan] hadn't been standing there with a big stick. Here's the palladium chart as a 'for instance'...and you can click here for the platinum chart.
The dollar was comatose right from the open in the Far East...and that condition lasted until the Comex open at 8:20 a.m. in New York. From there, the world's reserve currency rose about 40 basis points...reaching its high shortly before 11:00 a.m. Eastern. Then it proceeded to give back half those gains going into the close of electronic trading at 5:15 p.m. Not much to see here, folks...please move along.
Since gold was up on the day when the equity markets began trading...the stocks began on a positive note as well. It should come as no shock to anyone, that the high for the HUI on the day came at 10:40 a.m. in New York before JPMorgan et al laid into the precious metals complex. After the beatings had been administered, the stocks flopped around in slightly negative territory for the rest of Friday...and the HUI finished down a smallish 0.71%.
Despite silver's positive close, the silver equities turned in a decidedly mixed performance. Here's the HUI's 5-day chart for the week that was.
For whatever reason, the CME Delivery Report was not posted yesterday. As of 6:39 a.m. Eastern time Saturday morning, they're still showing Thursday's data.
The GLD ETF reported a smallish withdrawal yesterday. This time it was 13,302 ounces. The SLV ETF reported no changes.
The U.S. Mint finally had another sales report...although it wasn't particularly large. They reported selling another 7,500 ounces of gold eagles...along with another 76,500 silver eagles. For the first week of February, the mint has reported selling 13,500 ounces of gold eagles, along with 126,500 silver eagles.
It was another day of silver withdrawals over at the Comex-approved depositories on Thursday. They reported that 415,538 ounces were shipped to parts unknown. The link to the action is here.
Well, the Commitment of Traders report in silver wasn't all sweetness and light like I had hoped, as the three big up-days that we had during the prior reporting week negated all the improvements that we had prior to that. The Commercial net short position in silver actually increased by 1,655 contracts. Ted Butler says that all of this number was the '9 or more' Commercial traders [which he calls the raptors] taking profits by selling long positions into the rally that began in earnest on Friday, January 28th.
Selling a long position [in the Commercial category] has exactly the same effect on open interest as putting on a new short position in that same category. If these raptors hadn't sold these long positions, then the Commercial net short position would have shown no change...as the '8 or less' bullion banks showed no net change for the reporting week.
From its absolute low tick on the January 28th...to it's high tick yesterday...silver is up $3.00 from the prior week's COT report...with no increase in the bullion banks' short position.
The Commercial net short position in silver currently sits at 224.0 million ounces. The '4 or less' bullion banks are short 202.3 million ounces...and the '8 or less' bullion banks are short 253.1 million ounces of silver.
In gold, there was a slight improvement in the Commercial net short position...as it declined by 4,286 contracts...and currently sits at 19.3 million ounces...the lowest its been for at least a couple of years.
The '4 or less' bullion banks are short 16.7 million ounces of gold...and the '8 or less' bullion banks are short 21.9 million ounces.
Here's Ted Butler's "Days to World Production to Cover Short Positions" graph...as updated by Nick Laird over at sharelynx.com...who managed to survive Tropical Cyclone Yasi in one piece.
Well, February's Bank Participation Report was issued on Friday morning...and it was an education. The U.S. bullion banks reduced their short position in silver by 3,405 Comex contracts during the month of January. The non-U.S. banks actually increased their net short position by 335 Comex contracts.
As of Tuesday, February 1st...the U.S. bullion banks [virtually all JPMorgan] are short 94.7 million ounces of silver...and the remaining eleven non-U.S. banks are short 17.3 million ounces of silver. Some simple arithmetic shows that for every ounce that the foreign banks are short silver on the Comex...JPMorgan is short approximately 60 ounces of silver on the Comex.
In gold, the four U.S. bullion banks reduced their net short position by 14,037 Comex contracts...and the fourteen non-U.S. bullion banks dropped their Comex short position in gold by a whopping 22,603 Comex contracts.
In ounces, these four U.S. bullion banks are short 7.8 million ounces...most of it held by JPMorgan...and virtually all the rest by HSBC USA. The fourteen non-U.S. banks are short 3.46 million ounces of gold...or around 247,100 ounces each.
It's not rocket science here, dear reader. The numbers show that the U.S. bullion banks run the precious metals show with JPMorgan being the tallest hog at the trough in both silver and gold.
But the other thing it shows is that [for the second month in a row] just about everyone is heading for the exits across the board...and it will be interesting to see how the next BPR stacks up against this reporting period.
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¤ Critical Reads
SubscribeDavid Stockman: Listen Up Folks
As I hinted at yesterday, I have a lot of reading material for you today...including several big reads and videos that I've been saving all week. All of it is going to be dumped in this column...and you can pick and chose.
My first offering is courtesy of reader Roy Stephens...and it's a posting over at market-ticker.org. It's a CNBC video clip that features David Stockman. In it, he talks about yesterday's jobs numbers...and he just eats the talking heads alive. The interview starts at the 3-minute mark...and runs about 8:10 from there. It's worth watching...and is headlined "David Stockman: Listen Up Folks". The link is here. By the time you get around to reading this column, you may have to scroll down a bit to find the story.
Outside View: Jobs drought continues with little relief in sight
Before leaving the jobs report, here's a UPI piece on this issue that was also sent to me by Roy Stephens. The headline reads "Outside View: Jobs drought continues with little relief in sight". It's a short read that gilds no lilies...and the link is here.
Taleb Advises ‘First’ Avoid Treasuries, Then Dollar
Today's next offering is courtesy of Australian reader Wesley Legrand. It's a Bloomberg piece from Thursday that's headlined "Taleb Advises ‘First’ Avoid Treasuries, Then Dollar". Nassim Taleb, author of The Black Swan said the “first thing” investors should avoid is U.S. Treasuries and the second is the dollar. The link to the story is here.
Jim Rogers Tells CNBC To Change Its Name To CommoditesNBC, Sees Oil At $150, Is Short Nasdaq ETFs, Expects More Governments To Collapse
Today's next CNBC video clip is imbedded in a zerohedge.com piece...and was sent to us by Washington state reader S.A. The longish headline reads "Jim Rogers Tells CNBC To Change Its Name To CommoditesNBC, Sees Oil At $150, Is Short Nasdaq ETFs, Expects More Governments To Collapse". Jim takes no prisoners...and carves the interviewers a new one. Tyler Durden's preamble...and the video clip itself, which runs 9:33...are more than worth your time...and the link is here.
Sovereign Credibility and Bank Runs
Here's a piece that I stole from Friday's King Report that I feel deserves to be on your must read list this weekend. It's a blog [from January 5th] posted over at the Council on Foreign Relations that's headlined "Sovereign Credibility and Bank Runs". In the midst of the financial crisis of 2008, governments helped to prevent bank runs by guaranteeing bank debts. Yet, as sovereign solvency itself becomes an issue, such guarantees quickly lose their value. If Ireland provides a rule of thumb, bank runs can be expected once sovereign credit default swap yields pass 3%. The story contains an excellent chart and one paragraph of text, so it won't take you long to blast through it...and the link is here.
WikiLeaks cables: US agrees to tell Russia Britain's nuclear secrets
Here's a real interesting story that reader Craig McCarty sent out yesterday evening. It was posted late last night in The Telegraph in London. The headline reads "WikiLeaks cables: US agrees to tell Russia Britain's nuclear secrets". Information about every Trident missile the US supplies to Britain will be given to Russia as part of an arms control deal signed by President Barack Obama next week. The fact that the Americans used British nuclear secrets as a bargaining chip also sheds new light on the so-called “special relationship” between these two countries...and is often shown to be a one-sided affair. Wow! If the USA is your friend...who needs enemies...and the link to the story is here.
Three Eric King blog/interviews
Next, I have Three Eric King blog/interviews that were just posted over at King World News. I've had no time to read/listen to any of them...so I will just post the title, plus the link to each. One can assume, by looking at the list of people interviewed, that they are all precious metals-related in one form or another.
1] Silver Shortages Continue According to Pan American CEO [blog]
2] Interview with Ben Davies of Hinde Capital [audio interview]
3] Interview with GoldMoney's James Turk [audio interview]
China gold buying "stuns" precious metals traders - demand unbelievable
I only have two other gold-related stories today...and this one I received from many readers yesterday. It's a piece that's posted over at the mineweb.com. It's basically a re-hash of a Financial Times story that I ran in this column a few days back. I wasn't going to run it because of that fact, but decided to include it here at the last moment. It's only a handful of paragraphs in length...and if you decide to pass on it because you read the original FT story in the GATA dispatch I posted, you're probably not missing much. The headline reads "China gold buying "stuns" precious metals traders - demand unbelievable"...and the link is here.
Smell a rat? Then buy some gold
The other gold-related story is a Bill Bonner offering from The Daily Reckoning that's posted over at the Christian Science Monitor...and I thank reader Kevan Crozier for sharing it with us. The headline reads "Smell a rat? Then buy some gold"...and the link is here.
The Economic Crisis: When Irish Eyes Are Crying
My last five items are all big reads or long video presentations that I've been saving all week, because there was no way that I was going to post them on a week day.
The first was sent to me by Casey Research's own John Grandits. It's from the March edition of Vanity Fair...and the headline reads "The Economic Crisis: When Irish Eyes Are Crying". First Iceland. Then Greece. Now Ireland, which headed for bankruptcy with its own mysterious logic. In 2000, suddenly among the richest people in Europe, the Irish decided to buy their country—from one another. After which their banks and government really screwed them. So where’s the rage?
This is the deep inside story of how Ireland destroyed itself in eight short years...little of which you'll ever see in the main stream media. So put on a pot of coffee...and then click here.
Crouching tiger, soaring cranes, rumbling doubts
Reader Anson Lau from Shanghai was kind enough to send me the following essay earlier this week. It's from last Saturday's edition of the Sydney Morning Herald...and the headline reads "Crouching tiger, soaring cranes, rumbling doubts". It's the inside scoop on a real estate market gone mad on the back of a white-hot economy. As a 27-year veteran of the residential real estate market in Edmonton, what I've read here is a sure sign that at some point in the future, the whole thing has to come crashing down...as I've seen this sort of madness on a much smaller scale a couple of times during my real estate career. You can't make this stuff up. It's one hell of a read...and the link is here.
Global Economic Recovery: An Australian Perspective
Australian reader Wesley Legrand sent me the following 26-minute video of a fight between the bulls and the bears in the "land down under". It's always interesting to see how world economic, monetary and financial conditions are perceived when the commentators are far removed from both Europe and North America. Wesley Legrand is a major participant in this exchange and is, of course, on the 'bears' side of the argument. The headline reads "Global Economic Recovery: An Australian Perspective"...and the link is here.
Cheviot Asset Management's Sound Money Conference at Guildhall in London
Lastly today, is a video presentation of all the main speakers that presented at the Cheviot Asset Management's Sound Money Conference at Guildhall in London on January 27, 2011. They have been posted at the Cheviot Internet site. Among them are the presentations made by GoldMoney founder and GATA consultant James Turk, Hugo Salinas Price of the Mexican Civic Association for Silver, and GATA's secretary treasurer, Chris Powell. The links to all speeches are in the right side-bar. Unfortunately, the speakers are not identified, so you have to click on each link to find out who is presenting each talk.
After the introduction, I know that James Turk is the first speaker that's up to bat...followed immediately by GATA's Chris Powell, then Hugo Salinas Price. There are enough speeches here to keep you off the streets for the rest of the weekend. It's almost like getting free admission to this conference. Maybe a cold six-pack...or a bottle of wine might be in order before you hit the play button. The link is here.
¤ The Funnies
Trays with gold ingots are placed in a room for final weighing and packaging at the Krastsvetmet plant in the Siberian city of Krasnoyarsk - Reuters/Ilya Naymushin
Gold figurines on display in a shop window in Hong Kong - Mike Clarke/AFP/Getty Images
Gold bars are pictured at the Ginza Tanaka store in Tokyo - Reuters/Issei Kato
¤ The Wrap
Today's 'blast from the past' is one that was sent to me by reader Bill Wiltse earlier this week. For those who may have forgotten the Marx Brothers...and for those of you who have only heard of them [or maybe not]...did you know that Chico and Harpo were a great piano duet? This video was from the 1941 film The Big Store. It's a hoot to watch...and fun to listen to. The link to the youtube.com video is here.
Well, despite the fact that the entire precious metals complex wanted to take off for the moon and the stars, it was not to be...as a not-for-profit seller was ever vigilant. With the Commitment of Traders in both gold and silver the best they've been in years, one has to wonder when JPMorgan and Co. will stand back.
Volume was very light on Friday...particularly in gold...so it wasn't too much effort on the part of the New York bullion banks to keep gold and silver in check. Preliminary open interest numbers for Friday's trading do not warm the cockles of my heart one bit.
As far as open interest changes on Thursday are concerned...gold o.i. was 3,930 contracts, with silver open interest up a rather chunky 4,350 contracts. Ted figures that some of this silver open interest increase might have been spread related. We won't have an inkling of that until next Friday.
Without doubt, the day of financial reckoning is fast approaching. And, as I've said many times over the years...if the Federal Reserve stopped propping up everything that wanted to crash...and stopped suppressing everything that wanted to blast off...the world's economic, financial and monetary system would be a smouldering ruin within five business days. That's unavoidable anyway...and all they're doing is prolonging the agony.
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.
See you on Tuesday.
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