Global Gold Demand Hit 10-Year High In 2010

Although Wednesday's activity looks impressive on the Kitco graph below...nothing much happened yesterday...at least not on the surface. Gold's low of the day [$1,367.40 spot] came at the London p.m. gold fix around 3:05 p.m. GMT...which is 10:05 a.m. Eastern. From that low, gold rallied a bit...and then really caught a bid shortly before 11:30 a.m. The vertical price spike was hammered flat about forty-five minutes later...and gold behaved itself for the rest of the New York trading day. The spike high was recorded at $1,383.30 spot.

The price action is silver was, as always, more 'volatile'. After hovering around both sides of $30.80 for most of the Far East and London trading day, silver got sold down a couple of times shortly after the Comex open, with the low...surprise, surprise...also coming at the London p.m. gold fix about 10:05 a.m. Eastern time.

From there, a substantial rally began that ended at the same time as the gold price rally did...12:15 p.m. in New York...and at the very moment that silver stuck its nose above the thirty-one dollar price mark.

Silver's low and high for the Wednesday were both set in New York trading. The low was $30.29...and the high was $31.02 spot. That's quite a range.

Once the silver price was back under control, it quietly traded sideways for the rest of the day.

The dollar was down about 40 basis points by 3:00 p.m. Hong Kong time during their Wednesday afternoon trading day. From there, the dollar began a rally that gathered considerable strength by 10:00 a.m. in London...and hit its zenith about 8:45 a.m. New York time...when it was up 55 basis points from it's Hong Kong low. The dollar then rolled over hard...and lost all those gains by shortly after 12 noon Eastern. From there it basically traded sideways for the rest of the Wednesday trading session. The dollar was down about 35 basis points on the day.

I guess there was some correlation between the world's reserve currency and the gold price action yesterday...but it certainly wasn't an exact relationship.

Once again, the gold equities pretty much followed the gold price, at least in the early going. The stocks hit their nadir around the London gold fix...and then headed higher...topping out at 12:15 p.m. in New York, when gold and silver hit their high ticks. But, despite the fact that both metals got sold down hard after that, the gold stocks almost closed on their highs of the trading session. This is the third day in a row that we've seen this sort of counterintuitive price action in the gold stocks. And, as I said yesterday, maybe these buyers know something that we don't.

Yesterday's Daily Delivery Report from the CME wasn't very exciting, as they only reported that 4 gold contracts would be delivered on Friday...and nothing in silver.

Nothing very exciting happened at either ETF yesterday,as neither GLD or SLV had a report.

The U.S. Mint reported selling another 25,000 silver eagles yesterday.

Over at the Comex-approved depositories, their report showed that they shipped out 302,311 ounces of silver on Tuesday...and none was received. The link to that action is here.

Here's Nick Laird's Silver Sentiment Index that shows how seven of the world's largest silver producers are doing. Nick says that "The Silver 7 Index & the PM Funds Index are moving up nicely. We should have breakouts to new highs soon..."

¤ Critical Reads

PIMCO Total Return Fund pares U.S. government-related debt

Despite my best editing efforts, I have another pile of stories for you to sift through today. As always, I leave the final edit up to you.

My first story is a Reuters piece that's courtesy of reader Bill Brunskill. The headline needs no embellishment from me...and reads "PIMCO Total Return Fund pares U.S. government-related debt". Bill Gross is now following China's lead...and the link to the story [which is only a handful of short paragraphs] is here.

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Liberty Mutual Says U.S. Deficits ‘Debase the Dollar’

Not to be outdone by the like of Bill Gross, here's a Bloomberg story [with thanks to Scott Pluschau] that points out that one of America's largest insurance companies has also cottoned on to all the Fed's money printing...and are heading for the exit door on the U.S. dollar as well. The headline reads Liberty Mutual Says U.S. Deficits ‘Debase the Dollar’. It's not an overly long piece...and the link is here.

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The Coming Food Envy

There was a very short piece that was imbedded in Casey's Daily Dispatch yesterday that's more than worth your time. It's headlined "The Coming Food Envy" by author Kevin Brekke. You have to scroll down just a bit to find it...but it's an education when you do get there. As I said, it's worth the read...and the link is here.

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Another Look At Inflation: Cotton Up 44% YTD - One Percent Per Day

Reader Mike Molleur provides today's next reading material. It's a posting over at zerohedge.com that's headlined "Another Look At Inflation: Cotton Up 44% YTD - One Percent Per Day". There's a nifty graph...and only one measly paragraph of text...so this won't take a lot of your time. The link is here.

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Rising food prices push millions into poverty

Roy Stephens has the following story that was posted over at the france24.com website on Tuesday. The headline reads "Rising food prices push millions into poverty". World Bank President Robert Zoellick has warned that global food prices have reached “dangerous levels” and pushed an estimated 44 million people into poverty over the past year, an effect he says could contribute to political instability. The man has a keen grasp of the obvious...and the link is here.

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Iran’s Leader Derides Protests; Lawmakers Urge Death for Opposition Leaders

Roy's next offering is this piece from Tuesday's edition of The New York Times. The headline reads "Iran’s Leader Derides Protests; Lawmakers Urge Death for Opposition Leaders". It's a bit of a read, but it appears that Iran's leaders are in a bit of a spot...and the link is here.

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Oil rises to $104 a barrel

Roy's last offering is this piece from The Telegraph late last night. The headline reads "Oil rises to $104 a barrel". The price of Brent crude flirted with two-and-a-half-year highs amid fresh concerns about tensions in the Middle East. The link is here.

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Saudi, Jordanian Columnists Attack U.S. Policy in Middle East

The next piece on the goings-on in the Middle East was sent to me by reader U.D. It's posted over at the memri.org website...and is headlined "Saudi, Jordanian Columnists Attack U.S. Policy in Middle East". It's a boots-on-the-ground perspective on things Arabian and Persian, far away from the Wall Street spin machine. For that reason alone it is very much worth the read...and the link is here.

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Doug Casey on Revolution in Egypt and Beyond

I'll leave the last word on what's happening in the Middle East up to our own Doug Casey. His views are well know to me...but maybe not well known to you. So be prepared to educated...and a bit shocked with some of the things he has to say. But don't be surprised...as it's just Doug being Doug. The interview is conducted by Louis James, editor of the International Speculator. The headline reads "Doug Casey on Revolution in Egypt and Beyond"...and the link is here.

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Interview With Eric Sprott

My first precious metals-related story is one that I ran yesterday where the link didn't work. It was the Interview With Eric Sprott by Dr. Dave Janda over at WAAM 1600 in Ann Arbor, Michigan. The link worked fine for me when I checked it before sending it off to get posted...but something strange obviously happened in cyberspace...so here's the link once again. Eric spends a lot of time talking about the silver market...plus other things.

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Don't go Dutch

The story about the Dutch pension fund that may be forced to sell its 13% allocation to gold bullion is not going away. As Netherlands reader Ronald Langereis put it to me yesterday..."The Dutch central bank argued that, by doing so, the pension fund breached the "prudent-person" rule, as gold as a commodity doesn't qualify for investment over an average percentage of 2.7% for commodities. The pension fund's point of view, that gold shouldn't be regarded as a commodity but rather as a "medium of exchange", wasn't swallowed by the CB. They ordered them to sell their gold possessions down to the limit of 2.7%. The CB motivated its standpoint by stating that gold can't be considered a "medium of exchange", because of its too high price volatility...which, of course is a lame, if not ludicrous, argument."

On exactly this issue comes this 3-page essay from the U.K. firm PFP Wealth Management. The rather cute headline reads "Don't go Dutch". It's all about this pension fund and its golden problems...and where it all might lead. The link to the story is here.

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Obama Administration calls for 5% royalty on gross proceeds of mines

Here's Mike Molleur's second offering in this column today. It's a story that showed up posted over at mineweb.com...and bearing the headline "Obama Administration calls for 5% royalty on gross proceeds of mines"...The Obama Administration has called for a hard rock mining royalty and a new hard rock AML fee, along with other fees and tax increases for coal mining. The link to the story is here.

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China gold demand growing at "explosive" pace: ICBC

Here's a Reuters offering that I ripped out of a GATA release yesterday. The headline reads "China gold demand growing at "explosive" pace: ICBC". Demand in China for physical gold and gold-related investments is growing at an "explosive" pace and its appetite for the yellow metal is poised to remain robust amid inflation concerns, said an Industrial and Commercial Bank of China (ICBC) executive. What's not to like about this story, one wonders...and the link to the rest of it is here.

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Gold Imports by India Reach Record on Jewelry Sales

And this just in from Russian reader Alex Lvov at 2:08 a.m. Eastern time...a Bloomberg piece that was filed from Mumbai early in their Thursday business day. The headline says it all..."Gold Imports by India Reach Record on Jewelry Sales". [Gold] purchases totaled 918 metric tons in 2010, according to provisional data released today by the World Gold Council. That exceeds the projection of about 800 tons made last month by Ajay Mitra, the group’s managing director for India and the Middle East. More than 50% of world gold production disappeared into the Chinese and Indian markets last year. The link to the story is here.

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World Gold Council: Global Gold Demand Hit 10-Year High In 2010

Reader 'David in California' sent me the following piece that was posted over at Kitco at 1:00 a.m. Eastern time this morning. The headline says it all..."World Gold Council: Global Gold Demand Hit 10-Year High In 2010". Knowing the WGC as we at GATA do, it wouldn't surprise us in the slightest if they understated demand...and overstated supply. They have an unblemished track record in that regard. But, the article is worth your time...and the link is here.

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Any hedging by silver miners won't diminish short squeeze, Turk says

Today's last story is a GATA release that Chris Powell has headlined "Any hedging by silver miners won't diminish short squeeze, Turk says". Powell's preamble...and the link to the King World News blog itself...is here...and it's a must read.

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We have so much unemployment, it is so undercounted. The free market economists report that there is probably 22% of unemployment. They [the Fed] pumped in $4 trillion, they should have added a lot of jobs, but how much did it cost us, and that of course is the price inflation that will come. We are moving into another 30 year period where we are going to see a reversal of interest rates, and we are going to see a crashing of the bonds like we saw 30 years ago and it's going to last a long, long time. The Fed deserves the blame for the inflation, and for the unemployment.- US Congressman Ron Paul.

It should be obvious that, for the second day in a row, there was a willing seller ready to put the boots to a breakout in both gold and silver. Volume in gold was up for the third day in a row...around 125,000 contracts traded. The preliminary open interest numbers didn't impress me, either.

Silver volume was decent...and there are lots of roll-overs into the May silver contract...but silver's open interest in March only dropped by 2,329 contracts. Without doubt, that number will be revised when the final figures are posted later this morning. Preliminary open interest numbers for the Wednesday trading day may show a slight increase in silver o.i. when they're posted later as well.

Tuesday's gold open interest came in big, just as I expected...as o.i. rose 8,035 contracts. As for silver...after Monday's huge jump in open interest...I was hoping that Tuesday's number would show a bigger decline than the 352 contract decline reported. But it was not to be. These numbers will be included in Friday's Commitment of Traders Report.

The spreads in silver tightened up some more yesterday. The March contract settled at $30.629 the ounce...and May settled at $30.644 the ounce. The difference is only 1.5 cents per ounce. Silver is not in backwardation, but it's getting closer by the day. According to yesterday's settlement data from the CME...silver is not in true backwardation until the very thinly-traded March 2012 contract...and then only by about three cents.

Both Ted Butler and I feel that something is definitely up in the silver market. Everything looks ready to blow sky high. I can tell you for an absolute certainty, that I'm going to be buying physical silver today like it was the last day it was ever going to be under $31/ounce.

Here's something that was sent to me from Casey Research HQ that may be of interest to some. It certainly got my attention when I read it. Here's the pitch...

Exciting news! EverBank is going to offer a new MarketSafe® CD starting February 17, 2011. It's called MarketSafe® Diversified Commodities...and is available for deposits starting February 17, 2011 – in the afternoon. The funding deadline is March 17, 2011.

The components are:

· A 5-year term...and it's comprised of 10 commodities – equally weighted: WTI Crude Oil, Gold, Silver, Platinum, Soybeans, Corn, Sugar, Copper, Nickel and Lean Hogs. There will be 5-annual pricing dates...and the minimum to get is $1,500. There are no fees...and it's IRA eligible.

Just as a reminder, this product is 100% principle protected. There is no downside! So, no matter what the commodities do at the end of the term, investors will receive 100% deposited principle protection. Your maximum upside will be the sum of the average returns for years 1-5, based on the Spot Price as of each Pricing Date relative to the Spot Price on the Initial Value Date; subject to a 10% cap and -20% floor for each commodity.

As mentioned above, the funding deadline is March 17, 2011 – this date reflects when your account needs to be opened and deposit received. The product will be available on EverBank's website on the afternoon of February 17, 2011. That's today!

So, if you're at all interested...and it looks appealing to me...all you have to do is click here sometime this afternoon...and all will be revealed to you.

The gold price has been inching higher all night long...and is up three bucks now that a couple of hours worth of trading has gone by in London. Silver has been struggling...and got sold off at the beginning of London trading...and is down about a nickel as of 4:51 a.m. Eastern time. Needless to say, the New York trading day will be the place where all the action happens once again...and be ready for anything once the Comex opens at 8:20 a.m. this morning.

That's quite enough for today...and I'll see you here tomorrow.