More Q.E. Could Send Silver Above $50

As I mentioned in the closing paragraphs of my column on Thursday, the gold price had recovered back to Wednesday's closing price of $1,435.70 spot before a not-for-profit seller showed up. From that point, the gold price got sold off another three or four times during London and New York trading sessions...and gold closed down over $20...but off its low of the day...which was $1,409.40 spot.

I also mentioned in yesterday's column that silver was "knocking on the $35 door" around 1:30 p.m. Hong Kong time on Thursday before it, too, got smacked...and from that point, followed the gold price down for the rest of the day. As you can see from the chart below, silver [like gold] made many attempts to recover, but got sold off every time it tried to advance any significant amount. From its high to its low on Thursday...silver was down about 80 cents...but [like gold] did not close on its low.

The dollar didn't do a lot between the Far East open and the Comex open at 8:20 a.m. Eastern time in New York. Then, over the next 35 minutes, the dollar cratered by about 40 basis points...and recovered a bit of that before the 5:15 close of electronic trading.

During this mini-crash in the dollar...and within the space of less than 10 minutes...the gold price got smacked by eleven bucks. Go figure. It's quite obvious that the dollar paid no part in the gold and silver price shenanigans on Thursday.

The gold stocks, which gapped down more than 2% at the open...hit their nadir minutes before 12:30 p.m. Eastern. From there...and despite the negative price action...the HUI rallied into the close of trading. It ended virtually on its high of the day...down only 1.11%. The silver stocks, most of which were down pretty big as well, recovered nicely too. Of the eighteen different silver and gold stocks I own...five of them were actually up on the day. But, now that all is said and done, I must admit that I really don't know what to make of Thursday's price action...in the metals, or in the shares.

Opening the CME's Daily Delivery report on Thursday was a relief at first...as 40 gold contracts were posted for delivery on Monday. But, when I scrolled down to check the silver deliveries, there weren't any to be found for the second day running. This is now beyond bizarre...and, as I said yesterday, it's almost right out of the Twilight Zone. The link to yesterday's action is here.

There was a smallish withdrawal from the GLD ETF yesterday...only 10,946 ounces, which may have been a fee payment. The SLV ETF added 976,380 ounces of silver yesterday.

The U.S. Mint had no report.

Wednesday's report from the Comex-approved depositories showed that a very small 26,775 ounces of silver were received..and 36,305 ounces of silver were shipped out. Nothing to see here.

Washington state reader S.A. sent along this neat graph titled "Money Leaders". It's self explanatory. From this graph, the US dollar's position looks pretty solid.

¤ Critical Reads

Zell: Dollar's Global Fall Will Be 'Disastrous’ for US Living Standard

In line with the graph above, here's another story about the demise of the U.S. dollar. Billionaire real-estate magnate Sam Zell warns that Americans should brace for a "disastrous" 25 percent decline in the standard of living if the U.S. dollar’s reign as the global reserve currency ever ends. He says that there are signs in the market that it could eventually happen. This is a longish read, but worth it if you have the time. I thank reader Ray Wiberg for sending this story along, which is posted over at moneynews.com...and the link is here.

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U.S. postal service faces cash shortage by end of year

Today's next two stories are courtesy of reader Scott Pluschau. The first is an AP story. Unless things change, the post office will run out of money by the end of the fiscal year in October, Postmaster General Patrick R. Donahoe told the House Oversight subcommittee on the postal service.

Donahoe said that as of Sept. 30 his agency will owe the federal government a payment of $5.5 billion to fund medical costs, in advance, for future retirees...and in November it will need to make a $1.3 billion payment for worker's compensation.

These entitlement programs will bleed the western world dry...and note today's cartoon. The link is here.

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World Food Prices Climb to Record as UN Sounds Alarm on Further Shortages

Scott's second offering today is a story that was posted over at Bloomberg yesterday. An index of 55 food commodities rose 2.2 percent to 236 points from 230.7 in January, the eighth consecutive gain, the UN’s Food and Agriculture Organization said yesterday. Wheat rose as much as 58 percent on the Chicago Board of Trade in the past 12 months, corn gained 87 percent and rice added 6.5 percent. This is a long read, but if you're interested in eating three meals a day for the rest of your natural life...this is worth your time. Here's the link.

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Announced U.S. Job Cuts Rose 20% From Year Ago, Challenger Says

This Bloomberg story is one that I stole from yesterday's King Report..."Planned firings increased 20 percent to 50,702 last month from February 2010, the first year-over-year gain since May 2009, according to a report today from Chicago-based Challenger, Gray & Christmas Inc. Announcements at federal, state and local government offices almost tripled from last year." This is worth the read...and the link is here.

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What is gold telling us? Gold’s gains may have meaning beyond the market

My first gold-related story is courtesy of reader U.D. It's commentator Peter Brimelow over at marketwatch.com. He notes that gold reached a new high on Wednesday...and asks if that is telling us something. This story is definitely worth reading...and the link is here.

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Global Gold Mining Production: An Interactive Map

Gold-producing countries are found on all continents, and represent the gamut of economies from developed super-powers to small, emerging market countries. With gold’s spectacular rise in price and related demand, it’s worth your time to know a little bit about where all the gold comes from. All you have to do is click on the map to learn more about each country's gold production. This interactive map is posted over at U.S. Global Investors...and the link is here. I thank reader U.D. for this piece.

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The Seasonality of the Longwave Principal

Canadian reader John Sawkins provides today's next item that's was posted over at The Gold Report earlier this week. It's a short piece by my good friend Ian Gordon over at Longwave Group. He has been asked: "Under what circumstances would he change policies and start investing in areas other than gold." That's easy, he said. I'll move my investment money out of gold and gold shares and into the general stock market when the Dow:Gold ratio reaches an extreme low. You won't believe how extreme that low is...and you can find out by clicking here.

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In Colombia, New Gold Rush Fuels Old Conflict

I stole this from a GATA release yesterday...and it's a story out of The New York Times. Now the Columbian warlords are getting into the gold mining business. The result is a gold rush unlike any now under way in South America, both feeding off Colombia’s evolving conflict and keeping it alive. Up and down the sweltering river basins around Medellín, miners from across Colombia are flocking to sites where backhoes are tearing up forest and tree canopies, leaving behind lunaresque landscapes. This is a 2-page story which is well worth reading...and the link is here.

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More QE could send silver above $50, Hathaway tells King World News

Silver could rise to $50 or $60 if quantitative easing continues into July, Tocqueville Gold Fund manager John Hathaway told King World News yesterday. Of course, as you well know dear reader, that's not the only reason why silver could be at those prices [or higher] sometime this year. The link to this short must read blog is here.

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It was a strange day in the precious metals market yesterday. The rally was obviously killed in its tracks in the early going...and its hard to tell whether an intermediate top is being painted here or not. The price action also indicates that instead of longs selling their positions or bids being pulled...their could be some shorts being placed.

Of course, if we see a major sell-off at this point, we don't have to look to far for the culprit.

But the situation in silver is beyond twisted...and as Ted Butler told me yesterday, something is definitely amiss in with silver at the moment...as it is the most bifurcated market he has ever seen. The price, the deliveries, the physical tightness...and the backwardation situation are all way out of sync. Things just don't add up...and it's the resolution of these issues that he is waiting for.

Thursday's volume in gold was much higher than Wednesday's volume...and just eyeballing the preliminary open interest number, I'd say that gold's o.i. may have deteriorated by a couple of thousand contracts at most.

Gold's final open interest number for Wednesday's trading day showed an increase in o.i. of 2,947 contracts...which is pretty much the number I guessed at in this column yesterday.

Silver's volume yesterday was also considerably heavier than on Wednesday...and I'm not sure how to read the open interest number. It's higher than it should be considering silver had a big down day yesterday...so maybe the big preliminary o.i. number indicates that short contracts were being placed...and I'm just speculating about that. I'll know for sure when the final figures are posted on the CME's website later this morning.

Wednesday's final open interest number in silver showed a further decline. This time it was a smallish 289 contracts...but still heading in the right direction. This was a slightly better number than I predicted in yesterday's column.

March open interest in silver has now slid down to 1,876 contracts...which is a very tiny number...and may shrink a bit more as the days pass. Now all we have to do is wait for the delivery notices to go out...and, as you already know, there have been none of those in the last two days.

The backwardation situation is still there. The spreads in the nearby months have widened out just a hair...but is in backwardation once December 2011 rolls around. The backwardation out to December 2015 is basically unchanged at $1.065.

Today, at 3:30 p.m. Eastern time sharp...we get the latest Commitment of Traders Report...for positions held at the close of trading on Tuesday, March 1st. At the appropriate time, you can click here to get the new report.

In Far East trading during their Friday, gold rose a bit...but the silver price was really starting to head higher until precisely 10:00 a.m. Hong Kong time when someone showed up to sell it off. Silver is still up about twenty cents as of this writing...and gold is up less than a dollar.

But now that London has been open for about ninety minutes...both metals are adding to their gains from the Far East trading day. Gold is up about four bucks...and silver is up thirty-three cents, as of 4:43 a.m. Eastern time. Volumes in both metals can only be described as moderate at best.

Today we get the jobs report at 8:30 a.m. Eastern time...about ten minutes after the Comex opens...and it will be interesting to see how gold and silver are allowed to 'react' to whatever numbers are published. The "planned firings" mentioned in the Bloomberg story in the 'Critical Reads' section doesn't paint a particularly happy picture...but it's surprising what fairy tales the BLS can weave when they're trying to make a silk purse out of sow's ear. We'll find out soon enough just how well they did.

There's still a bit of time left 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.

Have a great weekend...and I'll see you here tomorrow.