Approved, Gold and Silver Money Bill Goes to Utah's Governor

Up until 7:00 a.m. in London on Thursday morning, there had been virtually no change in the gold price since the New York close the previous afternoon. But, as I pointed out in the closing paragraph of yesterday's column, a sharp rally had begun in the dollar a few hours before that...and the gold price was under pressure, but it was too soon to tell whether this was the beginning of a serious decline.

As is now self-evident...that's exactly what ended up happening. The gold price popped a bit at the Comex open...but then there were three bouts of selling [or shorts being placed] after that, that dropped the price to its low of the day [$1,402.00 spot] around 11:45 a.m. Eastern.

There was a robust rally going into the close of Comex trading at 1:30 p.m...but gold got sold off a tad after electronic trading began...and the gold price then traded sideways into the close of electronic trading at 5:15 p.m. in New York.

Silver got hammered pretty good as well...starting at the same 7:00 a.m. London time. Silver's low [$34.66 spot] came an hour earlier than gold's low...at 10:45 a.m. Eastern. The silver price also rallied right into the close of floor trading...and then traded sideways from there.

The rally in the dollar began shortly before 10:00 p.m. Eastern time Wednesday night...which is 3:00 a.m. in London on Thursday morning. This rally in the dollar had no immediate effect on the either the gold or silver price...and it wasn't until four hours later when a sharp 20 basis point rally in the dollar at 2:00 a.m. Eastern time...7:00 a.m. in London...that the gold and silver prices reluctantly rolled over and headed south. I would bet some serious coin that the gold and silver prices had some help 'rolling over' as well.

From bottom to top, the dollar rallied a bit over 65 basis points...with the absolute high coming about 3:15 p.m. in New York...many hours after gold and silver's lows were in, both had rallied...and had traded sideways in electronic trading.

Lots of pundits will say that it was the dollar rally that did the precious metals in yesterday...which you can see for yourself is patently false. Here's all the action from midnight in New York [5:00 a.m. in London] onwards.

Here's the platinum chart from yesterday. Note platinum's high also came at the same 2:00 a.m. time...after basically trading sideways before that. The bottom was essentially in by noon in New York...even though there was a spike low at 2:00 p.m. Eastern. There's nothing dollar-related about this price decline, either. Yesterday's price graph is the red trace.

The shares all got crushed yesterday...especially the silver shares...reinforced by the decline in the general equity markets. The shares recovered somewhat as the day wore on...and you can see the price spike that occurred at 1:30 p.m. when both metals were at their respective recovery highs at the close of Comex trading.

That bit of excitement gradually dissipated...but the shares did not finish on their absolute lows. However the HUI finished down 3.37%...which is a lot. And as I said yesterday, all the momentum/day traders were heading for the exit door at the same time...and the rest of them left yesterday.

The CME Daily Delivery Report showed that 1 [one] gold and 35 silver contracts were posted for delivery on Monday. At this rate, not all the contracts standing for March delivery are going to get their silver. How this situation resolves itself is of keen interest to both Ted and myself.

Their were no reported changes in either the GLD or SLV yesterday.

The U.S. Mint had another sales report yesterday. They added 14,000 ounces of gold eagles to their sales volume yesterday...along with a very small 48,500 silver eagles. Month-to-date the mint has sold 32,500 ounces of gold eagles, along with 717,000 silver eagles.

It was another busy day over at the Comex-approved warehouses on Wednesday. They reported receiving 419,342 ounces of silver...and they shipped 107,534 ounces out the door. The link to the action is here.

Here are a couple of graphs that were sent to me by Washington state reader S.A. yesterday. I believe I've run this first one before. It bears the self-explanatory title of "Gold and Gold Mining Shares as a Percent of Global Assets".

His next offering is this Casey Research chart titled "Gold and Oil Move Together"...and, like the previous chart, needs no further embellishment from me.

¤ Critical Reads

Jobs returning — but good ones not so much

Here's a story that was posted over at news.yahoo.com on Wednesday...and was sent to me by reader Scott Pluschau. Lower-wage industries -- things like retail and food preparation -- accounted for 23 percent of the jobs lost during the recession, but 49 percent of the jobs gained over the last year. Higher-wage industries, by contrast, accounted for 40 percent of the jobs lost, but just 14 percent of the jobs gained. In other words, low paying jobs are increasing as a percentage of total jobs, while high-paying jobs are on the decline. This should not be a surprise to anyone...and the link to this short read [which is well worth your time] is here.

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Bill Gross: Who will buy Treasuries when the Fed doesn't?

Here's a piece that Casey Research's own David Galland sent around yesterday. I'm sure that Mr. Gross already knows the answer to his own question...and that's the Fed...as they already own the largest pile of Treasuries in the world...despite the revisions they made to those numbers just recently.

Bill has changed from a U.S. paper bull to a U.S. paper bear in a very short period of time...and unless he wanted his bond fund to get destroyed, he saw that it was time to abandon ship. Bill doesn't mince words in this article...and if you have the time...it's worth the read. The link is here.

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Spain downgrade sparks storm over rating agencies

Here's reader Roy Stephens first contribution to today's column. It was filed late last night in London over at The Telegraph...and is another offering from Ambrose Evans-Pritchard. Moody's has reignited the storm of controversy over the power of rating agencies after it downgraded Spain, and warned that the bank clean-up will cost vastly more than claimed. The link is here.

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UK austerity plan averted gilts crisis, says debt management chief

Roy's next story is also from yesterday's edition of The Telegraph. What the headline should have read, is this..."UK austerity plan averted gilts crises for the moment, says debt management chief". That would be a lot closer to the truth...as Britain's financial condition is no better than the rest of the PIIGS. This is another classic example of whistling past the graveyard. The link is here.

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Voter betrayal: FG/Labour to ditch pledges on economy

Here's a story from Ireland that shocked even me. And to tell you the truth, I'm surprised that I hadn't heard about this sooner. It was sent to me by reader Tom Textor...and was filed over at the independent.ie website on Sunday.

In what will amount to the most barefaced breach of election promises ever perpetrated by an incoming Government, the Fine Gael/Labour coalition Government is to implement in detail the outgoing Government's four-year austerity plan as approved by the EU-IMF.

This is a very long article...but if you're Irish, it's a must read...and the link is here.

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The World from Berlin: 'More Realism Would Do No Harm'

Just two more Roy Stephens stories left to go. This one was posted yesterday over at the German website spiegel.de.

Will the West intervene in Libya?

The European Union as well as NATO are meeting this week to discuss the notion of a no-fly zone in Libya. Offering protection from Gadhafi's jets for the rebels may sound noble, but German commentators on Thursday are skeptical. A no-fly zone, they argue, would mean nothing short of war. That it would...and the link is here.

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The Greatest Country on Earth: What the United States can learn from the tiny island nation of Mauritius.

Roy's last offering is one that I would not normally give a second glance...but because of the subject material...and the author, Joseph E. Stiglitz...it really piqued my curiosity. I spent some time in the island nation of Mauritius back in the early 1970s...long before everything in this story occurred. It's obvious that a lot has changed since I was there...and I probably wouldn't recognize their capital, Port Louis, anymore...as it was a pretty sleepy place way back then.

The United States occupies one of Mauritius's offshore islands, Diego Garcia, as a naval base without compensation, officially leasing it from the United Kingdom, which not only retained the Chagos Islands in violation of international law, but expelled its citizens and refuses to allow them to return.

The United States should now do right by this peaceful and democratic country: recognize Mauritius' rightful ownership of Diego Garcia, renegotiate the lease, and redeem past sins by paying a fair amount for land that it has illegally occupied for decades.

This is a must read for any student of the 'great game'. The story is posted over at the slate.com website...and the link is here. The BBC story linked at Chagos Islands above is also well worth looking at, as it's "A very sad and by no means creditable episode in British history."

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China Woos Mongolia as Australia of North Asia

This next piece, courtesy of reader John Archer, sort of fits halfway between general news and precious metals...and you can decide which category it fits into once you get into it.

Bilateral trade between the two is currently at US$3.3 billion, however this is expected to increase significantly over the next few years as the economic bonanza promised by Mongolia’s massive mineral wealth starts to materialize. Investors are certainly straining at the leash to get in.

It's a fairly short read that was filed from Ulaan Baatar on March 2nd...and is posted over at china-briefing.com...and the link is here.

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With gold market outlawed, Vietnam bans dollar market

My first real gold-related story is from a GATA release yesterday. It's a little something that was posted over at blogs.wsj.com. Vietnam shares ended higher, with buying across the board, after authorities intensified efforts to ban U.S. dollar trading in the free market, including the seizure of some individuals who were trading the dollar without permission. This is a very short must read story...and the link to the GATA release is here.

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Gold market will get ever more violent, Sinclair tells King World News

Here's another GATA release that Chris Powell sent out late last night. Eric King headlined this blog "Jim Sinclair - Gold Explosion, Oil $150 to $200, Continued QE". It's definitely worth your time...and the link is here.

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Approved, gold and silver money bill goes to Utah's governor

Here's another story that was in a GATA release yesterday. I've borrowed Chris Powell's headline...but the headline in the Deseret News out of Salt Lake City reads "Lawmakers back recognizing gold and silver as currency". Utah might be one step closer to its own gold standard after the Senate approved a bill Thursday that would require the state to recognize gold and silver coins as legal tender. This is another must read...but it's not very long...and the link is here.

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Where the law is subject to some other authority and has none of its own, the collapse of the state, in my view, is not far off.- Plato

Yesterday was a bad day all around, but I'm sure that the U.S. bullion banks were covering every short silver and gold contract they could as the prices of both metals 'fell'. I'm sure they helped the process along by pulling their bids a few times during the New York trading session...and if that's what they did, it's obvious from the charts exactly when they did it.

Gold traded about 170,000 contracts yesterday, net of all roll-overs. The preliminary open interest number is larger than I would like to see...but it's the final number posted later this a.m. that counts.

Wednesday's final open interest number for gold showed an increase of 5,923 contracts, which was more than I was expecting.

Net volume in silver on Thursday was around 75,000 contracts...which is quite a bit, but not surprising considering the price action. Silver's preliminary open interest number doesn't make me very happy, either.

Silver's final open interest number for Wednesday's trading day was flat...showing neither an increase or decrease.

March open interest in silver is now down to 1,347 contracts. Some of yesterday's decline was from deliveries, but certainly some of that decline was from contract holders deciding to sell their March contract rather than take delivery.

Looking at the settlement price in the silver futures market yesterday, I note that nothing much has changed...as all the delivery months in 2011 are selling for a very tiny premium to the March contract. However, compared to the spot price, silver is still in backwardation all the way out to December 2015.

Like the March deliveries, this backwardation issue still awaits resolution.

I note that gold has been inching slowly higher since Far East trading began during their Friday...and silver has been flat all night long...and is still flat as London trading begins. But just as I hit the 'send' button, I see that both gold and silver really got whacked by the bullion banks, as they pulled their bids shortly after Hong Kong closed for the weekend. Here's the silver chart as of 5:22 a.m. Eastern.

The dollar, which had a smallish spike shortly after 7:00 a.m. London time this morning, has been slowly declining since its peak around 3:00 p.m. on Thursday afternoon in New York.

In my daily chat with Ted Butler yesterday, he's not sure just how much tech fund long liquidation is left in silver...as the tech funds weren't big buyers on the last rally. But it's always possible that the New York bullion banks will use this opportunity to continue bashing the gold price in order to get beat the silver price down some more.

Whether they continue doing that this morning in New York is still the big unknown...but if what happened in London earlier this morning is any indication...things could turn nasty during Friday's trading session in New York And, as I said yesterday, as long as JPMorgan et al are on the hunt for tech fund long positions in silver and gold, it matters not what's happening in any other market...so I await Friday's Comex trading session with great interest...and some dread.

Have a good weekend...and I'll see you on Saturday.