Gold Is Still Cheap Despite Record Surge: Marc Faber

Starting early in the morning in Far East trading, the dollar headed south...and both precious metals headed north. There was a slight dip at an early London p.m. gold fix at 2:45 p.m. GMT...9:45 a.m. in New York...but other than that, gold rose pretty steadily throughout all of Friday trading. Volume was very light.

The silver price gained a bunch during the Far East trading day, then basically flat-lined in London trading until the p.m. gold fix...then away it went to the upside, closing virtually on its high of the day. Volume was pretty decent, but not off the charts.

The dollar fell out of bed starting at precisely 8:00 p.m. on Thursday night...which was 9:00 a.m in Hong Kong on their Friday morning. By the time the trading day was done in New York at 5:15 p.m. Eastern time on Friday afternoon, the world's reserve currency was down about seventy basis points.

For some reason I thought that the 75 cent mark would offer come resistance to the downside in electronic trading yesterday afternoon...but it sliced through that without any fanfare. Here's the 3-day dollar chart to put all of Friday's dollar move in some perspective.

The gold stocks gapped up...and stayed up...and followed the gold price for the rest of the trading day. The HUI finished up a respectable 1.77%. Here's the 5-day HUI graph for the week that was.

The little dip in the gold price [and even bigger dip in the silver price] between 2:30 and 3:00 p.m. Eastern time had a huge impact on the silver companies share prices. And even though the shares did well yesterday, they gave up a large chunk of their Friday gains during that dip...and only gained back a bit of that on the subsequent recovery in the silver price...closing well off their highs of the day. I had some of my silver stocks actually finish down on Friday, which is hard to imagine considering the fact that silver closed up $1.29 on the day. It's obvious that there are a lot of nervous silver investors out there right now with their fingers on the 'sell' button...but I'm not one of them.

Nick Laird over at sharelynx.com provides his "Silver Sentiment Graph"...and it's at another all-time high once again, which would have been higher if silver hadn't had its little price dip late in electronic trading in New York.

The CME's Daily Delivery Report showed that 23 gold, along with 21 silver contracts, were posted for delivery on Tuesday. The link to that action is here.

There was only action at the SLV ETF on Friday...and they reported taking in 1,610,278 troy ounces.

The U.S. Mint had another sales report yesterday. They sold 7,000 ounces of gold eagles, along with 47,000 silver eagles. Month-to-date the mint has sold 39,000 ounces of gold eagles...3,000 one-ounce 24K gold buffaloes...plus 750,000 silver eagles.

Nothing worth mentioning happened over at the Comex-approved depositories on Thursday.

Since I was ready for anything in Friday's Commitment of Traders Report [for positions held at the close of Tuesday, April 5, 2011] I wasn't surprised by what it contained. I was happy to see that silver's open interest in the Commercial category was up a very small 1,119 contracts. If I remember correctly, I believe that Ted mentioned that the '4 or less' traders did not increase their short positions during the reporting week. So the big build-up in short positions by the bullion banks did not materialize...and I must admit that I'm much relieved by that.

However, it was a different story in gold...as the Commercial short position rose by a rather large 17,896 contracts. Ted mentioned that a big chunk of this short position was taken on by the 'raptors'. The raptors are some of the fourty-three small traders in the Commercial category that aren't bullion banks.

All in all, it could have been worse.

Nick Laird provides Ted Butler's "Days to Cover Short Positions" chart updated with Tuesday's data.

Here's the Executive Summary of April's Bank Participation Report, compared to the one that came out in the first week of March.

The data for this monthly report came from Tuesday's Commitment of Traders Report...and it rips out of this report, all the long and short positions of all the world's banks in all Comex traded commodities. The 'Days to Cover' graph above is the visual representation of what the world's eight largest traders are up to in these particular commodities...and in the precious metals, they're all bullion banks.

In gold, 4 U.S. bullion banks increased their Comex net short positions by 24.1%...and the 13 non-U.S. banks increased their net short position by 16.5%.

In silver, the 2 U.S. banks [I'm guessing at this number, as the CFTC doesn't release the actual number of banks if it's less than 4] actually decreased their net short position, but it was only by a very tiny amount...with emphasis on the word very...about 2 percent. These two banks would be JPMorgan and HSBC USA...and if there is a third bank involved, their short position would be negligible compared to the 'big two'...or it could be just the 'big one'.

The 10 non-U.S. banks involved also decreased their net short positions in silver by an equally negligible amount.

In a nutshell, the Bank Participation Report in gold showed an increase in Comex short positions by the world's bullion banks...but it wasn't by an earth-shattering amount. And, in silver, there was basically no change at all.

This is another report that could have been much worse, but in the end, it wasn't.

Nick Laird over at sharelynx.com was kind enough to turn the Bank Participation Report for silver into an 11-year set of five mini-graphs. It may seem confusing at first, but if you use the 'click to enlarge' feature, you can blow the graph up to full-screen size...and spend a few minutes studying it. The first graph is the price, the second is silver's open interest each month. The third graph is the number of US and non-US banks...and you can see the point that the CFTC began to withhold the number of banks so that they could protect JPMorgan. They started withholding this data when Ted Butler discovered the Bank Participation Report back in 2008...and within months, the CFTC pulled the data.

The first of the last two graphs shows the number of contracts both long [above the line] and the shorts [below the zero line] held by both the US and non-US banks...and the last graph is just the two US banks on their own....and their respective long positions [non-existent] and their monstrous short positions. It's easy to see that JPM runs the silver price show.

¤ Critical Reads

Malls Face Surge in Vacancies

I have a lot of stories, videos and interviews for your reading, listening and viewing pleasure...and I hope you can find time over the weekend to work them into your schedule.

Today's first story is the piece out of Thursday's edition of The Wall Street Journal...and I thank reader Scott Pluschau for sending it along.

Mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed. In the top 80 U.S. markets, the average vacancy rate was 9.1%, up from 8.7%. The outlook is especially bad for strip malls and other neighborhood shopping centers. Their vacancy rate is expected to top 11.1% later this year, up from 10.9%, Reis predicts. That would be the highest level since 1990. The link is here.

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The World from Berlin: 'Euro-Zone Leaders Need the Courage to Tell the Truth'

A day after Portugal formally requested aid from the European Union to help ease ongoing debt problems, Madrid on Friday insisted that it was "out of the question" that Spain would be next. German commentators aren't so sure, and say that it's time for European leaders to reveal the true extent of the problems.

This is a story posted over at spiegel.de. It's definitely worth the read...and I thank reader Roy Stephens for sending it along. The link is here.

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Highway To The Fukushima Zone: First Person Trek Through A Radioactive Wasteland

Here's a 12-minute video clip that's posted in a zerohedge.com piece...and it's courtesy of Washington state reader S.A. I can't improve on the preamble that precedes the video, so I won't bother trying. The link is here...and it's very much worth your time.

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Video of Tsunami That Hit Japan

This BBC clip contains more incredible video of the destructive tsunami waves as they roared inland. The clip runs less than ten minutes...and I thank reader G.G. for sharing it with us...and the link is here.

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Interest rate differentials, deficit, to destroy dollar, Turk tells KWN

GoldMoney founder and GATA consultant James Turk told King World News that interest rate differentials and the U.S. government's ever-growing deficit are starting to destroy the dollar. An excerpt from the interview is headlined "Twin Dollar Destroyers to Create Earthshaking Collapse"...and the link to this must read KWN blog is here.

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Gold Is Still Cheap Despite Record Surge: Marc Faber

Here's a CNBC story that ended up as a GATA dispatch yesterday, but the first person through the door with it was Russian reader Alex Lvov.

The Federal Reserve's money-printing policies continue to make gold an attractive investment even though it has hit a succession of new highs recently, Marc Faber, author of the Gloom Boom & Doom report, told CNBC. "If it were a bubble a lot of people would have gold. The whole world would be trading gold 24 hours a day," he said. "But I don't think it's really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252."

The story is definitely worth the read...and the link is here.

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MineWeb reports on congressional hearing on U.S. Mint's failure

Here's a GATA release of this mineweb.com article...and since Chris Powell has written such an excellent introduction, it saves me the time, for which I thank him. It's a longish read...but gives you a look inside the minting process that most people never see. The link is here.

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Gold: "This is the Perfect Storm"

Here's a money.cnn.com story from yesterday that was sent to me by reader Scott Pluschau.

Gold prices have hit a series of record highs this week, as a combination of inflation worries, a weaker U.S. dollar and geopolitical turmoil have weighed on investor confidence. The link is here...and the embedded chart is the worth the trip all by itself.

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Murray Pollitt: Cosmic shifts

In his latest market letter, Murray Pollitt of Toronto mine finance house Pollitt & Co. writes that inflation is becoming the big financial story and that the gold market hasn't caught up with it.

Murray is to the gold market in Canada, what Richard Russell is to the stock market in the United States. I stole this story from a GATA release yesterday...and the link is here.

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CNBC Interview Eric Sprott

This cnbc.com video clip runs 5:21...and was done on April 5th when Eric was at the exchange to ring the closing bell. I thank reader George Findlay for sharing it with us...and it's a must listen/watch...and the link is here.

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Two Johns Get Interviewed at King World News

Earlier this week I posted two KWN blogs...one with John Embry and the other with John Hathaway. Here are the two audio interviews that these blogs came from. The link to John Embry's interview is here...and John Hathaway's is here. Both are must listens...and they both agree that this breakout in both gold and silver is the real deal. So do I.

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The Bank Runs Of The Early 1930s And FDR’s Ban On Gold

Here's an op-ed piece that appeared in Forbes earlier this week that I thank Roy Stephens for sending along.

The gold price reached a record of $1464/ounce this week, fittingly on the 78th year anniversary of FDR’s ban on private gold ownership in 1933. Gold has increased by 30% over the past year, 145% in the past five years and 465% in the past decade; by contrast, the S&P 500 today is only 12% higher vs. a decade ago.

This is a longish read...but well worth your time if you don't know the history of FDR's gold confiscation of 1933. The link is here.

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Join GATA for Gold Rush 2011 in London in August

Well, it's now official...our London conference at the famous Savoy Hotel on the Thames River is now cast in stone...and the list of speakers is impressive. Chris Powell outlines the whole thing in this GATA release, which is a must read...and the link is here.

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Of the 1%, by the 1%, for the 1%

Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

This is the introduction to a 2-page essay in the May edition of Vanity Fair magazine. It's written by one Mr. Joseph E. Stiglitz...and is an absolute must read from one end to the other...and I thank reader Barnabe Geis for bringing it to my attention...and now to yours. The link is here.

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As always, the one constant is the assertion that the entire global financial system MUST remain under total government control and be "financed" by means of paper claims to future wealth created at whim by central banks. Government power depends on that. Governments will not give it up lightly.- Bill Buckler, The Privateer...April 2, 2011

Here's a 'blast from the past' that I've already run once...but it was at least a year ago...so I guess it won't hurt to run it again, as I just don't have the time to go looking for something new. It's a wonderful piece...and most of you, young and old, should know it well. So turn up your speakers...and then click here.

As I mentioned at the top of this column, net trading volume in gold was very light...a bit under 110,000 contracts. I guess that shouldn't come as a total shock, considering the fact that the gold price was only up a bit over one percent...but, as a general rule, the bullion banks never let the price run up too much...as that generates too much 'irrational exuberance' during their controlled retreat in the price of both precious metals.

The preliminary open interest number for gold trading yesterday was a rather hefty 9,012 contracts...and hopefully that will be reduced somewhat when the final numbers are posted on the CME's website late on Monday morning.

However, as you may have noted from both the latest COT report...and the Bank Participation Report that was derived from it...the bullion banks [both U.S. and non-U.S.] are slowly building up their Comex short positions once again...however, we're a long way from being in the danger zone as far as total open interest goes.

But, having said that, the bullion banks can reach out and smack this market any time they wish...but at the moment, it doesn't feel like they're about to do that.

Thursday's final open interest number in gold showed an increase of 3,212 contracts...which is down quite a bit from the 8,485 preliminary number...and I'm always happy to see that.

There are still 2,460 gold contracts open for April delivery. About this much has already been delivered in April...and it remains to be seen how long it takes the shorts to get around to delivering the rest to the long contract holders.

Silver's net volume yesterday was a bit over 60,000 contracts, which is not overly heavy for such a large price move to the upside. Of course a move of $1.29 now that silver is at $40...is not the same as that kind of move when silver was half that price, so we have to look at all of this with new eyes.

Silver's preliminary open interest number for Friday's trading day showed an increase of only 3,210 contracts...which I expect to be much reduced with the final report on Monday. What we're seeing now is a very orderly price increase in silver...and I'll have more on that a bit further down.

The final o.i. number for silver on Thursday was reduced down to 426 contracts. The preliminary number was 1,341 contracts.

I am intrigued by what the final open interest numbers for Friday might be...especially in silver...as the preliminary number was not overly large to begin with. The lighter the volume that this rally continues on, the longer it will last...and the higher it will go.

The backwardation issue in silver is about the same as it was on Thursday...and it remains to be seen how this situation resolves itself.

As Ted Butler pointed out on the phone yesterday, the shorts are about to get another margin call on Monday after silver's big rise in price on Friday. This margin call money is advanced by the shorts and credited to the contract holders who hold the corresponding long positions. The short holders are billions of dollars under water...just in the silver market alone...and Ted is just waiting for some sign that the short holders are going to panic and cover...as I'm sure a lot of the smaller players must be screaming in financial pain as they drip financial blood from all their body orifices.

Ted says that once the shorts start to cover, then we'll go from an orderly price rise...to a disorderly price rise...in a heartbeat. Disorderly means big moves of many dollars to the upside over very short periods of time...along with wild swings in price. So far it's been rather benign. Ted figures [and rightly so, I believe] that these sorts of trading days are about to come to an end.

If that is truly the case, then once disorderly trading begins, it pretty much signals the beginning of Phase 3 of this bull market in precious metals...and this where the really big money is to be made. But I absolutely guarantee that the ride to the top will scare the hell out of most investors...your humble scribe included.

Here's a chart that's courtesy of Nick Laird over at sharelynx.com. He slid this one into my in-box in the wee hours of this morning. The dollar value is in blue...and the total ounces are in black. Both lines are in record territory. Any questions?

I'm not going to post the charts here, but I note that gold is just starting to poke its nose into overbought territory...and silver has been well into overbought territory for most of this past week.

At this particular moment in history, the gold and silver markets remind me of the old "Star Trek" TV series...because with prices in both metals breaking out to the upside, we're boldly going where no man [or woman] has gone before...and for virtually all of us, this is terra incognia.

Once again, there's still a little time left [but not too much I would suspect] 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.

I'll be watching the Monday opening in the Far East on Sunday night here in North America with great interest.

Enjoy what's left of your weekend...and I'll see you on Tuesday.