'We View Silver As Gold On Steroids'

Gold fell to its low of the day around 2:00 p.m. Hong Kong time...which was 1:00 a.m. Eastern. From there, the price climbed up to its London high which occurred shortly before 1:00 p.m. local time...which was just before 8:00 a.m. in New York.

From there, it got sold off until the London p.m. gold fix was in at 10:00 a.m. Eastern time. The subsequent spike in the gold price to $1,500.80 spot, got sold off immediately...in a pattern that was very similar to Monday's price spike.

After the spike got hammered flat, the gold price traded sideways for the rest of the New York trading session. Volume was light.

Silver's price path was very similar to gold's...with the highs and lows occurring at the same times. Once the London p.m. gold fix was in, silver also rose...and made it all the way up to $44.21 spot before selling off to close slightly below $44 spot. Volume was very decent.

The dollar was flat until around 3:00 p.m. Hong Kong time during their afternoon session...and then began a long, slow decline that lasted right until the close of trading in New York yesterday. In the process, the world's reserve currency lost a bit over 40 basis points.

I thought I'd toss in the 3-year dollar chart at this juncture to give you a 'big picture' perspective. As you can see, we've still got a bit more than four cents to go before we hit a new low in the dollar.

The gold stocks didn't do much until gold made its big run for the $1,500 mark, which began around 11:30 a.m. Eastern. From there, the gold stocks worked their way higher...closing almost at their highs of the day. The HUI finished up 1.51%. Most, but not all, of the silver stocks did OK as well.

The CME's Daily Delivery Report showed that 81 gold, along with 8 silver contracts, were posted for delivery tomorrow. The link to that action is here.

The GLD ETF showed a smallish decline yesterday...29,249 troy ounces. And it was no surprise at all to see the SLV ETF head in the other direction, as they received a very chunky 2,341,901 ounces...with much more to come.

The U.S. Mint had a smallish sales report yesterday. They sold another 21,500 silver eagles, with no sales reported in anything else.

The Comex-approved depositories reported an increase of 302,336 ounces of silver on Monday...and a very tiny 1,991 ounces were withdrawn. The link to that action is here.

My bullion dealer had another monstrous day yesterday...and it was wall-to-wall buyers [and some sellers] almost all day long.

¤ Critical Reads

Zhou Says $3 Trillion China Reserves Have Risen Beyond ‘Reasonable’ Level

China’s foreign-exchange reserves have exceeded a “reasonable” level and the management and diversification of the holdings should be improved, central bank Governor Zhou Xiaochuan said after a speech at Tsinghua University in Beijing late Tuesday.

Zhou spoke of the need to reduce an excessive accumulation of reserves, using a Chinese word that could refer to either existing holdings or the pace of the build-up.

If you check the above daily dollar chart, I think you can pick out the time in their afternoon that this story hit the financial markets in the Far East. I borrowed this Bloomberg piece from the King Report yesterday...and the link is here.

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Deutsche Bank’s $4 Billion Las Vegas Bet

The owner of the most expensive casino ever built in Las Vegas, Deutsche Bank, is not announcing its arrival in lights.

Even before that casino, the Cosmopolitan of Las Vegas, opened in December, the German financial company was planning its exit strategy from a $4 billion investment that could take years, if not decades, to recoup.

The bank reluctantly inherited the Cosmopolitan in 2008, just as the local and national economy began to crumble. I posted a story about this when that happened...and this piece out of Monday's edition of The New York Times, is sort of a follow-up. I thank Washington state reader S.A. for sending this very interesting story along...and the link is here.

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Investment funds accuse banks of rigging interest rate benchmark

Three investment funds have accused a group of US, European, and Japanese banks of conspiring to manipulate the benchmark interest rate used to calculate the cost of billions of dollars of debt.

The 12 banks named in the suit filed in a New York federal court are accused of harming investors by selling derivatives based on artificial prices between 2006 and 2009.

The suit revolves around the London interbank offered rate, or Libor -- the estimated cost of borrowing for banks between each other set daily by the British Bankers' Association.

This Financial Times story was posted in the clear as a GATA release yesterday...and it's a must read from one end to the other. The link is here.

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Greece forced to pay sky-high rates to borrow

I ran a story similar to this on Tuesday...but there were several more stories about it yesterday. This one was in The Telegraph...and it's courtesy of reader Roy Stephens.

Greece was forced to pay sky-high rates to borrow money for the next three months, amid reports Athens accepts that it has no alternative but to renege on the terms of its impossible debt burden.

This is no surprise...and it's only a matter of time before Greece is forced to walk on its debts. The link is here.

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Chinese Takeaway

When China invests in developing countries, Chinese labor is part of a "no-ticky-no-laundry" deal. A Chinese construction company recently broke ground for Baha Mar, a $3 billion gambling project on Cable Beach, 15 minutes from Nassau's international airport and 30 minutes from downtown Nassau. China originally said it would require 8,150 of its own workers on site. The Bahamian government complained the influx was discombobulating the local labor market and they compromised on 6,150-strong Chinese labor force.

This incredible upi.com story was sent to me by Roy Stephens...and is a must read. The link is here.

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Dubai on Empty

Its skyline erupting from the desert in just two decades, Dubai is a cautionary tale about what money can’t buy: a culture of its own. After gorging on the Viagra of easy credit, the emirate has the world’s tallest building, the world’s most expensive racetrack, and a financial crisis to match. From the Western mercenaries and Asian drones who maintain the gaudy show to 100-odd families who are impervious to any economic reality, A. A. Gill discovers that no one truly belongs in Dubai, where the legacy of oil has made everything worthless.

Like the upi.com story on Chinese construction companies in developing nations posted above...this story on Dubai is posted in the April edition of Vanity Fair...and is a must read as well. I thank reader U.D. for sharing it with us...and the link is here.

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Wheat Advances for a Third Day on Deteriorating Crop Conditions in U.S.

Here's a Bloomberg story from yesterday courtesy of reader N.A.

Wheat rose for a third day in Chicago as worsening winter-crop conditions in the U.S., the largest exporter, and delayed spring-crop plantings fueled supply concerns amid strengthening demand.

About 38 percent of the winter-wheat crop was in poor or very poor condition as of April 17, up from 36 percent a week earlier and 6 percent a year earlier, the U.S. Department of Agriculture said yesterday. Dry weather in the past week from central Kansa to Texas hurt crops.

It's a short story that's worth skimming...and the link is here.

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'We view silver as gold on steroids'

Brian Ostroff, the managing director of Windermere Capital, a Canadian investment firm, said he was bullish about the prospects for all precious metals because the world's central banks were printing money. But he was particularly upbeat about silver.

"We love silver. It has definitely come into the forefront. The physical market characteristics are very positive," he told the Gold Report. "Ultimately, we view silver as gold on steroids. When you're in these up-trend's and everyone's looking at precious metals, silver tends to perform much better [than gold].

Of course, he doesn't mention the real reason that silver prices are rising these days...but his heart's in the right place. I thank reader Roy Stephens for sending along this story from this morning's edition of The Telegraph...and if you don't want to read it, you should least look at the picture. The link is here.

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All the facts point toward silver not being in a speculative bubble and being in a tight physical structure with a giant short position. Until there is compelling evidence to the contrary, the likely path of silver prices is higher...much higher. - silver analyst Ted Butler, 16 April 2011

After Monday's spectacular volume day, Tuesday's volume was a lot quieter. Net volume, less roll-overs, was just under 130,000 contracts...and the preliminary open interest number was +4,766 contracts.

Gold's final open interest number after Monday's very volatile trading day showed a tiny increase of only 462 contracts...which is almost nothing compared to the preliminary report which showed an o.i. increase of 8,110 contracts.

April's open interest in gold took a tumble, just as I mentioned it would...and is now down to 785 contracts yet to be delivered or closed out.

Silver had another big volume day yesterday as well...with a bit over 85,000 contracts traded...net of all roll-overs.Of course that was quite a bit lower than Monday's dramatic volume. The preliminary open interest number showed an increase of 5,400 contracts.

Silver's final open interest number for Monday was a shocker, as it showed a decline of 2,467 contracts. This was a hell of a swing from the preliminary open interest figure, which was a very chunky +3,693 contracts. This proves, without doubt, that there was massive short covering by JPMorgan et al in the silver futures market on Monday.

This big improvement, coupledwith the surprise improvement in silver's open interest in last Friday's COT report, shows that the bullion banks are covering their short positions as fast as they can...and that this current rally in the silver price is a short covering rally.

I will be more than interested to see what Tuesday's final o.i. numbers in silver are when they're posted on the CME's website later this morning. Whatever they may be, they will be in Friday's Commitment of Traders report, because yesterday was the cut-off for it.

Even more impressive was what happened with silver backwardation yesterday. I was expecting the same old, same old...but that's not what happened. The settlements in the silver futures market yesterday showed that premiums had collapsed from about eight cents, all the way down to about two cents, in one trading day. Also of note is the backwardation between the May 2011 delivery month...and the December 2015 delivery month. It increased to 57 cents from about 49 cents on Monday. If these numbers actually mean anything, then it shows that the market is beginning to realize that physical silver is getting harder to come by once again. This is getting interesting.

Here's a little 6-monthchart to give you some idea of just how badly the gold price is doing with respect to silver. Silver is the tallest hog at the trough on this chart...up 84.1% in the last six months...compared to gold's gain of only 11.2% over the same period of time. That's why my own personal portfolio is heavily weighted in silver stocks.

And that's why the Gold/Silver Ratio Chart looks the way it does...with the ratio setting a new low for this move...down to 34.05. Expect this chart to look like this for a very long time.

Overnight, both metals slowly worked their way higher during the Far East trading day...but got sold off a hair when London opened at 8:00 a.m. local time...which is 3:00 a.m. in New York. But that hardly slowed them down at all, as silver and gold continued to power higher from there. Volumes were decent...and the dollar was down about 32 basis points as of 4:40 a.m. Eastern.

Here's a deal that I've mentioned before. In case you're interested, Casey Research is having a special promotion for The Casey Report which...along with the International Speculator...is one of CR's flagship publications. For a [very] limited time only, a 1-year subscription has been reduced to $279...which is a 20% discount over the regular price. If you buy it on a quarterly basis, it costs only $75/quarter, which is a savings of 14%. I read it from beginning to end every month...and consider the subscription price an investment, rather than a cost. If you'd like to learn more, you can click here. And, as usual, our 90-day, 100% money-back-guarantee applies.

It will probably be another interesting day when the bullion banks start to trade on the Comex in New York this morning.

See you on Thursday.