Zimbabwe's Central Banker Urges Gold-backed Zimbabwe Dollar

The gold price spent all of Far East and most of the London trading day between $1,490 and $1,500...and finally broke through the $1,500 market moments before the London p.m. gold fix at 3:00 p.m. GMT...which is 10:00 a.m. Eastern.

Once 'the fix was in'...and London closed an hour later...someone was only too happy to sell the gold price off for a small loss by the close of electronic trading at 5:15 p.m. in New York. Volume was pretty light.

Silver was under pressure right from the opening in the New York access market on Sunday night...and it's secondary low came at the London silver fix at noon in London...which is 7:00 a.m. in New York.

From that low, silver rose to its New York high at the London p.m. gold fix, which was minutes after 10:00 a.m. Eastern...and that, as they say, was that. By the time the silver market closed in New York electronic trading...it was down about $1.50 from it's 10:00 a.m. New York high. Volume [which included a lot of high frequency trading] was decent.

Once again it was obvious that silver was the center of attention yesterday...because when you look at all four precious metals, gold was down 0.36%...platinum was down 0.68%...and palladium was up 0.42%...and silver was down 4.82%.

The dollar traded in a very tight range just under 76 cents right up until the London silver fix was in at noon local time...7:00 a.m. in New York. Then the dollar headed south.

The dollar hit its nadir at 11:00 a.m. Eastern time right on the button...and didn't start a rally worthy of the name until half past lunchtime...and then erased a lot of its losses by the close of trading at 5:15 p.m. in New York.

It's tempting to say that the gold and silver prices followed the dollar, but even a cursory inspection shows that the price patterns in both metals just don't quite fit.

The HUI followed the gold price around for the entire New York trading session...and despite the fact that the gold price finished down on the day...the HUI posted a smallish gain of 0.54%.

For the most part, the silver stocks got hit pretty hard once again...but there was the odd green arrow here and there. Here's Nick Laird's "Silver Sentiment Index" updated with Monday's data.

The CME's Daily Delivery Report showed that only 6 silver contracts were posted for delivery tomorrow.

There was no change reported in the GLD ETF yesterday...but 1,658,238 troy ounces of silver were withdrawn from the SLV ETF.

Over at Switzerland's Zürcher Kantonalbank last week, they reported that their gold ETF declined by a smallish 5,510 ounces...but their silver ETF showed an increase of 788,530 troy ounces. I thank Carl Loeb for providing these numbers.

There was no report from the U.S. Mint yesterday...but over at the Comex-approved depositories last Friday, they reported receiving 57,500 ounces of silver...and shipped 251,666 ounces out the door...for a net decline of 194,166 troy ounces.

Here are a couple of snippets from silver analyst Ted Butler's weekend commentary to his paying subscribers.

"There were some notable changes in this week’s Commitment of Traders Report (COT), although you had to dig deep in silver to uncover them. I had been expecting a big liquidation in speculative long positions, especially by the technical funds, and we did get that liquidation, but it came with a twist. One twist in this week’s report was that the big technical fund liquidation of long positions wasn’t offset by a corresponding big decline in the commercial [bullion bank] net short position, as is usually the case."

"The total commercial net short position is the lowest it has been in more than a year, back to March 2010, when silver traded at $16.. Also, the concentrated short position of the big 4 [bullion banks]is the lowest it has been since November of 2006 when silver was trading around $12. On strictly a COT basis, the data points to silver being as cheap now as it was at $12 or $16 back then."

Dr. Dave Janda sent me an interesting story out of last Thursday's Financial Times. The story notes that "Mark Wetjen, a Democratic senate aide, has been nominated as a new commissioner on the Commodity Futures Trading Commission, the US futures regulator.

He would replace Michael Dunn, who was a crucial swing vote on the five-member commission. The CFTC has yet to vote on final rules under the Dodd-Frank act that will transform the derivatives market."

It will be interesting to see how he votes on position limits...as the story goes on to say the following..."Mr Dunn was one of the three Democratic appointees on the commission, including the chairman, Gary Gensler, and Bart Chilton. However, he would occasionally side with Jill Sommers and Scott O’Malia, the Republican appointees, on some issues.

In January, Mr. Dunn voted to allow the CFTC to proceed with a proposal to look at position limits, but went public with “serious reservations” about it, saying that “forging ahead on a position limits regime for political expediency is not the course of action that ... promotes the health and integrity of the futures industry in the US”.

Here's a chart I haven't posted for a while...and I thank Nick Laird over at sharelynx.com for providing this 5-year graph of the Baltic Dry Index. I can't see any 'green shoots' in this chart, can you?

Here's another chart that Nick sent our way. It's the "Global Indices" chart...and needs no further embellishment from me.

¤ Critical Reads

Fair Game: A Low Bid for Fixing a Big Mess

Here's a story from Saturday's edition of The New York Times by writer Gretchen Morgenson that was sent to me by reader Phil Barlett.

SO the feds finally got one: Raj Rajaratnam, the hedge fund tycoon, is going down for insider trading.

Just don’t think for a moment that this victory for prosecutors will be keeping the high and mighty of finance up at night. No, some giant financial institutions have a bigger worry — namely, how to make the foreclosure fiasco go away.

It's not an overly long read...and is well worth your time. The link is here.

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Sex Charges Against IMF Chief: France Aghast at Arrest of Socialist Star Strauss-Kahn

With DS-K rotting without bail in a New York jail as I write this, the sensational story of what happened on the weekend is almost old news. But I do have one story from the European press that's worth your time. It's courtesy of reader Roy Stephens...and is posted over at the German website spiegel.de.

The charges against IMF chief Dominique Strauss-Kahn have triggered a political earthquake in France, where he was seen as the best hope of the Socialist opposition to oust President Nicolas Sarkozy in the 2012 election. It's good news for Sarkozy, whose most dangerous rival has gone.

It's a short piece...and the link is here.

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Greece Reality Check: Euro Crisis Worsens as EU Leaders Play for Time

Here's another piece from spiegel.de that was posted on their website yesterday...and I once again thank reader Roy Stephens for sharing it with us.

Europe's leaders are still opposing a Greek debt restructuring, and they are exacerbating the euro crisis as a result. The Greek economy is at risk of collapse and resistance to further loans for the troubled nation is mounting. The continent urgently needs a new bailout plan.

I noted that they never mentioned the fact that IMF chief Dominique Strauss-Kahn was not there...but I'm sure that didn't help yesterday's conference. It's a 3-page story that pretty much spells out the fact that the European Union, as it's currently structured...along with its currency...are heading for the dumpster. The link is here.

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'Spiral of Mistrust': Danish Threat to Schengen Agreement Under Fire

In another sign that the European Union is in trouble is brought to the fore in this piece...also from the German website spiegel.de...and also courtesy of Roy Stephens.

The tiny country of Denmark is threatening one of the European Union's core principles -- freedom of movement -- out of self-interest. But other member countries are outraged and expect the European Commission will staunchly reject their plans to reintroduce border controls.

In a little over two weeks, Copenhagen plans to reintroduce controls and, by the end of the year, make 35 million crowns (€4.7 million/$6.6 million) available to employ additional police and customs officials. The Danish government contends that this is "compatible with the Schengen Agreement."

It's just another brick in the wall...and the link to this short, must read story, is here.

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Italy Next to Seek EU Bailout: Wealth Manager

Italy is next in line to seek a bailout from the European Union and the International Monetary Fund, Felix Zulauf, President of Zulauf Asset Management said. "Everyone is focused on Spain. I think the next country to go is Italy," Zulauf told delegates at a conference in Edinburgh.

"What I notice is a tremendous deposit outflow. It's a slow-motion banking crisis, and the banking system has been the big buyer of government bonds in Italy," Zulauf said.

This cnbc.com story is courtesy of reader U.D...and the link is here.

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Syrian troops open fire, defying presidential order

Just in case you thought that the protesters had packed up their tents in the Middle East, here's an AFP story that was posted over at the france24.com website last Friday.

At least three protesters were shot dead in Syria on Friday despite an order from President Bashar al-Assad for security forces not to open fire on demonstrators, rights activists said.

The continuing repression came as the government announced plans to launch a "national dialogue" in response to the anti-regime protests that have rocked the country since March 15th.

And Britain summoned the Syrian ambassador in coordination with other European nations, warning of "further measures" if it fails to stop the crackdown on protesters.

The link is here.

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Walker's World: French food and inflation

An ominous sign that global inflation isn't going to relax anytime soon can be seen in the stunted growth of the corn and wheat in the rich farmlands of central France.

The grass, which usually grows an inch every three days at this time of year, is taking 10 times longer because of the lack of water. Across France, the forage crop for livestock is down by one-third and, without strong rains soon, this summer's wheat crop will face the same fate.

"This April was the driest we have ever known since 1939 and that is the fourth month this had endured," meteorology Minister Nathalie Kosciusko-Morizet told the French National Assembly last week.

This Reuters piece is Roy Stephens last offering of the day...and is also a must read...and the link is here.

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Zimbabwe's central banker urges gold-backed Zimbabwe dollar

Central bank chief Dr. Gideon Gono said the country should consider adopting a gold-backed currency. "There is a need for us to begin thinking seriously and urgently about introducing a gold-backed Zimbabwe currency that will not only be stable but internationally acceptable," Gono said in an interview with state media. "We need to rethink our gold-mining strategy, our gold-liberalisation and marketing strategies as a country. The world needs to and will most certainly move to a gold standard and Zimbabwe must lead the way."

The good doctor hyper-inflated the Zim dollar into worthlessness last year...and now he's talking about a gold-backed currency. I'll bet the $100 trillion Zimbabwe dollar note that I have propped up against my coffee cup at the moment, that it will never come to pass...at least not in his country.

However, having said all that, this very short story that I stole from a GATA release yesterday, is a must read...and the link is here.

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Gold Coins Show Bull Market Unbowed in Commodities Decline

Here's a Bloomberg story that's courtesy of reader Ken Metcalfe. There isn't a thing in here that surprises me...and it shouldn't surprise you, either. Silver [and gold] bullion sales are off the charts...both before and after the 'crash' of two weeks ago.

Sales of gold coins are on track for the best month in a year amid the worst commodities rout since 2008, a sign that bullion’s longest bull market in nine decades has further to run, if history is a guide.

It’s not just the U.S. Mint that saw accelerating sales. Rand Refinery Ltd., which makes the Krugerrand, said May 13 that sales are heading for their best month since August. Demand for physical gold on May 6th was the strongest since early February, Standard Bank said in a report May 11. The U.S. Mint sold 62,000 ounces of American Eagles in the first week of May, as the S&P GSCI slumped 11 percent, the most since December 2008.

This is another must read...and the link is here.

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Silver Market Defined By Lack of Supply

As a wonderful companion story to the Bloomberg piece above, is this interview out of yesterday's edition of Casey's Daily Dispatch. In it, BIG GOLD editor, Jeff Clark, interviews Andy Schectman of Miles Franklin about the current situation in the retail bullion market. Andy had this to say at the beginning of the interview...

"I feel as though I'm the boy who cries wolf, or that I've been beating the same drum for too long. But in reality, it has been my feeling since late 2007 that ultimately this market will be defined less by the price going parabolic - which I think ultimately will happen - and more by a lack of supply. You see occasional reports that state it's just a lack of refined silver or lack of silver in investable form. But as far as I'm concerned, there is a major supply deficit issue, and it's getting worse."

"And this is all occurring in an environment that has only minimal participation by the masses. Few people in this country have ever even held a gold or silver coin. So, if it's this difficult to get bullion now, what's it going to be like when it becomes evident to the masses they need to buy? This is what keeps me up at night."

My bullion dealer here in Edmonton would agree wholeheartedly with every word in this interview. It's an absolute must read...and the link is here. You have to scroll down a few paragraphs to get to it.

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Silver re-monetization gaining in Mexico, Hugo Salinas Price tells KWN

Here's a must read King World News blog. The headline only tells part of the story...and the rest is linked here.

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U.S. should sell assets like gold to cut debt, conservative economists say

Here's a GATA release...and it contains a story out of the Sunday edition of The Washington Post. The headline says it all...and the link is here.

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Washington tub-thumping should fool no one

Here's Sprott Asset Management's chief investment strategist John Embry...and his latest offering in the May issue of Investor's Digest of Canada.

Anything that John writes is well worth reading...and this essay is no exception. I thank Australian reader Wesley Legrand for bringing it to my attention...and now to yours. The link is here.

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If the U.S. government ever talks seriously about selling gold, it will be because the gold is already long gone, just as the gold supposedly sold by the Western European central banks in the last decade was actually secretly leased gold that was long gone and could not be recovered without exploding the market. - Chris Powell, GATA

As I mentioned at the top of this column, gold volume yesterday was pretty light...a bit over 105,000 contracts net of all roll-overs. The preliminary open interest number showed an increase of 5,340 contracts.

Friday's final open interest number for gold showed an increase of 4,044 contracts...which is a huge drop from the preliminary number...which was an increase of 12,279 contracts.

Silver's net volume was also pretty light...around 70,000 contracts. The preliminary open interest number showed an increase of 2,986 contracts but, considering yesterday's price action, that should be substantially reduced...unless there was fresh shorting or new spread trades being put on. We'll find out soon enough.

Silver's final open interest for Friday's trading day showed an increase as well...up 1,873 contracts...which was a significant drop from the preliminary number...which showed an increase of 6,536 contracts.

Considering the price action in both metal during the Friday trading day...these increases [especially in gold] are a bit of a surprise. But Ted said that it's dangerous to try and read too much into the day-to-day changes in open interest...and we'll find out more once this Friday's Commitment of Traders Report comes out, because this activity will be included in it.

The 'backwardation' situation in silver is mostly unchanged...although the premium in the front months widened out by a bit more than a cent on Monday. As I keep saying, we'll find out if these backwardation numbers really mean anything as time marches on.

The other two things regarding silver that still stand out are... 1] there are 325 May silver contracts still to be delivered, and... 2] June open interest in silver is now up to 810 contracts. June is not a traditional delivery month for silver...and to see this many contracts outstanding in this month bears watching...and I will be doing exactly that.

Here's the 1-year silver chart. They continue to beat the hell out of the silver price...but the '4 or less' bullion banks...led by JPMorgan...actually increased their short position in last week's COT report...and it remains to be seen how they fared since last Tuesday's cut-off. The cut-off for this Friday's COT report is at the end of trading today. On Friday we'll see if the bullion banks made any progress in this regard. As Ted Butler mention earlier, it's been many a moon since the COT report has been this bullishly structured in silver.

Here's the 1-year gold chart. As I've mentioned many times before, the bullion banks may use the gold price to beat the silver price down...and the 200-day moving averages in both metals are a very long way down. I doubt they can get the price down that low...but I've learned never to say never.

Both precious metals were in positive territory during the Far East trading day...and are still in the black in early London trading as well...especially silver. Volume is light in gold...and quite a bit heavier in silver, although it's probably the high-frequency traders in action in this market.

There's no sign, at least at the moment...5:33 a.m. Eastern time...that the New York bullion banks are lurking about, but that can all change pretty quick.

It should be another interesting trading day in New York once again.

See you on Wednesday.