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Message: Ed Steer this morning
JPMorgan Says Crude Oil, Gold to Drive Rebound in Commodities
"I wonder what will drive silver prices higher from here? Will it be new buying...with the bullion banks going short again...or are the bullion banks going to drive this market higher themselves with short covering?"
¤ Yesterday in Gold and Silver
The gold price traded up between five and ten dollars during most of Far East and early London trading yesterday. This price action continued into early New York trading as well...and another five bucks was added onto the price shortly before the London p.m. gold fix was in at 10:00 a.m. New York time.
From there, the gold price more or less traded sideways for the rest of Comex trading...and the electronic market that followed. It was obvious, at least to me, that despite a rapidly falling dollar, every attempt gold made to break through the $1,500 mark got sold off. Volume was pretty light.
Silver was up about fifty cents by the time the Comex opened for business yesterday morning. Then, about 9:20 a.m. Eastern, a rally began that took the silver price up to its high of the day around 12:45 p.m.
From that high, silver traded sideways until around 2:10 p.m. in the New York Access market, when a not-for-profit seller lopped about seventy cents off the price in less than twenty minutes. But the silver price rallied back to close a hair above the $35 mark by the 5:15 p.m. Eastern close.
The dollar's nadir came around 1:30 p.m. Hong Kong time in their afternoon...which was half-past midnight in New York. From there the dollar rallied a bit more than 40 basis points...hitting its zenith at 9:30 a.m. Eastern.
From there, it fell a bit...and then chopped around, closing almost unchanged on the day.
If you're looking for any co-relation between the dollar's activities and what happened with gold and silver prices, I wish you luck...because I couldn't find any. There would have been more of a co-relation if the gold price had been allowed to trade freely after the dollar began it's decline at 9:30 a.m. in New York. The gold price should have handily broken through the $1,500 price barrier on this dollar decline.
The gold stocks pretty much followed the gold price during the New York trading session.
The HUI finished up [0.60%] for the third day running...and this time gold actually closed higher on the day...as it closed lower on both Monday and Tuesday.
The silver shares really caught a bid yesterday...but got sold down well off their highs after that not-for-profit seller showed up in the New York Access market around 2:15 p.m.
The CME's Daily Delivery Report showed that 45 gold, along with 82 silver contracts, were posted for delivery tomorrow. For once, JPMorgan's name was nowhere to be found as an issuer or stopper in the silver market yesterday...and for that reason alone, the report is worth a look...and the link is here.
Despite up days in both metals yesterday, both ETFs showed withdrawals...with GLD showing a decline of 29,329 ounces...and SLV was down 1,316,747 troy ounces.
After two days of no report...the U.S. Mint had a sales report worthy of the name yesterday. They reported selling 8,500 ounces of gold eagles...3,000 one-ounce 24K gold buffaloes...and 671,500 silver eagles.
Month-to-date, the U.S. Mint has sold 93,500 ounces of gold eagles...9,500 one-ounce 24K gold buffaloes...and 2,177,500 silver eagles.
On Tuesday, the Comex-approved depositories reported receiving 4,949 ounces of silver...but shipped 683,812 ounces of the door, for a net decline of 678,863 troy ounces. The link to that action is here.
Before you get to my list of reading material for today, here are a couple of graphs that are courtesy of Washington state reader S.A...both of which need no further embellishment by me.
¤ Critical Reads
SubscribeU.S. Postal Service warns of default on retiree benefits
Reader Scott Pluschau plucked today's first story from the federalnewsradio.com website. USPS was threatening this many months ago...and now it looks serious.
The U.S. Postal Service will begin to default on its financial obligations just over four months from now unless Congress takes action to relieve it of its obligation to pre-fund retiree health care accounts, its leader told lawmakers Tuesday.
It's a longish story...and the link is here.
Vietnam central bank raises OMO interest rate to 15 pct
Vietnam's central bank raised the interest rate it charges in open market operations on Tuesday, its second hike in two weeks in the face of some of the world's highest inflation.
In April, the consumer price index was up 17.51 percent from the same month last year -- the highest level since December 2008 -- while the index leapt 3.32 percent from March.
The rate has been lifted 800 basis points since early November in the face of rising inflation, and as the country's monetary authorities rearrange the policy rate regime.
I thank reader Andy Lawrisuk for this short Reuters piece, which is well worth the read...and the link is here.
Inflation rebounds sharply in April as travel costs soar
Inflation in Britain jumped to its highest level in two-and-a-half years last month, owing to soaring travel costs around Easter and higher duty on alcohol and tobacco.
The annual increase in the consumer prices index to a 30-month high of 4.5%, from 4% in March, wrong-footed the City and intensifies the dilemma for the Bank of England over how much longer it can keep interest rates low to support the flagging economy.
I lifted this Guardian story from yesterday's King Report...and the link is here.
German Chancellor on the Offensive: Merkel Blasts Greece over Retirement Age, Vacation
It was the kind of criticism that one isn't used to hearing from Angela Merkel. Normally sober and analytical to a fault, the German chancellor on Tuesday evening blasted a handful of heavily indebted southern European countries, saying they needed to raise retirement ages and reduce vacation days. Germany will help, she said, but only if indebted countries help themselves.
This story was posted yesterday over at the German website spiegel.de. Roy Stephens dug it up on our behalf...and the link is here.
Could Greece be the next Lehman Brothers? Yes – and potentially even worse
It was less than three years ago that the failure of Lehman Brothers sent tremors through the global financial system, threatening the existence of every major bank and triggering the most severe economic crisis since the Great Depression. As Europe's policy elite met for fresh crisis talks today, the dark fear that haunted everyone around the table was this: if the bankruptcy of a middling-sized Wall Street investment bank with no retail customers could have such dire consequences, what would happen if the Greeks decide they have had enough and renege on their debts? If Athens reneged on its debts it would shatter the markets' confidence in the eurozone project.
I hate to break it to these guys...but the European Union is already a dead man walking...and it's just a matter of time before the whole thing comes apart at the seams. This story was in the Tuesday edition of The Guardian...and I thank Washington state reader S.A. for sending it along...and the link is here.
EU and IMF seal €78 billion bailout deal for Portugal
European finance ministers on Monday agreed unanimously to rescue Portugal, a statement said, making it the third eurozone country in the space of one year to receive a multi-billion-euro bailout after Greece and Ireland.
The emergency loans to Lisbon are “warranted to safeguard the financial stability in the euro area and the EU as a whole,” said the statement by ministers from the 17-nation eurozone and the remaining 10 European Union states that partly underwrite the emergency financial assistance.
Just another brick in the E.U. wall...and I thank Roy Stephens for this story that was posted over at the france24.com website on Monday. The link is here.
At the IMF, the noise of 'Old Order' creaking
Washington state reader sent me this story from today's edition of The Wall Street Journal...and I even used his title for it, as the one the WSJ used...'Fund Falls Behind in Global Changes'...just didn't quite make it.
Empires do not succumb quietly. Old powers do not readily surrender prerogatives. Rising ones do not wield clout with agility.
For nearly 60 years, the IMF job has been reserved for a European and the top World Bank job for an American—an archaic, if not illegitimate, tradition.
"Europe no longer has the divine right to this job," Arvind Subramanian and Nicolas Véron of the Peterson Institute for International Economics, a Washington think tank, wrote this week. "The world has changed, and antiquated if unstated arrangements dating from 1945…must keep pace with reality." The next managing director of the IMF, they said, must be chosen on merit, "which is not to be found only in Europe."
This story is a must read...and the link is here.
Has the Arab Spring Stalled? Autocrats Gain Ground in Middle East
According to the "Fundamental Law of Revolution," regimes fall when those at the bottom are fed up with the status quo and those at the top are no longer capable of remaining in power.
That was the experience of Vladimir Ilyich Lenin.
But difficulties arise when there is one thing those at the top are still quite capable of doing, namely deploying tanks to deal with their opponents -- as is the case in Syria and Libya.
This story was posted over at spiegel.de yesterday...and I thank Roy Stephens for sending it along. The link is here.
Massive Gold & Silver Demand Out of India: Rick Rule
Eric King sent me a blog with Rick Rule he posted over at his King World News website yesterday. This short piece is worth the read...and the link is here.
JPMorgan Says Crude Oil, Gold to Drive Rebound in Commodities
Today's last offering is a Bloomberg story from Russian reader Alex Lvov...and was posted from Singapore in the wee hours of yesterday morning.
Crude oil and gold will lead a rally in commodities as production fails to keep pace with demand, said Ray Eyles, chief executive officer of JPMorgan Chase & Co. commodity business in Asia.
Precious metals will benefit the most from a “strong interest” in diversification and inflation and currency hedges, he said on May 16th. “What people tend to underestimate is how strong and how far the market can go when there is a limited supply to match a very heavy demand,” he said. Gold stored in the bank’s vault in Singapore is “rapidly increasing,” he said.
This is a must read from start to finish...and the link is here.
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¤ The Wrap
After a great correction in price like we’ve just witnessed, there always exists the feeling that the silver game may be over, or over for a long time...especially when a large number of commentators are echoing this sentiment. But feelings are different from facts and the facts argue against this line of thinking. - silver analyst Ted Butler...May 18, 2011
Gold's volume on Wednesday showed that a bit over 120,000 contracts net of all roll-overs were traded yesterday...and the preliminary open interest number showed an increase of 9,910 contracts.
The final open interest number for Tuesday's trading day showed a big decline of 5,686 contracts...and this was not a surprise, as the preliminary o.i. number showed a rather small increase of 2,333 contracts. This number will be included in tomorrow's Commitment of Traders Report.
Net volume in silver yesterday was also on the smallish side, with only around 65,000 contracts traded...and the preliminary open interest jumped a chunky 5,291 contracts.
Tuesday's final open interest number showed a decline of 2,004 contracts...and the preliminary number showed an increase of 2,207 contracts. This is another nice decline in silver's o.i...and this, too, will be in tomorrow's COT report...which, as I said yesterday, may be suitable for framing.
But I'm not overly thrilled with the preliminary open interest figures for yesterday. These are big numbers for a low-volume and low-price increase day in both metals. But before I get too upset about it, I think I'll just wait and see what the final figures on the CME's website are when I get up in the morning.
The silver backwardation issue showed that there was little change in Wednesday's numbers compared to those issued on Tuesday.
I'm not sure what, if anything, there is to be read into the current situation in the silver market. The silver price is four bucks below its 50-day moving average...and the technical funds won't dip their toes back in the water on the long side until we get above that moving average...so we're sort of in a silver 'no-man's-land' right now.
I wonder what will drive silver prices higher from here? Will it be new buying...with the bullion banks going short again...or are the bullion banks going to drive this market higher themselves with short covering, as there are virtually no technical fund longs left to liquidate. The changes in open interest will tell us a lot as the price moves higher in the next rally.
Here's the 6-month silver chart once again...
Neither silver nor gold did very much during the Far East trading day...and what gains that were recorded, disappeared when a dollar rally materialized. Gold is down about seven bucks...and silver is unchanged in early London trading as of 5:14 a.m. Eastern time. Volume in both metals is average...and it doesn't appear that the high-frequency traders are thrashing about in the silver market at the moment. It also looked like they were M.I.A. yesterday as well.
The Comex opens at 8:20 a.m. Eastern time this morning...and I would bet that any significant price action will occur after that time.
That's it for today. I'll see you here tomorrow.
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