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Message: Ed Steer this morning
It Would Be Foolish to Deride or Ignore GATA: Financial Times, London
"Make no mistake about it...we are at, or near, historic low levels in all three categories contained within the Commitment of Traders Report."
¤ Yesterday in Gold and Silver
The gold price spent most of the Far East trading day within a ten dollar price range...but around noon London time...a rally worthy of the name appeared. This lasted until 9:40 a.m. in New York...which may have been an early London p.m. fix.
That was gold's high of the day...and from there it got sold off about fourteen bucks to its New York low around 1:10 p.m. Eastern time. From there it rallied gradually right into the close of electronic trading.
The gold price closed at $1,642 spot...up $21.80 on the day...gaining back virtually everything it 'lost' on Thursday. Net volume was sort of average...around 122,000 contracts.
As always, the silver price was more 'volatile'. It chopped around in a 50 cent price range until a rally began around 12 o'clock noon in London. It's possible that this rally [along with the beginning of the rally in gold] began once the silver fix was in, which occurs around noon local time every day.
Once the 'fix was in'...the silver chart looked very much like the gold chart, except for the fact that the silver rally got chopped off at the knees at 8:40 a.m. Eastern time vs. 9:40 a.m. for gold. The price traded in a one percent price range from there, closing reasonably close to its high of the day...which was $31.40 spot...up 82 cents on the day, gaining a bit more than it lost on Thursday. Net volume [30,000 contracts] was pretty average considering the price action.
Here's the New York Spot Silver [Bid] chart. The daily chart above doesn't show the big spike in the silver price the moment that Comex trading began...and was probably the reason they smacked it an hour sooner than gold. One can only imagine how high the silver price would have gone if the not-for-profit seller hadn't shown up when they did.
The dollar took a bit of a header yesterday beginning at 9:00 a.m. in London...4:00 a.m. Eastern time. The vast majority of the drop was in by 10:00 a.m. in New York...but the actual low for that move came an hour later at 11:00 a.m.
The gold rally fits the dollar rally pretty well, but was a rather anemic gain considering the size of the drop in the dollar.
The gold stocks pretty much followed the gold price yesterday...and the HUI finished up 1.73%...gaining more than double Thursday's loss. I'm sure that was helped along by the fact that the Dow was in rally mode.
The silver stocks did just all right...and Nick Laird's Silver Sentiment Index closed up 1.95%
(Click on image to enlarge)
The CME's Daily Delivery Report didn't show much. They reported that 27 gold and one lonely silver contract were posted for delivery on Tuesday.
There were no changes in the GLD ETF yesterday...but over at SLV they reported another withdrawal. This time it was 1,070,546 troy ounces. During this past week, 3.65 million ounces were reported withdrawn from SLV.
There was no sales report from the U.S. Mint.
The Comex-approved depositories reported receiving 595,958 ounces of silver on Thursday...and shipped 262,251 ounces of the stuff out the door.
Well, I must admit that the Commitment of Traders Report [for positions held at the close of trading on Tuesday, October 18th] was a very pleasant surprise. In silver, the Commercial net short position declined by a further 2,054 contracts...and is now down to 18,774 contracts...which is a shockingly low 93.9 million ounces. Most of the improvement was Ted Butler's smaller traders [the raptors] adding to their long positions on the price declines of the past reporting week.
The '4 or less' Commercial traders are short 143.7 million ounces...and the '5 through 8' Commercial traders are short 46.5 million ounces. If you add them up, these eight largest Commercial traders in silver are short 190.2 million ounces...which is a bit more than double the Commercial net short position...and they are short 64.6% of the total gross short position in the Commercial category as well. And if you remove all the spread trades, then the concentrated short position held by the Commercial traders skyrockets even further. They are the market!
The other 33 traders holding short positions in the Commercial category don't matter at all...and the shorts they hold are probably the short side of a long/short spread trade anyway. I'd bet money that that's the case.
The other surprise in silver was the fact that the technical funds, along with the small traders in the Nonreportable category, added to their short positions. It's been a while since I've seen that, especially considering how far below silver's 200-day moving average we are.
In gold, the Commercial net short position declined by a rather substantial 9,325 contracts, or 932,500 ounce of gold...and is now down to 15.9 million ounces. And, just like in silver, the technical funds and the small traders not only sold long positions, they also added to their short positions as well.
The '4 or less' Commercial traders are short 14.1 million ounces...and the '5 through 8' are short 4.3 million ounces. Between the eight largest Commercial traders they are short 18.4 million ounces...which is 115% of the Commercial net short position...and 54% of the gross short position in gold. Just like in silver, these 'big 8' are the market...as the other 41 traders that hold the balance of the short positions in the Commercial category [15.7 million ounces] just don't matter.
Ted Butler and I both agree that, since the Tuesday cut-off, there has probably been even more improvement in the short positions of the big commercial traders...but the extent of that won't be known until next Friday.
But, regardless of that, from a COT point of view, this is probably the most wildly bullish report that I've seen in many, many years. It's hard to imagine a more bullish report than this.
Here's Ted Butler's 'Days of Production to Cover Short Positions for the 4 largest traders...and the 8 largest traders...in all Comex traded commodities as of yesterday's COT report...from which this chart is derived. Note the number of days of total world production it would take to cover their respective short positions...particularly silver and gold. The 8 largest traders in silver are short 100 days of total world silver production...and the 8 largest traders are short 86 days of total world production.
(Click on image to enlarge)
Now here's the same chart from way back on September 28, 2010...a year ago next week. Look at the number of days production that the 'big 4' and 'big 8' were short back then. In silver, the 8 largest traders were short about 178 days of world silver production...and about 131 days in gold Notice how much it has declined in a year. That's JPMorgan et al gettin' out of Dodge.
(Click on image to enlarge)
But, as I said, we are virtually totally cleaned out to the downside...and the only way that JPMorgan et al are going to be able to get out of their remaining short position [100 days of world silver production as of the cut-off for the COT report on Tuesday] is by breaking every rule in the book...because whatever they don't cover, they have to buy back and drive the price sky high...or declare force majeure...or maybe the crooks running the CME will change the rules on their behalf.
Since we're talking about silver...here's a pretty picture of pallets of Comex good delivery bars. I wish I could say that it was my personal stash, but it isn't.
(Click on image to enlarge)
Since it's my Saturday column, it's time to empty the in-box...and I have lots of good stories and interviews for you today.
¤ Critical Reads
SubscribeU.S. "misery index" rises to highest since 1983
An unofficial gauge of human misery in the United States rose last month to a 28-year high as Americans struggled with rising inflation and high unemployment.
The misery index -- which is simply the sum of the country's inflation and unemployment rates -- rose to 13.0, pushed up by higher price data the government reported on Wednesday.
The data underscores the extent that Americans continue to suffer even two years after a deep recession ended, with a weak economic recovery imperiling President Barack Obama's hopes of winning reelection next year.
What recovery? Doug Casey's "Greater Depression" is upon us. This Reuters story from Thursday, posted over at finance.yahoo.com, is courtesy of reader Scott Pluschau...and the link is here.
The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System
Most people have no idea that Wall Street has become a gigantic financial casino. The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end. The word "derivatives" sounds complicated and technical, but understanding them is really not that hard. A derivative is essentially a fancy way of saying that a bet has been made.
Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before. Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion.
This very long read is well worth your time, if you have it. The essay is posted over at theeconomiccollpase.com website...and I thank Roy Stephens for the first of many stories he has for us today. The link is here.
Sean Corrigan: Value can't be calculated after governments wreck markets
This is a GATA release from late last night...and it begins as follows...
Interviewing Sean Corrigan of Diapason Commodities Management in Lausanne, Switzerland, GoldMoney gets a wonderful comment along the lines of GATA's old complaint: "There are no markets anymore, only interventions." Asked how to determine whether gold [and everything else] is over...or undervalued, Corrigan remarks:
"What is 'value' in a world where the single goal of the powers that be is to deny the market the ability to have its constituents' underlying ordering of wants accurately reflected in the price structure? We have no proper market in capital; severely impaired markets in any number of basic goods; false markets in real estate; distorted markets in labor (hence why so many poor souls are still without jobs); and no certainty about anything except the awful certainty that nothing is off-limits to those who are desperately trying to put Humpty Dumpty together again."
This GATA release of a 2-part goldmoney.com interview with Sean is a must read...and the link is here.
Occupy Wall Street: Washington Still Doesn't Get It: Matt Taibbi
I'll have more coming out about this in a few days, but there have been two disgusting developments in the realm of plutocratic intervention on behalf of Wall Street that everyone protesting should take note of.
The fact that both of the following things took place in the middle of the full fever of OWS, when everyone is supposedly trying to placate anti-banker sentiment and Obama and the DCCC are supposedly pledging support of the protesters, shows how completely bankrupt this system is and how necessary street-level protests have become.
This short Matt Taibbi blog posted over at Rolling Stone magazine...and courtesy of Roy Stephens...is worth the read. The link is here.
U.S. Shouldn’t Ignore Iran’s Speedboat Threat: Jeffrey Goldberg
The Revolutionary Guards have their own navy -- a bigger one, in fact, than Iran’s traditional navy. (The traditional navy has 18,000 sailors; the IRGC’s navy reportedly has 20,000 personnel, as well as a large fleet suitable for waging the sort of asymmetric warfare it favors.) And the guards -- protectors of Ayatollah Khomeini’s dystopian vision for a radicalized Muslim world, enthusiastic exporters of terrorism, and rulers of a state within a state -- are becoming ever more aggressive in the Gulf.
From what I already know, this scenario is absolutely true...and should be taken deadly seriously. No navy on Planet Earth has suitable protection against the "swarming" patterns of these hundreds of small torpedo-equipped speedboats when they attack in large numbers.
I thank Washington state reader S.A. for sending me this Bloomberg story posted on Monday...and the link to this must read story is here.
War...and the Return of Populism: Why Obama is targeting Iran - Justin Raimondo
What’s behind the recent upsurge in anti-Iranian war propaganda coming out of the Obama administration? This is the question Stephen Walt posed on his blog at ForeignPolicy.com:
“What’s the endgame here? What is the positive purpose to be gained from this new campaign? If there really is hard and reliable evidence of a serious Iranian plot to bomb buildings in the United States and to kill foreign emissaries on our soil, then that’s one thing. But if this turns out to be a much more ambiguous business – either a rogue Iranian operation, a false flag scheme, or a case of FBI entrapment – then what are we trying to accomplish by rolling out a seemingly well-orchestrated round of new accusations, especially when there’s little chance of getting the sort of ‘crippling sanctions’ that might actually alter Iran’s behavior? Are we just trying to divert attention from other issues (the economy, the ‘Arab Spring,’ the failed diplomacy on Israel-Palestine, etc.), or is this somehow linked to the 2012 campaign?”
He’s getting warmer.
This Justin Raimondo piece fits like a hand in a glove with the previous Bloomberg piece...and is a must read as well. The story is posted over at the antiwar.com website...and I thank Michael Riedel for sharing it with us. The link is here.
German Chancellor Angela Merkel denies there is an EU deadlock
Angela Merkel has denied that there is a deadlock between Germany and France and insisted that a debt crisis resolution has been delayed by "technical details" not disagreement.
The German Chancellor told members of the Bundestag that a "second meeting" on Wednesday had been called to nail down details because it was "better to be safe than sorry".
A meeting of the eurozone finance ministers – the so-called Eurogroup – kicked off the weekend of talks in Brussels. On Friday they agreed to release the €8bn (£6.95bn) tranche of international aid to Greece following Athens' approval of its latest austerity package on Thursday night.
"We have endorsed the disbursement of the next tranche of financial assistance to Greece," the Eurogroup said, after clearance from International Monetary Fund, the European Commission and European Central Bank troika. "The disbursement is expected to take place in the first half of November."
You can't make this stuff up. This story was filed in The Telegraph yesterday evening...and is another Roy Stephens offering. The link is here.
Greece handed €8bn aid package lifeline but euro concerns remain
Greece was handed a lifeline on Friday night after international lenders finally released an €8bn (£6.95bn) aid package for the beleaguered country, kicking off a crucial weekend for the future of the eurozone.
Although the agreement will allow Athens to avoid imminent default, a report leaked at the Brussels summit on Friday night suggested the terms of the second Greek bail-out would have to be ripped up in order to stabilise the country.
The report – prepared for the troika of the IMF, European Central Bank and European Commission – suggested Greece’s economy has deteriorated to such an extent that lenders would have to find €252bn in loans by the end of the decade.
This is another story from The Telegraph yesterday evening. I thank Roy Stephens once again...and the link is here.
Greek PM clings to power, tries to dodge snap polls
Greece's embattled socialist Prime Minister George Papandreou is clinging to power after losing a deputy in the effort to impose a fresh wave of austerity on an angry public, but his grip is weakened by problems at home and abroad.
A shrinking parliament majority, street protests and lack of wider consensus are testing Papandreou's resolve, as will any failure on the EU's part to come up with a comprehensive solution to Greece's biggest post-war economic crisis.
Snap elections now would be disastrous for his ruling Socialists, who won polls two years ago on tax-and-spend pledges and found themselves unprepared to deal with the debt crisis threatening to take down the euro and derail the global economy.
Greece will default. It's just a matter of when...and how big the bust will be. The longer this is dragged out, the bigger the problems become. This Reuters story was filed from Athens yesterday afternoon...and is courtesy of Roy Stephens once again. The link is here.
Germany and the Euro: Currency Crisis Heightens Trans-Atlantic Tensions
The US is becoming increasingly impatient with Europe's seeming inability to solve the ongoing euro crisis. Many in the United States think they know who is to blame: Germany.
For once, US President Barack Obama sounded satisfied. "Chancellor Merkel and President Sarkozy fully understand the urgency of the issues in the euro zone and are working diligently to develop a comprehensive solution that addresses the challenge," reads a White House press office statement on a Thursday video conference involving the three leaders, in addition to British Prime Minister David Cameron.
The message could, of course, be seen as one of many such White House statements issued each year expressing confidence in allies as they face difficult problems. But Thursday's statement stands in sharp contrast to the trans-Atlantic bickering that has accompanied Europe's search this autumn for a solution to its growing common currency crisis. And it obscures the truth: Many in the US think Europe -- and Germany in particular -- has taken a wrong turn.
Actually, if I were Merkel, I'd run screaming from all this...pull Germany out of the European Union and go back to the Deutsche Mark. Who needs the aggravation? However, the 'powers that be' have other plans. This spiegel.de story from yesterday is another Roy Stephens offering...and the link is here.
The single currency is close to collapse
Yet again, Europe stands on the brink of abject disaster, apparently unable to resolve its differences. A monetary union that was meant to bring former enemies together, binding them to each other via irreversible economic integration, is succeeding only in tearing them apart. It is a crisis that this newspaper has consistently warned of since the single currency’s creation; it gives no pleasure to see our predictions come true.
With a meltdown in the sovereign debt markets fast metastasising into an all-embracing economic and political calamity, the Continent’s position has rarely seemed quite so imperilled since the days of the Second World War. Most worrying is that the Franco-German partnership which lies at the heart of the European project is fracturing as never before, with deep divisions over almost every aspect of the grand rescue plan.
This was posted in The Telegraph yesterday evening...and is an absolute must read. I know you're not going to believe it, dear reader, but I actually dug this story up on my own. Roy is still in a state of shock. The link is here.
Skype and Sensibility: Estonia Lives the European Dream
The Estonians, with little debt, an enthusiastic attitude toward Europe and a stoic approach to austerity measures, are a model EU nation in the midst of a crisis. They live in a digital republic defined by a business-friendly atmosphere and government transparency, an image that is attracting European expats.
I checked the dateline on this spiegel.de essay just to ensure myself that this 2- page story was current...and it was. It's amazing what happens when there's limited government...and that limited government is really there to help...and not get in your face.
This is the only truly positive story in the whole column...and is Roy Stephens final offering of the day. The link is here.
Another day, another currency market rigging
Japan's finance minister said on Saturday he would take decisive action against excessive and speculative yen moves, Kyodo news agency reported, threatening to conduct currency intervention after the yen rose to a record high against the dollar.
Jun Azumi was also quoted by Kyodo as saying that the yen's appreciation was not so much a reflection of Japan's economic fundamentals, but reflected the relative economic conditions in Japan, Europe and the United States.
"I would like to take decisive action on excessive and speculative movements," Azumi was quoted by Kyodo as telling reporters.
"We're in a situation where the foreign exchange rates would wipe out earnings by hard working companies."
This Reuters story, filed from Tokyo, showed up in a GATA release late last night...and the link is here.
Long wait for silver delivery in manipulated market, trader tells King World News
Silver supplies are tight, there are long waits for delivery, and market participants increasingly realize that the silver futures market is manipulated and has little bearing on the price of real metal, the KWN London trader source reported yesterday. The link to the blog is here.
Market manipulation and the second Great Depression
Writing for Matterhorn Asset Management in Zurich, the German journalist Lars Schall has interviewed the American financial journalist and former investment banker Nomi Prins...and the Australian fund manager Wesley Legrand about the manipulation of the precious metals markets. The interview cites GATA, is headlined "Market Manipulation and the Second Great Depression," and can be found at Matterhorn's Internet site, goldswitzerland.com. The link is here.
Russian central bank acquiring 'huge volumes' of gold
The Russian central bank will continue raising the share of gold in its gold and foreign exchange reserves, the central bank First Deputy Chairman Alexei Ulyukayev said on Thursday.
"We are not planning to step away from this path. We are acquiring huge volumes" of gold, Ulyukayev told the parliament.
Earlier on Thursday, the central bank data showed that Russia's gold and forex reserves, the world's third largest, rose to $517.7 billion in the week to Oct. 14th.
This Reuters story was filed from Moscow on Thursday...and I borrowed it from a GATA release as well...and the link is here.
Why such a manipulated and covert gold market?, Rickards asks
Interviewed yesterday by King World News, geopolitical analyst James G. Rickards laments the surreptitiousness and manipulativeness of the gold market. "Why do we have such a non-transparent, manipulated, covert system?," Rickards asks. "Why don't we have something that's more normal."
Unfortunately the system Rickards laments has been the "normal" system for most of the 40 years since the United States repudiated the direct convertibility of the dollar into gold.
I thank Chris Powell for wordsmithing the introduction...and the link to the KWN blog is here. Eric told me that the full audio interview won't be available on his website until sometime on Sunday.
John Embry and Ben Davies: Two KWN Audio Interviews
Gillian Tett in the Financial Times: It would be foolish to deride or ignore GATA
Out there in the world today, a cabal of Western central bankers is secretly determined to manipulate the world's markets. They are doing this not via interest rates but by rigging gold prices.
More specifically, they have kept bullion prices artificially low in recent decades to ensure that our so-called fiat currency system -- that is, money created by central banks -- continues to work. For if the public ever knew the "real" price of gold, we would finally understand that our currencies, such as the dollar, are a sham. ... Hence the need for that central bank plot.
Does this sound like the ranting of a Tea Party activist? A Hollywood screenplay? Or could there be a grain of truth in it?
This rather long story was posted in the Friday edition of the Financial Times of London. It's printed in the clear in this GATA release...and it's almost pointless to mention that it's well worth the read...and the link is here.
Chris Powell: Where in the world is the gold?
This is the speech by Chris Powell, the secretary/treasurer of GATA, given at the fall dinner meeting of the Committee for Monetary Research and Education in New York on Thursday, October 20, 2011.
The speech is pretty long, but a must read in my opinion. It's posted over at the gata.org website...and the link is here.
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¤ The Wrap
The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. - Earnest Hemingway
Today's 'blast from the past' is a tune that everyone knows. It started off life as a well-known Christian hymn first published in 1931. Then this artist included a version of it on his 1971 album Teaser and the Firecat...and the rest, as they say, is history. I thank reader Eldon Johnson for sending it along. So turn up your speakers and click here.
There wasn't much to be gleaned from yesterday's preliminary open interest numbers...or from the final open interest numbers for Thursday. The fact that yesterday's COT report [for positions held at the close of Comex trading on Tuesday] was a very pleasant surprise to both Ted Butler and myself, proves that you can't read much, if anything, into the daily open interest numbers, either preliminary or final.
But make no mistake about it...we are at, or near, historic low levels in all three categories contained within the Commitment of Traders Report...the Non-Commercials [tech funds], the Commercials [the bullion banks and the raptors]...and the Nonreportable positions of the small traders [less than 150 Comex contracts held]. It's a clean-out of almost biblical proportions...that just got better with yesterday's COT report.
Whether or not the bullion banks continue to drive prices lower in order to get more leveraged longs to liquidate is not known...but the law of diminishing returns has to set in at some point...and the price action next week should tell us a lot.
The other thing that's beginning to happen as gold and silver prices goes lower, is that the technical funds and small traders are starting to put on short positions...and you can bet your last nickel that it's the bullion banks [along with the raptors] taking the long side of the trade. So the bullion banks can continue to hammer away, and although they're not covering short positions, they are taking the long side of the short position that's being put on by the traders in the other two categories...which, mechanically, amounts to the same thing as covering a short position.
But the real question that has to be asked is the same one that Ted and I ask all the time. Will the bullion bank become the short sellers of last resort...the not-for-profit sellers taking the short side of all the longs coming into the market? If they do, it's the same old, same old. If they don't...then pick a very large number for both gold and silver. That's all we're waiting for now...and it's just the timing of that event that's the big unknown.
The other thing I spend a lot of time thinking about is the imminent demise of our current economic, financial and monetary system...and whether or not this big clean-out by the bullion banks may in some way be related to a global re-pricing of gold that would shore up the asset side of the world's central banks' balance sheets...especially the western central banks. Will this happen? I don't know, but if there was ever going to be a moment to pull this off, now would be the perfect time.
This is certainly speculation on my part, but looking at the big picture, it's the only card the powers that be have left to play if they want to make sovereign debt 'as good as gold'. If they don't, it won't be worth much at the rate things are circling the drain at the moment.
We shall see how this all plays out in the fullness of time...but there's not much of that left.
As I said yesterday...and again today...it's still my opinion that the bottom is in [or very close] for both metals. And, like the physical metal itself, the precious metal shares are now on sale as well. So there's still time to either re-adjust 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'm still 'all in'.
Enjoy what's left of your weekend...and I'll see you here on Tuesday.
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