Gold & Silver Articles
A scrolling feed of the latest and best articles on the Gold & Silver market from Ed Steer’s Gold & Silver Daily. Every day he lists all the important and must-read articles around the web, this is unmissable.
- Fri, 18 May 2012 09:38:18 +0000: Doug Casey: Precious Metals Market Manipulation? - Ed Steer's Gold & Silver DailyAuthor:
Yesterday in Gold and Silver
Ed_GSDMay 18, 2012 10:38am GMTIt was nice to see some positive price action in gold for a change...and by 3:00 p.m. Hong Kong time it was up about ten bucks...and was still up ten dollars going into the London p.m. gold fix, which came shortly before 10:00 a.m. in New York.
The gold price then jumped about $15 once the fix was in...and by lunchtime in New York, it had reached its high of day, which Kitco recorded as $1,584.80 spot. From there, gold got sold off ten dollars in short order...and then traded sideways into the close of electronic trading.
Gold closed the Thursday session at $1,574.30 spot...up $34.00 on the day. Net volume was immense once again at 182,000 contracts.
Silver had a pretty decent day as well...and was up about 50 cents by 3:00 p.m. Hong Kong time. From there the price slid until 1:00 p.m. in London...about twenty minutes before the Comex open. From there, the silver price rose in fits and starts until noon in New York. And, like gold, that was the high tick of the day...$28.35 spot...and from there silver got sold off to the $28 mark at the close of Comex trading...and then traded flat into the close electronic trading at 5:15 p.m. Eastern time.
Silver finished the Thursday trading day at $28.05 spot...up 78 cents. Volume was pretty heavy at 44,000 contracts.
The dollar index oscillated within about a 40 basis point price range yesterday...bouncing off the 81.6 price level for the second time in as many day...and finished up about 15 basis points. Not much to see here.
The gold stocks gapped up at the open in New York. The London p.m. gold fix at 10:00 a.m...and the New York high at noon yesterday, are the most prominent features on this chart. After the high tick was in, the stocks faded a bit, but held onto a large portion of their gains. The HUI finished up 4.45%.
For the most part, the silver stocks were on fire yesterday, but three of the seven stocks that make up Nick Laird's Silver Sentiment Index did not share in the fun...and the SSI finished up only 2.87%.
(Click on image to enlarge)
The CME's Daily Delivery Report was another yawner, which it has a tendency to become once we get past the first full week of deliveries in any delivery month. They reported that 35 gold and 21 silver contracts were posted for delivery on Monday.
Both GLD and SLV had changes to report yesterday. GLD added 67,954 troy ounces of gold...but over at SLV an authorized participant added a whopping 3,299,537 ounces of silver. Considering the lousy silver price action of earlier this week...and the smallish increase in the price of silver yesterday...I would assume [like the counterintuitive deposit in SLV on Monday] that this deposit had something to do with covering a short position. But, as I mentioned yesterday, we won't really know for sure until the report comes out over at shortsqueeze.com next week...and even then I don't think that this addition will be in it, because I believe that it occurred after the cut-off date. We'll see.
The U.S. Mint did not have a sales report yesterday.
Over at the Comex-approved depositories on Wednesday, they reported receiving 605,838 troy ounces of silver...and shipped 288,396 ounces of the stuff out the door. The link to that action is here.
Today's first chart is courtesy of Washington state reader S.A. As you can see, it's the 3-year dollar index...and as one commentator over at Zero Hedge put it yesterday..."When the US dollar is your 'safe haven', you know you've hit rock bottom." Amen to that.
(Click on image to enlarge)
Here's another happy looking chart...and should make everyone on a 'blue pill' diet feel a little better. The chart and dialogue say it all.
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I said I was going to post the charts on silver yesterday that German gold analyst Dimitri Speck sent me earlier this week, but they got preempted by others, so here they are now. The first one is the 14-year silver chart from August 1998 to the end of 2011. Three stand-out features are the 12 o'clock noon London silver fix...and in New York it's the secondary decline at the London p.m. gold fix at 10:00 a.m. Eastern time...and, surprisingly enough, the high for silver on average over the last fourteen years of Comex trading comes at twelve o'clock noon in New York...exactly what happened with silver during yesterday's price action. You can read into that what you wish.
(Click on image to enlarge)
Dimitri's second chart for silver is just for 2011...and even a cursory glance tells you that it's an entirely different looking beast than the previous chart. Now the three stand-out features on this chart are the usual London silver fix at noon local time...but the high in Comex trading in New York is now 10:30 a.m....not noon. And the amazing thing is that there is now a secondary low equivalent to the London silver fix that occurs shortly after 3:00 p.m. in electronic trading...and the whole chart has a negative bias to it as well. As you can tell, the selling in the New York session last year became much more ferocious once the high was in for the day.
(Click on image to enlarge)
Dimitri's gold Intraday Price Movements charts for gold showed up on the Internet about ten years ago and caused a sensation when they did. This is the first time he's done it for silver, so these charts are new for me as well.
I have the usual number of stories...and I hope you find a few that float your boat.
GLD added 67,954 troy ounces of gold...but over at SLV an authorized participant added a whopping 3,299,537 ounces of silver.Gold rallies on technical buying; dead-cat bounce? South Africa gives tax break to gold miners. Despite Pullback, Gold to Hit New All-Time Highs. 3.3 million ounces deposited in SLV.Critical Reads
JPMorgan unit has $100 billion in risky bonds
Ed_GSDMay 18, 2012 10:38am GMTThe unit at the centre of JPMorgan Chase's $2 billion trading loss has built up positions totalling more than $100 billion in asset-backed securities and structured products -- the complex, risky bonds at the centre of the financial crisis in 2008.
These holdings are in addition to those in credit derivatives that led to the losses and have mired the bank in regulatory investigations and criticism.
The unit, the chief investment office (CIO), has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralised loan obligations in all markets for three years, more than a dozen senior traders and credit experts have told the Financial Times.
This Financial Times story was posted on their website shortly after midnight...and is posted in the clear in this GATA release...and the link is here.
BOMBSHELL REPORT: Jamie Dimon Personally Approved The Concept Of The Disastrous Trade, Losses Could Total $5 Billion
Ed_GSDMay 18, 2012 10:38am GMTDetails continue to emerge regarding JP Morgan's shocking multi-billion trading losses.
However, the biggest behind-the-scenes report so far was just published by The Wall Street Journal and written by Monica Langley.
Here's how Dimon first found out about the losses: On April 30, associates who were gathered in a conference room handed Mr. Dimon summaries and analyses of the losses. But there were no details about the trades themselves. "I want to see the positions!" he barked, throwing down the papers, according to attendees. "Now! I want to see everything!"
When Mr. Dimon saw the numbers, these people say, he couldn't breathe.
This story was posted on the businessinsider.com website late yesterday evening...and I thank Roy Stephens for sending it along. The link is here.
Spokane Banker 'Bails Out' a Dozen Ducklings
Ed_GSDMay 18, 2012 10:38am GMTJust when you thought that bankers didn't have a soul, here's a 2:32 minute video clip from ABC News that will warm the cockles of your heart. Of course he's not a New York banker, so that's probably one of his saving graces. It's cute and definitely worth watching. I thank reader Brad Robertson for sending it along...and the link to the youtube.com video is here.
The American Foreclosure Process Has Ground To A Halt
Ed_GSDMay 18, 2012 10:38am GMTSomething funny happened in the aftermath of the US fraudclosure settlement, in which millions of backlogged housing units were supposed to enter the foreclosure process and begin the clearing of the nearly 9 million housing units in shadow inventory: nothing.
Because as RealtyTrac disclosed overnight, in April the US saw a mere 188,780 foreclosures events of various type (NOD, auction, REO) take place. Why is this number significant? Because it is the lowest in 5 years, despite shadow inventory in the US now being virtually the highest ever.
This zerohedge.com posting from yesterday was sent to me by Casey Research's own Alex Daley, for which I thank him...and the link is here.
Hewlett-Packard Said to Consider Cutting Up to 25,000 Jobs
Ed_GSDMay 18, 2012 10:38am GMTHewlett-Packard Co. is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
The number to be cut includes 10,000 to 15,000 from Hewlett-Packard’s enterprise services group, which sells a range of information-technology services and has been beset by declining profitability, said these people, who asked not to be identified because the plans aren’t final and may change.
Meg Whitman, chief executive officer since September, is seeking to reverse the growth slump that led to the ouster of her predecessor, Leo Apotheker. The company’s PC sales are dropping as consumers favor tablets, such as Apple Inc.’s iPad, and it has been slow to adapt to the shift toward cloud computing, away from the IT services Hewlett-Packard provides.
This Bloomberg story was courtesy of reader 'David in California'...and the link is here.
US manufacturing adds to Fed's fears
Ed_GSDMay 18, 2012 10:38am GMTA survey of manufacturing activity from the Federal Reserve's Philadelphia branch tumbled to -5.8 this month from 8.5 in April, where any reading below zero signals contraction.
Although Thursday's survey only covers Pennsylvania and surrounding states, economists take it as an early reading on America's wider manufacturing industry.
The steep decline comes as Europe's escalating debt crisis dominates thinking in Wall Street and Washington. Federal Reserve policymakers cited the region's woes at the central threat to the US recovery this week.
Should the drop in the manufacturing index prove to be the start of a run of weaker activity, economists expect Federal Reserve chairman Ben Bernanke to take further measures to help the economy.
This story was posted in The Telegraph yesterday evening...and it's Roy Stephens second offering of the day. The link is here.
Italy deploys 20,000 to protect sensitive targets
Ed_GSDMay 18, 2012 10:38am GMTItaly increased security Thursday at 14,000 sites, and assigned bodyguards to protect 550 individuals after a nuclear energy company official was shot and letter bombs directed to the tax collection agency.
Under the enhanced measures, Interior Minister Anna Maria Cancellieri deployed 20,000 law enforcement officers to protect individuals and sensitive sites. In addition, 4,200 military personnel already assigned throughout Italy will be redeployed according to new priorities.
"Based on a thorough analysis of the situation, Interior Cancellieri has confirmed the need to maintain a high level of vigilance, strengthen the security measures against sensitive targets and those exposed to specific risks," the Interior Ministry said in a statement.
This AP story was filed from Rome yesterday...and was posted in The Atlanta Journal-Constitution. I thank reader 'David in California' for his second offering in today's column...and the link is here.
ECB stops operations with some Greek banks
Ed_GSDMay 18, 2012 10:38am GMTThe European Central Bank has stopped providing liquidity to some Greek banks as they have not been successfully recapitalized, the ECB said on Wednesday, confirming news earlier reported exclusively by Reuters.
The news sent the euro lower against the dollar, fanning concerns among investors and in Greece that the country may have to leave the euro zone.
The development highlights the weak state of the banking sector in Greece, where Greeks are pulling euros out of the banks in fear that their country may exit the European single currency despite the declared determination of EU powers Germany and France to keep Athens in the monetary union.
This Reuters piece filed from Berlin and Frankfurt was posted on their website Wednesday afternoon...and I lifted it from yesterday's King Report. The link is here.
Ambrose Evans-Pritchard: Global banks see market rally on Greek exit
Ed_GSDMay 18, 2012 10:38am GMTBank of America said it expects a "powerful short squeeze" in risk assets as speculative funds unwind positions, led by a rebound in battered bank stocks and Club Med bonds. The euro would surge 10pc to $1.40 against the US dollar after dipping first to $1.20 in the immediate panic.
The benign outcome assumes that the European Central Bank steps in with massive support, backed by the US Federal Reserve, the Bank of Japan, and key central banks along the lines of concerted action in 2008-2009.
Bank of America said EU authorities will pull out the stops to keep Greece in the system as they weigh the full dangers of contagion. Should that fail, it expects a series of dramatic moves.
"The global central banks are going to respond with the biggest flood of liquidity the world has ever seen. It will make the LTRO (the ECB's €1 trillion lending to banks) look like small change."
This story was posted on The Telegraph's website early yesterday evening. I thank Nick Laird for bringing it to our attention...and it's a must read. The link is here.
Euro crisis ensnares Spain
Ed_GSDMay 18, 2012 10:38am GMTSpain moved back into the eye of the eurozone storm on Thursday, as the country’s borrowing costs rocketed to unsustainable levels and the country's banking sector was hit by mass downgrades.
Moody's slashed the ratings of 16 Spanish banks on Thursday evening, citing the reduced ability of the Spanish government to provide support to the sector, as well as the "adverse operating conditions" characterised by a renewed recession.
The rating agency also downgraded Santander UK, although, at "A2," it is still rated one notch above its parent bank Banco Santander. Moody's highlighted that Santander UK has "no direct exposure to the Spanish government (or regional governments)".
Earlier in the day, shares in Bankia, the country’s fourth biggest bank, plunged by as much as 29pc amid reports that depositors had pulled out €1bn in the past week.
This story was posted in The Telegraph late Thursday evening...and I thank Roy Stephens for bringing this article to our attention. The link is here.
Sir Mervyn King: the eurozone is tearing itself apart
Ed_GSDMay 18, 2012 10:38am GMTSir Mervyn said the recovery would be "slow and uncertain" as the economy tried to navigate its way through a potential "storm heading our way from the continent."
"We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country's history, the biggest fiscal deficit in our peacetime history, and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution," Sir Mervyn King said.
This video, posted over at The Telegraph late Wednesday afternoon, runs 2:22 minutes...and is worth watching. I thank Roy Stephens for his final offering in today's column...and the link is here.
China: Big banks' lending grinds to halt in first half of May
Ed_GSDMay 18, 2012 10:38am GMTChina's "Big Four" banks made almost no new loans in the first two weeks of May, after a surprise drop in new loans in April, highlighting liquidity strains that have persisted despite the central bank's monetary easing.
Citing an unidentified insider, the China Securities Journal reported that two of the banks saw only minor loan growth of less than 10 billion yuan ($1.59 billion), while new lending actually contracted at the other two. The article didn't say which banks fell into either category.
The "Big Four" - Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Agricultural Bank of China Ltd - usually account for 30 percent of new yuan loans each year.
The dismal performance followed an overall drop in new loans last month. Financial institutions in China extended 681.8 billion yuan of loans in April, a sharp fall from 1.01 trillion yuan in March and far below market expectations.
This story showed on the chinadaily.com.cn website early yesterday morning...and I thank Hong Kong reader Graham C. for sending it along. The link is here.
Gold rallies on technical buying; dead-cat bounce?
Ed_GSDMay 18, 2012 10:38am GMTSpot gold rallied more than 2 percent on Thursday for its largest one-day gain since late January, as technical buy signals and new signs of a sluggish U.S. economy more than offset deepening despair over the euro zone.
After flirting with a bear market on Wednesday, down more than 20 percent from its September record, bullion rallied early after Philadelphia Federal Reserve data showed a contraction in factory activity in the U.S. mid-Atlantic region. The data rekindled some hope the Fed would plow more money into the system to stimulate the economy, traders said.
The dramatic $24 bolt higher started just before the release of the Philly Fed statement at 10:00 a.m. EDT (1400 GMT) and continued for about 20 minutes, accompanied by a spike in volume.
This Reuters story was filed from New York yesterday...and was posted over at the finance.yahoo.com website. I thank reader Peter Handley for sending it...and the link is here.
South Africa gives tax break to gold miners
Ed_GSDMay 18, 2012 10:38am GMTAs African governments seek to extract more revenue from their mining sectors, the continent's biggest economy has given gold producers a much-needed tax break that removes at least one head wind from a struggling industry.
Gold Fields, the world No. 4 bullion producer, on Thursday became the latest South African gold miner to report better-than-expected earnings partly on the back of the new, lower tax regime. It benefited to the tune of close to 1 billion rand ($120.46 million) from the change in the first quarter.
The companies' gain will cause some shareholder pain as the burden has been partly sifted to dividends, but analysts generally agree that the Treasury's revenue stream from the gold sector will be less as a result.
This Reuters story was filed from Johannesburg yesterday...and I plucked it from a GATA release late last night. The link is here.
Three King World News Blogs
Ed_GSDMay 18, 2012 10:38am GMTThe first is with Peter Schiff...and it's headlined "The Market Rollover, QE3 Bottom & Gold". The next blog is with Citibank analyst, Tom Fitzpatrick. It bears the title "Despite Pullback, Gold to Hit New All-Time Highs". And lastly is this commentary with Mike Roth who, according to Eric King, is the "Number 1 oil analyst in the world." It's headlined "Fears of '08 Credit Metldown Impacting Markets".
Guest Post: Gold Tells The Truth
Ed_GSDMay 18, 2012 10:38am GMTOne of gold’s greatest powers is that it is a unit of account which cannot be fudged nearly as easily as the fiat all-you-can-print buffet.
But gold is still gold. It’s still that same shining yellow metal that investors have for thousands of years held up as a unit of account and store of value, and a medium of exchange.
Central bankers can’t just abolish history. On the other hand, history may very well abolish the central bankers and their fiat currencies.
I've never heard of the author...John Azia of Azizonomics...however his short commentary, with some really incredible graphs, was posted over at the zerohedge.com website yesterday...and is a must read. I thank Australian reader Wesley Legrand for sending it to me...and the link is here.
Peter Grandich's presentation at the New York Hard Assets Conference
Ed_GSDMay 18, 2012 10:38am GMTIn his presentation at the New York Hard Assets Conference, market analyst and mining company consultant Peter Grandich says gold will never find respect from the financial and news media establishment even though its performance over the last decade far exceeds any other asset class. He maintains that gold's bull market is far from over. Grandich's presentation is 14 minutes long.
This is another item that I pulled from a GATA release last night...and the link to the youtube.com video is here.
Doug Casey: Precious metals market manipulation?
Ed_GSDMay 18, 2012 10:38am GMTIn an essay posted Thursday at GoldSeek, financial writer Doug Casey of Casey Research asks for evidence of gold market manipulation and some explanation of its purpose.
GATA's secretary treasurer Chris Powell picked up that torch...and provided the link not only to Doug's commentary, but to all the evidence that GATA and its consultants have gathered since he and Bill Murphy founded the organization back in 1999.
There's lots to read in the links provided...and its up to each individual reader/investor to weight the evidence presented to them by all parties...not just here in my daily blog, but everywhere they roam on the Internet. As you can tell, there are dissenting voices everywhere and, for the moment, Freedom of Speech is still legal in North America.
Most people that are familiar with this issue have pretty much chosen sides already. I made up my mind long before I ever heard of GATA...or Casey Research...when I read the essay "The Golden Pyramid" by John Hathaway that my friend/full-service broker gave me more than ten years ago. Hathaway knew that something was amiss in the gold market even back then...and it still is. Nothing that I've read or heard since has changed my mind. On the contrary, with the evidence that has been brought to light since, my opinion is more strongly held than ever.
But it's a free country on both sides of the 49th parallel for the moment...and most everywhere else on Planet Earth as well...and everyone is entitled to their opinion, whatever it may be. In the future...and probably in the not-to-distant future...the matter will be settled in both gold and silver. Then Doug and I can compare notes over a glass of Torrontés.
I thank reader Howard Brown for being the first one through the door with Doug's commentary. The link to it...and all the evidence gathered...is posted in this GATA release linked here.
The Wrap
Ed_GSDMay 18, 2012 10:38am GMTThe vast majority of people do not seek wisdom; they seek affirmation of their core beliefs. - Author unknown
I don't know what to make of yesterday's price action. I was certainly happy to see prices move higher...but I found the huge volume that went with it rather disturbing. I'd rather see light volume on big price moves...and that certainly wasn't the case yesterday.
Well, all the stories that I've been posting this week have led me...and probably yourself...to the obvious conclusion that the entire world is starting to float off the rails, especially in Europe. But don't kid yourself, if Greece goes, it won't be too long before the rest of the E.U...and it's beloved currency...follow it down the drain. Right after that will come the rest of the world, as the economic, financial and monetary systems of this planet are one giant Gordian Knot...and no amount of cheating or 'thinking outside the box' will make any difference. There's no way out of this where there will be one man standing. And if there is one man standing, it will redefine the word Pyrrhic Victory.
The only thing left of value will be hard assets...with gold and silver at the top of the list...whether it is remonetized or not.
Today we get the much anticipated [at least by me] Commitment of Traders Report...and as I've mentioned several times already this week, it will be one for the record books. I'm particularly interested in seeing the situation in silver...the Commercial net short position...and the positions of the '1-4' and '5-8' short holders in that metal. It's just too bad that it won't include what happened during the 24 hours and 15 minutes after the Tuesday cut-off, as that included the absolute low.
Here's the Total PMs Pool for all precious metals that Nick Laird keeps updated on a daily basis. We just hit another new high [barely] in physical ounces in all four precious metals combined. If you check the period from the end of December to the close of trading yesterday on this chart, you will see that the 'total ounces held' has been in a permanent up-trend. During that time period gold rose and fell about $250...and silver rose and fell more than $10...platinum rose and fell about $310...and palladium rose and fell about $150. None of this price movement had anything to do with the physical market...it was all paper trading in the Comex futures market.
(Click on image to enlarge)
The gold price did nothing through all of Far East trading on their Friday afternoon, but shortly after London opened, the price has ticked up about ten bucks. Silver traded within a 20 cent range during the same time period, but is also up in mid-morning London trading. Volume's are already monstrous, so it's obvious that these rallies are running into massive resistance from JPMorgan et al. It will be interesting to see how things unfold once trading begins in New York at 8:20 a.m. Eastern time.
And as I hit the 'send' button at 5:20 a.m. Eastern time, it appears that the rallies in both gold and silver have been stopped in their respective tracks for the moment. Gold is currently up ten bucks...and silver is only up 17 cents.
There's still the opportunity 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. Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.
I hope you have a good weekend...and I'll see here tomorrow sometime.
- Thu, 17 May 2012 10:16:29 +0000: Japanese Pension Fund Buys Gold -- But Only the ETF Kind - Ed Steer's Gold & Silver DailyAuthor:
Yesterday in Gold and Silver
Ed_GSDMay 17, 2012 11:16am GMTGold hit its low price tick of the day [about $1,525 spot] shortly after the London open yesterday morning...and by 9:40 a.m. in New York, the gold price was up about fifteen bucks off that low...and then spiked over fifteen bucks going into the London p.m. gold fix. That was the New York high at $1,553.50 spot.
From there, it got sold off to its New York low [$1,530.10 spot] about twenty minutes after the close of Comex trading. The gold price then rallied about eight dollars going into the close of electronic trading at 5:15 p.m. Eastern time.
Gold closed down four bucks on the day at $1,540.30 spot...but would have obviously closed substantially higher if it had been left to its own devices once the London p.m. gold fix was in...which it wasn't. Net volume was an absolutely astounding 200,000 contracts.
Silver was also under selling pressure in the Far East and London yesterday...and also set a new low shortly after the London open as well. From there it followed almost an identical price path to gold.
The New York high [$28.10 spot] came about 10:30 a.m. Eastern...but once that high was in, the engineered sell-off continued anew...and by the time the carnage was over about six or seven minutes after the close of Comex trading, silver had hit its low of the day...and printed another low for this move down...$26.68 spot.
The recovery off the bottom was instantaneous...and only a few minutes later, silver was back over the $27.00 mark...and closed the trading day at $27.27...down another 45 cents on the day...but 59 cents off its low price tick. Net volume was a stunning 55,000 contracts.
From its New York high to its New York low, the silver price was savaged for $1.42...a hair over 5 percent. If you think that this sort of price activity was the free market in action, then you obviously only need to follow the daily precious metals advice that you will find at this link here.
The dollar index peaked around 81.58 just moments after the London open...and then declined a bit before spending the rest of Wednesday trading within 15 basis points of 81.35. The index finished up about 20 basis points on the day.
Not surprisingly, the gold stocks opened in the plus column...and then peaked at the 10:30 a.m. Eastern time, which was the high tick in the gold price. From there the gold stocks pretty much followed the metal's price...with the low coming shortly before 2:00 p.m...which was the low price tick for gold in New York. Even though gold finished down four bucks...the HUI finished in the black, but only by 0.20%.
There were some green arrows in the silver stocks yesterday...but with silver down as much as it was during the New York session, most of the silver equities were brutalized once again...and Nick Laird's Silver Sentiment Index closed down 0.68%.
(Click on image to enlarge)
It was a nothing day for deliveries...and the CME's Daily Delivery Report showed that only 3 silver contracts were posted for delivery tomorrow.
The GLD ETF showed a tiny withdrawal of 16,253 troy ounces, which was probably a fee payment of some kind...and there were no reported changes in SLV.
Over at Switzerland's Zürcher Kantonalbank, both their gold and silver ETFs showed minor withdrawals of metal as of the close of trading on Tuesday. Their gold ETF showed a decline of 80,814 troy ounces...and their silver ETF declined 44,368 troy ounces.
The U.S. Mint had another sales report. They sold 1,500 ounces of gold eagles...4,000 one-ounce 24K gold buffaloes...and 275,000 silver eagles. This brings the mint's month-to-date sales up to 36,000 ounces of gold eagles...5,500 one-ounce 24K gold buffaloes...and 1,410,000 silver eagles.
There wasn't a lot of activity over at the Comex-approved depositories on Tuesday. They reported receiving 300,253 ounces of silver...and shipped a smallish 13,894 ounce of the stuff out the door. The link to that action is here.
Silver analyst Ted Butler was at the top of his game with his mid-week market commentary...headlined "In Search of the Bottom"...to paying subscribers yesterday. Here are three free paragraphs...and the first three from his report...
"I can’t call it unique, nor can I claim to be unfamiliar with the present circumstance of silver and gold price weakness. I didn’t predict it, but that doesn’t mean I can’t see what caused it. The fact that the situation is so familiar makes it depressing in many ways; yet understanding what will occur at some point is encouraging. Of course, I’m speaking of the bottom in the price of silver and gold that is being established."
"I believe that the most plausible and verifiable explanation is usually the correct explanation. Since the top of silver prices on Feb 28 at $37, the $10 price decline (so far) has allowed the commercials on the COMEX to buy back and reduce their total net short position by 30,000 contracts (150 million ounces), as speculators sold that same net amount. The biggest commercial silver short, JPMorgan, bought back almost half that amount. In gold, the commercials bought back 100,000 net contracts (10 million oz) on the $150 price decline from the top on Feb 28."
"Not only are these figures verified by CFTC COT data, the amounts of metal represented in the COMEX maneuvering since Feb 28 dwarf any other verifiable gold and silver ownership changes throughout the world. In fact, the world’s holdings in gold and silver ETFs (the largest privately held stores of metal) have been quite stable over the past six months or more. Therefore, the most obvious and plausible and verifiable explanation for the price decline has to be COMEX maneuvering. The next obvious question is who was doing the maneuvering; the commercials or the speculators? Since it is unthinkable that independent speculators would collude for the purpose of losing money, it is clear that the commercials were doing the maneuvering. This is old stuff, of course, but I repeat it because it is important to understand how any market works."
Here's a nifty chart of all the big New York money center banks. It shows the decline in their respective share prices since the end of March. The 'click to enlarge' feature will be useful here. I thank Washington state reader S.A. for sending it along.
Here are two more charts from Washington state reader S.A. They put the current engineered price declines in both gold and silver in some sort of long-term perspective.
Australian reader Wesley Legrand sent me this 3-year chart of the HUI...along with the following comment..."Incredible HUI Chart: You'd think that gold is under $1,000!"
(Click on image to enlarge)
Reader Scott Pluschau has posted a blog over at his Internet site that's headlined "Target 2 reached in silver [Copper target reached]"...and you can read all about it here.
I have the usual number of stories today...and a lot of them are well worth reading.
The lows we saw in all the precious metals just after the Comex close looked like a final capitulation to me...not only in price, but in volumeWorld Gold Council: 1Q Gold Demand Falls 5% From Year Ago; Jewelry Demand Dips But Investment Up. Grandich, Sinclair do hand-holding for monetary metals investors.Critical Reads
JP Morgan's $2 Billion Trading Loss Is Already $3 Billion (And Counting)
Ed_GSDMay 17, 2012 11:16am GMTJamie Dimon said it could get worse...and it is.
The JP Morgan trading loss that was $2 billion four days ago is now $3 billion, report Nelson Schwartz and Jessica Silver-Greenberg in The New York Times.
Why?
Because every hedge fund in the world knows JP Morgan is stuck in a position so big that it can't unwind it... and they're taking the other side of the trade.
Great shades of LTCM...as this is precisely what happened to them when they tried to get out of all their losing trades. Eric Sprott's comments about further loses by JPMorgan in his New York speech yesterday were prophetic. This story was posted on the businessinsider.com website late yesterday evening...and it's worth the read. I thank Roy Stephens for sending this...and the link is here.
"Jon Corzine - What's Going On?"
Ed_GSDMay 17, 2012 11:16am GMTIt pays to be rich, powerful and a Democrat with friends in Washington. While Anna Gristina, a Connecticut mother accused of being a New York “madam” sits in a cell on Riker’s Island, Jon Corzine, the former CEO of MF Global sits at home in his New Jersey mansion. MF Global had been a publically traded securities firm with $40 billion in assets, but with liabilities even larger, filed for bankruptcy late last year, after being accused of co-mingling customer funds with its own, a flagrant violation of securities law.
As we all know, prostitution is illegal. Ms. Gristina has been charged with providing attractive young women to testosteronic men for money — a crime, but largely victim-less. Nevertheless, she has already spent two months on Riker’s Island, awaiting a June 21st hearing. Bail for her was set at $2 million in a bond, or $1 million in cash. Despite the misappropriation of an estimated $1.6 billion, Mr. Corzine has yet to be charged. Yet 36,000 clients had their money appropriated under his watch. It is hard not to believe that his status as a former Senator from and Governor of New Jersey, and major bundler for President Obama’s campaign has not provided him special privileges. Is not justice supposed to be blind?
It is hard to imagine that Ms. Gristina, whose business was to introduce consenting adults, could be an enormous risk to society. On the other hand, a wealthy and powerful man who appears to have cheated his clients is a fraud and a menace. MF Global was a public company, until it became the nation’s 8th largest bankruptcy when it filed last October. Thus, not only are customers, for whose funds Mr. Corzine had a fiduciary responsibility, out their money, but shareholders of MF Global lost their investment as well. Of course, it is perfectly possible that the morally challenged Mr. Corzine was unaware that embezzling is a crime. However, as CEO he is responsible for financial transgressions within his firm. It is unfortunate that he is not man enough to admit it.This most excellent essay showed up over at The Daily Reckoning yesterday...and is a hoot to read! Corzine was also involved in the LTCM debacle as well. As one of the 'rescuers'...he knew all their positions...and he and his firm [Goldman Sachs] were betting heavily against them. This guy is a real piece of work, dear reader. Once again I thank Roy Stephens for sharing this with us...and the link is here.
Has The Simple Retail Investor Become Smarter Than Sophisticated QIBs?
Ed_GSDMay 17, 2012 11:16am GMTThere was a time when retail investors were mocked and derided by all: after all whenever the big boys needed to unload they jest blew the whistle, and like obedient lap dogs retail would buy at the very peak of the market because "stocks are a once in a lifetime buy", leading to what some call distribution, and others, a plunge. Not any more.
In spite of the recent 20% surge in stocks, following a pattern absolutely identical to the one from September 2010 to March 2011, for the entire 32 week duration of the artificial central bank induced rally beginning October 5, there were a total of 3 weeks of inflows into the market, totaling a whopping $2.8 billion. The outflows: 29 weeks for a total of $96.6 billion, with $2.4 billion pulled out in the most recent week.
This short but worthwhile read was posted over at zerohedge.com yesterday...and the graph is worth the trip all by itself. Make sure you click on it so you can view the whole thing. As reader U.D. said..."Has the electronic casino, a.k.a. the stock market lost a key play...the sheeple?" The link is here.
That Ugly Market Pattern Keeps On Happening
Ed_GSDMay 17, 2012 11:16am GMTA pattern that we've observed before is how pathetic the stock market has been behaving these days.
Each day we see periods of downs and ups, but in the end, the market ends down, usually fairly near the lows, with miserable performance in the final hour.
Today was no exception, as a nothing day (that at one point was decently higher after the FOMC minutes came out at 2:00 PM ET), turned into a 0.4% loss.
You've just read three of the four short paragraphs of this businessinsider.com piece from yesterday evening. The graph that accompanies the article is definitely worth a quick look. This is another story courtesy of Roy Stephens...and the link is here.
Fed minutes: More members open to stimulus measures
Ed_GSDMay 17, 2012 11:16am GMTMinutes of the central bank's April 24-25 meeting released Wednesday stated that "several members" thought additional Fed support could be needed if the recovery lost momentum or if the risks to the economy became great enough.
The minutes did not spell out what circumstances would trigger further Fed efforts to lower interest rates to boost the economy. But they did note some threats to the U.S. economy. One is Europe's debt crisis. Another is the risk that spending cuts and tax increases that could take effect at year's end if Congress can't reach a budget agreement could slow growth more than expected.
The comments stood in contrast to the previous minutes, which said that only "a couple" of members expressed support for further bond purchases. Since the financial crisis, the Fed has pursued two rounds of bond purchases to try to push down long-term interest rates, with a goal of encouraging borrowing and spending.
This usatoday.com piece was posted on their Internet site early yesterday afternoon...and I thank West Virginia reader Elliot Simon for sending it along. The link is here.
Greece on brink of collapse
Ed_GSDMay 17, 2012 11:16am GMTEurope’s financial crisis lurched into a perilous new phase as dire predictions emerged of a collapse in Greece’s economy, with a run on its banks bringing an inevitable end to its membership of the euro.
As leaders in Athens accepted the need for a new general election to end a national stalemate, the International Monetary Fund said Europe’s leaders should prepare for the possibility of a Greek departure from the single currency.
Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the utmost effort must be made to ensure any Greek exit was orderly. The effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she said.
This story was posted on The Telegraph's Internet site on Tuesday evening...and I dug it out of yesterday's King Report...and the link is here.
Euroland's €1 trillion question: after Greece goes, can Spain stay in?
Ed_GSDMay 17, 2012 11:16am GMTGreece is no longer the main event. Everyone knows it’s a matter of when, not if, ouzoland leaves the euro. Not least the Greeks themselves, who are pulling euros out of local banks at a right lick in preparation for the glorious return of a cheapo drachma.
Bank deposits, already down from €244bn (£195bn) at December 2009 to €171bn at the end of March, are now being withdrawn at the rate of around €3bn a week. In the real world the exit is underway, as another dive in Greece’s benchmark 10-year bond also indicated. It dropped for the 10th day running to just 14.4 cents on the euro.
Rather than trying to keep Greece in, Europe’s politicos, the ECB and the IMF should be focusing on how to contain the impact of its inevitable exit. And, if IMF chief Christine Lagarde, really is “technically prepared for anything”, she must have a solution for Spain.
This story was posted on the telegraph.co.uk website early yesterday evening...and I thank Roy Stephens for sending it along. The link is here. This is worth reading.
Argentines jump through new hoops to get dollars
Ed_GSDMay 17, 2012 11:16am GMTArgentina's quest to keep dollars in the country is spawning illegal money trades inside offices and even schools. But big companies have fewer ways to skirt currency controls and must adapt to the country's offbeat, changeable rules.
As the red tape piles up, businesses face delays and distortions that are hitting private investment. Analysts say the tightened state grip could backfire as an economic slowdown cools consumer and corporate spending.
With limited access to dollars on the formal market, individuals and some small companies go in search of greenbacks on the black market, where costs are rising sharply.
This Reuters piece was filed from Buenos Aires yesterday afternoon...and I thank Roy Stephens for sending it along. The link is here.
India dumps Iran, squeezes Obama
Ed_GSDMay 17, 2012 11:16am GMTThe cloud cover of sophistry that has been characteristic of India's Iran policy in recent years lifted on Tuesday when the government admitted in parliament that it had taken a policy decision to reduce oil imports from Iran.
The frank admission came on a day when an emissary from Washington, Carlos Pascual, special envoy on energy matters in the United States State Department, arrived with the proclaimed intention of weaning New Delhi away from Tehran's fuel.
The Barack Obama administration will be delighted that the sustained diplomatic and political pressure on India is finally bearing fruit. Tehran, on the other hand, will view this as the unkindest cut of all the blows that New Delhi has inflicted on it over the past five year. Meanwhile, a protagonist lurking in the shade is all excited - Saudi Arabia.
A mystery lingers. What did the Obama administration promise the Manmohan Singh government as quid pro quo? Manmohan most certainly sensitized US Secretary of State Hillary Clinton of India's "wish list" during her recent hurried visit to hold consultations personally with him just ahead of the US-India Strategic Dialogue co-chaired by her, which is scheduled to convene in Washington.For those of you interested in the new "Great Game"...this is a must read...and is Roy Stephens last offering in today's column. It's posted over at the Asia Times Internet site...and the link is here.
Three King World News Blogs
Ed_GSDMay 17, 2012 11:16am GMTThe first is with Rick Santelli...and it's headlined "Traders Taxing JPMorgan to Exit Losing Postions". The second is with technical analyst Louise Yamada. It's entitled "We Now Have Massive Tops on Global Markets". And lastly is this blog with Caesar Bryan of Gabelli & Company...and it's headlined "What Investors Need to Know About Gold & the Mining Shares".
Egon von Greyerz Interviewed by Die MetallWoche
Ed_GSDMay 17, 2012 11:16am GMTEgon von Greyerz is founder and managing partner of Matterhorn Asset Management out of Zurich, Switzerland. The interview runs about 23 minutes...and is posted on the metallwoche.de website...and the link is here.
Grandich, Sinclair do hand-holding for monetary metals investors
Ed_GSDMay 17, 2012 11:16am GMTBoth of these commentaries are imbedded in this GATA release from yesterday...and the link to the GATA release is here.
WGC: 1Q Gold Demand Falls 5% From Year Ago; Jewelry Demand Dips But Investment Up
Ed_GSDMay 17, 2012 11:16am GMTWorld gold demand fell 5% to 1,097.6 metric tons during the first quarter compared to the same period a year ago, with jewelry consumption down but investment demand higher, the World Gold Council said in its quarterly trends report released early Thursday.
“It was quite a complex quarter,” said Marcus Grubb, managing director for investment at the World Gold Council.
He pointed out that prices climbed year-on-year despite the lower global demand, including a sharp decline in buying from India, historically the world’s largest consumer. This meant there had to be “a lot of positives” elsewhere for demand to hold up as well as it did, Grubb said. Chinese buying surged, far outpacing India for both gold jewelry and investment, and central banks remained net buyers.
I found this story posted over at the kitco.com website in the wee hours of this morning...and it's definitely worth reading. The link is here.
Japanese pension fund buys gold -- but only the ETF kind
Ed_GSDMay 17, 2012 11:16am GMTOkayama Metal & Machinery has become the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies.
Initially, the fund aims to keep about 1.5 per cent of its total assets of Y40 billion ($500 million) in bullion-backed exchange-traded funds, according to chief investment officer Yoshisuke Kiguchi, who said he was diversifying into gold to "escape sovereign risk."
The move into a non-yielding asset comes as funds in the world's second-biggest pension market are under increasing pressure to meet promised payments, as domestic interest rates remain rooted near zero. This year, the first of Japan's baby boomers turn 65, becoming eligible for payouts.
This story showed up in the Financial Times yesterday...and is posted in the clear in this GATA release. I thank reader 'David in California' for giving Chris Powell and myself the 'heads up' on this FT piece...and the link is here.
The Wrap
Ed_GSDMay 17, 2012 11:16am GMTThe glory of great men should always be measured by the means they have used to acquire it. - François de la Rochefoucauld
Well, the lows we saw in all the precious metals just after the Comex close looked like a final capitulation to me...not only in price, but in volume as well. I suspect that the sharp decline in the silver price about 1:35 p.m. in New York yesterday was a short position being place, as it had all the characteristics of it. If that's the case, then that position was under water within minutes.
If we did see the lows yesterday, it's just a matter of 'where to from here...and how fast'. As Ted Butler pointed out on the phone yesterday...all these new shorts that have been placed during this engineered price decline are going to want to cover at some point. The 'raptors' will be the ones selling to them, but the question remains "at what price will they do it?" Will they let them off the hook easily by selling to them at a low price...or will they stick it to them and force them to bid the price up a whole bunch before they starting selling their longs? An even bigger question is whether JPMorgan will show up as a seller of last resort again. If they don't, then look out above!
That is all that matters in the 'where to from here...and how fast' equation. So we wait.
I'd give another day's pay to know what the Commitment of Traders would have looked like if it had been compiled at the close of electronic trading yesterday. I'd bet that it would be another one for the records books considering the fact that we hit new lows for this move down after the cut-off for Friday's COT report at 1:30 p.m. on Tuesday afternoon.
Of course the Relative Strength Indicators for both gold and silver hit new record lows at the close of trading yesterday. Here are the 3-year gold and silver charts. Unless 'da boyz' have something even more horrific planned to the downside that we know nothing about...and can't see coming...these oversold points should also be record lows for years to come.
(Click on image to enlarge)
(Click on image to enlarge)
I had a couple of readers point out that JPMorgan et al may have painted a 'triple bottom' [accidental or otherwise] in both gold and silver over the last year and a bit...as it's certainly visible on both the above charts. We'll see if that make a difference, but it will take many months or even years before we know if that's true...depending on 'how high...and how fast' that prices move from here.
Both gold and silver worked their way higher in price during most of the Far East trading day on their Thursday...but at 3:00 p.m. Hong Kong time, right on the button, a not-for-profit seller showed up...and both metals have been trading sideways ever since. As of 4:25 a.m. Eastern time, volume is very high in both metals...but nowhere near what they were this time yesterday morning when the new low price tick was set just after the London open. The dollar index is moving sideways...and is basically unchanged from Wednesday's close. And as I hit the 'send' button at 5:19 a.m. Eastern time, gold is up about eight dollars...and silver is up 20 cents.
I'm done for the day. Let's hope 'day boyz' are done as well.
I hope you have a good Thursday...and I'll see you here tomorrow.
- Wed, 16 May 2012 09:58:54 +0000: Checking the Vaults: Germans Fret About Their Foreign Gold Reserves - Ed Steer's Gold & Silver DailyAuthor:
Yesterday in Gold and Silver
Ed_GSDMay 16, 2012 10:58am GMTGold set another new low for this move down about an hour before London opened yesterday. From that low, the gold price rallied right a bit right up until the Comex open...and was under a bit of selling pressure from that point onward.
But the major selling pressure came once the Comex was through trading at 1:30 p.m. Eastern time...with the low price tick of the day [$1,540.70 spot] coming just moments before 4:00 p.m. in New York in the very thinly traded electronic market. From that low, gold recovered a few dollars going into the close at 5:15 p.m. Eastern.
Gold finished the Thursday trading day at $1,544.30...down another $12.20. Net volume was pretty decent at around 143,000 contracts.
It was pretty much the same price pattern in silver...except the engineered sell-off was far more intense. Silver's low price tick [$27.51 spot] came at the same time as gold's...and the silver price recovered about 20 cents going into the electronic close.
Silver closed the day at $27.72 spot...down 46 cents from Monday. Net volume was pretty high at 37,000 contracts, more or less.
The dollar index traded in a narrow 10 basis point range of 80.60 for a goodly portion of Tuesday. That lasted until shortly before 9:00 a.m. in New York...and then away it went to the upside until about 3:20 p.m. Eastern time where it traded sideways into the close. The dollar index closed up about 65 basis points.
The gold stocks started off in positive territory...and then got sold off...but recovered back to unchanged just before lunch in New York. It was all down hill from there. The HUI got smacked for another 3.83%.
The silver stocks really got crucified again...and Nick Laird's Silver Sentiment Index took it on the chin for another 5.95%.
(Click on image to enlarge)
The CME's Daily Delivery Report showed that 1 gold and 123 silver contracts were posted for delivery on Friday. The big short/issuer was Merrill with 113 contracts...and the short/stoppers were a mixed bag. The link to the Issuers and Stoppers Report is here.
There were no changes in either GLD or SLV yesterday. Ted Butler and I were discussing the big 1.6 million ounce surprise deposit in SLV on Monday...and Ted figured it probably had something to do with covering a short position in SLV shares. We'll know more when the new report is posted over at shortsqueeze.com a week from today.
The U.S. Mint had a sales report worthy of the name yesterday. The sold 3,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 150,000 silver eagles. Month-to-date the mint has sold 34,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 1,135,000 silver eagles.
It was a busy day over at the Comex-approved depositories on Monday. They reported receiving 1,526,942 troy ounces of silver...and shipped 305,421 ounces of the stuff out the door. The link to that action is here.
German gold analyst Dimitri Speck was kind enough to send me several of his excellent charts...and I'm more than happy to post them here. I'll post the gold charts today...and the silver charts tomorrow.
The first chart shows the "Intraday Price Movements" in gold over about eighteen years. The high at the London open...and the low at the London p.m. gold fix...are the most prominent features.
(Click on image to enlarge)
The second chart shows the intraday price movements for the first quarter of 2012...and there are subtle differences, but the overall price pattern is the same...and only the times of the highs and lows have shifted.
(Click on image to enlarge)
And lastly, here's the chart for 2011 on its own...the same, but slightly different once again. The negative price bias in London really stands out in this chart.
(Click on image to enlarge)
I have a lot of stories again today...and I hope you have time to read through most of them
You have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes.Soros Ramps Up Gold ETF Holdings. Gold Slides to New 2012 Low: Buying Opportunity or Bull Market Breakdown? Central banks aim to redistribute gold and push it way up.Critical Reads
The "London Whale" Swamps JPMorgan
Ed_GSDMay 16, 2012 10:58am GMTBloomberg's Stephanie Ruhle reports on Jamie Dimon's disclosure of JPMorgan's $2 billion trading loss, how regulations may have forced his hand in revealing the loss and that there may be further losses yet to come.
This 1:36 minute video was posted over at the bloomberg.com website on Monday...and Casey Research's own David Galland sent it around to everyone yesterday morning. It's a must watch for sure...and the link is here.
JPM Losses already $3-4 bln; Europe's Core Emergency Ongoing bank runs: Greece to Re-default: Eric Sprott
Ed_GSDMay 16, 2012 10:58am GMTMy friend Aaron Krowne over at ml-implode-explode.com reported on the highlights of Eric Sprott's speech at the New York 2012 Hard Assets Conference that's going on now. It's a short must read...and the link is here.
Dodd-Frank Swaps Legislation Delayed After JPMorgan Trade Losses
Ed_GSDMay 16, 2012 10:58am GMTU.S. House lawmakers, acting after JPMorgan Chase & Co. (JPM) announced $2 billion in derivatives trading losses, delayed a committee vote on legislation easing Dodd- Frank Act swaps rules.
The U.S. House Agriculture Committee postponed a May 17 committee meeting to vote on the measures, which would limit the international reach of the 2010 regulatory-overhaul law’s swaps regulations and allow more derivatives trading to occur in federally insured banks.
“As always, Washington has a tendency to overreact. While the news of JPMorgan’s trading loss is unfortunate, the bipartisan legislation the committee was scheduled to consider is unrelated to the cause of the trading loss,” Representative Frank D. Lucas, an Oklahoma Republican and chairman of the committee, said in a statement.
“However, this committee will take the time to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions,” Lucas said.
This Bloomberg story from yesterday is courtesy of Australian reader Wesley Legrand...and the link is here.
Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'
Ed_GSDMay 16, 2012 10:58am GMTIt doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.
The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.
Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.
This Matt Taibbi blog was posted over at the Rolling Stone website yesterday afternoon. It's a long, but very interesting read...and I'm sure this issue isn't going away. I thank Roy Stephens for sending me this...and the link is here.
Foreigners Boost Buys of Long-Term U.S. Securities: Treasury
Ed_GSDMay 16, 2012 10:58am GMTForeigners increased purchases of long-dated U.S. securities, including government bonds, in March, the U.S. Treasury said on Tuesday, but lightened up on short-term assets such as bills.
Overseas investors bought a net $36.19 billion in long-term assets in March, above February's inflow of $10.14 billion. They increased Treasury holdings by $20.47 billion after buying a net $15.35 billion the prior month.
China, the largest foreign U.S. creditor increased its Treasury holdings to $1.170 trillion from a downwardly adjusted total of $1.155 trillion in February. Brazil increased its holdings by $9 billion to $237.4 billion.
This story from yesterday's New York Times was posted on their website yesterday morning...and I thank Phil Barlett for sending it along. The link is here.
Homebuilder Confidence Rises To 5 Year High As Actual Sales Remain Near All Time Lows
Ed_GSDMay 16, 2012 10:58am GMTAmerica may not sell many new homes (read - sales are near or at all time lows), but that does not prevent homebuilders from having a dream, or in this case confidence that soon, soon, SOON, things will finally improve. Sure enough, in May the NAHB homebuilder confidence soared to 29, from 24, on expectations of a 26 print.
Of course, these numbers are completely meaningless, and only serve to get the algos ramping momentum in an upward direction. In the meantime, the reality of actual sales, can be seen on the chart below.
These two paragraphs comprised the entire zerohedge.com article yesterday...but the graph mentioned is well worth looking at...and the link is here. I thank Phil Barlett for his second contribution in a row.
Scottish pensions crisis: Scots born today ‘will retire at 77’
Ed_GSDMay 16, 2012 10:58am GMTScots infants will be forced to work until they are 77 years old before they become eligible for a state pension, according to a new report that paints a grim picture of aged toil.
The age at which the public becomes eligible for a state pension is set to rise to 77 for today’s children, with the following generation likely to work until they are 85.
As the UK government announced in the Queen’s Speech that the state pension age will now be linked to how long the average person lives, and will rise to 67 in 2028, the new study predicts it will go up again to 68 by 2031, adding an extra year of work for those aged 48 or younger.
This story showed up over at the scotsman.com website yesterday...and I thank Andrew Holland for sending it along. The link is here.
New Elections in June Markets Fall after Greek Talks Collapse
Ed_GSDMay 16, 2012 10:58am GMTIt was the final act in the tragedy surrounding the attempts to form a Greek government -- and it had a dramatic ending. Greece will hold a new election in June after politicians failed to form a government on Tuesday, nine days after a vote that produced a stalemate.
Athens now faces at least another month of political uncertainty that threatens to push Greece closer to bankruptcy and an exit from the euro.
After a third day of failed talks with political leaders, a spokesman for President Karolos Papoulias said the process of seeking a compromise had failed and a new vote must be held. Elections rules suggest it will be in mid-June, possibly June 17. A caretaker government is to be formed on Wednesday to lead the country until the new vote can be held.
This story was posted over at the German website spiegel.de yesterday...and I thank Roy Stephens once again for sending it along. The link is here.
Greek Bank Run accelerates: Depositors withdrew $898 million from Banks Monday
Ed_GSDMay 16, 2012 10:58am GMTGreek depositors withdrew €700 million ($898 million) from the country's banks on Monday, fueling fears of a bank run amid the growing political disarray.
With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.
Greek President Karolos Papoulias told the country's political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some €800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures.
This subscriber-protected story was posted in The Wall Street Journal yesterday...and the link to what's available for public viewing is here. I thank reader U.D. for sending it.
Global lenders face 'killer losses' on Greek debt
Ed_GSDMay 16, 2012 10:58am GMTThe euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro
“What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”
“A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International
Political Economy in Brussels, said. “No other course of events is now likely.”
This story was filed in The Telegraph late last night...and I thank Roy Stephens for bringing it to our attention. The link is here.
This is how the euro ends – not with a whimper but a bang
Ed_GSDMay 16, 2012 10:58am GMTSo it's still possible that Greeks will, when push comes to shove, simply surrender and take their punishment. It hardly needs saying that such an outcome would resolve nothing.
And the other possible outcome? Greece is indeed forced in despair to quit. With the precedent set, there would follow a mass flight of deposits out of Italy and Spain into safer havens, such as Germany and even the US and the UK. Indeed, this process has already begun. The only way of stopping it is to impose capital controls, but once major economies begin to do this, the euro is essentially over. It's no longer a single currency.
With or without capital controls, the European Central Bank would in any case need to step into the breach to stop the Italian and Spanish banking systems from collapsing. Ironically, the liquidity to do this would come from Germany and other surplus nations such as Finland and Austria, setting in train a giant, money merry-go-round.
Think about it. The Italian depositor removes his money and places it in a "safe" German bank account. There's nothing safe to invest in, so the German banker places the money on deposit with the Bundesbank, which then lends it to the ECB, which lends it back to the original Italian bank struggling with funding because of the flight of capital. The upshot is a massive build up of German central bank claims on Italy and Spain. In Germany alone, these contingent liabilities already exceed €600bn, or around a quarter of German GDP.
This is another story from The Telegraph yesterday...and it's also courtesy of Roy Stephens. The link is here.
China: Listed firms offer bleak outlook
Ed_GSDMay 16, 2012 10:58am GMTAlmost half of the companies listed on the mainland's two bourses that have so far released financial forecasts for the first six months expect to see a decline in earnings or to fall into the red, primarily due to falling demand amid an economic slowdown.
According to Wind Information Co Ltd, a leading provider of economic data and financial information, 845 companies listed on the Shenzhen and Shanghai stock exchanges had released January-June financial performance forecasts as of May 13.
A total of 384 companies forecast a slump in their net profit or a loss, accounting for 45.4 percent.
This is no real surprise...and confirms that China's economy is following the rest of the world into the proverbial dumpster. I thank Hong Kong reader Graham C. for sharing this story with us. It was posted over at the chinadaily.com.cn website yesterday morning...and the link is here.
Checking the Vaults: Germans Fret about Their Foreign Gold Reserves
Ed_GSDMay 16, 2012 10:58am GMTA large portion of Germany's massive gold reserves are stored abroad, mainly in the Federal Reserve in New York. But are the bars really where they are supposed to be? A dispute has broken out over whether the central bank needs to check on its gold, or if Germany can trust its international partners.
Germany has gold reserves of just under 3,400 tons, the second-largest reserves in the world after the United States. Much of that is in the safekeeping of central banks outside Germany, especially in the US Federal Reserve in New York. One would think that with such a valuable stash, worth around €133 billion ($170 billion), the German government would want to keep a close eye on its whereabouts. But now a bizarre dispute has broken out between different German institutions over how closely the reserves should be checked.
Germany's federal audit office, the Bundesrechnungshof, which monitors the German government's financial management, is unhappy with how Germany's central bank, the Bundesbank, keeps tabs on its gold. According to media reports, the auditors are dissatisfied with the fact that gold reserves in Frankfurt are more closely monitored than those held abroad.
In Germany, spot checks are carried out to make sure that the gold bars are in the right place. But for the German gold that is stored on the Bundesbank's behalf by the US Federal Reserve in New York, the Bank of England in London and the Banque de France in France, the German central bank relies on the assurances of its foreign counterparts that the gold is where it should be. The three foreign central banks give the Bundesbank annual statements confirming the size of the reserves, but the Germans do not usually carry out physical inspections of the bars.
The rest of this spiegel.de story from yesterday is posted on their Internet site...and the link to this must read story is here. Roy Stephens provided this story as well.
Bundesbank Confirms German Gold Held By FED, BOE and Banque De France
Ed_GSDMay 16, 2012 10:58am GMTThis story was posted over at the goldcore.com website yesterday...and is certainly worth reading. It covers a lot of territory, including the surge in gold demand coming out of the Far East...which is certainly no surprise to me.
I thank Richard Craggs for sending me this story...and as I said in the previous paragraph, it's worth your time. The link is here.
Stoferle, Macleod discuss clamor for gold reserve repatriation
Ed_GSDMay 16, 2012 10:58am GMTIn an audio discussion at GoldMoney's Internet site, Erste Bank gold market analyst Ronald Stoferle and economist Alasdair Macleod discuss the market and calls to repatriate national gold reserves held by foreign central banks.
I borrowed the headline and the introductory paragraph from a GATA release yesterday. It's certainly worth the listen...and the link is here.
Three King World News Blogs
Ed_GSDMay 16, 2012 10:58am GMTThe first one is with Paul Brodsky...and it's headlined "The Paralyzing Fear Among Investors Today". The second blog features Michael Pento...and it bears the title "Here is What is Facing Investors & The World Today". And lastly is this blog with James Turk...and it's headlined "Expect Tremendous Chaos, Europe Deterorating Rapidly".
Palladium shortage to be 714,000 ounces in 2012: UBS
Ed_GSDMay 16, 2012 10:58am GMTThe palladium market is expected to be in a 714,000 ounce deficit in 2012 as demand for the commodity continues to exceed supply, UBS stated in a report.
In view of the same, the bank has raised its palladium price forecast for 2012 to $760/oz from the previous $725/oz. This shortage in the market is expected to continue for about the next 3 years until 2016 when the palladium will shift into surplus.
Meanwhile, its cousin platinum will see a 143,000 ounce surplus this year. But despite this, the bank has raised its price forecast to $1,700/oz from $1,675/oz. Platinum and its related metals are expected to benefit in Q2 largely due to improved growth in the US and emerging economies.
This story was posted over at the commodityonline.com website on Monday...and I thank reader Richard Craggs for sending it along. The link is here.
Gold Slides to New 2012 Low: Buying Opportunity or Bull Market Breakdown?
Ed_GSDMay 16, 2012 10:58am GMTCasey Research's own Louis James was interviewed by the good folks over at finance.yahoo.com yesterday. The video clip runs for 4:14 minutes...or you can read the transcript. It's a must watch/listen...and the link is here.
Brodsky and Quaintance: Central banks aim to redistribute gold and push it way up
Ed_GSDMay 16, 2012 10:58am GMTIn their May letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that the investment case for gold is to a great extent a matter of its likely official revaluation upward to support confidence-based currencies that have lost the market's confidence.
As improbable as it may seem lately, what with the constant suppression of gold and silver prices on the futures markets, Brodsky and Quaintance conclude that central banks now really mean to push the gold price up -- way up -- once the gold necessary for the plan has been obtained and redistributed among central banks.
This is one of my pet theories as well...and it's the last arrow in the quiver of the fiat currency crowd. We certainly won't see a convertible currency from it, but certainly a much higher gold price. If in fact this scenario does materialize, my estimate is somewhere between $8,000 and $18,000 the ounce. These are about the same numbers that Jim Rickards has thrown around from time to time.
The rest of Chris Powell's comments, plus the link to their May newsletter, is contained in this GATA release...and the link is here. It's well worth reading.
Miners will need $3,000 gold price to be profitable, WGC head says
Ed_GSDMay 16, 2012 10:58am GMTSharp increases in mining costs mean gold will need to reach $3,000 an ounce in five years for the industry to stay profitable, World Gold Council chief executive Aram Shishmanian said on Monday.
Miners currently needed a gold price of $1,300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.
"If this continues for the next five years the gold price needs to be at least $3,000 just to stay in the business," he said. However, he was optimistic sustained demand would drive prices higher over the long term.
I found this Reuters story posted in a GATA release yesterday...and the link is here.
Soros Ramps Up Gold ETF Holdings
Ed_GSDMay 16, 2012 10:58am GMTSoros Fund Management picked up a new stake in J.P. Morgan Chase in the first quarter, sold out of Google and nearly quadrupled exposure to the SPDR Gold Trust, a quarterly portfolio disclosure shows.
This very short story was posted over in Barron's late yesterday afternoon...and the link is here.
Jim Puplava: Keeping the Faith: Holding Onto Your Gold Stocks When Your Emotions Tell You To Sell
Ed_GSDMay 16, 2012 10:58am GMTThis 50-minute audio commentary was posted over at the financialsense.com website on Saturday...and if you have the time, it's worth the listen. I thank reader Howard Brown for sending it along...and the link is here.
The Wrap
Ed_GSDMay 16, 2012 10:58am GMTWhile the US Dollar and Treasury debt are the twin foundations of the system, the major modern indicators of how the system is functioning are the stock market and the precious metals, Gold in particular but also Silver. A stock market investment is a bet ON the system, a purchase of physical Gold and/or Silver is a bet AGAINST it. This is clearly shown by the lengths to which the financial powers that be will go to support the stock market - and to undermine the price of the precious metals. - Bill Buckler, The Privateer, 12 May 2012
Well, the pain continued unabated again yesterday. Everything that occurred up to and including the close of Comex trading at 1:30 p.m. in New York yesterday, should be in this Friday's Commitment of Traders Report...and as I pointed out in this space yesterday, it should be a stunner.
Unfortunately, 'da boyz' leaned on the precious metals particularly hard after the Comex close yesterday...and that data won't be in Friday's report.
Here are the 3-year charts for all four precious metals, with the exception of palladium, which had a price bounce yesterday, every other precious metal is more oversold than its been in the last three years.
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As I mentioned further up in this column, you have to ask yourself why the precious metals are getting trashed in the face of one of the biggest financial crisis of our lifetimes. One only has to read Bill Buckler's quote above to understand.
But once this engineered 'correction' has run its course, it's my guess that JPMorgan et al will be nowhere to be found [fingers crossed!] on the next rally...unless it's a short-covering rally that they themselves instigate.
I've been watching the precious metals ever since they opened for trading in the Far East earlier today...and in London this morning. Once again, the 'salami is being sliced' to the downside...as more new lows were set in all four precious metals shortly after the London open. Net volumes as of 4:49 a.m. Eastern time were monstrous in both metals. In gold it was 46,000 contracts...and in silver it was just under 10,000 contracts. The dollar index rallied about 25 basis points overnight, but topped out shortly after the London open...and is now back to virtually unchanged from Tuesday's New York close.
One has to wonder just how much more 'oversold' this market can get, as we are already in record territory in that regard...and I'll be watching the price activity during the Comex trading session in New York with great interest when I get out of bed later this morning.
See you on Thursday.
- Tue, 15 May 2012 09:31:30 +0000: Bron Suchecki: IMF To Buy Gold? Not - Ed Steer's Gold & Silver DailyAuthor:
Yesterday in Gold and Silver
Ed_GSDMay 15, 2012 10:31am GMTAfter doing nothing up until mid afternoon in Far East trading on their Monday, the selling pressure began anew...and by shortly after 10:00 a.m. in London, JPMorgan et al had peeled another $20+ dollars off the gold price.
From there it drifted very gently lower...hitting another intraday low shortly after 10:00 a.m. in New York...which may have been the London p.m. gold fix. Once that second low was in, the gold price recovered a bit until about half an hour after Comex trading was done for the day, the gold price was engineered lower once again, with gold closing close to its absolute low of the day [$1,1554.40 spot] at the close of electronic trading at 5:15 p.m. Eastern time.
Gold closed at $1,556.50 spot...down another $23.90. Net volume was reasonably heavy at 130,000 contracts.
However looking at the New York Spot Gold [Bid] chart on its own, it's hard to tell whether the low of the day came at the London p.m. gold fix...or at the close. Not that it matters, I suppose.
The silver price was under pressure right from the open on Sunday night...and it pretty much followed the same price path as gold...with a secondary low at 10:00 a.m. in London...and the absolute low [$28.03 spot] coming at the close of electronic trading in New York.
Silver closed at $28.18 spot...down 71 cents from Friday's close. Net volume was 33,000 contracts...the same as Friday's net volume.
Every precious metal got it right between the eyes yesterday...and all set new lows for this move down. Palladium was down 2.00%...platinum down 1.98%...gold down 1.51%...and pretty much always in last place, silver was down 2.46%.
The dollar index gapped up a bit at the open...and rose unsteadily for the rest of Monday...closing at 80.65...up 35 basis points. It's obvious that this tiny rally in the dollar index was not the reason that all four of the precious metals got sold off yesterday.
The HUI gapped down again at the open, but the moment that the London p.m. gold fix was in just after 10:00 a.m. in New York, the shares took off to the upside, almost making back to unchanged on the day. But that brief moment of joy vanished...and when the stocks headed down, they did so with a vengeance...and the HUI finished down 3.36%. With yesterday's close, all the HUI's gains for the last two years have vanished.
The silver shares got hammered again...and Nick Laird's Silver Sentiment Index closed down another 5.03%.
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The CME Daily Delivery Report showed that only 3 gold and 12 silver contracts were posted for delivery tomorrow.
There were no reported changes in GLD...but over at the SLV ETF I was rather astonished to see that 1,649,901 troy ounces of silver were added by an authorized participant yesterday. Considering the price action lately, it's a mystery to me as well.
The U.S. Mint reported selling 475,000 silver eagles...but nothing else. Month-to-date the mint has sold 31,500 ounces of gold eagles....1,000 one-ounce 24K gold buffaloes...and 985,000 silver eagles.
There wasn't much activity over at the Comex-approved depositories on Friday. Only 4,949 troy ounces were received...and a smallish 97,264 ounces were shipped out the door.
Silver analyst Ted Butler had a rather lengthy commentary in his weekend report to paying subscribers...and here are a few free paragraphs...
"One thing that I hope everyone realizes is that we have not declined in gold or silver prices for any reason other than to enable the commercial controllers on the COMEX the opportunity to buy as many gold and silver contracts as possible. The data indicate that these commercials are doing just that, in spades."
"In watching the daily price action I have been muttering many things to myself, not the least of which has been the phrase, “slicing the salami.” That’s the term that my good friend and mentor Izzy and I have used to each other over the years to describe one of the commercials’ favorite tricks against the technical funds. It involves the deliberate setting of a series of new price lows to lure the technical speculators into selling (both long liquidation and new short selling). Nothing encourages technical selling more than the establishment of a series of new price lows (or buying into new price highs). It’s like waving a red flag in front of a bull. Once this process is complete, you are invariably left with an important price bottom. I haven’t talked with Izzy lately, but I’m sure he would agree that the commercials sliced the salami recently in silver and gold like never before."
"The changes in this week’s COT report for gold and silver were spectacular, as they should have been given the price action. If you have to endure the financial pain from the endless slicing of the salami, the reward should be a commensurate improvement in the market structure. While I can’t say I’m surprised at this week’s COT readings, I am also relieved because last week’s strange movements by the silver raptors still have me scratching my head. And it goes without saying that given the dramatic price weakness since the cut-off on Tuesday, that were the COT to be calculated as of Friday’s close, there would be further significant improvement in both gold and silver."
[Of course, the COT structure was further improved on Monday as well, because JPMorgan et al took a couple of more slices off the salami in all the precious metals once again. - Ed]
Here's a chart that Washington state reader S.A. sent my way yesterday evening. It shows personal income minus transfer payments [social security, disability, etc] in thousands. Not a pretty sight. As S.A. said..."All debt, no income per capita. U.S. is Greece."
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Reader Scott Pluschau has posted a blog about gold on his website. It's titled "Target Reached on Gold"...and the link is here.
It was a very busy weekend for stories...and I have a record number. The final edit is up to you.
As you've probably already noticed...both gold and silver set new lows for this move down in Far East trading this a.m...none of it accidental of course.Alasdair Macleod: Gold bugs will be vindicated. Indian government aims to 'throttle' gold demand. German Parliament wants accounting of gold reserves; Bundesbank resisting.Critical Reads
California budget hole deepens to $16 billion - governor
Ed_GSDMay 15, 2012 10:31am GMTCalifornia's budget deficit will swell to nearly $7 billion greater than expected due to weak tax revenues and slow progress in cutting spending, Governor Jerry Brown said on Saturday.
Brown said the shortfall for the state's 2012-2013 fiscal year now stands at $16 billion, up from a previous estimate of $9.2 billion made in January.
"We are now facing a $16 billion shortfall, not the $9 billion we thought in January," Brown announced in a video posted on YouTube. "This means we will have to go much further and make cuts far greater than I asked for at the beginning of the year."
This Reuters story was posted on their website on Sunday...and I thank reader "David In California" for sending it. The link is here.
Fair Game: At JPMorgan, the Ghost of Dinner Parties Past
Ed_GSDMay 15, 2012 10:31am GMTThe loss, and the embarrassment it held for Jamie Dimon, the bank’s imperious chief executive, came just one month after a private dinner party in Dallas at which he assailed two respected public figures who have pushed for policies that would make banks like JPMorgan smaller and less risky.
One was Paul Volcker, the former Federal Reserve chairman, whose remedy for risky trading by too-big-to-fail banks is known as the Volcker Rule. The other was Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who has also argued that large institutions should be slimmed down or limited in their risky trading practices…
One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher. Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.” He went on to lambaste Mr. Fisher further, according to the attendee. Some in the room were taken aback by the comments…
Gretchen Morgenson has her way with Mr. Dimon in her Saturday column over at The New York Times. I borrowed it from yesterday's edition of the King Report...and the link is here.
JPMorgan Chase Executive Resigns in Trading Debacle
Ed_GSDMay 15, 2012 10:31am GMTStung by a huge trading loss, JPMorgan Chase will replace three top traders starting Monday, including one of the top women on Wall Street, in an effort to stem the ire that the bank faces from regulators and investors.
They are the first departures of leading officials since Jamie Dimon, the chief executive, disclosed the bank’s stunning $2 billion loss on Thursday.
The huge scope of the complex credit bet caught senior bank officials off-guard when it began to sour last month and has set off renewed regulatory scrutiny of the industry. Mr. Dimon has largely sidestepped blame for the loss, although he has offered numerous apologies for the blunder, the biggest of his eight-year tenure at JPMorgan, the nation’s largest bank.
This story appeared in the Sunday edition of The New York Times...and I thank Roy Stephens for sending it along. The link is here.
Jim Rickards: Why J.P. Morgan's Jamie Dimon Should Resign
Ed_GSDMay 15, 2012 10:31am GMTOf all the tricks Wall Street uses to pull the wool over the eyes of regulators, Congress, and everyday Americans, none is more effective than the pretense that the strategies used in finance are so complicated that few outside the banking industry could possibly understand them. Wall Street CEOs ask to be treated like nuclear engineers and say "trust us" when it comes to the complexity of their tasks. In fact, no trust could be more misplaced and no claim to superior knowledge could be further from the truth.
The $2 billion loss announced at J.P. Morgan last week is the latest example. Management, starting with CEO Jamie Dimon, would have the public believe that the loss was due to a complex hedging strategy involving hard-to-value instruments and embedded risk that eluded the best and brightest minds at the bank until it was too late.
This is nonsense. The trade was a simple bet on the difference, or "spread," between the price of a group of bonds and an index based on those bonds. In theory, those two prices should be about the same. In practice, they may vary due to factors such as the relative liquidity of the bonds and the index. At a certain point, the J.P. Morgan trader, known as the "whale," took a view that the index was expensive and the bonds were cheap. In effect, by selling the index and buying the bonds, the whale would own the spread. As the spread comes back to normal, the whale reaps enormous profits and finally unwinds the trade by selling what he bought and buying what he sold at better prices.
This sounds an awful lot like what happened to LTCM when other traders began to trade against LTCM's know positions, knowing that the brain trust at LTCM would have to get out of the trade with a loss. This usnews.com story was sent to me by Randall Reinwasser...and is certainly worth the read. The link is here.
Doug Noland: Risk Off Gains a Foothold
Ed_GSDMay 15, 2012 10:31am GMTIf I were JPMorgan top management, I’d surely be moving today to reduce the company’s risk profile – especially with respect to myriad global market risks. The clouds are darkening and much better to move before the heavy downpours commence (and buyers, along with their liquidity, run for the hills). While I will give no Credit for their self-serving self-flagellation, they are a savvy group that has demonstrated their ability to manage through crises. Certainly, writing Credit and market risk insurance has, again, become a risky proposition. And I’ll assume that JPMorgan’s market-making operations will be reined in throughout various risk insurance markets – and I’ll assume a similar change in tack will be afoot by the cadre of major derivatives operators. Importantly, this equates to less liquidity and more expensive market insurance. A less favorable insurance market equates to more restraint in risk-taking and an attendant tightening of financial conditions. As such, I would not be surprised if this week proves a major inflection point for global risk markets - and a major coup for “risk off.”
Doug's Credit Bubble Bulletin from last Friday is posted, as usual, over at the prudentbear.com website. I thank reader U.D. for bringing it to my attention. I consider it a must read...and the link is here.
At Least 100,000 March in Spain Over Austerity
Ed_GSDMay 15, 2012 10:31am GMTAt least 100,000 Spaniards angered by grim economic prospects and the political handling of the international financial crisis turned out for street demonstrations in the country's cities Saturday, marking the one-year anniversary of a movement that inspired similar pressure groups in other countries.
Tens of thousands of protesters in Madrid flooded into the central Puerta del Sol plaza in the evening and aimed to stay for three days. But authorities warned they wouldn't allow anyone to camp out overnight, and up to 2,000 riot police were expected to be on duty.
"I'm here to defend the rights that we're losing and for the young people who have it so tough," 57-year-old middle school teacher Roberto Alonso said. "They're better educated than ever. But they don't have work. They don't have anything. They're behind and they'll stay that way."
This AP story ended up posted over at The New York Times website on Saturday...and is the second story that I lifted from yesterday's King Report. The link is here.
High earners say au revoir to France
Ed_GSDMay 15, 2012 10:31am GMTThe annual mass exodus from the French capital sees the city's inhabitants while away the August heat in the countryside.
But this week many of the biggest earners across the Channel have been mulling a départ which could be rather more permanent.
The toppling of Nicolas Sarkozy by François Hollande, the first socialist president to lead the country in 17 years, has sent ripples of fear through the wealthier arrondissements of Paris.
This story was posted in The Telegraph late on Saturday night...and is another offering from reader Roy Stephens. The link is here.
Socialist Hollande owns three homes on the Riviera
Ed_GSDMay 15, 2012 10:31am GMTFrance's new Socialist president owns three holiday homes in the Riviera resort of Cannes, it emerged today.
Francois Hollande, 57, who “dislikes the rich” and wants to revolutionise his country with high taxes and an onslaught against bankers, is in fact hugely wealthy himself.
His assets were published today in the Official Journal, the gazette which contains verified information about France’s government.
To the undoubted embarrassment of the most Left-wing leader in Europe, and a man who styles himself as “Mr Normal”, they are valued at almost £1 million.
It will also reinforce accusations that Hollande is a “gauche caviar”, or “Left-wing caviar” — the Gallic equivalent of a champagne Socialist.
Isn't hypocrisy delicious sometimes? This story was in last Friday's edition of the London Evening Standard...and is third story that I borrowed from yesterday's King Report. The link is here.
Merkel's party suffers heavy losses in state election
Ed_GSDMay 15, 2012 10:31am GMTChancellor Angela Merkel’s conservatives suffered a crushing defeat on Sunday in an election in Germany’s most populous state, a result which could embolden the left opposition to step up its criticism of her European austerity policies.
The election in North Rhine-Westphalia (NRW), a western German state with a bigger population than the Netherlands and an economy the size of Turkey, was held 18 months before a national election in which Merkel is expected to fight for a third term.
She remains popular in Germany for her steady handling of the euro zone debt crisis, but the sheer scale of her party’s defeat leaves her vulnerable at a time when a backlash against her insistence on fiscal discipline is building across Europe.
According to first projections, the centre-left Social Democrats (SPD) won 38.8 percent of the vote and will have enough to form a stable majority with the Greens, who scored 12.2 percent.
This Reuters piece was posted over at the france24.com website on Friday...and I thank Roy Stephens for sending it. The link is here.
European leaders and financial markets braced for Greece exit from euro
Ed_GSDMay 15, 2012 10:31am GMTFinancial markets are hastily making preparations for a Greek exit from the euro after a day of political and economic turmoil ended with Europe's policy elite admitting for the first time that it may prove impossible to keep the single currency intact.
With attempts in Athens to form a government after last week's election looking increasingly doomed, European leaders abandoned their taboo on talking about the possibility that Greece might have to leave the euro.
Shares, oil, and the euro were all sold heavily on Monday in anticipation that anti-austerity parties would garner support in a second Greek election likely to be held next month, bringing the row between Greece and its European creditors to a climax.
This story was posted in The Guardian just after midnight in London last night...and once again I thank Roy Stephens for bringing it to our attention. The link is here.
Euro zone finance ministers dismiss Greek exit "propaganda"
Ed_GSDMay 15, 2012 10:31am GMTEuro zone finance ministers dismissed talk of Greece leaving the euro zone as "propaganda and nonsense" on Monday, but said the country had to respect the terms of the bailout program agreed with the EU and the International Monetary Fund.
If Greece can form a government and that government signs up to the bailout agreement, then it is possible some of the targets in the program could be softened, the chairman of the euro zone finance ministers, Jean-Claude Juncker, said.
"I don't envisage, not even for one second, Greece leaving the euro area. This is nonsense; this is propaganda," Juncker, who also serves as Luxembourg's prime minister, told reporters, dismissing those who threaten Greece with expulsion.
This Reuters story was filed from Brussels and Athens late last night...and is another item from Roy. The link is here.
Greece will run out of money soon, warns deputy prime minister
Ed_GSDMay 15, 2012 10:31am GMTSpeaking exclusively to The Sunday Telegraph, Theodoros Pangalos said he was "very much afraid of what is going to happen" after Greek voters rejected the deal in elections last Sunday.
"The majority of the people voted for a very strange mental construction," he said. "We want to be in the EU and the euro, but we don't want to pay anything for the past."
The main beneficiary of the election, the hard-Left Syriza coalition, came a startling second on a promise to tear up the deal, which promises EU loans to keep massively-indebted Greece afloat, but demands crippling spending cuts in return. Germany, the principal lender, has said it will stop payments if Greece breaks its promises on spending.
I thank Roy Stephens for this story as well...and the link is here.
Time to Admit Defeat: Greece Can No Longer Delay Euro Zone Exit
Ed_GSDMay 15, 2012 10:31am GMTAfter Greek voters rejected austerity in last week's election, plunging the country into a political crisis, Europe has been searching for a Plan B for Greece. It's time to admit that the EU/IMF rescue plan has failed. Greece's best hopes now lie in a return to the drachma.
Even though the country is virtually being governed by the European Commission and the IMF, Greece's debts are higher than ever and the recession is worsening. As the political situation becomes increasingly chaotic, new elections seem all the more likely.
At the Chancellery in Berlin, the television images from Athens now remind Merkel's advisers of conditions in the ill-fated Weimar Republic of 1919-1933. Back then, the Germans perceived the Treaty of Versailles as a supposed "disgrace." Now, the Greeks feel the same way about the austerity measures imposed by Brussels. And, as in the 1920s in Germany, the situation in Greece today benefits fringe parties on both the left and the right. The country's political system is unraveling, and some advisers even fear that the tense situation could lead to a military coup.
Here is another item from Roy Stephens. This one was posted on the German website spiegel.de yesterday. It's very much worth reading...and the link is here.
The final death throes of the euro
Ed_GSDMay 15, 2012 10:31am GMTThe euro crisis is entering its final stages. Economic pain is now interacting with political resistance to produce intense financial pressure. I expect Greece to leave the euro – and perhaps very soon.
It could happen voluntarily, but both the Greek people and Greek politicians are still clinging to the idea that they can put an end to austerity yet still stay in the euro. In order to try to achieve that, a new government may call the eurozone's bluff.
At that point, the other eurozone members would face an awkward choice. Doubtless there would be voices in favour of providing the money, willy nilly. That might well be the French position. But if the eurozone gives way on this, what chance would there be of painful austerity being continued, not just in Greece but also in Portugal, Spain, Italy and Ireland? The northern countries would face the prospect of pouring money into a bottomless pit.
This op-ed piece showed up in The Telegraph on Sunday...and is another offering from Roy Stephens. The link is here.
World edges closer to deflationary slump as money contracts in China
Ed_GSDMay 15, 2012 10:31am GMTAll key indicators of China's money supply are flashing warning signs. The broader measures have slumped to stagnation levels not seen since the late 1990s.
Narrow M1 data for April is the weakest since modern records began. Real M1 deposits – a leading indicator of economic growth six months or so ahead – have contracted since November.
They are shrinking faster that at any time during the 2008-2009 crisis, and faster than in Spain right now, according to Simon Ward at Henderson Global Investors.
If China were a normal country, it would be hurtling into a brick wall. A "hard-landing" later this year would already be baked into the pie.
Whether this hybrid system of market Leninism – with banks run by Party bosses – conforms to Western monetary theory is a hotly contested point. The issue will be settled one way or the other soon.
Ambrose Evans-Pritchard has a must read story for us. It was posted over on The Telegraph's website early on Sunday evening local time...and is Roy Stephens final item in today's column. The link is here.
India likely intervened in forex market to support rupee
Ed_GSDMay 15, 2012 10:31am GMTIndia's central bank likely intervened in the foreign exchange market today, underscoring its determination to prevent the rupee from weakening below the psychologically important level of 54 to the U.S. dollar, dealers said.
The Reserve Bank of India likely started selling dollars when the greenback was trading around INR53.90, four dealers told Dow Jones Newswires.
The dollar was at INR53.80 as of 1004 GMT after the suspected intervention, down from an intraday high of INR53.91 and compared with INR53.63 late Friday in Asia. The rupee's all-time low against the dollar is 54.2925, which it touched on Dec. 15.
This subscriber-protected story appeared in The Wall Street Journal yesterday...and is posted in the clear in this GATA release. The link is here.
Chinese Rare-Earth Mining Quotas For 2012
Ed_GSDMay 15, 2012 10:31am GMTWhen the subject of quotas for the Chinese rare-earth industry comes up, we’re generally talking about export quotas, which control (in theory at least) how much material may be shipped out of China, in any given period, and by which companies. Such quotas are controlled by the Chinese Ministry of Commerce (MOC) and their existence is at the heart of the recent WTO complaints filed by the USA, Japan and the EU, against China.
There are, however, at least two other sets of quotas that affect the rare-earth industry in China. The first concerns the separation and smelting of rare-earth products, controlled by the Chinese Ministry of Industry and Information Technology (MIIT); the other concerns mining quotas, controlled by the Chinese Ministry of Land and Resources (MLR). Of the two, the mining quotas are usually the more prominent, and each year, usually sometime in March, the MLR publishes a list of the mining quotas that have been allocated to each province or region in China.
Each year that is, until this year.
This story was posted over at the techmetalsresearch.com website on Sunday...and I thank Australian reader Wesley Legrand for bringing this story to our attention. If you're into the Rare Earth Elements, this is a must read...and the link is here.
Indian government aims to 'throttle' gold demand
Ed_GSDMay 15, 2012 10:31am GMTMineWeb's Shivom Seth reports that the Indian government is considering issuance of gold bonds to strengthen the rupee and "throttle" gold imports. The MineWeb story says:
"In a major effort to mobilise the vast gold in the country and to reduce imports of the precious metal, the Indian government is contemplating a proposal to issue gold bonds. India accounts for nearly one third of the total world demand for gold, though it might soon cede that position to China.
"'The idea is to throttle gold imports, but this alternative investment avenue will help savings-challenged Indian consumers with pretty much the same attributes of positive real rates of return while keeping risk to the minimum,' said an investment banker."
I borrowed this mineweb.com story from a GATA release yesterday...and the link is here.
Four King World News Blogs
Ed_GSDMay 15, 2012 10:31am GMTThe first is with Michael Pento. The GATA headline for this blog reads "Gold standard would discourage derivatives craziness". The second is with John Embry...and Chris Powell has given it the headline "JPM's derivatives blowup vindicates Jim Sinclair". The third blog is with Stephen Leeb...and it bears the GATA headline "Inflation will always be chosen over austerity". The last blog features Robert Fitzwilson. It's entitled "Who is Crashing the System".
Ron Paul: Get government out of the money business
Ed_GSDMay 15, 2012 10:31am GMTLast week I held a hearing to examine the various proposals that have been put forth both to mend and to end the Fed. The purpose was to spur a vigorous and long-lasting discussion about the Fed's problems, hopefully leading to concrete actions to rein in the Fed.
First, it is important to understand the Federal Reserve System. Some people claim it is a secret cabal of elite bankers, while others claim it is part of the federal government. In reality it is a bit of both. The Federal Reserve System is the collusion of big government and big business to profit at the expense of taxpayers. The Fed's bailout of large banks during the financial crisis propped up poorly-run corporations that should have gone under, giving them a market-distorting advantage that no business in the United States should receive.
The recent news about JP Morgan is a case in point. JP Morgan, a recipient of $25 billion in bailout money, recently announced it lost another $2 billion. If a corporation shows itself to be a bottomless money pit of "errors, sloppiness and bad judgment," the Fed shouldn't have expected $25 billion in free money to change that or teach anyone a lesson in fiscal discipline. But it determined that this form of deliberate capital destruction was preferable to one business suffering bankruptcy. Clearly, some changes need to be made.
I found this story in another GATA release yesterday. Ron's headline reads "The Fed: Mend It or End It?" It's posted over at Ron Paul's website...paul.house.gov...and the link is here.
Pat Heller: U.S. govt. agency is specifically authorized to rig gold market
Ed_GSDMay 15, 2012 10:31am GMTThe new commentary at Coin Week by Patrick A. Heller of Liberty Coin Service in Lansing, Michigan, is a reminder that the U.S. government has a secretive financial agency, the Exchange Stabilization Fund, specifically authorized by statute to manipulate the gold market in the name of regulating the value of the dollar.
The rest of Chris Powell's preamble...and the link to the story itself...can be found in this GATA release. The link is here.
Why Gold Is No Longer a Safe Haven for Investors
Ed_GSDMay 15, 2012 10:31am GMTThis story was posted over at the CNBS website yesterday...and is the biggest pile of horse manure that you can imagine...but that's what passes for serious 'journalism' in the precious metals field in the main stream press these days. Read it at your peril.
It was sent to me by West Virginia reader Elliot Simon...and the link is here.
Yukon gold rush isn't slowing but watershed raises concerns
Ed_GSDMay 15, 2012 10:31am GMTAt the turn of the 19th century it played host to the famed Klondike Gold Rush that drew thousands to the rugged wilderness in search of riches, but now the Yukon entertains a newer, more modern kind of mining rush.
For the past two years, mineral exploration here has been through the roof, nearly half a billion dollars spent searching for the next mother lode of gold, silver, copper, zinc, molybdenum, or tungsten and nearly 200,000 claims staked.
"From July [2011] I flew 10 months worth of hard staking and we probably single-handedly staked 25 to 30,000 claims," said Ben Drury, a pilot with Horizon Helicopters, one of the many charter services in the Yukon that benefited from the staking craze.
"We'd show up at a remote location and there were piles and piles of staking posts stacked 6 feet high waiting for us, coming in a steady stream of Twin Otter [plane] loads, 500 posts at a time."
Ah, yes...Twin Otters. I've flow on a few of those myself in the six years I spent in Canada's high Arctic back in the late 1960s and early 1970s. This rather long story showed up on Canada's nationalpost.com website on Sunday...and I 'borrowed' it from a GATA release. The link is here.
German Parliament wants accounting of gold reserves; Bundesbank resisting
Ed_GSDMay 15, 2012 10:31am GMTThe German parliament, the Bundestag, is looking at the accounting of German gold reserves at the Bundesbank. Parliament's Budget Committee has requested, in opposition to the Bundesbank, a critical report by the Federal Audit Office, the newspaper Bild reports.
"The decision has been unanimous," the paper quoted the Christian Social Union budget expert Herbert Frankenhauser. The newspaper report alleged "account cheating" regarding the German gold reserves.
According to the Bild report, the federal auditing office complained of "inadequate diligence of the accounting of the gold reserves, which are stored in some foreign countries. Repatriation of the gold reserves is encouraged. The German gold reserves are in part held at foreign central banks.
The English translation of this German story is posted in a GATA release...along with the link to the original story. The link to the GATA release is here.
Casey Research: Strategies for Weary Gold Stock Investors
Ed_GSDMay 15, 2012 10:31am GMTBack at the metals ranch, the whole suite has sold off over the last two weeks. Fears of further trouble in Europe and decreasing growth rates in China have copper, lead, zinc, aluminum, and other industrial minerals on the retreat, and the precious metals as well: gold, silver, platinum. But is this a problem or an opportunity?
I'd guess you know my answer.
Jeff Clark's take on gold stocks below is focused on just that one metal, and it's written with investors who are relatively new to the market and under water in their portfolios in mind. If that's not you, the article isn't for you, but if you're feeling anxious about the direction of the gold market and gold stocks, Jeff's article can still help.
Casey Research's own Louis James wrote the above 3-paragraph introduction to yesterday's edition of Casey's Daily Dispatch. Needless to say it's a must read...and the link is here.
Alasdair Macleod: Gold bugs will be vindicated
Ed_GSDMay 15, 2012 10:31am GMTWriting at GoldMoney, the economist Alasdair Macleod argues that when the debt trap is sprung on profligate governments, not just their bonds but their currencies too will be wrecked, and "gold bugs will be vindicated."
I borrowed the above introductory paragraph from Chris Powell...and the link to the goldmoney.com article is here.
After years of selling it, IMF plans to buy $2 billion in gold
Ed_GSDMay 15, 2012 10:31am GMTThe International Monetary Fund is planning to purchase more than $2 billion worth of gold on account of rising global risks. The IMF currently holds around 2,800 tonnes of gold at various depositories
"The Fund is facing increased credit risk in light of a surge in program lending in the context of the global crisis. While the Fund has a multi-layered framework for managing credit risks, including the strength of its lending policies and its preferred creditor status, there is a need to increase the Fund's reserves in order to help mitigate the elevated credit risks," Bloomberg quotes a report by an IMF staff while also adding that a $2.3 billion gold purchase is in the planning.
This was the most prominent story in my in-box when I got up yesterday morning. I thought it rather strange the IMF would actually announce this sort of thing in advance...as there certainly was no indication of that in the gold price...as JPMorgan et al were still stomping around in the precious metals market as I read it. A story like that would normally send the price of the 'commodity' in question roaring to the upside...and that certainly wasn't the case...a fact that I mentioned to Ted Butler in the first of our three phone calls of the day.
The story in question is headlined "IMF stresses need to increase reserves due to rising credit risk"...and was posted over at the commodityonline.com website yesterday. You will note that the story has now been "updated and corrected" to deny that the IMF is buying gold. The link is here.
IMF To Buy Gold? Not
Ed_GSDMay 15, 2012 10:31am GMTA great example today of the children’s game Chinese whispers (or Telephone for our America friends) and poor journalism in the gold blogosphere (thinking the Internet is about journalism is idealistic of me, I know). I’ll focus on Zero Hedge as the example because they are a high profile website from which many other bloggers and commentators pick up stories. Knowing how influential they are, you’d expect them to at least apply some basic journalism fact checking before breaking news.
Yesterday Zero Hedge posted the following heading “Meet The Latest Converted Gold Bug: The IMF”. Its key “news” is this republished quote from a Commodity Online post, also dated the 14th:
“The International Monetary Fund (IMF) is planning to purchase more than $2 billion worth of gold on account of rising global risks.”
Rather than being the source, Commodity Online’s story is just a rehash of a May 12th Bloomberg story. Note that the above quote is Commodity Online’s take on the Bloomberg story, not a direct quote from the IMF.
Zero Hedge were aware of this, because they also quote directly from the Bloomberg story, but that is where they left what is quite significant news. As Zero Hedge themselves noted, the IMF had previously been selling its gold. You would think such a major policy shift would at least warrant some more investigative work. Apparently not.
Bron Suchecki over at The Perth Mint sent me his blog on this subject in the wee hours of this morning...and just before I posted the above story about the IMF buying gold. He has been proven correct. This is a must read...and the link is here.
The Wrap
Ed_GSDMay 15, 2012 10:31am GMTThe facade behind which the financial system is hiding is getting very worn and very tired. The pretense that it can be made to work if some of us just pull in our belts so the rest can keep the faith is being exposed as the gargantuan lie which it always has been. There are very few people left who are ignorant of the fact that there is a “problem”. Fixing it is by no means impossible, it is simply illegal. - Bill Buckler, The Privateer, 14 May 2012
Another day...another engineered price decline in all the precious metals. What I wouldn't give to see the Commitment of Traders Report for positions held at the open of London trading this morning.
As you've probably already noticed...both gold and silver set new lows for this move down in Far East trading this a.m...none of it accidental of course. The term "slicing the salami" that Izzy and Ted came up with is a perfect analogy for what's currently happening.
How long can this go on, you ask? That's a good question for which no one has answer. It will be done when 'da boyz' have forced out all the spec longs that they can...and made as many of them as they can go on the short side. As Ted Butler said in the paragraphs I stole from his weekend commentary...they are doing an outstanding job of this.
It has dawned on a few of people now, that this may be JPMorgan's last swing for the fence. I just can't imagine why they would go to all this considerable trouble, only to go back to be the short sellers of last resort on the next rally. Their efforts, unlike the engineered take-down in December, seem far more deliberate and calculated than ever before...and ruthless too.
But we won't know for sure until the next serious rally begins. And considering how far we are below the 50 and 200-day moving averages at the moment, the rally may in fact be started by JPMorgan et al as they may instigate the short-covering rally themselves, just like they did starting back in July of 2010.
We'll see how it all turns out.
Today, at the close of Comex trading, is the cut-off for this Friday's Commitment of Traders Report...and unless something out of the ordinary to the upside occurs between now and then, it should be another report for the record books.
As I hit the 'send' button at 5:20 a.m. Eastern time, all four of the precious metals have recovered from their pre-London open sell-offs...and are now rallying a bit. Volume in gold is already sky high at 36,000 contracts...and silver's volume is north of 8,000 contracts. For this time of day, these are really big numbers. The dollar index isn't doing a whole heck of a lot.
We'll see if these rallies amount to anything as the day wears on...and of course it's what happens in New York that is the most important, as the bulk of the trading volume is transacted there during the Comex session.
That's more than enough for today...and I'll see you here tomorrow.
- Sat, 12 May 2012 13:35:54 +0000: FT's Gillian Tett Provides the Rationale for Gold Price Suppression - Ed Steer's Gold & Silver DailyAuthor:
Yesterday in Gold and Silver
Ed_GSDMay 12, 2012 2:35pm GMTAs you already know from yesterday's comments in 'The Wrap'...the gold price came under selling pressure at 9:00 a.m. Hong Kong time on their Friday morning...with the low tick of the day [around $1,573 spot] coming at 8:30 a.m. in London.
From that low, the subsequent rally made it up to the high of the day [$1,591.90 spot]...which came around 10:45 a.m. in New York. And, like Thursday, it got sold off into the close electronic trading from there.
Gold finished the Friday trading session at $1,580.40 spot...down $13.00 from Thursday's close. Net volume was around 117,000 contracts.
Silver also got sold off in Far East trading starting at the same time. But silver's low [around $28.40 spot] came exactly thirty minutes after gold's...at precisely 9:00 a.m. in London. The silver price recovered a bit from there, but then got sold off once Comex trading began...and by 9:30 a.m. in New York, it was almost back at its London low.
But from there it moved sharply higher...with the high of the day [$29.23 spot] coming around 11:00 a.m. Eastern time. From that point, the silver price got sold off just over a percent going into the 5:15 p.m. close.
The silver price closed the day at $28.89 spot...down 15 cents from Thursday. Net volume was around 33,000 contracts.
The dollar bounced around between 80.10 and 80.30 for most of the trading day on Friday...closing almost on it high at 80.26...but only up about 6 basis points from Thursday's close.
The gold stocks gapped down over a percent at the open...but then managed to make it back into positive territory for about thirty minutes around gold's high. However, once the gold price rolled over, the equities followed...and the HUI finished the Friday trading session down 1.69%.
The silver stocks didn't do much better...and Nick Laird's Silver Sentiment Index closed down 1.38%
(Click on image to enlarge)
The CME's Daily Delivery Report showed that 65 gold and 7 silver contracts were posted for delivery on Tuesday. Not much to see here.
There were no reported changes in either GLD or SLV...and the U.S. Mint sold another 75,000 silver eagles.
Switzerland's Zürcher Kantonalbank updated their gold and silver ETF totals at the end of the Wednesday trading day on May 8th. Their gold ETF took in 42,497 troy ounces...and their silver ETF added 574,823 troy ounces.
It was extremely busy over at the Comex-approved depositories on Thursday. They reported receiving 1,207,452 troy ounces of silver...and shipped another 1,097,050 ounce of the stuff out the door. The link to that action is here.
Well, yesterday's Commitment of Traders Report [for positions held at the close of Comex trading on Tuesday, May 8th] was beyond even my expectations...which were considerable. And, as fantastic as these numbers were, I should point out right up front that the new lows in all precious metals that were set on Wednesday...and again yesterday morning in London...means that they are even more fantastic now.
In silver, the Commercial net short position declined by a whopping 5,844 contracts. The Commercial net short position is now down to 17,900 contracts, or 89.5 million ounces. The biggest changes in the Non-Commercial and Nonreportable categories were the huge increases in their respective short positions. Between both categories, they increased their net short positions by 4,844 contracts. As Ted Butler mentioned several times during the reporting week, it was obvious that JPMorgan et al were setting prices lower in such a way as to entice the traders in these other two categories to go massively short...and they succeeded.
Many multi-year records were broken in this COT report...and I know that Ted Butler will have much to say in his weekly commentary later today. One record that fell in this COT report was the net long position of the small traders in silver...the Nonreportable category. It hit a record low on Tuesday...and is lower still, since the cut-off.
It was just as impressive, if not more so, in the COT for gold. The Commercial net short position in gold dropped by 26,548 contracts, or 2.65 million ounces. The Commercial net short position is now down to 15.1 million ounces...a level not seen in a bit over three years. In the other two categories of the COT...the Non-Commercial and the Nonreportable...traders dumped long positions and piled onto the short side. During the reporting week, these two categories dumped 7,136 long contracts and went short 19,412 contracts. If you add those last two numbers up, the total comes to the drop in the Commercial net short position...26,548 contracts. Don't forgot that there has to be a long for every short...and there's your proof.
In some ways, this COT report is better than the one that we had at the prior low of late December of last year...and with the improvements from Wednesday and Friday thrown in, we're most likely at new records in all categories in all four precious metals.
Today's first chart is courtesy of Washington state reader S.A. It's the "Annual Consumer Inflation" graph from John Williams over at shadowstats.com...and needs no further embellishment from me.
The next chart courtesy of Nick Laird shows the "Total Weight vs. Total Value" of all the transparent precious metal holdings in the world.
Nick also pointed out the following..."Just updating my ETFs holdings...and UBS declared that they sold 347,850 oz ($5.5 billion worth) of gold out of three different Gold ETFs this week - 23% of their total gold holdings, so it's a huge change."
Yes, it is...and here's the "UBS Gold ETF Ounces" chart that Nick sent me.
(Click on image to enlarge)
I have the usual number of stories for a weekend...and I hope you have the time to glance through all of them.
The internal structure of the precious metals market from a Commitment of Traders perspective is the most bullish I can remember in yearsGold -- what correction? Gold ‘Will Go To 3,000 Dollars Per Ounce’ - David Rosenberg. If It’s Made of Metal, Thieves Aren’t Picky. A Blockbuster COT Report.Critical Reads
What Jamie Dimon Doesn’t Know Is Plain Scary
Ed_GSDMay 12, 2012 2:35pm GMTCould Jamie Dimon really be as clueless as he sounded on the phone yesterday?
Last month, after Bloomberg News broke the story that JPMorgan Chase & Co.’s chief investment office had, in essence, become a ticking time bomb, Dimon, the bank’s chief executive officer, called the press coverage “a complete tempest in a teapot.” That explanation no longer works.
Yesterday, Dimon changed tacks. Losses on the investment office’s “synthetic credit portfolio” had reached $2 billion so far this quarter, though he refused to give any meaningful details on how that had happened. Presumably, these are derivatives of some sort, but even that basic fact was too much for the bank to specify.
What Dimon lacked in information, he more than made up for in assigning blame -- to himself and JPMorgan employees.
Bloomberg columnist Jonathan Weil tees up Jamie Dimon and drives him down the fairway in this op-ed piece posted on their website early yesterday morning. It's certainly a must read...and I thank Phil Barlett for sending it. The link is here.
Jamie's Cryin: Dimon, J.P. Morgan Chase Lose $2 Billion: Matt Taibbi
Ed_GSDMay 12, 2012 2:35pm GMTA quick note on the disastrous news emanating from J.P. Morgan Chase, whose unflappable (well, unflappable until yesterday) CEO Jamie Dimon yesterday disclosed that the bank suffered $2 billion in trading losses this quarter.
I’m still not entirely clear on what the trades by Bruno Iksil, the so-called "London Whale," were exactly. According to the excellent Felix Salmon at Reuters, Iksil had taken a massive long position on corporate CDS, and when word of this leaked out, the market turned on him and beat his brains out. From Salmon’s piece: "Whenever a trader has a large and known position, the market is almost certain to move violently against that trader — and that seems to be exactly what happened here. On the conference call, when asked what he should have been watching more closely, Dimon said “trading losses — and newspapers”. It wasn’t a joke. Once your positions become public knowledge, the market will smell blood."
Matt Taibbi over at Rolling Stone magazine posted this piece on their website about two hours after the Bloomberg piece above. It's also worth reading...and I thank Roy Stephens for bringing it to my attention. The link is here.
Chilton: JPMorgan's Loss Signals It's Time for Regulators to Put the Hammer Down
Ed_GSDMay 12, 2012 2:35pm GMTLeave it to Wall Street to remind us all how vulnerable our economy remains, and how important it is that we implement financial reform as soon as possible.
Yesterday, JPMorgan Chase reported mammoth losses—over $2 billion—a significant amount of which appear to be related to failed speculative bets on credit default swaps. While that won't trigger a repeat of 2008, it certainly highlights what we already know, painfully well: reckless speculation and poor risk management by large, interconnected financial institutions can spark financial calamities.
These circumstances take on a fantasy-world quality in that many of us continue to believe the bankers are so scary smart about our markets and economy. What it really demonstrates is what chumps we sometimes have become.
Bart Chilton has always struck me as one of those "all hat and no cattle" kind of guys. Since they can't/won't do anything about JPMorgan's obscene short position in silver, you have to wonder what makes you think that the CME will allow the CFTC to put JPMorgan Chase in its place now.
This op-ed piece by Chilton was posted over at the cnbc.com website late Friday morning...and I thank West Virginia reader Elliot Simon for sharing it with us. The link is here.
Guest Post: How Long Before Massive Government Debt Buildup Triggers Another Financial Shock?
Ed_GSDMay 12, 2012 2:35pm GMTSometimes a picture is worth a thousand words. A recent post on the popular ZeroHedge financial blog compared the annualized growth in federal debt to the annualized growth in GDP in Q1 2012. ZeroHedge reported that while U.S. government debt rose by $359.1 billion in Q1 2012, the U.S. GDP grew only $142.4 billion. Durden noted that, “It now takes $2.52 in new federal debt to buy $1 worth of economic growth.”
The surprising observation prompted us to examine the relationship between growth in debt and growth in GDP from 1975 through 2012. What we found is both astonishing and frightening.
Each $1 increase in GDP has been accompanied by, on average, a $2.50 increase in debt. Before the recession, an increase in debt generally generated a greater increase in GDP, but now it takes an enormous increase in debt to eke out a small increase in GDP. At some point, the amount of debt required to generate even modest GDP growth will suffocate the economy and trigger another financial shock.
This short piece posted over at zerohedge.com is worth the trip for the chart alone. I thank Roy Stephens for digging it up on our behalf. The link is here.
James Turk: Central Bankers Are Intellectually Bankrupt
Ed_GSDMay 12, 2012 2:35pm GMTCongressman Ron Paul says that “central bankers are intellectually bankrupt”. This is actually the title of an excellent op-ed article he wrote last week for London’s Financial Times in which he clearly explains that controlling interest rates is a form of price fixing. We know from monetary history that price fixing has always been harmful to economic activity. Yet “control of the world’s economy has been placed in the hands of a banking cartel” even “while socialism and centralised economic planning have largely been rejected by free-market economists”.
It is an excellent article, and I highly recommend it. But I do want to comment on one point.
This short piece by James was posted on his fgmr.com website earlier this morning in Europe...and the link is here.
Fitch: REOs Now Reach One-Third of All U.S. CMBS Delinquencies
Ed_GSDMay 12, 2012 2:35pm GMTU.S. Commercial Mortgage-Backed Securities [CMBS] delinquencies rose for the second straight month while the volume of real estate-owned [REO] assets continued to climb, according to the latest index results from Fitch Ratings.
Late-pays rose 10 basis points in April to 8.53% from 8.43% in March. This was largely expected with five-year loans originated in 2007 now starting to come due.
Another notable trend is the increased amount of REO assets, which are making up a larger share of the index. REO assets climbed again and now represent one-third of all delinquencies, reaching $11.1 billion in scheduled loan balance in April.
This story was posted on the finance.yahoo.com website yesterday...and I thank reader Ryan McQuire for sending it along. The link is here.
Postal Service Reports Quarterly Loss of $3.2. Billion
Ed_GSDMay 12, 2012 2:35pm GMTThe United States Postal Service on Thursday reported a quarterly loss of $3.2 billion and blamed Congress for blocking the agency’s cost-cutting efforts to offset declining mail volume and mounting costs for future retiree health benefits.
From January to March, losses were $1 billion more than during the same period last year. The Postal Service said that without legislative action, it would be forced to default on more than $11 billion in health prepayments due to the Treasury this fall.
This very short AP story showed up in The New York Times yesterday...and you've already read half of it. I thank Phil Barlett for sending it our way...and the link is here.
Bankia Bailout: Spain Struggles to Control Escalating Bank Crisis
Ed_GSDMay 12, 2012 2:35pm GMTThis week's move by Spain to nationalize the country's fourth-largest bank almost overnight is just the latest in a financial sector crisis that has been growing since the Spanish real estate bubble burst. It is likely to increase calls for Madrid to accept financial aid from its European partners.
It wasn't so long ago that the Spanish banking system was the subject of glowing praise. As financial institutions in Germany and many other European Union countries began to falter because they had badly gambled on high-risk US mortgage securities, the situation remained remarkably quiet in the southwestern part of the continent. The reason was that Spanish banking regulators had largely restricted the country's banks from engaging in the risky business.
In the meantime, Spain's banks are now amongst the greatest problem children in the euro zone. Developments on Wednesday night underscored just how dire the situation has become. The Spanish government announced that Bankia, the country's fourth-largest financial institution, would be largely nationalized. The announcement, made with little notice, suggests a hectic situation. The cabinet of Prime Minister Mariano Rajoy had actually been planning to announce a new bailout program on Friday.
This story was posted over at the German website spiegel.de yesterday...and is another offering from Roy Stephens. The link is here.
French deficit to shatter faith in the new fiscal compact
Ed_GSDMay 12, 2012 2:35pm GMTGreece never was any more than the canary in the mineshaft, a mere outrider for much wider and more fundamental problems in the eurozone. The European Commission's latest economic forecasts, which optimistically point to slow recovery from the second half of this year, more than prove the point.
The Commission has downgraded its growth forecasts for virtually all EU countries for both this year and next. Among the major economies, Germany and Britain are notable exceptions. Even so, the forecasts still look far too optimistic. Does anyone honestly believe that Italy and Portugal will be growing again by next year, or indeed that Greece will have stopped contracting?
The whole thing looks worryingly like one of those exercises in forecasting where the policymakers think about what they would like to happen, rather than what will. I'm not saying they are completely incredible, but they do rely substantially on the eurocrisis slowly resolving itself, even though that looks the least likely outcome right now.
This is another Roy Stephens offering as well. This one is from yesterday's edition of The Telegraph...and the link is here.
Companies must raise £28 trillion to finance 'wall' of debt
Ed_GSDMay 12, 2012 2:35pm GMTBusinesses will need to secure as much as £28.5 trillion to refinance old borrowings and fund new spending, raising major questions over the ability of the world economy to avoid a recession, according to a report from Standard & Poor's.
British companies will have to find between £220bn and £268bn of new financing to fund their growth plans on top of refinancing hundreds of billions of pounds more of existing debt, according to the ratings agency.
The scale of the refinancing required, as well as the amount of new debt companies must sell, could create what S&P described as a "perfect storm for credit markets".
This story was posted on The Telegraphs' website early on Thursday evening...and is a story that I borrowed from yesterday's King Report. The link is here.
'No biting the bear's sensitive parts'
Ed_GSDMay 12, 2012 2:35pm GMTIn the Kremlin corridors under the new management, it is generally acknowledged that one of the stupidest things former president (now premier) Dmitry Medvedev ever did was to order Russia's representative on the United Nations Security Council to abstain from the vote and veto of the no-fly zone resolution aimed at the Muammar Gaddafi regime in Libya.
That was on March 17, 2010. Russian intelligence services already knew that United States and British submarines were in place under the surface of the Mediterranean, ready to fire missiles to start a war that was intended to end in Gaddafi's death. It did.
This story was posted over at the Asia Times on Wednesday. It's not overly long...and I thank Roy Stephens for bringing it to my attention. It's definitely worth the read...and the link is here.Why India is Ignoring U.S. Pressure and Continuing to Trade with Iran
Ed_GSDMay 12, 2012 2:35pm GMTBiased Western news outlets keep trumpeting that Iranian exports have fallen, presumably to shore up support for the unlikely idea that the US can unilaterally wish extra millions of oil onto world markets. Few bother to mention that they have fallen in the first two quarters of 2012 primarily because of an Iranian dispute with China over payment terms, delaying Chinese imports. But that dispute has been resolved. China’s oil imports are expected to rise 5% this year, and China will be back to importing a lot of Iranian petroleum soon. The Chinese are also about to deliver a new supertanker to Iran, the first of 12, which will increase Iran’s delivery fleet. And, Iran will accept Renminbi in payment for oil imported by China.
This story was sent to me by Roy Stephens as well. It was posted over at the oilprice.com website...and the link is here.
Gold ‘Will Go To 3,000 Dollars Per Ounce’ - David Rosenberg
Ed_GSDMay 12, 2012 2:35pm GMTMarkets are repeating the downturns of 2010 and 2011, and it is time to search for safety, Gluskin Sheff's David Rosenberg tells James Mackintosh, FT investment editor. That means gold eventually reaching $3,000 an ounce.
This 6:21 video interview was posted over at the Financial Times website on Tuesday...and I thank Roy Stephens for his final offering of the day. The link is here.
Why CP’s old-time bondholders have a big say in the future
Ed_GSDMay 12, 2012 2:35pm GMTCanadian Pacific Railway Ltd. has a problem over a century in the making.
As the company’s war for control with activist investor Bill Ackman rages into its ninth month, obscure bonds issued just four years after the completion of the trans-Canada railway are emerging as a potential financial hurdle to a restructuring of the company’s balance sheet.
The bonds, which were sold as far back as 1889, are an investor’s dream: Known as “perpetuals,” they pay 4 per cent interest rate annually every year, have no date of maturity, and contain a clause that once required the company to make the interest payments in gold coins. What’s more, the $31-million of these bonds outstanding represent CP’s highest-ranking debt – having first call on all its assets, ahead of all other bond issues, and carrying a credit rating far above the rest of CP’s debt.
But for CP, the bonds represent a big headache if the company ever attempts to reorganize its finances.
You can't make this stuff up, dear reader...and I thank reader Donald Sinclair for digging up this absolute jewel for our Saturday reading pleasure. It was posted in the Wednesday edition of the Toronto Globe and Mail...and the link is here.
If It’s Made of Metal, Thieves Aren’t Picky
Ed_GSDMay 12, 2012 2:35pm GMTThe high price of oil is not the only effect of commodity inflation hitting the streets of New York. A surge in the value of copper, iron and other metals has fueled a wave of thefts from sidewalks, roadways and rail yards in the last few months.
On Wednesday alone, the New York police arrested three men for stealing hunks of cast iron — grates made to protect tree roots and manhole covers weighing as much as 300 pounds. The arrests followed reports of the disappearance of dozens of the grates and covers across the city and came on top of a continuing spree of thefts of copper wire from utility cables.
“It’s about money,” said Kevin Rafferty, president of Dublin Scrap Metal in Newark. “The economy’s tough, and people are looking to sell whatever they can find to sell.”
This story was posted on The New York Times website on Thursday evening...and I thank Phil Barlett for sending it. The link is here.
Two King World News Blogs
Ed_GSDMay 12, 2012 2:35pm GMTThe first is with Ben Davies, the CEO of Hinde Capital. It's headlined "3rd LTRO Coming...and Fed to Power Up Swap Lines". The second blog is with Rick Rule. It bears the headline "This Can bring Down the Entire Financial System"
Gold, silver, copper mining could get Haiti off international welfare
Ed_GSDMay 12, 2012 2:35pm GMTIts capital is blighted with earthquake rubble. Its countryside is shorn of trees, chopped down for fuel. And yet Haiti's land may hold the key to relieving centuries of poverty, disaster, and disease: There is gold hidden in its hills -- and silver and copper too.
A flurry of exploratory drilling in the past year has found precious metals worth potentially $20 billion deep below the tropical ridges in the country's northeastern mountains. Now, a mining company is drilling around the clock to determine how to get those metals out.
In neighboring Dominican Republic, workers are poised to start mining the other side of this seam later this year in one of the world's largest gold deposits: 23 million ounces worth about $40 billion.
This longish AP story was posted in a GATA release yesterday...and the link is here.
Egon von Greyerz: Gold -- what correction?
Ed_GSDMay 12, 2012 2:35pm GMTMatterhorn Asset Management's Egon von Greyerz shrugs off the recent setbacks in the gold and silver markets. His commentary is headlined "Gold -- What Correction" and it's posted at Matterhorn's GoldSwitzerland Internet site here.
FT's Gillian Tett provides the rationale for gold price suppression
Ed_GSDMay 12, 2012 2:35pm GMTExplaining "financial repression" as the coercion of investors to purchase government bonds that pay negative real interest rates, Gillian Tett of the Financial Times this week provided the perfect rationale for the Western central bank gold price suppression scheme -- all without mentioning gold at all.
In an essay published in The Wall Street Journal last December, recently resigned Federal Reserve Board member Kevin M. Warsh was among the first to complain about "financial repression," which he described as a matter of policy makers' "suppressing market prices that they don't like"
Chris Powell has a rather long must read preamble to go with this Financial Times story that's posted in the clear in this GATA release...and the link to both is here.
The Wrap
Ed_GSDMay 12, 2012 2:35pm GMTThese are the times that test men's souls. - Thomas Paine
A lot of TV commercials, both past and present, have been using clips of popular and classical songs for decades to sell their wares. There has been a commercial on TV here in Edmonton for the last couple of weeks that has a few bars from this 1974 hit from a group called Pilot. I always sing along to the bits on the commercial, but thought I'd dig up the whole piece and post it in today's column. Everybody knows it...and the link is here.
The visible price action yesterday was almost incidental to what was going on under the surface of the gold, silver, platinum and palladium markets. New lows were set for this move down in all the metals..and each came at different times throughout the day. I've never seen any market bottom in the precious metals that looked like this one.
The internal structure of the precious metals market from a Commitment of Traders perspective is the most bullish I can remember in years...and that's just based on an educated guess as to how much it has improved since the Tuesday cut-off. It's an easy call to say that we are at or below the December 2011 lows in every important measurement in the COT report.
These engineered sell-offs achieved the desired results. JPMorgan et al have now reduced their short positions to very low levels once again...and at the same time have tricked the traders in the other two categories into going massively short. That was the plan...and it worked to perfection. 'Da Boyz' know their prey all too well.
I'm sort of hoping, like I was last week at this time, that we have two more quiet trading days in gold and silver on Monday and Tuesday so that we get an accurate picture of this historic bottom in all four precious metals...especially silver.
As I mentioned the other day, we are now so far below the relevant moving averages that the tech funds aren't going to going long any time soon...especially when they're holding these monster short positions that they just put on. So we could wander around [price wise] well below these moving averages for quite some time.
But the question always is...will JPMorgan et al put their collective heads back in the proverbial lion's mouth and go short against all comers on the next rally? They have been the short sellers of last resort for a very long time. Will that continue...or is this the end of it?
That's all I have for the day...and the week. I'll be watching the New York open on Sunday night with great interest.
See you on Tuesday.
