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Message: Ed Steer this morning

Ed Steer this morning

posted on Jul 17, 2009 10:04AM

From Ed Steer:

It was pretty much a yawner in gold trading throughout the world yesterday. The only excitement...if you want to dignify it with that term...occurred shortly after the London a.m. fix at 10:30 a.m. their time...5:30 New York time. A smallish rally developed that got capped the moment the Comex opened for trading in New York...with another $4 shaved off the price the moment the London p.m. fix was in at 10:00 a.m. Eastern time. Needless to say, gold wasn't allowed anywhere near $940 for the rest of the day. Is a top being painted here? The graph from yesterday's New York trading session is shown below.

click to enlarge


Ted Butler mentioned yesterday that volume in gold trading was super low...almost not worth mentioning. The usual N.Y. gold commentator concurred..."Volume is slow: only estimated at 48,203 by 12:00 noon New York time."

Silver didn't do a thing on Thursday either. It's momentary excursion above $13.30 lasted about five minutes according to the Kitco silver chart. Like gold, which was not allowed to close above $940 for the second day in a row...silver's closing price has been carefully kept below the $13.30 mark for the second day running as well. Does all of this mean anything? As I've said all week, the precious metals market is going to be difficult to call until this CFTC position limits issue in both gold and silver is settled.

Now for the open interest numbers for Wednesday. Remember I mentioned yesterday [and backed up with a graph to prove it] that there were 7 major and 2 minor interventions in the gold market [during New York trading hours] on Wednesday that were designed to make sure that the gold price did not close above $940? Well, the o.i. numbers reflect the epic battle that took place. Gold o.i was up a hefty 9,498 contracts to 380,007...on absolutely monstrous volume of 160,405 contracts! Some of the major moving averages were broken to the upside on the big $15 rally, and the technical funds poured in on the long side, as the N.Y. bullion banks went short against all of them...and it’s obvious that the line in the sand for the bullion banks was the 'technical resistance' at $940.

And in case you've forgotten, silver had a rally of its own on Wednesday as well...but in silver, the o.i. went down 328 contracts! Open interest fell to 99,334 contracts, with a hefty 28,637 contracts traded. Why the dichotomy in o.i. change between gold and silver when they both made major up-side moves and got capped in New York trading? A good question for which I have no answer...but I suppose short covering during that rally would be one explanation. But you will carefully note that this action happened on Wednesday...the day after the cut-off for today's COT. Wednesday's numbers will be in next Friday's COT. And as I've pointed out before...they pull this stunt all the time...last Wednesday's huge price decline in both metals being the previous example of this type of behavior.

The Comex Delivery Report yesterday showed that 95 gold contracts and 35 silver contracts were delivered. There were no changes in the alleged holdings over at SLV...but the GLD ETF reported adding a tiny 9,817 ounces of gold to their stash...such as it is. I was surprised to see that the U.S. Mint added another 100,000 silver eagles to their total for the month of July, which now stands at 1,725,000 ounces. There were no changes reported to their gold eagle numbers. And over at the Comex-approved warehouses, another 472,948 ounces of silver were withdrawn from inventory.

Along with watching the paint dry again yesterday, there wasn't any other gold or silver news worth mentioning.

The following comment is courtesy of this morning's King Report..."Stocks ignited in the early afternoon yesterday when CNBC and other financial media outlets reported that renowned doomster, Prof. Roubini, said the worst of the financial and economic crisis was behind us. After the close, Roubini denied that he had changed his forecast. This led astute operators to wonder if someone planted the erroneous story as part of a well-orchestrated option expiration squeeze."

I have four stories today…but the only mining-related story I could find was this one that I dug up over at lemetropolecafe.com. It's posted at mineweb.com and doesn't appear to be good news for a lot of domestic U.S. mining companies. The story bears the headline "EPA to wield enhanced power over U.S. hardrock mining through financial guarantees"...and the link is here.

Another story of note is this piece from The Times in London...as it appears that Israel is ratcheting up the tension level with Iran by a couple of notches. The story is headlined "Israeli navy in Suez Canal prepares for potential attack on Iran". I thank Kevin Fischer for the story...and the link is here.

As you know, I always keep one eye on the real estate market in the U.S. Here's a story out of Bloomberg yesterday that doesn't surprise me in the slightest. The headline reads "Foreclosure Filings in U.S. Reach Record 1.5 Million"..."One in eight Americans is now late on a payment or already in foreclosure." The link is here.

And lastly is this piece that just arrived as I was about to send this rant off to my editor. It's commentary by Paul Craig Roberts. Roberts was Assistant Secretary of the Treasury in the Reagan administration. His commentary bears the title "What Economy? There's Nothing Left to Recover". The article is posted at counterpunch.org and the link is here.

Interventionism cannot be considered as an economic system destined to stay. It is a method for the transformation of capitalism into socialism by a series of successive steps. - Ludwig von Mises

As I've said, with the CFTC re-examining position limits in both gold and silver...and the bullion banks sitting on massive short positions that they've barely begun to cover...I can quickly explain a huge rise in the gold price, or a move of an equal amount in the opposite direction. Plus we're in the 'summer doldrums'...whether real, or manufactured...and I suspect the latter. So I'm going to take each day as it comes and hopefully make some sense out of it...as we're living through very interesting times in the gold and silver world right now.

click to enlarge


It's Friday...and I hope you take the time this weekend to make like the kitty in the photo above, and forget about all this stuff for a couple of days...because that's exactly what I intend on doing myself.

All of us at Casey's Daily Resource Plus hope you have a great weekend, and we'll see you here on Saturday sometime.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

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