Ed Steer's Gold & Silver Daily

07/28/2009

Gold got sold off for about four dollars very early on Monday morning in Sydney...but then a rally developed that took the gold price to its high of the day around the silver fix in London at noon their time...and it was all downhill from there. The usual New York gold commentator said..."Somebody's attention was attracted today, as the Comex open encountered a deluge of selling: estimated volume was 65,237 lots by 9:00 a.m N.Y. time...and 91,568 by 11 a.m. Some commentaries describe the latter part of the session as quiet, but aggregate volume was 130,582 lots and might well exceed 150,000...a pretty active day. One could say gold has done rather well to stay above $950."

Silver never got more than a dime either side of $14.00...yawn.

Friday's open interest numbers were reported yesterday...and gold o.i. jumped again...this time by 4,618 contracts to 395,762....on volume of 105,467 contracts. There was nothing in Friday's gold price action to indicate that o.i. should have jumped that much, and Ted Butler thought it might have been spreads being put on. Options expiry for the August contract is today...July 28th. Silver o.i. was actually down 17 contracts to 96,292...on smallish volume of 14,246 contracts. The open interest numbers in both metals [particularly gold] could jumps around quite a bit for the rest of the week...and we probably won't get a real handle on this week's goings-on until the COT on August 7th.

The Comex delivery report showed that nothing was delivered yesterday in either gold or silver. There are only 87 gold and 100 silver contracts left to deliver in the July contract...all of which have to be delivered before Friday, as Friday is first day notice for the August contract. There were no changes in the alleged holdings of either GLD or SLV yesterday. But at the Zürcher Kantonalbank in Switzerland, their gold ETF rose a smallish 17,075 ounces...and for the first time since I've been reported this Swiss ETF figures, there were no changes in their silver ETF. I thank Carl Loeb for those numbers. The U.S. Mint reported a smallish change in their silver eagle production yesterday...adding another 25,000 to their July totals. There were no changes in gold eagles. And over at the Comex-approved warehouses...72,040 ounces of silver were withdrawn.

On Sunday night, the usual New York gold commentator sent out a special e-mail mentioning the number of technicians who are bullish on gold right now...ScotiaMocatta, Bill Buckler in his Gold This Week commentary on Saturday a.m...and Martin Pring who notes that his key short-term momentum indicator for gold turned positive this week, which 'suggests a test of this all-important trend line in the $990-1,000 area.' As gold moves closer to the usual August Indian demand revival, the Bears need to do something."

"The Gartman Letter today repeated its intention to double up its gold holding if the metal held above $955 for an hour. Gold apparently did that between 5:30 and 8:30 a.m. on Monday. There are those who feel pronounced TGL interest in gold will attract malign attention." [You would be right about that. - Ed]

"Midsummer is a tricky time to forecast the gold market." [You would be right about that, too! - Ed]

Ted Butler and I spent some time talking about the silver price after I had read his new article [see below] that came out yesterday. He feels that because of the huge dichotomy that exists between the open interest in silver and gold, that silver will now be allowed to break free from the gold price and head off on its own...higher. We'll find out soon enough if/when silver breaks through its 50-day moving average to the up-side, and the technical funds come pouring back into the market. If the bullion banks [principally JPMorgan] do not go short against them, well...pick a number. Silver closed at $14.03 yesterday, and it's 50-day m.a. is at $14.15. We shouldn't have long to wait. It could happen today.




Lot of stories this Tuesday morning...as I've been collecting them for the last three days. A couple of highlights first. I note in a Bloomberg story that "Charles Schumer, the third-ranking Democrat in the U.S. Senate, asked the SEC to ban so-called flash orders for stocks, saying they give high-speed traders an unfair advantage. Schumer, a member of the Senate Banking Committee, said he will introduce legislation to ban flash orders if the SEC doesn't act on his request." In another Bloomberg story I see that "The Financial Accounting Standards Board is girding for another brawl with the banking industry over mark-to-market accounting. And this time, it’s the FASB that has come out swinging. It was only last April that the FASB caved to congressional pressure by passing emergency rule changes so that banks and insurance companies could keep long-term losses from crummy debt securities off their income statements. Now the FASB says it may expand the use of fair-market values on corporate income statements and balance sheets in ways it never has before. Even loans would have to be carried on the balance sheet at fair value, under a preliminary decision reached July 15. The board might decide whether to issue a formal proposal on the matter as soon as next month." [This could get interesting. - Ed]

The first link is to a youtube.com video that features an CNBS interview with former New York Governor Eliot Spitzer. The interview occurred on Friday, July 24th. In it, Sptizer calls the Federal Reserve "a Ponzi scheme". The whole piece is a damning indictment of the Fed, and worth watching. The link is here.

In a story filed over at yahoo.com is this piece. The first paragraph reads "Federal regulators on Monday made permanent an emergency rule put in at the height of last fall's market turmoil that aims to reduce abusive short-selling." The article then goes on to say the following..."At the same time, the SEC has been considering several new approaches to reining in rushes of regular short-selling that also can cause dramatic plunges in stock prices." The story is worth the read and bears the headline "SEC rule on 'naked' short-selling now permanent" and the link is here.

Next is the latest commentary from James Turk over at goldmoney.com. Turk examined the charts for the U.S. dollar and gold and found the former exceedingly weak and the latter exceedingly strong. Turk's commentary is headlined "The Summer Doldrums Are Ending" and is definitely worth the read...and the link is here.

And lastly is silver analyst Ted Butler's latest weekly commentary. Ted has speculated for years that the day would come when the silver price would break away from gold's...and with the current Commitment of Traders configured the way it is, and new position limits coming in from the CFTC...Butler feels that the time could be now. The essay is appropriately titled "D-I-V-O-R-C-E"...and is a must read in my opinion. He also has a new audio interview with King World News linked at the bottom of this essay...and the link to the essay itself is here.



Whether ancient or modern, monarchy or republic, coin or paper, each nation descends pretty much the same slippery slope, expanding government to address perceived needs, accumulating too much debt, and then repudiating its obligations by destroying its currency. - James Turk and John Rubino

There's a big meeting going on in Washington that started yesterday...and runs through today. It's a summit called Strategic and Economic Dialogue. America's top banker...China, not the Fed...has shown up looking for some answers. The world's top creditor nation meets the worlds top debtor nation. In a Financial Times story linked here...the columnist states that "America used to defend its enormous national debt by arguing the country owed the money to itself. That's no longer true. And the fact it isn't, means America's crucial QE exit strategy could soon be yanked from American hands."

While their guests are here, the U.S. Treasury is busy manufacturing $235 BILLION out of thin air.

A well-known Chinese greeting goes like this..."May you live in interesting times." Not only are they 'interesting'...they're historic as well!


See you on Wednesday.