Ed Steer's Gold & Silver Daily

08/04/2009

Gold didn't do much during early Monday morning trading in the Far East. A tiny rally began at 4:00 p.m. in the afternoon in Hong Kong...about a half an hour before London opened Monday morning for its trading day. This lasted for about nine hours...all through London trading...with its top coming around noon in New York. From there it got sold off into the close of electronic trading at 5:15 p.m.



Silver's chart pattern was similar to gold's...but it managed to finish up 30 cents in yesterday's trading...a rather impressive gain considering what happened to gold. As a matter of fact, gold was the big precious metals loser of the day on Monday, as it was only up 0.21%...while silver was up 2.16%, platinum up 2.15% and palladium up 3.05%. I guess that's the reason why the silver shares did so well yesterday.

Yesterday, the U.S. dollar closed a full cent below it's early June lows...when gold hit its high tick of around $990...before 'correcting'. Now at this new US$ low of around 77.5 cents...gold only managed to get up to $963 before 'correcting' again. It will be interesting to see how low the US$ has to fall before gold is allowed to retest the $1,000/ounce price...for the fifth time in 18 months.

The Dollar Index has also taken out the panic low of December 2008...and gold is still under $1,000 the ounce. The graph below tells all.



Open interest for Friday's two big spikes were as follows. Gold o.i. shot up a very large 8,420 contracts to 377,992...on big volume of 125,792 contracts. And in silver, o.i. rose 1,584 contracts to 99,411...on really big volume of 30,4574 contracts. So, Ted was right...and I was wrong. This did not appear to be a short-covering rally in either metal. This was a buyer that drove the prices vertical before the bullion banks could show up to go short against him. 'Da boyz' got caught by surprise...just like all of us!

The Comex Delivery Report yesterday finally showed some decent deliveries in gold. There were 2,859 contracts delivered on Monday...and in silver, there were only four contracts. Obviously, August is not a delivery month for silver. Those gold contracts that were delivered yesterday represent about half of what's currently on notice to be delivered for August so far...which is 6,344 contracts. There were no changes in the alleged holdings of either GLD or SLV yesterday. Over at Zürcher Kantonalbank in Switzerland, their gold ETF added a smallish 4,993 ounces...but their silver ETF [after adding nothing last week] added a huge amount...1,928,979 ounces! That's the biggest add that I can remember them making. And, once again, I thank Carl Loeb for those numbers. Not surprisingly, there was no report from the U.S. Mint yesterday...and over at the Comex-approved warehouses, someone shipping in one whole bar of silver weighing 940 ounces! It was hardly worth making up a report for that amount!

In the first of two reports from the usual New York gold commentator, comes these words about Friday's action..."Considering that the ferocity of gold's rise just before noon on Friday convinced experienced observers that short stops were being triggered, the amount of fresh buying coming in must have been really substantial...as Friday's powerful $18.50 rise turned out to involve the addition of 8,420 contracts in open interest...26.2 tonnes."

In his second report, he has this to say about Monday's gold action..."While the Dollar Index appears to be undergoing a catastrophic chart breakdown since the N.Y. open, heavy selling has appeared in gold, which has lost some € 6 since 8:30 a.m. N.Y time, while struggling to stay even in U.S. Dollars. A bout of what ScotiaMocatta politely describes as 'heavy profit taking' in the last half-hour of the floor session more than halved December gold's intra-day gains; and gold showed softness in the after-market. This is no surprise to the experienced gold observer. [No...it's not! - Ed] Since the effect will be to reduce the gold price in key consuming currencies, gold's friends can be patient. But unless some hero Hedge Fund feels like challenging the seller on the Comex again, Gold's friends will have to wait for Asian physical buyers to outflank this obstacle."

In other precious metals news comes the following bits and pieces. I've seen several stories over the last couple of weeks that HSBC is closing its depositories to private gold and silver investors...and has asked their retail clients to move their metal out of the HSBC facility at their earliest possible convenience. Why would they do this??? That's a good question for which I have no answer. But, it has raised my level of angst just one more notch. I see that Bernard von NotHaus has suspended Liberty Dollar operations until his trial is over. You can read his comments on this at his libertydollar.org website. And lastly is this story from last Friday's The New York Times. The headline says it all...A Hong Kong Gold Merchant Seeks Fortune in China...and the link is here.

The first story is gold related. It has to do with IMF gold sales. Now they're postponing gold sales until sometime in 2010...and there still isn't a word about a third Washington Agreement anywhere in this story. Even though IMF gold sales have been approved by the U.S. Congress, I still doubt that the European banks will want to part with their portions when push becomes shove. We'll see. The story is headlined "IMF may sell 200 tons of gold annually from 2010"...and you will note the word 'may' in the headline. The link is here.

The next piece is from Karl Denninger over at The Market Ticker. This story is about the FDIC and is definitely worth the read. I know just how insolvent most smaller American banks really are...but this is the first time I've seen the facts to back it up. It's headlined "Is The FDIC Broke and Covering it Up?" The link is here.

The third story is from The Times of London. One of the reasons why the US$ is heading for the rocks is this one. The headline reads..."China moves to internationalize its currency". They, like many other countries, are slowly heading toward the U.S. dollar exit doors. The link is here.

And lastly comes this essay from Gary North..."Why Bernanke is in Panic Mode". In it, North brilliantly exposes and demolishes the secret patronage on which the Federal Reserve system now is mainly based, patronage that risks exposure if U.S. Rep. Ron Paul's legislation to audit the Fed is ever enacted. The whole must read story is wrapped in a GATA release. I'm linking it this way because GATA's secretary treasurer, Chris Powell, has added some important preamble...which [I believe] is worth reading as well. The link is here.



There has not been a major "Summit" this year in the lead up to which, or during which, the paper price of spot Gold (and usually Silver) on the New York futures market, has not taken a major dive....By now, the manipulation going on here should long since have become so obvious as to be laughable. Be that as it may, it is still "working". We wonder for how much longer. - Bill Buckler, The Privateer

The fight for US$1,000 gold is on again...and it's obvious that the New York bullion banks are going short against all comers...despite the fact that the US$ is being hammered. Silver appears to be doing better. Yesterday's close was above its 50-day moving average. Can it hold that level and add to its gains? Ted Butler and I will be watching with great interest to see if the bullion banks go even shorter on this rally. They went short on Friday...and probably did again yesterday...but we won't know by how much until the open interest numbers are released later this morning. Stay tuned.

See you on Wednesday.