Ed Steer's Gold & Silver Daily

08/05/2009

Between the Far East open on Tuesday morning...and the Comex open 14 hours later...gold shed about five bucks. Then, at 8:05 Eastern Daylight Time, both gold and silver took off to the up-side. This lasted until a few minutes before 1:00 p.m. before the obligatory seller appeared. As I've said many times in the past...please feel free to point out any day in the last 10 years that gold and silver have closed on their high ticks of the day. I wouldn't need all the fingers on one hand to do it.

Silver performed in virtual lock-step with gold during Comex trading...and has really been adding to its price gains in the last several days. And like I pointed out yesterday, gold was the loser in the precious metals family on Monday, and it was again yesterday...up only 1.17%...whereas silver was up 2.96%, platinum up 2.59% and palladium up 1.85%. But, as Ted Butler has mentioned in his last couple of essays [plus his new one today, linked further down]...all eyes should be on the silver price.



The gold stocks did not appreciate the aggressive selling that appeared in the closing minutes of Comex trading [and beyond] and sold off. The peak in the HUI came in the minute that gold and silver prices peaked. How do the owners of these shares seem to know that? Just asking. However, the silver equities were the standout for the second day running. Is there a message to investors in this somewhere?



Well, Monday's changes in open interest were not very reassuring. Gold o.i. rose another 5,396 contracts to 383,388...on big volume of 110,554. In silver, o.i. only rose 994 contracts to 110,405...on volume of 31,379 contracts, which is quite a bit. I don't see much sign that JPMorgan et al are changing tactics. Ted says its a little too soon to tell. Silver has only been above its 50-day moving average for a couple of days, and may take a day or two more before the tech funds show up. But when they do, we'll know almost instantly whether we have blast off or not. If there's nobody [meaning JPMorgan specifically] to take the short side of the tech fund longs, then you're going to see a one-day silver chart for the history books. But if JPM does show up...then it's the 'same old, same old' for the time being.

The Comex Delivery Notice for Tuesday showed that 838 gold and 3 silver contracts were delivered yesterday. That leaves about 2,100 gold contracts still open for delivery this month... and always subject to change, of course. Over at the SLV ETF, there was a minor reduction of 111,462 ounces...and, for whatever reason, the GLD ETF did not update their website yesterday. The U.S. Mint has not been idle during the first couple of working days in August. They showed that 6,500 gold and 200,000 silver eagles have been produced already this month. And over at the Comex-approved warehouses, 516,203 ounces of silver were taken into inventory.

The usual N.Y. gold commentator was busy yesterday...as three e-mails arrived in my in-box during the course of the day. I'll cherry-pick them for you. One of his first comments was about Monday's price decline at the close of Comex trading..."Observers concur that gold's move on Monday was restrained by what Standard Bank calls 'good physical selling'. UBS reports 'decent selling' at $960 which it pointedly says included profit-taking by recent buyers: which meant that it wasn't just profit taking!" [Someone was capping the price. - Ed]

"The European Central Bank's weekly statement of condition, published today, reports a reduction of € 6 million [0.28 tonnes] in 'gold and gold receivables' said to be caused by a sale by one captive Central Bank. This follows an unprecedented two weeks of zero sales. With the final WAG2 year closing at the end of next month, it really seems that the ECB squadron has pulled out of the gold market."

"Reports that the Italian legislature is trying to figure out a way to siphon some cash out of the Bank of Italy's unrealized profits on its substantial gold holdings by means of a tax [meeting ECB opposition] imply that the Italian politicians hold no hope of releasing the revenue by actual sales. The story...filed at nasdaq.com...is headlined 'Italy Senate OKs Government Anti-Crisis Decree Including Gold Tax'...and the link is here."

The only other gold-related story I could find was filed over at Bloomberg early yesterday. It's a story about gold investment products from the Royal Mint in Wales. The headline reads "U.K. Royal Mint Doubles Gold Output as Demand Swells". It's definitely worth running through...and the link is here.

From The Economist in London yesterday...courtesy of P.S. "The World's Biggest Companies by Market Capitalization". The market capitalization of PetroChina may have fallen by almost half in the past year, but it remains the world’s most valuable company. Chinese firms now occupy three of the top four slots. (The state’s large non-traded holdings are valued at market prices.) Seven of the 12 most valuable companies are either banks or oil producers. Wal-Mart, Johnson & Johnson and Procter & Gamble have all climbed the table in the past year; their industries tend to weather recessions better than others. Market capitalization does not necessarily tally with other measures of size. Microsoft is worth more than Royal Dutch Shell, which has nearly eight times the revenue of the software company and 10,000 more employees.



I have a fair amount of reading today...if you're so inclined. The first of four stories is from Bloomberg. It appears that the SEC is to ban advance looks at stock trading orders. The headline in this one reads "SEC to Ban Flash Trades of U.S. Stocks, Schumer Says". Will this put the kibosh on that "great vampire squid"...Goldman Sachs? Probably not...as these types of criminals cannot be rehabilitated. The link is here.

As you are aware, Representative Ron Paul's bill to get the Fed audited...and then scrapped, if possible...is getting a lot of attention. His efforts find some support in the pages of the Christian Science Monitor. The headline reads "End the Fed? A not-so-crazy idea." and the link is here.

The next story is a little on the longish side. It's a GlobalEurope Anticipation Bulletin from leap2020.eu. The title says it all..."When China prepares its 'Great Escape' from the dollar-trap for the end of summer 2009". I consider this story very much worth your while. I thank Brad Robertson for sending it along...and the link is here.

And lastly is silver analyst Ted Butler's latest commentary. I've been reading Ted's work for 10 years now...and I have all the time in the world for anything he has to say. His latest commentary, published yesterday, is entitled "History In The Making". Ted also announces in this commentary that this will be one of his last [meaning free] public commentaries on the silver market, as he is going to a pay subscription service...so enjoy this one...and the link is here.



If a nation expects to be ignorant and free in a state of civilization...it expects what never was and never will be. - Thomas Jefferson

Well, both gold and silver put on a show yesterday. You will carefully note that in the last 48 hours, the U.S. dollar has basically sat 15 basis points either side of 77.65. So...if anyone ever gives you the line that precious metals can't rise in the face of a flat or rising dollar...you can tell them that it ain't so. What makes the prices rise and fall is 100% determined by who is going short...or not going short...on the Comex. Gold could rise a couple of hundred bucks and silver by 25 bucks if the U.S. bullion banks just put their hands in their pockets and did nothing...and it wouldn't make any difference at all as to what the dollar was doing, or not doing, at that particular time.

See you on Thursday.