Gold Down... Gold Stocks Up???

The gold price rose about $10 during Far East trading on Tuesday... and was obviously headed higher... but it appeared that some entity stepped in and ended it at precisely 3:00 p.m. in Hong Kong at gold's high price of the day... around $1,128 spot. From there, and in fits and starts, the price 'fell' for the rest of the trading day, with the low [$1,114.10 spot] occurring around 2:00 p.m. Eastern time... just after Comex trading session ended. Gold finished down $3.70 on the day... closing at $1,117.20 spot.

Well, the movement in the dollar certainly explains why gold peaked at precisely 3:00 p.m. in Hong Kong trading Tuesday afternoon. The dollar had its nadir at precisely the same moment... which was 2:00 a.m. on Tuesday morning New York time. I find that this "top-of-the-hour dollar rise/gold fall" reeks of market management. This sort of precision does not happen by accident.

Silver didn't do much, and it appeared that every time it made any attempt to break out even a little, it got gently sold down. It's low and high of the day came during New York trading... $17.50 and $17.90 spot respectively... and managed to close with a gain of 18 cents the ounce.

Both gold and silver had tiny [as in miniscule] rallies starting shortly after 2:00 p.m. in New York... but the shares rose out of all proportion to that... and [compared to the loss it was facing] the HUI finished with a decent gain of 1.03% at 449.42. I'd love to know who was buying the shares... and why. The smallish Dow rally had nothing to do with it, as the mystery buyer there didn't show up until precisely 3:00 p.m... long after the precious metals shares were on the rise.

My comments on Tuesday about a "chunky" rise in open interest numbers on Monday's big move in gold, turned out to be the case. Open interest rose 16,796 contracts on volume of 181,168 contracts. Total o.i. in gold is now back over the 500,000 level at 506,575 contracts. That rise gives you, dear reader, some idea of just how much paper the bullion banks had to throw at Monday's rally to stop it in its tracks.

In silver, although its rise was even more impressive than gold's in percentage terms, open interest only rose 1,563 contracts. Volume was 34,043 contracts... with total o.i. in silver now back above 125,000 at 125,620 contracts.

The CME posted their Tuesday Daily Delivery Notice late yesterday evening. It showed that 67 gold and 28 silver contracts are due for delivery tomorrow. There were no reported changes in GLD yesterday... but over at the SLV, a smallish 133,673 ounces were withdrawn. This was probably a fee payment. The U.S. Mint had another update yesterday. They showed that 2,000 ounces of gold were sold in gold eagle bullion coins. The Comex-approved depositories showed that a smallish 65,665 ounces of silver were taken into their collective inventories yesterday.

I have quite a few stories again today. The first was send to me on Monday by reader Roy Stephens, but my list for Tuesday's column was already long enough. But there's no harm done in running it a day or so late. As I've pointed out for the last few months, things are getting really financially ugly in Europe. This brief article [posted at france24.com] touches the high [low?] points and is well worth your time. The headline reads "Eurozone faces 2010 debt crisis"... and the link is here.

The next story [courtesy of Craig McCarty] is also Europe-related. It's a piece posted over at zerohedge.com entitled "PIMCO Sees U.K. Rating Downgrade Probability at 80%, Gilts Higher by 100 Bps". Britain is basically running the printing presses 24/7 right now and a downgrade of British bonds [Gilts] appears to be forthcoming. Another reason to buy physical gold and silver with both hands, dear reader. The link to this must read article is here.

The next must read piece is from Ambrose Evans-Pritchard at The Telegraph in London. Along with his Armageddon outlook for 2010... Ambrose states that "Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Once this dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE [quantitive easing... money printing - Ed]. The country will flip from deflation to incipient hyperinflation." The headline reads "Global bear rally will default as Japan leads world in sovereign bond crisis"... and I thank Australian reader Wesley Legrand for bringing it to my attention. The link is here.

And it gets worse. You might remember that before Christmas, Bernanke was talking about withdrawing liquidity from the U.S. banking system to prevent inflation from breaking out. Well, you can forget about that. A Reuters story sent to me by reader Joseph Weiler reads "Fed may re-enter MBS [mortgage backed security - Ed] market later in 2010". When they do, it will be more QE [Quantitive Easing]... which is just another name for printing money to buy more worthless assets to stick on the Fed's balance sheet. The link is here.

The next item of interest is this marketwatch.com headline that reads "Time for Fed to disprove PPT conspiracy theory".... "Charles Biderman, chief executive of TrimTabs Investment Research, is the latest and most credible person to charge that the Federal Reserve and the Treasury [in league with top Wall Street firms] is rigging the stock market on a daily basis." This is, of course, no surprise to you, dear reader... as this has been ongoing for at least the last 10 years. But it now looks like us "conspiracy nuts" have company... and the link to this very worthwhile story is here.

And lastly comes the latest [and rather longish] offering from F. William Engdahl. The country of Yemen has been in the news for the last several months... and the "bombing attempt" of a Northwest Airlines flight from Amsterdam to Detroit by a Nigerian national "suspected" of being trained in Yemen, has brought the country to centre stage of world geopolitics. Engdahl's essay... entitled "Yemen: Behind Al-Quadea Scenarios, a Geopolitical Oil Chokepoint to Eurasia"... shines a light on what really may be going on in this chapter of the "Great Game". The story is posted over at financialsense.com... and the link to this intriguing essay is here.

It's amusing that the fiscal health of the developed world now hinges on the amount of ink cartridges that are accessible to the world's two main central banks... the United States and Britain. - "Tyler Durden" - zerohedge.com - January 5, 2010

I note in Far East and early London trading that both gold and silver are trying their best to rally... even as the dollar moved a bit higher. As I watch the screen, at 4:47 a.m. Eastern time, I see that gold has just broken above $1,125... and silver is right at $18.00 the ounce. Will that last? We'll find out soon enough what JPMorgan has in store for these markets when New York opens this morning. And, for whatever technical reason, current volume figures for both metals are not being displayed on the CME's website. However, preliminary volume numbers are available for Tuesday's trading in both gold and silver. Gold shows 178,500 contracts traded... and silver traded just under 34,000 contracts.

I hope your Wednesday goes well... and I'll see you here tomorrow.