CME Increases Margins on Gold, Silver and Palladium

Well, gold didn't do much in either Far East or London trading on Thursday. There was a pop at the Comex open in New York that got firmly sold down to gold's low of the day... which occurred at the London p.m. gold fix at 3:00 in the afternoon their time... 10:00 a.m. in New York. The low price at the London fix was reported as $1,073.10 spot. From there, a bit of a rally commenced... which turned into a big rally the moment that the London gold market closed for the day. But, as per usual, the gold price was only allowed to rise about 2% from its previous day's close, before the chart took it's usual turn to the right... just like it does every day. Check the gold chart below if you doubt me.

Silver's price activity was, as usual, more 'volatile'. After doing nothing during Far East trading, silver began to get sold off the moment that the London a.m. gold fix was in at 5:30 a.m. New York time... 10:30 a.m. in London. And, except for the price pop at the Comex open, silver got sold off to its low of the day... which occurred sometime between 9:00 a.m. Eastern time and the London close at 11:00 a.m.... 4:00 p.m. in London. Then silver joined gold in a big rally that tacked on about 40 cents in an hour. And from there, like gold, silver more or less traded sideways into the New York close at 5:15 p.m. Silver's low and high price for Thursday both occurred during New York trading... and were reported as $15.16 and $15.74 respectively.

Well, as far as the dollar was concerned... it began to rise shortly after midnight last night... and really took off at 8:00 a.m. Eastern time... just minutes before the vertical spikes in both gold and silver at the Comex open. As you can see from the above graphs, dear reader, these spikes were capped immediately... and from there, both metals 'fell' to their respective lows of the day... as the dollar continued to head skywards. Then, miraculously, at precisely 11:00 a.m.... the close of gold trading in London... the dollar reversed to the downside and both metals launched upwards!

So, between shortly after midnight on Thursday morning, right up until gold's low at the London p.m. gold fix at 10:00 a.m. in New York, the dollar gained a very respectable 59 basis points. While that big dollar rally was under way, gold fell... wait for it... three whole U.S. dollars! Then gold began to head higher even though the U.S. dollar continue to climb another 15 basis points to its zenith. This is the second day in a row where the gold price would have been much higher if the bullion banks hadn't intervened early in New York trading. Gold is now being bought regardless of what the dollar is doing during U.S. trading hours... and any drop in the dollar just exacerbates the ensuing price rise. It will be interesting to see if this trend continues.

The HUI was in positive territory all day on Thursday... and climbed steadily until shortly after the big rallies in both gold and silver were in... and then the precious metals equities basically traded sideways for the rest of the session. The HUI closed near its high of the day... up a very respectable 4.25%... and finally closing above 400 for the first time in about three weeks.

After gold's swan dive in price on Wednesday, I was kind of hoping for a better showing in open interest than was reported. Gold o.i. fell a smallish 688 contracts... and volume wasn't particularly heavy at 177,940 contracts. Silver's o.i. drop was even smaller... down a whole 22 contracts on volume of 51,892 contracts. Maybe the bullion banks also went long to hide their short covering. Whatever it was, it will be in the Commitment of Traders report on February 19th.

Talking about the COT... it's due out at 3:30 p.m. Eastern time. Ted Butler and I discussed the possibility it might be delayed because of weather factors on the east coast this week... but we won't know if that's the case until that precise time when we'll find out if the numbers have been updated... or not. As I mentioned yesterday, I'm expecting huge improvements in the bullion banks' net short position... especially in gold. For those of you who can't wait until my Saturday report, the link to the COT web page is here

Thursday's CME Delivery Report showed that 190 gold and 83 silver contracts are due for delivery on Tuesday. Silver deliveries continue to surprise... as another 259 contracts were just added to open interest yesterday for delivery before the end of February. That brings the total silver contracts left for February delivery up to an even 300... and there's still eight delivery days left in February before the real serious silver deliveries start in March. These developments are worth following... so watch this space for updates! The link to today's list of issuers and stoppers is here.

There were no reported changes in either GLD or SLV once again... and that goes the same for the U.S. Mint. The Comex-approved depositories reported a smallish 50,295 ounces of silver were withdrawn on Wednesday.

Late last night I received this precious metals-related story from my Russian friend, Alex Lvov. This piece is from zerohedge.com and bears the headline "CME Increases Gold, Silver, Palladium Margins". The increase are all in the 25% range... one a bit more, another a bit less. This is a strange time in the price cycle to be increasing margin requirements. Normally they do this when prices are getting frothy. What do they know about what's coming that we don't? Just asking. The link is here.

Today's first news story is from yesterday's edition of the New York Post. It appears that the U.S. Treasury is hiding 739 pages of minutes of the secret meetings of the Plunge Protection Team from public view... and columnist John Crudele wants to know why. This piece is well worth your time... and bears the headline "Plot thickens in the battle of 'The Plunge'"... and the link is here.

This next story involves the "giant vampire squid" once again. This one's from the pages of today's edition of the Financial Times in London. "Goldman Sachs and other banks should give up their bank status if they want to avoid the ban on proprietary trading proposed by the White House, Paul Volcker, head of President Barack Obama’s Economic Recovery Advisory Board, said." The headline reads "'Volcker rule' gives Goldman Stark Choice". I thank Florida reader Charles Dubelier for sending this must read article... and the link is here.

The next three stories are all about Greece... again... and the first story is a Bloomberg piece courtesy of Australian reader Wesley Legrand. The headline reads "PIGS Exposure Explains 'Shotgun Greek Wedding': Chart of Day". The story is only a handful of paragraphs... but be sure to click on the "Graphic" tab to view the "Chart of the Day"... as it's a beauty! It shows just how deep the major European powers are already into the Greek debt problem. The link is here.

The next story on Greece [courtesy of the King Report] is from Ambrose Evans-Pritchard at The Telegraph in London and is headlined "Markets fragile amid confusion over Greek rescue deal". "European officials were scrambling on Wednesday to put together a 20 billion Euro rescue plan or standby facility for Greece amid fears that misgivings in Germany may yet derail a credible deal." In this story, the total exposure to Club Med debt is said to be $853 billion for France and $707 billion for Germany... not the $520 billion and $390 billion respectively that's stated in the previous Bloomberg story [and graph]. Not that it really matters which figures are correct, dear reader, as none of it's going to be repaid anyway. It will either be defaulted on, or hyper-inflated away. The link to this story is here.

The last story regarding Greece [once again courtesy of the King Report] is this piece that was in yesterday's Wall Street Journal. "Germany's longstanding commitment to fiscal rectitude and stringent anti-inflation policies are deeply ingrained in the national psyche, leaving many Germans with little sympathy for euro-zone laggards that have spent beyond their means." It's a very short read headlined "Aid Is Tough Sell in Germany", and I would give it your undivided attention... and the link is here.

And lastly today, comes this very long read entitled "Sovereign Alchemy Will Fail" by Egon von Greyerz of Matterhorn Asset Management in Zurich. He argues that governments are about to discover that they really cannot turn paper into gold. He also takes note of the gold price suppression scheme... and you can find his essay at the Matterhorn Asset Management Internet site... and the link is here.

I place the economy among the first and most important virtues... and public debt as the great danger to be feared. To preserve your independence, we must not let our leaders load us with perpetual debt. We must make our choice between economy and liberty... or profusion and servitude. ~ Thomas Jefferson

There's not much to add to what I've been saying all week. The European Union is like a deer caught in the headlights at the moment. They know exactly what we know, the moment they attempt to bail out Greece, the alarm bells for the Euro will go off... so right now they're just talking a lot... and hoping the Greek government will get the message and do the right thing. But there's already demonstrations in the streets of Athens... so this situation is not going to go away anytime soon. The crux of the matter is that it's a 'lose-lose' situation no matter what happens. Sooner or later, all of Europe is going to go down the financial, economic and monetary drain... with the rest of the Western world not far behind.

Ted Butler came out with another commentary on Thursday stating that he thought that the bottom was either in... or very close to it... and that he [like me] was "all in" himself.

As I've said before, it's at times like this that you should place your bets. I urge you to give serious consideration to spending $39 and purchasing a one-year subscription to Casey's Gold & Resource Report... as I feel that the next upside move in gold and silver... especially silver... should be fairly major. How high we go depends 100% on whether or not the bullion banks [led by JPMorgan] go short on the next rally. If they don't, it will get really interesting, very quickly.

I note in Far East trading that both metals had upwards spikes in prices right at the open... but were sold off immediately. A small dollar rally began moments before 3:00 p.m. in Hong Kong trading [2:00 a.m. New York time]... and both metals are under a bit of pressure going into the London open. Since today is the last trading day of the week, I wouldn't be at all surprised if the bullion banks didn't use that reason to engineer a sell-off of some sort. But I've been surprised all week at the price action of both gold and silver in the face of a rising U.S. dollar... so I could be wrong about Friday action as well.

Gold trading volume in the April contract is very light at 17,659 lots... and silver has only traded 2,893 contracts for March as of 4:17 a.m. Eastern time. The CME has posted their preliminary volume figures for Thursday's trading. It shows that 202,363 gold and 50,763 silver contracts changed hands yesterday.

That's all for today. I hope you have wonderful weekend... and I'll see you here tomorrow morning.