European Banks Use Gold Reserves to Raise Cash

The gold price was pretty choppy in Far East trading. It's impossible to read anything into the this sort of price action as volume was very low. It was interesting to see that gold's high price of the day [around $1,213 spot] came shortly before 10:00 a.m. in London... with the real selling beginning during the London lunch hour. Then at 9:30 a.m. in New York [the moment that equity trading began for the day] the dealers pulled their bids and gold dropped $15 in just a few minutes going into the London p.m. gold fix at 10:00 a.m. Eastern time. Once the 'fix was in'... gold didn't do much after that... with it's low of the day [$1,188.40 spot] coming in New York electronic trading around 3:30 p.m. Volume was pretty heavy.

Gold made a new low price for this down-move yesterday... and, without doubt, that caused more tech fund long liquidation. I'll have more on that further down.

Silver's path was very similar to gold's... right down to the pulling of the bids at precisely 9:30 a.m. in New York... the moment that the equity markets opened. Silver's low of the day [$17.60 spot] came at the London p.m. gold fix. From that low, silver recovered a bit, but really sailed minutes after 11:30 a.m. Eastern time. What happened was exactly opposite to the 'no bid' situation that occurred at 9:30 a.m... just two short hours before that. This time there was 'no ask'... as there were few contracts offered for sale and the buyer had to take what few contracts were available... and at the prices offered. It's impossible to tell whether it was short covering or a new buyer. Silver made it to $18.05 spot... its high of the day... before a serious seller showed up and drove the price back down from whence it had come. Silver's volume, at least compared to gold's, was not overly heavy yesterday.

For the second time during this down-move in silver, the price came within an eyelash of its 200-day moving average, which currently sits at $18.58. Will JPMorgan et al arrange for it to happen? Ted Butler and I wondered about that yesterday. We'll find out soon enough, I would think... but if I were them, that's exactly what I'd be doing.

The dollar had another interesting day on Tuesday. Just as it did on July 1st, the world's reserve currency swooned as gold got hammered. From its high at 9:00 p.m. on Monday night, to its low around noon in New York yesterday, the dollar 'lost' 95 basis points... but had made about half of that back by midnight Eastern time last night. Obviously there was absolutely no co-relation between the dollar and gold yesterday.

Although the HUI was down 1.34% on Tuesday, it's hard to say whether it was a result of the gold price action or the general equity markets. In reality, it was probably a combination of both. But considering how badly gold got hammered, I was not overly alarmed by the precious metals equity action yesterday.

Over a month ago I said that I was not going to discuss daily changes in open interest, as they just weren't an accurate indication of what was really going on in the gold and silver markets... as the U.S. bullion banks were masters at hiding their tracks. However, the open interest changes for last Thursday's pounding in both gold and silver were sensational, so I will mention them here.

Gold open interest fell almost 16,000 contracts... and silver's open interest fell almost 6,000 contracts, as the tech funds pitched their long positions and the bullion banks covered their short positions. Ted Butler said that there was probably more tech fund liquidation than that, as the bullion banks certainly increased their long positions in both metals as well... which has the same effect as covering a short position. Yesterday's trading action will also be included in this Friday's Commitment of Traders report... as Tuesday [at the close of trading] was the cut-off for that report.

The CME's Daily Delivery Report showed that zero gold and 186 silver contracts were posted for delivery on Thursday. JPMorgan was the big issuer as well as the big stopper. The action is linked here. The GLD ETF reported a smallish decline of 78,237 ounces... and, as per usual, the SLV didn't show any changes. The good folks over at Switzerland's Zürcher Kantonalbank reported adding 49,300 ounces of gold, plus another 481,651 ounces of silver to their ETFs last week. Thanks, as usual, for those numbers, Carl.

The U.S. Mint had another sales report yesterday. They reported selling another 6,500 one-ounce gold eagles... 1,500 24-K gold buffaloes... and another 488,500 silver eagles. Month-to-date the U.S Mint's sales are as follows: 26,500 one-ounce gold eagles... 2,500 24-K gold buffaloes... and 875,500 silver eagles. Just as a point of interest... year-to-date sales of silver eagles now sit at 19,044,000. Do you have your share, dear reader? Just asking.

The Comex-approved depositories had an interesting report for Friday. There were two withdrawals... one from Scotia Mocatta and the other from HSBC USA... totaling 700,497 ounces. The link to all that action is here.

Nick Laird over at sharelynx.com from the 'land down under' slipped another graph into my in-box yesterday evening. This one is titled "Comex Gold Futures - 1980 Top". It shows that gold went from $400 to $873 in 36 trading days.

Today's first gold story is courtesy of Russian reader Alex Lvov. It's a Bloomberg piece bearing the headline "China Gold Output May Gain by 5% This Year, National Gold Says". Without doubt, not an ounce of that [or any] increase will ever make it out China. This three paragraph story confirms that... and will warm the cockles of gold 'bugs' hearts everywhere... and the link is here.

I have one other gold story, which I'm saving until the end... but stories posted before that are also worth reading as well... and I ask you to kindly resist the urge to scroll down and read it now.

Yesterday I mentioned a story about a secret meeting of German banks that was held last week. Well, Ambrose Evans-Pritchard, has taken the bit between his teeth on this one... and posted this story in Monday's edition of The Telegraph. It bears the headline "Europe’s ‘toothless’ bank tests making matters worse". RBS [Royal Bank of Scotland] and other City institutions have warned that Europe’s stress tests for banks are almost useless and may further damage confidence if they fail to cover the risk of large losses on sovereign defaults by Greece and other Club Med states. I thank reader Roy Stephens for sending it along... and the link to the story... which is well worth reading, is here.

Two more stories from Ambrose today. The first is courtesy of reader Brad Robertson... and bears the July 4th headline "With the US trapped in depression, this really is starting to feel like 1932". It's very unhappy reading... but what isn't these days, dear reader? The link is here.

And lastly from Ambrose is this piece about China's real estate market. There has been much talk of the China's economy in general... and its overheated real estate market in particular... are about to come crashing to earth. That's certainly been the case for their equity markets... and now it appears that they're hyper-inflated real estate bubble is about to burst. This reminds me of Japan over 20 years ago. As a 27-year veteran of residential real estate sales, I've lived through a couple of them myself. As Mark Twain is often quoted as saying... "History doesn't repeat, but it rhymes". The headline reads "China's property market braces for 30% drop"... and the link is here.

This next story, posted over at marketwatch.com, was sent to me by two different people on opposite sides of the USA yesterday... both within 5 minutes of each other... Vern from Ventura... and Scott Pluschau on the very east coast. It's a 2-page read by Paul Farrell. In it, he pretty much sums up why the U.S... closely followed by the rest of the world... is heading for Doug Casey's "greater depression". The longish right-on-the-money headline reads "Obama's 'Presidency in Peril' or 'Failed President?': 12 deadly signs Wall Street's 'Conspiracy of Weasels' killed Obama's reforms". The article is a little on the long side as well... but it's definitely worth your time... and the link is here.

We've all heard of HFT... High Frequency Trading. I knew it was bad, but this story posted over at zerohedge.com shows just how frightening it really is. The attached liquidity analysis by Abel-Noser indicates that the US stock market has now become a concentrated pool in which just the top 99 stocks account for 50.09% of total domestic trading volume. It's a short article... and the chart speaks volumes. I thank reader U.D. for sharing it with us. It's a must read... and the link is here.

My last story is the second gold story of the day... which is now all over the Internet. I have two items on that... and both are from the gata.org website. The first is from the Financial Times in London and is headlined "European banks use gold reserves?to raise cash"... and the must read story is linked here.

The second GATA release is headlined "With BIS gold swap, central banks throw the kitchen sink at gold". Chris Powell's preamble [and associated links] are an absolute must read as well... and the link is here.

Can we truly expect that those who aim to exploit us can be trusted to educate us? - Eric Schaub - Individualist, activist, speaker, author

I note that the Dow just couldn't hold its big gains yesterday. A lot of people have been talking about the 'cross of death'... the 50-day moving average closing below the 200-day moving average. Well, it came within a couple of points of doing just that yesterday... and, from a technician's point of view, this is as negative as it gets. Here's the 2-year Dow chart. I posted something similar last week, but thought I'd revisit it considering yesterday's Dow action.

As of 5:27 a.m. Eastern time, I note that both silver and gold were under pressure earlier in today's trading in the Far East and at the London open. It will be interesting to see if we get another big decline today... and, if we do, whether all the damage will be done in New York... or will 'da boyz' start the process in London like they did on Tuesday. We'll know in a bit.

See you tomorrow.