Silver Velocity -- the Coming Bullet

As you can see from the chart below, gold didn't do anything in Far East trading... with the low of the day [around $1,127 spot] coming at 11:00 a.m. in London yesterday morning. From there, gold rallied a couple of bucks going into the Comex open. At that point, the rally developed more legs... and hit its high of the day [$1,238.70 spot] a few minutes before 10:30 a.m. in New York.

That was it for the day as gold began to sell off... and then a not-for-profit seller dropped the price $7 in minutes starting around 11:30 a.m. Eastern... and ending a few minutes before noon. The gold price recovered a few bucks... and then basically traded sideways for the rest of the day. As you know, dear reader, this is a very common daily chart pattern.

Starting from it's London low, the silver chart looks almost identical to the gold chart. The only really difference being that when the not-for-profit seller showed up at 11:00 a.m. in the New York session, the price got taken down to its absolute low of the day, which was $16.24 spot... and, like gold, the selling ended a few minutes before lunchtime in New York. The silver price recovered a bit, but still finished down on the day. Silver's high of the day [$18.61 spot] appeared to occur at the London p.m. gold fix at 10:00 a.m. Eastern time.

Here's the U.S. dollar chart for the last three days. The price is all over the map, with wild swings on Wednesday and Thursday. It's hard to divine from this data if the dollar will rise or fall from this point.

The precious metal shares pretty much followed the gold price... with the HUI's absolute low coming a few minutes before noon in New York. But even though the gold price recovered back into positive territory, the weight of selling in the rest of the equity markets proved too much for the HUI this time... and it finished down, but only 0.56%... which was a lot better performance than the general equity markets.

The CME's Daily Delivery report showed that 175 gold contracts were posted for delivery on Monday. The big issuer was Prudential... and the big stopper was HSBC. The link to the action is here. The GLD had another report yesterday. This time they received 127,075 ounces of gold. In the last three days, GLD has reported receiving 410,556 ounces of gold. The SLV ETF... zero!

The U.S. Mint had a very tiny sales report yesterday. The sold an additional 1,000 ounces of gold into their gold eagle program... a 1,000 24-K gold buffaloes... and 163,500 silver eagles. It's been a very slow month for bullion sales from the U.S. Mint... but its summer... and not much is happening at the moment.

Not much happened over at the Comex-approved depositories yesterday, either... with 37,482 ounces of silver reported withdrawn from their collective inventories. The link to the action... such as it was... is here.

Today is the 20th of the month... and its on this day every month that The Central Bank of the Russian Federation updates its website. Today it will be with its July data. This includes an update on how much gold they purchased and placed in their reserves for that month. I await that number with great interest... and I'll report on that in my Saturday column.

I have a lot of stuff for you today, dear reader... and some of the items are pretty long. I'm going to post it all now, because I have no idea how many stories I'll have for Saturday.

My first story is an Ambrose Evans-Pritchard offering headlined "Western profits wilt on China's surging wages". Rising wage and production costs in China are eating into the profits of Western companies and may soon set off an exodus of multinational companies to cheaper locations. Well, dear reader, the world is just about out of 'cheaper locations' to produce manufactured goods for western 'civilization'. I thank Roy Stephens for providing the story... and the link is here.

Here's a story that's certainly a harbinger of things to come. It's a marketwatch.com item that's headlined "McDonald's yuan-bond sale to drive growth in China". McDonald's Corp. took its first steps to fuel growth in China using bonds denominated in that country's currency Thursday. They raised 200 million yuan, or about $29.5 million, through the sale of 3-year bonds to institutional investors in Hong Kong -- becoming the first nonfinancial multinational company to issue such bonds." I thank reader 'David from California' for sharing it... and the link is here.

The next piece is from Washington state reader S.A. I'd received this story from several other sources on Wednesday and just let is slide, but finally decided to run it today. It's a piece that appeared over at zerohedge.com headlined "Goldman Tells Its "Special" Clients To Sell Gold Even As It Raises Its Price Target On The Shiny Metal". The "great vampire squid" will screw anyone if there's a dollar to be made by doing so... and this might be one of those times. But, on the other hand, it could just be a case of the right hand at GS not knowing what the left hand is doing... so keep that in mind as you read this short piece. However, having said all that, I'm no fan of Goldman. If they disappeared from the face of the earth tomorrow, the world would be a better place. The link is here.

The rest of today's offerings are all gold and silver related in one way or another. The first is from reader Charles Savoie, who sent me this Reuters story filed from Buenos Aires. It appears to be another road block for Barrick Gold, as it tries to get its Pascua Lama project on the Argentina/Chile border underway. The headline reads "Analysis: Argentine glacier protection bill could shut mines". It's less than a 5-minute read... and the link is here.

The next story is from CNBC Europe... and was sent to me by Russian reader Alex Lvov. The headline reads "Western Economies Face Hyperinflation: Gold Bull". The decline of the Western economic model will bring about hyperinflation and decades of painful readjustment, Egon von Greyerz, founder of gold investment intermediary Goldswitzerland.com told CNBC Thursday. It's a short read... and it's well worth it. The interview itself is imbedded in the article, but I could not get it to play. Maybe it's my web browser... so I hope you have better luck, dear reader. The link to 'all of the above' is here.

GATA's Chris Powell posted a piece over at gata.org shortly after midnight that he headlined "Why can't those Nepalese women settle for a nice ETF?" The story itself appeared in this morning's edition of The Himalayan Times... and was filed from Kathmandu. Their headline reads "Gold's Glitter Remains Despite Spiralling Price". It's an interesting story from a part of the world we never hear from... and for that reason alone I consider it worth the read... and the link is here.

The next gold-related story was posted over at marketwatch.com yesterday. It's a Peter Brimelow offering headlined "Gold Gearing Up? Gold bugs see a renewed rise". Peter mentions the strange happenings in the gold and silver market on Wednesday that I spoke of in this column yesterday. In my opinion, it's well worth the read... and the link is here.

The next item is a GATA release headlined "GATA distributes international press release on Douglas study". GATA board member Adrian Douglas issued a report a couple of days ago that was headlined "The Failure of the Second London Gold Pool". I will be the first to admit, dear reader, that I don't understand everything that Adrian talks about... as some of it is way over my head. So please direct any questions you have to Adrian... not to me. His website and contact information is in the report. It's a long read... and you'll have to spend some serious time on it... but there are lots of graphs that should help you. The link to Adrian's report... and the international press release... is here. You may want to save this for weekend reading.

Before I post the last story of the day... I want to drop in this graph that Nick Laird from sharelynx.com sent me yesterday. It's the Dow/Silver ratio that goes back about 210 years. It's a Log Format chart that should be educational... and it dove-tails nicely with my last offering of the day. I pointed out to Nick that the Dow didn't exist for most of the first half of this chart... but Nick told me that he used the stock index that was in existence before that... whatever that was.

My last offering today was contained in another GATA release... and I'm just going to steal Chris Powell's introduction and post the link... "Hinde Capital in London, whose CEO, Ben Davies, lately has thrown himself into the campaign to expose manipulation of the precious metals markets, published a long report this month on the excellent prospects for silver, citing the concentrated short position of the bullion banks and the work of silver market analyst Ted Butler.

As Chris mentions, it's a long report... a 12-page pdf file to be exact... with lots of graphs. It's a must read of course, but it's something you can pick away at on the weekend if you don't have the time at the moment. The Hinde report is titled "Silver Velocity -- the Coming Bullet" and you can find posted at their Internet site hindecapital.com... and the link is here.

It's obvious that the bullion banks are keeping silver on a very short leash... and they're only letting gold climb a few dollars a day... "slicing the salami to the upside" as Ted Butler mentioned to me yesterday. More tech funds buy every day... and that's the reason why the price is moving higher... because black boxes that these 'brain dead' tech funds use are telling them that's what they should be doing... and that's what they do. I'm of the opinion at times [most of the time, actually] that some of these tech funds are in cahoots with the bullion banks, because no trading firm can be that stupid for that long. Other people I know feel the same way... but Ted Butler isn't one of them.

As I said in the previous paragraph, gold is grinding slowly higher... and steadily heading towards overbought territory. If these incremental price increases continue for the next couple of days, gold will be overbought and ripe for an unhappy surprise from JPMorgan et al. I certainly wouldn't put anything past them... and neither should you, dear reader. Here's the 6-month gold graph that illustrates my point.

Silver's graph for the same period shows how carefully the price has been controlled between the 50-day and the 200-day moving averages to prevent the tech funds from returning to the market in large numbers. They returned on Monday and Tuesday... and then promptly got blown out of the water on Wednesday. That's happened four times since the end of June. It almost looks like we're in some sort of holding pattern... but for what? Maybe it's just my [and Ted's] imagination.

Today we get the new Commitment of Traders report for positions held at the end of trading on Tuesday. Let's hope 'da boyz' have reported everything that they should have... and it's too bad that Wednesday's trading data won't be in there. I'd give a few days pay just to know what happened on Wednesday as far as changes in open interest went. Anyway, the COT report, when it becomes available at 3:30 p.m. sharp this afternoon, is linked here.

Gold and silver didn't do a thing in Far East trading earlier today... and volume is extremely light. The world's reserve currency, which hadn't done much of anything since lunchtime in New York yesterday, blasted off to the upside starting at precisely 4:00 a.m. Eastern time. I wonder what that's all about? Whatever the reason, it's having zero impact on gold and silver prices in London as of 5:22 a.m. Eastern time.

Since today is Friday, I'm not sure what to expect when the Comex opens this morning... but I'm ready for just about anything.

We've got eight summer trading days left before the northern hemisphere goes back to work. If you're still sitting on the fence regarding investing in the precious metals, there's still time to put your investment dollars to work. The first place I'd start would be with a subscription to either Casey's Gold and Resource Report... or Casey Research's flagship publication... the International Speculator. Please click on the links, as it doesn't cost a dime to check them out... and the subscriptions come complete with our usual money-back guarantee.

Enjoy your weekend, dear reader... and I'll see you here on Saturday.