Treasury Bills - The New Opium: Jim Rickards

The precious metals market were open on Monday... but not in North America. From the gold and silver charts from Monday [the red lines] below, you can see that nothing much happens when the American bullion banks aren't trading... either in New York, or on the Globex trading system in the overseas markets.

Tuesday trading was a bit more exciting... and even though gold didn't do much of anything in Far East trading... selling pressure showed up around 9:30 a.m. in London. That pressure reached a selling climax just before lunch, when gold hit its low of the day [slightly under $1,244 spot]. From that point, it was onward and every upward... with gold gaining about $17 by 8:50 a.m. Eastern time in New York. That was pretty much its high of the day [$1,260.90 spot] before trading sideways to down for the rest of the Tuesday session.

Silver was under selling pressure right from the open in Far East trading on Tuesday morning... and managed to recover a bit of that by 4:00 p.m. Hong time, which was 8:00 a.m. in London. But, starting at that time, silver came under very heavy selling pressure with a double bottom being set [around $19.50 spot] between 11:00 a.m. and 12:00 noon in London. From that double bottom, silver followed gold's path almost to the letter... and to the minute... with it's New York high of the day [$20.04 spot] at 8:50 a.m. But, shortly after that high, the selling pressure showed up anew... and silver closed the day below its Monday and Friday closes.

The world's reserve currency began rising almost the moment that trading began in the Far East on Tuesday morning... and by the end of the trading day in New York, was up about 85 basis points. A cursory glance at the precious metals charts above indicates that what happened to gold and silver yesterday didn't have much to do with the almighty U.S. dollar.

The HUI was in positive territory the whole day, but gave up about a percent of its gains starting around 2:15 p.m. Eastern time as the general equity markets headed south. The HUI finished up 0.72% on the day.

Monday was a pretty quiet delivery day. The CME's Delivery Report showed that one gold and 90 silver contracts were posted for delivery on Thursday. Although nothing to write home about, JPMorgan issued 85 silver contracts for delivery in its 'client' account... and stopped 63 contracts in its 'house' account. As you know dear reader, both JPM and GS have stated that they're going to give up their proprietary trading activities in commodities... so we'll know when they 'cease and desist' from their trading activities in this report. The link to yesterday's delivery activity is here.

Another interesting thing about silver at the moment is that 924 contracts have been delivery so far in September... and the latest report from the CME shows that 1,764 contracts are still outstanding to be delivered. One has to wonder what the issuers are waiting for. Silver to deliver, perhaps?

There was no news from either the GLD or SLV ETF yesterday... and there was also no activity reported from either the U.S. Mint on Tuesday... or the Comex-approved warehouses on Friday.

But, without fail, the good folks over at the Zürcher Kantonalbank had a report on Monday. For the week that was, their gold ETF was up 78,140 troy ounces... and their silver ETF was up 438,472 ounces. I thank both Carl Loeb and Nick Laird for these numbers.

I have a lot of stories today... and the first one I'll start with is one that was sent to me by reader 'David from California' on Saturday. Shoes and eggs were pelted at former British prime minister Tony Blair as he arrived at a Dublin book store to promote his controversial memoir, A Journey. One protester managed to confront Mr. Blair and attempted to make a citizen's arrest over alleged war crimes. It's not an overly long read... and there's a video clip as well. The story, which is posted over at the belfasttelegraph.co.uk web site, is headlined "Tony Blair pelted with eggs and shoes at Dublin book signing"...and the link is here.

Here's a story from last Friday's edition of The Miami Herald. The headline reads "Venezuela introduces Cuba-like food card"... "I have called it a Good Life Card so far,'' Chávez said in a brief statement made on the government television channel. ``It's a card for you to purchase what you are going to take and they keep deducting. It's to buy what you need, not to promote communism, but to buy just what you need.'' And we believe him... right, dear reader? I thank Scott Pluschau for sending me the story... and the link is here.

From the Monday edition of The Guardian comes this story headlined "Ireland's finance minister tries to calm fears over Anglo Irish Bank". Brian Lenihan dismisses talk that €25bn cost of the toxic bank could bankrupt Ireland and says that there's no 'magic resurrection' for the economy. In my opinion, the people should just withdraw their money and buy silver and gold. I thank Swiss reader B.G. for sharing this story with us... and the link is here.

Australian reader Wesley Legrand sent me the following story from the German web site spiegel.de. It's a 2-page essay that bears the headline 'Peak Oil' and the German Government: Military Study Warns of a Potentially Drastic Oil Crisis. The report states that "there is "some probability that peak oil will occur around the year 2010 and that the impact on security is expected to be felt 15 to 30 years later." Well, dear reader, for all intents and purposes peak oil occurred in 2005... and all governments are going to have to deal with that issue on a much shorter time-line than that. The link to the story is here.

The next three stories are all courtesy of reader Roy Stephens. The first is from Martin Walker, UPI Editor Emeritus. The headline reads "Walker's World: The food crisis". For the first time in quite a while, this is a story that deals with a wheat rust called Ug99. I've run a couple of times on this... all of them from last year... and this is the first time I've seen it discussed this year. This is a must read... and the link is here.

Roy's second offering is a piece by Ambrose Evans-Pritchard from yesterday's edition of The Telegraph in London. The headline reads "China’s young officers and the 1930s syndrome"... “China’s military spending is growing so fast that it has overtaken strategy,” said Professor Huang Jing from the Lee Kwan Yew School of Public Policy in Singapore. “The young officers are taking control of strategy and it is like young officers in Japan in the 1930s. They are thinking what they can do, not what they should do. This is very dangerous." This should be on your must read list as well, dear reader... and the link is here.

The third story from reader Roy Stephens is another item from The Telegraph. The headline reads "Iran on brink of nuclear weapon, warns watchdog"... Iran has passed a crucial nuclear threshold, weapons inspectors have warned, and could now go on to arm an atomic missile with relative ease. The link to this story is here.

I have quite a few gold-related stories today... and the first one is a GATA release. Imbedded in it is Part 2 of Eric King's interview with Jim Rickards of Omnis Inc. I'll let Chris Powell do the honours with the preamble... and the GATA story is headlined "Jim Rickards puts on GATA's tin-foil hat at King World News"... and the link is here.

In case you missed it in the last story, Jim Rickards comments regarding China and gold can be found posted in a blog over at King World News. The headline of the blog reads "Jim Rickards - Treasury Bills: The New Opium" [Britain used to be the biggest drug trafficker in the world back in the first half of the 19th century. From what I've heard, that roll has now been taken over almost completely by the CIA. That's one of the reasons the U.S. is in Afghanistan. - Ed] The link to the blog is here... and is certainly worth your time.

The next two stories are also GATA releases. I'm using them because Chris Powell is saving me a lot of time by writing his most excellent preambles. The first one is headlined "Jim Sinclair: Strapping in for the big move". For fearlessness, straightforwardness, and commitment, nobody in the gold world tops Jim Sinclair, the veteran trader and mining executive who runs JSMineSet.com as an financial education forum and, sometimes, as a handholding service for gold bugs at risk of losing their nerve. It's not a long read... but it's a must read... and the link is here.

Lastly today is this next GATA release from yesterday. Nick Laird over at sharelynx.com sent it to me late on Sunday night... and it ended up as a GATA release the following day. Egon von Greyerz, founder and managing partner of Matterhorn Asset Management in Zurich, updates the case for the precious metals in a new essay headlined "Gold Entering a Virtuous Circle". GATA's secretary treasurer Chris Powell once again does the honours... and the link to this rather longish must read article, is here.

What is up, and up dramatically, since the recession began 33 months ago are government transfers to households (in the form of unemployment benefits, food stamps, welfare, social security) — they have ballooned 31% since the end of 2007. A record 30 cents of every dollar in personal income is now derived from some form of government support — now tell me that is not a depression-era statistic. The modern day soup line is a cheque in the mail. Maybe now we can get a better appreciation of why it is that the NBER has yet to sound the all-clear siren that the recession actually ever officially ended despite four quarters of positive GDP growth — perhaps not only because this may have merely been an unsustainable policy-induced spasm, but also because, in per capita terms, real final sales continued to contract through this alleged statistical recovery. - David Rosenberg, Chief Economist & Strategist, Gluskin Sheff & Associates [Toronto]

Well, we keep getting closer and closer to the old highs in both gold and silver. But it's coming at a cost. The bullion banks are going massively short against all comers... and we're in overbought territory in both metals. There's nothing to say that we can't continue going higher from here, because there's certainly lots of precedent for it if you take a look at the 3-year gold chart below.

But, there's also lots of precedent for an ugly price drop [courtesy of JPMorgan et al] to relieve this overbought condition that the bullion banks have sucked all these tech longs into. Ted Butler mentioned $2 in silver and $50 in gold. So when [not if] we do get hit during this leg up in the bull market... don't be surprised... and don't get panicked out of your positions.

Like you, dear reader, I want to be wildly optimistic every second of the day... but at times I'm choked with caution. This is one of those times. I love watching my 'all in' position grow in value by leaps and bounds... but I'm always on the lookout for 'in your ear'. And the price spikes in both gold and silver that we had at precisely 3:00 a.m. Eastern time this morning did nothing to calm my nerves... as I've seen that sort of signpost before at [interim?] market tops.

The big price spikes we had in both gold and silver yesterday during early Comex trading occurred on the cut-off day for this Friday's Commitment of Traders report. Even though this data should be in this COT [and Bank Participation Report], it's pretty much a given that the bullion banks will withhold this data... as they've always done in the past. You're dealing with white-collar criminals here, dear reader... and they have white-collar criminals at the CFTC backing them up at the moment. Ted mentioned to me yesterday that there was a strong possibility that JPMorgan is adding to their short positions on this rally. This Friday's COT and BPR will tell us a lot.

Volume for Monday and Tuesday's trading [combined] was not overly heavy in gold, but pretty decent in silver. The final open interest figures, when they're published later this morning, will be interesting... but if the preliminary numbers are any indication... they will be pretty ugly.

So far in Far East and early London trading today, volume is light in both metals. I'll be interested in seeing what happens at the London a.m. gold fix, which is 5:30 a.m. Eastern time. But, regardless of that, all the action that really matters will occur when New York starts trading in a bit.

Today will be a particularly interesting day, so be ready for anything.

See you on Thursday.