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gwr1

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Ed Steer this morning

posted on Sep 23, 2010 09:37AM

$30 Silver is Possible in the Near Future: James Turk

Sep

Dollar Decline is Imminent: James Turk. Central Banks are a 'barbarous relic'... not gold. $30 Silver Coming? "Gotta Buy Gold". Will the PM stocks break out? And much more.

¤ Yesterday In Gold And Silver

Gold traded flat through morning trading in the Far East yesterday, before turning gently higher around 2:00 p.m. Hong Kong time. That upward trend ended shortly after 9:00 a.m. in New York eight hour later, when gold topped out at $1,297.40 spot before getting sold off ten bucks going into its New York low, which was minutes after twelve noon. From that low, gold recovered somewhat before the 5:15 p.m. close.

The gold price got perilously close to the magic $1,300 spot price yesterday morning... and I'm wondering if that might have been the reason why it ran into a willing seller early in the New York trading session.

Silver's path was very similar to gold's. The only difference being that silver got sold off from its high [$21.17 spot] at 10:00 a.m. vs. 9:15 a.m. for gold. Silver's New York low was moments before lunchtime... and from there, made it almost back to its high of the day before the close of trading at 5:15 p.m.

Here's the 3-day chart of the world's reserve currency. You can see its waterfall decline shortly after 2:00 p.m. on Tuesday after the FOMC meeting... and it continued downward from that point until its low between 9:00 a.m. and 10:00 a.m. Eastern time yesterday morning... the same time as both gold and silver hit their Wednesday highs. Coincidence, you ask? Probably not.

The precious metal stocks pretty much followed the gold price... and the HUI managed to stay in positive territory for the entire day, despite gold's ten dollar sell-off and the general equity markets finishing in the red. The HUI closed up 0.97% on the day.

Wednesday's CME Delivery Report showed little activity. Only 30 gold and 6 silver contracts were posted for Comex delivery on Friday. JPMorgan's activity in silver showed that it was still trading in its proprietary account.

There were no reported changes in either GLD or SLV yesterday. The U.S. Mint reported selling another 3,000 ounces of gold in its gold eagle program... and the Comex-approved warehouse showed a smallish decline of 163,356 ounces of silver. The link to that action is here.

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¤ Critical Reads

The US dollar is ready to plummet

I only have a handful of stories and interviews for you today... which suits me just fine.

The first one is commentary from GoldMoney founder James Turk that's posted over at his fgmr.com website. It's about the imminent demise of the world's reserve currency. It's three paragraphs of text, plus the usual excellent graph. The headline reads "The US dollar is ready to plummet"...and the link to this worthwhile article is here.

James Turk: Central banks, not gold, are the barbaric relics

Meanwhile, gold and silver dealer Mike Maloney of GoldSilver.com interviews Turk on video for four minutes, giving him a chance to elaborate on the theme he raised at GATA's Gold Rush 21 conference in Dawson City, Yukon in Canada, in August 2005... that gold isn't the "barbarous relic" of Keynes' phrase... central banking is. The link to the video is here.

Sinai Says Fed's Sept. 21 Statement Means "Gotta Buy Gold'

The next story comes from Bloomberg and is headlined Sinai Says Fed's Sept. 21 Statement Means "Gotta Buy Gold'. Not too many shade of gray in this story, which isn't very long... and the link is here.

PM Funds Index

Before I run my last gold and silver-related story of the day, here's an update of Nick Laird's PM Fund Index chart as of the close of trading yesterday. We are now back at the old all-time high set back in 2008.

Click here to enlarge.

GoldMoney founder and GATA consultant James Turk

Today's last piece is another interview with GoldMoney founder and GATA consultant James Turk. This 7-minute interview can be found posted over at the King World News website. James talks about silver reaching $30 within the next few weeks... and warns precious metals investors not to trade themselves out of their positions. Instead Turk urges steady accumulation for the long term as a form of savings in sound money. The link to this must listen interview is here.

Global food risk from China-Russia pincer

Today's last story was sent to me by reader Roy Stephens. It's an Ambrose Evans-Pritchard offering that was posted late last night over at The Telegraph. World food supplies are caught in a pincer as China becomes a net importer of corn for the first time in modern history and Russia's drought inflicts even more damage than expected, raising the risk of a global grain shock in 2011. The headline reads "Global food risk from China-Russia pincer"... and it's a must read as well... and the link is here.

¤ The Funnies

¤ The Wrap

There are no markets anymore... only interventions. - Chris Powell, GATA

Yesterday was a pretty quiet day price wise... but the volume was quite heavy. I mentioned that very thing in my column yesterday, as volume in Far East and London trading was robust early on Wednesday, even though gold and silver prices weren't doing much. Ted Butler speculated that maybe not all of Tuesday's volume that occurred on the FOMC news was reported in a timely manner... and was reported in Wednesday's volume instead. If it was, then that data won't be in tomorrow's Commitment of Traders report.

In my daily conversation with Ted yesterday, he mentioned that the bullion banks were suffering some pretty horrendous paper losses now that gold and silver were at record high prices. Rather than try to remember what he said to me verbatim... I'll just steal the appropriate paragraph from his note to subscribers yesterday.... "Over the past month, the largest 8 short traders on the COMEX, at $21 silver and $1290 gold, are out around $3 billion ($1 billion in silver and $2 billion in gold). I am unclear of the reporting and earnings implications, given the complexities of financial accounting. But given the realities of the marketplace and the clearing structure, this $3 billion adverse move for the 8 large traders had to have resulted in $3 billion in margin calls. This is about the largest amount the 8 biggest traders have been out in my memory. It makes the current circumstance critical. These are significant amounts, averaging $375 million per trader on a combined gold/silver position." Ted's website is linked here.

Based on the above, Ted and I discussed the only two possible outcomes from the current situation. Either the bullion banks get over run [hooray!]... or they rig a sell-off and attempt to cover as many shorts as they can. We've been here before, dear reader... so we'll just have to wait it out.

Well, we're down to 231 silver contracts still open in September. The 484 contracts that were posted for delivery on Monday were delivered as scheduled on Wednesday... and subtracted from the outstanding September open interest in the CME's Preliminary Wednesday report posted at their website in the wee hours of this morning. So, unless something extraordinary happens, there should be no delivery problems for silver in September.

Next week is a busy week on the Comex. There's options expiry in the OTC market in both gold and silver on Monday... and options expiry on the Comex on Tuesday... last notice day for delivery into the September silver contract on Wednesday... and first day notice for delivery in the October gold contract on Thursday the 30th.

As I put this report to bed for another day, I see that not much happened in Far East trading... and nothing is happening now that London is open, either. Gold volume is tiny... and silver volume is decent.

It beats me what's going to happen when New York starts trading today. I'm optimistic... but still have Ted's commentary from a few paragraphs ago ringing in my ears... so nothing will surprise me in the very short term. Long term, I'm wildly bullish. James Turk is right... you don't want to be caught out of position in this market... and I won't be. How about you?

There's still time to get on board. As I said in this column on Saturday, as Nick Laird's chart indicates above, the metals shares are poised to blast off to new highs in the very near future... and I would deem it prudent to be as fully invested as you wish to be... starting right now. I'm still urging you 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 costs nothing to check them out... and the subscriptions come complete with CR's usual money-back guarantee.