Judge Orders Fed to Deliver Gold Records for Her Review

The gold price didn't do a lot yesterday, pricewise. It gained five bucks by 11:00 a.m. Monday morning Hong Kong time...and stayed there until 3:00 p.m...before sliding into the New York open. A sharp rally commenced...that ran into equally sharp selling...with gold's low [$1,364.60 spot] coming at the London p.m. gold fix...which was 10:00 a.m. in New York...right on the button! From there, gold climbed to its high of the day, which was $1,377.30 spot, which came at the close of trading at 5:15 p.m. Eastern time. Not much to see here, but it was gold's first positive day of the new year.

What I said about gold, pretty much applies to the silver price yesterday as well...with the high of the day posted at $29.14 spot. The low was around $28.60 spot sometime during the lunch hour in London. Looking at the New York chart on its own, it's impossible to tell when the high was...as every time that silver poked its nose over $29.10 spot, it got sold off. Silver finished up 40 cents on the day.

Here's the New York Spot Silver chart on its own...

The world's reserve currency didn't do much during the Monday trading day, anywhere in the world...although there was a 45 basis point sell-off between 8:00 a.m. and 12:30 p.m. Eastern time yesterday. From that low, the dollar traded sideways into the New York close.

Not surprisingly, because gold hit its low of the day at precisely 10:00 a.m. Eastern time, which was the London p.m. gold fix...that was also the precise bottom for the gold stocks...as the HUI chart shows below. And, like the gold price, the stocks finished in slightly positive territory [up 0.26%] as well.

The CME's Daily Delivery report is hardly worth mentioning, as only 9 gold and 3 silver contracts were posted for delivery tomorrow. Nothing to see here, folks.

For a change, the GLD ETF showed an increase yesterday. It was only 48,800 troy ounces...but an increase nonetheless. However, over at the SLV ETF it was an entirely different story, as 1,709,855 ounces of silver were reported withdrawn. That's the second withdrawal of 1.7 million ounces in as many business days. I'm not sure if it's a legitimate withdrawal because of the price action...or did someone have urgent need for the silver that they had temporarily stored there?

The U.S. Mint had a sales report as well. They sold another 5,000 ounces of gold eagles yesterday...along with a whopping 1,136,000 silver eagles! Month/year-to-date, the mint has sold 33,500 ounces of gold eagles, along with 3,357,000 silver eagles.

Over at the Comex-approved depositories on Friday, they reported that 300,296 troy ounces of silver were withdrawn...and the link to that action is here.

While I'm on the subject of silver, my bullion dealer here in Edmonton is off to his best start to a year, ever. As a matter of fact, he has all the business he can handle...and then some. Most people showing up now are all new customers that are buying silver because they've heard or read that this is the 'sure thing' for 2011. Isn't the Internet just grand? Ordinarily, I'd say that that might be an indication that a top was close...but that is definitely not the case this time. If was I was a bullion bank, or any other entity short the silver market right now, I'd be shaking in my boots at news like this.

And it gets worse, or better, depending on who you are. Scottish reader Ian McGlone sent me the following tidbit yesterday morning... "Ed, this just appeared on the bullionvault.com website. Price & liquidity warning - Silver - Our inbound silver deliveries have been delayed. We only sell bullion which is physically under our control, so we find ourselves currently unable to offer silver on our own market. Naturally, the market remains open for all our customers to quote their own prices; but as we ourselves currently have no silver to offer, there is a tendency to higher prices for both buyers and sellers. Buyers are advised to be appropriately cautious when confirming their order's limit price. We are advised silver be delivered on Tuesday 11th Jan 2001."

Not that anyone would want to throw gasoline on this fire...but here's a press release from yesterday that Ted Butler sent my way. It's from Sprott Asset Management. Eric has just made public what everyone and his dog knows about now...that it took them over ten weeks to get all the silver they ordered. "Frankly, we are concerned about the illiquidity in the physical silver market," said Eric Sprott. "We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver."

Gee, I wonder where Eric got that idea from? Anyway, the GATA headline to the press release reads "Plenty of paper silver...but metal is scarce, Sprott warns". Needless to say, it's worth the read...and the link is here.

Ted Butler and I were discussing both CEF and Sprott's physical silver funds yesterday...talking about how soon they would have offerings. I note that CEF's silver fund has a premium of only 6.8% in both U.S. and CAN$ terms...but over at Sprott, they reported 13.5% as of the close yesterday. I would suspect [at this premium] that Sprott will have an offering pretty soon.

In his commentary to clients on last week's trading activity, silver analyst Ted Butler had this to say on Saturday... "There were no obvious physical market factors to account for this [past] week's price decline, particularly in silver. All signs pointed to an old-fashioned Comex-orchestrated affair, complete with late-night spoofing [phony offers] and actual selling at thin times to get prices rolling down hill to scare and induce others to sell. I guess the regulators at the CFTC...and the criminal enterprise also known as the CME Group...need a good night's sleep and can't be bothered with late night Comex shenanigans."

¤ Critical Reads

Algeria in turmoil as riots stretch over third day

It's Tuesday...and I have three days worth of stories to post. I've edited them as much as I'm going to...and the final edit is up to you.

The first is follow-up to the story I posted about food price riots in Algeria. This story is posted over at the france24.com website...and was sent to me by reader Roy Stephens. Algerian protesters angered by rising food prices and widespread unemployment have clashed with police in a third day of rioting that has highlighted growing anxiety among the country's youth. The headline reads "Algeria in turmoil as riots stretch over third day". It's a longish story with an 85 second video imbedded...and the link is here.

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Rioting spreads across Tunisia; unrest also reported in Algeria

From Algeria to Tunisa...comes this offering from Scott Pluschau. The headline in the L.A. Times reads "Rioting spreads across Tunisia; unrest also reported in Algeria". Tunisia's problems sound the same as Algeria's problems. Protests and strikes driven by unemployment and high food prices continued to sweep across the tightly controlled North African nation of Tunisia on Friday amid police attempts to clamp down on the unrest. The link to the story is here.

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Food Agriculture Organization - Food Index

Talking about food prices...I posted a similar graph to the one below, last week. It's the "Food Agriculture Organization - Food Index" graph. It shows that world food prices are at record highs...even higher than they were in 2008. I thank Casey Research's own Bud Conrad for sharing it with us.

Click here to enlarge.

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Sarkozy takes G20 case to Obama as food prices soar

Here's a Reuters piece from reader Carl Loeb that's headlined "Sarkozy takes G20 case to Obama as food prices soar". Soaring food prices and riots in places like Algeria offer Sarkozy ammunition to press for more coordination between G20 governments to combat wild swings in vital commodity prices as well as exchange rates versus the long-dominant U.S. dollar. Paris is also pressing for international efforts to impose greater transparency in commodity markets trading and pricing, and for tougher regulation of trading in commodity derivatives. The link to this worthwhile story is here.

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Stock market plunge sparks protest in Bangladesh

Here's an American Press story posted over at apnews.myway.com...that was sent to me by reader Scott Pluschau. The headline reads "Stock market plunge sparks protest in Bangladesh". Bangladesh suspended trading at its main stock exchange Monday and security officials used batons to disperse thousands of angry investors upset over a market plunge. It's a very short read...and the link is here.

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Cash-Strapped Argentines Begin Year on a Tense Note

The next item is from yesterday's edition of The Wall Street Journal. Because it's subscriber protected...there are only about three paragraphs of text for you to read. The first paragraph tells you a lot... "Argentines are starting the new year facing a cash crunch—literally, a shortage of bills at banks and automated-teller machines due to what critics say is faulty planning at the central bank, as well as persistent inflation.". The rest of the text is well worth your time...and I thank Washington state reader S.A. for sending it along. The headline reads "Cash-Strapped Argentines Begin Year on a Tense Note"...and the link is here.

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Walker's World: Euro train wreck

Here's Roy Stephens next offering of the day. It's a UPI piece filed from Washington that's headlined "Walker's World: Euro train wreck". This week will be the first test of the year for the survival of the euro, as Portugal, Spain and Italy all have bond auctions. The countries are likely to raise the money they need. The first question is how much they will have to pay in interest to compensate investors for the risk. The second question is: who will take the risk? The link to the story is here...and, in my opinion, it's worth the read.

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Illinois Governor Flees Capitol Through The Basement After Disastrous Meeting On State Budget

Reader 'David in California' has the following offering for us...and it's posted over at businessinsider.com. The headline says it all... "Illinois Governor Flees Capitol Through The Basement After Disastrous Meeting On State Budget". Need I say more...and the link is here.

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Deepening crisis traps America's have-nots

Here's a story from yesterday's King Report that ended up as a GATA dispatch. It's from the Sunday edition of The Telegraph...and is headlined "Deepening crisis traps America's have-nots". Ambrose Evans-Pritchard says that "The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature." It's a tale of two shoppers - Louis Vuitton has helped boost the luxury goods stock index by almost 50% since October, yet Wal-Mart has languished. I feel that this is worth reading...and the link is here.

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Toward Sensible Monetary Policy

This next item was also contained in a GATA release yesterday...and that's where I stole it from. It's commentary from Texas Congressman Ron Paul...and is headlined "Toward Sensible Monetary Policy". It's well worth your time...and the link is here.

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American the Beautiful Bullions Go to "Profiteers"

The rest of my stories are all precious metals related...and the first one is about silver. I've posted several stories on this issue...but now everything that I've said about it has come to fruition. The confirming story about it was posted over at numismaster.com...and is headlined American the Beautiful Bullions Go to "Profiteers". Jim Hausman of The Gold Center in Springfield, Ill., sold about 600 sets of America the Beautiful 5-ounce silver coins at $975 each on Jan. 3rd. That should make him a happy businessman, right? Uh, not so much. "These coins were supposed to go to collectors, and they went to profiteers,” Hausman said. This a very interesting read...and I thank Florida reader Donna Badach for sending it along...and the link is here.

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Quebec police help gold miners fight thieves

Here's Donna's second contribution to today's column. It's from Saturday's edition of Canada's National Post. The headline reads "Quebec police help gold miners fight thieves". Recent gold mine robberies in Mexico and Brazil, coupled with soaring gold prices are prompting Quebec mining companies to ask for police help to prepare employees in case they become the targets of organized crime. The link is here.

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Virginia Creates Subcommittee To Study Monetary Alternatives In Case Of Terminal Fed "Breakdown", Considers Gold As Option

The next gold-related item is from reader 'David in California'. It's a zerohedge.composting that bears the headline "Virginia Creates Subcommittee To Study Monetary Alternatives In Case Of Terminal Fed "Breakdown", Considers Gold As Option". No further embellishment is required by me...and the link is here.

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Not owning gold is insane, Casenove's Griffiths tells CNBC

Here's a GATA release that Chris Powell has headlined "Not owning gold is insane, Casenove's Griffiths tells CNBC". Robin Griffiths remarked that gold is still in a "linear trend" but eventually will "go exponential" as fiat currencies are "printed into oblivion." Chris Powell's preamble...and the 4-minute CNBC Europe video interview...is linked here...and I thank 'David in California' for alerting me to the story long before it showed up at gata.org.

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David Einhorn: Federal Reserve's Policies Are Quite Dangerous

Yesterday, Eric King of King World News interviewed hedge fund manager and gold investor David Einhorn of Greenlight Capital, who remarks, among other things, that gold looks pretty good to him while the major currencies are in a race to devalue. Excerpts from the interview are headlined "David Einhorn: Federal Reserve's Policies Are Quite Dangerous"...and the link to this very worthwhile read, is here.

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China 2010 gold output seen above 340 tons

Here's a piece I found posted over a Kitco. It's a story over at commodityonline.com...and filed from Beijing yesterday morning. The headline pretty much says it all..."China 2010 gold output seen above 340 tons". There's a little more to the story than that...and the link is here.

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Judge orders Fed to deliver gold records for her review

Here's another GATA release that has an extensive preamble by GATA's Chris Powell. Yesterday, GATA scored a small but perhaps auspicious victory over the Federal Reserve in its lawsuit seeking access to the Fed's secret gold files. The judge presiding over GATA's federal freedom-of-information lawsuit in U.S. District Court for the District of Columbia, Ellen Segal Huvelle, granted GATA's motion to order the Fed to produce [in complete form for the judge's private review] 20 gold-related documents the Fed has sought to keep secret. The judge ordered the Fed to deliver the documents by Friday. The preamble...and the two links in the GATA release are more than worth your time. The headline reads "Judge orders Fed to deliver gold records for her review"...and the link is here.

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India, Iran mull over gold-for-oil for now

Today's final story is one that sort of slipped under the radar on the weekend. It was a posting at indiatimes.com and filed from New Delhi that bears the rather sensational headline of "India, Iran mull over gold-for-oil for now". India is determined to ensure steady crude oil supplies from Iran and is even considering settling payments with gold in the short term before the two countries agree on a mutually accepted currency and a bank to clear the transactions. It's not an overly long story...and, once again, I thank reader 'David in California... and the link is here.

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Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage and political will to recognize the mess and act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched and where the rot is by far the deepest.- Harry Schultz, in his last newsletter to his subscribers before he retired last week.

As I mentioned at the beginning...it wasn't an overly exciting day in the gold and silver markets, but both managed to finish in positive territory. Volume was very much on the light side in both metals...and I'm not expecting much in the way of changes in open interest, either up or down, when the final numbers are posted later this morning.

Friday's open interest numbers were quite encouraging...with gold open interest down 2,721 contracts...and silver's o.i. down a chunky 2,212 contracts. This will all be in Friday's Commitment of Traders report.

In another comment to his subscribers over the weekend, silver analyst Ted Butler said the following..."If my analysis is correct, and the era of silver pricing being dominated by a big Comex silver short is ending, what will the silver pricing landscape look like in the future? The answer is that the landscape will be radically different, in order to reflect such a radical structural change. Removing the dominant pricing force on the Comex is as radical a change as putting LeBron James on a high school basketball team. It changes everything."

Yes, it certainly will.

Not much happened during the Tuesday trading day in the Far East...but shortly before London opened for trading at 8:00 a.m. GMT, both metals began to move a bit higher. Today is the cut-off for Friday's COT report...and lately there has always been big activity on that day...whether the data is reported on Friday, or not. It remains to be seen what happens in New York this morning...but it might prove interesting. We'll find out soon enough.

It's still hard to tell whether we've reach a bottom in either metal. The chart patterns indicate that may have bottomed here...but only JPMorgan really knows what the future holds for the prices of both metals.

Here's the 6-month silver chart with yesterday's price action posted.

And the 6-month gold chart. We've been under the 50-day moving average for quite a few days now, so most tech fund liquidation [not that there was a lot to begin with] should have occurred by now.

The quote above from the great Harry Schultz pretty much sums up my feelings on the state of the world's economic, financial and monetary situation as it stands today. We are on an increasingly slippery slope, with no way out that I can see. The only possible savior would be an almost immediate return to the gold standard...and we're beginning to hear rumblings from high places about that very thing. If it does happen, the two things we don't know is the timing...and what form it will take.

I see nothing out there that changes my current 'all in' investment strategy in the precious metals.

See you on Wednesday.