Dollar Ready to Collapse, Silver Squeeze to Continue

When I hit the 'send' button on my Friday morning column, gold had just printed its low price tick of the day at $1,400 spot...so my warning of possible impending doom during the New York session wasn't worth a hill of beans. But at 2:50 a.m. Mountain time yesterday morning, it wasn't looking too good.

From that low, which occurred minutes before London opened, gold rallied in fits and starts right up until the close of electronic trading in New York. You'll notice that the spike in the gold price that began the moment that the London p.m. gold fix was in at 10:00 a.m. Eastern, wasn't allowed to go far...and that was the high price tick of the day at $1,412.80 spot. The gold price closed just a bit under that.

Here's the New York Spot gold chart on its own. You can see the New York low at the London p.m. gold fix...10:00 a.m. Eastern, 3:00 p.m. GMT...plus the subsequent price spike that got cut off at the knees shortly before 11:00 a.m. Eastern. One can only wonder how high the price might have gone if there hadn't been a not-for-profit seller there to hammer it flat.

The silver price came roaring back with a vengeance...with a preliminary top coming at the London open at 8:00 a.m. GMT...which is 3:00 a.m. in New York. The secondary low came precisely at the silver fix at noon in London...7:00 a.m. on the eastern seaboard. From that secondary low, the silver price renewed its climb, finishing almost on its high of the day...$33.46 spot...which came moments before the close of electronic trading at 5:15 p.m. in New York.

The dollar opened around 77.10 cents bright and early yesterday morning in the Far East...and dipped briefly to around 76.95 around 7:00 a.m. in London. That was its low of the day...and by the London p.m. gold fix at 10:00 a.m. in New York [3:00 p.m. in London], the dollar had reached its zenith around 77.42. From that high, the dollar got sold off about twenty basis points to 77.22 going into the New York close at 5:15 p.m. Eastern. There wasn't too much direct correlation between the gold price and the dollar yesterday that I could see.

The gold stocks gapped up at the open, then pretty much followed the gold price from that point on, almost to the tick...with the HUI finishing up 2.31%...it's high of the day. For the most part, the silver stocks vastly outperformed the gold stocks once again. Here's the 5-day chart for the week that was.

Well, the CME Delivery Report has deliveries posted for March 1st already. The report showed that 823 gold, along with 252 silver contracts, were posted for delivery on that date. In gold, the big issuer [820 contracts] was the Bank of Nova Scotia in its proprietary trading account...and the big stopper [776 contracts] was JPMorgan in its client account.

In silver, the big issuer [250 contracts] was HSBC USA...and there were a lot of companies on the receiving end of these deliveries...the biggest being the Bank of Nova Scotia with 97 contracts. For first day notice in silver, I was expecting far more delivery activity than this. We'll see how things progress as the first week in the March delivery month unfolds.

The link to all that action is here...and it's definitely worth a look.

After a wild and woolly week, neither the GLD nor the SLV ETF had a report on Friday.

While on the subject of the SLV ETF, silver analyst Ted Butler mentioned the fact [both on Thursday and Friday] that he thought the reason that silver was creamed in the thinly-traded electronic market on Thursday afternoon, was JPMorgan's attempt to get massive liquidation in SLV shares, in order to cover their short positions in that market as well.

That's a theory that Ted has advanced before....and the only reason I'm brining it up here is because of a graph that reader 'Silver Steve' sent me yesterday. It's the 10-minute chart of SLV for the last week. Note the massive volume spike in SLV on the price smash-down in silver on Thursday afternoon before the equity markets closed. If Ted's theory is correct...and I see no reason to doubt it...then I'm sure JPMorgan was standing there buying every share that was falling off the table.

The U.S. Mint had another sales report yesterday...adding another 4,000 ounces of gold eagles sales...and an extremely tiny 1,500 silver eagles. Month-to-date...87,500 ounces of gold eagles and 2,665,000 ounces of silver eagles have been sold. Ted Butler feels that we'll get a final February sales figure from the mint on either Monday or Tuesday.

The Comex-approved depositories reported receiving a net 598,486 troy ounces of silver on Thursday. There was a big internal transfer from Eligible into the Registered category at HSBC that makes the numbers look more impressive than they actually are...and the link to all the action is here.

It was a 'good news, bad news' Commitment of Traders Report yesterday...as it showed further increases in the short positions of both metals. That was the bad news. But, as Ted Butler was quick to point out on the phone yesterday, the short sellers in silver and gold were not the bullion banks at all, but 'the raptors'...the smallest traders in the Commercial category...and not the '8 or less' bullion banks, who were totally M.I.A. during the last reporting week. That was the good news. Ted says that the Raptors hold large short positions in both metals...more than they have for a very long time.

The Commercial net short position in silver increased by 2,746 contracts, which translates into 13.73 million ounces of silver. In gold, the Commercial net short position increased by 13,180 contracts, or 1.32 million ounces of the stuff.

The link to the full-colour COT graph for silver is here...and for gold it's here. Both are worth looking at...as the long-term 12-month trends are easy to spot in both metals.

Here's Ted Butler's "Days to Cover Short Positions" graph as updated by Nick Laird over at sharelynx.com.

¤ Critical Reads

Russian Central Bank Unexpectedly Raises Main Rates, Reserve Requirements

I don't have a whole lot of stories today, which suits me [and probably you] just fine.

The first is from reader Barnabe Geis...and is a Bloomberg story filed from London early Friday morning. With domestic inflation approaching 10%...Russians see inflation, the fastest among the so-called BRIC countries, as the country’s biggest challenge facing the country. Prime Minister Vladimir Putin's administration has sold discounted grain from state stockpiles and ordered oil companies to cut prices for gasoline and diesel to stem price increases. Link here.

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Bank of India becomes first to offer trade settlement in yuan

Here's a story that's filed from Beijing...and posted in The Times of India late Thursday evening. Bank of India has become the first Indian bank to offer trade settlement facility between the rupee and the Chinese RMB from Hong Kong. This follows intense persuasion by the China Banking Regulatory Commission, which is trying to gain acceptance of the RMB as an international currency. Link here. I thank reader 'David in California' for sharing it with us.

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Robert Fisk with the first dispatch from Tripoli - a city in the shadow of death

Today's second story is also courtesy of reader Barnabe Geis...and is one of three stories I have about the ongoing strife in Libya. This one was posted over at The Independent in London on Thursday. Up to 15,000 men, women and children besieged Tripoli's international airport last night, shouting and screaming for seats on the few airliners still prepared to fly to Muammar Gaddafi's rump state, paying Libyan police bribe after bribe to reach the ticket desks in a rain-soaked mob of hungry, desperate families. Many were trampled as Libyan security men savagely beat those who pushed their way to the front. This is an ugly read...and the link is here.

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Battle at army base broke Gadhafi hold in Benghazi

The next Libya-related item was sent to me by Swiss reader G.B. It's an AP story that's filed from Benghazi and is posted over at yahoo.com. The young men of Benghazi pounded the dreaded military barracks in the city center with everything they could find. They threw stones and crude bombs made of tin cans stuffed with gunpowder. They drove bulldozers into its walls. All under a blaze of gunfire from troops inside that literally tore people in half.

More than 100 were killed in three days of fighting. But in the end, the base fell and Moammar Gadhafi's forces fled, executing comrades who refused to shoot.

This is an ugly read...and the link is here.

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Behind the Arab Revolt is a Word We Dare Not Speak

Reader U.D. sent me this story that's posted by writer John Pilger over at antiwar.com. I believe every word in it, as I'm more than familiar with the American Empire and how it operates, from reading books such as "The Creature From Jekyll Island" by G. Edward Griffin...and "Confessions of an Economic Hit Man" by John Perkins...plus many others in a similar vein. It's not a big read...but it's a must read from one end to the other...and the link is here.

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More Christchurch, New Zealand Earthquake Pictures

Here's another bunch of pictures...77 in total...taken just days after the earthquake. Some of these are aerial shots that show the extensive damage...and the extensive liquefaction that occurred. One has to wonder whether or not there are any more earthquakes like this in their future as they attempt to rebuild what is now a ruined city. The link is here. And here's another 6-minute video shot in downtown Christchurch just minutes after it all happened...and parts of it are very distressing to watch. Click here.

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Marc Faber - McAlvany Interview 23 February 2011

Nick Laird sent me this longish interview with Dr. Marc Faber, but if you have the time, it's posted over at youtube.com. It starts around the two minute mark...and probably runs to the end. I haven't listened to all of it, but Nick says that it gives an interesting perspective on the coming failure & how the precious metals will react to all the money printing. The link is here.

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Turk - Dollar Ready to Collapse, Silver Squeeze to Continue

Interviewed yesterday by King World News, GoldMoney founder James Turk calls attention to the precarious position of the U.S. dollar on the dollar index chart, reports that silver's backwardation is deepening, and finds the gold chart explosive. The blog is not particularly long, but is definitely worth your time...and the link is here.

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Interview With Jim Rickards

Eric King over at King World News sent me a link to an interview that he says will be posted on his website "very early today." He gave me the link for it, but there's nothing posted there at the moment [5:45 a.m. Eastern]...so if it's not there when you first click on it, you'll have to keep checking back until he gets it up on his website. And, as usual, I don't care what subject Jim is talking about, it will be well worth listening to. The interview, when it's posted, will be linked here.

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Afternoon Gold Fix -- February 25, 2011

Reader U.D. sent this story my way very late last night that was posted over at the fmxconnect.com website. This was obviously written by one of the quants that trades commodities on a level far above our understanding...as reading it left me gasping for air...as a lot of it was so far over my head, that I really didn't have a clue what he meant.

But it's not the part of the report that you don't understand that will bother you. You should read his Analysis, Commentary...and Editorial Comment sections, but pay particular attention to what he says in his 'Editorial Comment'. He has stumbled across Thursday's mini-crash in both silver and gold that was orchestrated by JPMorgan et al...and he has a few things to say about it from his perspective. This is a must read...and the link is here.

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Speak up and be heard by the CFTC one more time

And lastly, don't forget to write to the CFTC about position limits as silver analyst Ted Butler has requested. It will take less than ten minutes of your time...and every voice is important. My comments will go out this weekend...and I hope you can find the time to do the same. The link to everything you need to know...and do, is here.

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Today's 'blast from the past' will date a lot of people...as it does this writer. This 1968 instrumental piece needs no introduction whatsoever...so turn up your speakers and click here.

Gold volume was a bit over 110,000 contracts net of all roll-overs on Friday...and the preliminary open interest number should mean that we'll see a decline in o.i. when the final figures are posted on the CME's website late on Monday morning.

In silver, volume was heavy...but once the roll-overs and spreads are removed...there wasn't much new volume to speak of...as Friday was the last trading day in the February contract...with March now being the front month. And, as has been the case for the last few days, it appears that we'll see another decline in open interest when the final numbers are posted on Monday.

Thursday's final open interest numbers show that gold o.i. increased by 5,799 contracts...not what I was expecting in light of all the shenanigans we saw during Thursday's trading session. But like I said yesterday, the bullion banks may have been tardy in reporting all their late-day trading activity in a timely manner...and the preliminary gold numbers posted for Friday may include the data missing from Thursday. We'll see.

Silver's final open interest number on Thursday showed another big decline. This time it was 4,942 contracts. Ted isn't sure whether this was all long liquidation...or just spread trades being lifted on the roll-over into the May contract. This won't be known until next Friday's Commitment of Traders report.

March opened interest dropped to next to nothing with the preliminary report that came out earlier this morning. It was north of 29,000 contracts on Thursday morning...only to drop down to around 14,200 contracts when the CME's final o.i. numbers for Thursday were posted on Friday morning. Now it's Saturday morning...and the CME's preliminary report shows a further decline of 10,072 contract for March...leaving only 4,187 contracts left. And, without doubt, that number will decline further when the final Friday o.i. numbers are posted on Monday morning.

Unless something out of the ordinary happens, there certainly doesn't appear to be any sort of delivery squeeze coming in March.

With March now the front month, the backwardation has disappeared for the third day running...as May is now more expensive than March by 2.5 cents...the biggest contango in over a week. Silver does not return to backwardation until the December delivery month...but December 2015 is in backwardation to March 2011 to the tune of $1.115...so this issue is not going away any time soon. With February officially off the board, Ted Butler feels that we should soon return to backwardation in all months...so we'll have to see what next week brings.

Nick Laird sent me a chart of Friday's settlement prices in the silver futures market...and you can see at a glance that the months that are selling at a premium to March, are only doing so by a whisker.

You'll also note from the graph, that compared to the cash market, silver is in backwardation across the board. Backwardation is a classic example of the old phrase that "a bird in the hand, is worth two in the bush". Buyers are prepared to pay a premium to buy silver in the spot market...or in the nearby months...rather than shove their purchases months or years down the road, when there may be no silver to be had. This graph will be worth watching as March unfolds.

Looking at the respective 200-day moving averages for both gold and silver, I see that the gold price is within two dollars of the $1,300 mark...and silver is safely through $23.

What March brings for the precious metals is unknown. But along with next Friday's COT report will come the new Bank Participation report, which will spell out how the world's bullion banks have been doing in covering their short positions in both silver and gold...with most of the attention being focused on the ringleader, JPMorgan.

After Thursday's bloodbath in the silver equity market...the bargain hunters were out in force yesterday...and rightly so. A chance to pick up some of those stocks at bargain prices is not going to happen too often...and I hope you were one of them. I wish I'd been one of them...but being 'all in' precludes that, I'm afraid.

But there's still a bit of time left to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Enjoy what's left of your weekend...and I'll see you here on Tuesday.