Gold Mania Will Rival Tech Bubble: Rob McEwen

The smallish rally in gold that started at 9:00 a.m. London time...lasted until about 9:00 a.m in New York when gold reach it's high tick of the day at $1,423.90 spot. From that point on, the gold price met its usual fate...and got sold down to its N.Y. low [$1,423.90 spot] around 11:40 a.m. Eastern.

From that low, gold began to rally, but traded sideways from almost the moment that Comex trading ended...and electronic trading began.

The silver price was more 'volatile' during the Wednesday trading session. The major difference was that silver's high of $36.47 spot came at precisely 9:30 a.m. Eastern before JPMorgan pulled their bids twice...and the price crashed to its low of $35.62 at 11:35 a.m. in New York...an 85 cent price drop in two hours and five minutes.

Silver, like gold, then rallied...but traded sideways shortly after electronic trading began at 1:30 p.m.

The two things to notice about both these gold and silver graphs is the general price activity over all three days. For the most part, both gold and silver rallied during late Far East and London trading until New York trading began on the Comex...then the sell-offs began. Also note that for all three days there were big drops in price going into the London p.m. gold fix at 10:00 a.m.

Nick Laird [with a hat tip to Dimitri Speck] of sharelynx.com made up this graph entitled "Intraday Average Gold Price Movements". The average gold price has been obtained from 4 years of data - from March 2006 through to March 2010...which is approximately 1,000 trading days. Carefully note this price action, compared to the price of action of both metals during the last three trading days. This is the mark of the price management beast.

The dollar rose a hair until 8:30 a.m. in London trading, before falling to it's low of the day at 7:00 a.m. Eastern time...falling a bit more than 40 basis points during that period...before recovering a bit going into the close of New York trading. It's a big stretch to say that the dollar and gold were joined at the hip yesterday.

The gold stocks started off in positive territory, but couldn't hold up under the selling pressure in gold...and there's no prize for being able to pick the low in the gold price off this chart. The HUI finished down 0.86%...despite the fact that the gold price finished in the black.

Some of the silver stocks got smoked pretty good yesterday...but as I pointed out last week, there's a lot of day/momentum traders in some of these small junior producers...and at the first sign that things aren't going their way...they're gone. I would suspect that that was the case yesterday and Tuesday...but they'll be back on the next big price rally.

The CME's Daily Delivery Report showed that 2 gold, along with 88 silver contracts, were posted for delivery on Friday. The biggest issuer in silver was the Bank of Nova Scotia. There was quite a variety of stoppers...with the largest being Barclays. Here's the link to the action.

For the second day in a row, the GLD ETF reported no changes...and for the third day in a row the SLV ETF took in a big chunk of silver. This time it was 1,952,612 troy ounces. Right now the SLV is reported to be sitting on 352,824,122 ounces of silver...which is a new record high.

The U.S. Mint reported selling another 5,500 ounces of gold eagles yesterday...but did not add to their silver eagle sales. Month-to-date, they have sold 18,500 ounces of gold eagles...along with 668,500 silver eagles.

There was activity in all four Comex warehouses on Tuesday. They reported receiving 592,485 ounces of silver...and shipped out a smallish 92,492 ounces. The link to that action is here.

Washington state reader S.A. was kind enough to provide the 30-year chart of the Gold/Silver Ratio. We aren't at 30-year lows...but we're getting close.

Another one of my daily readers, who wishes to remain anonymous, made up the following 40-year graph of the Gold/Silver Ratio...but the vertical axis is reversed...showing an upward trend as the ratio gets smaller. This graph shows that we are in a 'bull market' for the Gold/Silver ratio.

The absolute 'high' was 14.00 in early 1980. I'm sure we'll get there again...it's just a question of how long it takes...and how much we'll exceed the old 'high'.

It was another busy day for my bullion dealer yesterday...and if this keeps up, it should be a record week for silver sales. I think he's only sold a handful of gold maple leafs...and the rest has been silver bullion. I'm sure that this is a scenario that's occurring in every coin and bullion store across North America at the moment. And, when all is said and done, it will be the rapidly increasing investment demand that will drive a stake through the heart of the silver price suppression scheme that JPMorgan et al are currently trying to extricate themselves from.

¤ Critical Reads

Massachusetts mayors, unions debate health care proposals

Today's first story is courtesy of reader Scott Pluschau. It's filed from Boston...and posted over at cnbc.com. Massachusetts mayors are warning state lawmakers that, without dramatic changes to the way municipalities provide health care to their public workers, cities and towns will face dire fiscal straits for the foreseeable future, threatening core local services from police to road repairs.

State governments, squeezed between a lower tax base and rapidly escalating costs for health care, are finding themselves up against the wall...and something's got give. The link is here.

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Warning Of 'Food Price Riots In The UK'

In a similar light, is this story from Britain that's posted over at the news.sky.com website. A senior economist said the following..."Even in the developed world I think we have very, very low wage growth, so people aren't getting more in their pay packet to compensate them for food and energy, and I think we could see social unrest certainly in parts of the developed world and the UK as well." She would be right about that. The link is here...and I thank reader Scott Pluschau for this story as well.

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Number Of Underwater Mortgages Rises As More Homeowners Fall Behind

This next story is courtesy of reader Roy Stephens...and is a posting over at the huffingtonpost.com website. About 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter, according to report released Tuesday by housing data firm CoreLogic. That's up from 22.5 percent, or 10.8 million households, in the July-September quarter. The link to the story is here.

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Welfare State: Handouts Make Up One-Third of U.S. Wages

Here's a rather unhappy story that's posted over at cnbc.com...and was sent to me by reader U.D. Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement. The link is here.

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Another PIMCO fund dumps U.S. government debt

This is a Reuters piece that I 'borrowed' from a GATA release yesterday. PIMCO's Total Return Fund, the world's biggest bond fund, hasgone ultra bearish on the United States, dumping all of its U.S. government-related debt holdings, a source familiar with the fund's holdings said on Wednesday. This is definitely worth the read...and the link is here.

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Argentina bans inflation from official jargon; inflation of synonyms

Here's a story that falls in the 'You Can't Make This Stuff Up' category...and it was sent to me by Casey Research's own Louis James...and is a posting over at mercopress.com. Next October Argentines will be going to the polls to vote for president and renew Congress which anticipates a rough political eight months, but before that the administration of President Cristina Fernandez de Kirchner has to weather a round of labour contracts which will be demanding strong adjustments because of the “prices distortion and dispersion” since the word ‘inflation’ has been erased from the official jargon. The link is here.

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EU paralysis drives fresh bond rout

Reader Roy Stephens brings us this story that was posted late last night in The Telegraph. Political paralysis in Brussels and monetary tightening by the European Central Bank has set off a fresh spasm of the eurozone bond crisis, pushing spreads on Portuguese, Irish and Greek bonds to post-EMU records. International business editor Ambrose Evans-Pritchard lays it out for us...and it's definitely a must read. The link is here.

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Dubai's Next Luxury Megahotel Is 'Heavily Behind Schedule' As Funding Dries Up

Reader 'David in California' sent me this piece that was posted over at the businessinsider.com website. A local realtor warns that "the Palazzo Versace is heavily behind schedule… What we hear is that project funding is blocked [and] completion dates have been postponed." Meanwhile there's no sign of a recovery in the real estate market, where 40% of homes are vacant...or the stock market, which sits near seven-year lows.

This is quite the chicken shack, dear reader...and the photo sequence imbedded in the article is worth the trip all by itself. The link is here.

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China adviser says Beijing should buy more gold

Here's another story that I stole from a GATA release yesterday. It's a Reuters piece filed from Beijing...and it's another 'senior economic advisor' being quoted about the fact that China should buy more gold. "China should increase its gold reserves appropriately, and China must take every chance to buy, especially when gold prices fall," senior economist Li Yining was quoted by the official Xinhua news agency as saying. The link is here.

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No Getting Away From It, Swiss Francs and Gold Are Still the Surest Havens

Washington state reader S.A. provides the next gold-relate story which appeared in yesterday's edition of The Wall Street Journal. In the end, the quest for safe havens most obviously ends up at the doors of gold and the Swiss franc. Gold is hitting record highs daily at the moment and looking extremely comfortable well above the $1,400 per ounce level. Meanwhile the dollar notched up its all-time low against the Swiss franc two weeks ago, and hasn't recovered much poise since.

But it's interesting to note that one of these two is a 150-year old redoubt in times of trouble. The other, well, it's been a store of last-ditch value for millennia.

I was amazed to see such a positive story on gold posted over at The Wall Street Journal...even if it was their 'online' version. It's very much worth the read...and the link is here.

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Gold Mania Will Rival Tech Bubble

Here's another item I stole from a GATA release yesterday...and I'm also borrowing Chris Powell's preamble, so I don't have to write my own. Currency diversification will support gold and gold is such a tiny market that a substantial move into it by investors could take it parabolic, gold mining entrepreneur Rob McEwen told King World News in an interview yesterday. Excerpts from the interview can be found linked here...and this is definitely worth the read.

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The gold price met the usual fate during the New York trading session yesterday. Volume wasn't particularly heavy...about the same as Tuesday's. I'm not overly happy about the preliminary open interest number...but I've been wrong about it before.

Tuesday's final open interest number in gold showed a smallish increase of 817 contracts, which is basically a rounding error in the grand scheme of things. This will be in tomorrow's Commitment of Traders Report.

The silver price got hammered pretty good in New York on Wednesday...and volume was also about the same as Tuesday's. The preliminary open interest number was higher than I was expecting...but, as always, what's posted in the CME's final report later this a.m. is all that matters.

Based on Tuesday's preliminary open interest number in silver, I was expecting a rather large decline in silver's o.i...and that's exactly what occurred, as open interest fell a chunky 2,182 contracts. This, too, will be in tomorrow's COT report.

The backwardation issue in silver remains the same as it has for the last week...and still awaits a resolution.

Here's a chart entitled "Silver Comex MAY 2011 Futures" that reader 'Silver Steve' sent my way yesterday. It shows the trading action on the Comex for the last couple of days. The standout features of this graph are as follows: When silver is trading quietly...either up, down or sideways...there's no volume to speak of. Only when the bullion banks pull their bids, causing the price to crater...and the sell stops get hit...is there a major spike in silver's trading volume.

This is a visual representation not only of how JPMorgan et al do what they do...but also the results of their actions in graphic terms. A graph can 'speak a 1,000 words'...just like a picture can.

Carefully note the two big down price spikes that were instigated by JPMorgan in silver yesterday morning when they pulled their bids...along with the huge spikes in volume...as the long holders [who had been quietly buying since the Tuesday London gold fix at 10:00 a.m. Eastern] had their sell stops tripped and were forced to dump their contracts into this price vacuum.

This is the process that JPMorgan and the other bullion banks [working in collusion] use to cover their short positions.

I note that both gold and silver were under some pressure shortly before London opened for trading this morning. This started at precisely 7:00 a.m. GMT...2:00 a.m. Eastern...as the dollar began a small rally...which is now fading as I hit the 'send' button on today's rant. I wouldn't read much into it...at least not at the moment. But it's always possible that the New York bullion banks could pull the same stunt today that they did yesterday, as there's no one to stop them. And, as you've probably figured out already...it doesn't matter one iota what the dollar is, or isn't, doing when JPMorgan et al are lurking about.

I'm off to bed. See you on Friday.