Gold to Break $2,000/oz Barrier

Gold's Far East low came during the Hong Kong lunch hour...but began to rally shortly after London opened, reaching it's zenith about half an hour after the Comex open.

Then the N.Y. bullion banks showed up...and you can see where they pulled their bids once the London p.m. gold fix was in at 10:00 a.m. Eastern time. That effort managed to get the price down another fifteen bucks...with the bottom coming minutes after the London close at 3:00 p.m. GMT...which is 11:00 a.m. in New York.

Once 'da boyz' were through trashing the price, it recovered a bit going into the close of electronic trading at 5:15 p.m. Eastern. Volume [at least compared to Monday] was huge.

Silver did nothing in Far East trading...but [like gold] began to rally minutes after the London open. This lasted until 11:00 a.m. local time...and then declined until half past lunchtime in London...which was 7:30 a.m. in New York.

The New York high [$40.91 spot, according to Kitco] came at 8:50 a.m...just like gold...and from that point, silver suffered the same fate. Although silver's low was $39.72 spot, it managed to recover back above $40 by the end of electronic trading. Volume was even heavier in silver on Tuesday than it was on Monday.

The world's reserve currency gained a bit after the Far East opened Tuesday morning...and reached its zenith at precisely midnight Eastern time. Then, three hours later...8:00 a.m. in London, as the metals began to rally...the dollar rolled over and lost over 45 basis points...with the nadir coming at 8:50 p.m.

This dollar low was the high price tick of the day for the precious metals as well. The New York high for the dollar corresponded precisely with the lows for the precious metals. It was just too cute for words.

On Monday, the dollar hardly moved, while the precious metals had one of their wildest up and down days of 2011. Then yesterday, the precious metals followed the dollar's peaks and valleys almost to the tick. I would bet some serious money that the dollar/precious metals action we saw yesterday was pretty much a stage-managed event from one end of the trading day to the other.

The gold shares bottomed shortly after the London p.m. gold fix at 10:00 a.m. Eastern time...the same time as the bullion banks pulled their bids. After that, the gold stocks recovered a hair...and then spent the rest of the New York trading session two points either side of 580 on the HUI...which closed down 1.58% on the day. The silver stocks got hit pretty good for the second day running.

The CME Delivery Report was even less exciting on Tuesday than it was on Monday...as only two silver contracts were posted for delivery tomorrow...no gold at all.

There was activity at both ETFs yesterday. GLD declined 29,251 ounces...and SLV showed a withdrawal of 975,878 ounces.

The U.S. Mint had no sales report yesterday.

The Comex-approved depositories on Monday showed that, for the second day in a row, no silver was received...and this time 576,249 ounces of silver were shipped out the door. That's about 1.3 million ounces in the last two business days. The link to Monday's action is here.

Before getting into my stories for the day, here's an 18-year graph of the Dow that was sent to me by Washington state reader S.A. One has to wonder how much longer the money that Wall Street gets from the Fed to keep the U.S. equity markets propped up, is going to work.

¤ Critical Reads

American Ghost Towns of the 21st Century

First out of the starting gate today is this real estate-related story that reader Scott Pluschau sent me yesterday. Someone else sent me this story on Monday, but I decided not to run it. I've since changed my mind.

There are several counties in America, each with more than 10,000 homes, which have vacancy rates above 55%. The rate is above 60% in several. Data from states and large metropolitan areas do not tell the story of how much the real estate disaster has turned certain areas in the country into ghost towns.

This is a sad story to read...and the link is here.

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US deficit up 15.7% in first half of fiscal 2011

Scott's got two more stories for us today. This one is an AFP offering that was picked up by google.com.

The US budget deficit shot up 15.7 percent in the first six months of fiscal 2011, the Treasury Department said Wednesday as political knives were being sharpened for a new budget battle. The Treasury reported a deficit of $829 billion for the October-March period, compared with $717 billion a year earlier, as revenue rose a sluggish 6.9 percent as the economic recovery slowly gained pace. The link to the story is here.

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Big banks are government-backed: Fed's Hoenig

Scott's third offering is this Reuters item posted over at news.yahoo.com.

Big banks like Bank of America Corp and Citigroup Inc should be reclassified as government-sponsored entities and have their activities restricted, a senior Fed official said on Tuesday.

The 2008 bank bailouts at the height of the financial crisis and other implicit guarantees effectively make the largest U.S. banks government-guaranteed enterprises, like mortgage finance companies Fannie Mae and Freddie Mac, said Kansas City Fed President Thomas Hoenig.

You can't make this stuff up...and the link is here.

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Unwanted 'help'

Reader Roy Stephens is next with this piece that was posted over at the Asia Times website at the start of their Wednesday.

Economist "We're all freakin' doomed" [WAFD] Richard Daughty has a few things to say about current world conditions [CWC] that I know you will find both elucidating and hilarious...although it is possible that you will find them to be neither.

To all the kids reading this piece, here's the reason that you need to stay in school past Grade 6...especially if you have a speech [and writing] impediment like Mr. Daughty does. His wife still thinks I'm acers since I took those WWII surplus twin 50-caliber machine guns off his hands a couple of years back.

Fortunately, this is a short read...and one of Daughty's few redeeming features [FRF] is the fact that he decided to buy precious metals early and often. Other than that, his scribblings have no value whatsoever. But Richard's life revolves around his writing, as he doesn't get out much...and I hate to discourage the poor guy...so you keep right on truckin' Richard. The link to must read bit of nonsense [MRBON] by the Mogambo Guru, is here.

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Gold seen safer than govt. bonds in survey of central bank reserve managers

I stole the above title, plus this Reuters story, from a GATA release yesterday. The real headline read "Central Banks Turn Net Gold Buyers, Cut Euro-Zone Debt: Survey"

Concerns over sovereign default fueled demand for gold, turning central banks into net buyers in 2010 after 20 continuous years of selling the metal. "Gold's quality as a store of value and fears over reserve currencies are the main reasons that central banks turned net buyers of bullion in 2010," wrote survey author Nick Carver. The link is here.

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Why outlaw private gold and silver coins?

Here's a GATA release about the Liberty Dollar legal case that was just concluded in a federal court in North Carolina. A lawyer from California, Bill Rounds, argues that the prosecution misrepresented the law on private currency systems.

I'll let Chris Powell complete the preamble on this worthwhile story...and the link is here.

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Gold to break $2,000/oz barrier

Here's a Roy Stephens offering that appeared in yesterday's edition of The Telegraph.

The price of gold will reach $2,000 an ounce within three years and could rise to almost $5,000 by the end of the decade, according to a new report. Rising demand for gold in China and India will drive the precious metal's continued bull run, analysts at Standard Chartered, the Asia-focused bank, predicted.

This is a short read that's well worth your time...and the photo alone is worth the trip. The link is here.

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2011 5-oz U.S. silver bullion coins go on sale April 25th

Believe it or not, here's a story that I dug up on my own over at mineweb.com yesterday evening.

In a memo to its Authorized Purchasers, the U.S. Mint said it will accept orders for its 2011 five-ounce silver bullion coin beginning April 25 with the coins honoring the Gettysburg National Military Park in Pennsylvania, as well as the Glacier National Park in Montana.

It's a short read...and the link is here.

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Imaginary gold, silver, and copper to trade on Singapore exchange

This is a Reuters article filed from Singapore yesterday. I stole it from a GATA release bearing the above headline. The actual headline reads "Singapore's SMX Launching Copper, Gold, Silver Trade".

The exchange "will begin trading cash-settled gold, silver, and copper futures contracts from April 15, 2011, in contract sizes of 100 troy ounces, 5,000 troy ounces, and 5 metric tons, respectively," the exchange said in the note.

It will be interesting to see how well paper metals do in a part of the world where physical possession of metal is king. Even the comments in the article itself are choked with caution about how well it will do. The link is here.

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Matt Taibbi: The real housewives of Wall Street

Lastly today is this non-precious metals story. I was going to save it for the weekend, but I received so many copies of it from readers yesterday...and early this morning...that I decided to post it now. The first person through the door with it was Washington state reader S.A...but I'm going to post the GATA release on it...as Chris Powell has an excellent preamble that's definitely worth your time.

It's Matt Taibbi's latest essay over at Rolling Stone magazine. Taibbi's report is headlined "The Real Housewives of Wall Street -- Why Is the Federal Reserve Forking over $220 Million in Bailout Money to the Wives of Two Morgan Stanley Bigwigs?"

I haven't read it yet, but I suspect that it contains Matt's usual pithy prose...which means it's X-rated in spots. I would guess that this is a must read from one end to the other...as is Powell's preamble...and the link is here.

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I may be a nervous long, but I’m sure glad I’m not a silver short.- silver analyst Ted Butler, April 9, 2011

It was obvious, at least to me, that the New York bullion banks were throwing their weight around in the gold and silver markets yesterday. They always leave their calling card...and yesterday's action was an example of it.

As I mentioned earlier, volume in gold was enormous yesterday, at least compared to Monday. Net volume was just under 175,000 contracts...and the preliminary open interest number showed an increase of 5,395 contracts.

The final open interest number for Monday's big action day in the gold market showed an increase of only 1,182 contracts...which is a substantial drop from the preliminary number, which was 6,234 contracts.

Silver's volume yesterday was around 105,000 contracts net of all of all roll-overs, which was an even larger number than I reported on Monday. This is huge volume for silver. The preliminary open interest number showed an increase of 4,162 contracts. I think it's a safe bet that both silver and gold's preliminary open interest numbers will be reduced by a goodly bit when the final numbers are posted on the CME's website later this morning.

Silver's final open interest number after Monday's wild day was 849 contracts, which was down substantially from the preliminary number of 5,821 that the CME posted in the wee hours of Tuesday morning.

Yesterday's trading day was the cut-off for Friday's Commitment of Traders report, so whatever shows up as a final o.i. figure for both gold and silver in the CME's report later this morning, will be in Friday's COT. Ted Butler feels that, based on the volume figures, virtually all of yesterday's trading action will show up in it. As is always the case when that report comes out, I'll be looking forward to seeing what really happened during the first two days of this week.

Even though there have been few deliveries posted in gold these last few days [and there was none reported in yesterday's CME Delivery Report], the April open interest in gold is now down to 1,618 contracts, as more and more contract holders decide not to take delivery.

The backwardation in silver is now down to about thirty-eight cents between April 2011 and December 2015. At this rate, the backwardation in silver will be totally gone by the end of this month.

Here's the 1-year gold chart. You can see that gold was barely into overbought territory before the 'correction' began...and after this two day sell-off, gold is well back into neutral territory.

Silver, is still in overbought territory...but with all that's going on in the silver market these days, one has to wonder whether this indicator means as much as it did many years ago. I'm happy to see that silver has managed to recover back above the $40 spot mark both days...and it will be interesting to see how it fares against JPMorgan et al, if they decide to make their presence felt in the New York market again today.

Gold didn't do much during Far East trading...but is up about vie bucks now that London has been open for a bit. Silver gained about two bits in Far East trading...and is up a bit more since then. Volume is very light in gold...but much heavier in silver, with over half of that volume involving roll-overs into future months.

The roll-overs in silver are getting heavier now, as May is a big delivery month for the metal...and everyone, except those who plan on standing for delivery on first notice day [Friday, April 29th], have to be out of the May contract before that date.

In case you're interested, Casey Research is having a special promotion for The Casey Report which...along with the International Speculator...is one of CR's flagship publications. For a [very] limited time only, a 1-year subscription has been reduced to $279...which is a 20% discount over the regular price. If you buy it on a quarterly basis, it costs only $75/quarter, which is a savings of 14%. I read it from beginning to end every month...and consider the subscription price an investment, rather than a cost. If you'd like to learn more, you can click here. And, as usual, our 90-day, 100% money-back-guarantee applies.

That's it for today...and I'll see you here tomorrow.