Be Your Own Central Bank; Own Gold, Silver: Marc Faber

The gold price didn't do much during Far East trading on Monday...but began to roll over with a bit more zeal very late in the morning in London...and about fifteen minutes before the Comex opened for trading, gold hit its low of the day, before drifting higher.

Then at 9:00 a.m...the news on the S&P downgrade warning on U.S. debt hit the wires. Gold really took off, but it was obvious that there was a not-for-profit seller waiting in the wings...and the gold price got chopped off at the knees before it could touch the $1,500 mark. It traded above the $1,498 spot level for just a few seconds...and then never made it above that price again for the rest of the New York trading session.

Up until 9:00 a.m. Eastern, volume had been pretty quiet...but after that time, volume was very high.

Silver reached its Far East high on Monday shortly after 1:30 p.m. Hong Kong time which, from the chart below, is 12:30 a.m. Eastern.

From that point, the silver price decline began...and it was down about 40 cents from its Friday close by 9:00 a.m. in New York.

Then, along with gold, the silver price launched to the heavens...only to be crushed by the same not-for-profit seller...and by the time that seller disappeared, silver was down about 85 cents from Friday's close...and down an eye-watering $1.38 from its New York high price, which had occurred less than an hour prior to that.

Silver then came roaring back and came close to its previous high of the day, before selling off a hair into the close of electronic trading at 5:15 p.m. Eastern. Volume was monstrous.

The dollar gapped up a hair at the Far East open...and then climbed steadily right up until the magic moment at 9:00 a.m. Eastern. Then, as gold blasted off in a northerly direction...the dollar headed south with a vengeance. But there was obviously someone waiting in the wings to catch a falling knife...and I would bet serious coin that the same people who beat the snot out of gold and silver, were there to put a bid under the dollar as well...and by 11:00 a.m. Eastern...the dollar had gained 65 basis points from trough to peak.

But once the dollar buyer disappeared, the dollar sold off quietly into the close of New York trading.

Well, dear reader, is it just me, or is the market management thingy getting more blatant with each passing day?

The gold shares, along with the rest of the equity markets, were under pressure right from the opening bell...and the New York low for the gold price is easy to spot on the HUI chart below. Even though both gold and silver went on to close at new highs for the third day in a row, the gold stocks did not join in the party again...and the silver shares had another poor day as well.

I spoke with John Embry of Sprott Asset Management yesterday...and he wasn't a happy camper watching the non-confirmation of the shares over the last three trading days. He once again stated the opinion that the share prices of both gold and silver were being manipulated.

I also got an e-mail on this issue from reader Bill Gebhardt on Saturday, because I was complaining in my Saturday column about how poorly the stocks were performing on Thursday and Friday...and this is what he had to say..."Yesterday [Friday] was settlement day for stock options. It was probably in someone's best interest that the April options in gold and silver stocks expire at a lower price. Otherwise some party would have lost big time."

Also on the subject of the lousy share price action, was this worthwhile piece that was sent to me by reader 'David in California'. It's by Dan Norcini...and is posted over at his website. The headline reads "Hedge Fund Ratio Spread Trades Continue to Distort the Value of the Mining Shares". This article, along with the excellent graphs, is a must read...and the link is here.

So, there you have it. Three different opinions on why the share price action is not confirming the price of the underlying metal...and I believe that there's some merit in all of them. By the way, James Turk has more to say about this in a King World News blog futher down, so don't miss that.

Well, the CME Daily Delivery Report on Monday showed that another big chunk of the April gold contract [334 contracts in total] were posted for delivery tomorrow. Merrill, JPMorgan and Prudential were the big issuers...and JPMorgan and the Bank of Nova Scotia were the big stoppers.

JPMorgan issued 128 contracts in its client account...and stopped 218 contracts in its proprietary [in house] account. Once again it can be seen that JPMorgan is taking the opposite side of the trade to its clients. If this isn't conflict of interest, or insider trading, I don't know what is. The action is well worth a quick glance...and the link is here.

There were only 6 silver contracts posted for delivery on Wednesday.

Neither GLD or SLV had any changes to report yesterday.

The U.S. Mint had some sales to report on Monday. The sold 9,500 ounces of gold eagles...2,500 one-ounce 24K gold buffaloes...along with 658,500 silver eagles. Month-to-date the mint has sold 58,500 ounces of gold eagles...12,500 one-ounce 24K gold buffaloes...and 2,079,500 silver eagles.

The Comex-approved depositories showed that 403,727 ounces of silver were received on Friday...and 234,626 ounces were shipped out, for a net increase of 169,101 troy ounces. The link to that action is here.

My bullion dealer had another big day on Monday...and had buyers standing at the door the moment he showed up for work. The Royal Canadian Mint has now extended delivery times on new orders of silver maple leafs to eight weeks...so it's obvious that investment demand is still off the charts.

Here's a paragraph I stole from silver analyst Ted Butler's Weekly Review which he sent out to his subscribers on Saturday afternoon..."Against the backdrop of a surging silver price, the calls for a sharp sell-off continue unabated. As I previously reported, almost all those calling for a sharp correction seem to share a commonality, namely, a disbelief in the silver manipulation. I think this is a crucial observation. Let me stipulate first that there can be a correction in the price of silver regardless of whether it has been manipulated or not. But nothing can be more important to the future direction of silver prices than in understanding whether this market has been manipulated. To those who don’t believe silver has been manipulated in price, it’s hard to see how the price won’t collapse. Those who believe that silver has been manipulated [like me] know that the price will explode when the manipulation is terminated. That’s a clear line of demarcation."

Well, try as I might, I just couldn't edit the list of stories that I'd accumulated over the last three days to a shorter list than this one. This leaves the final edit up to you once again.

¤ Critical Reads

US warned over debts, as S&P cuts outlook to 'negative'

America's ability to tackle its deficit has been given a strong vote of no confidence, after leading rating agency Standard & Poor's said the chances are rising that the country will lose its prized AAA status. This was a clear shot across the bows of Congress and the White House.

I thank reader Roy Stephens for this story posted late last night in The Telegraph...and the link is here.

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Negative US Credit Watch Signals Dollar Collapse: James Turk

James is not overly optimistic about the dollar's future after yesterday's S&P warning. But that's only part of what he has to say. He talks about the gold price, the silver price...and the lousy performance of the precious metal shares. This King World News blog is definitely a must read...and the link is here.

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Budget Cuts are Meaningless Without Fed Transparency: Ron Paul

In addition to Congress' spending, many Americans are finally paying attention to the spending done by unelected banking cronies at the Federal Reserve. Recently the Fed was forced to reveal some details of loans given out during the financial crisis of 2008 and they are truly shocking. Matt Taibbi points out in a recent Rolling Stone article that two very well-connected Wall Street wives got together and formed a real estate investment company that garnered $220 million in so-called "loans" (free money) from the Fed. Compare this number to the $352 million in spending cuts the CBO says are in the current budget! A few months later, one of the wives bought a $13.5 million personal residence with her husband, the CEO of Morgan Stanley.

I stole this story from a GATA release yesterday...and the link is here.

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Goldman's Jan Hatzius: "We Are Downgrading Our Real GDP Growth Estimate To 1¾% From 2½%"

Here's a zerohedge.com posting that I lifted from yesterday's King Report...and I'm sure that this added more fuel to the sell-off fire in equities yesterday. The headline pretty much says it all...and the link to this longish read is here.

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China Raises Reserve Ratio to Curb Inflation as Zhou Pledges More to Come

This is another story that I picked up from yesterday's King Report. Reserve ratios will rise a half point from April 21, the People’s Bank of China said on its website yesterday, pushing the requirement to a record 20.5 percent for the biggest lenders. The move came less than two weeks after an interest-rate increase. Zhou sees no “absolute” limit on how high reserve requirements can go, he said April 16.

Not too many shades of gray in this Bloomberg story...and the link is here.

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China's yuan nearly "freely usable": central bank's Yi

China's yuan is close to being a freely usable currency, one of two key tests for it to be included in the International Monetary Fund's currency basket, the deputy governor of China's central bank said on Sunday.

This Reuters story is courtesy of reader Roy Stephens...and the link is here.

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Morgan Stanley fund fails to repay $3.3 billion debt on Tokyo property

A Morgan Stanley property fund failed to make $3.3 billion in debt payments by a deadline on Friday, handing over the keys to a central Tokyo office building to Blackstone and other investors, the largest repayment failure of its kind in Japan.

I thank reader U.D. for sharing this Reuters story...and the link is here.

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World Bank president: 'One shock away from crisis'

The president of the World Bank has warned that the world is "one shock away from a full-blown crisis". Robert Zoellick cited rising food prices as the main threat to poor nations who risk "losing a generation".

It's a short story posted over at the bbc.co.uk website...and I thank reader Phil Barlett for sending it along...and the link is here.

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Election Success for the True Finns: Finland's Right Turn Spells Trouble for Europe

Now, it is Finland's turn. Following in the footsteps of several northern European countries in recent years -- and continuing a trend that has been particularly apparent in Scandinavia -- Finnish voters on Sunday threw substantial support behind the right-wing populist party True Finns.

The right-wing populist party True Finns won 19 percent of the vote in Finland on Sunday. The euroskeptic party has said it is opposed to a bailout package for Portugal, which could spell trouble for the euro zone.

This short essay posted over at spiegel.de yesterday is another Roy Stephens offering...and the link is here.

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Britain 'will not join eurozone bail-out fund'

Britain will not be part of any future eurozone bail-out fund, officials from the UK have told their European counterparts in the face of pressure to back a new safety net for troubled countries from 2013.

Brussels has been pressing the UK to be part of the replacement, the European Stability Mechanism (ESM), on the grounds that it is a member of the European Union. France and Germany are particularly keen for the UK to sign up because, as the largest member states, they will bear the lion’s share of the burden.

This story was posted in The Telegraph over the weekend...and is Roy Stephen's third offering of the day...and the link is here.

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Furious Greeks press for country to default on debt

Here's a story that was filed from Athens...and was posted in The Guardian on Sunday.

"It's better to have a restructuring now … since the situation is going nowhere," said Vasso Papandreou, whose views might be easier to discount were she not head of the Greek parliament's economic affairs committee. Other members of prime minister George Papandreou's party have said that Greece is locked in a "vicious cycle", unable to dig itself out of crisis with policies that can only deepen recession.

I thank Swiss reader G.B. for sharing this with us...and the link is here.

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Texas gold buy will encourage other institutions, Hathaway tells Bloomberg TV

I received more stories about the University of Texas' endowment fund taking physical delivery of its gold, than any other story that I have ever posted in this column.

Washington state reader S.A. was the first person through the door with this Bloomberg interview, but I'm going to post the GATA release on it, as Chris Powell has already done the heavy lifting for me.

Powell's preamble is a must read...and the Bloomberg TV interview is a must watch...and the link is here.

And in case you missed the original Bloomberg story headlined "Gold-Shortage Threat Drives Texas School's Hoarding 664,000 Ounces at HSBC"...that link is here...and it, too, is a must read.

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Texas university endowment's gold investment will prompt others, Lassonde tells King World News

Here's a very short blog that was posted over at the KWN website on the weekend. The title is self-explanatory...and the link is here.

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CNBC - Dump SLV for Physical Silver!

Here's a youtube.com video that was posted on April 15th that reader 'David in California' sent me on the weekend. It's all about physical metal in hand...not paper silver. The 2-minute clip is well worth watching...and the link is here.

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Anatomy of a short squeeze: Alasdair Macleod

I pilfered this story...and Chris Powell's preamble...from a GATA release over the weekend.

Writing at GoldMoney.com, economist and former banker Alasdair Macleod tells a story explaining how short squeezes can drive values to fantastic levels even when the relevant fundamentals are terrible. Short squeeze circumstances, Macleod writes, apply in gold and silver today even as their fundamentals are powerful.

This, too, is a must read. Fortunately it's only a handful of paragraphs...and the link is here.

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Be Your Own Central Bank; Own Gold, Silver: Marc Faber

Famed investor Marc Faber, Editor and Publisher of The Gloom, Boom & Doom Report said investors "should be their own central banks and gradually accumulate gold reserves as a currency", rather than speculating in gold.

I thank Russian reader Alex Lvov for sharing this cnbc.com story with us...and the link is here.

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Audio of Rickards interview with King World News

The last post for today is an interview with Jim Rickards over at King World News. Late last week Eric posted the blog...now here's the interview in its entirety. The link is here.

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But we didn’t have a free market silver price; we had a depressed price due to concentrated short selling on the COMEX. As a result of the depressed price and less production and more consumption, we are now staring down the gun barrel of a silver shortage. - silver analyst Ted Butler...April 16, 2011

Gold volume traded yesterday, net of all roll-overs, was just under 190,000 contracts...which is the biggest volume day we've had in a while. The preliminary open interest number was 8,110 contracts. After watching the trading action yesterday, I wasn't quite sure what this number was going to be, so I'm not disappointed...nor surprised.

Gold's final open interest change for Friday's trading day showed an increase of 10,263 contracts...which was an improvement from the preliminary number of 15,556 contracts...but still monstrous. Gold is now getting into the danger zone as far as a sell-off is concerned. Although last week's Commitment of Traders Report for gold showed a decline, Ted figures that we've had massive deterioration since then...unless they've been covering shorts and hiding them with spread trades during the current reporting week [which ends today]...which is what they did the prior week.

The April open interest in gold is still showing 1,136 contracts left to deliver...but with what will be delivered both today an tomorrow, I expect this number will be reduced by more than 50% within the next 48-hour period.

I said at the top of this column that the silver volume was 'monstrous'...and that was an understatement. The net volume was around 115,000 contracts, which is off-the-charts monstrous! The preliminary open interest number was +3,693 contracts.

As far as Friday's final open interest number, this is what I had to say about its prospects in my Saturday column..."The preliminary open interest number was a surprisingly low 1,925 contracts, which was way better than I expected. Based on this, there might have been some short covering in the futures market yesterday [Friday]. I'll have a better idea of that when the final o.i. numbers are posted on the CME's website on Monday morning.

Well, guess what, the final number showed a big decline of 2,382 contracts. Without doubt the bullion banks were short covering in the Comex silver futures market on Friday...and that's what drove up the price. I'll be really interested in seeing what Monday's final open interest numbers are in both gold and silver when I get up later this morning.

The backwardation shows that silver is selling at a premium to the spot month all the way out until the December 2012 delivery month. The backwardation from the current month to the December 2015 delivery month, currently sits at fourty-nine cents...which is a bit of an increase from last week.

As Ted mentioned on the phone yesterday...gold looks hugely overbought...with the bullion banks really piling in on the short side. But, in silver, it's the opposite...they've been covering like mad at every opportunity. Last Friday's big decline in silver's open interest in the COT report, was a very pleasant surprise. Ted figures that if/when the bullion banks do pull the plug on gold and harvest all these newly-minted technical longs, silver may hardly be affected at all.

That remains to be seen, of course...but, with a bifurcated market such as this, I have no plans to sell a single share or a single ounce of anything. I'm a 'buy-and-hold' investor...and I've been in gold and silver since the HUI was trading at 35. I just don't have the time to try and second-guess this market...especially trying to pick short-term tops and bottoms. Five or ten years ago, it was pretty easy...but now the precious metal prices recover in days...or even hours. Years back it used to be weeks...or even months. Unless you day-trade these markets for a living, I wouldn't attempt it myself. But...I'm not you.

Here's the 1-year gold chart...

And the 1-year silver chart...

Silver and gold sold off a bit during the Far East during their Tuesday trading day...but have recovered virtually all their loses now that London has opened for the day. Volume in both metals is lighter than it was this time on Monday...but that all got blown to hell once the S&P negative watch came out...and the bullion banks killed the subsequent price spikes. That's why yesterday's final open interest numbers will be of interest when they're reported later this a.m.

It could be another wild day in New York trading today...so be prepared for anything.

Before I forget, for all you Casey Research subscribers...Miles Franklin still has that special discount offer on 1-ounce Austrian Philharmonic silver bullion coins. For the moment, that offer is still open, as he still has a few monster boxes left...and if you wish to partake and 'buy the dip'...and if you need more information...please click here.

That's enough for one day...and I'll see you here tomorrow.