Old Gold Fundamentals Are 'Passé' – Peter Munk, Barrick Gold

The gold price was pretty steady all through Far East and London trading yesterday...and also through morning trading in New York...as the world waited for "Helicopter" Ben to speak.

The gold price began heading north around 10:45 a.m. when the dollar hit its zenith and began to roll over....and the gold price hit its absolute high at precisely 4:00 p.m. Eastern time, before sliding a few bucks into the close of electronic trading.

This was a new record high close for gold. Volume was very decent.

The silver price rose to just over $46 in early Far East trading on Wednesday morning, before declining slowly into the Comex open in New York.

By 9:30 a.m...silver was back above $46...but that didn't last, as the low of the day [$44.86 spot] occurred around 10:45 a.m. Eastern.

From there, silver crawled slowly higher, before heading north with a vengeance at 12:30 p.m....the same time as gold. Silver's high came minutes before 4:00 p.m. at $48.32 spot. Silver's low-to-high move was $3.46 in just over five hours. Silver volume was huge, but most of it was roll-overs out of the May contract.

The dollar opened at 73.80 in Far East trading yesterday morning...dipped down to 73.5 late in the Hong Kong morning...before climbing to it's high of the day around 10:45 a.m. in New York. This high, just under 74 cents, was also the low of the day for both silver and gold.

From there, the dollar headed south, as the bullion prices headed north. The dollar closed the New York trading session at 73.33...down about 60 basis points from its 10:45 a.m. high.

For once there was co-relation between the dollar and precious metals prices that made some sense.

The gold stocks pretty much mirrored the gold price...and the chart of the HUI below reflects that. With the silver price on a tear...the silver equities really sailed, with some pretty eye-popping gains across the board. Of course the equities aren't back at their old highs just yet...but I doubt that it will take long if these break-outs in both gold and silver really develop some legs.

The HUI finished the Wednesday trading session up 2.03%.

Here's Nick Laird's 'Silver Sentiment' graph...and we've got a ways to go to get back to the old highs...but another few days like yesterday should do the trick.

The CME's Daily Delivery Report showed that 191 gold, along with 81 silver contracts, were posted for delivery on Friday. Of course it was JPMorgan as the biggest issuer and stopper in their client and house accounts that provided all the action in gold...and the link to it is here.

There were no reported changes in the GLD ETF once again but, like yesterday, it was a whole different ball game over at the SLV ETF as, for the second day in a row, another huge chunk of silver was withdrawn. This time it was 6,390,835 troy ounces. That's 10.8 million ounces in just two days! Once again, this had nothing to do with the big drop in silver prices on Monday and Tuesday...this metal was withdrawn by an authorized participant because it was urgently needed elsewhere.

The U.S. Mint had another sales report yesterday. The sold another 19,000 ounces of gold eagles and 3,000 one-ounce 24K gold buffaloes...but no silver eagles. Month-to-date, gold eagle sales total 106,500 troy ounces...one-ounce 24K gold buffaloes sales are 20,000...and there have been 2,819,000 silver eagles sold.

Over at the Comex-approved depositories on Tuesday, they did not receive any silver, but reported shipping out 104,493 troy ounces. The link to the action is here.

My bullion dealer had another big day yesterday. One can only imagine how big silver bullion sales are in the United States...along with larger cities here in Canada...if my coin guy is doing this well here in Edmonton.

Here's a chart that Nick Laird over at sharelynx.com sent me last night. It's titled "US House Price/Gold Ratio"...and you can see that it has experienced a rather precipitous decline beginning in 2002.

¤ Critical Reads

Federal Reserve cuts forecasts for growth in the US

Federal Reserve chairman Ben Bernanke has signalled June will mark the permanent end of quantitative easing even as the central bank cut its growth forecasts for the US economy this year. Now why don't I believe that he's being entirely honest? Maybe because his lips are moving.

One has to wonder how his promise of keeping interest rates low can be fulfilled without printing more money. I'll wait to see what Jim Rickards [and others] have to say about this in the days ahead.

This story was posted very late last night in The Telegraph...and is courtesy of reader Roy Stephens...and the link is here.

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New York Sun: Omitting gold, Bernanke offered only the illusion of transparency

This headline...and the preamble below...is courtesy of Chris Powell. This is an editorial that appeared in the New York Sun yesterday just moments after Bernanke spoke.

Federal Reserve Chairman Ben Bernanke's unprecedented press conference today, the New York Sun says, delivered only "the illusion of transparency," since "it's hard to see much illumination in a press conference in which the chairman of a central bank whose currency is collapsing fails to utter even once the word 'gold.'" The Sun's editorial is headlined "The Dog that Didn't Bark".

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

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Ron Paul says Bernanke ducks the issue

Inflation is already here, says Texas Republican Ron Paul. Paul, the Federal Reserve’s most powerful critic, was reacting to Ben Bernanke’s press conference. Here’s a lightly edited transcript of his remarks to the MarketWatch Radio Network. Paul is the chairman of the House monetary policy subcommittee, and is thinking of running for president again in 2012.

It's a short read...and there are a couple of video clips imbedded as well. I thank reader George Findlay for sending them along...and the link is here.

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Fed Halting Bond Purchases Equals Big Problems: Chris Whalen

Eric King over at King World News sent me a couple of blogs last night regarding Bernanke's speech. Whalen states the following...

"The bottom line is that they seem to be I think lost in a policy sense. They are going to continue to muddle along and keep rates where they are, so there doesn’t look to be any change in price guidance coming from the Fed....The problem is that there aren’t many ways for the Fed to help the economy if they can’t re-liquefy households with cheaper credit. So if you don’t have households getting a little bit of a lift in terms of disposable income we are not going to see a rebound in the economy."

It's a short blog...and I consider it worth your time...and the link is here.

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Fed’s Actions Cause Massive Gold & Silver Buying: Peter Schiff

The second blog that Eric sent me is this short read by Peter Schiff. Peter states the following...

"You could see the dollar begin to fall as soon as the statement was released, and then the fall intensified when he [Bernanke] began opening up his mouth. He’s either lying or he's incompetent or a combination of both, but neither inspires confidence in our country, our currency or our economy. I mean whenever Ben Bernanke opens his mouth you want to sell anything that is related to the United States."

Not too many shades of grey in this. It's another short read that's well worth your time...and the link is here.

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UK has third biggest budget deficit in Europe

Britain’s shortfall in its finances amounted to 10.4pc of gross domestic product (GDP) in 2010, according to data for each of the EU’s 27 member states from the statistics agency Eurostat. That meant the UK had a bigger deficit, or annual shortfall, than the recently bailed-out Portugal and also Spain, which is viewed as the next euro-using nation to potentially need international aid.

This is a story that was in Tuesday edition of The Telegraph...and I stole the story from yesterday's King Report...and the link is here.

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S&P cuts Japan rating outlook to negative

“We revised the outlook on the long-term rating on Japan to negative to reflect the potential for a downgrade if fiscal deterioration materially exceeds these estimates in the absence of greater fiscal consolidation,” the rating agency said in a statement.

This is another offering from reader George Findlay...and it's a posting from marketwatch.com yesterday...and the link is here.

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Markets shun debt of rescued nations

Here's a story out of last night's edition of The Telegraph that was sent to me by reader Roy Stephens.

Greece, Ireland and Portugal enjoyed no respite as investors grew still more reluctant to hold their debt, taking the yields, or returns, offered by the governments' bonds to new highs. The yield on two-year Greek debt passed 25pc for the first time, while yields on 10-year debt climbed further over 15pc. Portuguese and Irish 10-year debt yields also hit records, trading around 10pc.

The photo that accompanies this article is worth the trip all by itself...and the link is here.

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Are You Smart Money?

Yesterday's edition of Casey's Daily Dispatch contained a short commentary by BIG GOLD editor Jeff Clark.

You've probably heard the term "smart money" used by various pundits, a reference to those investors and institutions that are consistently better at making money than the uninformed masses. Which begs the question: are you one of them?

This is definitely a must read...and you have to scroll down a tad to find it...and the link is here.

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The Waterfall Decline in the US Dollar Has Begun: James Turk

Eric King just slid this James Turk blog into my in-box a few minutes before I hit the send button. I haven't had time to even read it yet, but I would suggest that it's a must read...and the link is here.

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Old gold fundamentals are 'passé – Peter Munk

The traditional supply and demand fundamentals that have determined the gold price in previous decades no longer apply, Barrick Gold chairperson and founder Peter Munk asserted on Wednesday. Gold is being driven by “a fundamental and global growing insecurity, a fundamental and global growing lack of confidence in the world of everything they were brought up to believe."

This is a 2-minute read that's worth your time...and I thank reader George Findlay for sending it along...and the link is here.

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Certainly, there is a limit as to how many leveraged speculators can be flushed from the market on these engineered take downs. My sense is that we have witnessed most, if not all, of the potential speculative long liquidation already. There wasn’t a tremendous amount of speculative long silver fruit on the tree going into the sell-off, and after the commercials shook it good and hard these past few days, there’s a lot less left to still be shaken off. As always, when the commercials can’t force any further speculative long liquidation that marks a price bottom. - silver analyst Ted Butler, 27 April 2011

Gold volume on Wednesday was just over 160,000 contracts net of what few roll-overs there were. Of more concern was the preliminary open interest number, which was up a very chunky 14,839 contracts. On the face of it, this means that yesterday's big rally in gold was caused by new speculative long buyers coming into the market...and they, in turn, were met by JPMorgan et al...who took the short side of all these new long positions. So it looks like the same old, same old routine...but I'll reserve judgment until the final o.i. numbers are posted later this morning.

The final open interest number in gold for Tuesday's trading day showed an increase of only 40 contracts...which is nothing in the grand scheme of things...and certainly a vast improvement from the preliminary number which was +7,609. I was very happy about this.

Silver's volume was pretty heavy yesterday as well, but once the roll-overs out of the May contract were removed, there really wasn't much in the way of new buying or selling...under 20,000 contracts net...which is nothing at all. The preliminary open interest number showed a smallish increase of 1,923 contracts, which is rather tiny in the face of a $3.46 up-move in silver's price yesterday. I've got my fingers crossed that it was a short covering rally...but I'll wait until the final number is posted before breaking out the party favours.

Tuesday's final open interest number in silver was a sight to behold, as it showed a monster decline of 9,604 contracts. I had said yesterday that I was "delighted with the preliminary open interest number of only 663 contracts, as the final number posted later this morning should show a rather large decline." And that, dear reader, is exactly what we got...and an even bigger decline than I was expecting, so a lot of short positions got covered on Monday and Tuesday.

These final open interest numbers in both silver and gold will be in tomorrow's Commitment of Traders report...and both Ted and I are expecting this report to be very positive.

Silver's April open interest declined to 81 contracts in the preliminary report...which is exactly what was posted for delivery tomorrow in the CME's Daily Delivery Report further up in this column...so the deliveries worked out fine in both silver and gold...and the April delivery month will slide into the history books with no fanfare.

The backwardation situation in silver is little changed from Tuesday's numbers.

Gold is up six bucks now that London has been trading for a couple of hours...and silver, which had been up almost a dollar during early Far East trading, is only up about 35 cents as of 4:56 a.m. Eastern time. And, for whatever reason, the CME's website is not showing the current volume figures.

It's hard to say whether the worst is behind us as far as price declines go. The open interest in gold is still up there...but silver's open interest has improved quite a bit. Both metals are still well into overbought territory but, as I've said before, it may not matter this time...and even Barrick Gold's CEO Peter Munk says that the "old gold fundamentals are now passé." From his lips, to God's ears!

But from and 'old gold fundamental' point of view, gold is now well into overbought territory.

And silver has been in overbought territory for some time.

Is this time different? I don't know, but I would suspect that we'll find out the answer to that in pretty short order.

See you tomorrow.