Silver Hits Record Near $50 For the First Time Since 1980

Gold was up a few dollars in Far East and Early London trading, but opened flat in New York yesterday morning.

But, beginning at 8:30 a.m. Eastern right on the button, a rally began that began to develop some legs shortly after 11:00 a.m. However, at 11:31 a.m. in New York, a not-for-profit seller showed up...and that was that.

The gold price recovered after both sell-offs...but the potential runaway price rally to the upside was halted right in its tracks.

This was a scene repeated at precisely the same time in silver, platinum...and palladium.

Here's the platinum chart, with Thursday's trading day represented by the red trace.

And here's palladium...also represented by the red trace.

Note how all metals were on the rise starting at that 8:30 a.m. time...with the not-for-profit seller showing up at the exactly the same times across the board in all these metals.

As GATA's Chris Powell famous quotation goes..."There are no markets anymore, only interventions."

The dollar continued its losing ways in morning trading in the Far East...and hit its low of the day about half past lunchtime in Hong Kong...which was 11:30 p.m. Wednesday night in New York. From there it recovered half its losses before trading ended at 5:15 p.m. Eastern time yesterday afternoon. If you can read anything into Thursday's dollar chart pattern that would account for the price action in the precious metals starting at 11:31 a.m. Eastern time yesterday morning...you're a better person that I am.

Despite the mostly positive price action [and positive closes in both metals] the average retail investor in the precious metals was a seller yesterday...particularly in the silver stocks. You would have thought that the price had dropped a couple of bucks, instead of closing well in the black.

One thing this kind of selling stupidity shows is that the REAL story behind silver's rise in price, is not known by the vast majority of the silver-investing public. They're just buying these stocks because they're going up. Ted Butler and I spent a lot of time on the phone talking about this very thing yesterday.

The CME Daily Delivery Report showed that 19 gold, along with 6 silver contracts were posted for delivery on Monday. This is a strange report, as First Day Notice for delivery into the May contract is today...and I get the feeling that these 25 contracts in gold and silver should be delivered today...not Monday as the report states.

For a change, there were no reported changes in either GLD or SLV ETFs yesterday...and the U.S. Mint had no sales report either.

There was some activity over at the Comex-approved warehouses on Wednesday. They reported receiving 548,024 ounces of silver...and shipped out 146,601 ounces of the same, for a net inflow of 401,423 troy ounces. Of note is the fact that the JPMorgan Chase depository took in 110,392 troy ounces...but I'm not reading a thing into that...and you shouldn't either. The link to the action is here.

Yesterday's price action in silver brought the following comments from reader Scott Pluschau..."Ed, another classic move from the 11:30 a.m. high today of $49.56...right into the Comex close at $47.58. Do you think the kitchen sink was thrown at silver to keep the margin calls down? I would imagine they are doing their best to paint a double top formation on the daily chart, and pray for further long liquidation."

Also silver-related yesterday was the news that the CME had raised margin requirements in silver for the second time this week. Reader Charlie Orr sent me a very short piece on this that was posted over at dannorcini.blogspot.com which is well worth your time...and the link is here.

Before I post my stories, here's a graph that was sent to me by Washington state reader S.A. I like these kind of charts best, because the message they are sending is self-evident...and I don't have to write anything in way of explanation.

My first two stories are all about the Fed...or the reaction to the FOMC meeting...and "Helicopter" Ben's subsequent press conference.

¤ Critical Reads

Why the power of the mighty Federal Reserve is finally on the wane

The first story on this is one that Scott Stephens sent my way last night. It was posted over at The Telegraph yesterday afternoon.

It's only right that central banks, having messed up so monumentally, are made more transparent and accountable. Yet the Fed's initiative marks more than just an end to the hubris of the Greenspan era. It may also be more widely symbolic of the passing of dollar hegemony. What Valery Giscard d'Estaing once called the dollar's "exorbitant privilege" as the dominant international reserve currency has never before looked so vulnerable.

It's not an overly long read...and the link is here.

View full GSD edition

Fed's secrecy is deceitful and corrupt, Texas professor Auerbach says on Bloomberg TV

This is a story that I extracted from a GATA release last night...and I borrowed Chris Powell's preamble as well.

Interviewed Tuesday by Bloomberg Television, University of Texas Professor Robert Auerbach, formerly an economist for the Federal Reserve and an aide to the late House Banking Committee Chairman Henry Gonzalez, D-Texas, recalls how the Fed has a long, corrupt history of hiding and then destroying its records to keep the public ignorant of what it is really doing. Congress should legislate to make the Fed more accountable, Auerbach says. It's something to keep in mind in regard to GATA's recent lawsuit against the Fed to obtain gold-related documents. The interview is not quite eight minutes long and you can watch it at Bloomberg TV here...and it's definitely worth your time.

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Adjusted For Inflation, Dollar Hits Fiat-Era Low

Here's another piece that started off as a GATA release last night. It's a story that was posted over at cnbc.com late last night.

“The recent parabolic spike in silver and to a lesser degree gold, shows that the market considers a ‘disorderly decline’ of the U.S. dollar an increasing possibility,” said Jim Iuorio, managing director at TJM Institutional Services. “Devaluing your currency has always been a risky proposition...and its success is dependant on knowing how to exit gracefully from monetary stimulus.”

This isn't a long piece...but it's a must read...and the link is here.

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Wal-Mart: Our shoppers are 'running out of money'

Here's a cnn.com story from yesterday afternoon that's courtesy of reader George Findlay.

Wal-Mart's core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried, CEO Mike Duke said Wednesday. Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in.

Wal-Mart is considered a barometer of the health of the consumer...and the economy. To that end, Duke said he's not seeing signs of a recovery yet.

Mike Duke's comments should come as no surprise to anyone...and the link to this worthwhile read is here.

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Japan enters recession but no yen printing yet

Here's another Roy Stephens offering from The Telegraph that was posted on their website late last night.

In its first forecasts since the crisis, the Bank of Japan judged that gross domestic product (GDP) grew 2.8pc in the year to March, down from a 3.3pc prediction in January. That implied two quarters of falling economic activity, which represents a recession.

With a national debt twice the size of its economy...and an ageing population...Japan was struggling even before the March 11th earthquake damaged much of the infrastructure along its northeast coast and power outages forced companies to shut down production.

This is a very short, but very well written story that's more than worth your time...and the link is here.

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Wesley Legrand from Australia

Most long-time readers will recognize his name from the many contributions that he has made to this column over the years. Wesley is fund manager and corporate advisor at Grand Private Equities in Adelaide.

Here is his interview on Switzer TV Business Channel that was posted yesterday. This is an excellent clip...and Wesley is one of those kind of guys that can really think on this feet. He spends a fair amount of time discussing the precious metals...and their relationship to world-wide currency debasement. It's also interesting because it gives the viewer an opinion of world events far away from the influences of the Wall Street spin machine. The video runs for 11:34...and gets better the further into it you get. In my opinion it's a must watch...and the link is here.

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Silver hits record near $50 for first time since 1980

Here's a Reuters story from yesterday that was sent to me Roy Stephens.

Silver soared to an all-time high on Thursday and gold rose to another record, as the dollar fell and as signs that the Federal Reserve would maintain a loose monetary policy stoked inflation worries.

"I'm seeing all types of bullish call buying. They are in the money and far out, including December, March and September calls," said COMEX options floor trader Dominick Cognata. "They are looking to buy cheap call spreads because this thing looks like it may shoot up to $70 or $80."

Those prices would be 'jacks for openers' as GATA chairman Bill Murphy is wont to say. The story is definitely worth the read...and the link is here.

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Gold, Gresham's Law & the Dong

Here's a great piece posted over at my good friend Peter Spina's website [goldseek.com] that reader U.D. sent my way yesterday.

The author, Ben Traynor, is the editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. In part, he has this to say about the Vietnamese dong...which is their national currency. "Unable, therefore, to directly incentivize people the hold paper money, the authorities have resorted instead to marginally disrupting gold's monetary function. But this won't work. People will still prefer to hold gold because the Dong is failing to fulfill one of the core functions of money. It is a terrible store of value.

That is why the Vietnamese continue to hoard "good" money [gold] while passing the bad stuff around...just as Gresham's Law predicts.

Vietnam is stuck in an inflation-devaluation cycle. Ordinary people do not trust its paper currency, and sell it for something better. This reduces its value against other currencies. It also reduces its value against goods and services, which takes the form of rising consumer prices. All of which serves to make the Dong even less popular.

This is a longish read...but an absolute must read...and the link is here.

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Until the lion has his own historian, the hunter will always be a hero. - African proverb

Gold volume yesterday was rather large...a bit over 180,000 contracts net of roll-overs. The preliminary open interest number showed a surprisingly small increase of 1,685 contracts...and that bodes well for a big decline in gold's open interest in the CME's report later this morning.

The final open interest figure for Wednesday's big up-day was a rather chunky 7,678 contracts but, considering the size of the move, the number could have been much worse than that. The preliminary o.i. number posted yesterday was 14,839 contracts, so I guess we should be thankful for small mercies.

Once again there was monstrous volume in silver...well north of 100,000 contracts net of all roll-overs. I was shocked at the preliminary open interest number...as it showed a decline of 461 contracts. Along with gold's final o.i. numbers this morning, I will be more than interested in what the final silver number is as well.

As [pleasantly] shocked as I was with Thursday's preliminary open interest number, I was totally blown away by Wednesday's final open interest number...because that was the day that silver rose $3.50 in just a few hours. I was expecting the worst, but the final o.i. number showed a stunning decline of 7,497 contracts.

Not that I wish to look a gift horse in the mouth, but I'm wondering if Wednesday's big rally was short covering...or are 'da boyz' being fashionably late in reporting o.i. declines from earlier this week? Ted Butler's comment yesterday that JPMorgan et al had harvested as many tech fund long contracts as they could in this engineered price decline in silver, is a comment that's probably right on the money...and you can add Thursday's final open interest number to that decline when it's posted later this a.m.

First day notice for delivery into the May silver contract is today...and according to this morning's preliminary report, there are only 2,143 contracts left open...so unless something out of the ordinary happens, there shouldn't be any problems for silver during the May delivery month.

At 3:30 p.m. sharp this afternoon, we get the new Commitment of Traders Report for positions held at the close of trading on Tuesday. It should be a sight to see...and I'm sure that Ted will extrapolate those figures to include the monster o.i. decline in silver on Wednesday, plus the decline that's posted this morning. I'll report on that in Saturday's column. The link to the COT report, when it's posted, is here.

The silver backwardation issue shows that the premiums declined a bit...and silver now slides into backwardation in May 2012...rather than later in 2012...which is what it was showing a few days ago. The backwardation between the May 2011 delivery month...and the December 2015 delivery month, is now up to about 77 cents. Here's the link to yesterday's Settlements page so you can see for yourself...and the 'Settle' column is what you need to look at.

Looking at the 3-year silver graph once again, the overbought position continues...but from a Commitment of Traders standpoint, Ted Butler says that the internal structure of the silver market has hardly looked better...and nothing would surprise him as far as an up-side break-out in price is concerned.

On the other hand, gold's open interest has been climbing slowly but relentlessly higher with each passing week. This trend began during the second week of February...which you can check out in this terrific graph linked here. However, gold is not extremely overbought...and is a long way from its worst-case positions from several years ago...but Ted thinks the possibility exists that JPMorgan could engineer a sell-off in gold...and this would undoubtedly spill over into silver as well.

But, having said that, any correction in either gold or silver will be shallow...and of very short duration. And, as Richard Russell says, all dips are buying opportunities...and I echo that sentiment. Here's the 3-year gold chart.

Price action in Far East and early London trading is comatose...and that's being kind. The dollar is flat. Gold volume [9,050 contracts net] is the lowest I can ever remember for this time of day...4:54 a.m. Eastern. Silver's volume is a little busier, but not by much. I guess everyone's taking a rest after the week just past...as it was frantic...especially in silver.

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Today is Friday...and the last trading day of May. One has to wonder what JPMorgan et al have in store for us today. But, whatever it is, I don't think they'll keep us in suspense for too long.

I hope your Friday goes well...and that you have a good weekend...and I'll see you here on Saturday.