Mexico Buys 93 Tonnes of Gold

The gold price didn't do a whole heck of a lot during Far East or London trading on Wednesday. There was a tiny rally that started around noon in London...and reached its zenith [and its high of the day] about ten minutes after Comex trading began in New York...which was about an hour and change later. This price was just above yesterday's closing price in New York.

From there, gold price was held pretty flat until about 10:15 a.m. Eastern before the price began heading south...with the bottom coming about two and half hours later around 12:30 p.m. Once the selling stopped, the gold price recovered a bit into the close of electronic trading. Volume was monstrous.

Silver had its high price tick in early London trading before it, too, rolled over and headed south...with the bottom coming at 12:30 p.m. right on the button. Every feeble rally attempt that silver made after that got sold off into the close of the New York access market at 5:15 p.m. Eastern. Volume in silver was very heavy as well.

From the open, the dollar rose about 20 basis points to its high of the day around noon Hong Kong time on Wednesday, before rolling over and falling 60 basis points to its low of the day in New York at precisely 10:00 a.m. Eastern. Then, by the end of the trading day, the dollar had recouped all its losses...and closed the day unchanged from Tuesday.

The gold price made its only decline of the day during a two hour period between 10:30 a.m. and 12:30 p.m. in New York. During that time, the dollar rose a mere 35 basis points. One wonders why the gold price didn't rise while the dollar fell 60 basis points?

If you compare the gold and silver price charts above, to the dollar chart below, you'll see that the dollar had very little to do with their price patterns during the Wednesday trading day.

The gold shares pretty much followed the gold price but, amazingly enough, they did not get sold off by very much...and the HUI spent an impressive party of the day in positive territory...even closing up a hair.

The silver shares, despite another big hit to the price, were the stars of the day...and quite a few had big gains. Was this bottom fishing? I'm guessing that it was...but one reader suggested that it was traders that were long the metal and short the shares that were unwinding their positions yesterday. I suppose that's a possibility...and may also explain why the gold stocks didn't get their heads handed to them yesterday.

The CME's Daily Delivery Report showed that 76 gold, along with 23 silver contracts, were posted for delivery. The biggest issuer in both was JPMorgan...and the biggest stopper in both was the Bank of Nova Scotia...and the link to the action, such as it was, is here.

Well, there was big action over at the precious metal ETFs yesterday. GLD reported another decline...this time it was 165,719 ounces that were withdrawn. But the withdrawal from the SLV ETF was the shocker...and I had to look at the number a few times before I would accept it. SLV showed a withdrawal of...wait for it...16,776,286 troy ounces!!!

Was that withdrawn by an authorized participant...or was it honest liquidation?. I don't know. All I do know is that, in the last three business days, SLV has shown a total withdrawal of 20.9 million ounces...about 6% of the silver in the fund.

The U.S. Mint had its second sales report for May yesterday. They reported selling another 5,000 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...along with a smallish 47,000 silver eagles. Month-to-date sales totals show that 24,500 ounces of gold eagles...3,000 one-ounce gold buffaloes...along with 701,000 silver eagles have already been sold this month.

Tuesday was a fairly busy day over at the Comex-approved warehouses. They reported receiving 1,434,657 troy ounces of silver...and shipped 603,181 ounces out the door, for a net increase of 831,476 ounces. The JPMorgan depository received 200,879 ounces of the total amount. The link to the action is here.

Silver analyst Ted Butler posted an essay to his paying subscribers yesterday...and I'm stealing this paragraph and a bit from it...

"The decline in silver has been brutal and fear-inspiring. Let me try to dissect it and put it into the proper perspective.The current takedown has been a typical COMEX-generated production. In little more than ten minutes in the absolute least liquid trading time possible, light COMEX predatory trading took the market down almost 13%. That takedown resulted in the continuing follow-through to the downside. I'm told the CFTC is looking into that trading, but then again, they have been looking into the silver manipulation forever. (Note to CFTC: time to stop looking and start doing.) While extreme, this COMEX price smash is remarkably similar to previous silver smashes where the commercials sold small amounts of contracts in order to start an avalanche to the downside, so that the commercials could buy at distressed price levels afterward."

"Also similar, is the general misunderstanding by the world at large of what actually occurred in these price smashes. That's because the world at large does not and cannot recognize that the silver market is manipulated. So when these price smashes occur, the world invents reasons for them other than the simple truth of a COMEX-induced manipulation."

Washington state reader S.A. sent me this rather interesting graph yesterday that showed Canada's deficit compared to the leading industrialized nations. If we're doing so great up here, why is this country doing so poorly? That's because 75% of everything we make is sold to the U.S...and they aren't buying as much of our 'stuff' as they used to.

I have a huge pile of stories today...and most of them are precious metals-related.

¤ Critical Reads

SEC Requests Comment on Increased Disclosure for Short Sellers

My first offering today is this Bloomberg piece from yesterday that's courtesy of Washington state reader S.A.

The Securities and Exchange Commission is considering a volunteer pilot program in which each short-sale trade would be immediately reported on the so-called consolidated tape where all equity transactions are recorded. The SEC opened the comment period with 23 questions on the monitoring of short selling. It’s seeking comment “on both the existing uses of short selling in securities markets and the adequacy or inadequacy of currently available information regarding short sales,” the regulator said.

I think this is a hell of an idea that's long overdue...and Ted Butler echoes that sentiment. The link is here.

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Asian trio to study dollar alternative: report

Officials from China, Japan and South Korea agreed on Wednesday to study a proposal to use their own currencies for regional trade settlement instead of the U.S. dollar, according to a Dow Jones Newswires report. The report cited a joint communiqué issued in Hanoi.

I thank reader George Findlay for sending me this marketwatch.com piece from yesterday...and the link is here.

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Interest Rates in India Raised to Slow Inflation

Here's a story out of Tuesday's edition of The New York Times that was sent to me by reader Phil Barlett.

In a bid to rein in persistently high inflation, India’s central bank raised interest rates on Tuesday more than analysts had expected and signaled that it would be willing to raise borrowing costs even further.

The article, filed from Mumbai, is linked here.

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Superman Renounces U.S Citizenship...Canada Offers Safe Haven

Washington state reader S.A. sent me two stories on this yesterday. You just know you're country is in trouble when this sort of thing happens. The story about Superman renouncing his citizenship is posted at comicalliance.com...and is linked here. The safe haven offer from Canada is posted over at Toronto's National Post...and is headlined "Come to Canada, Clark Kent". The offering from the National Post is by far the more intelligent of the two stories, so if you pick one to read...that should be the one...and the link is here.

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Ralph Benko: Fort Knox vs. Fort Fed

This story did not have the correct link yesterday...so I'm running it again today.

Here's another blog posted over at Forbes. Chris Powell sent it out as a GATA dispatch shortly after he sent out the previous story. Powell's preamble is lengthy, so rather than stealing it, here's the link to that...and the Forbes blog. Both are worth your time...and the link is here.

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Sprott tells King World News he has more silver than ever

For whatever reason, this story disappeared into cyberspace...and never made it into my Wednesday column like it was suppose to, so here it is today.

Here's a blog that Eric King sent me last night that also ended up as a GATA release shortly thereafter, so I'm just going to steal Chris Powell's most excellent preamble...and then post the link.

There's been some controversy over Canadian fund manager Eric Sprott's sale of some shares of his company's spectacularly successful physical silver fund, PSLV. In an interview yesterday with Eric King of King World News, Sprott remarked that the sale was small, that the proceeds were entirely reinvested in silver-related assets, that he continues to expect silver's price to return to a 16-1 ratio to gold's price, and that he now owns more silver than ever.

Here you have it from the man himself...and the link to this must listen audio interview is here.

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Mexico went from 7 to 100 tonnes in a flash; Russia, Thailand bought too

As Chris Powell says in the preamble of this GATA release..."How strange. The IMF never issued a press release about the Mexican, Russian and Thai gold purchases. Apparently, at least to the IMF, only gold sales are news."

The story was in yesterday's edition of The Wall Street Journal...and it's printed in the clear in this GATA release linked here. I would think it's worth the read.

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Silver, Gold Futures Dropping as Soros Reported to Have Sold

Here's a Bloomberg piece that Washington state reader S.A. sent me yesterday, which is typical of the drivel that passes for serious reporting these days. It's full of half-truths and misleading stories, as the reporter attempts to link silver's big price decline to anything but the real reason. The piece is worth skimming, but only the photo is worth spending any time on...and the link is here.

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How Far Does Silver Fall?

In yesterday's edition of Casey's Daily Dispatch comes this piece from BIG GOLD editor, Jeff Clark. It's his version of what's going on in the silver market. You have to scroll down a bit to find it...and the link is here.

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CME Margin Hike Is 4th AND 5th - Charting The Parabolic Rise In CME Silver Margin Hikes

In one release, the CME has performed two concurrent margin hikes, which means today's action is the 5th margin hike in 8 days, a previously unheard of event! As of May 9th, the initial margin is $21,600, or 11% of the contract value, while the maintenance is $16,000.

Ted says that margins should be higher anyway...and will probably rise more as silver continues its rally. I ran a piece very similar to this yesterday as well. This is a zerohedge.com story that is, once again, courtesy of Washington state reader S.A...and the link is here.

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Carlos Slim's mining group upped bet against silver in Q1

I've mentioned Minera Frisco a few times in this column, as it had sold forward over 70 million ounces of silver...plus a bunch of gold and base metals as well. Now they've added another 25 million ounces to their previous disastrous decision. Even at the current price of $39 the ounce, Ted Butler says that the company has lost over $500 million on these positions. And when silver was approaching $50/ounce...they were over $1 billion in the hole.

This story alludes to that...and is a must read from one end to the other. Once again I thank Washington state reader S.A. for sharing this Reuters story with us...and the link is here.

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What's gold really worth? Central banks sure don't want you to find out

Here's another gold story that Washington state reader sent me early this morning, which made it into a GATA release shortly after that.

It's a piece that was posted at marketwatch.com...which bears the headline "Is Gold About to Go Vertical". Chris Powell's preamble is extensive.

'All of the above' is a must read...and the link is here.

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Long-time readers may remember a pet theory of mine that I had kind of forgotten about until this week. My theory was that before we get the real blast to the upside, amid the termination of the manipulation or a physical shortage, we would get an unbelievable shakeout to the downside. After that downside shock...and after the last speculator that could be tricked and frightened into selling did sell, the commercial would just put their hands in their pockets and not sell on the upturn. That selling void would create the conditions for the final blast-off. This sell-off sure feels like the big one to me. - silver analyst Ted Butler, 04 May 2011

As I mentioned at the top of this column, gold volume was very heavy...just over 228,000 contracts net of all roll-overs. The preliminary open interest number is a rather chunky 6,410 contracts...and it will be interesting to see what the final number shows later this morning.

Gold's final open interest number for Tuesday's trading day showed a decline of 5,561 contracts. This is in line with the drop I was expecting, as the preliminary gold o.i. number showed a tiny increase of 873 contracts...so the final number was no surprise.

Silver's net volume yesterday was around 145,000 contracts...and the preliminary open interest numbers showed an increase of 5,908 contracts...and the final number in silver will be of interest as well.

Since all this activity [in both gold and silver] occurred on Wednesday, it won't show up until next Friday's COT report.

Silver's final open interest number for Tuesday's trading day showed an increase of 1,340 contracts. This was a vast improvement over the preliminary number which showed an increase of 7,389 contracts. But, considering the size of the price decline on that day, even this number is misleading...and only Friday's COT report will reveal the full story.

The backwardation story in silver is showing almost total backwardation across all delivery months out until December 2015. This backwardation is now up to $1.31. There is a small fraction of a penny premium in the near months...but that's it. There are vastly different opinions on what this all means. Some analysts think that it's wildly bullish for the price, while other commentators think that it means absolutely nothing. We'll find out who is right in short order I would think.

Here's the 1-year silver chart once again. Silver's 50-day moving average got taken out in early London trading this morning...and that will certainly flush out a few more technical longs...but there are very few left to be had, as tomorrow's COT report will certainly show. The report should also indicate that we are at multi-year lows for tech fund long positions...along with the bullion banks short positions.

Here's the 1-year gold chart. You can see that we still have a long way to go to get to gold's 50-day moving average. But, as I've said several times before, the bullion banks may beat the crap out of the gold price to flush out every possible long-holder in the silver price. But can they, or will they? I don't know...and JPMorgan isn't telling.

The other thing that I've noted is that the dollar is wildly oversold...and if a rally in the dollar can be engineered, 'da boyz' may also use that to keep pounding away at silver.

If you find this possibility either depressing, or frightening, please re-read Ted Butler's quote under today's cartoon.

Gold did nothing in Far East trading during their Thursday...and the selling pressure began shortly after London opened. Silver didn't do much ealier today either...but as I mentioned above, it appears that silver's 50-day moving average was penetrated briefly in early London trading. As of 4:59 a.m. Eastern time, volume in gold is nothing special...but it's very chunky in silver already...and I'm sure that taking out the 50-day m.a. had a lot to do with that.

It should be another very interesting trading day in New York when JPMorgan et al show up for work at the 8:20 a.m. Comex open.

I'm still 'all in'.

See you on Friday.