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Message: Ed Steer this morning

Silver Will Hit New Highs in Just Weeks: James Turk

"Did we set the low for this move down on Friday...as I stuck my neck out and mentioned in my Saturday column? Or is this rally a fake out?"

¤ Yesterday in Gold and Silver

The gold price hit its low in the New York access market on Sunday evening about 7:00 p.m. Eastern time, just before the markets opened in the Far East on Monday morning.

There was an intermediate high shortly before 10:00 a.m. in London...5:00 a.m. Eastern...and from there the price declined to just above $1,500 spot going into the New York Comex open at 8:20 a.m.

From there, gold rose slowly for the rest of the New York trading day...and closed virtually on its high of the day at the close of electronic trading at 5:15 p.m. Eastern time. Volume was not overly heavy.

Silver rose and fell during the Far East trading day...and by 3:00 p.m. Hong Kong time, it was back to unchanged from the Friday close in New York.

From that point, silver caught a real bid...and by the time that the noon London silver fix rolled around [7:00 a.m. Eastern time] silver was up over two dollars.

Silver, like gold, then declined into the Comex open at 8:20 a.m. Eastern...and from there it rose to almost $38 late in electronic trading, before getting sold off a bit into the close. Volume was pretty heavy, but nothing like the trading volumes that we saw last week.

The dollar's low on Monday came at 9:00 a.m. in London...4:00 a.m. in New York. From there a bit of a rally began that really didn't develop any legs until 8:00 a.m. Eastern. Then, in the space of two and a half hours, the dollar rose a bit over half a cent, before rolling over and losing that entire gain by the close of trading at 5:15 p.m. in New York.

If you can find any trace of this dollar rally...and subsequent decline...in the gold price chart posted above, you're a better person than I am.

As you can tell, the gold price rises and falls against the dollar only when it suits the bullion banks purposes...and it obviously didn't today.

The gold shares got sold down to their lows of the day about half an hour after the equity markets opened...and from there, clawed their way back to their opening high by the close of trading at 4:00 p.m. in New York. Frankly, considering the price rise in gold, I was expecting a better performance out of the shares than that...but, after the drubbing they took last week, I guess one shouldn't expect too many miracles during the first upside trading day we've had in ten days. The HUI finished up 1.76%.

With the silver price almost 6% on Monday, it should be no surprise that the silver shares turned in a much stronger performance than their golden counterparts. Here's Nick Laird's 'Silver Sentiment Index'.

The CME's Daily Delivery Report showed that 18 gold, along with just 8 silver contracts, were posted for delivery tomorrow. There are 364 contracts still open in silver's May delivery month...and it's obvious that the short holders are [once again] taking their sweet time in delivering to the longs.

It was another active day for both the GLD and SLV ETFs yesterday. GLD reported another decline...this time it was a smallish 90,373 ounces. But the big surprise was the SLV...where they reported adding a hair under 10 million ounces. I was expecting an addition...but not that big.

I have a report from Switzerland's Zürcher Kantonalbank...the first one in a while. As of the close of trading last Friday their gold ETF showed a very tiny decline of only 2,896 troy ounces. But it was a different story over at their silver ETF, where they showed a big decline of 5,188, 721 troy ounces. I thank reader Carl Loeb for those numbers.

The U.S. Mint had a fairly impressive sales report yesterday. The sold another 13,500 ounces of gold eagles...along with 720,000 silver eagles. Month-to-date, gold eagles sales are a very robust 76,500 ounces...along 4,500 one-ounce 24K gold buffaloes...and 1,421,000 silver eagles.

There was virtually no activity to speak of over at the Comex-approved depositories on Friday...as only 80,262 ounces of silver were deposited...and there were no withdrawals.

Here's a nifty graph that Nick Laird over at sharelynx.com sent to me on the weekend. It's at 1-year tick chart for the gold price...and tells you all you need to know about where the gold price is headed in the long term. I would suspect that the equivalent silver chart would look even more impressive.

Here's a paragraph from silver analyst Ted Butler's Weekly Review to his subscribers on Saturday.

"There were huge physical out movements in the big silver ETF, SLV, to go along with the record volume this week. Over the past 10 days, more than 35 million ounces have been removed from the Trust, including a whopping one-day decline of 17 million ounces. Most, but certainly not all, of the silver removed came as a result of plain vanilla investor liquidation on the plunge in price. In fact, I’ve come to believe that getting this investor liquidation was at the heart of why the price was manipulated lower this week. I also believe that it is a mistake to assume that the 35 million silver ounces is somehow freely available to the market at current prices. This is not silver that is now lying on the streets of London abandoned like some street urchin in a Charles Dickens novel. This silver, like every other asset in the world, is very much owned by someone and that someone will determine when and at what price it may be sold. My guess is that this silver is now held in the strongest of hands, probably by whoever masterminded this silver plunge and expressly for that purpose."

My bullion dealer had another monster sales day on Monday. He had customers still in the store until well past closing time...and he told me that he hadn't had time to do the daily tally...but had done two thirds of Friday's business by 1:00 p.m. in the afternoon.

¤ Critical Reads

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Your monthly gasoline bill: $368

My first story today is one that I borrowed from yesterday's King Report that was posted over at money.cnn.com on the weekend.

That's the average amount American households spent on gas in April, according to an exclusive analysis of data by the Oil Price Information Service for CNNMoney.

The study, which compared average gas prices with median incomes nationwide, also showed that U.S. households spent nearly 9% of their total income on gas last month.

It's a short read...and the graph alone is worth the trip. The link is here.


What’s the Difference Between Onions and Corn? No Speculators

Here's a very short piece that was posted in yesterday's edition of The Wall Street Journal that was sent to my Washington state reader S.A.

Last year I ran a story about how consumers in India were up in arms about the price of onions. Well, that price has come back down to earth. It's one short paragraph...along with one graph...and will take one minute of your time to peruse...and the link is here.


China to Fine Unilever for Telling Media It May Raise Prices

Here's an item from the 'you can't make this stuff up' file that was posted over at Bloomberg last Friday...and is courtesy of reader Bob Fitzwilson.

The media reports “disrupted market prices” and led to the hoarding of consumer goods in some cities, said the NDRC, as it is also known. “Severe punishment was meted out this time to break ugly habits and build new rules” and operators should “absorb the lesson,” the statement said.

Surprisingly enough, this a must read...and the link is here.


A Scheme to Make Charles Ponzi Proud

I have a couple of stories about the Greek [and Portugal] debt problem. This situation blew up late last week...and continued over the weekend. The first story is also from Washington State reader S.A...and it's also out yesterday's edition of The Wall Street Journal.

It's not overly long...and certainly worth your time, if you intend on reading the companion story posted below. The link is here.


EU under pressure to slash ruinous Irish and Greek bailout bills

Ireland's prime minister heaped pressure on Brussels on Monday to make concessions over his country's interest bill amid chaotic discussions between European Union finance ministers over the fate of the eurozone bailout funds.

With some kind of deal for Greece appearing all but inevitable, Kenny's intervention came after a flurry of meetings and phone calls between ministers aimed at striking a compromise deal that would reduce the cost of loans to Greece and Ireland and prevent a disorderly debt restructuring.

One has to wonder how long they can draw this whole charade out before it collapses...along with the European Union...and it's currency.

This is well worth the read...and I thank Swiss reader G.B. for sharing it with us. The story is posted in Monday's edition of The Guardian...and the link is here.


John Williams: Hyperinflation and Double-Dip Recession Ahead

Economic recovery? What economic recovery? Contrary to popular media reports, government economic reporting specialist and ShadowStats editor John Williams reads between the government-economic-data lines. "The U.S. is really in the worst condition of any major economy or country in the world," he says. John concludes the nation is in the midst of a multiple-dip recession and headed for hyperinflation.

This essay was originally posted over at The Gold Report...but has been reposted at Casey Research's website...and I thank reader Nitin Agrawal for sending it to me on the weekend.

This is a long read...but John is one of the handful of people that I have all the time in the world for...and if you can find the time yourself, this is definitely worth the effort. The link is here.


Biggest market rigger is government itself

When you're the managing editor of a large daily newspaper...and buy your ink by the barrel...you can get away with writing some pretty nifty stuff.

This is certainly the case with GATA's secretary treasurer, Chris Powell. Here he is in his day job, doing what he does best...telling it like it is.

Need I point out that it's a must read? The link is here.


Financial Time's John Dizard concedes grudgingly to gold and even cites GATA

Here's a story that appeared in the Sunday edition of the Financial Times that's headlined "Reasons Not to Fondle Your Gold". It's printed in the clear in this GATA release...and the extensive preamble is written by...you guessed it...Chris Powell.

This is an absolute must read from one end to the other...and the link is here.


Hong Kong Mercantile Exchange's 1 Kilo Gold Contract To End Comex Gold Futures Trading [And "Bang The Close"] Monopoly

Several readers sent me this zerohedge.com piece over the last couple of days, but the first one through the door was Washington state reader S.A.

A kilo bar of gold isn't a very large bar...and it remains to be seen what kind of volume and delivery amounts will be involved on the HKME once this trading program is launched later this month. It will be interesting to see if this information is publicly available like it is on the Comex. Ted Butler was underwhelmed when I asked him what he thought of this...and the link is here.


Silver will hit new highs in just weeks, Turk tells King World News

In an interview for King World News yesterday, GoldMoney founder and GATA consultant James Turk predicts that silver will snap back up quicker than ever. From your lips, to God's ears, James...and the link to the short blog is here.

Lessons on Gold from India

Here's a story near and dear to my heart. I live in an area of Edmonton that has a very large Indian population...and if you know where to look, you can find their jewellery stores. Unless it's an elaborate piece, everything is sold be weight. They just drop the item you're interested in on a scale...and it gives you the weight to the nearest tenth of a gram...and from that number they compute the price. The only two piece of gold jewellery I own were both bought at one of these stores...and it's all 22K gold. If it's less pure than that...it ain't gold to them...and they'll tell you that in no uncertain terms.

BIG GOLD editor Jeff Clark has a story about this very thing imbedded in yesterday's edition of Casey's Daily Dispatch...and it's a must read. Jeff's piece is headlined "When a Gold Necklace Isn’t Jewelry"...and you have to scroll down a bit to get to it. The link is here.


Gold Trade Is Only Winner in Inflation Attack: William Pesek

Here's an op-ed piece about Vietnam, inflation...and gold, that was posted over at Bloomberg yesterday...and I once again thank Washington state reader S.A. for sharing it with us.

Nguyen Van Giau sighs audibly and shifts in his chair when I ask him the dreaded question: Is Vietnam losing its inflation battle?

It’s one the country’s central bank governor can barely go an hour without fielding these days. Such is life in a nation where consumer prices climbed almost 18 percent in April from a year earlier.

Giau’s assurances that he’s committed to taming inflation aren’t resonating with Vietnam’s 87 million people. The steady erosion of the currency has driven locals to hoard gold as the dollar grows shaky. Capital controls don’t stop households from swapping growing piles of dong for hard assets.

This applies to other South East Asian countries as well...and Bloomberg columnist William Pesek does a fine job of laying out the problems that they all face. This is definitely worth your time...and the link is here.


Monetary debasement, not speculation, driving precious metals, Davies tells CNBC

Interviewed yesterday on CNBC Europe, Hinde Capital CEO Ben Davies, who will speak at GATA's Gold Rush 2011 conference in London in August [mineweb.com...and the headline pretty much says it all.

Silver's price slump has done nothing but raise demand for silver in India as companies hand out silver coins as part of employee bonus packages and jewellery stores promote silver as an affordable alternative to gold. The link is here.


Silver will be a currency too, Sprott tells NY Hard Assets Conference

"Silver will be a currency just like gold. It's logical to expect silver prices to go much higher," said Eric Sprott, chief executive officer of Sprott Asset Management LP. As for the recent plunge, Mr. Sprott pointed at speculative short-sellers as the prime culprit, eliciting applause from the crowd of nervous believers. Knowing Eric as I do, he's not the kind of guy that shies away from the truth.

This was posted over at The Wall Street Journal, but was subscriber protected until Chris Powell posted it in the clear as a GATA release...and the link is here.


Sprott Launches Physical Silver Mutual Fund, Will Likely Soak Up Much Marginal Silver Inventory

Hard on the heels of that last silver story comes this zerohedge.com item that was sent to me by reader "Charleston Voice".

The Sprott Silver Bullion Fund is an innovative offering, being the first mutual fund in Canada to invest primarily in unencumbered, fully allocated silver bullion.

All the details are linked here.


First Fear...then anger: Ted Butler

Commenting on last week's crash in silver, market analyst Ted Butler is starting to suspect that the U.S. Commodity Futures Trading Commission and its chairman, Gary Gensler, may never do anything about silver market manipulation...and is giving him one last chance to walk the walk, as well as he talks the talk.

Since Ted began his subscription service, he hardly publishes anything in the clear anymore...so this is a must read...and the link is here.


¤ The Funnies

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¤ The Wrap

All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation. - John Adams [1735-1826]

Gold's volume yesterday was a hair over 150,000 contracts net of all roll-overs...and the preliminary open interest number showed an increase of 5,125 contracts, which isn't a particularly large number considering the rally in the gold price yesterday. But, having said that, the final figure posted at the CME's website later this morning should tell all.

I was very happy with Friday's final open interest number for gold when I checked it yesterday morning, as it showed another nice decline. This time it was down 4,448 contracts. The preliminary o.i. number showed a smallish increase of 3,204 contracts...and I mentioned that it "bodes well for he final o.i. number that will come out late Monday morning"...and that's exactly how it turned out.

Silver's net volume yesterday was in the neighbourhood of 85,000 contracts...and I was shocked at the open interest number, as it showed a decline of 246 contracts! I must admit that this was the last thing I was expecting to see considering the fact that silver was up over two dollars on Monday. When I looked at yesterday's silver graph, I mentioned the possibility to Ted that some of yesterday's action might have been short covering, but must admit that I was only half serious when I said it. The final o.i. number this morning should be something to see.

Silver's final open interest number for Friday's trading showed another huge decline. This time it was down 5,350 contracts. However, since Friday's preliminary o.i. number in silver already showed a decline of 3,123 contracts...this further improvement in the final o.i. number should have come as no surprise.

The near month spreads widened out a bit as a result of yesterday's big rally in the silver price...and the backwardation between the current month and the December 2015 delivery month is about $1.18. But does it mean anything? I don't know...but it looks like it should...however Ted remains unconvinced. Time will tell.

As usual, here's the 1-year silver chart. Did we set the low for this move down on Friday...as I stuck my neck out and mentioned in my Saturday column? Or is this rally a fake out? Time will tell here, as well.

In overnight trading, both metals were down for most of the Far East trading session, but have moved higher [especially silver] in London trading as of 4:59 a.m. Eastern time. Gold volume is nothing special...and silver's volume is pretty chunky once again with the High Frequency Traders obviously still in this market.

I await today's Comex action in New York with some interest.

That's more than enough for today. See you on Wednesday.

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