Expect Huge Rebound in Silver: Richard Russell

The gold price didn't do a heck of a lot during Far East and early London trading yesterday...and the five dollar gain that did exist at the Comex open yesterday, got sold off immediately.

By shortly after 10:00 a.m. Eastern, the gold price had gained that back, but traded flat for the rest of the Comex session...and in the New York Access market that followed. It was a nothing sort of day. Volume, at least compared to last week's activity, was light.

Silver didn't do much in Far East trading until about 2:30 p.m. during the Hong Kong trading day. Then a rally of sorts developed that lasted until the London a.m. gold fix was in at 10:30 a.m. in London...5:30 a.m. Eastern.

Silver then traded flat until the Comex open...and then, like gold, the silver price got hit pretty hard...down a dollar in less than 45 minutes of trading. But, like gold, silver recovered all that...and then traded flat into the close of electronic trading at 5:15 p.m. Eastern. Volume was pretty light.

The dollar rallied in early Far East trading...and hit its zenith about the same time as the silver price began to rally. From its high, the dollar lost about 40 basis pints and hit a secondary low at precisely 8:20 a.m....the Comex open...the exact moment that both silver and gold got hit.

The dollar rally that precipitated the big drop in gold and silver prices at the Comex open amounted to a whole 25 basis points. On Monday, a 55 basis point rally [followed by a 55 basis point decline] made no difference in the precious metal prices at all. Like I said, 'da boyz' use the dollar price action as a cover when it suits them...and it did yesterday.

The dollar then fell 30 basis points to its absolute low of the day at the close of New York trading...and the precious metals did zip.

After Monday's terrific day in the precious metals, I must admit that I was disappointed in the gold [and silver] share action yesterday, as I was expecting much better. The HUI finished down 0.68%...and the silver shares, despite the nice move in the silver price, were an even bigger disappointment. I'll have more to say about this in the wrap.

The CME Daily Delivery Report showed that only 6 gold along with zero silver contracts were posted for delivery on Thursday.

There was no reported change in GLD yesterday...but SLV took in 682,847 troy ounces of silver.

The U.S. Mint had a smallish sales report yesterday...selling 1,500 ounces of gold eagles, along with 500 one-ounce 24K gold buffaloes. No silver eagle sales were reported.

Over at the Comex-approved warehouses on Monday, they did not receive any silver...but reported shipping 699,319 ounces out the door. The link to the action is here.

Here's an interesting comment out of Clive Maund's latest offering over at silverseek.com that was sent to me by reader Tariq Khan yesterday..."...isn't the Fed's reckless and relentless money printing and zero interest rate policy pushing the dollar ever close to the abyss and the US towards hyperinflation. Yes it is, but do you think the Fed doesn't know that? These people should not be underestimated - keep in mind that they engineered a financial system which essentially turned the rest of the inhabitants of this planet into servants of the United States, with their reserve currency status for the US dollar, and have cajoled the rest of the world into handing over its savings to be used to support a sumptuous standard of living in the US and a big military to police the globe in furtherance of US interests."

How absolutely true that statement is. The American Empire exposed in one short paragraph.

¤ Critical Reads

Doug Casey: Government Policies Distort Markets; ‘Printing More Money’ To Mean Inflation

My first offering today is courtesy of reader Mike Smith. It's an interview that was posted over at Kitco yesterday.

“Governments have such immense influence on what happens through their debasement of currencies, through increasing regulations and through a structure of government debt,” said the co-founder of Casey Research, an independent advisory research firm based in Stowe, Vermont. “All of these things distort the way the markets work. So I find that the regular economic world is becoming less and less predictable as time goes on.”

Whenever Doug is talking...I'm always listening...and I feel that this should apply to everyone. The link is here.

View full GSD edition

Irish Bombshell: Government Raids PRIVATE Pensions To Pay For Spending

Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt.

The tax on private pensions will be 0.6%...and last for four years.

It's a pretty safe bet that once governments have their foot in the door on this sort of thing, not only will they not go away, but the tax grab will be bigger as time marches on.

I thank reader 'David in California' for sending me this businessinsider.com story...and the link is here.

View full GSD edition

Walker's World: Digging holes for euros

Reader Nitin Agrawal sent me a commentary from Mish Shedlock's site yesterday...and I'm just going to steal the headline..."S&P Cuts Greek Debt 2 Notches Deeper in Junk Cites 50% to 70% Haircuts: CDS at Record High, Probability of Default is 68%."

And now I'm quoting from the Walker World piece that I've linked below...

Having got themselves into a hole, the leaders of the eurozone countries have spent the last week digging it deeper by the day.

They began by signaling that Portugal would get a much more lenient interest rate on its bailout loans than Greece or Ireland. This in itself amounted to an admission that the onerous rates charged earlier would, as many economists warned, so depress their economies that they would never get out of debt.

This longish UPI essay, courtesy of reader Roy Stephens, is well worth your time...and the link is here.

View full GSD edition

Why I Don't Support Europe's Bailouts

Here's your first must read story of the day. This one was in the Monday edition of The Wall Street Journal...and I stole it from yesterday's King Report. It's an op-ed piece by Timo Boini, the leader of the New Finn Party...the political party that now rules the roost in Finland.

In the opening paragraph he states that..."When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the bailouts of euro-zone member states. Europe is suffering from the economic gangrene of insolvency—both public and private. Unless we amputate that which cannot be saved, we risk poisoning the whole body."

It just gets better from there...and if you read nothing else in today's column, this would be the story I would choose on your behalf. Europe is about to get a wakeup call...and the link is here.

View full GSD edition

Commodities Trading Is Banking’s New Battleground: Matthew Lynn

Investors held a record $412 billion of raw-material assets at the end of March, almost 50 percent more than a year earlier, according to estimates by Barclay's Capital. Trading in futures and options contracts is rising rapidly. For banks and fund managers, it is a lucrative business. And the more volatile it is, the more profitable it gets.

This Bloomberg piece is worth the time, if you have it...and I thank Washington state reader S.A. for sending it along. The link is here.

View full GSD edition

Senator Vitter Slams Tax Breaks for 'Big Gold'

The oil industry and its allies have gone on the offense in their efforts to persuade Congress not to raise the industry's taxes: They've taken to spotlighting other industries' tax breaks.

On Monday, Sen. David Vitter [R., La.] called on Senate Majority Leader Harry Reid to consider eliminating tax breaks for the gold mining industry, saying that the upward trajectory of gold prices is "quite similar" to the trend in oil prices during the Obama administration.

You can't make this stuff up...and I once again than Washington state reader S.A. for this story from The Wall Street Journal...and the link is here.

View full GSD edition

Expect Huge Rebound in Silver: Richard Russell

Here's a blog that Eric King sent me on Tuesday morning that I just didn't have room for in my column on Tuesday...so here it is now. This is very much worth the read...and the link is here.

View full GSD edition

Nowhere near a top in gold, Sinclair tells King World News

Here's another KWN blog...and Chris Powell has already done the heavy lifting for me...and the link to the GATA release is here.

View full GSD edition

Gold, silver rise again on debt, inflation concerns

My last offering today is this Reuters piece that was sent to my by Roy Stephens.

Gold and silver prices rose for a third straight session on Tuesday after last week's sell-off, boosted by intense fighting in Libya, uncertainty about debt-laden Greece...and the rising cost of oil and grain.

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

View full GSD edition

Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny. -- Thomas Jefferson

Gold's volume on Tuesday, net of all roll-overs, was around the 125,000 contract mark which, as I said in the opening paragraph of today's column, isn't a lot. The preliminary open interest number showed an increase of 5,092 contracts, which I expect to be much reduced when the final number is posted later this morning.

Monday's final open interest number for gold showed another decline. This time it was a drop of 2,130 contracts...which is a very good number considering the fact that the preliminary o.i. figure showed an increase of 5,125 contracts. I hope Tuesday's final o.i. numbers look as good as this.

Silver's net volume yesterday was just under 80,000 contracts...and the preliminary o.i. number showed an increase of 3,126 contracts.

Monday's final open interest number showed another huge decline. This time it was 5,219 contracts. This was not a surprise considering that the preliminary number showed a decline of 246 contracts.

Whatever the final o.i. numbers that are reported in both metals on the CME's website this morning, they will be included in Friday's Commitment of Traders report.

These large declines in silver open interest that we've seen over the last few weeks has been showing up as a decline in spread trades...about 10,000 contracts worth in the last couple of weeks. A spread trade is where you are long one month and short another. For a long time Ted Butler has been of the opinion that these spread trades have been used to hide the concentrated short position of the bullion banks in the weekly COT report...and now that the bullion banks are covering their short positions for real, these 'smoke screen' spread trades are being eliminated as well, as the bullion banks no longer have to hide their concentrated short positions behind this facade.

We've seen some huge declines in silver's open interest during the last reporting week...and it will be of interest to see not only the size of the drop in the Commercial [bullion bank] net short position...but how fast that these no-longer-needed spread trades are being eliminated as well.

The backwardation situation in silver changed a bit yesterday...as the premiums widened a hair in the near delivery months...but other than that, the situation remains basically unchanged from where it was on Monday.

I've been watching the overnight markets with more than the usual amount of interest. Both gold and silver were up nicely during the Far East trading day...right until London opened at 8:00 a.m. local time...3:00 a.m. Eastern time. Then both metals began to get sold off. It's not too serious at the moment, but it bears watching.

The reason I'm somewhat concerned, is that silver's 50-day moving average was penetrated to the upside during the Far East trading session earlier today...and it remains to be seen whether the technical funds will come back on the long side of this trade...and whether the funds that went short during this latest smash-down will begin to cover.

If they don't, we could have a 'failed' rally at silver's 50-day m.a....and the technical analysts will have a field day with that...even if the event itself is manufactured by the bullion banks. We'll have a much better idea of what's in store as the Wednesday trading day unfolds...especially in New York.

And as I said in my Saturday column...the other fly in the ointment is the fact that gold did not break below it's 50-day moving average to the downside during last week's sell-off. That fact is still of concern to me...and I'll be watching today's gold price action closely as well.

I'm hoping for the best...but always on the lookout for "in your ear."

Here's the 6-month silver chart...and you can see how close we came to penetrating the 50-day moving average yesterday...and finally succeeded earlier this morning.

This is the 6-month gold chart...and the fact that gold did not 'fall' far enough to penetrate its 50-day moving average.

As I mentioned at the top of this column, I wasn't a happy camper about the share price activity in both gold and silver yesterday...and when I see something like that, I really start to pay attention to what the metals themselves are doing.

Of course the above scenario I just described may not come to pass...and we could blast higher from here...but I would be negligent in my duties if I did not at least point out that possibility. Needless to say, it doesn't change my personal investment strategy one iota. But I'm not you...and I'm not an investment advisor.

We should know a lot more by the end of today's trading.

See you on Thursday.