Forbes Predicts U.S. Gold Standard Within 5 Years

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Everything was going along just fine in the gold market...not only in Far East...but in the early going in London as well. The high of the day was at 10:00 a.m. local time...which was 5:00 a.m. Eastern...while North America slept. Then the selling began.

By the time the seller was through for the day around 12:30 p.m. in New York, the gold price was down $30 from its London high. From that low, gold recovered back above $1,500 by the end of electronic trading at 5:15 p.m. Eastern time. Volume was pretty decent.

Silver also did well in the Far East...and silver was up almost a buck by the time that London opened its doors at 8:00 a.m. local time...3:00 a.m. Eastern.

But once the London silver fix was it at noon local time [7:00 a.m. Eastern] waves of selling hit the silver price...and nearly six hours later [around 12:40 p.m. in New York]...the major part of the selling was over and silver was down four bucks. The silver price made several attempts to recover after that, but there was always a willing seller there to make sure that it didn't...basically closing on its low of the day. Volume was very heavy.

The dollar fell a bit during Far East trading...and hit its nadir shortly after 10:00 a.m. in London. From there, a very spirited rally began which topped out around 2:30 p.m. Eastern...but the bulk of the gain was in by 12:30 p.m. Then the dollar sold off just a hair going into the close of electronic trading.

From the low to the high, the dollar was up almost a full cent...and almost all of gold's price 'decline' fit exactly into this dollar rally. You just have to wonder how they're able to time all this so perfectly. Actually, I don't have to wonder about it all.

Silver's decline began two hours later at the London silver fix...and was totally unrelated to what the dollar was doing...although silver's price bottom came shortly after gold's low price during the New York lunch hour.

Even though gold was down throughout the entire New York trading session yesterday, the shares briefly stuck their nose into positive territory...but that didn't last...and the HUI finished down over three percent.

The silver stocks got in the neck again...as Nick Laird's "Silver Sentiment Index" shows. The share price action in both metals was not helped by the fact that the general equity markets were in the toilet as well.

In case you missed it, the metal de jour yesterday...as it is almost every day...was silver. How can I tell, you ask? Well, gold was down 1.00%...platinum was down 1.12%...palladium was down 1.52%...and, drum roll please, silver was down 8.79%. You have to be pretty much brain dead not to understand that silver is the center of the universe for JPMorgan et al...and has been since they began to cover their short positions in earnest last August.

The CME Daily Delivery Report showed that only 7 gold, along with 10 silver contracts, were posted for delivery on Friday.

Once again there were declines in both GLD and SLV yesterday. GLD showed a 29,242 ounce withdrawal...and 1,463,226 troy ounces of silver were withdrawn from SLV.

The U.S. Mint had a smallish sales report yesterday. They sold another 2,500 ounces of gold eagles...and that was it.

The Comex-approved depositories on Tuesday showed that they received 118,727 ounces of silver on that date...and shipped 444,345 ounces out the door, for a net decline of 325,618 ounces. The link to that action is here.

In his mid-week commentary to clients yesterday, silver analyst Ted Butler had this to say about yesterday's smash-down in the silver price..."As far as the vicious takedown today, it was not expected by me. In fact, as I was reading the paper and having coffee this morning prior to 7 AM Eastern Time, the price of silver was above $39 in fairly orderly trading. We then dropped nearly $4 in a short period of time. Just like last week’s takedown, there was no fundamental supply/demand news to account for this. It appears that the culprit, once again, is this crooked HFT computer trading. Obviously, the CFTC has no interest to explain the price moves in silver in regulatory terms, or to reign in what appears to most as criminal market behavior. Also obvious is that this undermines the collective faith in our important institutions. That is a very bad thing."

Virtually every day that there's illegal activity in the silver market, I get a flurry of e-mails from readers that have sent messages to either CFTC Chairman Gensler...or CFTC Commissioner Chilton...and here's one of several that I got yesterday. This one's entitled "Is you is...or is you ain't?" and is from reader J.A. in Chicago.

The above is an expression my late father used jokingly to make a point...which in better English translates into "Are you going to do it, or aren't you?"

Dear Chairman Gensler and Commissioners: I would ask you the same question. I am referring of course to your taking action on position limits, specifically silver, about which I and thousands [repeat, thousands] of other members of the public have written to you about.

Just of a week ago, the silver market experience another egregious smack-down...$6 on light trading in the middle of a Sunday night before a European holiday on Monday...of which you are no doubt well aware. Yet, with all the hearings and investigations by the CFTC...and input from the public...still no action nor enforcement.

I am beginning to wonder if...at age 71...I am going to live long enough to see the CFTC take some meaningful action to the now more-than-ever obvious manipulation in the silver market. I note that short positions by the bullion banks have dropped significantly in the past month. Are you waiting to close the barn door until after the horse has left? Are you letting these thieves unwind their positions at the public's expense and then you are going to make your pronouncements? It certainly looks that way at this point.

I am rapidly losing faith that any meaningful rulings or action is going to come from the CFTC, even with the Dodd-Frank bill in place, as I'm sure many others are losing faith as well. The silence at the CFTC is deafening!

It is long, long past time for the CFTC to be heard from.

Sincerely,

J.A. - Chicago

After sending that to the CFTC yesterday, J.A. was surprised to get a quick reply from Commissioner Bart Chilton...but it was only a five-word sentence...and it read as follows: "I want limits and now. B" Obviously a man of few words.

My bullion dealer had two really good days in a row on both Tuesday and Wednesday...and has already sold 50% more silver bullion in May then he sold in all of April. The average buyer is getting smarter and buying these dips. I am, too.

Here's a graph that Washington state reader S.A. sent my way yesterday. It's titled "Tax and Spend"...and shows the average tax revenue and spending as a share of GDP, by administration.

¤ Critical Reads

Federal Retreat on Bigger Loans Rattles Housing

By summer’s end, buyers and sellers in some of the country’s most upscale housing markets are slated to lose one their biggest benefactors: the deep pockets of the federal government. In some communities of pricey homes, the dread of yet another housing shock is already spreading.

As a 27-year veteran of residential real estate here in Edmonton, I can tell you that another whole swath of U.S. real estate is about to get marked down to a new price. This 2-page story in yesterday's edition of The New York Times is a must read...and I thank reader Phil Barlett for sharing it with us. The link is here.

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Texas Taxpayers Finance Formula One Auto Races as Schools Dismiss Teachers

Texas, which may balance its budget by firing thousands of teachers, plans to commit $25 million in state funds to Formula One auto racing each year for a decade.

As many as 100,000 teachers in Texas may be fired because of spending cuts to cope with the state’s budget crisis, according to Moak Casey & Associates, an Austin-based education consultant. For $25 million a year, the state could pay more than 500 teachers an average salary of $48,000.

This is a story that was posted over at Bloomberg yesterday...and I thank Washington reader S.A. for sending it along. The link is here.

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Japan nuclear power expansion plans abandoned

Japan is to abandon plans to expand its nuclear power industry and make renewables a key part of its energy policy, the prime minister, Naoto Kan, said as the country marked two months since the tsunami disaster.

Japan, whose 54 nuclear reactors provide 30% of its electricity, had planned to build at least 14 new reactors over the next 20 years, but policymakers accept that will be impossible in light of the Fukushima crisis.

It will be interesting to see how Japan tackles this problem. I thank Swiss reader G.B. for sharing this story out of yesterday's edition of The Guardian...and the link is here.

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What does one TRILLION dollars look like?

Here's something that's been around the Internet for a year or so...and I've even run it in this column once before. But in light of the fact that the U.S. government is about to raise the debt limit again, it's time to review what $1 TRILLION dollars looks like in $100 bills.

But you can double what's in the last picture, because they'll probably increase it by $2 trillion...or maybe only $1.9 trillion just to make everyone feel better.

If you've seen this before, it's definitely worth a second look...and if you haven't seen it before, it's more than worth your time. I thank reader Kip Lee for sharing it with us...and the link is here.

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Forbes Predicts U.S. Gold Standard Within 5 Years

Such a move would help to stabilize the value of the dollar, restore confidence among foreign investors in U.S. government bonds, and discourage reckless federal spending, the media mogul and former presidential candidate said. The United States used gold as the basis for valuing the U.S. dollar successfully for roughly 180 years before President Richard Nixon embarked upon an experiment to end the practice in the 1970s that has contributed to a number of woes that the country is suffering from now, Steve Forbes added.

I thank reader Scott Pluschau for sending me this story that's posted over at humanevents.com...and the link to this worthwhile read is here.

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Interview With Jim Sinclair

Here's an audio interview with "Mr. Gold"...Jim Sinclair. Eric King sent it to me late last night. Because I'm in the process of writing this column at the moment, I've had no time to listen to it...but I would assume that it's worth your time...and the link is here.

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Tipping Point to Trigger $ Destruction & Hyperinflation: James Turk

Here's another item that Eric sent me last night...and it arrived in my in-box just a few minutes after the Jim Sinclair interview. It's a James Turk blog...and the headline pretty much indicates where this blog is headed. There's also a lot of discussion about silver and gold prices as well. It's not overly long...and very much worth your time...and the link is here.

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GoldMoney's Turk interviews Sprott's Embry about precious metals and lots more

Here's an item for your viewing/listening pleasure that has already been teed up by Chris Powell. I won't waste any more time on this...as you can just read what Chris has to say...and then click on the link to the video. The link to this GATA release is here.

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Gold Mania in the Yukon

This is a story that appeared in The New York Times yesterday...and it's a very long read...but it's really worth your while. Just like the previous story, Chris Powell has already written a rather extensive preamble...and I'll let him do the honours once again. The link to the GATA release is here.

View full GSD edition

What actually happens, and what is quite clear, is that there is usually some kind of event, it’s a tipping point. And the event causes people’s confidence in the currency pretty much to evaporate, and once that event occurs you’ve basically got six months before the currency is history. - James Turk, King World News, 11 May 2011

Gold's trading volume yesterday, net of all roll-over was around 185,000 contracts...and the preliminary open interest number was a very chunk 9,174 contracts. The final number will obviously be smaller than that. I'm surprised it's as high as it is, considering that the gold price was down on Wednesday.

Gold's final open interest number for Tuesday shows a smallish decline of 419 contracts...which is quite a decline from the preliminary o.i. number, which showed an increase of 5,092 contracts.

Not surprisingly, considering the price action, silver's net volume yesterday was very high...a bit over 120,000 contracts...and the preliminary open interest number shows an increase of 5,143 contracts.

Silver's final open interest number for Tuesday's trading day showed a small decline as well...down 698 contracts. The preliminary open interest number showed an increase of 3,216 contracts.

These final open interest numbers for Tuesday in both gold and silver will be in tomorrow's Commitment of Traders report, which I'm really interested in seeing.

The backwardation in silver, if it means anything, is about unchanged from Tuesday's figures.

A couple of other things of note regarding silver, is that there are still 325 May contracts still open. They have to be either sold...or delivered into. If these longs are waiting for delivery, then the shorts are sure taking their sweet time delivering it to them. This is the second delivery month in a row for silver that the delivery process has been dragged out like this.

One other thing that I noticed...and I think Ted Butler pointed it out to me the other day...was the large number of contracts [3,955] that are currently sitting in the June month. June is not a tradional delivery month for silver...and one has to wonder what that's all about. A few hundred contracts would be more typical.

All was pretty normal looking in the gold and silver market up until shortly before 3:00 p.m. Hong Kong time. Then the New York bullion banks showed up in the Globex market and pulled their bids in both metals in the thinly-traded market just before the London open. You will note that the silver price is their main objective...as it's already down a bit more than 4% as I write this. I'd guess that along with the bid-pulling, there's some shorting go on as well.

Both Wednesday and Thursday [so far] have been big down days for silver...and, unfortunately, none of this activity will be in tomorrow's COT report. One has to wonder what the bullion banks are trying to prove at this point, because at these price levels, there aren't that many technical fund longs left in this market.

This big rally that we had up until ten days ago, was never driven by speculative buying by the technical funds at all. Most of this up-move came from short covering by JPMorgan et al. As Ted Butler said, anyone who believed that this rally in silver was driven by 'hot money' hasn't bothered to look at the real facts.

Gold volume is nothing special...and it's obvious that the high frequency traders are doing their thing in the silver market, as net volume is already very high...14,000 contracts. Before these guys showed up, a big volume day up until the London open might have been 3,000 contracts. With these guys stomping around in the silver market, it's obvious the damage that they're doing...but even they have their limits.

I guess I was right in yesterday's column about what might happen to both gold and silver going forward. Silver did not penetrate it's 50-day moving average with any authority...and the share action on Tuesday was not very good. It's obvious, at least to me, that 'da boyz' can read a chart as well as anyone...and it sure looks like they're painting the silver [and gold] chart...and I'm sure the technical analysts are having a field day with this 'textbook' move down.

Can they take out the 200-day moving average? I didn't think so two days ago, but after the beating they laid on gold and silver in the thinly-traded late-afternoon Far East market earlier today, I supposed anything's possible. If they do actually make it that low, I can pretty much guarantee that the price won't stay there long.

Like I've said on many occasions, the bullion banks may use a smash-down in gold to drive silver lower...but that's only partly true at the moment, as gold hasn't suffered anywhere near the same fate as silver. But as I said above [for the umpteenth time] silver is the only metal that matters to JPMorgan at the moment.

Here's the 1-year silver chart.

And also the 1-year gold chart. Getting to the 200-day moving average would be quite the feat...but I suppose that one shouldn't dismiss the idea out of hand.

I must admit that the Thursday trading day has not started off well. But it should be obvious to anyone that what we're seeing here is not free markets in action...and as Chris Powell says ad nauseam..."There are no markets anymore, only interventions."

See you on Friday.