Silver to Take Out $50, New Shorts Are Suckers: Peter Schiff

Gold's high tick on Tuesday came at precisely 10:00 a.m. in London yesterday morning...and the moment that the Comex opened, the dealers pulled their bids...and the gold price fell about a percent in half an hour. The subsequent rally that occurred shortly after 10:00 a.m. Eastern time met the same fate as well.

The bottom was in...and a serious rally began around 11:40 a.m. Eastern...and gold gained back virtually all its loses of the day by the close of electronic trading. Volume was pretty decent.

Silver was up about fifty cents by the time Comex trading began in New York yesterday morning...and ran into the same not-for-profit seller at precisely the same time as gold did. The silver price bottomed about half an hour before the gold price...and the subsequent rally closed silver up about 30 cents on the day. Volume wasn't overly heavy.

The dollar's price action didn't have too much direction to it until shortly after 11:30 a.m. Eastern time yesterday. Then it headed south with some conviction...and by the time that New York trading closed at 5:15 p.m...the dollar had fallen about 45 basis points from it's zenith about six hours prior.

The bottom for the gold price came almost at the same moment as the dollar headed south...but if you're using the dollar as your guide...there's nothing in its price action to explain what happened to the gold price from the time the Comex opened at 8:20 a.m. Eastern...until the low in gold was in at 11:40 a.m...or how about silver's low at 11:10 a.m.?

The gold stocks pretty much followed the gold price...but I was singularly impressed with the strength of the gold equities in the face of such a big sell-off in price...and this is the second day running that the gold price has finished down on the day...but the stocks have closed higher. It appears that there has been some serious bottom fishing going on so far this week.

With silver down over 4% from its high of the day to its low of the day...the silver stocks were on the defensive again...but cut their losses by quite a bit as the trading day wore on. There were a few more green arrows around yesterday than there were on Monday.

The CME's Daily Delivery report showed that only 6 silver contracts were posted for delivery on Thursday.

The GLD ETF showed no change for the second day in a row...and despite the big decline in silver prices yesterday, SLV added a smallish 146,308 troy ounces.

There was no report from the U.S. Mint...but over at the Comex-approved depositories on Monday, they reported receiving 300,205 ounces of silver...and shipped out a smallish 20,060 ounces, for a net gain of 280,145 ounces.

¤ Critical Reads

Treasury to tap pensions to help fund government

Here's a story from Sunday's Washington Post that California reader Martin Arnest sent me yesterday.

The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.

Many congressional Republicans, however, have been skeptical that breaching the Aug. 2 deadline would be as catastrophic as Geithner suggests. What’s more, Republican leaders are insisting that Congress cut spending by as much as the Obama administration wants to raise the debt limit, without any new taxes.

The link to the story is here.

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Video: Taibbi vs. McArdle on Goldman

Wanted to post the video for an appearance I did this weekend on "CNN Your Money" with Ali Velishi, in which I was invited to debate the Goldman issue with Megan McArdle of The Atlantic. Megan and I have a long history, which I don't need to get into here, but I'll say this: her ragged intellectual poverty could not possibly have been laid any more bare than it was in this appearance. In it, she actually argues that Goldman did not have any more responsibility to see that their clients made money than, say, The Atlantic magazine has a responsibility to see that Rolling Stone makes money.

Matt Taibbi doesn't take any prisoners in this interview...and it's obvious that he doesn't hold McArdle in high esteem.

I thank Roy Stephens for sending this Monday, May 16th story/video from Rolling Stone magazine. It runs a bit under nine minutes...and it's definitely worth your time...and the link is here.

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Don't Buy the Dollar Rally Yet: Opinion

I said on the weekend that when this dollar rally breaths its last, the precious metals will react instantly. Reader/technical analyst Scott Pluschau has an opinion on the dollar as well...and the link to this short commentary is well worth running through. The graph alone is worth the trip.

The story was posted over at thestreet.com yesterday...and the link is here.

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Belarus: Crackdown and currency crisis

About a year ago I ran a very positive story about Belarus [and its leader] in this column...and as it turned out, the story was not even close to being factual...something that Casey Research's own Louis James was quick to point out at the time.

Since then, things have gone from bad to worse.

The economic crisis in Belarus deepened as the government of President Alexander Lukashenko continued to send regime critics to prison.

The Belarusian ruble is in a free-fall. On Monday, it plunged to 6,300 rubles per U.S. dollar on the interbank market after having traded at around 5,000 rubles last week. The ongoing currency crisis undermines the country's ability to import foreign goods and has caused Belarusians to hoard basic food stuffs.

This very short UPI story was sent to me by reader Roy Stephens...and it's worth your time...and the link is here.

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World on course for next crisis, warns Gordon Brown

"In 2008, when we were hours away from ATMs running out of money, small businesses being unable to pay their staffs, and schools and hospitals closing down through lack of cash flow, it felt as if the crisis of the century was upon us," he wrote in US magazine Newsweek.

"But if the world continues on its current path, the historians of the future will say that the great financial collapse of three years ago was simply the trailer for a succession of avoidable crises.

Mr. Brown has a keen grasp of the obvious...as we are already well on our way down the slippery slope towards the next one.

This rather short story is out of Monday's edition of The Telegraph...and I thank reader David Ball for sharing it with us. The link is here.

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Debate Over Strauss-Kahn's Successor: Europe and Asia Set for Battle over Top IMF Post

The sex charges against Dominique Strauss-Kahn have triggered a search for his successor as head of the IMF. Europe, mindful of the fund's role in the debt crisis, wants to keep the system of having a European at the helm. But emerging economies say it's time for a change, heralding a dispute over the succession.

The post is traditionally occupied by a European; a French national has run the IMF for 26 out of the past 33 years. But a power shift at the fund towards emerging nations could lead to a bitter dispute over the succession this time round, with analysts saying China may decide to flex its muscles to try to get an emerging market candidate into the job.

This very interesting story was posted at the German website spiegel.de yesterday...and it's also courtesy of Roy Stephens. The link is here.

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China forced to ration electricity

Here's a Financial Times story that showed up over at cnn.com yesterday...and it's courtesy of reader 'David in California'.

Chinese provinces are rationing electricity as soaring coal prices squeeze power generation companies, underlining the challenges facing the world's largest energy consumer as global fuel prices rise.

Chinese officials have been warning for weeks that shortages would be more severe than usual this year. On Tuesday, Xue Jing of the China Electricity Council, an industry body that reports to state regulators, told state media that China would "face its most severe electricity shortage since 2004".

I had no idea that China was in this predicament, so I consider this a must read...and the link is here.

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Silver to Take Out $50, New Shorts Are Suckers: Peter Schiff

Interviewed yesterday by King World News, Peter Schiff of Euro-Pacific Capital says he expects QE3 to sail soon after QE2 docks and that there's no bubble in mining stocks, many of which are lower than they were years ago when gold and silver were half what they are today. The intro was courtesy of Chris Powell...and the link to the KWN blog is here.

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King World News interview with Hugo Salinas Price

In my Tuesday column, I ran a King World News blog that featured Hugo Salinas Price. Eric just slid the full audio interview into my in-box at 4:47 a.m. Eastern time this morning. I haven't listened to it yet...nor do I know how long it is. But I guarantee it's worth listening to...and the link is here.

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Selling U.S. gold becomes question in debt limit controversy

Here's a GATA release with a story from yesterday's New York Sun imbedded. I will dispense with the introduction, as Chris has already provided it...and the link is here.

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The closest we come to eternal life on this Earth is a government program. - Ronald Reagan

Gold volume yesterday was just under 170,000 contracts net of all roll-overs...and the preliminary open interest number showed a rather tiny increase of 2,333 contracts. This will undoubtedly be a much smaller number when the final figure is posted on the CME's website later this morning...as gold came very close to touching its 50-day moving average...and there was probably decent tech fund long liquidation to go along with that.

Monday's final open interest number for gold showed a decline of 2,340 contracts...which is a big difference from its preliminary figure, which showed an increase of 5,340 contracts. These declines are very positive, as it shows that the tech funds are forced to sell long positions...and the bullion banks are covering their short positions. The very act of doing that decreases open interest and improves this Friday's Commitment of Traders Report.

Silver's net volume yesterday was around 72,000 contracts which, in the grand scheme of things, wasn't particularly heavy. The preliminary o.i. number showed an increase of only 2,207 contracts.

Monday's final open interest figure showed a smallish decline of 855 contracts...which is a much happier looking number than the preliminary report showed...and that was an increase of 2,986 contracts.

Whatever the final open interest numbers are for Tuesday...and they'll be reported later this morning on the CME's website...will show up in Friday's COT report.

It's my opinion that we are very close to a bottom in silver, so the COT report on Friday [provided JPMorgan et al aren't withholding data] should give us a pretty complete picture of the clean-out in silver. As Ted Butler mentioned a couple of weeks back, the COT was already very impressive, even before the smash-down that came on Sunday, May 1st...so whatever the COT shows this week, should be suitable for framing.

The situation with the silver backwardation issue on Tuesday showed that nothing much changed from what was reported on Monday.

Here's the 3-year silver chart to put May's price smash-down in some perspective. It's easy to see how historic [and how deliberate] this whole scenario was. The six dollar, 12-minute, take-down in silver on Sunday night, May 1st, in the New York Access market was not done by a profit-maximizing seller. The chart also shows that we are close to a significant low.

As you can tell from looking at the 3-year gold chart below, the sell-off in gold has been much more sanguine...and that's why I've been careful to point out that the bullion banks may engineer a further decline in the gold price, in order to continue beating on silver. But there's virtually no blood left in the silver stone...so it remains to be seen whether JPMorgan et al can [or will] take gold down further...but the potential is there.

Gold hasn't been below it's 200-day moving average since January 2009...and it's my opinion that it would take some doing on the part of 'da boyz' to break below it this time. Gold's 200-day moving average has been almost ruler-flat for the last two years.

Both silver and gold did pretty well during the Far East trading session...and both popped a bit at the 8:00 a.m. local time London open...which is 5:00 a.m. Eastern time. Gold volume is not overly heavy, considering the price action, which is always good to see. Silver volume is actually pretty light all things considered.

But, as we found out yesterday, all this could be for naught when the U.S. bullion banks begin trading when the Comex opens at 8:20 a.m. in New York, so we'll see what happens then.

I hope your Wednesday goes well...and I'll see you here tomorrow.