Demand For Bullion at Fever Pitch

• Yesterday in Gold and Silver
• Critical Reads
• The Funnies
• The Wrap

Note to all my readers: I will be attending the now sold out GATA conference in London all next week...and I will have no report for the entire time that I'm away. My last report is the one you're looking at right now...and the next one won't be in your in-box until Tuesday, August 9th.

The gold price did very little in the Far East during their Friday trading day. The low for the day came shortly after the London open...and from there, the price struggled back to just below its Thursday close by the time the Comex opened for trading in New York.

Then some serious buyers stepped up to the plate, but by shortly after 10:00 a.m. Eastern, the top was in. From there, the price got clipped for about half of its previous twenty dollar price gain...but added a few dollars by the end of electronic trading at 5:15 p.m.

The gold price closed at a new nominal high, but it was obvious that Friday's rally ran into the usual not-for-profit sellers. Volume was heavy.

The New York Spot Bid chart gives you a much clearer picture of the only gold trading action on Friday worthy of discussion. You can see that by 9:30 a.m. Eastern, the rally in gold was basically done for the day...and the high that came shortly after 10:00 a.m. hardly mattered.

The silver price pretty much traded sideways until around 1:00 p.m. Hong Kong time...and then drifted down to its low of the day...which came at the same instant as gold's low...shortly after trading began in London.

Silver opened in new York about fifteen cents below its Thursday close...and its rally, compared to gold, was anemic...and that's being kind. The top in the silver price came at 9:30 a.m...or shortly thereafter. Silver then got sold off alongside gold...and only closed up seventeen cents from Thursday. Volume on Friday was the lightest its been all week...so it wasn't too difficult to keep silver's price in check.

The dollar opened around 74.10...and then gained about thirty-five basis points, with the high coming moments before noon in London, about 6:50 a.m. Eastern. Then, at 8:30 a.m. the dollar fell out of bed...with the bottom coming minutes after 11:00 a.m. From there, the dollar basically traded sideways until just after 4:00 p.m. in electronic trading. At that point the dollar fell to it's absolute low of the day...which was around 73.74.

For a change, there was some co-relation between the dollar and gold yesterday. But, if you check the NY Gold Spot Bid chart, you'll see that it wasn't 100% by any stretch of the imagination, as gold ran into huge selling pressure while the dollar did its swan dive...and gold tried to blast off.

Here's the 5-day dollar chart for the week that was.

When I checked the HUI after I checked the gold and silver prices yesterday morning, I thought I was looking a chart from some other trading day. Despite the fact that gold was at a new record high of $1,632 spot when the New York equity markets opened, the gold stocks gapped down...and then got sold off hard from that point.

As you know, dear reader, I've been highly suspicious of the share price action all week...as [except for Thursday] there was no co-relation whatsoever between the daily gold price action...and the shares of the companies that mine it. Without any doubt, yesterday's price action, in the face of a new record high price, means that 'day boyz' were also dicking with the gold and silver equities, as well as the gold price itself.

The HUI declined every day this week...and if you think this is 'normal' price action in the face of almost new daily highs, maybe you should be reading the daily column of the gold commentator linked here.

I've been watching the gold market for about twelve years...and I've never seen a HUI that looks like the one below, at least not in the face of record-high gold prices. This is the 5-day chart for the week that was. The HUI was down 2.02% on Friday...and down about 7.4% on the week.

The silver stocks didn't fare any better...and Nick Laird's Silver Sentiment Index was down 1.81% yesterday.

(Click on image to enlarge)

Well, the CME Daily Delivery Report was exciting once again...as yesterday was the second day in the August delivery month for gold. There were 1,307 gold, along with 18 silver contracts posted for delivery on Tuesday.

The issuers/shorts in gold were JPMorgan, Goldman Sachs...and Fortis. The biggest stoppers/longs were the Bank of Nova Scotia, Barclays...and JPMorgan in its client account.

Once we're past the first week of deliveries in the August gold delivery month, the action really quiets down...as there is no financial benefit to the shorts by holding off delivery to the longs any longer than necessary. That's why the action in the silver delivery months for the past year have been such a surprise. I'm not expecting this to occur during a gold delivery month. This delivery report is also well worth looking at...and the link is here.

The GLD ETF added more gold to their stash, but this time it was a smallish 19,478 troy ounces. Once again, there was no report from SLV.

The U.S. Mint had one more sales report for July. They sold another 2,500 ounces of gold eagles...along with 340,000 silver eagles. For the month that just was, gold eagles sales totaled 64,500...one-ounce 24K gold buffaloes totaled 12,000 ounces...and silver eagles sales were 2,968,000 for July.

Year-to-date gold eagles sales total 640,500 ounces...which is within an eyelash of 20 tonnes. The one-ounce 24K gold buffalo sales for the year stand at 91,500. Silver eagle sales so far for 2011 total 25,271,500...so that puts the 40 million sales target for the year directly in the crosshairs. Are you getting your share?

The Comex-approved depositories reported receiving 1,208,710 ounces of silver on Thursday...with all of it going into Brink's, Inc. Only 17,027 ounces were shipped out. The link to that action is here.

I was not all happy with yesterday's Commitment of Traders Report...for positions held at the close of trading on Tuesday, July 26th. In both gold and silver, JPMorgan et al continued to pile in against all the new longs...taking the short side of virtually every trade.

The Reader's Digest version of this report is as follows. The Commercial net short position in silver rose by 3,260 contracts. The fact that about 2,300 of these contracts were the result of the raptors [small commercial traders] selling their long positions, was cold comfort. However, it does point to the fact that JPMorgan is reluctant to short this silver rally to any great extent.

The Commercial net short position in silver is back over 200 million ounces at 213.9 million ounces. Of that amount, the '4 or less' bullion banks are short 188.3 million ounces...and the '8 or less' bullion banks are short 229.6 million ounces...which is more than the entire Commercial net short position of 213.9 million ounces! Now that's concentration!!!

In gold, the bullion banks went short another 19,159 contracts...or a whisker under two million ounces. The Commercial net short position has now blown out to 28.3 million ounces, which I'm sure Ted Butler will say is getting into the 'high risk' zone.

The '4 or less' bullion banks are short 17.1 million ounces of that amount...and the '8 or less' traders are short 24.8 million ounces.

Could we power higher in price from here? Sure, but the warning flags are now flying in gold...and it's only a matter of when, not if, the bullion banks put their heads together and engineer a sell-off. I'm guessing they'll do it when there's a resolution to the debt ceiling issue, which could come this weekend. If it does, I wouldn't be entirely surprised to see JPMorgan et al hit the price in the New York Access Market on Sunday night...just like they did in the 'drive by shooting' in silver on Sunday night, May 1st.

I'm speculating as to the timing...but not the event itself. That's pretty much baked in the cake at this point.

There's always the chance that the bullion banks could get overrun and be forced to cover their short positions in a runaway market to the upside...but the chances of that happening are pretty remote, as 'da boyz' look like they're firmly in charge at the moment.

Over at my bullion dealer's store, it was a pretty good week considering the fact that it's the middle of summer. There are lots of dip buyers...and lots of newbies showing up wanting to buy silver...but gold sales have been outstanding as well.

Once we break above $50 again...then the buyers will be back in force...and in much greater numbers, as those who thought they missed it all, will want to jump on board.

Since I have no column until August 9th...and won't be able to steal anything from silver analyst Ted Butler's next two commentaries, I thought I'd lift one more item from his note to clients on Wednesday.

"I don’t doubt for a moment that China will play a major role in the future course of gold and silver. Hundreds of millions of potential gold and silver investors must be considered when contemplating future prices. However, I do have my doubts about the future of futures trading in China. You just don’t blink your eyes and establish a viable futures exchange. To highlight that point, the most successful futures exchanges here in the US date their origins from the Civil War, some 150 years ago.

"An analyst must also seek out verifiable data in an attempt to weigh the facts. Fortunately, the Hong Kong Mercantile Exchange (HKME) does seem to provide such data. Unfortunately for those convinced that this exchange will have a sudden impact on price, the data indicate otherwise. If you take the time to study the amount of silver contracts open after three full days of trading on this exchange and convert to COMEX size contracts (5,000 oz), you’ll see there are only 25 contracts open, amounting to less than 125,000 oz. By way of comparison, the COMEX has a gross total open interest of almost 120,000 contracts or 600 million oz.

"To be fair, we are only talking about the first three trading days in silver on that exchange. But the exchange has been trading gold futures for more than a month. In that market, the total open interest expressed in COMEX equivalent contract size (100 troy oz) is less than 650 gold contracts as compared to over 536,000 total contracts open on the COMEX. Interestingly, the HKME current gold open interest is down 50% from the first three trading days when gold trading commenced there. Plus, the volume on the HKME looks as phony as a three dollar bill to me, as it is dominated by spread trading designed to make the volume look much larger than it really is.

"Look, I’m all for new bullish factors in silver. It’s just that an analyst doesn’t make stuff up. At least this analyst doesn’t. Let’s continue to monitor this development and others, but guard against seeing things that aren’t there."

With ruthless editing, I have managed to keep the number of stories in my Saturday column to a 'reasonable' number...and some of them are ones that I've been saving all week and are on subjects just not suitable for a weekday column.

¤ Critical Reads

Insiders selling at unusually fast pace: Mark Hulbert

What do insiders know that outsiders do not?

One firm that gathers and analyzes the data is Argus Research, which publishes its findings in the Vickers Weekly Insider Report. One indicator that the firm calculates is a ratio of the number of shares that insiders have sold in the open market to the number that they have purchased.

In the week ending last Friday, according to the latest issue of the Vickers report, this sell-to-buy ratio stood at 6.43 to 1. This is higher than 95% of other weeks’ readings over the last decade.

That’s ominous enough, but consider last week’s sell-to-buy ratio for just those issues listed on the NYSE or AMEX. That came in at 13.10 to 1, which is the highest reading for this ratio since when Vickers began collecting the data, which was October 1974.

We know what they know. The economy is doomed...and we're well into what Doug Casey calls the 'greater depression'.

This marketwatch.com story was sent to me by reader Scott Pluschau...and the link is here.

View full GSD edition

US Dollar, Treasuries No Longer Safe Havens: Mark Mobius

Mobius, who oversees about $50 billion as executive chairman at Templeton Emerging Markets Group said emerging markets were now a much safer bet.

Mobius believes a shift is under way towards emerging market stocks and said that he was bullish on commodities and gold.

This cnbc.com story is courtesy of Florida reader Donna Badach...and it's worth your time. The link is here.

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Gold settles at record as GDP disappoints

Gold futures ended at a record Friday, thriving on bad news about the U.S. economy and after House leaders postponed a vote on the U.S. debt plan.

Gold for December delivery added $15, or 0.9%, to settle at $1,631.20 an ounce on the Comex division of the New York Mercantile Exchange.

It earlier traded as high as $1,637.50 an ounce, according to FactSet Reseach Inc. That’s an intraday record.

Gold gained 1.9% on the week, and on the month advanced 8.5%, having added $128.40 an ounce since the end of June.

This marketwatch.com story from yesterday is also courtesy of Florida reader Donna Badach...and the link is here.

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Spain downgrade threat adds to eurozone debt woes

Moody's said it had put Spain, which has a Aa2 rating, under review for a possible downgrade amid fears about the rapidly spreading European debt crisis. The rating agency said that last week's efforts by eurozone leaders had "not relieved market concerns" over Spain and other sovereigns – and had potentially made matters worse.

The agency had concerns over Spain's "funding pressures" as well as the "challenges" Madrid faces in meeting its tough austerity targets in a "weak growth environment".

The U.S. credit rating agencies are still turning the screws on Europe while they are basically unconcerned about the U.S. debt level...which is approximately the same as Portugal's, which has already been downgraded to junk status.

This story was posted in The Telegraph late last night...and I thank Roy Stephens for sending it along. The link is here.

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Europe's Achilles' Heel: Historical EU Error To Blame for Kosovo Strife

The bloody escalation at the Jarinje border post between Serbia and Kosovo reveals yet again that, even after the intervention of the international community 12 years ago...and investments worth billions, the western Balkans region hasn't found peace with itself -- not by a long shot.

The attempt by special forces of the Kosovo police to occupy the border posts in a surprise coup, in order to carry out customs controls in the future, triggered the latest skirmish.

Active mines still litter some of the region's former battlefields, and there is the continual risk that wounds that have only recently closed could tear open again.

This very short essay posted over at the German website spiegel.de yesterday is a must read...and I once again thank Roy Stephens for sharing it with us. The link is here.

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Bloodbath as Murdoch Gang tears itself apart

The next four stories all have to do with the trials and tribulations of Robert Murdoch...and his now defunct News of the World tabloid. Some of the stories that I've read about Robert Murdoch on the Internet this week would curl your hair...and although probably true in many respects, aren't going to be posted in this column.

Robert Murdoch was one of the world's 'power elite'...and to watch him and his empire crash and burn just a few short months after IMF Chairman Dominique Strauss-Kahn got caught in a 'honey trap'...certainly arouses my rather suspicious nature. As does the untimely demise of the world's top oil experts, Matthew Simmons on August 8, 2010.

The four stories I do have on this issue are incredible enough in their own right. This falls deeply into the category of "you can't make this stuff up". Even I was taken aback...and I've been around.

All four of them were sent to me by Roy Stephens during the past week...and, for obvious reason, were not suitable for my weekly missives. But now that it's Saturday...just about anything goes. I'm going to post them in the order I received them...and they're all worth your time.

Here's the introduction to the first story.

Better than any soap opera, the fall of the media tycoon's empire could topple a premier, writes John McEntee.

For the antics of Sun King Rupert, heir-apparent James, flame-haired Rebekah, son-in-law Matthew 'Dark Arts' Freud, Andy Coulson, Neil 'Wolfman' Wallis, not to mention departing Scotland Yard Commissioner Sir Paul 'Champneys' Stephenson...and the dead whistleblower Sean Hoare are surely the stuff of soap opera.

For more than two weeks Hackingate has dominated the news agenda here, nudging aside the dire international economic crisis and dying soldiers in Afghanistan.

This story was posted at the independent.ie website in Ireland last Sunday...and the link is here.

View full GSD edition

Murdoch’s Maelstrom: Still Worse to Come

This next story is from Canada's own Macleans magazine...and was posted on their website on Friday, July 22nd.

Under investigation in the U.K., Rupert Murdoch may well find that his toughest test will be in the U.S.

It was around the time the body turned up that the saga began to feel a little less Shakespearean and a little more film noir. The ever-evolving News of the World scandal was already epic in scope. It had claimed careers and tainted politicians. It had a movie star and a murdered child, and at its heart, of course, it had the king himself, Rupert Murdoch, clinging to his empire as the hordes—the shareholders, the police and the reporters—pecked away at its ever-more ragged borders. But with the death of Sean Hoare, one of the original whistleblowers in the whole affair, the News Corp. hacking scandal seemed to move in another direction.

Hoare was a one-time celebrity reporter at News of the World. He went public with allegations of widespread hacking at his old job as part of a New York Times investigation last year. He later promised more revelations to come. Instead, police found Hoare dead in his home on July 18. There is no suggestion that his death was criminal. Police were treating it as unexplained, but not suspicious, Agence France-Presse reported. But the moment seemed to push the hacking scandal into a slightly different realm, one where anything could happen and nothing would surprise.

The link to this story is here.

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You just wouldn't read about it: Paul Holmes

This next story is from last Saturday's edition of the New Zealand Herald if you can believe it...and it looks like an op-ed piece to me.

His newspapers have been vicious. And Rupert became a megalomaniac. Rupert, it seemed, wanted to control the world as Master of the Universe. He told a House of Commons select committee that the News of the World represented only 1 per cent of his global business.

So politicians in Canberra, Washington and London agonised for years over how to make him like them and endorse them. And suddenly the incredible has happened. His entire empire has been shaken to the core because of the filthy and cynical way his reporters got their stories, the intimate ones about people of prominence. The newspaper that loved to throw the s*** at people turned out to be more immoral, more crooked and corrupt than many of the people
it dumped on.

The link is here.

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The suspicious death of Murdoch whistleblower Sean Hoare

The suspicious death of Sean Hoare, the former showbiz reporter for the News of the World, who blew the whistle about senior Murdoch executives being complicit in phone-hacking at the now-defunct paper, has understandably raised questions about whether he was “silenced” in a bid to preempt further revelations into the scandal, which threatens Murdoch’s media empire and Britain’s political establishment.

There's some incredible stuff in here...all of which I've heard of before. So top up your coffee...and pop one of those red pills. The story is posted over at mathaba.net...and the link is here.

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Interview with Jim Rickards: King World News

Eric sent me this long audio interview with Jim in the wee hours of this morning...and it's a must listen. I ran the blog of this in my Friday column...and this is the interview itself...and it's much more extensive than the blog. The link is here.

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The coming UK energy meltdown

Here's your long read of the day. This story was posted over at the oildrum.com about ten days ago...and I thank reader U.D. for sending it along.

After hundreds of years of imperial and industrial power, the UK has suddenly become more or less powerless as a world player. With its North Sea resources fast depleting just when the world’s upstream energy producers of oil, coal and gas are struggling to meet rising global demand, saddled with a public debt of £ 1 trillion, and a massive trade deficit, its leading role as an innovative, world-class centre of scientific and manufacturing know-how being ceded to Germany, Japan and now China, it is ill prepared to become a net energy importer. Yet energy import dependence is what the country is rapidly headed for.

The UK has run through most of its hydrocarbon inheritance within the lifetime of anyone over fifty years old today. This means that the country will be faced with an entirely new situation. In one way or another, Britain has been energy self-sufficient for most of the last five hundred years. The destruction of its forests for ship building and fuel, prior to the industrial revolution, came to an end with the invention of the steam engine and the exploitation of coal, which energized the industrial revolution. The empire-builders of the 19th century ensured secure commodity supplies, including hydrocarbons, by planting the Union Jack on an unprecedented fraction of the World’s land surface.

In my opinion, this is an absolute must read, as 'peak oil' is staring Britain right in the face. The link is here.

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Gold could top US$2,500 an ounce and might even hit US$5,000, says Citigroup

My last two stories today were provide by reader 'Charleston Voice'.

Sovereign debt worries here in Europe and in the US could push the gold price up to US$2,500 an ounce, and possibly even as high as US$5,000 ounce, according to research from Citigroup.

Today gold is changing hands at over US$1,600 an ounce as investors beat a retreat into a safe-haven “hard asset”.

And analyst Heath Jansen likens the current, seemingly inexorable rise of precious metal to the bull run of the 1970s and 1980s.

“When investors are hungry for gold, the metal has a habit of rising exponentially which has no parallel amongst metals,” he said in a note to clients.

This was story was posted over at proactiveinvestors.co.uk in Britain yesterday...and the link is here.

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Demand for bullion at fever pitch

G'day, mate! Today's last story comes from this morning's edition of the Sydney Morning Herald.

Gold could easily reach US$2,000 this year or next as investors in the US, the euro zone and Britain worry about their governments' ability to manage huge sovereign debts and expect their currencies to face more downward pressure, says the editor of Sound Money Sound Investments, Greg Canavan.

''Gold is in a long-term bull market and it will not end until there is mass participation, where you have a lot of retail investors trying to get involved,'' Canavan says.

The story isn't all sweetness and light however...as there are also the doom-and-gloomers that are still pitching their line...and probably have been since the U.S dollar gold price was $252 the ounce.

The link to this story is here.

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If I were to script a scenario as to how the United States quickly could debase the U.S. dollar with maximum impact, impairing the dollar's reserve status and dwindling global credibility...and accelerating the movement towards a U.S. hyperinflation, it would be extremely difficult to come up with a more destructive course of action than what already is taking place in Washington, D.C. The chances of a U.S. debt default remain nil, but risk of a U.S. sovereign credit rating downgrade-though small-is increasing. - John Williams, shadowstats.com

Today's 'blast from the past' is one of my favourite songs of all time. It's a longish piece written by song-writing genius Jimmy Webb...and sung by Richard Harris. The link to the song is here. There's also an interesting background story to this piece...which is also worth your time...and the link to that is here. Enjoy.

Yesterday's volume in gold was around 166,000 contracts, which is huge. The preliminary open interest number showed an increase of only 6,699 contracts, which isn't a lot considering the price action. I'm already more than interested in what the final o.i. number will be when it's reported on Monday morning.

As I was hoping, all of Thursday's considerable increase in preliminary open interest disappeared when the final o.i. number was posted. It showed a smallish decline of 215 contracts.

Silver's volume yesterday was around 42,000 contracts, which was the lowest volume day of the week. The preliminary open interest number showed a rather smallish increase of 1,501 contracts...all of which will disappear in the final report on Monday.

I was expecting that all of Thursday's preliminary open interest number in silver would disappear [and more] when the final number was posted...and it did, as open interest declined 544 contracts.

Here's the 6-month gold chart. It keeps on powering ever higher...but doing it oh-so slowly, as the bullion banks aren't letting it get very far, very fast.

(Click on image to enlarge)

The silver price is not 'confirming' gold's move...and both Ted and I feel that this is deliberate.

(Click on image to enlarge)

As I said earlier, it appear to me that someone is screwing around with the precious metal shares, plus they are not allowing silver to confirm gold's move. I consider this to be a flagrant example of 'painting the tape'.

As I mentioned in my comments on this in the COT report...the warning flags are now flying for gold, as the bullion banks' short position is now getting up there...and it's only a matter of when, not if, they pull the trigger. And their short position has grown even larger since Tuesday's cut-off. Of course all the tape-painting will 'prove' that the technical analysis based on this was correct once again, when JPMorgan et al engineer a decline in the gold price. So we'll just have to see how this plays out during August.

As I put this column to bed, I note that crude oil is still knocking on the $100 price door...and I'd like to take a moment to remind you of the US$39 'blue-plate special' that the good folks over at Casey Research announced about two weeks back.

"In a shocking admission, the well-respected International Energy Agency (IEA) projected that conventional crude oil production will “never regain its all-time peak of 70 million barrels per day (mb/d) reached in 2006.”

"In other words, according to the IEA, the world actually crossed over the point of "peak oil production" five years ago!"

"So the world's supply of conventional oil was on a downward slope – even before the ground-shaking events in the Middle East and Japan."

I find nothing shocking about what's in these three paragraphs, dear reader...or the entire report in general...as I already know that 'Peak Oil' is something that is already visible in my rear-view mirror, as I'm very plugged into the oil patch here in Canada. It's only a matter of how steep the downward slope is going to be. What I can guarantee you is that life on this planet will be thrown into violent upheaval the further down this 'peak oil' road we get.

The promotion is headlined "Shell" Shocked: A Triple Threat is About to Tear the Financial Heart Out of America". It costs zero to check it out...and the annual subscription price is a measly $39...a saving of 50% off the regular $79 subscription price...and Casey Research's usual 90-day money back guarantee also applies.

The report also talks about a new "Energy Dividend"...and I urge you to read all about it by clicking here.

I'm done for the day...and the week...and all next week.

I'll see you back here on August 9th.