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Message: Ed Steer this morning
Gold for Oil? India and Iran Ditch the Dollar?
"John Embry and I both feel that 'da boyz' are foolin' with the shares as well as the metal prices themselves."
¤ Yesterday in Gold and Silver
The gold price did little in Far East trading on Tuesday. But, as is frequently the case, the high in the Far East came just before the London open...and it was, as is also frequently the case, all down hill from there...with the low of the day coming shortly after 9:00 a.m. in New York.
After the low was in, the gold price gained a few dollars and then traded sideways into the close of the New York Access market at 5:15 p.m. Eastern time.
Gold closed the Tuesday trading session at $1,666.40 spot...down $9.90 on the day. Gross volume was a monstrous 190,000 contracts, but once all the roll-overs out of the February contract were removed, the net volume imploded to a very small 85,000 contracts.
Silver's Far East high also came shortly before the London open...and its low came at 1:00 p.m. in London right on the button...which was 8:00 a.m. in New York...exactly twenty minutes before the Comex began to trade.
The subsequent rally hit its zenith at 10:45 a.m. Eastern, before getting sold down to the $32 spot level...and from there it traded sideways into the close of electronic trading.
Silver closed at $32.05 spot...down 30 cents on the day. Approximate net volume was a rather small 27,000 contracts.
The dollar index didn't do a lot yesterday. It had a small rally between 9:00 a.m. in London and 9:00 a.m. in New York, before selling off and closing virtually unchanged from Monday.
The only thing of note regarding the dollar index was that the tiny rally made it through the 80 cent level, but couldn't hold even that small gain.
Here's the 2-day chart starting right from the Monday morning Far East open at 6:00 p.m. New York time on Sunday night.
Like the Dow, the gold stocks gapped down at the open...and then proceeded to slide further as the trading day progressed. At the close, the HUI was down 2.17%...despite the fact that the gold price was only down ten bucks.
The silver shares were on the ropes all day long...and Nick Laird's Silver Sentiment Index closed down 1.87%.
(Click on image to enlarge)
With the January delivery month winding down, so are the physical deliveries between traders in the Comex futures market. The CME's Daily Delivery Report yesterday showed that only 2 gold and 5 silver contracts were posted for delivery tomorrow.
There were no reported changes in GLD...but SLV reported a withdrawal of 194,397 troy ounces of silver, which might have been a fee payment of some kind. That's the first withdrawal from SLV since January 5th.
The U.S. Mint did not have a sales report on Tuesday.
Well, the forklifts were certainly busy over at the Comex-approved depositories on Monday. They reported receiving 991,700 troy ounces of silver...and they shipped 1,522,467 ounces of the stuff out the door...for a net decline of 530,767 ounces. The link to that action, which is worth a peek, is here.
Here's a set of graphs that Nick Laird sent me in the wee hours of this morning...and I thought I'd stick in here, since I have quite a few graphs in 'The Wrap' already.
(Click on image to enlarge)
I'm happy to report that I don't have that many stories for you today...and after the twenty-six that I posted in my Tuesday column, I'm sure you're just as grateful.
¤ Critical Reads
SubscribeEconomic and Social Turmoil Risk Reversing the Gains of Globalization, Report Warns
The world’s vulnerability to further economic shocks and social upheaval risk undermining the progress that globalization has brought, warns the World Economic Forum in its Global Risks 2012 report, the seventh edition, published yesterday.
Chronic fiscal imbalances and severe income disparity are the risks seen as most prevalent over the next 10 years. These risks in tandem threaten global growth as they are drivers of nationalism, populism and protectionism at a time when the world remains vulnerable to systemic financial shocks, as well as possible food and water crises. These are the findings of a survey of 469 experts and industry leaders, indicating a shift of concern from environmental risks to socioeconomic risks compared to a year ago.
“For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs,” said Lee Howell, the World Economic Forum Managing Director responsible for the report. “This new malaise is particularly acute in the industrialized countries that historically have been a source of great confidence and bold ideas.”
This story from the New World Order crowd is a must read. It was posted on the businesswire.com website on January 11th...and I thank reader Ken Metcalfe for sending it along. The link is here.
Bank of England Governor Sir Mervyn King warns elite to rein in pay
The Governor of the Bank of England has warned Britain's business and banking elite to rein in pay and bonuses or risk sparking a rebellion against capitalism in its current form.
In a speech to business figures in Brighton setting out the "arduous, long and uneven" path to recovery this year, Sir Mervyn King said the key to restoring growth would be "above all else ... to maintain support for a market economy and an open world trading system".
Coming in the week that the Coalition laid out proposals to rein in excessive executive pay, Sir Mervyn said: "The legitimacy of a market economy will inevitably be challenged if rewards go disproportionately to a small elite, especially one which benefited from the support of taxpayers.
Mervyn has a keen grasp of the obvious in this story posted in yesterday's edition of The Telegraph. It's a fairly short read...and worth it if you have the time. It's also Roy Stephens first offering the of the day...and the link is here.
Euro Aid from the ESM: EU Reaches Agreement on Permanent Bailout Fund
Euro-zone finance ministers meeting in Brussels on Monday night finalized the treaty governing the permanent euro bailout fund, the ESM. The deal paves the way for the ESM to take effect in July, a year earlier than planned. German Finance Minister Schäuble also said that final agreement had been reached on tighter euro-zone budgetary rules.
The 17 euro-zone countries have reached agreement on the contract for the permanent euro bailout fund, the European Stability Mechanism (ESM), clearing the way for the aid fund to be launched one year earlier than planned. Luxembourg Prime Minister Jean-Claude Juncker, chairman of the group of euro-zone finance ministers, announced the agreement following a Monday night meeting in Brussels. The ESM is now set to replace the temporary European Financial Stability Facility (EFSF) on July 1, a year earlier than originally planned.
This is posted over at the German website spiegel.de yesterday...and is courtesy of Roy Stephens as well. The link is here.
Luxembourg's Foreign Minister: Merkel's Fiscal Pact a 'Waste of Time and Energy'
Luxembourg's Foreign Minister Jean Asselborn is sharply critical of German Chancellor Angela Merkel's push for an EU fiscal pact. In an interview with SPIEGEL ONLINE, he says it won't hold up. Furthermore, big countries like Germany and France threaten the currency union with their egotism, he says.
No shades of grey in this spiegel.de interview from yesterday. It's Roy's third offering of the day...and the link is here.
Greek Economy on Track to Implode: Hanke
Whether or not Greece is able to reach an agreement on the restructuring of its debt, the country is set to “implode” as the economy contracts, according to John Hopkins University’s Steve Hanke.
“The game is completely over,” Hanke, professor of applied economics, said at the Bloomberg Sovereign Debt Crisis Conference in New York hosted by Bloomberg Link. “All the calculations are nonsense and have been since day one. Since the crisis began the money supply has been shrinking and the economy is going to implode, no matter what they do in the short run.”
No surprises here. I thank West Virginia reader Elliot Simon for sending me this Bloomberg story yesterday. It's definitely worth skimming...and the link is here.
Gold for Oil: India and Iran Ditch Dollar - Report
According to a new and yet unconfirmed report, India bought oil from Iran using gold. India certainly has the gold resources to fund the oil, while Iran is under pressure by the West, due the continuation of its nuclear program.
This "new and yet unconfirmed report" the above story refers to, first showed up over at the debka.com website on Monday...and I had several sharp-eyed readers send it to me. Now a lot of other websites [including Russia Today] have gone with this story...and it has now developed a life of its own, true or not.
Of course I'm hoping that it's all true...but I'll wait for further confirmation...as does the forexcrunch.com website where this story came from...and rightfully so. This is a must read...and I thank Elliot Simon for sharing it with us. The link is here.
The Demise of the Petrodollar: The World of Energy
"Rumors are swirling that India and Iran are at the negotiating table right now, hammering out a deal to trade oil for gold. Why does that matter, you ask? Only because it strikes at the heart of both the value of the US dollar and today's high-tension standoff with Iran." - Marin Katusa, Chief Energy Investment Strategist, Casey Research.
The above paragraph led off yesterday's absolute must read edition of Casey's Daily Dispatch...and the link is here. Don't go any further until you've read this piece!
This Is Where The Gold Is(n't) - The New York Fed Guide To The Most Valuable Vault In The World
If your knowledge of the vault is limited to the perspective of one John McClane, you are missing our on a lot. Which is why the new York Fed, in those rare occasions when it is not monetizing debt, and/or telling Citadel which securities to buy, has been courteous enough to put together "The Key To The Gold Vault" - the official brochure of the warehouse where more gold is stored than at any other place in the world.
This very interesting zerohedge.com piece from yesterday was sent to me by Australian reader Wesley Legrand...and the link is here.
Silver Sales Up As Supply Slips
There have been several stories virtually the same as this that have been posted on the Internet since the beginning of the year...and I note that quite a bit of what's included in this story is taken from other writers without attribution, which is a very common disease these days.
But, having said that, the graphs are worth the trip...and it's worth skimming. It's posted over at the silverseek.com website...and I thank reader Bob Fitzwilson for sending it along. The link is here.
Paul Brodsky - We're Headed to a Point Where Gold Will Go Parabolic
Eric King sent me this Paul Brodsky blog yesterday morning. Lots of writers are forecasting a moon shot in gold and silver just about any day...and I hope that one of them is right...and sooner rather than later.
It's posted over at the King World News website...and the link is here.
James Turk - Greek Default Imminent as Financial Crisis Propels Gold
GoldMoney founder and GATA consultant James Turk told King World News that a Greek debt default is imminent...and Greece couldn't pay even a renegotiated debt anyway.
This story sounds very similar to the Bloomberg story posted further above...and the link to the KWN blog is here.
John Embry - Gold is the Cure to Epic Monetary Debasement
Sprott Asset Management's John Embry tells Eric King that people seeking to buy dips in gold now aren't getting any, because gold was driven down too far in the paper market at the end of 2011.
John Embry's blog is posted over at the King World News website...and the link is here.
Murray Pollitt: Gold is the uninvited guest
Resource broker and market analyst Murray Pollitt of Pollitt & Co. in Toronto writes in his January market letter that central bank price suppression has devastated the gold industry and dramatically reduced supply just when currencies are blowing up and taxes and geopolitical risk are reducing supply as well. Pollitt thinks 2012 will be the year when the chickens come home to roost.
This absolute must read essay is posted over at the gata.org website...and I thank Chris Powell for wordsmithing the introduction. The link is here.
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¤ The Wrap
As I have pointed out throughout the GFC - and long before - the global financial system is long overdue for a “purging” - a sweeping out of the huge pile of debt-induced malinvestments which have now all but brought the entire world to a standstill. When even the World Bank has come to the point where they can see no other way out, one may know that the purging is not far away. - Bill Buckler...The Privateer...January 22, 2012
There was certainly no reason for gold and silver to get sold off yesterday...and it was the same for platinum and palladium as well. However, volume was very light, so I'm not going to read a lot into the price action...eve though it appeared to be the 'same old, same old' drill.
The preliminary open interest numbers for yesterday's trading showed a smallish decline in gold o.i....and a smallish increase in silver's open interest. Yesterday was the cut-off for Friday's Commitment of Traders Report, so all will be revealed then.
I've got my eye on three different charts these days...gold, silver and the HUI. Here's the 1-year gold chart. I'm wondering if the rally will 'fail' at the 50-day moving average...and if it does fail, will it be man-made, or market forces at work?
(Click on image to enlarge)
Here's the 1-year silver, with the drive-by shootings of May 1st and September 27th being the most obvious features. I'd bet money that we saw the low for this move down between Christmas and New Years...and that any correction won't last long, or be overly deep...but the momentum to the upside seems to have been lost at the moment. I'm sure that loss of momentum had some help along the way.
(Click on image to enlarge)
And lastly comes the 1-year HUI chart. The price action since the beginning of the year has been horrid...and a lot of it has also been inexplicable, as the stock moves were totally counterintuitive to what was going on with the metal itself.
(Click on image to enlarge)
John Embry and I both feel that 'da boyz' are foolin' with the shares as well as the metal prices themselves.
In overnight trading, the gold price didn't do much in the Far East during their Wednesday but, like Tuesday, the high came within a half-hour of the London open...and it was pretty much the same for the silver price as well. At precisely those highs, a 25 basis point rally developed in the dollar index as well. Coincidence, you ask? Probably not. As of 5:10 a.m. Eastern time, gold is down about seven bucks...and silver is down about two bits from Tuesday's close in New York. Volume, like yesterday at this time, is vanishingly small in both metals. As I've said previously, this is highly unusual for this time of month...and I'm not exactly sure what it means.
Here's the silver chart as of 5:13 a.m. Eastern time.
With options expiry and the roll-overs out of the February delivery month in gold ongoing, I'd be surprised if the price action did anything of importance to the upside in either gold or silver until we get past First Day Notice next Tuesday. Time will tell.
One thing that I can say for sure, is that silver and gold sales at the retail level at my local bullion dealer have been pretty robust all month long.
That's all I have for today...and I'll see you here tomorrow.
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