Gold & Silver Daily: Vietnam Devalues Again: Gold Premiums Syrocket - Feb 11, 2010

Vietnam Devalues Dong Again: Gold Premiums Syrocket
Not much happened with gold during Far East trading on Wednesday, with gold's high of the day [around $1,082 spot] coming shortly before 8:00 a.m. in New York. From there, the gold price headed south to the tune of around $20... with half of that coming in the 30 minutes after the London p.m. gold fix at 10:00 a.m. in New York. The absolute low of the day was about 11:20 a.m. when gold touched $1,064.10. This was also the high of the day for the U.S. dollar. From there, a rally started as the dollar began to decline. This gold rally lasted for an about an hour before heading sideways into the New York close at 5:15 p.m.

Silver's ride on Wednesday was, as they say, much more 'volatile'. The low price in Far East trading occurred around 2:00 p.m. in Hong Kong... and from that point, silver tacked on about 24 cents to it's high of the day [around $15.62 spot] which was shortly before 1:00 p.m. in London... 8:00 a.m. in New York. Then, like gold, the roof caved in. In a little over two hours, silver's price dropped 50 cents... with its absolute low of the day [$15.05 spot] corresponding to the dollar high at 11:20 a.m. Eastern time. And, despite the subsequent rally in the U.S. dollar... the silver price didn't benefit much.

Yesterday's smack down in both gold and silver that began shortly before 8:00 a.m. Eastern time had nothing to do with the dollar. The dollar had declined all though Far East trading with the absolute bottom coming shortly after 6:00 a.m. in New York [11:00 a.m. in London]... with the low appearing to be around 79.68 on the dollar chart below. The dollar had a double top... with the last top coming at 11:20 a.m. in New York... the lows for both gold and silver. But, between the absolute low and the start of the 'correction' in both gold and silver less than two hours later at 7:50 a.m., the U.S. dollar index rose 30 basis points... and both gold and silver were silver moving higher... and in the case of silver... sharply higher. It should be obvious to anyone that... left to their own devices... both silver and gold would have performed much differently during New York trading yesterday. And it's equally obvious that someone in a position to do something about it, didn't want that to happen... so it didn't. And they made it so obvious. Here's the dollar chart, which you can compare to the gold and silver charts.

The shares had a vicious not-for-profit seller show up at precisely 10:00 a.m... and the shares got hammered way out of proportion to the minor sell-off that occurred in the Dow at the same time... and there wasn't the slightest indication that what was going on with silver or gold prices, had any bearing on what the precious metal stocks did... as they seemed to follow what the Dow was doing. I've noticed this pattern for most of this week.

Tuesday's open interest numbers were a mixed bag. From its low to its high, gold was up about $20 on Tuesday, so the 5,517 contract increase in open interest makes some sense. Final volume [which, once again, was the same as the preliminary volume number] was 193,627 contracts. Gold's total open interest is down to 466,905 contracts. Silver open interest went the other way. Silver also had a big rise in price on Tuesday... but open interest showed a decline of 2,308 contracts. My guess is that there was a lot of short covering going on. Final volume was the same once again as preliminary volume... 58,047 contracts. Total silver open interest is now down to 118,593 contracts.

This open interest data for Tuesday [the cut-off day] will most certainly be in tomorrow's Commitment of Traders report... and, if the reporting isn't totally screwed up again like last week, we should see massive drops in the net short positions of the bullion banks... especially in gold. As always, it will be very interesting to see how they hid their tracks... by what combination of long purchasing and short covering they used.

The CME Daily Delivery Report showed that 170 gold and 275 silver contracts are up for delivery on Friday. So far this month, a total of 4,937 gold contracts have been delivered into the February contract. And, surprisingly enough, considering it's a non-delivery month for silver... 792 silver contracts [almost 4 million ounces] have already been delivered in February as well. That's a lot. The link to yesterday's CME delivery data is here.

Once again, there were no reported changes in the GLD, SLV or U.S. Mint sales... but the Comex-approved depositories reported that a fairly chunky amount of silver was withdrawn from their collective inventories on Tuesday... this time it was 1,571,368 troy ounces. Comex warehouse silver stocks are now down to 109,409,220 ounces... the first time they've been below 110 million ounces since late 2006.

Three gold-related items to report. The first is this chart that was sent to me by Australian reader, Wesley Legrand. It's from the good folks over at chartoftheday.com. Using data from 1976 to present day, the chart shows that "on average, gold tends to have a choppy/downward bias from February to June."

The second gold-related item is this WSJ piece that came out yesterday bearing the headline "Midas touch lost? Paulson hits hurdles in gold fund". Normally you would require a subscription to the WSJ... but GATA has it posted in the clear. It's worth the read... and the link is here.

The last gold-related story comes to you from Vietnam. As you are aware, dear reader, this country [along with India and China] is a huge gold consumer. Most real estate transactions within the country are done using gold... and it's a serious contender to the local fiat currency... the dong. Anyway, for the second time in four months, Vietnam has devalued it's currency, and gold premiums in the local market are sky high again... over $50/ounce. The smugglers will be doing a roaring business. This Reuters story [posted at International Investor] on this issue is a must read... and the link is here.

Yesterday I brought you the story about the Chinese officially announcing that they were going to divest themselves of all non-U.S. government guaranteed debt instruments they were holding. This story made it onto CNBS, and the discussion about it can be found in this short piece over at zerohedge.com. I thank Russian reader Alex Lvov for sending it along... and the link is here.