Anyway, after the Sydney pounding [courtesy of the U.S. bullion banks out of N.Y. one would think], gold didn’t stray far away from $897…and was within a whisker of that price when trading began on the NYMEX/COMEX at around 8:20 a.m. in New York. Then it was lights out. A vertical decline like that can only occur if there is huge selling volume into a no-bid market…i.e. the traders for the bullion banks stand there with folded arms while the other traders try to sell. No bid…down goes the price until the bullion bank traders unfold their arms and start buying at the price they’ve been told to buy at. It’s as simple as that. It works the other way as well. A vertical price spike [and we have seen a few of those recently] means there are lots of bids…but few [or nobody] on the ‘ask’ side. But I digress…

Silver’s activity followed pretty much in lock step with gold…although the price moves weren’t as violent…and silver was helped to the down-side during London trading…a couple of hours before the boyz in New York went to work on the price.

Anyway, when you blow away all the smoke, between the Sunday night price peaks in Sydney and Hong Kong…and the lows shortly after the Comex opened in New York Tuesday morning…gold was smacked for $35, and silver for 90 cents. Most of the damage was done in three or four strategically placed hits to the market that just set the tone and the momentum. This is not normal trading at all…and it certainly isn’t a free market, as no profit-maximizing sellers ever sell like this…ever! I’ve been using that expression a lot lately. I hope you’re getting the message.

Here’s the gold chart for the period specified above. You can see every place that the New York [not for profit] bullion banks showed up.

click to enlarge

Needless to say, Ted Butler and I had our usual chats yesterday. He said that the volume in silver on Tuesday was super-low…like the lowest ever [net of spreads]. He felt that the senseless attack on gold and silver [especially silver] was not directly Comex-related…but could have been the bullion banks going after the silver longs held by the hedge funds that trade in the OTC market. Options expiry in the OTC market was Tuesday…not Monday.

The usual N.Y. commentator had the following to say yesterday…”Today’s European Central Bank weekly statement of condition indicates a drop of €823 million in “gold and gold receivables” which “reflected the sale of gold by two Eurosystem central banks”. This is 37.1 tonnes. Of this, 35.5 tonnes must be the sale by the ECB itself, revealed at the end of March. A 1.6 tonne sale by one of the captive CBs is a bit higher than the recent pace – last week’s reported sale was only €6.0 million…or 0.27 tonnes. Far below the notional 9.6 tonne average implied by WAG2.

“Why the ECB chooses to wreck the veracity of its weekly statements of condition (initially so impressive) remains a puzzle. An ECB Council member told Reuters today that Bank plans to ‘renew its commitment to the Central Bank Gold Agreement (CBGA)’ which expires in September and is running late for renewal. That goes some, but not all the way, to meaning that there will be a new one.”

Open interest changes for Monday [Comex options expiry in gold and silver] were as follows. Gold o.i. fell a smallish 157 contracts to 346,479 contracts…and silver o.i. fell a more substantial 899 contracts to 94,721. These numbers will be in Friday’s COT. Tuesday’s open interest numbers will be interesting when they become available later this morning.

The Comex Delivery Report showed that 752 gold contracts [75,200 ounces] were delivered yesterday. The big delivery was by Goldman Sachs (NYSE:GS) [710 contracts]…and the big receivers/stoppers were Bank of Nova Scotia (NYSE:BNS) [413], JPMorgan (NYSE:JPM) [161] and Bank of America (NYSE:BAC)[134]. Today is the last delivery day for April and it will be a pretty busy one…as yesterday was the last day of trading in the April contract…and it was interesting, as another 1,179 contracts were purchased for delivery in April. As I said, today is the last day for delivery into the April contract…so the Comex Delivery Report should show as many as 1,752 gold contracts delivered when it’s released this morning.

Over at the Comex-approved warehouses, silver stocks rose a smallish 203,678 ounces. There were no other changes anywhere…the U.S. Mint…the ETFs…nothing.

The only gold/silver story worth noting was the Bloomberg piece filed over at Kitco…where GFMS Ltd. was waxing philosophical on the first quarter gold scrap situation. This is sort of old news, but now they have some real numbers to go with it. The piece is entitled “Gold Scrapping May Have Reached 500 Tons, GFMS Says”. This short story is worth running through…and the link is here.

I’ve got another whack of stories again today. The first is an AP story from this past weekend that was posted at breitbart.com and is entitled “Italy’s Mafia thrives in global financial meltdown”. I thank P.S. for sending this story along…and the link is here.

In a story that appeared in The Wall Street Journal yesterday is this missive entitled “Car Dealers’ Next Headache: Inventory Loans”…”The two auto makers have about 10,000 dealers in the U.S., with the bulk of them carrying considerable debt, mainly from the money they borrow to buy cars that sit on their lots. If Chrysler or GM were to file for bankruptcy protection, the banks extending that credit could immediately begin calling dealer loans, demanding a good portion of the money back and refusing to extend any more inventory financing.” It sure sounds ugly to me. I thank Craig McCarty for the story and the link is here.

A story posted in the New York Times bears the following headline…”Italy Seizes Millions in Assets From Four Banks”. With municipal bond investigations spreading to Europe from the United States, Italian authorities have seized abut $300 million in assets of four global banks…JPMorgan Chase, Deutsche Bank (NYSE:DB), UBS and Defa. This is another multi-billion dollar story in the making. I once again thank Craig McCarty…and the link is here.

The next story is by John Crudele from the New York Post. John smells the body odour of Goldman Sachs all over this stock market…and at the same time wonders what the President’s Working Group [PPT] is up to. The article is entitled “Questions About Goldman Sachs’ Role in Market” and the link is here.

And lastly comes this story…once again from The Wall Street Journal. It asks lots more embarrassing questions about the Bank of America and the Merrill Lynch deal. And rightly so! The title of this article is “Busting Bank of America: A case study in how to spread systemic financial risk” and the link is here.

I look at the stock, bond and currency markets and just give my head a shake. It’s amazing what blind faith, B.S. and the Plunge Protection Team can do. As I’ve said before, the world’s economy, financial and monetary system is done for. The bullion banks in turn are trying to shake the gold and silver trees for the last available long contract they can get, because I doubt very much that they will be around to short the next rally in either gold or silver…at least not at these price levels. That’s what the last several days’ shenanigans have been all about. For gold and silver, today is the last delivery day in the April contract and tomorrow is first notice day for the May contract. Then all bets will be off.

See you on Thursday morning.

Source: And Then There’s This…Wednesday, April 29th, 2009

With deliveries into the December contract in both gold ands silver still ongoing, it should come as no surprise to anyone that the open interest in both metals was down again on Tuesday. This time gold o.i. fell another 1,938 contracts to 264,796. In silver, the open interest fell another significant chunk…2,609 contracts…to a new low of 82,434. These numbers should be in this Friday’s COT. As Ted Butler said in his commentary on Tuesday, we haven’t been at these levels of open interest for quite a number of years…as JPMorgan (NYSE:JPM) et al are breaking every commodity law in the book to cover their short positions.

Two days before Christmas…December 23rd…is options expiry for the January contract. January isn’t a big delivery month as was December…but it’s options expiry nevertheless. It’s hard to imagine that JPMorgan can get any more blood out of these precious metal stones, but who knows what the hell these guys have up their sleeves. Whatever it is, you can rest assured that neither the Comex nor your mining companies are going to say (or do) anything about it. We’ll have to wait and see how the month unfolds. As far as I’m concerned, the Commitment of Traders numbers are already beyond wildly bullish in both gold and (especially) silver…and are set to blow up at any time. Why they haven’t already is a surprise to me…and Ted. But as long as JPMorgan thinks they can get more shorts covered, these markets aren’t going anywhere.

In world news yesterday, I note in a Financial Times story out of London that “Financial markets are braced for large interest rate cuts across Europe (today) amid mounting evidence of a sharp slowdown in the leading global economies…traders priced in a 0.75% reduction by the European Central Bank to 2.5%…a move that would be bigger than any it has made in its near 10-year existence.” And in a Bloomberg story out of London comes this cheerful headline…”Corporate Debt Protection Costs Climb Amid Depression Concern”…”The cost of protecting corporate debt from default jumped to a record in Europe and neared a high in the U.S. amid concern that the global recession will sink into a depression. Credit Default Swaps on a benchmark index tied to below investment grade companies in Europe, reached levels considered distressed for the first time. The cost to protect U.S. leveraged loans from default neared a record, and a benchmark gauge of credit risk tied to investment-grade companies, also jumped…”

click to enlarge

Three stories again today…all from Ambrose Evans-Pritchard at The Telegraph in London. This first story must have sent chills throughout Southeast Asia this morning. The headline reads…”1930s beggar-thy-neighbour fears as China devalues” and the link is here.

This next story is a couple of days old, but still worth the read. The headline states…”World stability hangs by a thread as economies continue to unravel”. The link is here.

And lastly, here’s a story that’s a bit of a surprise. It’s a short commentary…and the headline reads…”Metal prices fall further than during Great Depression”. The link is here.

The service industry laid off another 181,761 workers in November…the Fed’s Beige Book showed that “overall economic activity weakened” across all 12 Fed districts since the last report in mid-October…the Fed also reported that consumer spending fell across the US, with vehicle sales “down significantly” in most regions. Manufacturing activity “declined noticeably” in most areas, and almost all regions reported falling exports.

In light of all this horrific news yesterday, it was obvious that without massive intervention on a couple of occasions yesterday, the Dow would have crashed and burned…just like the PPT intervened on Tuesday…so we wouldn’t have a continuation of Monday’s mini-crash.

There are no markets anymore…only interventions. – Chris Powell, GATA

See you Friday.

Source: And Then There’s This…Thursday, December 4th, 2008

Sterling took a much bigger hit, falling from $1.4916 to $1.4768, as the currencies are pressured by expectations for those big rate cuts by the European Central Bank and Bank of England today.

In the day’s hard numbers, bleak data continued piling up.

Non-manufacturing activity in the US contracted in November at the fastest pace on record, according to a survey of companies released by the Institute for Supply Management. The ISM index sank to 37.3% from 44.4% in October. That’s the lowest level since the survey began in 1997.

Also announced was that the US private sector shed 250,000 jobs in November, according to the ADP national employment index. That was the biggest job loss in seven years.

The ADP report precedes Friday’s government labor market figures for November, with analysts expecting nonfarm payrolls to decline by 350,000. If that happens, it would be the worst loss in more than 25 years.

Source: Dollar Holds Steady

The latest move probably comes as traders read the inflation tea leaves and do not see the Reserve Bank cutting rates this year. If today’s CPI data don’t confirm Monday’s PPI date, look for the Aussie to retreat.

However, if the CPI data show official prices growing above the 3-4% range, then for the rest of 2008 the Australian dollar is going to enjoy a significant yield advantage over most major currencies in the world. The Fed won’t be raising rates any time soon, and may cut them again. We believe that parity with the greenback is still a possibility this year.

It sounds extreme, especially since the Aussie has nearly doubled from its lows against the greenback in 2001. But if something grows at 7% a year, through the magic of compound interest, it will double in ten years. It’s not a big ask to grow another five percent in the next twelve months.

Heck, the Australian dollar is near parity with the Canadian dollar, another commodity currency with favorable fundamentals. Canada’s central bank cut its benchmark to three percent earlier this week, the fourth cut since December. Canada’s biggest liability these days could be its location.

Canada, as you might know, shares a rather larger border with the United States, and is America’s largest trading partner. America, as you might know, is in a recession. What’s bad for America is not good for Canada, nor, apparently its economic growth and thus, its currency.

Meanwhile, the U.S. dollar trades at US$1.60 to the euro, another new high (or new low, depending on your perspective). It’s astonishing isn’t it?

There are two ways to inquire about the U.S. dollar’s prospects. One is to ask: what would make it stronger? Higher interest rates, a lower deficit, reduced government spending, contraction in the money supply. None of those measures seem likely when foreclosures in California are up 327% from last year’s level. So that brings us to the other way of putting the dollar’s dilemma: what would make the euro weaker?

The obvious answer is: lower interest rates. But the old guard of the European Central Bank is dead set against lower rates. Europe’s dual Jean-Claudes (Trichet and Juncker) have an old fashioned view of a Central Bank’s mission: to combat inflation. “Inflation is a concern for all governments,” Juncker said earlier this month.

Correction. Inflation “should” be a concern of all governments. But central banks in Japan and the U.S. have expanded their fictional mandates to include employment, economic growth, and managing the deflation of asset bubbles. By contrast, Europe’s old-fashioned focus on price stability and money supply seems pretty single-minded and downright humble.

But then, Trichet and Juncker come from that generation of European money men who lived with the social and economic consequences of post-war inflation (both World Wars. ). They have real experience with the real world consequences of manipulating the value of the currency.

Wim Duisenberg, the first head of the ECB, once told politicians who told him to cut rates in order to promote growth, “I hear you. But I do not listen.” The ECB is deaf, and it’s not because it’s run by old men. It’s run by men, like our late mentor in these matters, Dr. Kurt Richebacher, who understand that stable prices mean a stable society. Unstable prices…and you have rice riots.

Mind you the euro has many critical problems of its own. Growth in the Eurozone occurs at different speeds in the North and the South. You have one price of money for twelve very different economies. The euro experiment may not last much longer than the dollar experiment. But relatively speaking, only some external shock (think bad things) can weaken the euro against the greenback this year.

Dan Denning
The Daily Reckoning Australia