However, if one looks at the silver chart, it looks like someone found a cliff to shove the price off of shortly before 4:00 p.m. during Hong Kong trading. The silver price dropped about two percent in half an hour or so…as some not-for-profit seller was about. That turned out to be the low of the day…despite the usual shenanigans at the Comex open. The 3-day silver graph doesn’t look like normal supply and demand buying or selling to me.

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Yesterday’s roller coaster ride in gold produced an increase in open interest of 1,901 contracts to 359,517 on big volume…151,219 contracts…including switches. It should be no surprise that silver o.i. fell…1,107 contracts to 95,439 contracts. Volume was average…18,562 contracts, including switches.

Very little to report in “other” gold news. Nothing from the U.S. Mint. There were no changes in either the GLD or SLV. The Comex Delivery Report showed only seven gold contracts were delivered…and 94 in silver. There are still about 1,050 silver contracts yet to be delivered for May. Silver stocks at the Comex-approved warehouses rose another 624,219 ounces…that’s about one 18-wheeler full of silver. I see that the strike at Peñoles precious metals refinery in Mexico was over on April 25th…and they’re now accepting precious metals concentrate again. I wonder if they’ve lifted their force majeure that they declared back then, as I haven’t seen anything written about this news item anywhere else. It’s my bet that it will take them at least a year to get their lost business back…if then.

I’m still trying to catch up the raft of excellent stories that I received while I was on vacation. The first story is from Oklahoma, of all places. It appears that a serious attempt is being made by the state legislature to restore Oklahoma’s sovereignty. A resolution to reclaim Oklahoma’s sovereignty has already passed the House and is now in front of the Senate. It seems that many federal laws violate the 10th Amendment, which says powers not delegated to the U.S. government “are reserved to the states respectively, or to the people.” I thank P.S. for the story entitled “House bypasses governor’s veto to claim Oklahoma’s sovereignty” and the link is here.

The next story is from the Financial Times in London. Someone has taken notice of just how much money that European central banks have lost by selling off chunks of their gold reserves over the last ten years. It adds up to around US$40 billion. The link is here.

Here’s a story from the Germany that’s posted at spiegel.de. It shows the physical manifestation of the effects of the breakdown of the Baltic Dry Index…both in words and pictures. Business is booming in the ship scrapping business in both Bangladesh and Pakistan. The photo gallery is great…and the article is first rate as well. The story is entitled “Shipbreaking Boom: The Freighter Graveyards of South Asia”. I thank Craig McCarty for sending it along…and the link is here.

It’s hard to write my daily rant without a piece by Ambrose Evans-Pritchard showing up in it at least a couple of times a week. Here’s commentary that he had this past weekend. This story was something he posted on Sunday…but which is still very much worth taking note of today. The title says it all…”Enjoy the rally while it lasts – but expect to take a sucker punch”. I couldn’t agree more…and the link is here.

Here’s a piece from the Asia Times. It was written by John Browne of Euro Pacific Capital. I’m not as enraptured as he is with all this improved Chinese manufacturing activity, but the rest of his commentary about China and gold is worth your while. The article is entitled “China stirs a pot of gold”…and once again I thank Craig McCarty for sending it along. The link is here.

As we all know, one of the next shoes to drop is the commercial real estate market in the United States. Much has already been written about that, but here’s a Bloomberg piece [courtesy of Craig McCarty once again] that shows what’s happening over in London’s business district. It’s a bit of a read, but definitely worth it. The article is headlined “Rents Crashing in London to 1991 Prices: Le Garoche Shows Gone” and the link is here.

And lastly is this illustration posted over at zerohedge.blogspot.com [with thanks again to Craig McCarty]. The map below demonstrates the massive impact that just the initial round of Chrysler dealer shutdowns will have on the US economy. As is evident, the pain will be focused east of the Rockies, although major West Coast cities will not be spared either. Every dot represents an automotive dealer that Chrysler will make redundant.

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As far as the Fed and the Treasury are concerned, this is an all-out WAR. They’ve put the viability of the United States at risk through creating trillions of dollars of debt. I believe this government will stop at nothing in their furious battle against the bear market and deflation. And if manipulation helps, they’ll do it.

For decades I’ve heard stories and rumors about manipulation. I’ve always brushed those rumors aside. But this is a different world, and the nation is literally fighting for its life. People ask me, “Do you really believe the government would manipulate the markets?” My answer, “You bet I do, they’re willing to do absolutely anything in their struggle to get the US economy back to ‘normal’ again. – Richard Russell, 14 May 2009

I note in a Reuters story that Standard & Poor’s said that “the nation’s banking crisis has ‘merely entered a new phase’ and might not end before 2013.” We’ll all be lucky if that’s the case. I’ve commented before that we won’t see a bottom in the U.S. real estate market until 2013…and that I’d be a very old man before this “greater depression” has breathed its last. I still stand by that statement.

See you on Saturday.

Source: And Then There’s This…Friday, May 15th, 2009

Good day… And a Tub Thumpin’ Thursday to you! Day One at the Orlando World Money Show (WMS) went well. My room for the presentation was packed! It was standing room only, and the good part was the fact that there were only about 30 Pfennig readers in the crowd. I say that not because I have something against Pfennig readers, oh Lord, they are dear readers! The reason I say that is I like to know how many of the non-readers I can convert to Pfennig readers!

Well… As you know, when I’m on the road like this, I’m not sitting in the saddle back home, and watching the markets all day long, and reading stories about what’s happening, etc. So, the “road Pfennigs” tend to be a bit shorter. But as my friend, and once editor of our monthly newsletter, David Galland, used to tell me… “you’ve got to get it out every day, no matter what!”

So… From what I can tell this morning, the currencies traded in a very tight range after the sell-off from the previous night that I told you about yesterday. Japanese yen is a bit weaker, from yesterday morning’s currency round-up, but other than that small move in yen, the levels look like they are wearing the same clothes as yesterday!

Today we have the Central Banks of England and the Eurozone meeting to discuss rates. As I said earlier in the week, I truly believe the Bank of England (BOE) to cut rates aggressively once more to bring their internal rate to 1/2% or 50 BPS, just like here in the U.S. The forecast is for the BOE to cut to 1%… But I’ll go out on that limb and say they’ll be even more aggressive. Here’s the thing that just gets my goat though… The more aggressive the BOE is in cutting rates, the better pound sterling will trade. Now this should be the opposite, as a rate cut is a true debasing of one’s currency. But the mental giants in today’s trading world don’t see it that way. They see it as a plus for the economy and so for the currency.

I could really go off on a tangent now about how trading desks are run by Ivy leaguers that got that job right out of grad school and don’t carry the same “valuation tools” as old timers… And quite frankly could very well be one of the reasons we’re in this mess today… But I won’t go there, as that’s too touchy of a subject!

The European Central Bank (ECB) will also meet today, but ECB President, Trichet, has pounded it into everyone’s heads that the ECB will NOT cut rates today, and to look to the March 5th ECB meeting as the next “chance” for a rate cut.

Here’s another example of not carrying the same “valuation tools”… The ECB is being prudent and waiting to see the results of previous rate cuts, so as to not “over cut” and get in trouble with spiraling inflation, etc. Why debase the currency when you don’t have to? But…. NOOOOOOO! The mental giants these days are punishing the euro because they believe the ECB is now “behind the curve” with regard to rate cuts. See how crazy this has all become? Crazy… I’m crazy for thinking about you… I’m Crazy… Crazy for feeling so blue… Ahhh, the soothing voice of Patsy Cline… Now, I can get back to writing without carrying on about “valuation tools”… Or as the kids say nowadays those guys are “tools”… HAHAHAHAHAHAHAHAHAHA!

Yesterday, I told you about the surprise Pending Home Sales report, and how maybe it’s a sign of better times, but I needed to be shown more before I would commit to saying that it’s a true sign. Well, my friend, Bill Bonner, author, and Daily Reckoning fame (www.dailyreckoning.com) had this to say yesterday about this very subject…

“Our guess is that the little light investors thought they saw will turn out to be another torpedo blowing up. Millions of homeowners and stock market investors have gone down already…but there are many still afloat.
And many torpedoes that still haven’t found their marks.

In Japan, for example, property prices began falling in 1991. They fell for the next 13 years…reaching a low in 2004 equal to where they had been in 1973!

If that pattern plays out in the United States, the housing market won’t hit bottom until 2020…when you’ll be able to sell your house for what you paid for it in 1989.”

Our old Fed Chairman, who is highly regarded for his inflation fighting in the early 80’s, Paul Volcker, spoke last night and he’s none too happy with the delay in starting the economic advisory group that the new President, Obama, set up. Obama picked Volcker, but Volcker isn’t seeing any moving forward with this advisory panel. Volcker wants to help, and I believe we need his voice, but no one wants to “include” him… Hmmmm… I wonder what’s going on there… Does the new administration believe they don’t need Volcker’s voice? I sure hope that’s not true!

In another sign that the German economy has fallen into a recession, German Factory Orders for December fell -6.9% bringing the annual number to a staggering decline of -25%, according to the report I saw this morning… This is just another reason why the euro no longer trades at 1.60…

I saw a report this morning regarding India and the rupee… I don’t talk about India very often, because not much in the way of market moving news comes out of India… But, this report is talking about black clouds hovering over India, so I thought I had better fill you in… An advisor to the Prime Minister said last night that the 2009 Budget “may” reach 7.5% of GDP! The forecast is for 2.5% of GDP. If this is true, the writer believes that the rupee could sell off from today’s level of 48 and change to 52… If that all holds true, then holders of rupees will be thankful for the above market interest rates to cushion that blow… But again, this is all based on a “may” and could turn out to be a boy crying wolf!

I’ll end today’s letter with a “feel good story”… Gold rallied to $915 yesterday… Gold traders say that they believe Government spending will spur inflation, the dollar will weaken, and gold will take off on the strength of its inflation fighting make up.

Goldman Sachs Group, Inc. (which probably has so many research people you can’t count them with stick) said that they believe Gold will reach $1,000 within three months. And a commodity analyst at Dresdner Bank said this, “expectations of future inflation and dollar depreciation are driving the market right now.”

I told the crowd at my presentation yesterday that Gold IS an excellent inflation fighter… And not to listen to those that preach otherwise, as they use the high of the 80’s at $800 and say Gold hasn’t done a very good job of fighting inflation since then! But! Not so fast Tim! I say you have to go back to when President Nixon closed the Gold window, and took the dollar off the gold standard. Gold was trading then at $35 an ounce… Now follow Gold’s price through the years to the present at $915… Now… That’s what I call an inflation hedge!

And finally on Gold… Kristin sent me this note that she came across… “Short term, said Tom Pawlicki, of MF Global in Chicago, “Investment has been a key supporting factor for gold,” and thus “Passage of the stimulus package in its current form would likely be inflationary and bullish for gold while a Senate filibuster would be bearish.”

On to the Big Finish! Wait! There’s been a nice move up in the currencies since I got up this morning! WOW! Alrighty then, let’s go to the currency round-up!

Currencies today 2/5/09: A$ .6485, kiwi .5130, C$ .8125, euro 1.2875, sterling 1.4515, Swiss .8615, rand 9.9765, krone 6.83, SEK 8.2625, forint 230.32, zloty 3.62, koruna 21.98, yen 89.70, sing 1.5050, HKD 7.7540, INR 48.77, China 6.8367, pesos 14.44, BRL 2.3075, dollar index 85.60, Oil $40.44, Silver $12.71, and Gold… $915.80

Source: Gold As An Inflation Fighter!

But shortly after the London p.m. fix was in, a serious seller showed up and took both gold and silver down to their respective lows of the day. Then, at precisely 1:00 p.m., G-Dubya opened his mouth…and one of the biggest turnarounds in gold, silver…and the stock markets…took place. The prices of both metals continued higher into after-hours trading on the Globex. Once again, these rallies in gold and silver looked like short covering to me. But, regardless of the cause of the price rises, the precious metals stocks did equally as well. Volume was only so-so in both metals.

Gold open interest on Wednesday’s $20+ decline in the price showed a drop of only 1,709 contracts to 292,122. Silver’s 50 cent drop only coughed up 160 contracts to 94,334. This is not a lot of change for such big drops in price…so you can see that even big price declines no longer get much selling activity, as there aren’t a lot of contracts to liquidate at these low prices. However, there could have been some new shorts put on. The volume on Wednesday was very light…air, really. What happened in Wednesday’s action won’t show up until the the COT on the 21st…next Friday.

Lots of gold news today. In a mineweb.com story I noted that South Africa’s September gold production fell 17.7% year over year. As I’ve said before, production could fall 100% and JPMorgan would not allow it to show up in the price…and any rally based on that news would be capped immediately. The usual NY gold commentator had three points of note yesterday: 1) Investment demand…plus gold sales to India…are still extremely high. 2) Last week the European Central Bank reported that there were NO gold sales at all, and inventories actually rose a hair. 3) After twelve consecutive days, GLD has finally shown some activity…down 8,000 ounces! And lastly, I note in commentary over at Bill Murphy’s lemetropolecafe.com that at the current price for gold, 90+% of all December gold options would expire out of the money. So much for a squeeze in the December delivery month. I guess the boyz at JPMorgan/HSBC can read too.

Also on gold was this item posted at arabiannews.net. I don’t have the URL to validate the information, but it looks legit to me. “There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources…Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’…He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.”

In other news, GE’s credit rating was confirmed AAA yesterday…even though they have their hand in one of TARP’s pockets! Go figure! The U.S. monthly deficit for October was…are you ready?…$237 BILLION. No wonder yesterday’s 30-year bond auction was a bust!

Today’s first story is a ‘must read’…and I mean it! I’ve been talking about this issue for over a year now, as more and more stories keep surfacing (like the one I posted in my rant yesterday) about a return to some new monetary system backed by gold…a return to the first Bretton Woods agreement. This article by Larry Edelson over at moneyandmarkets.com sums up my opinion exactly. It’s entitled “The G-20’s Secret Debt Solution”. None of the gold price numbers he mentions shock me in the slightest…as I’ve seen similar figures over the years. I thank Paul Bowman for sending this article to me…and the link is here.

The second story is from The Standard in Hong Kong which was filed yesterday evening in North America…but first thing Friday morning in Hong Kong. Here’s the first paragraph…”The mainland is seriously considering a plan to diversify more of its massive foreign exchange reserves into gold, a person familiar with the situation told The Standard.” Needless to say I think the story, entitled “Gold Rush”, is worth reading. The link is
here.

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Government’s view of the economy cold be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. – Ronald Reagan (1986)

Will there be a surprise new monetary order coming out of the G-20 this weekend? That’s what should happen, but I don’t know for sure, as I’m not a prophet. I had dinner with James Turk et al last night, and he thinks it’s all smoke and mirrors. Our group was evenly split on it. I know that printing more money is not the answer…and sooner rather than later…everything is either going to blow up or melt down. Will the voice or reason rule…or will insanity win the day? We’ll find out soon enough.

Source: And Then There’s This… Friday, November 14, 2008

Then both metals began a gentle rise…and then a gentle decline into the London p.m. fix. From there, both metals were away to the races. Prices continue to rise quietly in Thursday morning trading in the Far East as I write this…which is late Wednesday evening here in North America.

Open interest for Tuesday was quite interesting. Gold o.i. only rose 1,384 contracts, which is not a lot considering gold rose almost $15. There must have been short covering in there as well. Silver o.i. rose a more than substantial 2,466 contracts…no short covering there at all. These would be technically motivated funds putting on long positions, as silver is now well above it’s 50-day m.a. I wonder what entities took the short side of that trade? Whoever they were will remain unknown until the COT comes out on May 30th…next Friday.

Well, what I predicted in my commentary on Tuesday did not come to pass on Wednesday…but there’s still time for it to happen…but not a lot. Only a couple of trading days to be exact. I must admit that seeing the counter-intuitive price action in the HUI…actually going negative on the day…did nothing to allay my fears about what might happen in the very near future. This is one of the events that we at GATA have sometimes seen just before a major sell-off attempt by the boys. I don’t believe for a second that it had anything to do with the drop in the Dow, as we had a big drop on Tuesday and the HUI had a terrific day. But as I’ve said before, maybe I’m looking for a black bear in a dark room that isn’t there. Let’s see what today brings.

In other gold news on Wednesday, I see that Mr. Gartman laid on another long position in gold and will add another once gold trades above $930 in New York. Will that be today? I’ll be ecstatic if it is.

Yesterday it was the Zimbabwe dollar…such as it is. Here’s a graphic illustration of what the US$ might look like a few years down the road. Andrew Jackson would not be amused…

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I’m totally overwhelmed by the number of stories that are worth mentioning, but I only have room for a couple. The first story is a GATA dispatch of a speech given by Benn Steil, senior fellow and director of International Economics for the Council on Foreign Relations. The headline reads “CFR official: Gold is the world currency of the future.” The link is here.The second story is from Reuters and is entitled “Goldman, UBS and Morgan Stanley agree on dark pools.” According to the article, about 10% of all equities trading is now done in these “dark pools”. If this doesn’t sound very transparent…it isn’t…and that’s the whole idea. The article is linked here.

I see that the derivatives market expanded 44% last year (according to the BIS) and now sits at $596 Trillion dollars…that’s spelled with a ‘T’. If this pace keeps up, by this time next year, total derivatives will exceed one Quadrillion dollars…that’s spelled with a ‘Q’!!! And Moody’s says that a ‘computer error’ accidentally gave triple-A ratings to billions of dollars worth of now worthless debt products. You believe them…right?

I don’t think we’re in Kansas anymore, Toto….

See you on Friday.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

Source: And Then There’s This…Thursday, May 22nd, 2008

When the tech funds show up to buy in the Non-Commercial category, then we’ll have a sustainable rally. But without them, it was another light volume day on the Comex yesterday

Open interest on Tuesday was as follows…gold o.i up 1,438 contracts and silver o.i increased by 434 contracts. As you can see here…and as I’ve said before… when volumes are this wafer thin, it doesn’t take much activity to alter the price in either direction. That’s why I’m not prepared to read too much into the price action of either metal right now.

Further to the news about Anglogold reducing their hedge book, the article over at resourceinvestor.com contained this interesting set of figures concerning most of the major outstanding hedge positions and the companies that own them. It’s certainly worth a look. As I’ve said before, the most egregious offenders have always been Barrick and Anglogold. This set of numbers certainly proves that.

In other gold news, I see in a Wall Street Journal story posted at lemetropolecafe.com that Congress is unlikely to take action on IMF gold sales this year. The article also noted “that Congressional reaction to the IMF’s plan to sell gold is ultimately likely to be far less confrontational that in the past.”

In the King Report last night was the following Dow Jones story…” Merrill Lynch reported on Tuesday that its Level 3 assets (mark to myth – Ed) soared almost 70%, to $82.4B from $48.6B at year end…to end Q1. Get this self-incriminating statement from Merrill: “During the first quarter of 2008, there was a decrease in the liquidity for these products, resulting in the increased use of unobservable inputs to derive their fair value.” An ‘unobservable input’…isn’t that nice! I don’t remember ever learning about those sorts of things in my Advanced Managment Accounting class at the University of Alberta way back when.

As per usual, I have a couple of stories today. The first concerns the upcoming IMF gold sales. The Yahoo News story is preceded by an editorial on this issue by the senior editor of the Journal Enquirer out of Manchester, Connecticut…Mr. Chris Powell…who also just happens to be the secretary treasurer of GATA. The dispatch is entitled “Is the IMF trying to recover its gold by pretending to sell it?” and is linked here.

The second story is from Bloomberg and is an update on the “3 Stooges” comedy/tragedy/farce between GMAC, ResCap and Cerberus Capital Mangement. You might need a program to keep up, but I get the impression that unless they’re bloody careful, they could all go down together. The story is entitled “GMAC Buys Time for ResCap Unit as Bankruptcy Looms” and is linked here.

I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts. – Abraham Lincoln

Well, after six months or more of twisting in the wind, the city of Vallejo, California threw in the towel yesterday and voted itself into bankruptcy. It’s the first city to do so in this credit crunch, and it’s a given that it won’t be the last. Then it will be of interest to see which state goes belly up first…and how far after that…the late, great USA herself follows suit. It makes me sad.

See you tomorrow.

Open interest for Monday was, once again, of the rather strange variety. Despite the wonderful gains in both metals on that day, there was a divergence between them. Gold o.i. rose a respectable 3,669 contracts on the back of its $16 gain, but silver o.i. fell 314 contracts…despite the fact that the price rose 35 cents. Don’t ask me what that means, as I’m just the messenger.

A few things of interest in the way of gold and silver news. I see that Anglogold has decided to dilute its current shareholders by issuing more stock to raise $1.6 billion to close out part of its hedge book. Yesterday they announced a reduction in hedges during the last quarter to the tune of about 1.25 million ounces…bringing their hedge book down to about 10 million ounces. That extra $1.6 billion will buy them out of an additional 1.8 million ounces of hedged production. They (and their shareholders) have still got several more years of pain to go before they get their utterly disastrous hedge book paid off.

I also note that the IMF decision to sell 403 tonnes of gold was approved at their meeting in Washington. Let’s see how the U.S. Congress votes on this.

In silver, Ted Butler informed me that the huge buyer(s) of the silver ETF…SLV…were out in force again yesterday, after taking Friday off. Ted figures that the silver ETF is now owed somewhere between 5 and 10 million more ounces to bring the physical inventory into line with the number of shares sold recently. It will be of interest to see how long it takes to find this amount. The other question is…who’s buying?

I have another couple of stories today. The first is from Michael Kosares over at USAGold.com. In his commentary, he speculates that the European central Bank has begun to intervene surreptitiously in the currency markets to halt the Euro’s rise, and that gold’s recent fall can be largely attributed to this. The essay is entitled “Has Europe Declared War on the Weak Dollar?” and it’s linked here.

The second story comes from “Sin City” itself…Las Vegas. This story gives you some idea how fast and how hard this recession is hitting the US…and how quickly discretionary spending is evaporating as the consumer gets squeezed. The story is out of Newsweek and is entitled “Down on Its Luck” and is linked here.

As a sidebar to this story, there was a report in The Wall Street Journal yesterday that the famed Tropicana Resort & Casino in Las Vegas has sought Chapter 11 bankruptcy after missing an interest payment on a $1.32 billion loan to Credit Suisse Group last Friday.

Reason obeys itself. Ignorance submits to what is dictated to it. – Thomas Paine

Another day of worse than awful news…and another up day for the Dow. Up is down and black is white…and there are so many pigs with lipstick. So don’t worry… and be happy…because everything is fine.

See you tomorrow.