The selling pressure intensified further when the Comex opened in New York… and as usual, the bottom for both metals was in at the London p.m. fix. Silver had a nice bounce after that, but gold did not recover…but it didn’t close on its lows either.

Without a doubt, there was pretty good short covering in both metals on Tuesday. However, I must admit that I was taken aback by yesterday’s smack-down…as the boyz haven’t resorted to this tactic (continuing their down-side attack on gold and silver after options expiry) for quite some time. But, as I said yesterday, the bullion banks hadn’t covered many of their short positions during this last price rout, so maybe they were trying to make up for it now. However, there were other things that happened in the markets yesterday that may explain their actions, and I’ll get to that later.

Cut-off for this Friday’s Commitment of Traders was yesterday, so if everything got reported, then Tuesday’s activity should be in there as well. One can only hope.

Gold open interest for Monday fell an astonishing 15,599 contracts. A lot of this is obviously options expiry related, but first day notice for delivery is tomorrow…and it’s also the end of the month, so there will be lots of book squaring between now and then…all of which will be in the COT on August 8th. As for silver, not much happened as far as o.i. goes on Monday…silver o.i. rose 123 contracts…which is somewhat counterintuitive considering what happened with gold’s o.i.

The usual NY gold commentator had this to say about Monday’s and Tuesday’s trading…”The ECB weekly statement of condition indicated a sale of E600Mm of gold, ostensibly last week. In fact the bulk of this was doubtless the 30 tonnes the ECB itself reported on June 30th as having sold previously. The arithmetic is complicated by the June 30th book value change for gold: but it appears 1.49 tonnes is the amount actually “sold” last week. The detailed accounts show a fall of only E578Mm of gold due to “transactions”. Recently, ECB reporting has become sloppy.

“Monday’s +90c in Comex (AMEX:IAU) gold saw a startling 15,599 lot (48.51 tonne) drop in open interest. It is frankly difficult to know what to make of this – except that, as remarked yesterday, any day with 200,000 lots trading outright cannot accurately be described as “quiet”.

“Today’s (Tuesday’s) savage beating of gold, starting in the early European day, is of course precisely what has come to be expected on a day of bad financial structure news: of some interest is that all the damage was done by 10 am NY time. A huge 242,301 lots were estimated to have traded by the floor close: almost 75% by 10 am. The switch effect was only 30,000. What kind of profit-maximizing trader would behave like this?

“Amazingly, it appears the Gartman Letter’s E584 stop has survived.”

It is difficult to talk objectively about what’s going on in the marketplace right now. Monday night’s revelations by MER should have cratered the markets…and the US$…and put a real bid under gold and silver. Of course, it was exactly the opposite that happened. I know for a fact that the boyz spun the futures positive during the wee hours of Tuesday morning, ramped the dollar and stepped on gold and silver. All the spin on the major financial networks was how positive the MER news was. There is another word for this kind of reporting, and it’s called propaganda. The Soviets were great at it. So were the Nazis. I call it lying!

That leads nicely into my first story. Actually it’s a Keith Olbermann video. He (and Chris Mathews) really nail Scott McClellan to the wall. The seven minute video is entitled “Fox News Busted”. The link is here.

The second article is another currency debasement story camouflaged under the “Joe Six-Pack” label of inflation. It’s a Yahoo story entitled “As costs rise, inflation’s next front is retailers”.

The link is here.

Merrill providing financing for the deal suggests that the true value of the assets is quite a bit less…until the true value and the ‘mark to model’ converge, it’s going to be difficult for investors to have confidence in anything Wall Street management says. – Julian Mann, First Pacific Advisors LLC

Well, the boyz certainly didn’t allow a second big down day in a row, did they? As a matter of fact, the Dow gained back virtually all of its Monday losses. So everything is fine…right?

And…in the legendary words of GATA’s Chris Powell…there are no markets anymore, only interventions.

See you tomorrow.

Source: And Then There’s This…Wednesday, July 30th, 2008

The rally in both metals ended at 7:00 a.m. NY time when the usual not-for-profit sellers showed up. And just like Friday, the bottom was in at the London p.m. fix…which is 3 p.m. in London…10:00 a.m. in New York. Then both metals rallied sharply until 11:20, sold off, and then rallied into the Globex close at 5:15 p.m. New York time. Both gold and silver finished on their ‘highs’ of the day…such as they were. But having said that, Monday was options expiry and to see price action like this was rather amazing, and certainly not what I was expecting.

Here’s the Kitco gold chart for Friday and Monday’s trading. The lows at the London p.m. fix stick out like the proverbial sore thumb.

click to enlarge

On gold’s wild ride on Friday, the o.i. dropped 970 contracts. However, silver had a much bigger drop in o.i. on Friday…down 2,771 contracts. That drop goes along with Thursday’s decline in silver o.i., which was 1,256 contracts….a number I wasn’t able to track down for my Saturday a.m. commentary.

As I mentioned a few lines ago, yesterday was options expiry…and the bullion banks/’8 or less’ traders are still short massive amounts of both gold and silver. They only covered a very small fraction of their short positions in both metals this time around. They weren’t even able to (or didn’t want to) take out gold’s 50-day moving average…and they couldn’t (or didn’t want to) get either metal below their last Friday’s lows. A sign of weakness…or are they just keeping their powder dry for the ‘August Low’? Options expiry in August is the 28th. First day notice for delivery into the August gold contract is Friday, July 31st.

The day after options expiry in July, gold and and silver both had big rallies. Will history repeat…or will we have to wait until next week when first day notice has past? We’ll find out soon enough.

The usual NY commentator had the following to say about gold’s activity on Friday and Monday…”Friday’s $17+ range and up $4.50 Comex (AMEX:IAU) floor close saw open interest slip only 970 contracts (3.02 tonnes). Fresh sellers and long liquidation were accommodated by fresh buying, it seems. Several commentaries note that last week’s CFTC data indicated that gold was virtually the only commodity which did not experience significant net liquidation.

“Today’s (Monday’s) familiar morning sell-off and recovery to close up 90c was dismissed by some as a quiet day. Yet estimated volume was 230,870 lots with a switch effect of 31,712: any day with 200,000 contracts trading outright is only quiet in the sense of suppressed.”

Today is cut-off for Friday’s Commitment of Traders report. I’m hopeful that all of gold and silver’s wild ride into options expiry will be in it. We shall see.

On Friday afternoon, I had my regular weekly radio interview with my good friend Al Korelin, of Korelin Economics. If you’re interested, the link is here.

The news on Monday, and over the weekend, was beyond belief…The IMF sees no end to the credit crisis…the FDIC closed two more banks…First National Bank of Nevada and California-based First Heritage Bank. There will be hundreds, if not thousands more, before this financial and monetary debacle is over. I see that Valero Energy (NYSE:VLO) in Texas was informed that Mexico would be cutting crude deliveries to their refinery by 15%. Reason? Mexico’s oil production is in precipitous decline. Talking about oil…in a Financial Times story out of London…the move to put curbs on energy speculators was blocked by Republican legislators on Friday. The groups that were opposed to this legislation were…the Chicago Mercantile Exchange, the ICE, the NYMEX and the New York Energy Exchange. No surprises there.

The first story of the day is from the United Kingdom. In a move that probably made Paulson, Bernanke and the Fed swell with pride, the Chancellor of the Exchequer, Alistar Darling, has come out with a plan to rescue that country’s mortgage industry. The story is from The Telegraph in London and is entitled “Treasury plan to rescue mortgage lenders”. If this sounds like a carbon copy of what the U.S. just did for Fannie (NYSE:FNM) and Freddie (NYSE:FRE), it’s pretty close. The link is here.

In another story that has garnered almost no headlines…like every other news item I’ve mentioned in my column today…here is a story of a short seller on the wrong side of a crude oil trade. I mentioned the company last week…Semgroup…that went under because of a $3 billion loss in the crude oil market. This is a GATA dispatch of a Ted Butler essay, with a preamble by GATA’s secretary treasurer, Chris Powell. The comparison to that situation…and the short situation in silver and gold…is disturbing to say the least. I urge you to read this very carefully. The essay is entitled “Coincidence or Confirmation”. The link is here.

Anyone who thinks the banking sector is out of the woods is as stupid as a fence post, as corrupt as a Wall Street bond dealer, or as asleep as Rip Van Winkle. – Dr. Jim Willie, 24 July 2008 – goldenjackass.com

Reality caught up with Wall Street again yesterday. Will the boyz allow two big down days in a row? It’s not normally part of their SOP, but it has happened before. As I said in my radio interview with Al Korelin…”What we are looking at is an economic, financial and monetary hallucination.”…and if the ‘powers that be’ hadn’t been blowing asset bubbles left, right, and center, this market would have crashed more than a decade ago…and we wouldn’t be staring Armageddon between the eyes as we are right this very minute.

I hope your Tuesday goes well, and I’ll see you here tomorrow morning.

Source: And Then There’s This…Tuesday, July 29th, 2008

Once again, the 50-day moving average in gold was challenged, but not penetrated. Without doubt, there was more long liquidation on Friday…but how much won’t be known until Monday morning. Options expiry is at the close of trading on Monday. If this is the best the boyz can do…then things could get real interesting from hereon in.

Open interest in gold rose 3,697 contracts on Thursday’s smallish price gain. It’s not possible to read anything into that, so I won’t even try…and I don’t have the silver o.i. number for Thursday.

The Commitment of Traders report held no real surprises. In silver, the tech funds in the Non-Commercial category pitched 2,300 of their long contracts, and the bullion banks in the Commercial category covered 2,239 short positions and pitched 129 of their long contracts…so they improved their position by 2,110 contracts. In gold, the tech funds sold 9,764 longs positions and covered 1,634 of their shorts for a difference of 8,130 contracts. On the other side of the ledger, the bullion banks went long 2,036 contracts and covered 7,480 shorts…improving their position by 9,516 contracts. This leaves the bullion banks still short a massive 345 million ounces of silver and 23.7 million ounces of gold…hardly much of an improvement at all, considering that gold is down $60 and silver is down $2+. Is this the best they can do, or are they saving it for August? As far as concentration ratios go, the ‘8 or less’ traders/bullion banks are short 81% of the entire Comex market in both gold and silver. Without question, there has been further improvements in the COT numbers for both gold and silver since the Tuesday COT cut-off, but as I’ve mentioned several times earlier this week, we won’t find out until next Friday…which is forever in such a quickly changing market. Here’s the link to the latest COT report. Click here.

Talking about the ‘8 or less’ or ‘4 or less’ traders in the COT, here’s a very interesting chart that’s been updated from an essay Ted Butler wrote last year. It shows the number of days world production that the 4 largest and 8 largest short traders hold in a variety of commodities. Both silver and gold stand out like a sore thumb. I thank Carl Loeb for doing the heavy lifting on this.

click to enlarge

A couple of financial tidbits to ponder. In the land ‘down under’, the National Australia Bank took the bit between its teeth and wrote down its exposure to the US property market by 90% in one fell swoop! $1.2 billion suddenly morphed into $120 million…and over $1 billion went to money heaven. And talking about money heaven, things are looking rather grim over at Washington Mutual (NYSE:WM) these days as “many creditors have quietly been pulling funds” from the Seattle-based thrift.

The first story today is from Bloomberg. It’s hard not to think of April Fool’s day when I read stuff like this. Someone is dreaming in Technicolor if they think this will fly. The headline reads “Congress Pursues $80 Oil With Trading Limits, Disclosure Rules”. Something tells me that we’re not in Kansas anymore, Toto. The link is here.

The second story is about gold. In a story written by Frank Tang of Reuters that was released late Friday afternoon, the headline reads “Gold options point to $1,200″. From his lips to God’s ears! It can start anytime! The link is here.

Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others. – Ayn Rand

In today’s ‘blast from the past’ we return to the “land down under” mentioned in a previous paragraph. Turn up your speakers and enjoy. The link is here.

As usual, there was absolutely no follow-through to the downside allowed on Friday after Thursday’s big Dow sell-off. The markets wants to die, but the President’s Working Group just won’t let them. But it matters not. Wall Street and the entire US banking system isn’t worth a thin dime…and one of these days, all the efforts of the PPT won’t mean a thing.

Enjoy the rest of your weekend and I’ll see you here on Tuesday morning.

Source: And Then There’s This…Saturday, July 26th, 2008

Gold recovered off of its lows, but silver finished on its lows of the day for the fifth day in a row…for those of you that are keeping track.

Open interest for Thursday were huge numbers once again, as the tech funds went long and the bullion banks went short against them. Gold o.i. was up another 10,736 contracts (1.07 million ounces)…and silver o.i. also rose….this time 1,034 contracts, which is somewhere north of 5.0 million ounces.

The usual well known NY bullion commentator had this to say about Thursday’s and Friday’s Comex activity…”While Comex closed the floor session up $8 yesterday (Thursday), it was battered down $11 in the thin electronic session, always indicative of bearish exuberance. In fact, yesterday’s (Thursday) action saw a startling 10,376 contracts added to open interest – 33.39 tonnes. Clearly a massive seller was present to block any buying.”

“In the five business days to Thursday’s close, Comex gold added $23.30 and 42,621 lots in open interest (132.6 tonnes). That is…to go up 3%…9.4% had to be added to open interest. In the three weeks since June 26, gold rose 6% (from $915.10 to $970)…and open interest jumped 21.4%, (271.94 tonnes, or 87,430 lots)

“The most alarming financial system scare of modern times, besides stimulating a great many strange government actions, appears to have uncovered a community of heroic short sellers.

“Another interesting demonstration of the past few days has been how high the geopolitical component is in the short term oil price. If peace and friendship have indeed broken out in the Middle East, gold’s enemies can doubtless look forward to another pleasant week.”

The Commitment of Traders report issue on Friday for positions held at the close of trading on Tuesday are as follows: Gold…the tech funds increased their net long position in the Non-Commercial category by 13,181 contracts. Opposite them, were the bullion banks…the ‘8 or less’ traders…in the Commercial category. They increased their net short position by 17,917 contracts. The difference between these two numbers is the increase in the net long position by the small traders in the Nonreportable Positions category…so you can see that the bullion banks were going short against everyone who went long. Silver: There wasn’t as much activity as I expected (was it all reported?). The tech funds went net long 1,147 contracts and the bullion banks went net short 2,595 contracts…once again the difference being the increase in net long positions of the small traders in the Nonreportable category. Here’s the link for the COT if you want to follow along at home…click here.

This COT report was just about as bearish as it can get. It’s almost at the same record high that existed on March 11th before gold got hit for $150 and silver for $5. As a matter of fact, Ted Butler and I were actually expecting a worse report than the one we got. One of the reasons that we haven’t seen massive down-side price moves this past week, is because the 20 day moving averages have not been violated. The 20 day moving average in silver is about 20 cents below Friday’s close…and in gold, the 20 day m.a. is $25 lower than Friday’s close. If the boyz can break through those numbers, then we’ll see a really impressive waterfall decline in gold and silver prices…which should almost certainly take out the 50 day moving averages as well. Can they do it? Don’t know…but I expect that they will make every effort. With options expiry on Friday the 25th, next week’s trading will tell us a lot. IF this all comes to pass, there should be no doubt in anyone’s mind as to why it happened….or how it happened.

The concentration ratios for this COT show that the bullion banks…the ‘8 or less’ traders in the Commercial category…were short 79.9% of the entire Comex silver market and 76.8% of the entire Comex gold market.

In other gold news, I see that George Soros has gone short oil and long gold. And the Mineweb.com has finally turned in their “Flat Earth Society” membership card and admitted that that it just might be possible that central bank gold sales are designed to support the dollar. The GATA dispatch of this story, along with Chris Powell’s commentary, is well worth the read. The link is here.

Oh…by the way…I was interviewed yesterday morning by Al Korelin of Korelin Economics. If you’re at all interested in what I have to say, the link is here.

I’ve got one graph and only one story today…as I’ve rambled on a bit here. The graph tells all. It’s the MSCI World Index. The huge (and very bearish) head and shoulders pattern…and the huge breakdown since then…doesn’t look much like a bull market to me. It looks like the Dow graph in late 1929. You can draw your own conclusions.

click to enlarge

Now that short selling and naked short selling are in the news, here’s a really depressing story from the Financial Times in London. It’s entitled “Shorting ‘makes billions’ for fund managers”. I wonder if this is what’s happening to our gold and silver stocks? The link is here.

Socialism is inseparably interwoven with totalitarianism and the object worship of the state…No socialist system can be established without a political police. They would have to fall back on some form of Gestapo, no doubt very humanely directed in the first instance.” — Winston Churchill

Today’s ‘blast from the past’ comes from Britain. I saw these guys live in concert with the Edmonton Symphony Orchestra back in 1992. It was a great show, and this was one of the favourites that everyone was waiting to hear. Turn up your speakers, then click here.

Friday’s activity in the equity markets was ominous. The Dow needed major help three times throughout the day to stay in positive territory…which was similar to the Dow ‘action’ on Thursday. I must admit that I’m as nervous as a long-tailed cat in a room full of rocking chairs.

Enjoy the rest of your weekend…and we at Casey’s Daily Resource Plus will see you here again bright and early on Tuesday morning.

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…Saturday, July 19th, 2008

This rally lasted until the moment NY opened and it got promptly sold off. Gold touched its lows of the day at 8:45 NY time…but then a spirited rally began in both metals which lasted until London closed. Then silver got sold off heavily, with gold following about two hours later. The waterfall declines were kind of pretty, but we’ve all seen better…right? The Kitco gold graph for the last three days is shown below.

click to enlarge

From its high of the day, to its low in Globex trading after hours yesterday, gold got smacked for about $25 and silver for about 80 cents. During the last two trading days, gold has had $30 bucks shaved off its price…and silver about a buck. Options expiry is a week from today…Friday, July 25th. First day notice for August delivery (a big delivery month for gold, but not for silver) is Thursday, July 31st. You can bet your last nickel that the ‘8 or less traders’ want as many of these lovely call options as possible that they’ve written in the last month, to expire out of the money so they can collect the premiums. I mentioned “ring the cash register” in yesterday’s commentary. This is the reason that the price is being hammered to the downside. The bullion banks sell until stops are tripped…then they pull their bids…and down goes the price. They did this in March, April, May, June…and now July. Any questions?

The usual well know NY gold commentator had these thoughts yesterday about gold activity on both Wednesday and Thursday…”Wednesday’s down $16 Comex day involved a sudden, massive sell-off coincident with the oil inventory data being released. This clearly was not long liquidation: open interest on the day rose 1,146 contracts (3.56 tonnes). It is inconceivable that at least some long capitulation did not take place, considering Comex (AMEX:IAU) gold was in the (high) $980s during Monday’s session. The implication must be that fresh short selling into Comex yesterday (Wednesday) was substantial…The same spirit emerged after the Floor close this afternoon (Thursday), with gold dropping over $11 in a notoriously thin time of the day. Estimated (Comex) volume of 240,866 must be close to a record. This is a major suppression effort.” (Yes it is. – Ed)

As mentioned in the previous paragraph, gold open interest on Wednesday was actually up 1,146 contracts…and silver o.i. went the other direction…again…down 1,045 contracts. Twilight zone stuff. Thursday’s open interest changes that I’ll be reporting on Saturday should be more interesting…as will the Commitment of Traders report that will be out later today.

A couple of stories out of the Financial Times in London for you today. The first is entitled “Sovereign funds cut exposure to weak dollar” and is linked here.

The second story is entitled “Short-sellers caught out by higher costs”…and the link is here.

It took everything that the Catch-a-Falling-Knife Corporation had, to keep the Dow positive yesterday. From the graph, it looks like the Dow rolled over three times, and was briefly in negative territory once. It’s sure taking a lot of huffing and puffing to keep this short covering rally going.

Today is Friday, so don’t be surprised by anything that happens. As I write this, I see that the futures are down on all the bad news that came out after the market closed yesterday. Let’s see if the boyz can make a silk purse out of this one.

See you on Saturday.

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…Friday, July 18th, 2008

Silver was flat right up until the gold price took off just before the NY open…and both metals rose together. Silver’s advance ran into resistance a couple of times during New York trading and the top came about an hour after the London p.m. fix. From there, it was taken down 20 cents and spent the rest of the session trying to gain it back.

Volume was pretty decent on the Comex (AMEX:IAU) in New York yesterday…but the price managers are still lurking about. However, the precious metals shares soared, with the HUI up 5.01%

As expected, gold open interest on Thursday was up considerably…it rose 7,561 contracts. As has been the case more and more frequently, silver o.i. went the other way…down 1,488 contracts.

The Commitment of Traders for silver showed that the traders in the Non-Commercial category went long an additional 2,681 contracts, plus they added 1,032 contracts to their short position. The bullion banks in the Commercial category only added 47 longs, but went short a rather substantial 3,281 contracts. In gold, the Non-Commercial (tech funds) only went long 1,506 contracts and covered 417 shorts; while the bullion banks in the Commercial category went long 7,889 additional contracts…and they went short another 9,532 contracts. The numbers indicate that volume was very light during the period. With prices rising the way they’ve been doing since the Tuesday cut-off for the COT, we should expect more deterioration as the tech funds have started to come in on the long side and the bullion banks are going short against them. Same old, same old. Can the price go higher from here? Absolutely! But, as of this writing, the bullion banks are still running the price show. The link to Friday’s COT is here.

Yesterday I received a most interesting e-mail from silver analyst Ted Butler. It’s well worth the read….”GLD added the largest one-day increase in metal today, I believe, with 46 tons (almost 1.5 million ounces or $1.4 billion). An increase was expected, but not of this magnitude. Funny thing is, I think the metal deposit increase reflects yesterday’s (Thursday) high volume of 16 million shares and not today’s (Friday) enormous 25 million shares. Today’s GLD volume was the highest upside volume in my memory (there have been a few bigger volume days, but always to the downside). We’ll see if more comes in Monday. Since June 11, GLD is up 108 tons, or almost 3.5 million ounces, and over $3 billion…versus no growth in SLV. SLV had pretty big volume yesterday (Thursday) and today (Friday) and is still due much metal to come in. This (activity) seems to confirm a flight to quality buying in metals…and further, that they have the gold to deposit, but silver just ain’t available.”

In a comment in his early Friday morning report, Bill King had this to say…” A last hour 21-handle SPU rally saved the stock market on Thursday. With insolvency fears of major financial institutions running very high, and Lehman tanking to 17.30, it’s not surprising to see impact trading in the SPUs because many people have a vested interest in keeping an appearance of calm.” That probably happened on Friday in the markets as well.

It’s the weekend, and with so much happening, I’ve got three stories for you. All of them are from The Telegraph in London, and two of them are from their international business editor, Ambrose Evans-Pritchard.

The first one has to do with G. Dubya. George had an unusual way of saying his final goodbyes to his compatriots at the just-ended G8 summit in Japan. You can sure tell he’s not running for re-election. The story is linked here.

The first Ambrose Evans-Pritchard piece warns of a deflationary collapse, as the money supplies in Britain, Europe and the US, plunge. Over the past year, global deflation has overwhelmed central banks’ attempts to reflate. In the meantime, the skyrocketing prices of the necessities of life have squeezed the world’s consumer, creating political problems throughout the globe. The article is entitled “Monetarists warn of crunch across Atlantic economies”. The link is here.

The second item by Evans-Pritchard is a warning from Bill White, chief economist of the BIS. White says that “The current market turmoil is without precedent in the post-war period…and the magnitude of the problems yet to be faced could be much greater than many now perceive.” (Memo to White: Bill, you have a keen grasp of the obvious. – Ed) The article is entitled “BIS slams central banks, warns of worse crunch to come”. The link is here.

There are disturbing trends…huge imbalances, disequilibria, risks… Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. – former Fed Chairman Paul Volcker, 2005

This weekend’s blast from the past is one of the first C&W songs to ‘cross over’ to the pop charts…a long long time ago. RIP Patsy. Click here.

Without doubt, Hank & Ben’s Guardian Angels were looking out for the equity markets yesterday…as the Dow was only below 11,000 briefly. But, in my opinion…it no longer matters. I will pick this past week as the ‘point of no return’…the crossing of the Rubicon, if you like. Now it’s a death spiral. Hyperinflation of paper financial assets no longer seems possible, as the credit contraction really starts to bite…and the smart (and big) money has begun moving to the hard asset side of the street. A deflationary implosion appears to be gaining momentum. Could this be the first sub-zero blasts of the dreaded Kondratiev Winter?

Monday should be interesting. Enjoy the rest of your weekend, and I’ll see you on Tuesday.

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…Saturday, July 12th, 2008

Gold began rising immediately and hit its NY high at the close of Comex trading. In Far East trading this morning, gold has been selling off slowly and quietly up until now…which is 10 p.m. NY time as I write this.

Silver followed a slightly different path. Although it sold off as well…shortly after London opened…its low of the day was shortly before the Comex open. It rallied for a couple of hours and then got sold off going into the London close and rallied strongly from there…following the same path as gold from that point on.

As of this writing, gold is down about $30 from its highs of last Thursday. The open interest changes for Thursday showed no sign of short covering…just an increase in open interest. I expected some big declines in o.i. for Monday…but it didn’t happen…for either gold or silver. Instead, o.i. for gold was up another 406 contracts and silver o.i. went up another 728 contracts. It’s either new shorts being added, or the bullion banks are going long instead of covering their shorts…which only they (for whatever reason) are allowed to do. Both have the same effect of increasing open interest. I had a most excellent question about open interest and the Commitment of Traders from a CDR+ reader the other day…and if you’re a Casey Research subscriber, you can read the question (dated 2008-07-08) and my fairly detailed answer, by clicking here.

Some headlines of note…(CNN) Falling stock markets and the credit crunch are putting the pension funds of some of the largest US companies into deep financial holes. (AP) The Fed is considering extending emergency loans to Wall Street banks into 2009. (Earthtimes.org) Global financial crisis could lead to losses of $1.6 Trillion to financial institutes (It will be at least 5 times that amount before the smoke clears at least five years down the road – Ed)

And in The King Report last night was the following comment….”regulators effectively took control of IndyMac but didn’t declare an official seizure in order to prevent public panic at other depository institutions. Perhaps we have witnessed the new paradigm that regulators will employ when taking over troubled institutions.”

Two stories today…as usual. The first has to do with gold and real estate in Vietnam. It appears that the VND (Vietnam dollar) is being debased so badly, that another medium of exchange has been revived by the vendors. The article is posted at vietnamnet.vn and is entitled “Selling land for gold, not VND”. The link is here.

The second article is silver analyst Ted Butler’s latest weekly commentary. In it, Butler argues that the silver exchange-traded fund SLV is being heavily shorted because the silver necessary to back the new shares issued by the fund is simply not available without exploding the price. The essay, which is well worth the read, is entitled “The Sole Silver Price Depressant” and is linked here.

The issue which has swept down the centuries, and which will have to be fought sooner or later, is the people vs. the banks. – Lord Acton

Well, everything came up roses for the President’s Working Group yesterday…oil, US$, the Dow, gold, silver. I hope they enjoy their small victories when they get them, because it ain’t going to last.

All of us at Casey’s Daily Resource Plus will see you here tomorrow.

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…Wednesday, July 9th, 2008

Gold and silver were heading in the right direction during London trading, but moments after the Comex (AMEX:IAU) opened in New York, the not-for-profit sellers instantly dropped gold nearly $18 and silver about 42 cents from their highs in London less than 30 minutes before that. From the bottom, both gold and silver rallied, but gold’s attempt to regain any ground got squashed the moment that the LBMA closed for the day. Silver did a little better.

And in Friday’s trading, except for a dip in early Globex trading in the Far East, prices didn’t do much of anything until after the Sydney market closed. Then selling pressure showed up in both metals…which ended in mid-morning trading in London. From there, prices drifted very gently higher. Because Friday was a big holiday in the US, and everything was (supposedly) closed, I was surprised to see that there was trading in the Globex even after London had closed for the weekend. The questions would be…why was the Globex open…and who was doing the trading?

Open interest for Wednesday showed an increase of 4,771 contracts in gold o.i. In silver the increase was 2,980 contracts. A well known NY gold commentator had this to say on Thursday…”in four business days…open interest has risen 30,423 lots – 94.63 tonnes or 7.45%, during which time gold has risen 3.25%.

“The implication of this divergence was seen this morning (Thursday a.m.), with gold being ambushed immediately after the 8:30 AM (NY time) data ( US jobs) release. Gold fell some $18 in ten minutes: estimated volume of over 71,000 contracts was 51.3% of the whole day. A reasonable $10 rally attempt was turned back, although gold finished above the early morning lows.

“A contributor to LeMetropolecafe.com predicted this yesterday (Wednesday):

“ ‘Bill…the Cartel is so obvious and blatant in their illegal activities. The ECB rate announcement is due tomorrow and any increase will be dollar bearish. The US payroll data is also due. With gold making its way higher today but swimming with concrete boots on, supplied courtesy of the Cartel, the HUI has turned massively negative even with the USDX about to make a new ALL time low! Could it be any more obvious that they will attempt a gold raid tomorrow?

Cheers…Adrian’ ”

And it came to pass exactly that way…as it has done so many times in the past.

A couple of things in gold and silver that are noteworthy.

First…Australia’s largest gold miner, Newcrest Mining, announced that it had paid out the rest of its 4M ounce hedge book at a cost of US$1.6 billion. Would this move make Newcrest a take-over target? Secondly, in a lengthy phone conversation with Ted Butler on Thursday afternoon, he informed me that since June 12th there were about 2 million ounces of gold that had been purchased in the gold ETF…GLD. The fund is now almost back to the amount of gold it had in it before the March price ‘correction’. But silver is the jaw-dropper. You may remember that zero ounces of silver were sold out of the silver ETF…SLV…during the big $5 smack down in mid March. The amount of silver that has come into the silver ETF…SLV…since June 12th is zero, zip, zilch, nada, none…not an ounce!!! Ted says (and I agree) that the reason that no silver is coming in, is because a) there isn’t any to be had, or b) none is available at anywhere near current spot price, or c) a combination of both. Butler wrote an essay on this issue about three weeks ago where he felt that Barclays’ silver ETF (SLV) was short between 25-60 million ounces. Ted now feels that total owed has now risen to between 40-75 million ounces (that SLV should have backing all its shares, but doesn’t). Just to jog your memory, his essay on this issue (which I’ve posted before), is linked here.

Two stories for your reading pleasure today. The first is from the International Herald Tribune. In it, Russia’s new president, Dmitri Medvedev, said that “an America in ‘essentially a depression’ was in no position to lecture other countries on how to conduct their affairs.” The story is linked here.

The second story is about the future gold price. It’s from The Telegraph out of London and is entitled “Gold: the precious laggard that will hit $2,000″. The link is here.

And while recent market tumult has not had the intensity of March’s acute de-leveraging, the ramifications of recent developments are more problematic. For one, the markets are now coming to grips with the reality that much of the massive apparatus of various types of Credit insurance is insolvent and with little chance of recovery. While the nature of these companies’ obligations may not require bankruptcy filings in the near term, the market nonetheless recognizes that much of the future protection guaranteed by these companies/financial players has become worthless. – Doug Noland, prudentbear.com – 04 July 2008

I cannot overemphasize the catastrophe waiting in the wings, as all global markets continue to unwind. Old alliances that were solid in good times will disintegrate…as mass panic overcomes the major financial, economic and monetary players world-wide. It will be everyone for themselves in the fight to survive. And it will not be limited to just companies…but to nations and their currencies as well. The currency crisis in Vietnam, and the downgrade of Citigroup (C) by Goldman Sachs (GS), are the most recent examples…and last week’s comment that GM could go bankrupt, is another. There will be more…lots more. It’s going to be a really ugly summer.

I hope your weekend was great….and I’ll see you here tomorrow.

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…Monday, July 7th, 2008

However, once Sydney closed, the prices began to rise slowly all through early London trading. About 30 minutes before trading began on the Comex (AMEX:IAU) in New York, both metals really began to tack on some much bigger gains. This activity level continued until just about the time that the Comex closed. From that point on, both metals (especially gold) got sold down a little in after hour trading on the Globex.

Although both gold and silver put in some fine gains, I got the feeling that there was monkey business going on in the HUI starting a few minutes before lunch time in New York. There was absolutely no reason whatsoever for the shares to get sold off, but they did. Tuesday’s action was counterintuitive …similar to two Monday’s ago when both metals got shellacked big time…but the gold shares were up on the day. As I said at the time, I believe that the boyz buy these shares at times like that just to sell them into rallies like we were having yesterday.

Anyway, there wasn’t big volume yesterday, but in a conversation I had with Ted Butler, he’s happy that there are no big increases in the silver open interest as this rally continues. Open interest for Monday in gold was very impressive, as the tech funds piled in on the long side and the bullion banks went short against them. Monday’s gold o.i. was up 9,657 contracts on gold’s $3 loss on the day. Silver o.i dropped by 563 contracts…but don’t forget, there were 1,322 contracts delivered into on Monday, so silver open interest was actually up about 760 contracts.

In gold news, I see that the ECB (European Central Bank) announced a 30 tonne sale of its own gold holding and further announced that this would be the last sale until the next year of official sales that starts at the end of September. Of course, banks subordinate to the ECB can still sell if they wish to. The link to the story is here.

In other news, I note in a story in The Telegraph, the headline reads “British household debt is highest in history”. And in a Reuters story, Peruvian miners started a nation-wide strike at midnight Sunday night. The Iranians have threatened to block shipping in the Straits of Hormuz in case of war…the U.S. Navy says “no way”. And a US Defence department official says that “Israel is increasingly likely to attack Iranian nuclear facilities this year”. The dogs of war are straining at the leash, as an attack on Iranian nuclear facilities will undoubtedly escalate quickly. Count on it.

Today’s first story is one that I mentioned yesterday. James Turk over at goldmoney.com has a story about the US$ entitled “On the Precipice”. The story is linked here.

The second commentary today is from Ted Butler and his mentor, Israel Friedman. The title of Izzy’s latest is “The New Era” and Ted’s is entitled “A Timely E-mail from a Reader”. The link is here.

Without doubt, the hand of the President’s Working Group was all over yesterday’s markets. They’re making no attempt at all to hide their actions. As I’ve said repeatedly….”There are no markets any more, only interventions.”

All of us at Casey’s Daily Resource Plus will see you right here again tomorrow morning.

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…Wednesday, July 2nd, 2008

As you are now more than aware, the bullion banks (not-for-profit sellers) hit the markets hard about 20 minutes after the Comex open…leaving all of us (including this writer) fantasizing on what might be if/when the dealers decide to stop selling and start covering their mega-short position. This is the fourth or fifth vertical price chart we’ve seen in both metals in the last 10 days of trading…all of them squashed shortly after the NY open.

The gold price was contained all through regular trading on the Comex, but surged higher once again in after hours trading. Silver didn’t fare as well, and its opening spike high was it for the day.

I must admit that I was surprised to see Thursday’s action hard on the heels of options expiry and before first day notice for July delivery…but the economic and financial news is now beyond horrific. However, if the HUI activity yesterday was any indication, then something is definitely up as the Dow got hammered…and precious metals stock buyers were out in force as the equity markets plunged…which is very encouraging.

Open interest numbers for Wednesday are as follows…gold o.i. fell another very respectable 4,900 contracts…but silver o.i. went the other way…up 1,717 contracts. There’s lot of switching and ’stuff’ going on around options expiry/first day notice, so I wouldn’t read a lot into this.

My first story today is more talk about intervention in the commodity markets. However this time, the London Metal Exchange (LME) is warning that intervention would be hugely counterproductive. The article is entitled “Curbing Speculation is Foolish, warns LME”. At least someone in this world has got their head screwed on straight. The link is here.

The second article is another Armageddon story…this one from Barclays Capital. It’s another Ambrose Evans-Pritchard piece from The Telegraph in London. The story is entitled “Barclays warns of a financial storm as Federal Reserve’s credibility crumbles”. The link is here.

Inflation is really picking up…Whether it’s steel or oil… we see it everyplace. It’s exploding….The Fed has to be very careful not to signal that inflation is a secondary concern and something that can be dealt with later…” – Warren Buffett, 25 June 2008

I see in a Bloomberg story that analysts are backtracking on banking stocks after saying that “the worst is over”. And the chief of OPEC said that oil’s rise is mainly because of the dollar’s devaluation. Libya threatened to cut oil production in response to a new U.S. law. Seat belt fastened…and crash helmet at the ready…would be a good way to start the day. Hank Paulson should be a busy man. I must admit that what I see out there scares the hell out of me. Good luck to us all.

See you on Saturday morning.

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…Friday, June 27th, 2008