Platinum sank to $760, below the price of gold, in the far East, but rallied from there to a mid-morning high above $820, before finally subsiding to end at $790/oz., down $35. Overnight, platinum is sharply higher.

Silver was the day’s big winner, taking off at the same time as gold and pushing as high as $10.15 before falling back below $10 around noon and trading sideways from there into a close at $9.89/oz., up 70 cents. Overnight, silver has pushed higher. (Click here for charts)

Gold had a solid day yesterday, with silver soaring while platinum continued to bring up the rear. Something of a tailwind was provided by a dollar that slid against the euro and rising oil prices.

The Fed’s rate cut seemed to have little general effect, perhaps because it is widely expected that the European Central Bank, the Bank of England, and possibly even the Bank of Japan will follow suit with rate cuts of their own in the near future.

The Hightower Report wrote of silver’s breakout day: “The silver market mounted a fairly impressive recovery bounce which some players might have attributed to technical short covering. However, with the stock market at times Wednesday adding to the gains from the prior trading session, it would seem like some of the severe deflationary environment was lifting and that in turn helped a number of physical commodity markets like silver rally. It is also likely that strength in gold and copper gave the silver bulls additional confidence during the trade today. Even a slight correction in the stock market after the FOMC rate cut decision failed to severely dent the strength in silver prices.”

As gold rallies, analysts are wondering whether the tipping point is in sight.

“Some are beginning to extrapolate the medium- to long-term consequences of central-bank monetary creation,” said Jeffrey Nichols, of American Precious Metals Advisors. “The flashing lights that they are seeing ahead are the lights of inflation and currency depreciation,” developments which will inevitably push gold higher.

And James Moore, of TheBullionDesk.com, notes that “with the fact gold is considerably lower than at the start of the year and investors may look to further diversify their asset holdings, may allow gold to begin recouping some of its losses.”

Source: Gold rises, platinum falls to near parity -  Silver has a blast-off day

Platinum also bottomed in the first hour of New York trading, but it then found buyers that took it steadily higher, ending at $2006/oz., up $15. Overnight, platinum is sharply higher.

Silver bottomed at the same time as gold, at $16.50, but then it caught fire, shooting virtually straight up past $17.15 by mid-morning, eased back below $17 into the noon hour, but then re-ignited and closed near its intraday high at $17.15/oz., up 35 cents. Overnight, silver has been trending higher.
(Click here for charts)

It was an odd day for the precious metals, as silver decoupled dramatically from gold, registering a sharp increase even as gold continued to struggle. Platinum too outperformed the yellow metal, posting a larger gain.

It had to be a disappointing day for gold bugs as the metal’s performance was anemic even with the usual suspects lined up solidly in its favor: oil climbing steeply and the dollar getting hammered against the euro.

Of silver, the Hightower Report wrote: “With the silver market also getting its share of private bearish price predictions during the trade Thursday it was very impressive to see the market generally favor the upside. In fact, with gold favoring negative ground for most of the session, some of the bull contingent had to be extremely happy with the action today. Perhaps the silver market was garnering some support from the reversal in the Dollar and perhaps the silver market was actually lifted by the up beat macro economic developments from the US. In fact, with favorable initial and ongoing claims, positive May retail sales figures and a soaring equity market, perhaps the silver market was being lifted by improved physical demand expectations.”

That gold lagged the rest of the market was a foregone conclusion to those who believe it will follow the dollar and who shrugged off yesterday’s weakness in the buck.

“It’s [Ben] Bernanke” who drove down gold, said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. “He has basically said the other day that interest rates are going up. If the dollar is going higher, gold is going lower.”

Period? Uh uh, says James Moore, of TheBullionDesk.com, who wrote that “as inflation becomes an increasing issue globally and credit market issues resurface, investors are likely to increase their demand for safe-haven assets such as gold.”

Source: Gold Lags Other Precious Metals – Potential Propping up of Dollar Blamed

This sell-off lasted until noon, then lo and behold, the price took off again, but it was capped just before the NYMEX close. But all in all, it wasn’t a very exciting day, as everyone just wanted to get the heck away from work and enjoy the long weekend. I’m sure there weren’t a lot of people around after lunch.

Thursday’s open interest showed that gold o.i. rose 497 contracts (probably more shorting) and silver dropped 1,390 contracts.

The Commitment of Traders report for positions held as of May 20th are as follows. The bullion banks in the Commercial category went net short by an additional 3,187 contracts and the Non-Commercial/Tech funds went net long by an additional 3,028 contracts…so the bullion banks matched the tech funds almost contract for contract. The bullion banks went short against every long that the tech funds placed. The ‘8 or less’ traders (bullion banks) in the Commercial category are now net short 77.2% of the entire Comex silver market…a small increase from the previous week’s report.

In gold, there were some really big changes. The Commercial/bullion banks increased their net short position by a monstrous 37,584 contracts while the Non-Commercial/tech funds went net long 29,181 contracts. Not only have the bullion banks matched every change by the tech funds, they’ve also added a bunch of new shorts on top of that. And since Tuesday’s cut-off, Ted Butler feels that the bullion banks have added another 10-15,000 contracts to their net short position during the last three trading days of the week. The ‘8 or less’ traders (bullion banks) in the Commercial category are now net short a new record amount…an absolutely grotesque 81.4% of the entire gold short position on the Comex.

None of this warms the cockles of my heart one iota. Nothing has changed on this week-old rally, as the bullion banks continue to go short against all longs in both gold and silver…although the deterioration in silver wasn’t anywhere near as bad as it was in gold.

Since it’s a long weekend, I’ll really stretch the outside of the envelope with three stories. The first one is a front page story from Friday’s Wall Street Journal…the last place that one would expect to find a story such as this. It’s about the shortage of silver eagles…and without doubt, this story will help fan the flames of desire even hotter than they already are. It’s entitled “Losing a Mint: Curb on Coin Sales Anger Collectors” and it’s linked here.

The second story is one that I promised yesterday about JPMorgan and the woes in Jefferson County, Alabama. I wonder if it will be the first county to declare bankruptcy…as Vallejo, CA was the first city to do so. The item is from Bloomberg and is entitled “JPMorgan Swap Deals Spur Probe as Default Stalks Alabama County”…and the whole ugly mess is linked here.

And lastly, another story involving JPMorgan. Their CEO, Jamie Dimon, definitely had some unhappy thoughts to share at a UBS financial conference in New York earlier this week. This is one of the first indications I’ve seen, from a large American financial firm, that this will be no garden variety recession…and things, as he said, could get “really bad”. (Note to J. Dimon: Jamie, why don’t you just tell the truth and say that this “really bad” recession you talk about is a ‘best case’ scenario…not the worst case. – Ed) The link is here.

I got a request from a reader in Britain for ’something classical’ rather than the ‘pop’ music I’ve been putting up. I didn’t know if youtube.com carried that sort of thing, but it didn’t take me long to discover that they did…and lots of it. The piece I’ve picked was determined more by the artist, than the music itself. I met 15 year old violin prodigy, Joshua Bell, when he came to play with the Edmonton Symphony Orchestra. I think he played the Sibelius violin concerto. He performed for the ESO twice…and after that, we couldn’t afford his fee.

He’s playing in a hall I don’t recognize, and with a first rate chamber orchestra that I don’t recognize either. I’m sure some reader will happily provide the details. Here is (a lot older) Joshua Bell playing the final movement of Beethoven’s Violin Concerto in D minor – Op. 61. I thank Percy L. for the suggestion…and I hope you like my choice…despite the fact that I’m not wild about the cadenza. The link is here.

Now get as far away from a computer as possible for the rest of the weekend, and I’ll see you here bright and early on Wednesday morning.
Source: And Then There’s This…Saturday, May 24, 2008

Open interest numbers for Tuesday’s take-down in both gold and silver were a bit of a surprise. Gold o.i. only fell 362 contracts and silver o.i. was down 1,429 contracts. That’s not a lot (especially for gold) considering the price damage that was done. The COT on Friday will hopefully tell us more.

I see that SLV…the silver ETF…added another 1.9 million ounces yesterday, and the silver ETF…GLD…sold off another 200,000 ounces.

Looking at the gold and silver charts, I note that the gold price is about $35 above its 200-day m.a. and silver is a little over $1 above its 200-day m.a. Can/will the ‘8 or less’ traders try to get the price down to that level so they can force more tech funds to liquidate their longs? Don’t know, but it wouldn’t take a lot of effort…which you can see by looking at the carnage we had on Tuesday. After the big price correction in May/June of 2006, the 200-day moving averages were reached in the correction of both metals. Will history repeat itself? Here’s the 3-year gold chart for your perusal. The 3-year silver chart looks identical. The link is here.

And…one more thing. June is a big delivery month for gold…and options expiry is less than two weeks away, so if the bullion banks ever wanted to do the dirty, the timing couldn’t be better. We’ll see.

Two more stories today. The first one is the report from the CFTC that the silver market is not manipulated by anyone. Their report in 2004 said the same thing. So I guess the ‘8 or less’ traders holding 79% of all the short positions in both Comex gold and silver, is not a short-side corner on the market. If not…then what percentage is? The headline reads “New Study Finds Silver Futures Market is Functioning Properly”. The link is here.

The second story is from Bloomberg. Paul Volcker has been in the news in the last couple of days. Yesterday he was speaking in front of the Joint Economic Committee in Washington and he had a few things to say that are worth noting. The headline reads “Volcker Says Fed Interventions Risk Political Battles” and the link is here.

If there is a real loss of confidence in the dollar, then I think we are in trouble. That is something that has to watched…..That has to be very much in the forefront of our thinking, without that, we are back to inflation of the 1970s…or worse. – Former Federal Chairman Paul Volcker – 14 May 2008

The news on Bloomberg and Reuters yesterday was terrible. As far as the eye can see, it’s sheer economic, financial and monetary madness out there. It’s impossible to make any sense out of anything, and I’m not going to waste any more mental energy trying to figure it out. It’s probably a good idea if you did the same…and save yourself a lot of grief.

See you 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…Thursday, May 15th, 2008

However, oil was up $3.80 a barrel, and one would figure that gold and silver should have done better…but they didn’t.

Well, the open interest numbers for Thursday finally make some sense in gold for a change. Gold o.i. was down 4,079 contracts…and silver fell another 1,063. These numbers are very believable.

But now for the Commitment of Traders. Ted Butler and I had a chat about these long anticipated numbers, and here are the highlights…such as they are. In silver, the tech funds added a tad over 1,200 contracts to their net long positions. One would have expected that number to have dropped…not gone up…because the silver price has been dropping. The tech funds in the Non-Commercial category are supposed to be pitching their longs and the Commercial traders are supposed to be covering their shorts. That obviously didn’t happen.

To add to the mystery, the traders in the Commercial category added about 800 longs. This is perfectly legal, as they can go long instead of covering shorts…if that’s what they wish to do. The big changes were in the spreads.

In the Non-Commercial/tech fund category, 14,208 spread trades disappeared, and in the Commercial category another 12,000 were also removed. Total o.i in silver dropped 26,730 contracts for the week…virtually all of it spread related. But the ‘8 or less’ traders are now short 83% of the total silver market…up 1% from the COT the previous Friday. Other than the spreads, the COT in silver was almost a non-event. By the way, the silver ETF…SLV…added another 3.5 million ounces on Thursday despite the massacre.

In gold, the Non-Commercial/tech funds decreased their longs by about 5,400 contracts. The Commercials (including the ‘8 or less traders’) improved their position by roughly 14,000 contracts. They did this by adding 5,800 contracts to their long position and covering 8,200 shorts. The other big area of activity was the Nonreportable category where the thousands of small traders do business. Here they added 5,570 contracts to their long positions and a whopping 12,712 contracts to their respective short positions.

I must admit that I’m somewhat (more than somewhat, actually) suspicious of this. Here’s the reason. The Non-Commercials and Commercials are required to report their trading positions to the CFTC by the end of trading on Tuesday. The CFTC takes these numbers and plugs them into the spread sheet that produces the COT report. If it doesn’t balance (which it never does), they arbitrarily assign long and short positions in the Nonreportable category so that it does balance…because the number of shorts and longs must be the same.

This category is a balancing mechanism for the other two categories. It’s my opinion that if everything that should have been reported by Tuesday’s cut-off was actually in there, those positions in the Nonreportable would be entirely different…as would the rest of the report. The long form of Friday’s COT is linked here.

I spend a lot of time (as does Ted Butler) talking about the ‘4 or less’ or ‘8 or less’ traders. Who are they? Here’s the members list of the LBMA. There are eleven members in the category of Market Maker. They are the first eleven names on the list. It’s pretty safe to say that most, if not all, of these traders are there. The list is linked here.

Today’s story has to do with another infusion of cash into the banking system by the Fed…and the ECB. I see that the Fed has increased its term auction facility to $150 billion/month. In December it was $40 billion/month. The problem is still that banks don’t want to lend to each other. The story is from Bloomberg and is entitled “Fed Revs Up Emergency Lending in Latest Jolt to Credit Market”. The link is here.

Today’s fun video is a bit of a change from the normal music video. It’s a video about a pool shark. I’ve always considered excellence with the billiard cue to be the signs of a misspent youth…and that would be from personal experience. That’s not quite the case with this one. Click here.

Another winning day on the Dow. It was heading for negative territory, and below 13,000…but that never happened. I also note that the jobs report showed a loss of only 20,000. But that number included 267,000 fictitious ‘birth/death model’ jobs which the BLS made up out of thin air. All in a day’s work for the US government.