Casey's Daily Resource Plus - June 06, 2009Published: June 06, 2009 by GoldSpeculator In Today's Edition
Precious Metals Gold was unchanged in the first hour of New York trading on Friday, but that was as good as it got, with the metal plummeting nearly $25 by mid-morning, after which a rally to the late Comex was abruptly snuffed out and the price limped to a finish at $954.60/oz., down $25.80. For the week, gold slipped 2.6%. Platinum peaked in Hong Kong, then traded choppily through the day but with a general down bias, ending at $1263, down $28. For the week, platinum was up 6.3%.
Silver was already declining when it hit the same strong morning selling as gold, and it dropped briefly below $15.20 at mid-morning, a low that it nearly revisited as it remained weak through the day to close at $15.27, down 61 cents. For the week, silver skidded by 3.4%. The precious metals capped an up-again, down-again week by visiting the down end of the seesaw, as a strengthening dollar clipped off all of the rebound gains turned in on Thursday. The Hightower Report summed up a disappointing day for gold in this way: “After an early rally into the US Non farm payroll data, the August gold contract fell back sharply. With the US numbers potentially seen as supportive to recovery and or inflationary views, it was somewhat surprising to see gold prices fall back so sharply. However, in addition to a partly overbought short term technical condition in the gold market, it is possible that gold was undermined by the sudden and rather distinct rally in the US Dollar. Just to disappoint the bulls even more, gold prices even failed to benefit from a temporary rise above the psychological $70.00 level in crude oil.” Despite the zigzag nature of gold’s recent path, many analysts believe they are seeing a sea change in the way the metal is being viewed around the world. It’s not just about investment value any more, they say. In other words, gold is money. As Mark O'Byrne, executive director at Gold and Silver Investments Ltd., puts it, “Gold will likely be increasingly used as a safe-haven monetary asset to protect and bolster national currencies as it has been throughout history.” "As the common currency to the world [the dollar] devalues, then gold by extension has to gain in value,” said Marcus Hudson, president at Hudson & Associates. We couldn’t agree more.
Currencies and Economic News In the currency market, the dollar was sharply higher against the euro. Late Friday, the euro was trading at $1.3968 vs. $1.4171 on Thursday. The day’s big numbers were in the much-anticipated employment report from the Labor Department, which said that job losses slowed in May. Labor said that nonfarm payrolls declined by 345,000, the smallest job destruction in eight months. That was far under economists’ projections for something closer to 500,000. The currency market surely took note, as this “may be the stamp of approval we've ended the panic period,” in the words of Max Bublitz, chief strategist at SCM Advisors. “People think they don't need to sell the dollar.” However, the drop in job loss was nowhere near job creation. “The pace of deterioration is slowing, but we are still a long way from the point of stability in both the labor market and the broader economy,” said David Greenlaw, of Morgan Stanley. The report also noted that the economy has lost 6 million jobs since the recession began in December 2007. Payrolls have fallen by 4.3%, the biggest loss since the 1957 recession. Underlining the seriousness of the situation, overall unemployment rose by 787,000 in May to 14.5 million, pushing the jobless rate from 8.9% to 9.4% -- the highest level since August 1983. Unemployment is up 5% from its low, the biggest increase since the Great Depression. And that’s just the leading edge of the wave. If the data included discouraged workers and those whose jobs have been cut back to part-time status, the number of un- and underemployed rose to 16.4% from 15.8% in April. The number of workers forced into part-time positions rose by 164,000 to 9.1 million. We are not out of the woods yet. Energy In the energy market on Friday, crude for July delivery slipped, closing at $68.44/barrel, down 37 cents. July reformulated gasoline fell three-quarters of a cent, to $1.9546/gallon. Crude flirted with the $70 mark yesterday, briefly topping it for the first time in six months, at $70.32, in a rush of optimism immediately after the jobs data came out. Despite the slippage, crude ended the week up 3.2%. “Crude turned around to the downside because of the strength we are seeing in the U.S. dollar,” said Tariq Zahir, of Tyche Capital Advisors. “More importantly, the fundamentals of crude oil are still bearish … Demand is down, and inventories are up.” Credit Suisse analysts concurred, saying that, “Demand destruction is still a topic in the market … At the same time, OPEC production has started to grow again. We think price risks are skewed to the downside.” In the natgas arena, the fuel was higher on the week, with July futures gaining 10%, to $3.868 per million British thermal units. Base Metals The base metals were mostly in negative territory on Wednesday. Copper pushed above $2.30 in the early pre-dawn hours, but fell below $2.22 by late morning, then rallied back a bit to finish at $2.2506/lb., down 2¼ cents. Nickel followed copper, though it peaked a little later and came off its lows more strongly, ending at $6.5272/lb., down 4½ cents. Zinc traded listlessly, in the end dropping less than a half-cent, at $0.7018/lb. Aluminum was modestly lower, shedding a third of a cent, to $0.6981/lb., while lead bucked the general trend by tacking on two-thirds of a cent, to $0.7549/lb. The base metals turned mostly south after Thursday’s big gains, with copper leading the sector lower as the stronger dollar lessened the metals’ appeal as an inflation hedge. “Copper was down in a profit-taking retreat from the initial upside reaction to U.S. May payrolls data. Firmer dollar and fund money flows out of the broader commodity complex weighed on values,” said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey. Nevertheless, that employment data helped to limit yesterday’s losses in copper, according to Frank McGhee, of Integrated Brokerage Services LLC in Chicago. The jobs report “adds to the euphoria people have, thinking that the worst is over,” McGhee said. Stockpiles were supportive, notching another milestone as they fell below the 300,000 level for the first time since last December. Copper inventories monitored by the LME dropped by another 3,225 metric tons yesterday, to 299,975 tons. Meanwhile, aluminum headed for its biggest weekly gain in 21 years, as metal earmarked for shipment from warehouses registered with the London Metal Exchange jumped almost 15% to 81,375 metric tons, signaling a sharp rise in demand. “Some distributors are showing renewed buying interest on concern that they will not be prepared to meet orders when demand returns,” Deutsche Bank analysts wrote. Resource Stock Roundup Job losses in the United States slowed during the month of May but the overall unemployment rate came in higher at 9.4 per cent. The bulls took the news to mean that the glass is half full, while the bears think the glass is half empty and in the end it was the bulls that prevailed during Friday’s session on the Canadian Markets. For the tale of the tape, the TSX Exchange rallied 0.88%, while the TSX Gold Index was the big loser by falling 3.1% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, added 0.43% with the advancers beating out the decliners by a 451 to 390 margin on a respectable 197 million shares traded. Much like its move against the HudBay Mining – Lundin Mining proposed merger, it looks like Jaguar Financial through legal threats has stopped the proposed Glen Eagle Resources investment in Kinbauri Gold. You see, Glen Eagle has been advised by Kinbauri that it has terminated the subscription agreement dated May 8, 2009. For its part, Glen Eagle believes that Kinbauri's termination is a breach of the agreement and is considering its options. Meanwhile, Orvana Minerals all-cash offer of C$0.55 per share for Kinbauri is on the table. As it stands now, it will all come down to a court decision slated for June 17. Kinbauri ended the day unchanged at C$0.58, Glen Eagle fell C$0.01 to C$0.09 and Orvana closed up C$0.01 at C$0.74. Harry Winston Diamond tabled a net loss of US$45.1 million, or US$0.68 per share, in the first quarter ended April 30, compared to earnings of US$21.3 million in the corresponding period a year earlier. The 30 per cent holder of the Diavik diamond mine in the Northwest Territories is being impacted by falling diamond prices and the ongoing global financial woes. Harry Winston ended the day down C$0.03 at C$7.30. Despite a major plunge in the price of bullion, the junior market showed surprising strength with solid strength on the buy side. We shall see what Monday trading has in store. The Private Placement Alert Private placement financings are typically done on preferential terms, often providing investors the opportunities to buy shares at a discount to the market, and receive a warrant as well. In exchange, investors agree to a "hold" period of between 4 months and a year, during which they cannot sell their shares. If you are interested in participating in a private placement, contact the company directly. Typically, only high net worth individuals are allowed to participate. Below is a list of private placements announced this week...
And then there's this... From Ed Steer: As I mentioned in my closing comments yesterday, gold hadn't done much in Far East trading and early London trading...but I also mentioned that this would change as the day wore on in London...and certainly once the Comex opened. Well...I was right about that...unfortunately. The jobs numbers hit the tape at 8:30 a.m. in New York and the U.S.$ headed south and the precious metals headed north...for about five minutes. Then it was obvious that the President's Working Group gave the order and the dollar went straight up...and gold and silver went straight down. Nothing free-market about that. From the lows at the London p.m. gold fix, gold and silver made rally attempts...but both got squashed...and were bashed further in electronic trading once the floor trading session was over. The Kitco gold chart tells all.
Open interest numbers for Thursday's big rally were no surprise. Gold o.i. jumped another 5,776 contracts to 401,699 [the highest open interest since August 6, 2008]...and volume was a healthy 124,373 contracts traded. Silver had a huge o.i. jump...up 3,101 contracts to 109,274...with another big volume day of 38,654 contracts. Ted says that the rollover into the July contract [and later months] is already on in earnest, so that's the reason why there have been big increases in silver trading volume this week. The Commitment of Traders report showed that there was only minor deterioration in silver's [Commercial] net short position by JPMorgan et al...as they only increased their net short position by a measly 195 contracts. Ted and I were both expecting much worse...so it's plain that 'da boyz' do not want to short the silver market any more than they have to. The Commercial net short position is roughly 43,000 contracts...215 million ounces. The '4 or less' traders [bullion banks] in the Commercial category are short 47,700 contracts...238.5 million ounces of silver...more than 100% of the entire net short position in silver. These '4 or less' traders have been more than 100% net short the Commercial category of the COT silver market since July 29, 2008. The deterioration in gold was worse than awful. The Commercial [all bullion banks] net short position increased a whopping 18,385 contracts. They are now net short 22.65 million ounces of gold. '4 or less' bullion banks in this Commercial category are short 17.7 million ounces of that. This is monstrous and grotesque. To give you a further idea of how unbelievable this is, the Bank Participation Report for May came out at the same time as Friday's Commitment of Traders report...with the same cut-off date...the end of trading this past Tuesday, so we can compare apples-to-apples. Of the above 22.65 million ounce short position that the bullion banks have in gold, '3 or less' U.S. bullion banks are net short 12.3 million ounces of that...more than15% of world mine production. This is a new record high. And to show you how much the U.S. bullion banks dominate the world's gold market, the report states that twenty-one [21] 'Non-U.S. banks are only net short 410,000 ounces of gold between all of them!!!’ In silver, two [or less] U.S. bullion banks are net short 27,500 contracts...137.5 million ounces. The Bank Participation Report shows that twelve [12] Non-U.S. banks are net long the silver market by 5,200 contracts...26 million ounces!!! Ted Butler says, and I totally agree, that this has to be resolved...one way or another. The bullion banks are either going to get overrun with a huge short position on in both metals...or they're going to smash gold so they can beat the living snot out of the silver price. Unfortunately...as both Ted and I have already gone on record as stating...the end result will most likely be the latter, not the former. We figure that it will be quick and ugly. Very ugly. We'd both LOVE to be proven wrong on this one...but past history [with the COT in this configuration] is not on our side. Sorry! In other gold news, there were no changes at the U.S. Mint. The SLV ETF did not change, but there was a minor drop of 11,250 ounces at GLD. Over at the Comex-approved warehouses, there was an increase in silver stocks of 619,565 ounces. Friday's Comex Delivery Report showed that another 456 contracts in gold were delivered...as were 11 silver contracts. Taking a look at crude oil for a moment, the decline in crude oil prices that began in mid-2008 was historic...plunging over $90 barrel in just eight months. Over the past four months however, crude oil prices have spiked up nearly $30 per barrel. Today's chart provides some perspective on the historic decline and recent spike, with a long-term view of inflation-adjusted West Texas Intermediate Crude. The chart illustrates that most oil price spikes were a result of Middle East crises and often preceded or coincided with a US recession. It is also interesting to note that the recent spike in oil prices has brought the price of oil back to a relatively high level...a level that was surpassed only during the major price spikes of 1979-1982 and 2005-2008. I thank P.S. for this information. Chart Courtesy of Chart of the Day - Stock Market Graphs & Charts + Gold, REITs & the US Economy - www.chartoftheday.com
I only have a couple of stories today...the first is from Liberty Dollar founder Bernard von NotHaus. He reports that he and three associates in the Liberty Dollar operation were arrested by federal agents this week, as the U.S. government began to prosecute them criminally for issuing the gold and silver Liberty Dollar currency. Fortunately the arrests were civilized and now the issue may be determined in court with some degree of due process of law and some chance of restoration of limited government. You can find von NotHaus' account of the arrests here. In a story posted at Russian website rian.ru, Russian President Dmitry Medvedev said "the structure of the global currency system would inevitably change with the increasing role of regional reserve currencies, and called for a reassessment of the potential role of gold in the global currency system." The story is headlined "Role of gold in Russian reserves could increase - Kremlin"...and the link is here. One of my readers, Dave Delve, sent me the following...and it's oh so true. "See what happens if you sleep around...it's always the kids that suffer!" The photo below tells all.
The proud American will go down into his slavery without a fight, beating his chest and proclaiming to the world how free he really is. The world will only snicker. - Stanislav Mishin, pravda.ru, 01 June 2009 Today's 'blast from the past' is 115 years old. This piece of music was so popular at the time of the opera's premiere in Paris on March 16, 1894...that it already existed in transcription for eight different musical instruments. It symbolizes the moment when Thais, a courtesan in 4th century Alexandria, converts to Christianity under the influence of the monk Athanael. The opera has long been forgotten, but this composition lives on in the concert halls of the word, and is one of the most beautiful pieces of music ever written for violin and orchestra. When it's played, there isn't a dry eye in the place when the soloist and orchestra are done. Here is violinist Sarah Chang with the Berlin Philharmonic...under the baton of Placido Domingo. Turn up your speakers and click here. Friday's activity was vintage gold cartel. Virtually without fail, they always hit the gold price after a lousy jobs report. This time was no exception. This time they ramped the dollar as well, as it was heading south too. The economic news in the last couple of days has gone from bad to worse...retail sales are down almost everywhere, the American Trucking Association reports tonnage down again, the Association of American Railroads reported that "U.S. rail carload traffic in May 2009 fell 24.7% year/year"...the worst y/y decline of the recession. Plus the U.S. Treasury department said it has another $127 billion worth of paper to sell next week. Everything is fine! The gold and silver markets should be interesting when they open for business on Monday morning...which is late Sunday night here in North America. 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. Casey's Daily Resource Plus A quick reading but comprehensive daily update on all the goings on in the booming natural resource sector. All the important news delivered to your email inbox each morning in time for you to enjoy it over a cup of coffee, before markets open. The only tool like it in the world. And, did we mention... it's FREE!
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