Gold & Silver Daily: Swiss Warn That U.B.S. Bank Could Collapse - Feb 02, 2010

Swiss Warn That U.B.S. Bank Could Collapse
Well, the gold price oscillated within three or four dollars of $1,080 from the time that trading began in the Far East yesterday morning... right up until just before lunchtime in London. Then, something resembling a rally began. But the moment that the afternoon London gold fix was in... which occurred minutes after 3:00 p.m. London time... 10:00 a.m. in New York... the gold price tacked on $10 almost immediately. Then it spent the rest of the day working its way higher before losing momentum as soon as the Comex closed at 1:30 p.m. Gold almost closed on its high of the day... which was $1,108.10 spot. The low price [around $1,075 spot] was at the close of Sydney trading much earlier in the day.



Silver's price path was very similar... with the low of the day coming in Hong Kong trading... somewhere around $16.08 spot. Silver also closed very near to its high of the day... which was $16.73 spot.



After Friday's slaughter on the Dow... and in the precious metals stocks... I must admit that I was prepared for the worst at the New York open. So I was extremely happy when I turned the computer on yesterday morning and found the above chart staring me in the face. Volume wasn't particularly heavy... and thoughts of short covering crossed my mind. We may get some hint with this morning's open interest numbers, but will probably have to wait until Friday's Commitment of Traders report for sure.

The HUI closed up 5.57%... on its absolute high of the day... gaining back everything it lost on Friday, plus a bit more.



The U.S. dollar fell about 40 basis points in 24 hours... with the bottom occurring around the close of gold trading at 5:15 p.m. yesterday afternoon... which certainly doesn't explain the $25+ price surge. As I said before... was it short covering?



Friday's open interest changes were as follows. Gold o.i. rose an insignificant 110 contracts. Volume was relatively low 204,658 contracts. Silver's open interest rose a largish 1,249 contracts... and volume was smallish as well... 37,091 contracts.

The CME Delivery Report showed that 607 gold and 121 silver contracts are up for delivery tomorrow. For whatever reason, the GLD website wasn't showing any data... and the SLV reported that 932,389 ounces of silver were withdrawn yesterday. For the week that was at the Zürcher Kantonalbank in Switzerland, they showed that 18,297 ounces of gold were added... but their silver ETF showed no change. The U.S. Mint had no report... and the Comex-approved warehouses reported that 104,805 troy ounces of silver were added to their inventories.


Well, it's Tuesday... and, as usual, I have a lot of stories for your consideration. But first I want to revisit an item that I posted on Saturday. That was the Eric King interview of Jim Rickards. I forgot to mention that he and Eric spent a lot of time discussing the secrecy and obfuscation of the gold market, the need for central banks to devalue their currencies against gold to avert deflation, the bursting of economic bubbles, the parasitism of the big financial houses, and many other things. So... if you passed on it on Saturday... here's your chance to make amends, as the very long [almost an hour] interview is definitely worth your time... and the link is here.

The next story is one that GATA's secretary treasurer Chris Powell headlines "CFTC to join market riggers in conference on suppressing energy prices". Bloomberg's headline read "IEA to Meet CFTC, OPEC, Banks on Curbing Speculation". Please read this short article and decide which title applies. The link is here.

This next piece was written by the anonymous blogger FOFOA -- Friend of Friend of Another, a name referring to the famous "Another" postings at the old USAGold.com Forum. He posted a wonderful account of the London Gold Pool of the 1960s. It shows how gold dishoarding by central banks used to be frankly acknowledged as currency market manipulation. It shows how those holding a short position in a rising market can still make vast amounts when they know in advance the moments of government intervention... circumstances that apply today to the London bullion market and the gold futures market at the New York Commodity Exchange. The article, which is a must read, is entitled "Living in a Powder Keg and Giving Off Sparks"... and the link is here.

The next two stories are joined at the hip. The first came from Florida reader, Charles Dubelier. It's a piece out of yesterday's edition of The Guardian in London. The headline pretty much says it all... "[German chancellor] Angela Merkel ready to buy stolen Swiss data on alleged tax evaders". And, for good reason, Swiss president Doris Leuthard is really pissed about it... saying it was "insidious" for a state that operates under the rule of law "to make use of illegal data". I would expect this data, if purchased, would generate a court case [probably in both countries] almost immediately... and the link to this very short must read story is here.

The second story on Swiss banks and tax evasion comes from my good friend Peter Spina over at goldseek.com. "Switzerland's justice minister warned in an interview on Sunday that top bank UBS could collapse if sensitive talks with the United States over a high-profile tax fraud investigation fall through." The headline is similar... and the very short story is definitely worth the read... and the link is here.

What would my Tuesday commentary be without a rant from Ambrose Evans-Pritchard... and I just happen to have one. "Germany faces a terrible dilemma. Either Europe's paymaster agrees to underwrite a Greek bail-out and drops its vehement opposition to a de facto EU economic government, treasury, and debt union... or the euro will start to unravel, and with it, Germany's strategic investment in the post-war order." The headline reads "Should Germany bail out Club Med or leave the euro altogether?" This story is very much worth your time... and the link is here.

Last, but definitely not least, is Sprott Asset Management's latest "Markets at a Glance" commentary written by Kevin Bambrough & David Franklin. It's about gold from beginning to end... and the headline of this 3-page must read commentary is "Beware Counterfeiters"... and the link is here.

This mouse was playing with death when it tucked into the lunch of a hungry leopard. Seemingly unaware of the beast towering over it, the mischievous rodent grabbed at scraps of meat thrown into the African leopard's enclosure. But instead of pouncing on the tiny intruder, the 12-year-old leopard called Sheena appeared to be afraid of the daring mouse and kept her distance. At one stage she tried to nudge the mouse away with her nose, but the determined little chap carried on chewing away until he was full. [Photo credit: Casey Gutteridge] My thanks to Wistar Holt for the photo sequence.



Well, I received a pile of e-mails over the weekend and yesterday about Richard Russell's Friday commentary... and this is what he had to say: ....if the 7,286 level recorded in 2002 is violated, I see the Dow declining to the 1,000 level. Seems impossible? Seems out of the question? Call it anything you want, but that's where I stand. That's what I believe could happen if the advancing structure from the March low breaks down. And it does appear to be breaking down. My good friend Ian Gordon of Long Wave Analyst fame will be beaming with pride with words like that coming from the Master himself.

Well, the Dow got a reprieve yesterday... and I'll bet any kind of money you want to lay on the table that the President's Working Group on Financial Markets [a.k.a. the Plunge Protection Team] were there to make sure that Friday's debacle did not spill over into Monday. For the moment they were successful.

It's going to be interesting to see if this rally in both gold and silver has any legs. Both metals were oversold... but not to the extremes I would like to have seen. I'm somewhat concerned that this rally may roll over in the days and weeks ahead. But what I'm really watching is to see if JPMorgan et al are going to short this rally. You must understand, dear reader, that if the bullion banks... specifically the '8 or less' traders... were not there to go short against all longs, there is nobody... not a single trader left in the Commercial category of the Commitment of Traders... that is prepared to go short silver [and gold] at current prices... and the prices would explode instantly. That's why the bullion banks are there... as the shorts of last resort. The moment they withdraw from the market... or begin to cover their short positions... will be an event talked [and written] about for centuries to come.

There hasn't been much positive follow-through in Far East trading this morning... but the gold price is still above the $1,100 mark as London begins their business day. I'm not reading a lot into that, as it appears that the U.S. bullion banks [or their foreign proxies] are not making their presence felt to any great degree at the moment. But, using Monday's trading as a guide, they could show up at any time... and we'll find out in a big hurry which way they want prices to go.

At the moment [4:28 a.m. Eastern time] the CME website is not giving current volume data for either gold or silver. This is not the first time this has happened in the last week or so. But the CME has posted their preliminary volume figures for Monday's trading... and that shows a fairly light 173,450 gold and a so-so 37,459 contracts in silver. Most likely these figures will be updated higher when the final numbers are posted later this morning.

One thing I noticed on all the precious metals charts yesterday were the big gaps up in both gold and silver. It's been a while since I've seen a chart that looks like that. Here's the 6-month silver chart as a "for instance". The gold chart looks identical.



In order for this rally to gain any real traction from tech fund buying... the ones that just their heads handed to them by the bullion banks... the prices of gold and silver will have to work their way back above their respective 50-day moving averages. We have a ways to go in both metals... so we're in kind of a "no-man's land" at the moment. We'll just have to wait and see how this is allowed play out.

I hope your Tuesday goes well... and I'll see you here tomorrow.