Gold & Silver Daily: Every Human Being Should Short U.S. Treasuries - Feb 06, 2010

'Every Single Human Being Should Short U.S. Treasuries' - Taleb
Well, that little dip in both the gold and silver prices that occurred shortly before London opened for the day, proved to be the low in Far East trading on Friday. From there, gold didn't do much of anything... and stayed pretty much around the $1,055/ounce price until precisely 11:30 a.m. in New York trading... when it got smacked for about $15 to its low of the day which Kitco reported as $1,042.50 spot.

From there, the price crawled back to around $1,050 spot... but once the Comex closed and electronic trading began, gold had an impressive little $15 rally and actually closed up $1.80 on the day! Gold's high of the day was reported at $1,067.90 spot, which occurred at 4:00 p.m. Eastern time.



Silver followed a somewhat similar path. Once its Far East low was in, silver stayed around $15.10 spot... but once the Comex opened, silver made a brief attempt to rally above $15.30, but ran into a determined seller. From there, silver gold sold off to its low [and gold's low as well] which occurred shortly before lunch in New York. That low was $14.62 spot. Silver also rallied from this low and closed slightly below it's Thursday closing price.



The U.S. dollar had an interesting day... doing nothing worth mentioning until around 9:00 a.m. in New York when the dollar rose and the precious metals fell. But the interesting thing was this... gold and silver began to rise from their 11:50 a.m. lows long before the dollar topped out at precisely 2 p.m... and really started to accelerate to the upside as the dollar declined. Not only that... the Dow began a miraculous PPT-assisted recovery starting at precisely 2:00 p.m. as well. Coincidence??? Not bloody likely!



While I'm on the subject of 2:00 p.m... that's the time that the HUI took off... and it closed on its high of the day as well. Until that point, the HUI was sitting right on the unchanged mark. Up 5.28% in two hours is quite spectacular... almost making up for Thursday's debacle.



Now for the open interest numbers on Thursday's massive take-down in the precious metals. They were, as expected, opaque... as the bullion banks covered their tracks in most admirable fashion. Open interest only fell 2,974 contracts. Final volume in gold [298,073 contracts] was very close to the preliminary number. Silver o.i. fell a smallish 475 contracts on reported volume of 74,092 contracts.

Without doubt, the bullion banks purchased longs in huge quantities along with covering a lot of short positions in both metals. In this way they disguised just how much they've improved their net short position... but I can tell you that it was massive. And, as I said yesterday, now we won't have a clear picture of the final clean-out until the Commitment of Traders report next Friday... as these white-collar crooks are masters of covering their tracks until forced by this report to show their hands... and even then they can still pull a fast one.

Yesterday's Commitment of Traders report [for positions held at the close of trading on Tuesday, February 2nd] is a case in point of what I spoke of in the last paragraph. The bullion banks decreased their net short position in silver by a whopping 8,148 contracts. But, like last week's COT, it's the way they did that's most important. They went long 3,536 contracts and covered 4,612 short positions. This is how they covered their tracks last week, this week... and how they did it on Thursday's big take-down. And the 'how they did it' on Thursday won't show up until next Friday. Like I said, these crooks are clever bastards.

The COT in gold [in my opinion] had some serious errors in it... and it's impossible to tell how much the bullion banks really improved their net short position during the last reporting period. But the numbers they do show, indicate that the bullion banks decreased their net short position by a smallish 4,039 contracts. This they did by covering 12,170 short positions... which certainly seems believable... but it also shows they sold 8,131 longs, which is highly unlikely considering the price action. Whether this is an honest mistake [or otherwise] is impossible to tell... but it's not the first time it has happened... and it's particularly annoying that it happen at such a critical juncture. And I doubt that the CFTC will fix it either. So, I'll just have to wait it out until next Friday.

Needless to say, Ted Butler had a few things to say about the COT in his exclusive weekly interview with Eric King over at King World New and it's definitely worth listening to this week... and the link is here.

The CME Delivery Report issued yesterday didn't show much excitement. Only 97 gold and 3 silver contracts are scheduled for delivery on Tuesday. With the bulk of the February gold deliveries now out of the way... it should be reasonably quiet for the rest of the month... unless something goes 'bump' in the night. Surprisingly, the GLD ETF reported receiving a smallish 58,773 ounces yesterday... but there were no reported changes at SLV... or the U.S. Mint for that matter. And, for whatever reason, the Comex-approved depositories didn't file a report yesterday.

Sponsor Advertisement

First Majestic Silver Corp is committed to building a senior silver-producing mining company based on an aggressive acquisition and development plan with a focus on Mexico. The Company presently owns or operates three silver mines in Mexico: The La Parrilla Silver Mine; The San Martin Silver Mine and the La Encantada Silver Mine. Annual production from these three mines is anticipated to be 5 million ounces. Learn more about First Majestic.

Since this is my Saturday rant... I hope you have more time to read... and listen... because I have a full plate for you today.

I mentioned in my commentary yesterday morning that the Swiss National Bank had been spotted selling the Swiss Franc in Asian markets yesterday morning. Here's the marketwatch.com article about that. It isn't long, but it's worth running through... as it just proves that everyone is trying to debase their currency against everyone else. That's why hard assets are the only place to be. The story is headlined "World Forex: Swiss Franc Sinks; Central Bank Spotted Selling"... and the link is here.

The next two stories are both courtesy of yesterday's King Report. The first is a piece from the Financial Times in London. The headline reads "Portugal near political crisis over debt". Portugal, along with Ireland, Italy, Greece and Spain [the PIIGS as they're collectively called] are all in serious financial and economic difficulty. For the last couple of weeks, it's been all about Greece. Now the vultures are circling around Portugal. This is a must read story and the link is here.

The other story from the King Report is directly related to the above story. This one is from Ambrose Evans-Pritchard over at The Telegraph in London. "The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words." The headline reads "Fears of 'Lehman-style' tsunami as crisis hit Spain and Portugal'. This is must read as well... and the link is here.

In a story sent to me by California reader, Joseph Weiler, I see that the Fed is leaving the door open to more 'quantitative easing' by mentioning that they might buy more mortgages "if interest rates spiked or the economy showed new weakness." The Fed has said that it would end these purchases on March 31st... but obviously that's looking like a very flexible date to me. The headline reads "Official says Fed might buy more mortgage-backed securities"... and the link is here.

In a February 4th Bloomberg story, Nassim Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline. It’s “a no brainer” to sell short Treasuries, he said at a conference in Moscow. “Every single human being should have that trade.” The story, bearing a similar headline, is linked here.

In a GATA dispatch is a story all about gold. "The price of gold in Vietnam dropped by more than 5% on Friday after the central bank told the country's biggest maker of gold bars to sell bullion to help narrow the gap with world prices. The headline reads "At least Vietnam admits rigging gold as currency intervention"... and the link to the GATA dispatch is here.

Here's a very interesting story that's certainly food for thought. It's an article by Patrick Buchanan that's posted over at lewrockwell.com. The title of the piece is "Will Obama Play the War Card?" That's a very good question... but will it work this time if he does play it? I thank Casey Research's own Jeff Clark for bringing it to my attention... and the link is here.

Congressman Ron Paul [R-Texas], has once again prescribed just the right medicine for what ails this country's monetary system by introducing H.R. 4248, the Free Competition in Currency Act of 2009. Ron explains it all in this short 5-minute video. I thank Ken Metcalfe [and others] for bringing it to my attention... and the link is here.

I've had a couple of items sitting in my in-box since last weekend, and since I use my Saturday rant to clean house... this is the first one. It's an interview with Daniel Ellsberg. Ellsberg is a former U.S. military analyst employed by the Rand Corporation who precipitated a national political controversy in 1971 when he released the Pentagon Papers, a top-secret Pentagon study of U.S. government decision-making about the Vietnam War to the New York Times and other papers. In this interview, he says that the Pentagon is making the same mistakes in Afghanistan that it made in Vietnam... and has no hope of winning this war either. The other video below it shows how 'professional' some of the Afghan soldiers are... and how frustrated the U.S. military is trying to 'train' them. Both videos are well worth watching... and I thank reader Dave Delve for sending them to me... and the link is here.

The other item I had tucked away is another one on the climate change scandal that's been in the world press for the last couple of months. This article showed up in Canada's National Post newspaper at the end of January. I agree with every word that's in it. The headline reads "Climate change skeptic Danielle Smith is in good company"... and I thank reader Roy Stephens for bringing it to my attention... and the link is here.

In closing, I have two more interviews from King World News. The first is Eric King's interview of John Williams of shadowstats.com fame. Anytime that this gentleman is talking... I'm listening... and so should you. I urge you to listen to the entire interview which is linked here.

Another person I have all the time in the world for, is my good friend John Embry, chief investment strategist at Sprott Asset Management in Toronto. Eric King also interviews John and, as you may already suspect, I highly recommend that you listen to every word he has to say... and the link is here.



The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the last refuge of political and economic opportunists. - Ernest Hemingway

Today's 'blast from the past' is from way back in 1961. I wasn't even 13 years old when this was a #1 hit... and the video is in black and white to boot! But, everyone knows the song, and you're welcome to sing along... so turn up your speakers and click .

Well, is the bottom in? It sure looks like it in silver. If I had a lingering concern, it would be the fact that the 200-day moving average in gold has still not been taken out. But, as I said yesterday, it's impossible to know when the exact bottom is in... but if I had to bet $10... I'd say we saw it yesterday... with the turnaround in the gold, silver, the HUI and the dollar all occurring at precisely 2:00 p.m. Eastern time on Friday. Check all four graphs above and you'll see what I mean... plus check any Dow chart... and Bloomberg's home page is a good place to start. Here's the 1-year silver chart.



Well, dear reader, did you do any buying while 'blood was in the streets'? I bought some more physical silver yesterday... and just about caught the bottom. Since I'm personally "all-in" with my precious metals stock portfolio, there wasn't much I could do in that area. But, if you pulled the trigger yesterday before 2:00 p.m. on some of those gold and silver companies... you were up 5-10% in two hours. That's why I keep pounding away about subscribing to either International Speculator... or Casey's Gold and Resource Report. Both monthly reports contain lots of companies that were up that amount or more yesterday. And don't forget that if you ain't happy with what you plunked your money down for... you have our 90 day 100% risk-free guarantee. How can you lose?

We're now at the bottom [or damn close to it] of this precious metals correction. How far and how fast we rise from here is 100% dependent on JPMorgan and the other U.S. bullion banks... all of whom get their collective marching orders from Ben Bernanke and Tim Geithner... both of whom are card-carrying members of the Plunge Protection Team. If they short the next rally, it will be the same old, same old kind of rally. But, if they decide to put their hands in their collective pockets... well, you can pick any number you want for a gold or silver price... and I'm sure your wish will be granted... and maybe in short order, as there are no daily price limits in either gold or silver. None whatsoever!

I hope you enjoy the rest of your weekend... and I'll see you on Tuesday morning.