Gold & Silver Daily: A Bear Raid in the Precious Metals – Mar 11, 2010

A Bear Raid in the Precious Metals
Gold did nothing worth mentioning in Far East trading yesterday, but was up about $5 by lunchtime in London. From there it declined slowly… losing about $8 going into the London p.m. gold fix at 3:00 p.m. London time… 10:00 a.m. in New York. The moment ‘the fix was in’… gold rallied sharply, only to run into a wall of selling by the New York bullion banks at 11:05 a.m. Eastern time… five minutes after London closed for the day… which is 4:00 p.m. local time in London.

By the time that the not-for-profit selling came to an end about 70 minutes later, gold had ‘fallen’ from its absolute New York high of $1,128.90 spot… to it’s absolute New York low of $1,102.10 spot. From there, gold gained back about six bucks before the close of electronic trading in New York at 5:15 p.m. Eastern time.

It was the same story across the entire precious metals complex… silver, platinum and palladium included. All took off to the upside after the London afternoon gold fix… only to get crushed at 11:05 a.m. in New York… about 65 minutes later. Silver in particular got it in the neck… as it was breaking out to new highs, but got smacked for 75 cents from its absolute high of the day, which was $17.67 spot.

From its highs to its lows, platinum got hit for $48… almost 3 percent. It was the only precious metal that, despite getting creamed, finished up on the day.

Considering the damage done to both gold and silver prices [and sentiment] yesterday, the response of the shares was pretty muted. They started the day in positive territory but then sold off starting shortly after 11:00 a.m. Eastern time when the bullion banks showed up… and the decline ended at exactly 12:30 p.m. From there, the shares traded sideways until the equity market closed at 4:00 p.m. The HUI only lost 1.42%. For the moment, I’m encouraged by that.

The dollar was an interesting study yesterday. From exactly 3:00 a.m. until exactly 11:00 a.m. the dollar gained 50 basis points. If you check the gold chart above, you’ll see that during that time period, gold rose a whole five bucks. But starting at exactly 11:00 a.m… the U.S. dollar reversed course… and over the next hour and a half, gained back about 23 basis points of that 50 basis point loss. Five minutes after the dollar headed north… all the precious metals got slammed for multiple percentage declines. This was too precise an operation to be the free markets operating… in my opinion, this was a well planned bear raid.

As far as open interest goes, I mentioned yesterday that I was hoping that Tuesday’s rally might involve some short covering. Well, that may have been the case, as gold open interest fell 2,383 contracts on volume of 184,500 contracts. That may have been the case in silver as well because, despite it’s nice rally yesterday, silver open interest was only up a very small 452 contracts… and that positive amount may represent the bullion banks going long rather than covering their short positions. Volume was a decent 38,779 contracts. This data, too, will be in tomorrow’s Commitment of Traders report, as Tuesday was the cut-off date.

The CME Daily Delivery Report for Wednesday showed that 11 gold and 152 silver contracts were posted for delivery on Friday. JPMorgan was the big issuer in silver… and the whole report is linked here. Neither GLD or SLV posted any changes yesterday… but the U.S. Mint reported selling another 6,500 one-ounce gold eagles and had no update to silver eagle sales. It was another busy day over at the Comex-approved depositories on Tuesday, as all warehouses reported activity… and they showed that 726,638 ounces of silver were taken into inventory. Tuesday’s action is linked here.

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I only have four stories today, which is just as well, because the last one is a really big read. The first story is another chapter in the ongoing Greek saga. This one also involves Britain as well. It’s a story out of The Telegraph in London… and it’s another offering by their international business editor, Ambrose Evans-Pritchard. The headline reads “Fitch warns Britain and questions Greek rescue as sovereign risks grow”… “Fitch Ratings has delivered a serious blow to the credibility of the Government’s budget plans, warning that Britain risks a loss of investor confidence and erosion of its AAA rating unless it maps out clear austerity measures.” E-P also points out, correctly, that “While the EU game of ‘constructive ambiguity’ [regarding Greece] has succeeded in calming the markets, the agency noted that not a single “hard cent” has been put on the table so far.” It’s a short article… and definitely worth your time… and the link is here.

The next story is a real eye-opener that showed up posted over at Bloomberg yesterday. The headline is almost unbelievable… and reads “U.S. Posts Record Budget Deficit of $221 Billion in February”. The litany of woes contained in the article takes about five minutes to read… and the link is here.

Here’s the first of my two must read offerings for the day. This rather large read is posted over at jessescrossroadscafe.com. and bears the headline “Propaganda Campaign Attempts to Mask the Economic Risks and Reality”. The smallish introduction leads to a much larger essay by Yves Smith posted over at nakedcapitalism.com. The title to this essay reads “The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches a Fever Pitch”. Both the introduction and the essay are well worth your time… and the link is here.

And lastly comes this piece from the March/April edition of Foreign Affairs… published by the Council on Foreign Relations… and posted over at informationclearinghouse.com. It’s written by Niall Ferguson and is titled “Complexity and Collapse: Empires on the Edge of Chaos”. The summary statement says the following… “Imperial collapse may come much more suddenly than many historians imagine. A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice.” As I said, I feel this is a must read, even though it will take the better part of half an hour to run through it. I thank reader Roy Stephens for bringing it to my attention… and the link is here.

In the piece I posted above from jessescrossroadscafe.com piece above, came these words… “I have never seen such a load of rubbish being put forward with regard to the markets in US financial assets and commodities, and I’ve seen quite a bit in the last twenty years. In particular, the campaigns against gold and silver are heavy-handed, obvious, and reaching the point of hysteria.”

That would just about sum up what happened on Wednesday… as it was certainly “heavy-handed and obvious”. On Tuesday I included a 6-month gold graph along with the following commentary… “You’ll note that in the last four trading days, it seems like the gold price is rolling over. It’s hard to say whether this is going to correct itself… or if it’s going to go lower. If it does go lower from here… it will certainly not be due to any free market forces that I can think of… but it’s too soon to tell right now.” If you wish to refresh your memory, the link to Tuesday’s column is here… and the graph is near the bottom.

Anyway, here’s what the 6-month gold graph looks like two days later. Yesterday we closed slightly below the 50-day moving average… and if we don’t recover well above it either today or Friday, it’s my bet that the gold price may re-test the 200-day moving average, which has now snuck up to $1,039 spot.

One thing that you must remember looking at this chart is that it’s 100% made in the U.S.A. by the Fed, the Treasury and the PPT… with the bullion banks doing the dirty work. There is no free market price to be seen on this graph anywhere.

Ted Butler feels strongly that we are in the final stages of the bullion banks covering as many of their short positions as they can… and this final push to the downside [if it comes] fits right into the grand scheme of things… but a couple of more days of market activity will be needed to confirm this one way or another, so we’ll have to wait for the bullion banks’ next trick.

Not much happened during Hong Kong trading during their Thursday session, but I did note that silver hit a new low. Volume so far this morning [4:53 a.m. Eastern time] for gold is 19,791 contracts… and in silver it’s a reasonably heavy 4,565 contracts.

The preliminary volume numbers for Wednesday’s trading are now up on the CME’s website… and they show that a massive 235,814 contracts were traded in gold yesterday… and in silver it was 47,681 contracts. The open interest numbers will be worth looking at when they’re posted later this morning. I’m expecting some short covering to be reported. Of course none of these numbers will be in tomorrow’s COT report… as all this very interesting activity took place the day after the cut-off… and won’t show up until next Friday’s report. And as you already know, dear reader, ‘doing the dirty’ on a Wednesday is one of the bullion banks’ favourite tricks.

As I sign off on this column, I see that London has been open for a bit… and not much is happening their, either. It will be [once again] up to the U.S. bullion banks to provide today’s entertainment in the precious metals market when the Comex opens… and after yesterday’s performance… I’m sure they won’t disappoint us.

I hope your Thursday goes well… and I’ll see you tomorrow.

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