James Turk: Conditions Are Ripe For a Short Squeeze in the Gold Market

Gold gapped up… and the dollar gapped down at the Sydney open in early Monday trading yesterday morning. Gold’s high of the day [a hair over $1,170 spot] occurred a little over an hour later… but most of the price advance was beaten back… and from there, it was a slow, but gentle, slide into the London p.m. gold fix. Once the ‘fix was in’… gold rallied back into positive territory for a few hours in New York… but got taken down hard by a not-for-profit seller starting just before the Comex stopped trading for the day. By the time that electronic trading was through in New York on Monday afternoon at 5:15 p.m. local time… gold was closed almost at its low of the day.

Silver had a slightly different kind of day. It’s high was at 3:00 p.m. in Hong Kong trading, before it began its decline. That decline ended at 9:00 a.m. Eastern time… and the subsequent rally back into positive price territory ended shortly before lunch in New York. But, as they say, it was all down hill from there, with silver’s absolute low price [$18.15 spot] coming minutes before 4:00 p.m.

Monday morning’s 50 basis point gap down in the U.S. dollar at the Sydney open was the second gap down open of some consequence in the last little while. The absolute low [80.076] came at 3:00 a.m. in Hong Kong’s afternoon… which just happened to be silver’s high price spike of the day. From that low, the dollar rallied about 50 basis point… and reached its high price around 8:00 a.m. in New York. The dollar basically sat at that price [80.60] for the rest of the trading day… and beyond. But if you look at the gold and silver price graphs above, you’ll not that both gold and silver [after their respective morning lows in New York] go hammered flat for no apparent reason. I guess the U.S. bullion banks weren’t too amused that gold and silver were heading back into positive territory, despite a flat dollar… and engineered a sell-off in both metals… plus a lot of other things… except the Dow, which the PPT finally got to close over 11,000. Happy days are here again!

The precious metals shares acted in a predictable manner… but it could have been worse… as the HUI only finished down only 1.39%.

Gold open interest rose again on Friday. This time it was up 3,096 contracts. Final volume for the day was reported as 147,981 contracts. In silver, the volume was a pretty chunky 41,282 contracts… with about 15% of the being swaps. Silver’s open increase was chunky as well… up 2,404 contracts. As I’ve mentioned every day since last Wednesday… this rally in both gold and silver is being resisted with a ferocity that I haven’t seen in a quite a while… and it doesn’t bode well for the current rally.

The CME Delivery Report for Monday showed that 449 gold and 12 silver contracts have been put up for delivery on Wednesday. In gold, the ‘4 or less’ traders that are mega short both gold and silver on the Comex, are all present and accounted for in Monday’s report. See for yourself… as the link is here.

There were no reported changes in GLD’s alleged stocks yesterday… but, once again, there’s been another huge withdrawal from the SLV. This time it was 1,470,852 ounces. Since February 26th… 11.07 million ounces of silver have been withdrawn from SLV in seven consecutive tranches. Not one ounces of silver has gone into the SLV since that date. However, in GLD, there have been ten deposits and one withdrawal since February 23rd… with a net total of 1.1 million ounces of gold added. Ted Butler is very bullish about this ongoing withdrawal from SLV… and is probably even more so after Monday’s withdrawal. It should be obvious to all but the most brain dead, that silver [in size] is just not available anywhere at any price… so the ‘authorized participants’ are satisfying demand out of the SLV ETF. One can only imagine what the price would do to if they went and tried to access this sort of silver from the Comex.
The Zürcher Kantonalbank in Switzerland provided their weekly update for their precious metals ETFs on Monday. There was no change reported in their gold ETF… but their silver ETF recorded an increase of 387,770 troy ounces. I thank Carl Loeb for those numbers.

The U.S. Mint had nothing to say yesterday… but over at the Comex-approved depositories, they reported another silver withdrawal there. This time it was 325,982 troy ounces.

Well, there were a lot of stories over the weekend… and I was tempted to put out a commentary yesterday morning, just to ease the reading load today. I didn’t… and now regret it.

Today’s first story is an item from Friday’s edition of The Wall Street Journal. It appears that 18 major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York. And, according to an SEC report… quarter-end loan figures sit 42% below peak, then rise as the new quarter progresses. More ‘book cooking’ to keep the American public in the dark about how bad it really is. The headline reads “Big Banks Mask Risk Levels”… and I thank T.J. from North York for sending me the story… and the link is here.

Goldmoney.com’s James Turk has two offerings today. In his first story, James says his chart suggests that gold will reach $1,200 soon, in large part because GATA’s work has persuaded the market that the investment houses that are suppressing the gold price with the help of central banks, are running a very vulnerable naked short position. Turk’s commentary [along with an excellent graph] is headlined “Gold Hurdles Above $1,140″… and the link is here.

There were a few main-stream stories in the press about Andrew Maguire… the ex-Goldman Sachs trader who blew the whistle on JPMorgan’s silver price management scheme. The first came from the Sunday edition of the New York Post. The headline reads “Metal$ are in the pits: Trader blows whistle on gold & silver price manipulation”… and the link is here.

Two other stories… one in Australia’s largest newspaper… Friday’s edition of the Melbourne Herald Sun. The notice came in a column by John Beveridge headlined “More Bull than Bullion” and was accompanied by a great cartoon. The Herald Sun does not seem to have posted the material on its Internet site but thanks to a friend in Australia we have a pdf image of the article itself… and the link to that is here.

And lastly… many Chinese Internet sites on financial topics have picked up on GATA’s presentations at the March 25 meeting of the U.S. Commodity Futures Trading Commission. Here’s one — Popular Financing — that has posted its commentary in English as well as Chinese. It’s headlined “Two U.S. Dollar Signposts and Gold, Silver Stealth”… and the link is here.

Interviewed this week by Eric King of King World News, mining entrepreneur Rob McEwen acknowledges the likelihood that the U.S. government manipulates the gold market. “The government,” McEwen says, “is involved in manipulating many asset prices in the marketplace, and it’s their function and mandate to do so. I wouldn’t put it past them to have checked the gold price and other commodity prices. They have large strategic supplies.” The interview is linked here.

Jeff Christian of CPM Group continues to step in crappy paper as he tries to explain how the gold and silver markets really are just fine… as long as gold and silver buyers don’t actually take delivery of their metal. ZeroHedge.com has just analyzed Christian’s latest presentation, an interview on Jim Puplava’s Financial Sense News Hour, and you can read the Z.H. analysis, headlined “Jeffrey Christian Has a Second Chance to Disprove the Gold Ponzi Scheme, Fails,” here. [If Christian is the best the central banks and bullion banks can muster as a defense of the gold and silver price suppression schemes as those schemes begin to draw major media scrutiny, the market rigging may be nearing its end.] This article is definitely worth the read.

Not that I want to beat this particular dog to death, but here’s another take on whistleblower Andrew Maguire. This is an article by Mark Mitchell over at deepcapture.com. The headline reads “Manipulating Gold and Silver: A Criminal Naked Short Position that Could Wreck the Economy” It will take a little more than 5 minutes to run through this piece… and the link is here.
Casey Research’s own Jeff Clark, Senior Editor of Casey’s Gold & Resource Report has issued an article on silver bearing the headline “Why Are Silver Sales Soaring”. The link to this short article is here.

Peter Brimelow over at marketwatch.com had a gold-related story in his commentary yesterday. The headline reads “Winning week for gold leaves bugs hopeful, wary: After highs, gold’s Wall of Worry is close, and steep”. The link is here.

And lastly… finally… GoldMoney founder James Turk, editor of the Free Gold Market Report and consultant to GATA, writes that conditions are ripe for a short squeeze in the gold market. He adds that he expects gold to reach $8,000 per ounce by 2015. Turk’s commentary is headlined “Another Short Squeeze in the Precious Metals” and you can find it linked here. Needless to say, it’s very much worth the read.

It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong. – Thomas Sowell

Well, I certainly wasn’t happy with Monday’s turn of events. As you know, dear reader, the open interest has been skyrocketing over the last four business days… and if you tack that deterioration onto last Friday’s Commitment of Traders report… we’ll, it doesn’t look very pretty.

However, there’s still more room for upside price appreciation… if the bullion banks allow it… so we’ll just have to wait it out. But maybe it really will be different this time… if the short squeeze in gold that James Turk speaks of… along with Ted Butler’s short squeeze in silver… all pan out.

Both gold and silver were under a little pressure in Far East trading earlier this morning… and that has continued right into the London open. Gold volume is just under 19,000 contracts… and silver volume is around 2,700 contracts when you take out the roll-overs from May into the July contract.

The CME has posted volume numbers for Monday. Gold’s volume was reported as 134,881 contracts… and silver’s o.i.. was a largish 40,691 contracts. But a hair over 20% of that number was roll-overs from the May contract into future months… mostly July.

Tuesday should be an interesting day in the gold and silver pits during Comex trading.

See you tomorrow.