Record silver backwardation spells danger for US dollar – James Turk

The silver price made many valiant attempts to rally yesterday…but just couldn’t make it far above the $37.80 spot mark…except minutes after 10:00 a.m. in New York where it touched $38.00 spot for an instant before retreating into the close.

The dollar hit its low of the day around 75.68 just minutes after 10:00 a.m. in London trading…and then spent the rest of Thursday climbing back to close a hair above 76 cents…which was basically flat on the day. A cursory glance at the both the dollar chart and the gold chart indicates that there was little, if any, co-relation between the two yesterday.

The gold stocks were up about a percent for most of the day…and, like the rest of the equity markets, got sold off a hair during the last half hour of trading. The HUI finished up 0.85%. And, with some notable exceptions, the silver stocks did much better than their golden cousins.

The CME’s Delivery Report showed that 422 gold, along with 9 silver contracts, were posted for delivery on Monday. JPMorgan was the big issuer with 329 contracts…and also the biggest stopper with 240 contracts, although the Bank of Nova Scotia wasn’t too far behind at 168 contracts. The link to the action, which is worth a glance, is here.

The GLD ETF showed a smallish decline of 19,493 ounces…and there was no report from SLV once again.

The U.S. Mint had no sales report yesterday.

The Comex-approved depositories received 1,100,822 troy ounces of silver on Wednesday…and only shipped out 43,621 ounces, for a net gain of 1,057,201 ounces. I would suspect that this silver was brought in by the shorts who had to deliver to the longs before the March delivery month came to an end. The link to the action is here.

I didn’t get very much response to my comments on what I had to say about the Perth Mint the last couple of days. However one reader took great umbrage with what I had to say…and told me so in no uncertain terms. Attached to her e-mail was an e-mail from John Durham, who is the manger of Depository Services at the Perth Mint…and I’m only too happy to post his e-mail in its entirety.

Dear Ms. xxxx…”Some US commentators have made claims that The Perth Mint doesnot have the silver that it is holding on behalf of its Perth Mint Depository clients. This allegation is entirely unfounded. The guidelines approved by the Board of the Perth Mint do not permit the Mint to run short metal positions, as all metal sales to clients are matched ounce-for-ounce with purchases made from counterparties. [Emphais mine – Ed]

At no time have the Perth Mint’s silver liabilities to Depository clients exceeded its silver assets. The Perth Mint is audited annually by the Auditor-General of Western Australia as well as its internal auditors, PriceWaterhouse Coopers. Both sets of auditors have regularly reviewed this matter in the past and neither has found any reason for concern.

A number of articles regarding this situation and offering clarification can be found on The Perth Mint’s blog. The link to the blog is here.

Please be aware that we do not sell ‘paper silver’. The commentators that make such claims do not have an understanding of our business nor an understanding of the products we offer.

Your unallocated metal can be fabricated and delivered to you in Sydney. However, please be aware that this cannot be achieved overnight. Our standard fabrication time is 10 working days – this is a working Mint with production schedules for many products. The Mint is not a courier and employs the services of third party freight companies such as Brinks. These companies maintain their own terms & conditions and some, for security purposes, will not deliver to your home. Some will only deliver to an office and some will allow collection from their depot. Should you wish to fabricate and take delivery of your metal please contact this office and we will be happy to arrange a quote for you which will detail cost and the services available.

Please do not hesitate to contact me should you have any further queries.

Regards, John Durham, Depository Services, Perth Mint

I will be communicating with John early next week…but based on what he said, it’s possible that what I said in my column over the last few days was not entirely factual. But I do have some questions…and I will have an update for you after I’ve spoken with him.

Here’s a chart that Australian reader Wesley Legrand sent me late last night. It shows the gold price bouncing off the 150-day moving average on a regular basis ever since the debacle in 2008. These lows are reached when the bullion banks have flushed out every technical long that they can force to sell…and covered as many of their own short positions as they can. In a way, this chart has basically been ‘painted’ by JPMorgan et al.