Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
| “But, as we found out again yesterday, the real silver price action occurred during the New York trading day.” |
Yesterday in Gold and Silver
The gold price didn’t really do a whole heck of a lot during Far East trading on Monday…and only developed a downward bias once the London a.m. gold fix was in at 10:30 a.m. local time…which is 5:30 a.m. Eastern. By the end of Comex trading, gold was down a whole seven bucks…then got sold off a few more in electronic trading. Volume was light.
The real fireworks were in the silver price…as it was off like the proverbial rocket shortly after trading began in the Far East. The price came close to breaking through the $42 level just after 2:00 p.m. Hong Kong time. But, that was its high of the day, as the selling pressure began…and by the time that Comex trading was concluded at 1:30 p.m. Eastern time in New York, silver was down about 30 cents from Friday’s close.
Then, at 2:00 p.m. Eastern time in electronic trading, the bullion banks pulled their bids…and in just over an hour, the silver price was down another $1.10. Then a bid reappeared…and silver popped back above the $40 spot mark with some authority.
In the run-up to the $42 price level in Far East trading, volume was extremely heavy. By 2:00 a.m. Eastern time, it was north of 13,000 contracts…which is unheard of for that time of day. It was obvious that the New York bullion banks were in this market buying/short covering on the Globex trading system…as normal volume in the Far East markets is considerably less than that.
Considering the price range that silver traded in, it should come as no surprise that overall silver volume was monstrous yesterday.
The dollar rose about twenty basis points from the open in the Far East, until the close in New York at 5:15 p.m. yesterday. It was obvious that the world’s reserve currency had nothing to do with the price shenanigans in the precious metals market yesterday.
You’d think that gold was down $50 by the way the shares responded to the small drop in the gold price…and the silver stocks got smoked. Gold was only down 0.80%…and silver was down 1.73%. A lot of nervous day-trading newbies out there. The HUI was down 2.66%.
The CME’s Daily Delivery Report was another yawner…as only 3 gold, along with 3 silver contracts, were posted for delivery tomorrow.
There were no reported changes in either GLD or SLV yesterday.
Over at Switzerland’s Zürcher Kantonalbank for the week just past, they reported an increase of 34,205 ounces in their gold ETF…and no change whatsoever in their silver ETF. As always, I thank Carl Loeb for these numbers.
The U.S. Mint had a sales report yesterday. They sold another 5,000 ounces of gold eagles…3,000 one-ounce 24K gold buffaloes…along with another 624,000 silver eagles. Month-to-date the mint has sold 44,000 ounces of gold eagles…6,000 one-ounce 24K gold buffaloes…and 1,374,000 silver eagles.
The Comex-approved depositories did not receive a single ounce of silver on Friday, but reported shipping out 715,828 ounces of the stuff. The link to the action is here.
Well, yesterday’s sell-off brought out the buyers in droves in Edmonton yesterday…as my coin guy had all the business he could handle right from the time he opened the doors yesterday morning. The buy-the-dips crowd was out in force. His main supplier of silver bars informed him that delivery times for new product had suddenly jumped from four weeks, to six weeks.
Here’s a paragraph from silver analyst Ted Butler’s weekly review that he sent out to subscribers on Saturday…” I know we are over-bought in silver and in a normal market the price should correct sharply. But this is as far from anormal market as you can get. This is a manipulated market where the manipulation is in the process of ending and in which the manipulators appear to be in trouble. That means the charts and previous price patterns may not matter. It is very easy to imagine some important shorts throwing in the towel in their weakened financial state. In fact, it may be what we are witnessing now.”
Here’s a neat graph that Washington state reader S.A. sent my way yesterday. The scales are tough to read…but it’s really not necessary. This is a silver price chart versus the shares of Berkshire Hathaway going back to 1997. I would suspect that silver’s graph would look pretty similar to just about every other stock out there as well.
Here’s another graph…this one courtesy of reader Scott Pluschau. It’s entitled “Exhibit 1: The Federal Budget“…and needs no further comment from me.
The Wrap
| From the price lows within the past decade, silver is now up more than ten-fold, while gold is up almost six-fold. Compare those returns to any asset class widely available to the average investor (stocks, bonds or real estate) over that time span. Precious metals investors, especially silver investors, have much to celebrate. I believe they will have much more to celebrate in the future.– silver analyst Ted Butler, 09 April 2011
As I mentioned in the opening paragraph of this column, net gold volume traded on Monday was light…just a bit over 100,000 contracts. The preliminary open interest number is not overly high…just 6,234 contracts, which should be reduced when the final o.i. numbers are posted later this a.m. Gold’s final open interest number on Friday was posted at 2,600 contracts…which was down considerably from the preliminary o.i. number of 9,012 contracts. I’m hoping that Monday’s o.i. number will show a similar percentage reduction. April’s outstanding open interest in gold fell a chunky 808 contracts on Friday…and Monday’s preliminary report shows that it’s down to 1,727 contracts. It’s obvious that those 808 contract holders opted to sell their positions rather than take delivery. I suspect that a large chunk of the remaining open interest will disappear in the same way. Silver’s volume, as I mentioned earlier, was enormous…around 96,000 contracts net of all roll-overs. The preliminary open interest number shows a chunky increase of 5,821 contracts, which I expect to see lowered when the final report comes out of the CME. Silver’s final open interest number for Friday fell all the way down to 276 contracts…which is far cry from the preliminary number of 3,210 that was posted in the CME’s preliminary report in the wee hours of Saturday morning. One can only hope that this will happen with yesterday’s preliminary open interest number as well. The backwardation in silver is disappearing rapidly. A premium exists all the way out to the January 2013 delivery month, before it slips into backwardation…and the total backwardation from April 2011 out to December 2015 is now down to a rather small thirty-six cents. In the Far East’s Tuesday trading session, the silver price dipped below $40 a few times…but began trending higher shortly after London opened…and is now sitting at $40.56 spot as of 4:55 a.m. Eastern. Gold is now back to unchanged, after being down all night long here in North America. Volume in both metals is pretty decent. The dollar seems to have hit a peak…and appears to be trending lower. But, as we found out again yesterday, the real silver price action occurred during the New York trading day. This time it was in the thinly-traded electronic session after the Comex close. We’ve seen JPMorgan et al pull this stunt a lot over the last six months. One wonders how hard the U.S.-led bullion banks will push the tech fund silver longs this time. Since there’s no one at the CME or CFTC to do anything to stop them, they can pretty much do what they want. But this rally in the silver price did not involve much technical fund buying, so there’s a limit to how low ‘da boyz’ can drive the price if there are not that many longs prepared to sell. A week ago I pointed out to all Casey Research subscribers that Miles Franklin had a special discount offer on 1-ounce Austrian Philharmonic silver bullion coins. This offer is still open…and if you wish to partake and ‘buy the dip’…and if you need more information…please click here. I await the Comex open with great interest. |
