Central Fund Takes Another 7.8 Million Ounces of Silver Out of Circulation

Silver had a mind of its own yesterday.  Starting from the Far East open, silver spent the next 13 hours losing a whole ten cents.  This all ended at the London silver fix… which is at noon in London… 7:00 a.m. in New York.  From that point, silver gained 20 cents going into the New York open, and then promptly added another 40 cents to that gain in less than 15 minutes, before running into resistance just over the $19 level.  Then, from shortly after 8:30 a.m. Eastern time, silver spent almost seven hours gaining another 40 cents to its absolute high of the day… which was $19.42 spot.  Both silver and gold peaked together at 3:20 p.m. in New York trading.

The dollar, although up about 25 basis points on Tuesday, played no part in yesterday’s precious metals price action.  It may be too soon to write off all the paper currencies… but it sure looks like gold and silver are trading on their own merits.  This is only true up to a point of course, because if the prices of both these precious metals were allowed to trade freely, they would be trading for many orders of magnitudes higher than their current prices.

The shares were on fire yesterday… with some really substantial gains right across the board… especially in the juniors.  The HUI didn’t close on its high… but the precious metals shares certainly bucked the trend of the general equity markets during afternoon trading… and the HUI closed up a robust 6.0%.  But, despite the record gold price, the shares are still nowhere near their respective highs of late November last year.

Open interest in gold for Monday’s trading showed that it rose another 5,941 contracts… despite the fact that the gold price was actually down on the day.  Total trading volume was a chunky 210,064 contracts… but a huge chunk of that was roll-overs into future months.  Silver was up a dime on Monday… and open interest rose 1,237 contracts.  Volume was a decent 35,588 contracts, of which about 10% were roll-over or spread related.

The CME Delivery Report showed that 86 gold and 116 silver contracts were put up for delivery on Tuesday.  The link to the issuers and stoppers report is here.  There were no reported changes at either the GLD, SLV, or the U.S. Mint.  For whatever reason… and for the second day in a row… the Zürcher Kantonalbank in Switzerland has not updated last week’s gold and silver ETF numbers.  Maybe tomorrow.   The Comex-approved depositories showed that 466,291 ounces of silver were withdrawn on Monday.

The first story today pertains to the wildly successful offering by the Central Fund of Canada yesterday.  It was the biggest offering in the company’s history… and they raised US$376 million, which includes the underwriter’s rights.  This translates into about 7.8 million ounces of silver and around 151,000 ounces of gold.  I wonder how long it will take them to get all that silver?  It’s a bit over four days of world silver production… and as you know, dear reader, this kind of quantity is impossible to find in the open market.  So, without doubt, they will be standing at the refinery door waiting just like everyone else… including SLV.  The headline of the story reads “Central Fund Increases Equity Offering to U.S.$376 Million as Underwriters Exercise Their Rights to Purchase Additional Class A Shares“… and the link to the yahoo.com story is here.

The usual New York gold commentator stated in his column yesterday that… “The European Central Bank weekly statement of condition reports one captive Central Bank sold 1 million Euros worth of gold last week — 1,125 ounces at the current book value.  These €1 million sales have occurred a couple of times this year and are usually explained as coin transactions: however, this time the ECB made no such comment.”

Jim Rogers has a few things to say about the Greek bailout, fiat currencies in general… and gold in particular in this Bloomberg interview from Hong Kong.  It only runs a bit over three minutes… and it’s worth watching, as Jim doesn’t mince his words.  I thank Florida reader P.S. for sending it along… and the link is here.

I received a couple of worthwhile stories from reader Scott Pluschau in the last couple of days.  The first is about the price of beef in Venezuela.  It doesn’t pay to be a butcher there these days… and if you are, you’re chances of being arrested are rising rapidly.  This is a yahoo.com story posted from Caracas… and the headline reads “Butchers beware: Venezuela cracks down on prices“… and the link is here.

The second story from Scott is a Bloomberg offering.  More than a fifth of U.S. mortgage holders owed more than on their homes than they were worth in the first quarter, as repossessions climbed to a record, according to Zillow.com.  The headline reads “Mortgage Holders Owing More Than Homes Are Worth Rise to 23%“… and the link to the story is here.

Here’s a story that appeared in the Monday edition of The Wall Street Journal.  If you thought that taking silver out of the coinage was bad… the U.S. Mint is looking to debase U.S. coinage even further, as costs to mint coins continues to rise.  It’s a bit of a read, but it’s worth the effort… and I thank Washington state reader S.A. for sending it along.  The headline reads “Will Nickel-Free Nickels Make a Dime’s Worth of Difference“… and the link is here.

Here’s a story that I ‘borrowed’ from yesterday’s King Report.  It’s a short Reuters piece that bears the headline “Food-stamp tally nears 40 million, sets record.”  It’s certainly not a record to be proud of… and the link is here.

Here’s an interesting [and ominous] Bloomberg story that was sent along by reader Craig McCarty.   The Federal Deposit Insurance Corp. board approved a proposed rule that would require about 40 U.S. financial institutions to submit annual contingent resolution plans — “funeral plans” — that would demonstrate how to wind down the company in the event of its failure.  The story is only three short paragraphs… and bears the headline “FDIC Approves Proposal for Large Banks to Write ‘Funeral Plans’“… and the link is here.

The next item is from yesterday’s edition of The Wall Street Journal.  The headline pretty much says it all… “Senate Passes Amendment for One-Time Audit of Fed“.  Since this story normally requires a subscription… it’s posted in the clear in this GATA release… and the link is here.

Tyler Durden, the proprietor over at zerohedge.com, has a few things to say about the EU, the IMF and the ECB… and he’s pretty much in a position to know what’s happening on the inside.  The headline explains it clearly… “European Banks Now Feverishly Betting Against Euro, As Bailout Fails, Gold Surges“… “Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard which, with every ensuing bailout, does nothing but make the bonuses of French FX traders surge.”  It’s not a long read… and I thank reader U.D. for bringing it to my attention… and the link is here.

My last story today is about Greece.  This one was sent to me by reader Roy Stephens… and it’s an essay posted at the English language edition of the German website spiegel.de. It’s a longish piece in four parts that will take about 20 minutes to read.  It bears the headline “Herculean Task Ahead: Is It Already Too Late to Save Greece?“… and the link is here.

Gold took out its old high yesterday without a whimper.  It was a virtual non-event when it happened.  Here’s the 1-year gold chart… and as you can see, the RSI is now well into overbought territory.  The only time in the last two years when gold was this overbought was during the final rally into the old record high back in late November/early December of 2009.  Of course, it can stay overbought for quite a while… and this rally may still have some legs left considering what else is going on in the world right now.

Here’s silver’s graph… and it’s not anywhere near overbought… even after the big run-ups of the last 3 trading days.

Of course all these graphs mean nothing if the price manipulation of both silver and gold come to an end.  I’m sure that JPMorgan is feeling the heat with the Department of Justice breathing down their necks.  When this all blows up… overbought will have a whole new meaning.

Neither silver or gold did much in Far East trading… but they’re showing distinct signs of life now that London is open… and both metals are already above yesterday’s New York highs.  The dollar is down about 70 basis points in the last couple of hours… and that might have something to do with it.  But, as we all know, 80-90% of all trading activity occurs while the Comex is open in New York… so we’ll have to wait and see what happens there.

As of 5:34 a.m. Eastern time, gold has already traded a hefty 37,000 contracts net of roll-overs… and silver’s volume is way up there as well at a whopping 9,200 contracts.  These little rallies in London are not going unopposed.

The CME has reported the preliminary volume numbers for Tuesday.  They show that gold traded a hefty 241,000 contracts… a good chunk of which were roll-overs into future months.  Silver’s volume was equally impressive at 57,000 once all the roll-overs were removed.  I expect that gold’s open interest will be up another large amount when the numbers are reported later this morning… but silver is the big question mark.  Was part of yesterday’s action another short-covering rally?  I don’t know, but the o.i. numbers should tell us a lot.  But, whatever these numbers say, they will be in Friday’s Commitment of Traders report, as Tuesday was the cut-off for it.

I haven’t a clue as to what either silver or gold will do when New York opens.  But whatever happens, it should be interesting.

And lastly, dear reader, I should point out that the gains of yesterday were substantial.  My personal stock portfolio was up dramatically.  If you haven’t taken the plunge into precious metals, or if you have additional capital to invest, I urge you to seriously consider a subscription to either Casey’s Gold and Resource Report… or Casey’s flagship publication… the International Speculator.  These two monthly reports contain the best investment advice you can find anywhere.  Both silver and gold are going a lot higher as the year progresses.  As you know, I’m ‘all in’… how about you?

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