New Report Trashes Precious Metal ETFs

Silver’s path was slightly different, as its price bounced off its low [around $17.85 spot] several times during late Hong Kong and early London trading.  Then, at 10:00 a.m. in London [5:00 a.m. in New York] silver began a slow-but-steady rise that didn’t top out until its high of the day [$18.12 spot] was set at 11:15 a.m. in New York… and then it traded sideways for the balance of the day.  The preliminary volume numbers were pretty high.

The dollar rally that had been so prevalent earlier in the week was a no-show yesterday.  From the beginning of Thursday trading in the Far East [6:00 p.m. Wednesday evening in New York]… and right up until 4:00 a.m. Eastern time, the dollar dropped about 35 basis point… and, by 8:00 a.m. Eastern, had gained about 45 basis points back… and then flat-lined at 82.6 for the rest of Thursday.  Nothing to see here, folks.

For a change, the precious metals shares gapped up at the open yesterday, as the general equity markets headed south… and except for a dip in mid-afternoon trading, the HUI finished close to its high of the day… up 2.11%… which almost recouped its loses from Wednesday.  Many of the non-HUI stocks, plus quite a large portion of the juniors, gained a lot more than that.  The 5-day HUI graph is below because, for whatever reason, most of the data on the 1-day HUI graph was M.I.A. when I went to post it.

Thursday’s CME Delivery report showed only 23 gold contracts were put up for delivery on Monday.  And, once again, it was all HSBC USA and the Bank of Nova Scotia.  The link to the ‘action’ is here… but it’s not worth the trip.

The GLD ETF reported receiving another 29,327 ounces of gold yesterday… and the SLV ETF had no report once again.  There was no sales report from the U.S. Mint… and the Comex-approved depositories showed that their silver inventories dropped a tiny 6,122 ounces on Wednesday.

My first order of business today is to set straight a story that appeared in my column yesterday.  It was headlined “Morgan Stanley: There’s A Massive Short Position In The Dollar Right Now“.  Here’s the link… and I told you to pay close attention to the graph.  Well, dear reader, I thought I’d post the COT graph for the dollar short position in my column today… just as icing on the cake for this Morgan Stanley piece.  So I e-mailed my good friend Nick Laird atsharelynx.com in the land ‘down under’… and this is the chart he sent me.

The chart shows that there’s no massive short position in the U.S. dollar in the Comex futures market… and it also shows that total open interest is heading back towards the zero point.  I’m not sure what this analyst at Morgan Stanley was looking at… but it wasn’t this graph.  I urge you to re-read the story at the link above and draw your own conclusions.

Today’s first real story is from reader Roy Stephens.  This is an Ambrose Evans-Pritchard offering that appeared in the late Wednesday evening edition of The Telegraph out of London.  Ireland’s borrowing costs have begun flashing warning signs again on fears the full damage from the country’s banking crisis has yet to surface.  The headline reads “Irish debt under fire on fresh bank jitters“.  It’s a bit of a read, but I feel that it’s worth your time… if you have it… and the link ishere.

The next story is certainly no surprise… at least not for me.  It’s a Reuters piece posted over at news.yahoo.com that bears the headline “Foreign firms helped by U.S. bailouts: panel“.  The U.S. tactic of pouring money into ailing financial firms during the 2007-09 crisis helped many foreign banks whose governments should have shared some of the burden, a report from a congressional watchdog agency said on Thursday.  It cited insurer American International Group, Inc as an example, noting that while banks in France and Germany were big beneficiaries of a U.S.-initiated rescue of AIG, “the U.S. government bore the entire $70 billion risk of the AIG capital injection program.”  I thank reader Scott Pluschau for sending the story along… and the link is here.

Matt Taibbi of Rolling Stone magazine rose to fame with his huge essay about Goldman Sachs earlier this year, calling it “a great vampire squid wrapped around the face of humanity…sticking its blood-funnel into anything that smelled like money.”  That story woke a lot of people up.  Here he is again with a much shorter piece about G.S.  The title of this one reads “Goldman: New Reform Law Can Kiss Our Ass“.  Needless to say, it contains his usual ‘pithy prose’… so be ready for it.  I thank reader U.D. for bringing it to my attention… and the link is here.

My first gold-related offering was one that showed up as a GATA release yesterday.  It’s a story that was posted over at news.yahoo.com yesterday and bears the headline “Money fair showcases $100,000 bills, rare coins“.  It’s the World’s Fair of Money, which has brought about 1,000 coin dealers and hundreds of collectors to Boston, seeking to tap into the surprising resilience of the coin industry.  It’s an interesting read… and the link is here.

This next item was sent to me by several readers, but it ended up as a GATA release yesterday, so I’m using that.  It’s a report from Hinde Capital in London warning against investing in the gold exchange-traded fund GLD and the silver exchange-traded fund SLV.  The report is titled “Precious Metal ETFs Alchemy: GLD — the New CDO [Collateralized Debt Obligation] in Disguise?”  The report also notes the likely conflict of interest of the precious metal ETF custodians, HSBC and JPMorganChase, which are also the big Comex shorts in the gold and silver market.  As you know, dear reader, I’ve never been a fan of either one of these gold and silver investment vehicles… as there are others that I know for sure actually have the metals backing them.  The link to the report is imbedded in this GATA release that’s headlined “Gold, silver ETFs are price-suppression schemes, Hinde Capital report finds“… and contains a longish preamble by Chris Powell… and both are a must read in my opinion.  The link is here.

Also on the same subject is this interview that Eric King of King World News had with Hinde Capital CEO Ben Davies yesterday.  The topic of the interview is, of course, this report that was released yesterday.  It’s a must listen if you don’t want to read the whole report… which runs about fifty pages or so.  The link to the interview is here.

Maybe we have so long ridiculed authority in the family and discipline in education and decency in conduct and law in the state, that the freedom we fought so hard for has brought us close to chaos. And it could be that our leaders no longer understand the relationship between themselves and the people they lead. – Vince Lombardi

Gold punched through its 50-day moving average with a vengeance yesterday… and then… nothing!  Ted Butler couldn’t figure out what happened, as the tech funds would not normally buy until the price was already through the 50-day moving average.  It could have been short covering.  Ted also suggested that it was the bullion banks themselves that drove the price over the 50-day moving average in order to suck the brain dead technical funds into going back on the long side.  One thing is for sure, though… volume was monstrous… and the final open interest numbers [when they’re posted later this morning] probably won’t tell us much… so we’ll have to wait until next Friday’s Commitment of Traders report to know for sure.

While on the subject of the COT… the new report [for positions held at the close of trading on Tuesday] will be issued at 3:30 p.m. Eastern time… sharp.  At the appropriate time you can click here and see the changes in open interest by the bullion banks… for better or for worse.

Well, we’re almost halfway through August… and the ‘summer doldrums’ in the precious metals market.  Except for the take-down in both metals going into options expiry at the end of July, the summer season has been anything but quiet.

Both metals didn’t do much in Far East trading last night… but both are up slightly at the London a.m. gold fix at 5:30 a.m. Eastern time.  Volume is light.

It’s been an interesting week in the gold and silver markets… and it will be educational to watch what the bullion banks have in store for us today.

Enjoy your weekend… and I’ll see you here tomorrow.