We Have a New Gold Standard: Marc Faber

It was the same for silver.  There’s nothing to talk about in this chart.

The dollar has been an interesting case study over the last couple of days.  A rally started about 2:00 a.m. Eastern time on Wednesday morning… and, in fits and starts, added about 80 basis points to its price over the next 36 hours… yet the precious metals prices barely reacted at all.  In times past, a dollar rally of this magnitude would have resulted in a rather significant sell-off in both gold and silver.  It certainly didn’t happen this time… and as I mentioned in my column yesterday… we’ve see a lot more of that kind of action recently, where the gold price is not necessarily tied to the dollar action.  As other commentators have pointed out… the precious metals are now back in the roll of being currencies in their own right.  Central banks and governments are probably not amused.

The gold stocks, which started in positive territory at the market open, began to decline the second that the gold price began a $7 decline that started at precisely 10:00 a.m. in New York… and ended around 11:45 a.m… the second that the gold price hit bottom.  Dear reader, this does not pass the smell test as far as I’m concerned.  From there…and even though the gold price recovered nicely after that… the HUI could not get back into positive territory for the rest of the trading day… and finished down 0.66%.

Open interest changes for Wednesday’s price action were pretty unspectacular in gold.  Gold o.i. rose an insignificant 168 contracts on volume of 156,982 contracts.  On the other hand, silver’s open interest fell a reasonably large 1,103 contracts… which is comforting, considering its big increase on Tuesday.  Since the cut-off for today’s Commitment of Traders report was at the close of trading on Tuesday… none of the open interest numbers shown above will be in it.  Today’s COT will be posted at 3:30 p.m. on the button… and the link [for those interested] is here.

The CME Delivery Report yesterday shows that 76 gold and 79 silver contracts are up for delivery on Tuesday.  The link to all the issuers and stoppers is here.  Once again there were no reported changes from GLD, SLV, or the U.S. Mint.  The Comex-approved warehouses showed that another 293,123 ounces of silver were taken into inventory… all of it at Brink’s, Inc.  Here’s the link to that action.

My first story today is a graph… along with a couple of lines of text.  If you want absolute proof that the insanity of 2007 is back in spades, you need to look no further than the market value of the high yield FINRA-BLP Active U.S. Corporate Bond Index relative to its investment grade counterpart.  It has now exceeded the level seen in May 2007 at the peak of the credit bubble.

Today’s first gold-related story is found posted over at Bloomberg… and it’s courtesy of Russian reader Alex Lvov.  The headline is quite dramatic… and it reads “Central Bank Gold Holdings Expand at Fastest Pace Since 1964”.  It’s not a long read… and I recommend that you run through it.  The link is here.

I’ve had several stories about Lehman Brothers sent to me during this past week, but haven’t had the space until now.  This particular version was sent to me by reader Brad Robertson… and it’s a video of the Dylan Ratigan Show from msnbc.com a week ago today… and it’s posted over at brasschecktv.com. Not even the most wild-eyed “conspiracy theorist” could have imagined the rampant criminality that characterizes Wall Street and the Federal Reserve today.  This 11-minute clip is headlined “Why aren’t these guys in handcuffs yet?“… and is definitely worth your time.  The link is here.

Another day, another story about Greece.  Germany has told Greece to seek funding from the IMF and France wants to rescue it.  One spokesman said “Don’t underestimate the game of chicken that’s being played right now between Greece, the EU and the IMF.”  No matter which way it goes… Greece and the European Union are going to split the sheets sooner or later.  The headline reads “Papandreou Racing to Cut Greek Interest Rates with Aid Pledge.”  I thank reader Roy Stephens for sending me the story… and the link is here.

Here’s another graph that I’m sure you’ll find interesting.  It’s another bubble that most people don’t think about… one of the biggest bubbles in human history… population grown.  The slight dip around 1400 A.D. was due to the Bubonic plague… more commonly known as the Black Death.  I thank Australian reader Wesley Legrand for bringing it to my attention… and now to yours.

Here’s another excellent story provided by Alex Lvov.  It’s posted over at cnbc.com… and is headlined “Marc Faber: We Have a New Gold Standard“… and it’s the headline story for my column today.  It’s a bit of a read… but it’s well worth it in my humble opinion… and the link is here.

As you are probably already aware, GATA has been formally asked to present a brief to the CFTC’s precious metals hearing in Washington next week.  The formal statement that our chairman will deliver is imbedded in this GATA release entitled “GATA Chairman Murphy’s planned testimony to the CFTC“.  It’s a 5-minute must read document… and the link to the GATA dispatch is here.

As the headline in my column stated yesterday, the CFTC advised silver analyst Ted Butler that they were not going to ask him to provide testimony in Washington next week.  In commentary published yesterday, Butler discloses why he won’t be attending next week’s hearing of the U.S. Commodity Futures Trading Commission on position limits in the precious metals futures and options markets… but will be providing information to commission staff members. He remains optimistic about the commission’s work. Ted’s commentary is headlined “It’s the Message, Not the Messenger“.  The commentary is posted over at silverseek.com… and the link is here.

Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar. [This] trend shall continue months, if not years, into the future. – Dennis Gartman, The Gartman Letter, 18 March 2010

As I said towards the beginning of this column… and echoed by Marc Faber in the story above… and again by Dennis Gartman in the quote, gold has come into it’s own again and is now a currency for more and more people in the know.  That’s why the gold price is not as affected by moves in the U.S. dollar like it used to be… and if it is, the recovery is swift.  This has also affected silver… as it is money as well… no matter what anyone may say to the contrary.  All precious metals, including platinum and palladium, are becoming remonetized.

That’s why this bull market in precious metals is only in its infancy, dear reader.  And when it really gets wound up, it will be the only game in town for years to come.  In order to maximize your returns on your investment dollar, I urge you to seriously consider investing the $39 for a one-year subscription to Casey’s Gold & Resource Report.  Our usual 90-day money back guarantee applies if you’re not completely satisfied.  Please click on the link for further details.

I note in Far East and early London trading earlier this Friday, that there’s not much happening… and both metals are holding their own despite a slowly rising dollar.  I see [at 4:21 a.m. Eastern time] that gold has traded less than 7,500 contracts in April… minus the spreads.  This is the lowest volume number for this time of day that I can remember in a very long time!  May silver, however, has traded a respectable 2,404 contracts.  It’s even quieter now than it was this time yesterday.

The preliminary volume figures have been posted at the CME’s website for Thursday’s trading activity in both metals.  In gold, the volume number is a smallish 144,509 contracts… and in silver it was reported as 27,071 contracts.

Today is Friday… plus we have options expiry next week… so I’m on the lookout for an ‘in your ear’ move from the New York bullion banks over the next few days.  But, will it happen this time?  The reason I’m curious, is because I’m keenly interested in what the price action will be on the CFTC’s hearing date on March 25th… and the days leading up to it.  What will the bullion banks do on that day… and between now and then?  Will they behave… or send out an ‘up yours’ signal to CFTC chairman Gary Gensler?  We’ll find out soon enough.

I hope you have a great weekend… and I’ll see you here tomorrow.