China Fires Another Warning Shot

Silver ran up about fifteen cents in early Wednesday morning trading in the Far East.  From there it flat-lined into the New York open… and hit its high of the day [$18.73 spot] at the London p.m. gold fix.  From that point… well… we’ve seen it all before, dear reader.  By the end of Comex trading silver JPMorgan et al had silver back below $17.30 spot… and it closed there.  It’s obvious that the U.S. bullion banks don’t want any excitement in the silver market at the moment.

Here’s a chart that I haven’t posted in a few months.  Nick Laird over atsharelynx.com was kind enough to make up this chart… and it’s always worth looking at.  This chart is titled “Intraday Average Gold Price Movements“.  This was obtained from four years of data… from March 2006 through March 2010… which is approximately 1,000 trading days.  The price drops at the London fixes [especially the p.m. fix] stand out in stark contrast to the rest of the graph.  They don’t call them ‘price fixes’ for nothing!

Nothing much happened with the world’s reserve currency until 8:00 a.m. Eastern time… and then, right at the London p.m. gold fix, the dollar rose almost 50 basis points in less than an hour.  Coincidence, you ask?  Not likely.

Despite the ‘volatility’ of the gold price yesterday… the shares gapped up… and stayed up.  There was virtually no co-relation between the gold price and the shares at all.  It beats me as to why that was the case yesterday… but not other days.  The HUI was up 2.61% at the close.

Wednesday’s CME Delivery Report showed that 493 gold and 4 silver contracts were posted for delivery tomorrow.  The big issuer was the Bank of Nova Scotia and the big stopper was HSBC USA.  These bullion banks are two of the ‘4 or less’ traders Ted and I speak of in the weekly Commitment of Traders report.  The link to the action is here.

Both GLD and SLV had something to say for themselves yesterday… but in both cases it wasn’t a lot.  The GLD ETF declined a smallish 14,314 ounces… and SLV was down 122,455 ounces.

The U.S. Mint had a report as well on Wednesday.  The sales amounts were so small, I don’t know why they bothered.  They reported selling another 2,500 ounces of gold in the gold eagle program… and 500 24-K gold buffaloes.  Nothing was added to silver eagles sales.  Month-to-date sales aren’t worth mentioning yet.

The report from the Comex-approved depositories on Wednesday was quite something.  In addition to the 832,361 ounces of silver that were withdrawn from these depositories on Tuesday… another 449,717 troy ounces of silver was ‘adjusted’ right out of existence!  Normally, the “Adjustment” category shows a transfer from Eligible to Registered… or vice versa.  Not this time.  Maybe it will turn up in today’s report.  The link to Tuesday’s warehouse activity is here… and it’s definitely worth your time.

Here’s my second chart of the day.  It arrived in my in-box late last night… and it is, once again, from Nick Laird over at sharelynx.com.  Here’s theverbatim contents of his e-mail… “Hi Ed… Here’s one that you ran a while ago. It’s my PM Funds Index which is a good proxy for the favoured gold stocks.  As you can see, after a month of consolidation, it’s ready to test resistance again.  Could we see a breakout?  Cheers, Nick”.  From your lips to God’s ears, Nick.  But in all seriousness, dear reader, the COT report shows that we are set up for a big upside breakout… especially in silver… so I won’t be surprised when it comes, even though we made trade sideways for a while as well.

Here’s another chart that Nick sent me yesterday.  This one arrived in my in-box just moments before I filed my Wednesday commentary around 3:30 a.m. Eastern… and I was just too tired to wordsmith the preamble and do it any justice at that hour.  So here it is today.  This is another chart that you’ve seen before… and you’ll see it ever Saturday from now on.  Apparently Nick has had this graph hidden away for months… and I only found out about yesterday morning.

If I had to pick just one chart to show how grotesque the bullion banks’ short positions in silver and gold are… this is it.  This would be “Exhibit A” at JPMorgan’s trial for price fixing.  It’s prima facie evidence.  It shows, in days of world production, the number of days that each Comex-traded commodity is held short by the ‘4 or less’ or ‘8 or less’ traders.  In the case of gold and silver, it’s exclusively held by the bullion banks… with JPMorgan as the ringleader.

I’d also be interested in knowing who the ‘4 or less’ and ‘8 or less’ traders are holding short positions in palladium and platinum as well.

If you have any questions or comments about the short positions in silver and gold, you should direct them [politely] to CFTC chairman Gary Gensler at[email protected].  Or you can try CFTC Commissioner Bart Chilton… as he may actually answer your e-mail… [email protected].  Don’t forget to include the above graph.

Sponsor Advertisement

Bayfield Mobilizes Second Drill Rig to its Rainy River Gold Project in NW Ontario Bayfield Ventures Corp. (TSX-V: BYV) has now mobilized a second drill rig for the commencement of a drill program on its 100% owned “B” Claim Block property situated immediately northeast of the Company’s Burns Block and east of Rainy River Resources’ (TSX.V: RR) 433 gold zone in north-western Ontario. Bayfield now has two rigs drilling on its Rainy River properties (one on the Burns and one on the “B” Block) to carry out the Company’s 20,000+ metres of drilling. The objective of this major drill program is to explore and expand the extension of gold mineralization that is being defined by Rainy River Resources on their ground adjacent to Bayfield’s properties. The drilling will focus on confirming gold continuity and grade at both shallow and deeper depths. In other news, Bayfield has now completed approximately 4800 metres of drilling on its Burns Block property since starting its major 20,000+ metre diamond drill program. The Company has finished 11 holes on the property so far, ranging in length from 270 metres to 730 metres, and will continue exploring the strike extension of Rainy River Resources’ ODM17 gold zone at depth. Bayfield is extremely pleased with the drilling thus far and assays are pending. Rainy River Resources’ March 2010 NI 43-101 shows an indicated resource of 2.37 million ounces of gold (averaged at 1.3 g/t) and inferred resources of 2.66 million ounces of gold (averaged at 1.2 g/t) totaling 5.03 million ounces of gold. Please visit our website to learn more about the company and request information.

Today’s first story is courtesy of reader Scott Pluschau.  It’s a Bloomberg piece from yesterday that bears the headline “U.S. Consumer Bankruptcies May Exceed 1.6 Million, Report Says“.  The 137,698 bankruptcy filings in July represents a 9 percent increase from a year earlier.  It’s only a few paragraphs long… and the link is here.

Here’s the first of several stories from reader ‘David’.  It’s an item posted over atbusinessinsider.com that bears the headline “The Unemployment Rate May Be Sliding, But Food Stamp Use Isn’t“.  There are only three short paragraphs of text… but the graph is well worth looking at… and the link is here.

David’s next contribution to today’s column is this piece posted over atzerohedge.com.  The long headline reads “ICI Reports 13th Consecutive Week of Massive Domestic Equity Outflows As Banks Start To Panic” … “July was a miserable month for trading,” one senior banker said. “If August and September don’t rebound sharply, banks will be forced to cut jobs.”  This commentary is very much worth your time… and the link is here.

Here’s a Reuters piece from yesterday that was provided by Australian reader Wesley Legrand.  The headline reads “Banks report $450 Trillion in Interest Rate Derivatives“.  And please note, dear reader, those are just the interest rate derivatives they’re talking about.  There are lots of other kinds… but the lion’s share of all the world’s derivatives are interest rate-related.  The ‘4 or less’ and ‘8 or less’ bullion banks that are massively short gold and silver are almost all accounted for in the list contained in this story.  Fortunately, it’s a short read… but it’s a must read… and the link is here.

Australian reader Wesley Legrand provided the next story as well.  This piece is about a month old… but certainly a sign of the times… as there was a similar story out of East St. Louis earlier this week.  I found the headline to be a bit shocking… “Oakland fires 80 police officers, lists crimes cops will no longer respond to“.  It’s posted over at rawstory.com… and the link is here.

The following item showed up as a GATA release yesterday.  In another shot across the bow for the U.S. dollar comes this Bloomberg headline from Beijing… “Treasuries Lack Safety, Liquidity for China, Yu Says“…  “I do not think U.S. Treasuries are safe in the medium-and long-run,” Yu, a member of the state-backed Chinese Academy of Social Sciences, wrote yesterday in an e-mailed response to questions. China is unable to sell the securities in a ‘big way’ and a ‘scary trajectory’ of budget deficits and a growing supply of U.S. dollars put their value at risk, he said.”  I don’t know what you think about that, dear reader, but it sure sounds ominous to me.  The link to the story is here.

My last two stories today are both gold related.  This first is reader David’s last contribution to today’s column… and it’s a Reuters piece posted over attheaureport.com. It’s a very positive article on gold consumption… and the headline reads “Middle East Gold Sales Rise“.  It’s not overly long… and I suggest you give it the time it deserves.  The link is here.

Today’s last story is one that’s posted over at mineweb.com.  It’s imbedded in a GATA release that was dispatched at midday yesterday.  The headline reads “Beware the Dragon’s Gold Teeth“.  I couldn’t agree more with author Lawrence Williams’ conclusions.  China and Russia are both perfectly aware of how vulnerable the U.S. banking system [read JPMorgan] is to a major spike in gold and silver prices… and all the gold stories that have come out of China in the last few days are more warnings to the U.S. to tread lightly… or suffer the consequences.  Chris Powell’s preamble… along with mineweb.com story itself… are must reads… and the link to both is here.

But, if the U.S. does attack Iran, the youth of that country… which must hate both the economic situation and the social repressions there… will “patriotically” line up behind their leaders. The U.S. fleet in the Gulf will serve mostly as a dive site for people in the 22nd century. And the War against Islam could go into hyperdrive. – Doug Casey, The Casey Report… August edition

While on the subject of Iran, reader Roy Stephens slid this story from last night’s edition of The Telegraph in London into my in-box in the wee hours of this morning.  The headline reads “Ahmadinejad ‘assassination attempt’ was a firework, Iran claims”  An apparent assassination attempt on Iranian president Mahmoud Ahmadinejad was nothing more than an excited fan setting off a firework, according to the country’s official news agency.  Anybody believe that?  The link to the story is here.

Well, JPMorgan et al made it perfectly clear to all those who were watching, that they aren’t going to let things fly to the upside until they’re darn good and ready.  The attack on silver after the London p.m. gold fix was particularly vicious.  Wednesday’s volume in gold was pretty decent… as was the volume in silver.

Not much happened in Far East and early London trading today.  Volume in both metals is pretty skimpy… and we’ll have to wait until the Comex opens before we see any sort of fireworks… either up or down.  But, having said that, both metals are trending slightly higher as of this writing… 4:59 a.m. Eastern time.

I assume that you took the time to read the Doug Casey quote below the cartoons… but if you didn’t, dear reader, I urge you to scroll up and read it.  This is Doug being Doug.  The quote came from the August edition of The Casey Report that was sent out to subscribers yesterday.  It was awesome.  There’s an in-depth look at what’s actually going on in Iraq… as Doug just came back from visiting the country… as he was checking out an oil prospect.  He also reports on Iran and Kurdistan.  I was enthralled… as you’ll never hear any of this sort of insider information in the main-stream U.S. media.

I urge you to check out The Casey Report… as it’s well worth your time.  And don’t forget that our 100% money-back guarantee is in place.  Click either link to find out more… or click here.

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