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.
Yesterday in Gold and Silver
It was no surprise to me to see gold blast off once trading began in the Far East on Monday morning. This is what usually happens anyway, but I’m sure events in Japan only exacerbated the situation at the open yesterday morning…plus the fact that the U.S. dollar also gapped down at the open.
Within an hour, gold was up over fifteen bucks, but then a not-for-profit seller showed up…and by lunchtime in Hong Kong, the gold price had been beaten back to unchanged. Volume over that time period was extremely heavy.
From that point…and in fits and starts…the gold price climbed higher until it’s New York high of the day [$1,431.80 spot], which was the London p.m. gold fix at 3:00 p.m. GMT…10:00 a.m. in New York. Then it got sold off, but recovered a bit going into the close of electronic trading.
The silver price spike during the first hour of trading after the Far East open on Monday morning, was even more spectacular…blasting through $36.40 before being cut off at the knees during the ensuing four hours. Volume was also very heavy during that period…as it appeared that the bullion banks threw everything they had [except the kitchen sink] at the price…just like in gold.
Silver’s high price in New York [$36.31 spot] came around 9:40 a.m. Eastern…hitting its New York low of the day at the close of London trading at 11:00 a.m. Eastern time, right on the button. The low was $35.67 spot.
A cursory glance at both charts above shows that every time either metal showed any signs of life during the Monday trading session, it got sold off before the price could gather any kind of upward momentum. Considering the current state of world events, I’m not the slightest bit surprised that the bullion banks were riding shotgun on the precious metals yesterday.
Here’s the 6-month gold chart. Gold has been held below $1,430 spot on a closing basis ever since it tried to break through that barrier ten business days ago. Is someone trying to paint a top here? Don’t know.
The silver chart looks similar, except for the fact that its price has not been allowed to close above $36.00 spot. I don’t know what to make of it, but it could be nothing.
As I mentioned at the top of this column, the dollar gapped down a bit over 30 basis points at the open in the Far East yesterday morning. It gained all that loss back in the next three hours…and then proceeded to lose that and more by the low price tick of the day which came around 4:00 p.m. Eastern time.
The gold stocks pretty much mirrored the gold price action yesterday, but despite the fact that gold finished in the plus column, the HUI finished down 0.29% on the day. I’m sure that the general weakness in the equity markets had something to do with that as well.
Although the silver price pretty much finished the Monday trading day unchanged, most of the silver stocks did poorly.
Yesterday’s CME Delivery Report showed that 73 gold along with 188 silver contracts were posted for delivery tomorrow. In gold, the only issuer was Prudential, with all 73 contracts…and the biggest stopper was the Bank of Nova Scotia. In silver, the biggest issuers were JPMorgan and UBS…with the biggest stoppers being Barclays and the Bank of Nova Scotia. This activity is worth a look…and the link is here.
The GLD ETF reported a smallish decline of 58,520 ounces…and there was no reported change over at the SLV ETF.
For the week just past, Switzerland’s Zürcher Kantonalbank reported that their gold ETF took in 31,074 ounces…and their silver ETF added 197,341 ounces. As always, I thank reader Carl Loeb for those numbers.
The U.S. Mint had no report on Monday.
Friday was a busy day over at the Comex-approved depositories, as they didn’t receive a single ounce of silver, but shipped 700,718 troy ounces of the stuff. The link to that action is here.
Before heading into my stories today, here’s what silver analyst Ted Butler had to say about the Comex trading action during last Friday’s trading day in silver…”Quite frankly, I don’t think I have witnessed a more blatant manipulative takedown as what occurred on the Comex on Thursday evening and into Friday morning [Eastern time]. The vicious sell-off for no economic justification was simply outrageous. So outrageous, that I don’t know how it could not be judged as manipulative by any level of regulatory standard. I know many of you observed the same thing…and felt the same way. I want to be very careful about not overstating what I observed, but it was clearly a deliberate case of disruptive trading when liquidity conditions were thin. This disruptive trading was also clearly intended to induce as much speculative long liquidation as possible.”
I’m sure Ted will have much the same thing to say to me on the phone this morning, when we discuss what went on in the forty-five minute period between 11:30 p.m. and 12:15 a.m. Eastern time last night and this morning…which is 12:30 p.m. to 1:15 p.m. Hong Kong time in their Tuesday afternoon. I would bet serious dollars that JPMorgan was at the center of that bid-pulling scenario…just as they were last Friday.
Of course they hit gold as well…but it was the speculative silver longs that the bullion banks were really after…and they got them pretty good. There was big volume in both metals over that time period.
| The Wrap
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| If we do sell off in silver, it will be for one reason only…the commercial crooks on the Comex rigged the price lower. Considering the damage that has accrued to the commercials for being on the wrong side of the market for so long, the makes them weaker, not stronger. It increases the odds they will break ranks and panic to the upside. So we have to be prepared for volatility, continued commercial dirty tricks…and the deplorable lack of regulatory relief.– silver analyst Ted Butler, 13 March 2011
Gold volume yesterday, net of all roll-overs was around 90,000 contracts…which is very light. Most of the significant volumes occurring during Sunday night trading in New York…which was early Monday morning in the Far East. That’s when the bullion banks showed up to squash the rallies in both metals…as you can tell by looking at the gold and silver charts at the top of this column. The preliminary open interest number for gold is a very small 2,636 contracts…which I expect to see reduced considerably when the final number is posted later this morning. Silver volume was pretty decent…just under 50,000 contracts net…but nothing like the volume that accompanied the smash-down on Friday. With the bullion banks pulling their bids in the thinly-traded Far East market earlier today, volume was very heavy during that time period as well. The preliminary open interest number for Monday’s trading day was a rather small amount, so I’m hoping that the final number posted today will show a net decline in silver’s o.i. Friday’s final open interest number in gold showed a small decline of 665 contract…but silver’s open interest soared by a discouraging 4,300 contracts. Ted doesn’t know what to make of that…and we won’t get a clear picture of what went on until Friday’s Commitment of Traders report. Also in Friday’s report will be the action that we witnessed earlier this morning…and hopefully everything that happens during Comex trading today…as Tuesday [today] is the cut-off for Friday’s COT report. There are still 1,309 silver contract open in March, but that number will decline by the 188 contracts that are to be delivered tomorrow. I mentioned that number in the CME’s Daily Delivery Report elsewhere in this column. As far as the silver backwardation issue is concerned. The spreads for most of the 2011 delivery months widened out to about two cents…the highest in many weeks. Silver doesn’t slip into full backwardation until the March 2012 delivery month…but the backwardation from March 2011 to December 2015 still sits at $1.05. As of 5:10 a.m. Eastern time, both metals are now well off their Far East lows, but are getting smacked again now that London has been open for just over an hour. It remains to be seen what the bullion banks have in store for us during Comex trading hours in New York this morning…but it isn’t looking good at the moment. Without doubt it will have been another interesting trading day to report on when I write my column for tomorrow…and I’ll see you then. |
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Initial trading day on Monday the number of open contracts is a very small amount, so I hope the final number will be displayed in silver today posted a net decline.