Gold Spikes Higher on Jobs Report

Silver’s price action was very similar to gold’s… and every serious breakout attempt during the New York trading session ran into a not-for-profit seller.  Volume was moderate.

The dollar did a face plant at the release of the jobs numbers… and fell at least 75 basis points in less than two hours… hitting the 80.1 mark on the U.S. dollar index, before recouping some of its losses… but was still down 0.54% on the day.  Here’s the 5-day dollar chart for the week that was.  Lot’s of waterfall declines here.  The 30-day chart is even uglier… as the world’s reserve currency is down 3.5 cents during that time period.

Despite what the general equity markets were doing, the precious metals shares were up about ten points in the first hour of trading… but got sold off almost seven of those points in a 30 minutes period between 10:35 a.m. and shortly after 11:05 a.m… along with the rest of the equity markets.  I found it suspicious that the gold shares got sold off with general equity markets in the morning… but did not participate in any way in the end-of-the-day rally. The HUI finished up 1.04%.  Here’s the 5-day HUI chart to show the week that was.

The CME’s Daily Delivery report yesterday showed that 173 gold and zero silver contracts were posted for delivery on Tuesday.  The Bank of Nova Scotia was the big issuer… and HSBC USA was the big stopper.  The link to the action ishere.  Neither GLD nor SLV had a report yesterday.

But the U.S. Mint had something to say… and it was as follows:  They sold another 6,000 ounces of gold in the gold eagle program, plus another 3,000 24-K gold buffaloes, along with another 221,500 silver eagles.  Month to date… the mint has sold 20,000 ounces of gold in gold eagles…. 7,500 24-K gold buffaloes… and 497,000 silver eagles.

The Comex-approved depositories reported activity in all four of their warehouses on Wednesday… and by the end of the day, they had increased their silver inventory by 240,588 ounces.  The link to all that action is here.

Yesterday’s Commitment of Traders report was a disappointment in silver.  I was expecting an improvement… and it was anything but… as the bullion banks increased their net short position by a whopping 5,775 contracts.  Ted Butler pointed out that a very large chunk of that perceived deterioration was actually the ‘raptors’ in the Commercial category [which is any trader that is not one of the ‘8 or less’ bullion banks] selling long positions for a profit.  The act of doing that automatically increases the ‘net’ short position… because the long is extinguished in the Commercial category while the corresponding short position is closed out in the Non-Commercial category… as the tech funds in that category are starting to cover shorts and go long.  The act of doing that is what has been driving the price higher.

As of Tuesday’s cut-off for yesterday’s COT report… the Commercial net short position in silver sat at 262.7 million ounces.  The ‘8 or less’ bullion banks that ‘do the dirty’ inside this category were short 359.3 million ounces… and hold 71% of the entire silver short position in the Commercial category.  Guess who controls the price?   Preposterous, isn’t it?

In gold, the bullion banks improved their net short position by 5,526 contracts… 550,260 ounces.  As of the Tuesday cut-off, the total Commercial net short position in gold sat at 22.2 million ounces.  The ‘8 or less’ bullion banks are short 25.6 million ounces.  Which, in a nutshell, means that if these eight bullion banks weren’t there… the rest of the traders in the Commercial category are net long… so these bullion banks are the only thing standing in the way of much higher gold prices.  And that, dear reader, is exactly why the are there.  Ditto for silver… except in silver, the situation is beyond grotesque.

The Bank Participation Report was also released yesterday… and rather than have me explain it, I told Ted that I would leave the honours entirely up to him… as he’s the expert.  His commentary is always worthy of your undivided attention, dear reader… and I urge you to listen to what he has to say in his weekly interview with Eric King over at King World News.  The link is here.

Before leaving the COT report for another week.  Here’s the updated “Days of World Production to Cover” graph courtesy of Nick Laird at sharelynx.com.  Ted Butler is 100% of the reason that this graph sprang into existence… as Ted asked Nick to built it… and he did.  I’m just going to borrow it every Saturday from now on.

Today’s first story is a Bloomberg News piece that’s posted over at boston.com.  I stole this from Friday’s edition of the King Report.  The headline reads “Food stamp use hit record 40.8 million in May“.  The story is as short as it is ugly… and the link is here.

Here’s another ugly story.  This one was posted in yesterday’s edition of The New York Times… and was sent to me by reader Ken Metcalfe.  It’s a bit of a read, but if you’re planning on retiring with a pension of any kind… public or private… you can put this article in the must read category.  The headline states “Battle Looms Over Huge Costs of Public Pensions“… and the link is here.

Here’s another unhappy read… and this one involves JPMorgan.  This one’s also from The New York Times… and is courtesy of reader Roy Stephens.  This is an essay, not a story, so it’s pretty long.  But when columnist Gretchen Morgenson is the author, you can pretty much assume it’s well worth reading.  The headline states “Payback Time: Exotic Deals Put Denver Schools Deeper in Debt“… and the link is here.

Here’s a must read for you… also courtesy of Roy Stephens.  This is a Reuterspiece that’s been making the rounds for the last 36 hours or so and, if true… wow!  It was also linked in yesterday’s King Report as well.  “Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth.”  The headline reads “An August Surprise from Obama?“… and the link is here.

Here’s a graph from reader ‘David’.  It’s been ‘borrowed’ fromcalculatedrisk.com… and dates back to June… but it’s still very relevant now.  It’s not the percentage decline which is shocking [and about to get worse]… but it’s the horizontal axis… “Number of Months After Peak Employment” that’s the killer.  As I’ve said before… I’ll be a very old man before this depression breaths its last.

If you remember from my Thursday column, dear reader… I ran a 3-page story about Pakistan that was posted over at the German website, spiegel.de.  Here’s another one… this also courtesy of reader Roy Stephens.  It’s a UPI story that was filed from Karachi yesterday.  The headline reads “Shoot-to-kill orders given in Karachi“.  The story says that witnesses describe the scene in Karachi as a battle ground.  I would suggest, dear reader, that you find the time to read this… and the link is here.

I have two gold-related stories today.  The first is a GATA release that Chris Powell has headlined “Central bank gold sales minimal as IMF sales continue“.  Powell’s preamble… and the story itself from Rhona O’Connell over at mineweb.com… are both worth your time.  The link is here.

The second gold-related item is an interview of World Gold Council CEO Aram Shishmanian that’s posted over at Britain’s The Economist… and I thank reader Al Conle for sharing it with us.  He tries hard not to be bullish on gold’s purpose, market volatility and the dynamics of demand in China and India… but he can’t help himself.  This is the first time that I’ve laid eyes on the guy, or heard him speak… and I must admit that I was very favourably impressed… as he’s a smart guy… and extremely well spoken.  I consider this 8-minute video amust watch/listen… and the link is here.  I found the page a little slow to load.

My last piece is your really big read of the day.  Matt Taibbi of Rolling Stonemagazine is at it again as he tees off on the now-passed financial reform bill.  The headline reads “Wall Street’s Big Win“.  I thank reader U.D. for sending it along… and the link is here.

Today’s ‘blast from the past’ goes back to the early years of World War II.  The Warsaw Concerto was written for the 1941 British film Dangerous Moonlight… and continues to be a very popular concert and recording piece to this day. The film-makers wanted something in the style of Sergi Rachmaninoff, but were unable to persuade Rachmaninoff himself to write a piece.  So the job fell to British composer Richard Addinsell… and he was more than up to the task.

And, fittingly enough, here is Polish pianist Patrik Jablonski and the Polish Radio Symphony Orchestra to do the honours.  The musicianship [and the recording] are first rate… as are the photos of Warsaw after the blitz.  The link is here.

So where do we go from this point, dear reader?  Well, if you took the time to listen to what Ted Butler had to say about it in his interview with Eric King earlier on in this column, you probably have a good idea as to what might happen… and why.  I certainly have nothing to add to that.

The bullion banks continue to be the cork in the bottle preventing the prices of silver and gold from blasting higher… and as I said earlier… that’s why they have all these short positions in the first place, to prevent exactly that from happening.  But I’m hoping that the end-game is in sight.  Not only for your sake, dear reader… but mine as well.

Enjoy what’s left of your weekend… and I’ll see you on Tuesday.