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
Gold traded in a ten dollar price range through all of Far East and the first half of the London trading day on Thursday. The absolute low price came at the London silver fix at 12:00 noon local time which is 7:00 a.m. in New York. After that, it was up, up and away for the rest of the trading day.
The chart looks more impressive than it really is, as gold was only up a percent and a bit and I’ll really get excited when I see gold up 3-4% in one day which I’m sure that the bullion banks won’t allow but hope springs eternal.
However, having said that, I should just be thankful, and I am. Volume was pretty decent, so this rally is not going unopposed.
The silver price wandered around with a general positive bias early Thursday morning and about 2:30 p.m. Hong Kong time, silver really caught a bid and by the London open was up about sixty cents. During the subsequent four hour period, silver proceeded to give back all those gains…plus a few pennies more and by 12:00 noon [the London silver fix] was down about a dime from the close in New York on Wednesday evening.
But that was the absolute low and the silver price rose from there and closed the New York trading day up $1.52 and on its absolute high of he day and a new 30-year high.
For the second time this week, there was co-relation between the dollar and the precious metal prices but it was a pretty thin fig leaf to hide behind yesterday.
From shortly after the open in the Far East and until 2:30 p.m. Hong Kong time the dollar fell well over 40 basis points. Then from that 2:30 Hong Kong low, the dollar rose 50 basis points and hit its zenith at precisely noon in London 7:00 a.m. in New York. Please note how both gold and silver reacted up to that point.
Then, from that 7:00 a.m. Eastern high, the dollar rolled over and gave back all of its gains from the previous four hours but this time the effect on the price was enormous.
The day netted out with a 30 basis point loss. There were two big rallies…and one big decline…all about equal in size…but the effects on the precious metals prices during the last decline was out of all proportion to what went on prior to that. Maybe it had something to do with the fact that most of the final decline occurred during the New York trading session, which Ted Butler says is the only market that really matters.
I was amazed to see that the gold shares reacted poorly to all this positive price action yesterday. Not even all the silver stocks joined the party but, on average, did much better than their golden counterparts. Two silver companies in particular were down big but that was for unrelated reasons and I’ll have the story on that further down. The HUI finished up a smallish 1.30% on the day.
Well, we finally had some delivery action [256 contracts worth] in gold. As I’d pointed out several times, there were still a lot of gold contracts open in the April delivery month. Now some of the shorts have delivered and surprise, surprise JPMorgan was the big issuer in its client account plus the big stopper in its house [proprietary] account. This is a perfect example of the house betting against its own clients. About eight months ago, JPMorgan said it was going to stop all trading in its proprietary [or house] trading account. I’ve seen no sign that they are doing this. The Bank of Nova Scotia was also a stopper of note.
There was no delivery action in silver…and yesterday’s delivery report is well worth checking out for the reasons I mentioned in the previous paragraph…and the link is here.
The GLD ETF showed no change yesterday…and the SLV ETF showed a smallish increase of 146,377 troy ounces.
The U.S. Mint had no sales report…and nothing of consequence happened at the Comex-approved depositories on Wednesday.
Before I post the stories for today, here’s a graph of the Gold/Silver Ratio. After yesterday’s big gain in silver, it’s a new low…and will get much lower before this bull market in the precious metals breathes its last.
| The Wrap |
| Gold’s volume yesterday was a bit over 150,000 contracts net of all roll-overs. The preliminary open interest number is a staggering 22,034 contracts. As I said in my gold commentary at the top of this column, this rally is not going unopposed by the bullion banks.
Gold’s final open interest number for Wednesday’s trading day showed a drop of 2,967 contracts. The preliminary o.i. number showed +2,763 contracts…so that was a nice decline. I would suspect that some of this was spill-over from the price action on Tuesday…as Wednesday’s price action didn’t warrant such a decline. April’s open interest in gold stands at 1,377 contracts…and will be further reduced when the 256 contracts that were posted for delivery on Monday [that I spoke of above] get taken off that total. Silver’s net volume was around 90,000 contracts…and the preliminary open interest number was a very chunky 7,729 contracts. Silver’s rally is not going unopposed, either. There’s little, if any, signs of short covering going on at the moment. JPMorgan et al are going short against all comers. Without doubt, silver’s o.i. number [along with gold’s] will be lower when the final numbers are posted at the CME’s website later this morning…but it doesn’t really matter, because I already know that they’re going to ugly no matter what. Silver’s final open interest number for Wednesday’s trading day showed a smallish increase of 395 contracts…but this is a huge drop from the preliminary number of +4,259 contracts. I suspect that this is also spill-over from Tuesday’s trading day…which wasn’t reported in a timely manner…something that the bullion banks are very good at when it suits them. If they had reported it on time, it would be in today’s Commitment of Traders report. The backwardation issue in silver is basically unchanged. The spread between the April 2011 delivery month…and the December 2015 delivery month currently sits at 41 cents. Well, based on yesterday’s price action, the silver shorts will get another margin call this morning…and at US$5,000/contract, it doesn’t take long for this to add up to real money. As of the last Commitment of Traders report, there were 143,000 silver contracts held short. Now some of these are spreads, so they don’t count…but even if you be generous and take out 53,000 contracts worth of spreads [long one month/short another]…you’re still left with 90,000 contracts held naked short. Every time the silver price rises a dollar…the margin calls go out at $5,000/contract. So some of these shorts must be screaming in pain…because they have to cough up real cash to put in the longs’ margin accounts. How long the silver shorts can keep on bleeding cash like this is something that Ted Butler spends a lot of time thinking about. When the shorts finally head for the hills [and it won’t take many of them to do it] then you’ll see it in the price action immediately. But, so far, there’s no sign of it, as this rally has been very orderly to the upside. The day it becomes disorderly, will be the day when you see some of these shorts covering their positions. Here’s a graph that Nick Laird over at sharelynx.com sent me in the wee hours of this morning. It’s titled “Cumulative Gold Production vs. World Population“…and shows the number of ounces of gold per person as the population has soared.
Gold and silver were down a bit during Far East trading during their Friday…and recovered back into positive territory by the London open at 8:00 a.m. local time…which is 3:00 a.m. Eastern. Then, shortly after that, both metals came under selling pressure…especially silver. It will be interesting to see what the bullion banks have in store for us when Comex trading begins in New York. Once again, there’s still a little time left [but not too much I would suspect] to either readjust your portfolio…or get fully invested in the continuing major up-leg of this bull market in both silver and gold. See: Casey Research‘s International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers] |
